Supplycore Inc. v. United States

In the Cited States Court of Federal Claims

No. 21-1861C
Filed Under Seal: December 28, 2021
Unsealed and Refiled: January 10, 2022!

BUG OCIGIG IG IGIORIOCI ICI ICIOR IRIE KIRK
SUPPLYCORE INC.,
Plaintiff,
Vv.
THE UNITED STATES,
Defendant.
and

NOBLE SALES CO., INC., d/b/a
NOBLE SUPPLY AND LOGISTICS

2
and

PAE-IMK INTERNATIONAL, LLC,

Defendant-Intervenors.

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OPINION AND ORDER
DAMICH, Senior Judge

On September 15, 2021, Plaintiff SupplyCore, Inc. (“Plaintiff”), filed this post-award bid
protest challenging the United States Government’s (“Government”) award of two contracts
under request for proposals (“RFP”) No. SPE8E3-19-R-0001, issued by the Defense Logistics
Agency — Troop Support (“DLA”). The RFP concerns a program related to DLA’s construction
and equipment supply chain — called “Maintenance, Repair and Supply Operations” (“MRO”)
for the United States military in the Pacific Region. The two contracts reflect a division of the

‘This Court’s sealed Opinion and Order, issued on December 28, 2021, directed the
parties to file redactions “within ten (10) days.” ECF No. 37 at 22. Supplycore, Inc., Noble
Sales Co., PAE-IMK International, LLC, and the Government jointly agreed on the redactions
herein.
Pacific into two zones: Zone 1 comprises Japan, Okinawa, Singapore, Diego Garcia, the
Philippines, and Thailand, and Zone 2 comprises the Republic of Korea. SupplyCore challenges
DLA’s May 13, 2021 award of the Zone 1 Contract to Defendant-Intervenor, Noble Supply &
Logistics (“Noble), and the award of the Zone 2 Contract to Defendant-Intervenor, PAE-IMK
International, LLC (“PAE”).

Concerning Zone 2, SupplyCore argues successfully that a finding of “meaningful
discussions” between DLA and SupplyCore is contaminated by DLA’s representations to
SupplyCore and PAE. DLA informed awardee PAE that its proposed Round 3 distribution fee
price XXXXXXXXXXXXXXXXXXX “cannot be determined fair and reasonable,” but
conveyed no such message in response to SupplyCore’s Round 3 distribution fee price
XXXXXXXXXXXXXXXX. On top of this, despite DLA’s warning to PAE about its pricing,
DLA then awarded the contract to PAE even though PAE declined to lower its putatively
unreasonable pricing.

Concerning Zone 1, SupplyCore argues that DLA’s reasonableness evaluation was
arbitrary and capricious because the agency either (A) failed to conduct a reasonableness
analysis or (B) conducted such an analysis, but failed to find SupplyCore’s pricing
unreasonable.” SupplyCore additionally contends that discussions were inadequate because its
pricing constituted a “significant weakness,” triggering a notification requirement to which DLA
did not adhere. However, the Government convincingly responds that SupplyCore’s pricing
could reasonably be regarded as high, but not unreasonably high, reflecting SupplyCore’s chosen
approach and business judgment.

The Court issued an order on September 20, 2021 granting (A) Plaintiff's Motion to Seal
and (B) the Parties’ proposed briefing schedule. ECF No. 16. On October 15, 2021, the
Government filed the Administrative Record (“AR”) under Seal, and then re-filed part of the AR
on November 2, 2021. ECF No’s 23-24, 28.

On November 4, 2021, Plaintiff filed its Motion for Judgment on the Administrative
Record. ECF No. 29. The Defendant and the two Defendant-Intervenors (Noble and PAE) each
filed Cross Motions for Judgment on the Administrative Record on November 23, 2021. ECF
No’s 30-32. The case was fully briefed as of December 8, 2021.

After careful consideration, and for the reasons set forth below, the Court GRANTS
Plaintiff's Motion for Judgment on the Administrative Record with respect to the Zone 2
Contract and accordingly GRANTS Plaintiff’s requested Injunction. The Court DENIES
Plaintiff's Motion for Judgment on the Administrative Record with respect to the Zone 1
Contract. Therefore, the Court DENIES Defendant’s Cross Motion for Judgement on the
Administrative Record with respect to the Zone 2 contract and GRANTS Defendant’s Motion
with respect to the Zone 1 contract. The Court further DENIES Defendant-Intervenor PAE’s

? Ordinarily, a contractor would not want its pricing to be found unreasonable. However,
in the event the contracting officer finds the pricing to be unreasonable, the contractor could
request discussions with the contracting officer to justify its price or the contractor could adjust
its pricing based on the unreasonable finding.
Cross Motion for Judgment on the Administrative Record and GRANTS Defendant-Intervenor
Noble’s Motion for Judgment on the Administrative Record.

Because of the distinctions between the two contracts and the grant of an Injunction with
respect to the Zone 2 Contract, this opinion presents the facts and discussion regarding Zone 2
first, followed by the facts and discussion concerning Zone 1.

L Standard of Review

A. Standard for Motion for Judgment on The Administrative Record

This Court decides a motion for judgment upon the administrative record pursuant to
RCFC 52.1. The Court determines whether “given all the disputed and undisputed facts, a party
has met its burden of proof based on the evidence in the record.” Bannum, Inc. v. United States,
404 F.3d 1346, 1356-57 (Fed. Cir. 2005). “[T]he judgment on an administrative record is
properly understood as intending to provide for an expedited trial on the record.” /d. at 1356.

B. Bid Protest Standard of Review

In a bid protest, the trial court “review[s] the agency’s decision pursuant to the standards
set forth in section 706 of Title 5,” the Administrative Procedure Act (“APA”). 28 U.S.C. §
1491(b)(4); see Banknote Corp. of Am., Inc. v. United States, 365 F.3d 1345, 1350 (Fed. Cir.
2004). An APA challenge requires showing that the agency action in question is "arbitrary,
capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C.
§706(2)(A); Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332 n.5 (Fed. Cir. 2001). Accordingly, "[a] bid award may be set aside" if (1) "the procurement
official's decision lacked a rational basis" or (2) "the procurement procedure involved a violation
of regulation or procedure." WellPoint Mil. Care Corp. v. United States, 953 F.3d 1373, 1377
(Fed. Cir. 2020) (quoting /mpresa, 238 F.3d at 1332). The APA also requires that "due account
shall be taken of the rule of prejudicial error." 5 USC 706. So, "[t]o prevail in a bid protest, a
protestor must show a significant, prejudicial error in the procurement process." WellPoint, 953
F.3d at 1377 (quoting A/fa Laval Separation, Inc. v. United States, 175 F.3d 1365, 1367 (Fed.
Cir. 1999)); see also Bannum, 404 F.3d at 1351.

In reviewing the agency’s procurement decisions, the Court does not substitute its
judgment for that of the agency. Redland Genstar, Inc. v. United States, 39 Fed. Cl. 220 (1997);
Cincom Sys., Inc. v. United States, 37 Fed. Cl. 663, 672 (1997), see also M.W. Kellogg Co. v.
United States, 10 Cl. Ct. 17, 23 (1986) (holding that “deference must be afforded to an agency’s .
. . procurement decisions if they have a rational basis and do not violate applicable law or
regulations.”). The disappointed bidder “bears a heavy burden,” and the contracting officer is
“entitled to exercise discretion upon a broad range of issues confronting [her].” /mpresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001)
(citations and quotes omitted). This burden “is not met by reliance on [the] pleadings alone, or
by conclusory allegations and generalities.” Bromley Contracting Co. v. United States, 15 Cl. Ct.
100, 105 (1988); see also Campbell v. United States, 2 Cl. Ct. 247, 249 (1983). A procurement
decision is rational if “the contracting agency provided a coherent and reasonable explanation of
its exercise of discretion.” /mpresa, 238 F.3d at 1333. But “that explanation need not be
extensive.” Bannum, Inc. v. United States, 91 Fed. Cl. 160, 172 (2009) (citing Camp v. Pitts,
411 U.S. 138, 142-43 (1973)).

The Court’s “highly deferential” review such that “the disappointed offeror bears a
‘heavy burden’ of showing that the award decision ‘had no rational basis’ is particularly the case
with respect to matters requiring technical judgment. See, e.g., Benchmade Knife Co., Inc. v.
United States, 79 Fed. Cl. 731, 740 (2007) (‘Agencies are entitled to considerable discretion and
deference in matters requiring exercise of technical judgment.”); Beta Analytics Int'l, Inc. v.
United States, 67 Fed. Cl. 384, 395 (2005) (“the minutiae of the procurement process . . . involve
discretionary determinations of procurement officials that a court will not second guess.”)
(quoting EW. Bliss Co. v. United States, 77 F.3d 445, 449 (Fed. Cir. 1996)). The protester’s
mere disagreement with the agency’s assessment is not “nearly enough” to demonstrate arbitrary
and capricious agency action. See CRAssociates, Inc. v. United States, 102 Fed. Cl. 698, 717-18
(2012).

I. Zone 2 Contract: Agency Evaluation

Under the terms of the solicitation, the DLA would evaluate proposals using three
factors: (1) Technical Merit (subfactors: (1) Product Sourcing, (i1) Distribution and Delivery, and
(iii) Customer Support), (2) Past Performance/Confidence Assessment and (3) Price. AR 304-
05. Offerors were further instructed that “non-price evaluation factors were significantly more
important than price; however, as the non-price ratings of offerors became more equivalent, price
became more important.” AR 303-04.

The DLA received five timely offers for the Zone 2 contract. The DLA determined that
all five Zone 2 offerors would be included in the competitive range. AR 2031; AR 2093.
Discussions followed, during which offerors for Zone 2 were asked to validate or improve their
pricing. See AR 2081-93; 4370-4388; see also AR 4579-80 (PNM, Zone 2).

The DLA conducted three rounds of discussions with each Zone 2 offeror. See, e.g., AR
4370-4388; see also AR 3108-12; 3126-29; 3147-52; 3706-3725; 3728-65. XXXXXXXXXX
XXXXXXXXXXXXKXXXKKXXXXKKXXXXXXXXKKXXXKXXXKXK? XKKXXXKXXXXK
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. AR 3270-4388. SupplyCore’s Round 3
Distribution fees totaled XXXXXXXXXXX, while PAE’s totaled XXXXXXX — a disparity of
approximately XXXXXXX. AR 4385.

Pertinent to this, in Round 3 of the discussions, DLA advised PAE:

> Distribution Matrix (Drop Ship):
e Please ensure pricing is accurate for all distribution fee tiers. The distribution
matrix (drop ship) pricing appears to be significantly unbalanced across the various

3 Drop-shipped material is material delivered by a prime vendor’s supplier directly to the
Government customer. AR 240. In a prime vendor supported delivery (7.e., non-drop ship), the
prime vendor acts as middleman, receiving material from its supplier, then shipping it to the
Government customer. /d.
fee tiers. Please take note of FAR 15.404-1(g)(3)(“An offer may be rejected if the
contracting officer determines that the lack of balance poses an unacceptable risk
to the Government.”)

e Pricing Period 1
« Please improve pricing for the following distribution fee tiers: XXXXX
XXXX. Please note that the pricing proposed for tiers XXXXXXX
specifically cannot be determined fair and reasonable.

e Pricing Period 2
« Please improve pricing for the following distribution fee tiers: XXXXX
XXXX. Please note that the pricing proposed for tiers XXXXXXX
specifically cannot be determined fair and reasonable.

e Pricing Period 3
« Please improve pricing for the following distribution fee tiers: XXXXX
XXXXX. Please note that the pricing proposed for tiers XXXXXX
specifically cannot be determined fair and reasonable.

> Distribution Matrix (Non-Drop Ship):

e Please ensure pricing is accurate for all distribution fee tiers. The distribution matrix
(non-drop ship) pricing appears to be significantly unbalanced across the various
fee tiers. Please take note of FAR 15.404-1(g)(3)(‘An offer may be rejected if the
contracting officer determines that the lack of balance poses an unacceptable risk
to the Government.”)

e Pricing Period 1
o Please improve pricing for the following distribution fee tiers: XXXXXXX
XXXXXXXXXXXXXX. Please note that the pricing proposed for tiers X
XXXXXXX specifically cannot be determined fair and reasonable.

e Pricing Period 2
« Please improve pricing for the following distribution fee tiers: XXXXXXXX
XXXXXXXXXXXXXX. Please note that the pricing proposed for tiers
XXXXXXXXX specifically cannot be determined fair and reasonable.

e Pricing Period 3
« Please improve pricing for the following distribution fee tiers: XXXXXXXX
XXXXXXXXXXXXXXX. Please note that the pricing proposed for tiers
XXXXXXXXXX specifically cannot be determined fair and reasonable.
AR 3744-45.

In contrast, DLA advised SupplyCore:

> Distribution Matrix (Drop Ship):
e Pricing Period 1
« Please review and improve pricing on XX distribution fee tiers.

e Pricing Period 2
« Please review and improve pricing on XX distribution fee tiers.

e Pricing Period 3
« Please review and improve pricing on XX distribution fee tiers.

> Distribution Matrix (Non-Drop Ship):
e Pricing Period 1
« Please review and improve pricing on XX distribution fee tiers.

e Pricing Period 2
« Please review and improve pricing on XX distribution fee tiers.

e Pricing Period 3
« Please review and improve pricing on XX distribution fee tiers.

AR 3748-49. Thus, in contrast to PAE, SupplyCore was not advised that its distribution fee
pricing “cannot be determined fair and reasonable” even though its distribution fee price was
XXXXXXX higher than PAE’s. See id. The Round 3 warning to PAE about its distribution fee
prices is also somewhat surprising because PAE’s Round 3 distribution fee price was essentially
identical to Rounds 1 and 2. See AR 4378: 4381; 4385.

Then, despite DLA’s Round 3 warning to PAE that some of its distribution fees “cannot
be determined fair and reasonable,” PAE declined to reduce its distribution price, submitting an
identical final distribution price of XXXXXXXX (and was awarded the contract in any case).
AR 4388. SupplyCore, which was only advised to “improve” its pricing, submitted a final
distribution fee of XXXXXXXXXXKXKXKKXXKKXXKXXX. Jd.

The Source Selection Authority’s (“SSA”) Factor 1 (Technical Merit) analysis ascribed
“good” ratings to both PAE and SupplyCore. See AR 4570. Underpinning the Technical Merit
analysis, PAE and SupplyCore received matching “Good,” “Good,” and “Acceptable” ratings for
Subfactors 1(a-c). AR 4765. SupplyCore had a better rating than PAE on Past Performance:
“Substantial Confidence” in the case of SupplyCore, “Satisfactory Confidence” in the case of
PAE.

PAE-IMK SupplyCore
TECHNICAL MERIT GOOD GOOD
(a) Product Sourcing Good Good
(b) Distribution and Delivery Good Good

(c) Customer Support Acceptable Acceptable

PAST PERFORMANCE SATISFACTORY SUBSTANTIAL
CONFIDENCE ASSESSMENT CONFIDENCE CONFIDENCE
See AR 4570.

However, the SSA also found that XXXXKXXXXXXKXXXXXXX XXX XXX XXX XXX
XXXXXXXKXXKXXXKXKXKKXXXKXKXKXXKKX. AR 4766-67. Although SupplyCore
registered a higher Factor 2 performance confidence assessment than PAE, PAE’s Total
Evaluated Price (“TEP”) of $17.3 million was far below SupplyCore’s TEP of XXXXX;
therefore, the SSA determined that SupplyCore’s higher past performance rating did not justify
paying a XXXX percent premium above PAEF’s price. AR 4768, 4772. SSA thereby awarded
PAE the Zone 2 contract over SupplyCore. Jd.

III. Zone 2 Contract: Discussion

A. The Agency’s Round 3 Instruction to PAE Violates the Requirement for
Meaningful Discussions.

FAR 15.306(d)(3) mandates that when Government contracting officers engage with
bidders, such discussions must be meaningful, “[a]t a mimimum, . . . indicat[ing] to or
discuss[ing] with, each offeror still being considered for award, deficiencies, [and] significant
weaknesses.” In addition, FAR § 15.306(e)(1) prohibits government personnel from engaging in
conduct that "[f]avors one offeror over another, [such as when an agency] tells some offerors, but
not others, that their prices were high.” AshBritt, Inc. v. United States, 87 Fed. Cl. 344, 372
(2009). Therefore, “[t]he Government may not inform some offerors of a concern with their
pricing level while staying silent with respect to identical issues in other offerors' proposals.”
AshBritt, Inc. v. United States, 87 Fed. Cl. 344, 372 (2009) (citing Mu/timax, Inc., No. B-
298249.6, 2006 Comp. Gen. Proc. Dec. P 165, 14-15 (Oct. 24, 2006) (finding price discussions
unequal where the agency advised some offerors that prices were high in comparison with the
Independent Government Estimate while not advising others whose prices were even higher)).

In AshBritt, the agency warned the eventual awardee that its line-item prices were excessive,
“suggest[ing]” that the awardee lower its prices, while the protester, whose prices were even
higher than those of the awardee, did not receive such notice from the agency. As/Britt, Inc., 87
Fed. Cl. at 372.

While AshBritt requires that agencies may not tell some offerors but not others that their
prices were excessively high, disparate prices may be found reasonable or unreasonable relative
to their distinctive technical approaches — in other words, hypothetically, if Proposal A is $12
million and Proposal B is $40 million, an agency may possibly find that the price of Proposal A
is unreasonably high while finding the price of Proposal B reasonable. See DynCorp Int’l, LLC
v. United States, 10 F.4th 1300, 1316-17 (Fed Cir. 2020) (finding that disparate prices may be
found reasonable or unreasonable relative to different technical approaches, and that proposal-to-
proposal price comparisons are not required).
The fact pattern of the Zone 2 contract awards process resembles that in Ashbritt: the
protestor’s (SupplyCore’s) prices were higher than those of the awardee (PAE), but the agency
(DLA) warned the awardee and not the protestor of excessive pricing. In Round 3, DLA directed
both bidders to improve their pricing, but distinctively warned only PAE, in boldface, that its
distribution fee price XXXXXXXXX “cannot be determined fair and reasonable,” without
transmitting such a warning to SupplyCore, whose distribution fees were XXXXXXX. See AR
3744-45; 3748-49; 4385.

In their respective briefs, the parties present arguments about the significance of an
agency directing bidders to “improve” pricing. SupplyCore construes the “improve” instruction
as a routine bargaining communication interpreted by SupplyCore as conveying “that it was in
the hunt and that making minor reductions was all that was needed to position it for award.” See
ECF No. 29 at 16-17. SupplyCore also points out the high frequency with which this instruction
was conveyed to bidders in this case (for both Zone 1 and Zone 2) and thereby contends that “it
cannot be argued by the Agency that the requests for reduced pricing were intended to convey to
SupplyCore that its pricing was unreasonably high or that significant reductions were required in
order for SupplyCore to be competitive for award.” ECF No. 29 at 17. Conversely, the
Government and defendants-intervenors take the position that DLA advising SupplyCore to
“improve” many of the prices underlying components of its bid fully indicated to SupplyCore
that its pricing was too high. See, e.g., ECF No. 31 at 24.

While both of these arguments about the relative significance of the “improve” pricing
instruction may have merit, separately, the clear warning, in boldface, that pricing “cannot be
determined fair and reasonable,” is an evident instruction that a bidder’s pricing is outside
viable contention. Furthermore, this instruction was sent to PAE and not to SupplyCore even
though SupplyCore’s price was XXXXXX higher. In addition, in spite of DLA’s clear warning
to PAE that its distribution pricing could not be found reasonable, PAE held firm in its prices,
declining to make further reductions for the final bid submission. See AR 4385-88. Then,
despite PAE evidently disregarding the warning, the agency then awarded the contract to PAE.
These two facts together — (1) the Round 3 warning sent to PAE and not to SupplyCore and (2)
the award to PAE despite the fact that it declined to respond to the warning of an unreasonably
high price — lead this Court to hold that DLA’s award to PAE was arbitrary and capricious.*

In its reply brief, the Government dismisses SupplyCore’s argument regarding the
requirement for “meaningful discussions” as a “new argument” which may not be raised for the
first time in a reply brief. ECF No. 35 at 15. Specifically, SupplyCore argued that DLA’s
Round 3 warning to PAE did not qualify under the requirement for meaningful discussions.

* To reiterate, the Court recognizes that distinctions between the respective technical
approaches of offerors could possibly explain and justify DLA sending an “unreasonable price”
notice to PAE and not to SupplyCore even though SupplyCore’s price was XXXXXXXXXX.
See DynCorp Int’l, LLC v. United States, 10 Fed. 4h 1300, 1316-17 (Fed Cir. 2020) (finding that
disparate prices may be found reasonable or unreasonable relative to different technical
approaches, and that proposal-to-proposal price comparisons are not required). However, in
Zone 2, this occurred in conjunction with PAE disregarding the “unreasonable” price notice and
not reducing its price in response, and then being awarded the contract anyway.

8
While it is true that SupplyCore’s opening brief did not allege “unequal discussions” or quote the
DLA’s warning to PAE, SupplyCore’s brief does raise the issue of “misleading” discussions, and
widely contends that the instruction to “improve” pricing did not adequately notice SupplyCore
about the viability of its distribution fees (with a citation including the pages of the
Administrative Record containing the Round 3 PAE distribution fee warning). ECF No. 29 at
17. In effect, the Government asks this Court to assess SupplyCore’s opening brief arguments
that meaningful discussions were not held while disregarding the fact of the warning to PAE.
Such an approach would exalt form over function. Also, because this proceeding reflects two
rounds of briefs, the Government has had a reasonable opportunity to respond to SupplyCore’s
reply brief.

Challenging a procurement award requires a showing that the agency action in question
was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5
U.S.C. §706(2)(A). The Court holds that DLA’s Round 3 unreasonable price warning to PAE
and not to SupplyCore plus DLA’s award to PAE despite the fact that PAE declined to respond
to the unreasonable price warning amounts to an arbitrary and capricious award decision.

B. Finding of Prejudice and Award of Injunction

To establish prejudice, the protestor must demonstrate that there was a "substantial
chance" it would have received the award but for the errors in the procurement process.
Bannum, Inc. v. United States, 404 F.3d 1346, 1355 (Fed. Cir. 2005).

The administrative record confirms that per the solicitation, price became an issue for the
Zone 2 contract because the PAE and SupplyCore bids were otherwise close. PAE and
SupplyCore received matching “good” ratings for Factor 1, XXXXXXXXXXXXXXXXKX
XXXXXXXXXKXKKKXXXXKXXXXXXXXXXXXXXXX. AR 4766-67. Then SupplyCore
registered a higher Factor 2 (performance confidence) rating than did PAE. AR 4570. This
apparent proximity between PAE and SupplyCore raised the issue of price: the solicitation stated
that “as the non-price ratings of offerors became more equivalent, price became more
important.” AR 303-04. The SSA thereby determined that SupplyCore’s higher performance
rating did not justify paying a XX XX percent premium over PAE’s price. AR 4768, 4772. The
apparent role played by price in awarding the Zone 2 contract to PAE over SupplyCore certainly
suggests that had SupplyCore received a similar warning that its distribution pricing “cannot be
determined fair and reasonable” and responded, SupplyCore would have had a “substantial
chance” to qualify for the award. The misaligned feedback to SupplyCore and PAE plus the
award to PAE despite the Round “unreasonable price finding” discussions prejudiced
SupplyCore.

To obtain a permanent injunction, a party must show that: (1) it has succeeded on the
merits; (2) it will suffer irreparable harm if such relief is not granted; (3) the balance of the
hardships tips in the movant's favor; and (4) an injunction will serve the public interest. See
Hawpe Constr., Inc. v. United States, 46 Fed. Cl. 571, 582 (2000), aff'd, 10 F. App’x 957 (Fed
Cir. 2001). No one factor is dispositive, and "the weakness of the showing regarding one factor
may be overborne by the strength of the others." FMC Corp. v. United States, 3 F.3d 424, 427
(Fed Cir. 1993).
Because SupplyCore succeeds on the merits, the Court grants a Permanent Injunction for
the Zone 2 contract.

IV. Zone 1 Contract: Factual Context and Agency Evaluation
A. Background

On August 27, 2019, the DLA issued the RFP for the Zone 1 and Zone 2 contracts,
reflecting a single DLA program for indefinite delivery and indefinite quantity. The estimated
value of the Zone 1 contract was $75 million, with a five-year maximum of $562.6 million. AR
226-27. The RFP advised that several thousand delivery orders would be required annually in
each zone, and that offerors that they could submit proposals for one or both zones, with the
caveat that a single offeror could receive only one award, except in limited circumstances. AR
226; AR 228; AR 636-37. (RFP Amd. 0008.)

As noted above, the RFP established that awards would be made “to the offeror whose
proposal is most advantageous to the Government considering non-price evaluation factors and
price.” AR 228; AR 306. Offerors were further instructed that “non-price evaluation factors
were significantly more important than price; however, as the non-price ratings of offerors
became more equivalent, price became more important.” AR 303-04.

Specifically, the DLA would evaluate proposals using three factors: (1) Technical Merit,
(2) Past Performance/Confidence Assessment and (3) Price. AR 304-05.

Factor 1, Technical Merit, was to be broken down into three sub-factors: (1) Product
Sourcing, (11) Distribution and Delivery, and (i11) Customer Support; the sub-factors would be
weighed equally, and respectively assessed with a rating of Outstanding, Good, Acceptable,
Marginal, or Unacceptable. See, e.g., AR 7251. The subfactors’ ratings would then be “rolled
up” into the general rating of either Outstanding, Good, Acceptable, Marginal, or Unacceptable.
Id.

Factor 2, Past Performance Confidence Assessment, would be assigned one rating known
as the “Performance Confidence Assessment.” To make this assessment, the Government would
evaluate two aspects of Past Performance: (A) Relevancy (Very Relevant, Relevant, Somewhat
Relevant, or Not Relevant) and (B) Quality (Outstanding, Good, Acceptable, Marginal,
Unacceptable or Neutral). See, e.g., AR 7746-47.

10
For Price, offerors were instructed to submit pricing information for (A) acquisitions
(“PEL”)? and (B) distribution fees® corresponding to specific line items. AR 226. Thus, the
“Total Evaluated Price” (“TEP”) reflected the sum of each offeror’s aggregate acquisitions
prices, aggregate distribution prices and some additional prices: “the TEP for purposes of
evaluation of award was determined using a fixed formula, using aggregate pricing calculated
based upon the offerors’ line-item submissions for the various pricing elements.” AR 310. Also,
importantly, the solicitation specified that price reasonableness analysis would be conducted at
the line-item level, i.e., there would be no general evaluation of a bidder’s TEP — rather, the
evaluations would be focused on the various PEL items and distribution fees, comparing the bids
against one another, against historical pricing, and to the Government’s negotiation objectives.
See AR 1816-20. Pricing analysis would be conducted using “accepted price analysis methods.”
AR 309-10; see also AR 304-06 (Addendum to FAR 52.212-2). The solicitation did not require
any particular method for this analysis but mentioned several types of price reasonableness
evaluation methods including “comparison of offers to each other, comparison with market
research, and comparison with prior procurements.” AR 304-06; 309-10.

B. The Agency’s Evaluations of the Zone 1 Contract

The DLA received three timely offers for the Zone 1 contract. Following submission of
the initial proposals, the DLA developed minimum and maximum price objectives across the
different categories of pricing (e.g., anticipated acquisitions and distribution costs) and combined
these into total aggregate minimum and maximum price objectives. See AR 4076-82 (Final
Pricing Analysis, Zone 1); AR 4421-22 (Price Negotiation Memorandum, Zone 1).

The initial Price Submissions and Government Maximum objectives for Zone 1 were as
follows:

Noble SupplyCore | XXXXXX

PEL (Drop Ship and Non-Drop Ship)

Drop Ship Distribution Fee XXXXXXX | XXXXXXKXK | XXXKXKXX
Non-Drop Ship Distribution Fee XXXXXXXK| XXXXXKXX | XXXXXXXK

Combined Distribution Fees (Drop Ship

> Acquisition prices comprise the actual invoice price of the product or incidental service
paid by the prime vendor (contractor) to its sub-contractor or supplies. AR 239. The RFP
included a Price Evaluation List (PEL) of 450 line items for each zone, requiring acquisition
ceiling prices for 95% of the items (i.e. 428 items). AR 225. “All items offered w[ere to] be
evaluated in accordance with FAR Subsection 15.404-1(b) ‘Price Analysis.’” AR 310.

° Distribution fees were specifically defined as “fixed ceiling prices for each line item
which represent all elements of the contract price other than the acquisition price.”

ll

plus Non-Drop Ship) XXXXXXK | XXXKXXKX | XXXXXXKX
Government MAXIMUM Distribution

Fees XXXXXKXXK | XXXXXXX] XXXXXXX
Incidental Service Scenario XXXXX XXXXX XXXXX
Storefront Scenario XXXXXX XXXXXX | XXXXXXX
TOTAL EVALUATED PRICE (TEP) XXXXKXKK | XXXXXXKK | XXKXKKKK
Government MAXIMUM TEP XXXXXXK | XXXXXXKXK | XXXXKKKX

AR 1822; 4078-82.

DLA determined that all three Zone 1 offerors would be included in the competitive
range. AR 2031; AR 2093. Discussions followed, during which offerors were asked to validate
or “improve” their pricing. See AR 2081-93; see also AR 4423-24 (PNM, Zone 1).

The DLA conducted three rounds of discussions with each offeror. See AR 4078-93; see
also AR 3108-12; 3126-29; 3147-52; 3706-25; 3728-65. SupplyCore was asked to improve its
acquisition pricing on hundreds of items for all three rounds of the discussions of the Zone 1
contract. See AR 7749 (summarizing requests). XXXXXXXXXXXXXXXXXXKXXXKKKX
XXXXXXKXKXXXKXXKKKKKKKKKKKKKKKKKKK KX KK KKK KKK KXXKKKKKKKKK
XXXXXXXXXXXXXKXKXKXKXXXXKXXKXXXKXXKKXKXXXXXKXXXX. Accordingly, during
the bidding process, SupplyCore was repeatedly advised to “improve” its distribution pricing. In
Round 1, SupplyCore was advised:

> Distribution Matrix (Drop Ship):
e For Pricing Periods 1, 2, and 3 please review and improve pricing for the following
distribution tiers: XXXXXXXXXXXXXKXKXXKXXXKKXXKKXXKKXKKKXKK
XXXX.

> Distribution Matrix (Non-Drop Ship):
e For Pricing Periods 1, 2, and 3 please review and improve pricing for the following
distribution tiers: XXXXXXXXXXXXXXXXXXKXKXXXKXKXKKXKXXXKKKKX
XXXX.

AR 2132.

In Round 2, SupplyCore was advised:

> Distribution Matrix (Drop Ship):
e For Pricing Periods 1, 2, and 3 please review and improve pricing for XXX
distribution tiers: XXXXXXXXXXXXXXXXKXKKKKKKKKKKKKXKKKXK
XXXX.

12
> Distribution Matrix (Non-Drop Ship):
e For pricing Periods 1, 2, and 3 please review and improve pricing for XXX
distribution tiers: XXXXXXXXXXXXXXXXXXXXXXKXXXXXXXKXKXX
XXXX.

AR 2224.
In Round 3, SupplyCore was advised:

> Distribution Matrix (Drop Ship):
e For Pricing Periods 1, 2, and 3 please review and improve pricing for the following
distribution tiers: XXXXXXXXXXXXXXXXXXXKKKKKKKKKKXXKXXKXXX
XXXX.

> Distribution Matrix (Non-Drop Ship):
e For Pricing Periods 1, 2, and 3 please review and improve pricing for the following
distribution tiers: XXXXXXXXXXXXXXXXXXXXXXKXXXXXXXKXXXXXX
XXXX.

AR 2873. The Government’s estimated maximum total price for distribution fees was XXXX
XXXX. SupplyCore’s total distribution price in Round 1 was XXXXXXX; for Round 2 it was
not reduced at all and stayed at XX XXXXX; for Round 3 it was XXXXXXXX; and
SupplyCore’s final distribution price was XXXXXXX — in the end, XXXXXX above the
Government’s estimated maximum. AR 4079, 4084, 4086, 4089, 4092.

By comparison, Noble’s total distribution price in Round 1 was XXXXXX; for Round 2
it was XXXXXX; for Round 3 it was XXXXXXX; and Noble’s final distribution price was XX
XXXX. AR 4084; 4086; 4089; 4092. Like SupplyCore, Noble was instructed to “review and
improve pricing” for certain distribution tiers — however, distinct from the feedback to
SupplyCore, DLA requested “improve[ment]” on prices in only some distribution tiers, whereas
for SupplyCore, this instruction was directed to “XXX” distribution tiers. See AR 2103 (Round
1); AR 2162-63 (Round 2); AR 2859 (Round 3). By the end of the discussions process, in
Round 3, Noble was asked to improve pricing for XXXXXXX Drop Ship tiers and XXXXX
XX Non-Drop Ship tiers. AR 2859.

Thus, while SupplyCore was repeatedly and broadly advised to “improve” its distribution
pricing, including an emphasis that this applied to “XX” distribution tiers, SupplyCore was not
warned expressly about the disparity between the Government’s targeted maximum distribution
fee and SupplyCore’s proposed price. In other words, DLA never made a finding (or stated) that
SupplyCore’s bids for the Zone 1 were unreasonably high.

For the Zone 1 contract, the SSA’s Factor 1 (Technical Merit) analysis ascribed “good”
ratings to both Noble and SupplyCore — however, the SSA also found Noble’s proposal was
stronger than SupplyCore’s, namely under Subfactors 1(a) (Product Sourcing) and 1(c) Customer
Support, while SupplyCore’s proposal as only “slightly more favorable” than Noble’s under
Subfactor 1(b) (Distribution and Delivery). See generally AR 4539-4567. The SSA found that

13
SupplyCore’s Factor 2 Past Performance Confidence Assessment rating was higher than Noble’s,
but that Noble’s rating was “satisfactory.” AR 4558, 4561-62. Ultimately, SupplyCore’s higher
past performance rating relative to Noble was found to “not outweigh the greater technical
benefit offered by Noble’s proposal, which was more important to the evaluation.” Jd.

Since Noble and SupplyCore were close regarding Factors 1 and 2, the SSA turned to
Price and observed that Noble’s Total Evaluated Price (“TEP”), $16.2 million, was far lower
than SupplyCore’s TEP of XXXXXXX, and found that SupplyCore’s superior Factor 2 rating
did not justify selecting SupplyCore given that SupplyCore’s TEP was XXX XXX higher than
Noble’s technically superior proposal. See AR 7756. Therefore, the SSA awarded the Zone 1
contract to Noble over SupplyCore. AR 4562, 4567.

The contracts for both Zone 1 and Zone 2 were awarded in May 2021. SupplyCore
requested and received two rounds of debriefing for each of the two contracts. See AR Tabs 281,
282, 289, 291. SupplyCore then filed bid protests of both contract awards with the GAO, which
the GAO denied. AR 7734-70 (Zone 1); AR 8427-63 (Zone 2).

While SupplyCore’s bid protest remains pending, SupplyCore is currently performing as
the incumbent contractor in both Zone 1 and Zone 2. The Zone 1 and Zone 2 contracts originally
expired on October 25, 2019, but SupplyCore has continued performance under non-competitive
bridge contracts awarded under 10 U.S.C. § 2304(c)(1). AR 142. The bridge contracts are set
to expire on January 15, 2022. See ECF No. 15 at 2.

Vv. Zone 1 Contract: Discussion

SupplyCore makes three allegations purportedly foreclosing DLA’s award of the Zone 1
contract to Noble as arbitrary, capricious or irrational. Two of the allegations are linked:
SupplyCore alleges (1) that no adequate price reasonableness analysis was conducted by DLA,
or only occurred for awardees (see ECF No. 29 at 13); in the alternative, SupplyCore argues (2)
that if a reasonableness analysis had been conducted (or if the Court finds that such an analysis
was, in fact, conducted), SupplyCore’s bid should have been found unreasonably high. /d. at 14.
In addition, SupplyCore also argues that the discussions underlying the award for the Zone 1
contract were not meaningful. /d. at 16.

A. DLA Conducted Sufficient Price Reasonableness Analysis.

SupplyCore points out that the Solicitation commits the DLA to price reasonableness
evaluations of offerors’ PEL prices, distribution fees and other fees (see AR 309-10) with the
implication that DLA breached this requirement. Specifically, SupplyCore contends that while
the DLA might have “analyzed” offerors’ prices, this “does not satisfy the requirement to
evaluate the offers for price reasonableness” (emphasis added). ECF No. 33 at 4. SupplyCore
then further emphasizes that “SupplyCore is entitled to have the Government point to evidence
that it actually considered whether SupplyCore’s pricing was reasonable or not, which the
Government cannot do.” ECF No. 33 at 5. SupplyCore is particularly looking for a
reasonableness evaluation of its XXXXXXXX distribution fees, because this “constituted the
lion’s share of each offeror’s TEP.” ECF No. 33 at 5.

14
However, the Government cites considerable evidence that the DLA did adhere to the
solicitation’s requirements for conducting price reasonableness review. For example, DLA
certainly appears to have evaluated price reasonableness at the line-item level, and rating and
comparing prices. See ECF No. 35 at 2; see also AR 1814-22; 4074-92; 4558-4567.

In addition, SupplyCore seems to suggest a distinction between “analysis” and
“evaluation,” whereby, allegedly, the Government engaged in analysis but never reached any
conclusion regarding whether it considered any offeror’s pricing to be reasonable or unreasonable.
ECF No. 33 at 4. However, the Administrative Record certainly shows that the agency did
make final determinations, determining, SupplyCore included, that the pricing was fair and
reasonable. See, e.g., ECF No. 35 at 3, citing AR 4413, 4415-17, 4505-07, 4509. Nor is the
Government required to point to evidence that it considered in making its reasonable
determination as (1) the solicitation did not have a requirement for a formal determination of
price reasonableness, and (2) FAR 15.404-1(b) does not impose a documentation requirement.
DynCorp Int'l, 10 F.4th at 1313.

In addition, SupplyCore argues that the required threshold for a legally sufficient price
reasonableness analysis is not met when an offeror bases its pricing on incorrect information.
See ECF No. 29 at 13 (“An agency’s failure to conduct a required price reasonableness analysis
is prejudicial and requires that the award be set aside and the procurement be reopened for a
price reasonableness review (citing Caddell Constr. Co. v. United States, 125 Fed. Cl. 30, 56
(2016)). SupplyCore’s reliance on Caddell implies that DLA’s price analysis or evaluation
process and/or the administrative record of this process was superficial, purportedly failing to
demonstrate a proper analysis or evaluative process. But the Government has demonstrated (and
SupplyCore concedes (see ECF No.33 at 4)) that DLA really did conduct a price analysis. This
fact fundamentally and severely undermines SupplyCore’s arguments. While SupplyCore
vehemently argues that DLA’s representations about pricing are inadequate for price
reasonableness purposes, the fact is that DLA did repeatedly and broadly convey to SupplyCore
that its distribution fees were too high. See AR 2132, 2224, 2873. Furthermore, in response,
SupplyCore mostly declined to lower its distribution prices, while at the same time Noble
XXXXXXXXXXXXXXXKXXXXXKXKXKXXKXKXKXKXXKXKXKXKXKXKXKXKKK
XXXXXXXXXXXXKXXXXXXXXX.’ Also, as a matter of law, the Government generally
enjoys broad discretion with the manner in which it conducts and records price analysis and price
reasonableness evaluations.

7 SupplyCore’s initial total distribution price was XXXXXXX. With Round 1, the
distribution price was lowered to XXXXXXX, and this was kept level with Round 2. With
Round 3, SupplyCore lowered its distribution price to XXXXXXXxX, and then its final
distribution price was XXXXXXX. AR 4078-4092. Thus, SupplyCore reduced its price by XXX
XXXXX. In contrast, Noble, which received narrower instructions to lower its distribution fee
pricing than SupplyCore, reduced its distribution fees by a total of nearly XXXXXXX. Noble’s
initial distribution price was XXXXXXX. With Round 1 this was lowered to XXXXXXX. With
Round 2 was lowered to XXXXXX, then to XXXXXXX with Round 3, and followed by a final
distribution price of XXXXXX. Id.

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For these reasons, the Court holds that SupplyCore has not undermined the sufficiency of
DLA’s price reasonableness analysis or evaluations. The Court now moves to the question of
whether that analysis should have found SupplyCore’s pricing “unreasonable.”

B. DLA’s Price Reasonableness Evaluation Was Not Bound to Find SupplyCore’s
Distribution Pricing Unreasonable.

SupplyCore argues that had a price reasonableness evaluation been conducted (or if the
Court finds that such an evaluation was in fact conducted), its distribution fee pricing would and
should have triggered an “unreasonable” finding, as well as a requirement that SupplyCore be
apprised of this finding. See, e.g., ECF No. 29 at 14-15. The Government does not disagree that
if such an “unreasonable” price finding had been made, there may have been a requirement to
notify SupplyCore, but also highlights the fact that DLA repeatedly and broadly instructed
SupplyCore to improve its distribution prices. See, e.g., ECF No. 33 at 14.

The Court agrees that, as suggested by the Government, DynCorp Int'l, LLC v. United
States, 10 F.4th 1300 (Fed. Cir. 2020), is “instructive” in this case. In DynCorp, six offerors
submitted proposals. DynCorp, which was not selected for award, was initially found to have
submitted a decent but not distinctively good technical proposal, and also proposed much higher
prices than the other offerors. /d. at 1306. DynCorp moved to challenge the award on the basis
that the solicitation indisputably required price reasonableness to be evaluated for all offerors,
contending that this had not transpired. /d. at 1307. The Army postponed the bid protest and
undertook an additional review of all six offers for price reasonableness, and then reconfirmed its
decision, declining to reopen discussions having found that the prices of all six offerors were
reasonable, despite a very wide range of pricing. /d. In other words, the Army determined that
each offeror’s price was reasonable for its respective and distinct technical approach. /d.
DynCorp objected, contending that there should have been a simple proposal-to-proposal price
comparison, but the Court disagreed, finding that pricing regulations included no such
requirements. /d. at 1316. The Court concluded that while DynCorp’s price was high, the price
was not unreasonably high given its distinct technical approach; therefore, it upheld the Army’s
award. /d. at 1317.

Critically, in this case, GAO highlighted the apparent fact that SupplyCore’s approach —
specifically with respect to its distribution proposal — was distinct from Noble’s, the awardee.
See AR 7765 (citing AR 7255). As noted above, SupplyCore’s original bid protest before the
GAO alleged that its XXXXXXXX distribution fee proposals reflected SupplyCore’s purported
knowledge of the Agency’s “actual needs,” and that “Noble’s proposal does not reflect the actual
needs of the Agency and the pricing of the resulting contract will not properly reflect the actual
price to be incurred by the Agency and will ultimately result in greater cost to the Government.”

Id.

SupplyCore argues that DynCorp stands for the proposition that if there is a major
disparity in pricing, “unreasonable” pricing is indicated. However, the Government correctly
states that as presented in DynCorp, disparity in prices “is a function of a competitive
procurement, not a fundamental problem.” See ECF No. 31 at 23 (citing DynCorp, 10 F.4th at

16
1314). In other words, “the Army determined that each offeror’s price was reasonable for its
chosen technical approach, notwithstanding disparities in pricing.” /d. at 1316. The Federal
Circuit ultimately found that “DynCorp's proposed price was high[, but it was not unreasonably
high for the technical approach it proposed.” /d. at 1317. Thus, DynCorp cannot be read as
supporting the proposition that the magnitude of a discrepancy (alone) establishes that a
reasonableness determination has not been made. As with the protestor in DynCorp,
SupplyCore’s XXXXXXXX distribution fee pricing reflects its chosen approach — by
SupplyCore’s own account. See AR 7765 (citing AR 7255). Also, in addition, the GAO
opinion presents an emphatic and thorough general rejection of the argument that “magnitude of
the [price] disparity” should trigger “unreasonable” price findings. See AR 7759-7760
(addressing “magnitude of the disparity” arguments with respect to “meaningful discussions”
analysis).

SupplyCore also invokes Serco Inc. v. United States, 81 Fed. Cl. 463, 495 (2008) to make
an additional argument that SupplyCore should have been informed that its pricing was
unreasonable. In short, SupplyCore construes Serco as establishing a putative framework for
findings that a given price may be an “outlier,” which in turn, purportedly, may trigger an
“unreasonableness” finding. See ECF No.29 at 15. As presented, this “outlier” argument
applies to unreasonableness findings based on (A) prices of offerors relative to one another
(addressed above vis-a-vis DynCorp), but also (B), “outlier” status relative to the Government’s
maximum Total Evaluated Price (“TEP”) objectives. Jd.

Discussing the applicability of Serco requires some factual excavation of that case.
Underlying Serco was a solicitation awarded by the GSA to provide technology products and
services to the entire Federal Government. Serco, 81 Fed. Cl. at 465. The solicitation specified
that technical factors would be “significantly more important than cost or price,” but also added
that “the closer the technical scores of the various proposals are to one another, the more
important cost or price considerations become in determining the overall best value for the
government.” /d. at 466-67. The solicitation yielded 62 offerors whose bids, if technically
proximate, were supposed to be evaluated for price. See id. at 465-67. GSA also prepared an
“Independent Government Cost Estimate” (IGCE). /d. at 473. The GSA selected 29 awardees,
including the 28 offerors with the best technical proposals. /d. at 477. The prices of the offerors
(and the awardees) were wildly disparate, ranging from well beneath the ICGE to far above it —
some awardees’ prices were more than double the price of the lowest-priced awardee. /d. at 492.
GSA purportedly evaluated every offered price as “fair and reasonable,” and also issued awards
to the 59th, 60th, and 61st-highest bidders out of 62 (i.e., three of the four highest of the 62 offers
were selected). /d. In conjunction with this, every price analysis concluded: "In relation to the
IGCE for overall price and Mean Overall Price among all offerors (Government and Contractor
Site combined over 10 years), the Offeror's Mean Overall Price is in line with adequate price
competition and is, therefore, considered fair and reasonable." /d. at 495. In other words,
despite the dramatic variance in the pricing among the different offers and also between the
offers and the IGCE, GSA still represented, uniformly, that each offeror’s pricing was “‘in line
with adequate price competition’ ‘even when [GSA’s] own statistics demonstrated they were
not.’” Jd. The Court held that this clearly illogical representation triggered a decision that
GSA’s price reasonableness analysis was arbitrary and capricious because, apparently, there
“was no price reasonableness analysis at all.” /d. Pertinent to SupplyCore’s argument, in this

17
context, the Court referred to some of the prices which GSA found “fair and reasonable” as
“outliers.” Jd. at 492, 495. However, in fact, the Serco Court’s finding that GSA’s price
reasonableness analysis was arbitrary and capricious obviously hinges on a contradiction in the
agency’s finding: the finding espoused to reflect “the IGCE for overall price and the Mean
Overall Price among all offerors” and then found each offeror’s pricing fair and reasonable in
relation to these — which is difficult to rationalize given the actual range and volatility of all the
offerors’ pricing.

Thus, Serco discusses “outlier” prices with respect to the mean price among all offerors
and also when comparing offerors’ pricing to the IGCE. The Court took notice of these “outlier”
prices in conjunction with the GSA’s facially problematic finding that each and every offeror’s
price was “in line with adequate price competition.”

SupplyCore does not argue that the Government was bound to disclose or strictly apply
its maximum pricing for the Zone 1 contract (or the distribution costs thereof) but takes the
position that its distribution fee pricing constituted an “outlier”: relative to the Government’s
maximums. See ECF No. 29 at 15. Thus, drawing on Serco, SupplyCore suggests a per se rule:
“prices that are outliers are unreasonable on their face.” ECF No. 33 at 8.

SupplyCore’s suggested analogy to Serco, suggesting an “outlier” framework for
relatively high prices, is inapt. As the Government notes, the Serco decision “does not purport to
impose a bright-line rule that the mere presence of outlier prices renders a price proposal
unreasonable per se.” See ECF No. 35 at 6. Moreover, here, unlike the agency in Serco, DLA
made no representations to SupplyCore about reasonableness relative to the agency’s estimate or
maximum pricing. But DLA did evidently conduct price reasonableness analysis and conveyed
this to SupplyCore. In contrast to the DLA here, in Serco, GSA’s price reasonableness finding
made a facially erroneous representation with express reference to the Government’s estimate,
indicating that no price reasonableness analysis had actually taken place.

The Court holds that SupplyCore has not demonstrated that DLA should have found its
distribution pricing unreasonable.

C. The Discussions Between SupplyCore and DLA Were Meaningful.

SupplyCore levies a series of arguments that DLA arbitrarily and capriciously failed to
conduct meaningful discussions with SupplyCore, but these arguments are not convincing.

The Government’s position essentially has three steps. First, the Government highlights
the relatively low legal bar for “meaningful discussions: “[D]iscussions are meaningful if they
generally lead offerors into the areas of their proposals requiring amplification or correction,
which means that discussions should be as specific as practical considerations permit.”
WorldTravelService v. United States, 49 Fed. Cl. 431, 439 (2001) (quoting Advanced Data
Concepts, Inc. v. United States, 43 Fed. Cl. 410, 422 (1999), aff'd, 216 F.3d 1054 (Fed. Cir.
2000)); accord Carahsoft Tech. Corp. v. United States, 86 Fed. Cl. 325, 343 (2009). However,
“itis well-accepted that ‘agencies are not obligated to conduct all-encompassing discussions, that
is, to address in express detail all inferior or inadequate aspects of a proposal.’” Banknote Corp.

18
of Am., Inc. v. United States, 56 Fed. Cl. 377, 385 (2003) (citation omitted), aff'd, 365 F.3d 1345,
1356-57 (Fed. Cir. 2004). Agencies are “not required to ‘spoon-feed’ offerors in order to have
meaningful discussions.” Carahsoft, 86 Fed. Cl. At 343. “Rather, the agency should tailor its
discussions to each offer, since the need for clarifications or revisions will vary with the
proposals.” WorldTravelService, 49 Fed. Cl. at 439.

Second, the Government zeroes in on the legal requirements to clear this relatively low
bar: “The FAR only requires a contracting officer to discuss ‘deficiencies and significant
weaknesses.’” FAR 15.306(d)(3). Beyond this required minimum, the Government explains,
“the precise content of discussions is largely a matter of the contracting officer’s judgment.”
Patriot Taxiway Indust., Inc. v. United States, 98 Fed. Cl. 575, 587 (2011). “The contracting
officer has broad discretion in conducting discussions.” Advanced Data, 43 Fed. Cl. at 422;
FAR 15.306(d)(3) (‘The scope and extent of discussions are a matter of contracting officer
judgment.”).

Third, the Government contends that DLA did not run afoul of this requirement to
discuss “significant weakness” or “deficiencies”® because SupplyCore’s distribution fees under
the circumstances did not meet the definition of “significant weakness” or “deficiency.”
Following the principles of DynCorp, the Government explains that “a price that is too high, but
not unreasonably high, fails to meet the definition of either a deficiency or a significant
weakness.” See ECF No. 31 at 23, 26, 29. The Court finds this position persuasive. The
Government further disputes the possibility that DLA’s discussions with SupplyCore were not
meaningful by couching SupplyCore’s responses to DLA’s feedback as a function of business
judgment rather than inadequate information:

[W]hereas its competitors heeded the Government’s directives to improve
pricing in each of the three rounds of discussions, SupplyCore eschewed the
Government’s admonition and largely elected not to improve its pricing in
the second round of discussion (only in the first and third rounds). Given
these facts, there is no reason to believe that SupplyCore would have
sufficiently lowered its price to place it in line for award, even had the agency
directly advised SupplyCore of the agency’s negotiation objectives. Instead,
as SupplyCore’s comments make clear, SupplyCore’s pricing was the
product of its own business judgment, not of agency action or inaction.

See ECF No. 31 at 33. The Court finds this perspective correct. As noted above, DLA
advised SupplyCore to “review and improve pricing for XX distribution tiers: XXXXX
XXXXXXXKXXXKKXXKXXXXXXXXXXXXXXXXXXXXXX” and repeated this
instruction each Round. AR 2132, 2224, 2873. In response, SupplyCore lowered its
distribution prices from XXXXXXX (initial price) to XXXXXXX (final price). AR

8 A “[d]eficiency” is defined as “[a] material failure of a proposal to meet a Government
requirement or a combination of significant weaknesses in a proposal that increases the risk of
unsuccessful contract performance to an unacceptable risk.” FAR 15.001. A “[s]ignificant
weakness” is defined as “[a] flaw in the proposal that appreciably increases the risk of
unsuccessful contract performance.” /d.

19
4084, 4086, 4089, 4092. Noble, which received more moderate, narrower instructions to
reduce its distribution pricing, lowered its distribution pricing from XXXXXXXX (initial
price) to XXXXXX (final price). Jd. Because SupplyCore’s cuts were so modest, the
Government suggests that this Court should be skeptical of SupplyCore’s current
assertions that in response to alternative instructions, it would have made significant cuts
to its distribution fee prices.

In response, SupplyCore emphatically opposes the Government’s account of its pricing
decisions, but does not succeed in convincing this Court that DLA’s discussions were less than
meaningful. Central to these meaningful discussions arguments, SupplyCore agrees the
Government that FAR 15.306(d)(3) represents a key baseline requirement for discussions,
whereby an agency is bound by law to discuss “deficiencies” and “significant weaknesses.” See,
e.g., ECF No. 33 at 9.

SupplyCore spends surprisingly little time arguing that its distribution pricing in fact
constitutes a “significant weakness,” and seems more preoccupied with the implications which
follow, should such a finding be made. See, e.g., ECF No. 33 at 9-11. In any case, the crux of
SupplyCore’s argument that its distribution pricing constituted a “significant weakness” is the
disparity between DLA’s maximum objectives and SupplyCore’s pricing. See ECF No. 29 at 16.
But SupplyCore cites no cases where prices above the Government’s maximum objectives or
estimates were construed as “significant weaknesses” directly for that reason. SupplyCore does
cite DynCorp for the proposition that offerors’ “unreasonably high prices” must be discussed.
ECF No.33 at 9. However, for reasons reviewed above, the Court finds this completely
unconvincing because DynCorp establishes that high prices above the Government’s maximum
or estimate may not be unreasonable if they reflect an offeror’s chosen technical approach.
DynCorp, 10 F.4th at 1316-17. Also, again, the GAO ruling in this case already highlights the
fact that SupplyCore, the incumbent contractor, feels that it is more aware of the Government’s
“actual needs” than other offerors. This suggests that SupplyCore’s bid appears to have reflected
a different approach, like the protesting high bidder in DynCorp. AR 7765. The Court finds that
DynCorp cannot be credibly invoked to interpret SupplyCore’s distribution fee pricing as a
“significant weakness,” or to otherwise prove that DLA’s discussions were less than meaningful.

Beyond this, SupplyCore also argues against meaningful discussions on the basis that
DLA’s instruction to “improve” pricing was misleadingly understated. See ECF No. 29 at 18.
This argument again runs into the reality that DLA repeatedly and broadly instructed SupplyCore
to improve its distribution fees, and that SupplyCore mostly disregarded the instruction,
especially in conjunction with Noble’s responses (reductions) to narrower DLA instructions to
“improve” distribution pricing. See AR 2132, 2224, 2873; 4078-4093.

Finally, SupplyCore points out an apparent inconsistency: if, in the Zone 2 discussions,
DLA informed PAE that its distribution fee pricing “cannot be determined fair and
reasonable,” why was a similar instruction not conveyed to SupplyCore in the Zone 1 contract
discussions? See ECF No. 33 at 11-12. This again raises the issue underlying DynCorp.? The

? DynCorp does not embrace proposal-to-proposal price comparisons because of
differences in offerors’ technical approaches. DynCorp, 10 F.4th at 1316. In other words, the

20
Court is additionally disinclined to assess “meaningful discussions” in Zone 2 using DLA’s Zone
1 Round 3 representation to PAE because of how the solicitation effectively separates the Zone 1
and Zone 2 contracts, stipulating that one contractor almost certainly cannot win both bids. AR
226; AR 228; AR 636-37. For this reason and because of this Court’s reading of DynCorp,
DLA’s Round 3 discussions with PAE for the Zone 2 contract is not enough to render the Zone 1
discussions less than meaningful. In other words, the two contracts were sufficiently distinct to
preclude application of a rigid consistency requirement.

Again, challenging a procurement award requires a showing that the agency action in
question was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law." 5 U.S.C. §706(2)(A). SupplyCore has not established that DLA’s award of the Zone 1
contract to Noble instead of SupplyCore meets this threshold. Specifically, SupplyCore has not
convinced this Court that DLA’s evaluation of the Zone 1 distribution fee pricing proposals
constituted a “significant weakness” for the purposes of meaningful discussions requirements,
nor that DLA’s Zone 1 representations to SupplyCore otherwise fell short of “meaningful
discussions.”

VI. Conclusion

For the reasons set forth above, the Court GRANTS IN PART AND DENIES IN
PART Plaintiffs Motion for Judgment on the Administrative Record. With respect to the Zone
2 Contract, the Court GRANTS Plaintiffs request for a declaratory judgment and Motion for a
Permanent Injunction. The Court ENJOINS the DLA from continuing performance on the Zone
2 contract awarded pursuant to the solicitation at issue in this protest and DIRECTS the DLA to
cancel the contract awarded to PAE. With respect to the Zone 1 Contract, the Court DENIES
Plaintiff's Motion.

The Court further GRANTS IN PART AND DENIES IN PART Defendant’s Cross
Motion for Judgement on the Administrative Record. With respect to the Zone 2 contract, the
Court DENIES Defendant’s Cross-Motion. With respect to the Zone 1 contract, the Court
GRANTS Defendant’s Cross-Motion.

fact that the price of Proposal A is higher than that of Proposal B does not foreclose the
possibility that relative to what each Proposal entails, Proposal A may be reasonably priced
while Proposal B — while lower than Proposal A — conceivably may be unreasonably priced. See
id. (rejecting proposal-to-proposal price comparisons for review of price reasonableness). In this
case, the Zone 2 contract appears to approximately feature such a scenario, which does not
necessarily even come close to provoking an arbitrary, capricious or irrational finding. However,
there is the additional detail that in the Zone 2 discussions, after less expensive Proposal B’s
price (PAE’s) was found unreasonably high, the contractor (PAE) declined to lower the price —
keeping it “unreasonable” by the Government’s assessment — and then in spite of this, the agency
awarded Proposal B the contract. The Zone 1 contract, however, approximately features this
same scenario without the additional twist where the proposal with “unreasonable” pricing is
awarded the contract. Thus, the Zone 2 and Zone 1 awards represent distinct scenarios.

21
The Court further DENIES Defendant-Intervenor PAE’s Cross-Motion for Judgment on
the Administrative Record.

The Court also GRANTS Defendant-Intervenor Noble’s Cross-Motion for Judgment on
the Administrative Record.

The Clerk is directed to enter judgment accordingly.

The parties are directed to file redactions within ten (10) days of the date of this Opinion
and Order.

IT IS SO ORDERED.
s/Edward J. Damich

EDWARD J. DAMICH
Senior Judge

22