Court Opinion

ID: 4303948
Source: CourtListenerOpinion
Date Created: 2018-08-15 16:01:20.345356+00
Date Added: 2024-06-11T14:34:12.254294
License: Public Domain

In the United States Court of Federal Claims
                                    No. 17-1407C
                          (Filed under seal August 3, 2018)
                             (Reissued August 15, 2018)†

* * * * * * * * * * * * * * * * * *
                                  *
                                  *
ARXIUM, INC.,                     *           Bid preparation and proposal costs;
                                  *           unfair inducement to compete;
                 Plaintiff,       *           injunctive relief insufficient;
                                  *           infeasibility of meeting revised
      v.                          *           requirements; deferred entry of
                                  *           judgment.
THE UNITED STATES,                *
                                  *
                 Defendant,       *
                                  *
           and                    *
                                  *
INNOVATION                        *
ASSOCIATES, INC.,                 *
                                  *
           Defendant-Intervenor.  *
                                  *
* * * * * * * * * * * * * * * * * *

      Fernand A. Lavallee, Jones Day, with whom were J. Andrew Jackson, Cherie
J. Owen, Alexander M. Yabroff, Ryan P. McGovern, and Robin Overby, all of
Washington, D.C., for plaintiff.

       Sonia M. Orfield, Trial Attorney, Commercial Litigation Branch, Civil
Division, Department of Justice, with whom were Chad A. Readler, Acting
Assistant Attorney General, Robert E. Kirschman, Jr., Director, and Reginald T.
Blades, Jr., Assistant Director, all of Washington, D.C., for defendant.

      Stuart B. Nibley, K&L Gates, LLP, for defendant-intervenor Innovation
Associates, Inc.

† Because of the protective order in this case, this order was initially filed under
seal, and the parties were given the opportunity to request redactions. None have
done so. Accordingly, this order is reissued for publication, with a minor, non-
substantive correction.
                                       ORDER

WOLSKI, Senior Judge.

       In this post-award bid protest, the plaintiff, ARxIUM, Inc., has moved for an
entry of judgment entitling it to an award of bid preparation and proposal costs.
Pl.’s Mot. for Entry J. at 1, 9 (Pl.’s Mot.). The Court had previously found that the
Defense Logistics Agency (DLA), procuring automated pharmacy equipment for the
United States Air Force, arbitrarily removed the plaintiff from the competitive
range established for this procurement and thus arbitrarily awarded a contract to
the intervenor. ARxIUM, Inc. v. United States, 136 Fed. Cl. 188, 198–208 (2018).
After belatedly discovering that images of original written prescriptions were stored
in a proprietary database of the intervenor, the agency changed its interpretation of
a requirement concerning the display of these images, and concluded that the
plaintiff could not meet the new interpretation of this requirement. Id. at 199–200.
Among other reasons, this determination was arbitrary because the plaintiff had
reasonably interpreted a latently ambiguous solicitation requirement, had not been
informed of its proposal’s (retroactive) shortcoming during discussions, and was not
given the opportunity to submit a revised proposal which could aim to meet the
new, more restrictive interpretation. Id. at 200–04.

        The Court enjoined the government from proceeding with the award to the
intervenor, Innovation Associates, and from making any award under this
procurement without first amending the solicitation to clarify the meaning of two
requirements, including the one concerning the prescription images. Id. at 211.
The Air Force and DLA had previously (but mistakenly) believed that images of the
written prescriptions were received and stored in the Air Force’s own Composite
Healthcare System, and not the proprietary system of the intervenor. See id. at
199, 202. With the question of rights to the images data under law and contract
unexplored, as well as the costs and feasibility of alternative means of gathering the
images uncertain, the Court recognized that there was a possibility that the
clarified prescription images requirement might be one that ARxIUM could not
meet (at least, without the cooperation of the intervenor). Id. at 200–01, 210.

       Typically, injunctive relief will restore to a successful bid protester its
substantial chance of being awarded a contract, thereby precluding an award of bid
preparation and proposal costs, “as the investment in the proposal is no longer a
‘needless expense,’” Beta Analytics Int’l v. United States, 75 Fed. Cl. 155, 159 (2007)
(quoting Heyer Prods. Co. v. United States, 135 Ct. Cl. 63, 71 (1956)). But on
occasions when the injunctive relief fails to fully restore this opportunity, an award
of bid preparation and proposal costs is warranted. See, e.g., Q Integrated Cos. v.
United States, 126 Fed. Cl. 124, 148 (2016) (collecting cases). Because a latently
ambiguous solicitation provision induced ARxIUM to prepare and submit a
proposal, the plaintiff would be entitled to an award of these costs if the amended

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solicitation prevents it from competing for the award. ARxIUM, 136 Fed. Cl. at
200–01 (citing Centech Grp., Inc. v. United States, 79 Fed. Cl. 562, 564, 577 (2007);
Concept Automation, Inc. v. United States, 41 Fed. Cl. 361, 369–70 (1998)); see also
Guzar Mirbachakot Transp. v. United States, 104 Fed. Cl. 53, 68 (2012) (holding
that unnecessary bid proposal costs that were arbitrarily induced may be recovered,
in addition to injunctive relief).

       After the solicitation was amended, ARxIUM contends that this is the case
and moves for an entry of judgment awarding its bid preparation and proposal
costs. In addition to explaining that the prescription images are currently accessed
using the intervenor’s PharmASSIST Symphony software, and stored in a
PharmASSIST database, the amended solicitation required that offerors “have an
automated (non-manual) means of retrieving” these images. Ex. 1 to Pl.’s Mot. at
12 (Minimum Requirement No. 23); see also Pl.’s Mot. at 3. The plaintiff then
submitted a series of questions regarding access to the prescription images data, to
which DLA responded in another amendment to the solicitation. See Ex. 2 to Pl.’s
Mot. The agency explained that the Air Force intended to continue using the
servers employing the PharmASSIST Symphony software to store and access the
prescription images. Ex. 2 to Pl.’s Mot. at 2; Pl.’s Mot. at 4. Offerors were told that
retrieving these images “may require permission and/or a license from Innovation
Associates in order to interface with the PharmAssist /Symphony workflow
software.” Ex. 2 to Pl.’s Mot. at 2; Pl.’s Mot. at 4. And when asked whether the
government would provide vendors with credentials to access the servers and
database; with information such as an Entity Relationship Diagram; with an
Application Programming Interface, a web service, or interface information; with
an export of the images in a nonproprietary electronic format; or with database
backup or export of the images, in each case the agency responded in the negative
and reiterated the need for offerors to obtain a license or permission from the
intervenor. Ex. 2 to Pl.’s Mot. at 2–3; Pl.’s Mot. at 4–6.

       After exhausting those other possibilities, ARxIUM contacted Innovation
Associates and requested permission or a license to access the databases containing
the prescription images. Ex. 3 to Pl.’s Mot. The intervenor rejected the request,
and stated that “meaningful access cannot be provided at this time, and cannot be
in [the] foreseeable future.” Ex. 4 to Pl.’s Mot. With the manual copying of the
images prohibited, and access to the database blocked by the intervenor, ARxIUM
argues that the amended solicitation precludes it and any vendor other than
Innovation Associates from being able to meet the prescription images requirement,
and requests an award of bid preparation and proposal costs. Pl.’s Mot. at 2–3, 7–8.

       The government opposes an award of these costs, arguing that the plaintiff
has not shown that the amendment to the solicitation has precluded the latter from
competing for the contract to be awarded. According to the defendant, although a
licensing agreement with the intervenor was “the obvious means of meeting” the

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prescription images requirement, vendors were invited “to use their expertise to
propose creative solutions to meeting the Government’s stated needs.” Def.’s Opp’n
to Pl.’s Mot. at 2. Because of the theoretical possibility that the prescription images
could be provided (by some automated means) without the permission of or a license
from Innovation Associates, the government maintains that ARxIUM could still
have competed for the contract under the revised solicitation. Id. at 2, 8–9. But
both the defendant and the intervenor have previously argued that performance of
the requirement would be impossible without assistance from Innovation Associates
or access to its proprietary database. See Def.’s Cross-Mot. for J. on Admin. R. at
22–23; Int.’s Cross Mot. for J on Admin. R. at 15–16.

       In a nutshell, the government, under other contracts, has placed the images
in the intervenor’s database, and now takes the position that the intervenor has
complete control over the images. Various technical means of accessing the images
or their associated data were raised by the plaintiff, but rejected by the government.
See Ex. 2 to Pl.’s Mot. at 2–3. The government contends that ARxIUM should have
kept brainstorming. But the plaintiff has done more than enough to demonstrate
that it could not craft a proposal that could feasibly meet a requirement that is
tantamount to removing documents from a safe belonging to the intervenor, for
which only the intervenor has the keys. Since the initial solicitation did not inform
offerors that the prescription images needed to be retrieved from such a proprietary
database, ARxIUM was unfairly induced to enter a competition that could not be
won without the aid of a competitor. Thus, the plaintiff is entitled to an award of its
bid preparation and proposal costs. See ARxIUM, 136 Fed. Cl. at 200–01.

       The only issue remaining is one of procedure, as the plaintiff requests an
immediate entry of judgment. Pl.’s Mot. at 1, 9. Although there exists good,
persuasive authority for our court’s ability to enter judgment on a bid protester’s
entitlement to bid preparation and proposal costs before the size of these costs have
been determined, see CNA Corp. v. United States, 83 Fed. Cl. 1, 5–6 (2008), aff’d 332
F. App’x 638 (Fed. Cir. 2009), the safer, and more usual, course is to enter judgment
on the award amount, not the mere entitlement. Accordingly, the plaintiff’s motion
is GRANTED-IN-PART and DENIED-IN-PART. The Court finds that plaintiff is
entitled to an award of bid preparation and proposal costs, but entry of judgment is
deferred until the amount of this award has been determined.

       To that end, the Court ORDERS the plaintiff to submit to the government a
detailed reckoning of its bid preparation and proposal costs, on or before August 31,
2018. The government and the plaintiff shall thereafter confer regarding a
stipulation of appropriate bid preparation and proposal costs. Upon reaching
agreement, the defendant and ARxIUM shall file a stipulation with the Court for
the entry of judgment for the plaintiff in that amount. If they are unable to agree,
they shall, on or before September 28, 2018, each file a paper detailing their
respective positions on the appropriate amount of costs to be awarded.

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IT IS SO ORDERED.

                    s/ Victor J. Wolski
                    VICTOR J. WOLSKI
                    Senior Judge

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