United States Court of Appeals for the Federal Circuit
2008-5177
TYLER CONSTRUCTION GROUP,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Michael H. Payne, Payne Hackenbracht & Sullivan, of Fort Washington,
Pennsylvania, argued for plaintiff-appellant.
Douglas G. Edelschick, Trial Attorney, Commercial Litigation Branch, Civil Division,
United States Department of Justice, of Washington, DC, argued for defendant-appellee.
With him on the brief were Michael F. Hertz, Acting Assistant Attorney General, Jeanne E.
Davidson, Director, and Reginald T. Blades, Jr., Assistant Director. Of counsel on the
brief were Thomas J. Warren, Office of the Chief Counsel, Army Corps of Engineers, of
Washington, DC, and Charles L. Webster III, Engineer Trial Attorney, of Fort Worth, Texas.
Appealed from: United States Court of Federal Claims
Senior Judge John P. Wiese
United States Court of Appeals for the Federal Circuit
2008-5177
TYLER CONSTRUCTION GROUP,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
Appeal from the United States Court of Federal Claims in 08-CV-094, Senior Judge
John P. Wiese.
______________________________
DECIDED: June 25, 2009
______________________________
Before MAYER, FRIEDMAN, and RADER, Circuit Judges.
FRIEDMAN, Circuit Judge.
The principal issue is whether the United States Army Corps of Engineers (“the
Corps”) was authorized to use so-called Indefinite Deliver/Indefinite Quantity Contracts
(known as “IDIQ contracts”) for the design and construction of military buildings
(barracks and related structures) in an eight-state area in the southeastern United
States. As the name implies, those contracts did not state the number of such
structures to be built or the dates for construction, but did specify the total dollar range
the construction would involve. The Court of Federal Claims held that the Corps was
authorized to use those contracts for this procurement, and we affirm.
I
A. This litigation stems from what the Corps described, in the language of the
Court of Federal Claims’ opinion, as “part of a fundamental change in military
construction strategy designed to transform the United States Army into a more
modular, expeditionary, and effective fighting force.” Tyler Constr. Group v. United
States, 83 Fed. Cl. 94, 95 (2008). The underlying facts, as stated in that opinion, are
largely undisputed.
The Corps stated that “its primary objective is to meet the Department of the
Army’s time, cost, quality, and standardization targets and goals while providing new
facilities for our soldiers and their families—an undertaking requiring a minimum of 20%
reduction in cost and a minimum of 30% reduction in time to occupancy.” Id. at 95-96
(internal quotation marks omitted). To accomplish that objective, the Corps:
initiated a market research program in 2005 to acquaint
members of the construction industry with the Army’s
upcoming needs and to gain the industry’s perspective on
how best to execute a construction program of the
magnitude contemplated. The program included sponsor-
ship of a nationwide forum, four regional forums, and a
specialized forum with representatives of the pre-
fabricated/pre-engineered/modular construction industry, as
well as the implementation of an internet-based research
questionnaire. Through these efforts, the Corps identified an
industry consensus that the successful execution of its
construction program would require an emphasis on
standardization and economies of scale. Based on this
conclusion, the Corps decided to pursue a flexible
acquisition strategy “composed of primarily local and
regional contracts with a possibility of national contracts, in
order to execute an estimated $40 Billion dollar Military
Construction . . . Program.”
Id. at 96.
2008-5177 2
In 2007, the Corps issued a solicitation seeking proposals for the construction.
The amended solicitation provided for a negotiated one-year multiple award task order
contract, with two additional one-year options, a minimum $10,000 guarantee for the
first year, and a total estimated contract amount of $301 million. The Corps estimated
that the value of the initial task order under the contract would be between $25 million
and $100 million.
The solicitation described in general terms the facilities to be constructed under
the initial task order. It included a 252-page statement of work outlining in detail the
other types of facilities to be built. “The statement of work does not indicate where
these facilities are to be built; it does, however, inform offerors that the facilities will be
required primarily at Fort Benning, Georgia.”
The solicitation contemplated a two-phase proposal process in which two or
more contractors would be selected. In the first phase, the Corps would evaluate the
performance capabilities of the prospective contractors based on specified criteria. In
the second phase, the contractors would submit proposals for the initial task order.
Those to whom contracts were awarded would “become the only competitors for the
negotiation and award of all subsequent task orders, subject only to the limitation that a
contractor is not . . . obligated to honor a task order of less than $14 million, a task
order in excess of $47.5 million, or any order involving a combination of items in excess
of $95 million.” Id. at 96
B. The appellant, Tyler Construction Group (“Tyler”), which described itself in its
complaint as “a small business general contractor,” did not submit any proposal in
response to the solicitation. Instead, it filed the present suit in the Court of Federal
2008-5177 3
Claims seeking injunctive and declaratory relief against the solicitation. It challenged
the Corps’ use of IDIQ contracts for this procurement on various grounds, including the
claims that such use was not authorized by the Federal Acquisition Regulation (“FAR”)
and that it violated statutory and regulatory provisions that favor and protect small
businesses.
On the parties’ cross-motions for judgment on the administrative record, the
Court of Federal Claims granted the government’s motion and dismissed the suit. Tyler
Constr. Group, 83 Fed. Cl. at 95. After that decision, the Corps selected three firms to
whom it awarded contracts.
The court rejected Tyler’s contention that the FAR does not authorize the use of
IDIQ contracts for a major construction project. Tyler stated that such contracts “have
historically been used for the procurement of essentially identical ‘supplies or services’
for which there is a recurring need at a single installation or within a small geographic
area.” Tyler argued that FAR § 16.501-2(a), 48 C.F.R. § 16.501-2(a), “which identifies
an IDIQ contract as a contract used ‘to acquire supplies and/or services when the exact
times and/or exact quantities of future deliveries are not known at the time of contract
award,’” does not cover “construction” because the latter is not a “service.” It pointed to
other provisions of the FAR that parenthetically inserted, after “goods and services,” the
term “(including construction).” The government countered by citing still other FAR
provisions that stated, after “goods and services,” “(excluding construction).”
Noting that there is “no law, statute, or regulation that prohibits the use of an IDIQ
contract for the procurement of construction services,” the Court of Federal Claims
concluded that “the various provisions of the FAR offer little insight into whether
2008-5177 4
‘construction’ is included in or excluded from ‘supplies or services.’” Tyler Constr.
Group., 83 Fed. Cl. at 99. The court ruled that
FAR § 1.102(d)—providing procurement officials with the
authority to use innovative approaches to satisfy the
government’s procurement needs so long as such
approaches are not otherwise addressed in the FAR or
prohibited by law—governs the instant procurement. We
find that the solicitation represents the sort of innovation
envisioned by that section and, with its identification of both
a contract dollar value and a general scope of work,
constitutes a permissible exercise of IDIQ contracting
authority.
Id.
The Court of Federal Claims also rejected Tyler’s alternative contention that “the
scope of the solicitation, as measured by both its dollar amount and the geographic
distribution of its construction work, is of a magnitude that impermissibly forecloses
small business participation.” Id. at 100 (footnote omitted). Tyler relied on the anti-
bundling provision of the Small Business Act, 15 U.S.C. § 631(j)(3), which requires
“each Federal agency” to “avoid unnecessary and unjustified bundling of contract
requirements that precludes small business participation in procurements as prime
contractors,” and the similar limitation on “consolidation” of procurement in 10 U.S.C.
§ 2382(a). The court stated: “In plaintiff’s view, the Corps’ use of a single procurement
to acquire the design and construction of multiple facilities, many of which would have
been suitable for small-business contractors, constitutes the improper bundling the
statute prohibits and should be enjoined on that ground.” Tyler Constr. Group, 83 Fed.
Cl. at 100.
In rejecting this contention, the court relied on 15 U.S.C. § 644(e)(2)(A), which
provides:
2008-5177 5
Before proceeding with an acquisition strategy that could
lead to a contract containing consolidated procurement
requirements, the head of an agency shall conduct market
research to determine whether consolidation of the
requirements is necessary and justified.
The court
conclude[d] . . . that the Corps has demonstrated that the
consolidation of the contract requirements was necessary
and justified within the meaning of the relevant statutes.
[T]he Corps’ choice of acquisition strategy was dictated by
an industry consensus that successfully meeting the Army’s
goals in construction costs and time would require a
departure from the Corps’ traditional “one project at a time”
approach in favor of an acquisition strategy that maximized
economies of scale. Given the Corps’ extensive market
research and its detailed analysis of the issue, we can find
no fault with the Corps’ decision to rely on the industry’s
counsel.
Tyler Constr. Group, 83 Fed. Cl. at 103.
II
The FAR provisions relating to IDIQ contracts (there called “indefinite delivery
contracts”) state that such contracts “may be used to acquire supplies and/or services
when the exact times and/or exact quantities of future deliveries are not known at the
time of contract award.” FAR § 16.501-2(a), 48 C.F.R.. § 16.501-2(a). FAR
§ 16.504(a)(1), 48 C.F.R. § 16.504(a)(1) provides that “[t]he contract must require the
Government to order and the contractor to furnish at least a stated minimum quantity of
supplies or services.” The FAR provides that contracting officers “may use” such
contracts “when the Government cannot predetermine, above a specified minimum, the
precise quantities of supplies or services that the Government will require during the
contract period.” Id. § 16.504(b). Other provisions of that section also refer to “supplies
2008-5177 6
or services” the contractor will furnish or the government will acquire. Id. § 16.504(a)(1),
(a)(4)(iii).
Tyler contends that under these provisions IDIQ contracts cannot be used for
large scale building construction because “services” as there used does not include
“construction.” As previously noted, each party seeks to support its position by citing
other provisions of the FAR, some of which state “(including construction)” after
“supplies or services” and others of which state “(excluding construction)” after that
phrase. We agree with the Court of Federal Claims that these provisions of the FAR
“offer little insight into whether ‘construction’ is included in or excluded from ‘supplies or
services.’” Tyler Constr. Group, 83 Fed. Cl. at 99. All that they show is that, depending
on the context, “services” may or may not include “construction.” They do not establish,
as Tyler contends, that in determining whether IDIQ contracts may be used for major
military building projects, “services” does not include “construction.”
Like the Court of Federal Claims, we conclude that the proper inquiry is not
whether the FAR authorizes the use of IDIQ contracts for a procurement of construction,
but whether there is any statutory or regulatory provision that precludes such use.
Again, like that court, we are unaware of any such provision, and Tyler has not pointed
to any. Indeed, it appears that Tyler does not challenge that conclusion.
The reason that this is the appropriate inquiry is explained in FAR § 1.102(d), 48
C.F.R. § 1.102(d), which states:
The role of each member of the Acquisition Team is to
exercise personal initiative and sound business judgment in
providing the best value product or service to meet the
customer’s needs. In exercising initiative, Government
members of the Acquisition Team may assume if a specific
strategy, practice, policy or procedure is in the best interests
2008-5177 7
of the Government and is not addressed in the FAR nor
prohibited by law (statute or case law), Executive order or
other regulation, that the strategy, practice, policy or
procedure is a permissible exercise of authority.
In other words, government officers are authorized, indeed, encouraged, in
exercising personal initiative in procurement matters, to assume that “a specific
strategy, practice, policy or procedure” that is not “addressed in the FAR nor prohibited
by law (statute or case law), Executive order or other regulation” and that “is in the best
interests of the Government,” “is a permissible exercise of authority.”
We agree with the Court of Federal Claims that the Corps’ use of IDIQ contracts
to effect this procurement of military housing “represents the sort of innovation
envisioned by that section and, with its identification of both a contract dollar value and
a general scope of work, constitutes a permissible exercise of IDIQ contracting
authority.” Tyler Constr. Group, 83 Fed. Cl. at 99.
The Corps was faced with an unusually large and novel procurement that had to
meet the Army’s unusual and demanding standards and requirements. The Army was
seeking what the Corps viewed as “a fundamental change in military construction
strategy designed” to make the Army “a more modular expeditionary and effective
fighting force.” Tyler Constr. Group., 83 Fed. Cl. at 95. The Army’s new approach to
housing construction required a 20% reduction in cost and a 30% reduction in the time
required until the facilities could be occupied.
Prior to deciding to use IDIQ contracts for this procurement, the Corps carefully
studied, analyzed and evaluated the situation. It conducted a research program which
included a nationwide forum, four regional fora, and “a specialized forum with
representatives of the pre-fabricated/pre-engineered/modular construction industry, as
2008-5177 8
well as the implementation of an internet-based research questionnaire.” Tyler Constr.
Group, 83 Fed. Cl. at 96. The Corps concluded that there was “an industry consensus
that the successful execution of its construction program would require an emphasis on
standardization and economies of scale. Based on this conclusion, the Corps decided
to pursue a flexible acquisition strategy ‘composed of primarily local and regional
contracts with a possibility of national contracts, in order to execute an estimated $40
Billion dollar Military Construction . . . Program.’” Id.
The Corps, like other federal procurement entities, has broad discretion to
determine what particular method of procurement will be in the best interests of the
United States in a particular situation. Cf. E.W. Bliss Co. v. United States, 77 F.3d 445,
449 (Fed. Cir. 1996) (in negotiated contracts “[p]rocurement officials have substantial
discretion to determine which proposal represents the best value for the government”);
Lockheed Missiles & Space Co. v. Bentsen, 4 F.3d 955, 958 (Fed. Cir. 1993) (“Effective
contracting demands broad discretion.”). The Corps did not abuse that discretion in
concluding that in the situation here, the use of IDIQ contracts to obtain this large
military construction was the most appropriate method of proceeding and therefore best
served the interests of the United States. Nor did the Corps violate or ignore any
statutory or regulatory requirements, prohibitions or standards in so acting.
III
A. Tyler also contends that in using this type of procurement, the Corps violated
statutory and regulatory provisions designed to aid and protect small businesses and to
insure that they receive a fair and adequate share of government contracts and
business. It relies primarily on the anti-bundling provision of the Small Business Act,
2008-5177 9
which in pertinent part requires “each Federal [acquiring] agency” to “avoid unnecessary
and unjustified bundling of contracts requirements that precludes small business
participation in procurements as prime contractors.” 15 U.S.C. § 631(j)(3). According to
Tyler, the Corps’ combination (or “bundling”) of procurement of military facilities under a
single contract resulted in a procurement whose dollar amount was beyond the financial
capacity of small business firms, who could and would have competed for constituent
individual components of smaller size.
The government seeks to avoid this limitation on its contracting authority by
arguing that this statutory provision does not apply to new construction. It relies on
statutory provisions that state that “[t]he term ‘bundling of contract requirements’ means
consolidating 2 or more procurement requirements for goods or services previously
provided or performed under separate smaller contracts,” 15 U.S.C. § 632(o)(2), and
that “[t]he terms ‘consolidation of contract requirements’ and ‘consolidation’ . . . mean a
use of a solicitation to obtain offers for a single contract or multiple award contract to
satisfy two or more requirements . . . for goods or services that have previously been
provided . . . under two or more separate contracts smaller in cost.” 10 U.S.C.
§ 2382(c)(1). According to the government, under these definitions the bundling and
consolidation statutes “apply only to contracts that would combine existing
requirements, previously provided, under separate smaller contracts,” but “do not apply
to new construction, which is a new requirement.”
Like the Court of Federal Claims, we need not decide this question because we
conclude that even if those provisions cover new construction, the Corps’ conduct of
this procurement did not violate them.
2008-5177 10
The statute does not prohibit all bundling of contract requirements, but only
“unnecessary and unjustified bundling.” Light on the meaning of this language is
provided by 15 U.S.C. § 644(e)(2)(A), which states
Before proceeding with an acquisition strategy that could
lead to a contract containing consolidated procurement
requirements, the head of an agency shall conduct market
research to determine whether consolidation of the
requirements is necessary and justified.
As we have noted, the Corps conducted extensive market research before
determining that consolidation of the procurement requirements was “necessary and
justified.” We agree with the Court of Federal Claims
that the Corps has demonstrated that the consolidation of
the contract requirements was necessary and justified within
the meaning of the relevant statutes . . . the Corps’ choice of
acquisition strategy was dictated by an industry consensus
that successfully meeting the Army’s goals in construction
costs and time would require a departure from the Corps’
traditional “one project at a time” approach in favor of an
acquisition strategy that maximized economies of scale.
Given the Corps’ extensive market research and its detailed
analysis of the issue, we can find no fault with the Corps’
decision to rely on the industry’s counsel.
Tyler Constr. Group, 83 Fed. Cl. at 103.
B. Tyler makes an alternative argument challenging the combination or bundling
of these procurements, based on the requirements of the Small Business
Competitiveness Demonstration Program Act of 1988, 15 U.S.C. § 644 note, that relate
to set-asides of government contracts for small business. The Court of Federal Claims
stated:
“As explained in the Act’s introductory findings, traditional
efforts to implement the mandate for small business
participation in federal procurements have resulted in an
over-concentration of small business participation in a limited
2008-5177 11
number of industry categories, while at the same time failing
to expand small business participation in certain other
categories. 15 U.S.C. § 644 note, §§ 702(3)(A), (B). FAR
§ 19.1007(b), the regulation implementing the Act, thus
prohibits solicitations in certain designated contract
categories from being subject to small business set-asides,
except for those set-asides mandated for socially and
economically disadvantaged small businesses. 15 U.S.C.
§ 644 note, §§ 713(a), 717(a), (b), 718(a).”
Tyler Constr. Group, 83 Fed. Cl. at 103 n.9.
Tyler concedes that it is not such a disadvantaged small business and that the
statute would prohibit the Corps from awarding it a contract under a small business set-
aside. It argues, however, that because the Army had not met its total small business
set-aside requirement for the year involved, the Corps on its own should have
requested the Department of Defense to waive the foregoing statutory limitation on set-
asides for non-disadvantaged small businesses. It contends that the Corps’ failure to
seek such a waiver constituted an abuse of discretion.
Tyler does not state that it requested the Corps to seek such a waiver, that the
Department of Defense had any administrative procedure for doing so, or that if a
waiver had been sought it likely would have been granted. Nor is it clear exactly what
precise waiver was sought. Since Tyler contends that the combination of the individual
construction projects produced a contract whose dollar amount exceeded the financial
capacity of small businesses, it would not have aided Tyler if the entire contract project
had been set aside for small business: The contract still would have been beyond
Tyler’s financial capacity. What Tyler must have sought, therefore, was the breaking
down of this large contract into its component parts and separate procurements for each
part, for which Tyler would have had the financial capacity to compete.
2008-5177 12
Seeking such a waiver would have been inconsistent with the Corps’
determination that the consolidation of procurement it undertook was “necessary and
justified.” The Corps did not abuse its discretion in failing sua sponte to seek a waiver
of that statutory limitation, which would have undone that determination.
C. In evaluating Tyler’s contention that the Corps’ handling of this procurement
was inconsistent with, if not contrary to, the statutory and regulatory provisions involving
the federal commitment to aiding small business participation in government
procurement, it is important to consider the Corps’ action here in helping small
businesses to participate in this procurement.
In its “National Acquisitional Strategy” plan for this major military construction, the
Corps directed that regional acquisition plans “must strike a balance between achieving
economies of scale and meeting small business and other social-economic goals, as
well as small-business considerations when unrestricted acquisitions are necessary.”
The Acquisition Plan that covered this procurement provided that 20 percent of the
contract dollars be set aside for small business, including 100 percent of the dollar
amount for certain types of facilities and for projects valued at less than $15 million.
The solicitation in the present case provided that: “All offerors (both large and small
businesses) will be evaluated on the level of small business commitment they
demonstrate for the proposed acquisition, and their prior level of commitment to utilizing
small businesses in performance of prior contracts.” The Corps established
“reasonable and achievable” subcontracting goals for the utilization of small businesses,
including a goal that 70 percent of subcontracted work should be performed by small
2008-5177 13
business. Firms could associate together as teams or joint ventures when submitting
proposals.
The Corps endeavored, as far as practicable, to comply with the statutory and
regulatory requirements and policies for small business participation in government
procurement. It cannot properly be faulted for failing to do so because it did comply.
D. We have considered Tyler’s other contentions, but they are unconvincing.
They do not require separate discussion.
CONCLUSION
The judgment of the Court of Federal Claims is
AFFIRMED.
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