In the United States Court of Federal Claims
No. 18-1568C
(E-Filed: March 21, 2019) 1
)
LAND SHARK SHREDDING, LLC, )
Post-Award Bid Protest; Alleged
)
Proposal Evaluation Errors; Price
Plaintiff, )
Reasonableness of a Proposal
)
Submitted by a Federal Supply
v. )
Schedule Contractor; Preference for a
)
Service-Disabled Veteran-Owned
THE UNITED STATES, )
Small Business; Preliminary Injunction
)
Request.
Defendant, )
)
Joseph A. Whitcomb, Denver, CO, for plaintiff.
Sean L. King, Trial Attorney, with whom were Joseph H. Hunt, Assistant Attorney
General, Robert E. Kirschman, Jr., Director, Douglas K. Mickle, Assistant Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice,
Washington, DC, for defendant. Natica Chapman Neely, United States Department of
Veterans Affairs, of counsel.
OPINION AND ORDER
CAMPBELL-SMITH, Judge.
This post-award bid protest is before the court on plaintiff’s renewed application
for a temporary restraining order (TRO) and motion for a preliminary injunction. See
ECF No. 20. The court has reviewed the complaint, ECF No. 1; the administrative
record, ECF No. 11; plaintiff’s memorandum in support of its motion, ECF No. 20-1; the
exhibits to plaintiff’s memorandum, ECF Nos. 20-2 through 20-5; defendant’s opposition
1
This opinion was issued under seal on March 1, 2019. Pursuant to ¶ 2 of the
ordering language, the parties were invited to identify source selection, proprietary or
confidential material subject to deletion on the basis that the material was
protected/privileged. The proposed redactions were acceptable to the court. All
redactions are indicated by brackets ([ ]).
brief, ECF No. 21; and, plaintiff’s reply brief, ECF No. 22. Oral argument was deemed
unnecessary. For the reasons set forth below, plaintiff’s renewed TRO and preliminary
injunction motion is DENIED.
I. Background
A. Solicitation
The procuring agency here is the United States Department of Veterans Affairs
(VA). The competition that underlies this protest is for on-site document shredding and
pill-bottle destruction at the Bruce W. Carter VA Medical Center in Miami, Florida, and
other VA facilities in Florida. ECF No. 11 at 285-347. The solicitation for this firm,
fixed-price Federal Supply Schedule (FSS) contract, id. at 309, 327, issued on August 30,
2018, id. at 285, with a closing date for receipt of proposals of September 21, 2018, id. at
469. The contract would include one base year and four option years. Id. at 289-93.
This competition is described in the solicitation as “a Service Disabled Veteran
Owned Small Businesses (SDVOSB) set-aside with Small Business Set-aside -using a
tiered or cascading order of precedence.” Id. at 345. The tiers of cascading preferred
business types are clearly delineated, beginning with SDVOSBs, then veteran-owned
small businesses, then all other small businesses, then all other businesses. Id. Further,
offerors were informed that “[i]f an award or a sufficient number of awards cannot be
made at the first tier, evaluation of offers will proceed at the next lower tier until an
award or a sufficient number of awards can be made.” Id.
The solicitation contained at least three other provisions of relevance to this
protest. First, the solicitation included a performance work statement. Id. at 294-309.
Second, the solicitation cited a limitation on subcontracting regulation applicable to
SDVOSB set-asides. Id. at 323 (citing 13 C.F.R. § 125.6 (2018)). Finally, the
solicitation informed offerors that the agency would choose the “best value” proposal
among “acceptable” proposals. Id. at 345.
B. Offerors and Proposal Prices
Three offerors responded to the solicitation. ECF No. 11 at 618. The offerors
were plaintiff, Land Shark Shredding, LLC (Land Shark or LSS), SafeGuard Document
Destruction Inc. (SafeGuard), and [ ]. Id. at 278-79, 618. According to the
administrative record, Land Shark was the only first-tier offeror (SDVOSB), SafeGuard
was a third-tier offeror (small business), and [ ] was a fourth-tier offeror (large business).
Id. at 618.
For price evaluation purposes, Land Shark’s proposal was determined to be the
most expensive, at $2,819,101.20. Id. [ ]’s proposal was significantly less expensive
than Land Shark’s, at $[ ]. Id. SafeGuard’s proposal was slightly less expensive than
2
[ ]’s proposal, and much less expensive than Land Shark’s, at $474,034.80. Id.
SafeGuard’s proposal was also closest in price to the independent government cost
estimate (IGCE) for the contract, which was $490,000. Id. at 56, 617. According to the
VA’s records, the IGCE was calculated using FSS published prices for document
shredding services. Id. at 56. The court observes that Land Shark’s price was more than
five times as high as the prices proposed by the other offerors.
C. Award Decision and Land Shark’s Protest
SafeGuard’s proposal was selected for award on September 26, 2018. ECF No. 11
at 617. On September 27, 2018, Land Shark was informed that its proposal had not been
selected for award. ECF No. 1 at 5. The contract was awarded to SafeGuard on
September 28, 2018. ECF No. 11 at 625.
The decision not to award the contract to Land Shark was premised on the VA’s
determination that Land Shark’s evaluated price of $2,819,101.20 was “not reasonable.”
Id. at 620. In contrast, SafeGuard’s price was found to be “fair and reasonable.” Id.
Although both entities were considered to be qualified to perform the required services,
SafeGuard’s proposal was determined to be the “most advantageous to the Government.”
Id.
On Friday, September 28, 2018, Land Shark asked the VA’s contracting specialist
to explain how a SDVOSB could lose the contract to a small business that was not a
SDVOSB. Id. at 675. The contracting specialist explained that if the SDVOSB’s price
was “found [to be] not reasonable,” the VA could go to a lower-tier offeror for award. Id.
at 674. On Saturday, September 29, 2018, Land Shark’s CEO requested a “full
debrief[ing]” from the VA regarding the contract award. Id. at 678.
On Monday, October 1, 2018, the VA’s contracting specialist and Land Shark’s
CEO discussed the award during a telephone conversation. Id. at 744. Land Shark’s
CEO apparently presented his concerns about the propriety of the award, and indicated
that Land Shark would protest the award. Id. On October 9, 2018, Land Shark filed its
protest in this court.
II. Legal Standards
A. Bid Protest Standard of Review
As the United States Court of Appeals for the Federal Circuit has stated, “the
proper standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A)
[(2012)]: a reviewing court shall set aside the agency action if it is ‘arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.’” Banknote Corp. of
Am. v. United States, 365 F.3d 1345, 1350-51 (Fed. Cir. 2004) (citing Advanced Data
Concepts, Inc. v. United States, 216 F.3d 1054, 1057-58 (Fed. Cir. 2000)). Under this
3
standard, a procurement decision may be set aside if it lacked a rational basis or if the
agency’s decision-making involved a clear and prejudicial violation of statute, regulation
or procedure. Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071, 1085-86
(Fed. Cir. 2001) (citing Impresa Construzioni Geom. Domenico Garufi v. United States,
238 F.3d 1324, 1332-33 (Fed. Cir. 2001)). “The arbitrary and capricious standard
applicable [in bid protests] is highly deferential.” Advanced Data Concepts, 216 F.3d at
1058.
De minimis errors in the procurement process do not justify relief. Grumman Data
Sys. Corp. v. Dalton, 88 F.3d 990, 1000 (Fed. Cir. 1996) (citing Andersen Consulting v.
United States, 959 F.2d 929, 932-33, 935 (Fed. Cir. 1992)). The bid protest plaintiff
bears the burden of proving that a significant error marred the procurement in question.
Id. (citing CACI Field Servs., Inc. v. United States, 854 F.2d 464, 466 (Fed. Cir. 1988)).
Examples of arbitrary and capricious agency action include “when the agency ‘entirely
failed to consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or [the decision] is so
implausible that it could not be ascribed to a difference in view or the product of agency
expertise.’” Ala. Aircraft Indus., Inc.-Birmingham v. United States, 586 F.3d 1372, 1375
(Fed. Cir. 2009) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983)) (alteration in original). The court will, however, “uphold a
decision of less than ideal clarity if the agency’s path may reasonably be discerned.”
Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)
(citation omitted).
“‘If the court finds a reasonable basis for the agency’s action, the court should stay
its hand even though it might, as an original proposition, have reached a different
conclusion as to the proper administration and application of the procurement
regulations.’” Honeywell, Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir. 1989)
(quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301 (D.C. Cir. 1971)).
B. Injunctive Relief
As the Federal Circuit has held:
In deciding whether a permanent injunction should issue, a
court considers: (1) whether, as it must, the plaintiff has
succeeded on the merits of the case; (2) whether the plaintiff
will suffer irreparable harm if the court withholds injunctive
relief; (3) whether the balance of hardships to the respective
parties favors the grant of injunctive relief; and (4) whether it
is in the public interest to grant injunctive relief.
PGBA, LLC v. United States, 389 F.3d 1219, 1228-29 (Fed. Cir. 2004) (citing Amoco
Prod. Co. v. Vill. of Gambell, Alaska, 480 U.S. 531, 546 n.12 (1987)). The standard for a
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preliminary injunction is the same, except that likelihood of success on the merits --
instead of actual success on the merits -- must be shown by the plaintiff. Id. at 1229.
Further, the standard for the issuance of a temporary restraining order is the same as that
for a preliminary injunction. See, e.g., Munilla Constr. Mgmt., LLC v. United States, 130
Fed. Cl. 131, 135 (2016).
III. Analysis
There were three issues presented by plaintiff’s complaint for the court’s
consideration. Plaintiff argued, first, that its proposal should not have been subjected to a
test for price reasonableness, because Land Shark’s prices as an FSS contractor are
presumptively fair and reasonable. ECF No. 1 at 7-8. Plaintiff argued, second, that Land
Shark’s SDVOSB status was not given proper priority by the VA. Id. at 9-11. Third,
plaintiff argued that SafeGuard cannot comply with the limitation on subcontracting
provision in the solicitation, rendering the VA’s award to SafeGuard arbitrary, capricious,
and contrary to law. Id. at 11-12.
In plaintiff’s renewed TRO and preliminary injunction motion, a somewhat
different challenge to the award to SafeGuard is presented in three separately identified
sub-sections of the brief.2 First, plaintiff challenges the agency’s evaluation of proposals.
ECF No. 20-1 at 11-13. Second, the agency’s determination that Land Shark’s price was
unreasonable is alleged by plaintiff to be arbitrary, capricious and contrary to law. Id. at
13-16. Third, plaintiff contends that the award to a “non-SDVOSB” was improper. Id. at
16-19. The court addresses each of these contentions in turn, 3 and briefly considers the
question of whether Land Shark has shown its entitlement to preliminary injunctive relief
at the end of this opinion.
2
The court has also considered the arguments contained in plaintiff’s reply brief.
The court agrees with plaintiff that Land Shark has standing to bring this bid protest, see
ECF No. 22 at 3-7, but rejects plaintiff’s contention that Land Shark has shown
likelihood of success on the merits of its challenge to the award to SafeGuard, or that
plaintiff is entitled to preliminary injunctive relief.
3
The court restricts its analysis of the merits of this protest to plaintiff’s contentions
set forth in the “merits” section of its brief, identified in the brief’s outline as section
IV(A)(1)(a)-(c). ECF No. 20-1 at 11-19. This section of the brief presents plaintiff’s
most substantive arguments supported by citations to caselaw. To the extent that other
sections of plaintiff’s brief contain additional criticism of the agency’s award decision,
those allegations of error are cursory and unpersuasive. Cf. id. at 7 (alleging that the VA
violated 13 C.F.R. § 125.6 (2018) (Limitations on Subcontracting), but providing no
explanation for this assertion).
5
A. Alleged Proposal Evaluation Errors
The court has attempted to discern the evaluation error, or errors, that plaintiff
seeks to bring to the court’s attention in this sub-section of plaintiff’s motion. See ECF
No. 20-1 at 11-13. There is ample reference to unequal treatment of offerors, but no
explanation of the unequal treatment the court should focus on here. There is ample
reference to the principle that offerors must be evaluated according to the criteria set forth
in a solicitation, but no discussion of how the VA violated this rule.
Instead, plaintiff offers only a summary of vague and unsubstantiated allegations
of procurement errors, which are set forth in one sentence, without supporting citations to
the administrative record. This sentence reads:
Thus, the VA violated the terms of the Solicitation by eliminating LSS
from competition based upon an erroneous determination that LSS’s price
was unreasonable and imbalanced, by awarding the Contract to an offeror
that is not a SDVOSB, and by ignoring a likely violation of the limitation of
subcontracting regulation.
ECF No. 20-1 at 12. This sentence offers a preview of two upcoming sub-sections of
plaintiff’s motion before the court and alludes to an unexplained violation of regulatory
limitations on subcontracting. Plaintiff’s general and vague allegations of evaluation
error, in this sub-section of its brief, fail to persuade the court that the agency’s award
decision was flawed. Plaintiff’s renewed request for a TRO and preliminary injunction
cannot be sustained on this ground.
B. Price Reasonableness Evaluation by the VA
This sub-section of plaintiff’s brief is not a model of clarity. As many as five
different topics appear to be addressed, although the thread of plaintiff’s arguments on
each of these topics is difficult to discern. The court summarizes each of plaintiff’s
contentions as to the flaws in the VA’s price evaluation of proposals, and also
summarizes the government’s counter-arguments addressing each of these topics. The
court addresses each of plaintiff’s topics, in turn.
1. The Per Pound Shredding Price Used in the IGCE Is Allegedly Not
an Appropriate Unit of Measure for Evaluating Offerors’ Prices
According to plaintiff, most FSS contractors “don’t even list per-pound prices” in
their price lists for document shredding services. ECF No. 20-1 at 13 (citing ECF No.
20-2 at 6-34). Thus, in plaintiff’s view, an IGCE that merely multiplies an estimate of
700,000 pounds of paper per year, by a price per pound of $.14, “has no rational basis.”
Id.
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Defendant argues that the IGCE is rational, because it was based on published FSS
per pound shredding prices, and because two of the three offerors submitted prices in line
with the IGCE. ECF No. 21 at 18-20. The court must agree with the government that
plaintiff has not shown that the methodology used to create the IGCE lacked a rational
basis. Indeed, the per pound price used in the IGCE is supported by some of the price
lists attached as exhibits to plaintiff’s motion, which offer per pound shredding prices at
or near the price used in the IGCE. See ECF No. 20-2 at 9, 14, 24, 27-30. The court
cannot agree with plaintiff that the per pound price used in the IGCE was irrational.
2. The IGCE’s Pounds Per Year Estimate Allegedly Underestimates
the Work Required under the Contract
Plaintiff contends that a better estimate of shredding services under the contract
would be closer to 1,548,300 pounds per year, not 700,000 pounds per year. ECF No.
20-1 at 14. Plaintiff’s figure is derived from the weight capacity for various shredding
containers at VA facilities. Id. at 13-14. Defendant does not respond specifically to this
contention, other than to note that the IGCE was in line with two of the three offerors’
prices. ECF No. 21 at 19.
The court is not persuaded by plaintiff’s “container capacity” calculation that the
IGCE was irrational. The solicitation and the agency’s answers to bidder questions
discussed the number of shredding containers, and the frequency of service visits to these
containers, but did not indicate that container capacity and service frequency would
directly correspond with the amount, measured in pounds, of shredding required. ECF
No. 11 at 285-347, 465-67, 470-71. Further, the predecessor contract to this one
projected that 500,000 pounds of shredding would occur each year of the contract, and
modifications to that contract noted that sometimes less shredding was required. See id.
at 15-18, 42-54. Land Shark was informed that the current contract would involve the
same level of effort as the predecessor contract. Id. at 467. The record before the court
does not support plaintiff’s contention that the 700,000 pounds per year estimate in the
IGCE was irrational.
3. Alleged Flaw in the Evaluation of Contract Line Item Number
(CLIN) 002
Plaintiff contends that there is a flaw in the price evaluation of CLIN 002, which
required destruction of “special documents/Pill Bottles.” ECF No. 20-1 at 14 (citing ECF
No. 11 at 289-91). As a threshold matter, plaintiff contends that the solicitation was
ambiguous regarding this CLIN: “It isn’t clear what the VA wanted bidders to price
here.” Id.; see ECF No. 22 at 10 (stating that “there was obviously some confusion” as to
CLIN 002). Plaintiff also complains that the awardee’s price was viewed as reasonable,
even though SafeGuard priced this CLIN at $0.00. ECF No. 20-1 at 14.
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As defendant points out, if plaintiff believed there was a patent error in the
solicitation regarding CLIN 002, such a challenge should have been brought pre-award,
because such a challenge is untimely in a post-award bid protest. ECF No. 21 at 20.
Moreover, as defendant also points out, Land Shark received instruction as to the pricing
of CLIN 002, which stated that a price of $0.00 was acceptable for this CLIN. See ECF
No. 11 at 465. SafeGuard was not treated differently than Land Shark when it priced
CLIN 002 at $0.00. Plaintiff has not shown that the VA’s price evaluation of the CLINs
in the offerors’ proposals was irrational.
4. The Comparison of a SDVOSB’s price to a Non-SDVOSB’s Price Is
Allegedly Improper
Plaintiff suggests, with minimal explanation, that the VA could not determine the
reasonableness of Land Shark’s price through a comparison with non-SDVOSB prices.
The court reproduces the entirety of this argument, as follows:
The VA also based its evaluation of LSS’s bid on a comparison of
LSS’s prices to the other non-SDVOSB offerors. This is not a fair and
reasonable comparison, and it totally negates the value of set-asides. It also
ignores the U.S. Supreme Court’s holdings in the Kingdomware case, which
is discussed in detail below. Comparison of SDVOSB bids to non-veteran
and other than small business concerns also violates Congress’ express
policy regarding SDVOSB assistance programs. “The purpose of the
Service-Disabled Veteran-Owned Small Business Program is to provide
Federal contracting assistance to service-disabled veteran-owned small
business concerns.” FAR § 19.1401(b).
ECF No. 20-1 at 15 (citing generally to Kingdomware Techs., Inc. v. United States, 136
S. Ct. 1969 (2016)).
Defendant notes, first, that the comparison of quotes with other quotes received
was a methodology established by the solicitation, which expressly noted that several
tiers of businesses, including SDVOSBs, would be considered to be eligible offerors.
ECF No. 21 at 18 (citing ECF No. 11 at 345). Thus, defendant argues, plaintiff should
have raised its objection to the comparison of the offerors’ quotes in a pre-award protest,
not in a post-award protest. Id. at 18-19 (citations omitted). The court is not certain that
plaintiff’s challenge is untimely as raised, but need not resolve that question. More
important, in the court’s view, are the merits of plaintiff’s argument, which the
government also addresses.
The court agrees with the government that plaintiff has not cited any authority
which supports its position. Kingdomware does not address price comparisons, in
general, or the specific question of how the VA should determine that a SDVOSB’s
prices are fair and reasonable. The Federal Acquisition Regulation (FAR) provision cited
8
by plaintiff is a policy statement that does not regulate procedures for the price evaluation
of proposals in procurements such as this one. In sum, plaintiff objects to the price
comparison conducted by the VA here because it does not do enough, in plaintiff’s view,
to secure government contracts for SDVOSBs. That is a policy argument, unmoored
from statute or regulation. Without more, that policy argument is an insufficient ground
for this court to invalidate a procurement decision of a federal agency. See, e.g., Artuz v.
Bennett, 531 U.S. 4, 10 (2000) (“Whatever merits these and other policy arguments may
have, it is not the province of this Court to rewrite the statute to accommodate them.”);
Precise Sys., Inc. v. United States, 120 Fed. Cl. 586, 602 n.18 (2015) (stating that this
“court has no authority to compel [a] reconciliation” of conflicting procurement
regulations); Colonial Press Int’l, Inc. v. United States, 113 Fed. Cl. 497, 524 (2013)
(stating that even “a positive policy argument” cannot provide a reason to contravene a
long-standing statutory interpretation), aff’d, 788 F.3d 1350 (Fed. Cir. 2015); McKing
Consulting Corp. v. United States, 78 Fed. Cl. 715, 722 n.12 (2007) (“Regardless of the
merits of the[] policy argument, th[is] Court is not empowered to make [procurement]
law.”).
5. The VA’s Price Evaluation of Land Shark’s Proposal Is Allegedly
Improper under FAR 8.404(d), 48 C.F.R. § 8.404(d) (2017), and
FAR 8.405-2(d), 48 C.F.R. § 8.405-2(d) (2017)
This section of plaintiff’s brief is difficult to summarize, so the court quotes
plaintiff’s argument in full:
The VA has argued that FAR 8.405-2(d) requires the contracting officer to
make an independent evaluation of LSS’s price reasonableness. The Plaintiff
disagrees with that argument because in this case LSS was asked to bid prices
per bin, not hourly labor rates. In practical terms, what 8.405-2(d) is saying
is that hourly labor rates for a given employee may be fair and reasonable as
listed on the FSS (e.g. Engineer I, $60.00/hour), but the Government must
still evaluate the labor categories that will perform specific tasks and the
labor mix for the entire project in order to determine whether the total bid
price is reasonable. See Advanced Tech. Sys., Inc., B-296493.6, at page 9,
(Oct. 6, 2006). LSS’s per-bin prices on [the FSS price-list] are reasonable
per 48 C.F.R. § 8.404(d) and the VA’s analysis of reasonable pricing should
have stopped at that point. There is no legal or regulatory basis for further
evaluation of LSS’s price reasonableness.
ECF No. 20-1 at 15-16. Thus, plaintiff relies on both FAR 8.404(d) and FAR 8.405-2(d)
to argue that the VA was not permitted to conduct a price reasonableness analysis of
Land Shark’s proposal.
Defendant has a number of counter-arguments which are persuasive on this topic.
First, as the government notes, simply because FAR 8.404(d) states that agencies are not
9
required, generally, to inquire into the reasonableness of FSS prices, that regulation does
not forbid them from doing so. ECF No. 21 at 13. Second, defendant suggests that in
this type of FSS procurement, which contains a statement of work, a price evaluation was
required by FAR 8.405-2(d), as referenced in FAR 8.404(d). ECF No. 21 at 13-14. The
court agrees with both of these arguments. The government then proceeds to parse a
number of related regulatory provisions to show that the VA was permitted to assess the
reasonableness of Land Shark’s overall price, in order to ensure that the best value
proposal was obtained. Id. at 14-15. The government concludes that “Land Shark’s
unsupported allegations rest entirely on a disingenuous reading of § 8.404 which ignores
the express requirement to independently evaluate the reasonableness of quoted FSS
prices when a statement of work is required, and to select FSS quotes which provide the
best value to the Government.” Id. at 16.
The court agrees with defendant that, under the FAR and the terms of the
solicitation, the VA was permitted to conduct an independent assessment of the
reasonableness of Land Shark’s overall price. The court also finds that the VA’s
determination that Land Shark’s price was not reasonable is adequately supported by the
record before the court. The agency’s price evaluation therefore survives this court’s
review under both the arbitrary and capricious standard and the violation of procurement
regulations standard.
C. Cascading Tiers of Preference
The final protest ground addressed in plaintiff’s motion is a multi-pronged attack
on the agency’s use of a cascading tier of set-asides. Fundamental to plaintiff’s argument
is the assertion that Land Shark’s prices were and are reasonable. See ECF No. 20-1 at
16 (stating that “the VA should have concluded that [Land Shark’s General Service
Administration (GSA)] Schedule prices were reasonable without further analysis per 48
C.F.R. § 8.404(d) and then awarded the contract to LSS as a fully qualified first-tier
SDVOSB with a reasonable price”); id. at 17 (“The fact of this matter is that LSS’s bid
price was fair and reasonable per 48 C.F.R. § 8.404(d).”); id. at 19 (“The VA acted
arbitrarily and capriciously and violated regulations and case law when it determined that
LSS’s bid price was not reasonable and imbalanced, and when it awarded the contract to
[SafeGuard] . . . .”). But as the court has found, there was no error in the agency’s
determination that Land Shark’s price was unreasonable. Thus, Land Shark’s overall
argument that the award to SafeGuard was improper, under various authorities, suffers
from an inaccurate factual premise and must be rejected.
The individual components of Land Shark’s argument regarding the priorities due
the sole SDVOSB offeror in this procurement are also unsound. The principal authorities
relied upon by plaintiff are as follows: (1) the Supreme Court’s decision in
Kingdomware; (2) this court’s decision in Greenleaf Construction Co. v. United States,
67 Fed. Cl. 350 (2005) (Greenleaf); (3) Veterans Affairs Acquisition Regulation (VAAR)
10
852.219-10, 48 C.F.R. § 852.219-10 (2017); and (4) FAR 19.1405(c), 48 C.F.R.
§ 19.1405(c) (2017). 4 None of these authorities is persuasive.
1. Kingdomware
Plaintiff argues that “[t]he VA’s application of its tiered and cascading order of
precedence award process violated . . . the Supreme Court’s ruling in the Kingdomware
case.” ECF No. 20-1 at 17. Plaintiff quotes a passage of the Supreme Court’s decision to
support plaintiff’s assertion that once the VA “satisfied the rule of two . . . , it was
required to award the contract to LSS.” Id. at 18 (quoting Kingdomware, 136 S. Ct. at
1976-77). Plaintiff’s reliance on Kingdomware is unavailing.
The Rule of Two discussed in Kingdomware is found at 38 U.S.C. § 8127(d)
(2012). According to the Supreme Court,
The Act’s “Rule of Two,” at issue here, provides that the Department [of
Veterans Affairs] “shall award” contracts by restricting competition for the
contract to service-disabled or other veteran-owned small businesses. To
restrict competition under the Act, the contracting officer must reasonably
expect that at least two of these businesses will submit offers and that “the
award can be made at a fair and reasonable price that offers best value to the
United States.”
Kingdomware, 136 S. Ct. at 1973-74 (citing 38 U.S.C. § 8127(d)). The Kingdomware
decision shows that the Rule of Two applies to FSS contracts. Id. at 1979. Although the
Supreme Court required a Rule of Two analysis for FSS acquisitions, it is important to
note that the Court did not specify the manner in which the Rule of Two search for
veteran-owned contractors would be accomplished. Id. at 1977 n.4.
Although plaintiff argues that the VA “satisfied” the Rule of Two, ECF No. 20-1
at 18, that statement is only partly correct. The VA in this procurement conducted a Rule
of Two analysis, as required by Kingdomware, but the VA did not find that this
procurement could be entirely set aside for veteran-owned businesses. See ECF No. 11 at
345, 620. As defendant notes, the solicitation clearly indicated that, in addition to
veteran-owned small businesses and SDVOSBs, small businesses and large businesses
were welcome to apply. ECF No. 21 at 18. The court sees no violation of Kingdomware
4
Plaintiff also cites generally to an article in a government contracts journal. ECF
No. 20-1 at 16-17. As the court noted when it denied plaintiff’s initial TRO and
preliminary injunction motion, a general citation to an entire article, with no explanation
as to the significance of specific passages in the article to the analysis required in this
case, is unhelpful to the court. ECF No. 18 at 2 & n.1 (order).
11
in the agency’s Rule of Two analysis, its use of a cascading system of preferences placing
SDVOSBs in the first tier, or in the selection of SafeGuard as contract awardee.
2. Greenleaf
Plaintiff relies on Greenleaf because that decision criticized a tiered-preference
system used in another procurement. ECF No. 20-1 at 16-17, 19. The Greenleaf decision
is not particularly helpful here, however, because the preference system at issue in that
case was not the one set forth in § 8127(d). See Greenleaf, 67 Fed. Cl. at 360 (citing the
small business Rule of Two set forth in FAR 19.502-2(b), 48 C.F.R. § 19.502-2(b)
(2017)). Thus, Greenleaf is not “a case directly on point,” as plaintiff contends. ECF No.
20-1 at 16.
To the extent that Greenleaf articulates the general principle that a cascading set of
tiered preferences cannot contravene procurement regulations, the court would agree.
See 67 Fed. Cl. at 356 (“While the justifications for cascading may be legitimate, they
cannot lead to a procedure that violates acquisition regulations.”). Plaintiff argues that
the cascading set of tiered preferences used by the VA in this procurement violated this
statement of the principle in Greenleaf: “[A]warding the contract to a non-SDVOSB
bidder by application of the tiered and cascading order of precedence award process
would violate acquisition regulations, which take precedence over the tiered and
cascading order of preference per the Greenleaf case.” ECF No. 20-1 at 19 (citing
Greenleaf, 67 Fed. Cl. at 356). Unfortunately for plaintiff, the VA’s cascading tier of
preferences has not been shown to violate any procurement regulations.
3. VAAR 852.219-10
Plaintiff notes, first, that the “full text” of VAAR 852.219-10 was included in the
solicitation. ECF No. 20-1 at 17 (citing ECF No. 11 at 323-24). Plaintiff also notes that
the title of VAAR 852.219-10 is “Notice of Total Service-Disabled Veteran-Owned
Small Business Set-Aside.” Id. However, as defendant notes, this solicitation was not a
total set-aside for SDVOSBs, because the agency’s Rule of Two analysis was
inconclusive as to the appropriateness of proceeding with this FSS acquisition as a total
SDVOSB set-aside. 5 ECF No. 21 at 17-18. Defendant argues, further, that plaintiff’s
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In plaintiff’s reply brief, a new argument is raised regarding the SDVOSB set-
aside nature of this procurement. ECF No. 22 at 14. Plaintiff was specifically warned
not to raise new arguments in its reply brief, as it had done before in an earlier round of
briefing. See ECF No. 18 at 2. Plaintiff’s new argument, based on notations on the
solicitation’s “Form 1449,” is deemed to be waived. See, e.g., Arakaki v. United States,
62 Fed. Cl. 244, 246 n.9 (2004) (“The court will not consider arguments that were
presented for the first time in a reply brief or after briefing was complete.” (citing
Novosteel SA v. United States, 284 F.3d 1261, 1274 (Fed. Cir. 2002); Cubic Def. Sys.,
Inc. v. United States, 45 Fed. Cl. 450, 467 (1999))). Even if this argument were not
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opportunity to challenge the cascading tier of preferences, because it was not a total
SDVOSB set-aside, was pre-award, not post-award. Id. at 18.
The court agrees with defendant’s analysis of the solicitation, with defendant’s
contention that the cascading preferences aspect of the procurement did not offend
VAAR 852.219-10, and with defendant’s assertion that plaintiff’s challenge to the
solicitation’s cascading tiers of preferences is untimely. It appears that VAAR
852.219-10 is routinely inserted into solicitations where SDVOSBs will be given highest
preference, through a system of cascading tiers of preferences, and where the
procurement will not be a total set-aside for SDVOSBs. See 48 C.F.R. §§ 819.7004,
819.7009 (2017). Moreover, if there was, indeed, a patent discrepancy between VAAR
852.219-10 and the cascading tiers of preferences set forth in the solicitation, plaintiff
should have protested that patent error before award, not in a post-award protest. See,
e.g., Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1313 (Fed. Cir. 2007)
(“We also hold that a party who has the opportunity to object to the terms of a
government solicitation containing a patent error and fails to do so prior to the close of
the bidding process waives its ability to raise the same objection subsequently in a bid
protest action in the Court of Federal Claims.”). For all of the above reasons, plaintiff’s
challenge to the award to SafeGuard must be rejected, because no violation of VAAR
852.219-10 has been shown.
4. FAR 19.1405
It is unclear whether FAR 19.1405 applies to this procurement. This regulation is
not mentioned in the solicitation, and by its language, appears to refer to total SDVOSB
set-aside procurements conducted by federal agencies, not cascading tiers of preferences
procurements conducted by the VA, in particular. Defendant argues that FAR 19.1405 is
not applicable here, but that even if it were, the VA is nonetheless permitted to not award
to a SDVOSB under this regulation when the price offered is not fair and reasonable.
ECF No. 21 at 17 n.1 (citing FAR 19.1405(c)).
The equivalent VAAR provision is found at VAAR 819.7005, 48 C.F.R.
§ 819.7005 (2017), which would appear to replace FAR 19.1405 for VA procurements.
See VAAR 801.104(b), 48 C.F.R. § 801.104(b) (2017) (“The FAR applies to VA
acquisitions except as provided in the VAAR.”). The VAAR regulation states that “[i]f
the contracting officer receives only one acceptable offer at a fair and reasonable price
from an eligible SDVOSB concern in response to a SDVOSB set-aside, the contracting
officer should make an award to that concern.” 48 C.F.R. § 819.7005(c) (emphasis
waived, it is unpersuasive, because the solicitation form cited by plaintiff is not marked
as a 100% SDVOSB set-aside. See ECF No. 11 at 285.
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added). Thus, under VAAR 819.7005(c), when the VA conducts a SDVOSB set-aside
procurement, a SDVOSB does not receive a contract award simply because it is the only
SDVOSB participating in the procurement, it must also submit an offer that has a fair and
reasonable price. 48 C.F.R. § 819.7005(c). The court must conclude, then, that even if
this were a total SDVOSB set-aside, which it is clearly not, Land Shark would not
receive the award under VAAR 819.7005 because its price was not reasonable. The court
sees no violation of applicable procurement regulations which govern SDVOSB set-
asides in the VA’s award to SafeGuard.
D. Preliminary Injunctive Relief Not Warranted
Plaintiff has not shown likelihood of success on the merits of its protest. This
failure weighs heavily against the issuance of a preliminary injunction. See, e.g., FMC
Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993) (“Absent a showing that a
movant is likely to succeed on the merits, we question whether the movant can ever be
entitled to a preliminary injunction unless some extraordinary injury or strong public
interest is also shown.”). Indeed, the Federal Circuit has held that an inability to show
likelihood of success on the merits is dispositive. See Nat’l Steel Car, Ltd. v. Canadian
Pac. Ry., Ltd., 357 F.3d 1319, 1325 (Fed. Cir. 2004) (stating that “a movant is not
entitled to a preliminary injunction if he fails to demonstrate a likelihood of success on
the merits”) (citation and footnote omitted). The court briefly discusses the other
injunctive relief factors.
Although the court agrees with plaintiff that the SDVOSB program is an important
tool that serves the public interest, ECF No. 22 at 17-18, the court cannot agree that an
injunction is required here to uphold the public interest targeted by that program.
Procurement efficiency and reasonable prices for contract services are also in the public
interest. Under the facts of this case, the greater public interest would be served by not
enjoining a contract award to the lowest-priced offeror, when the highest-priced offeror,
offering the same services for more than five times the price, has not shown that the
award was improper. See Wind Tower Trade Coal. v. United States, 741 F.3d 89, 101
(Fed. Cir. 2014) (agreeing with the lower court that “no strong public interest [in the
issuance of a preliminary injunction] was demonstrated” when the movant had failed to
show likelihood of success on the merits).
The court also finds that irreparable harm to plaintiff is not established because the
protestor has not shown likelihood of success on the merits. See Akal Sec., Inc. v. United
States, 87 Fed. Cl. 311, 319 (2009) (stating that the “strength or weakness of [the
protestor’s] merits arguments largely determines the court’s view of irreparable injury”).
Finally, there would be more harm to the VA and SafeGuard flowing from an
injunction of contract performance than there would be to plaintiff in the absence an
injunction, where plaintiff has not shown likelihood of success on the merits. Contract
performance began even before this protest was filed, and SafeGuard is already five
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months into performance of shredding services. ECF No. 1 at 5; ECF No. 11 at 625-27;
ECF No. 21 at 22. If Land Shark were to prevail in its protest, an orderly transition to a
new contract award would mitigate any harm that Land Shark would experience in the
absence of an injunction.
When all four of the injunctive relief factors are considered, plaintiff’s renewed
request for a TRO and a preliminary injunction must be DENIED.
IV. Conclusion
Accordingly,
(1) Plaintiff’s renewed temporary restraining order and preliminary injunction
motion, ECF No. 20, is DENIED;
(2) On or before March 22, 2019, the parties shall CONFER and FILE a
proposed redacted version of this opinion, with any competition-sensitive
or otherwise protectable information blacked out; and,
(3) On or before March 22, 2019, the parties shall CONFER and FILE a
joint status report proposing the next steps toward a resolution of this
litigation.
IT IS SO ORDERED.
s/Patricia E. Campbell-Smith
PATRICIA E. CAMPBELL-SMITH
Judge
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