The price of Standing is eternal vigilance

Vigilance and action. You don't get standing by standing around.

The facts of this case just feel so wrong. But the courts do not hear matters simply because they are wrong. They hear matters only when parties are wronged. And when you are a party that is late to the party, you aren't wronged.

The case is DIGITALIS EDUCATION SOLUTIONS, INC. v. US, Court of Appeals, Federal Circuit 2012.

I've provided the description of facts from the lower Court decision because the Court of Appeals, while neatly encapsulating the legal essentials, just does not create the bad taste in the mouth. Indeed, this is an excerpt; the whole recitation is worth the read. There's much more that depicts a rigged and rushed expenditure just to use funds before the end of the fiscal year. In other words, a rort .

For many years, the Department of Defense Educational Activity ("DODEA") schools have used the "Starlab" brand portable planetaria manufactured by one of Digitalis' competitors, Morris & Lee d/b/a Science First ("M&L"). In September of 2009, DODEA conducted an unadvertised, sole-source procurement of 15 Starlab planetaria.

An initial draft of the Justification and Approval ("J&A") for the 2009 sole source procurement noted that Digitalis manufactured a similar but more expensive product. The published J&A, however, made no mention of Digitalis. Rather, it stated that Starlab was the only known product to integrate science with other subject matter and that, because Starlab systems were already used in DODEA schools, lesson plans and curricula for that system were already in place.

A year later, in September of 2010, the agency again began the process of acquiring more Starlab planetaria, a process that eventually culminated in the purchase of approximately 50 digital Starlab systems. The acquisition occurred with astonishing rapidity, with the entire procurement, from conception to contract award, taking place in only 15 days.

The first record of any contemplation of this procurement came on [Friday] September 10, 2010, in an internal DO DEA email suggesting the possibility of ordering Starlab systems should funding become available. A reply email, dated September 13, noted that such purchases must be publicly posted and suggested that, if the purchase was a possibility, a posting could be done "for couple [sic] days, just in case we need to go this route."

In the early afternoon of [Friday] September 17, 2010, DODEA posted on the Federal Business Opportunities website a notice of its intent to award a sole source procurement to M&L. It further stated:

This notice is not a request for competitive proposals. However, any party that believes it is capable of meeting this requirement as stated herein must submit a written capability statement that clearly supports and demonstrates their ability to provide the items by [Wednesday] 22 September 2010, 1200 a.m., Eastern Standard Time.

Two days later, on Sunday, September 19, the notice was modified to delete the estimated price.

The J&A was approved on [Monday] September 20, 2010. Citing 10 U.S.C. § 2304(c)(1) (2006) and FAR Part 6.302-2—"Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements"—the agency justified the sole source procurement as follows:

STARLAB is the only known portable planetarium system that meets DoDEA's established educational requirements to integrate sciences with teaching of other curricular [sic] such as, English/Language Arts, Cultures (Native American, Greek, African), Geography, History and Math. DoDEA has standardized curricula developed exclusively for the STARLAB portable planetarium. Curriculum standards and specific lessons for the STARLAB components are already in place and there are teacher trainers for this product in all respective areas of operation. It is also emphasized that STARLAB is the only source that provides a planetarium system with all the resources needed to support the instruction required by current curriculum to teach the DoDEA Kindergarten through Grade 12 curricular standards.

... to cancel the curriculum predicated on the STARLAB product would create the necessity for a new curriculum to be selected, developed, procured and implemented, to include, materials, staff development, creations [sic] of standards and rubrics. Lost classroom instruction hours for teachers attending training for a new curriculum would adversely affect DoDEA's all too critical mission to effectively provide a quality education to its students.

[This is an unwarranted focus on the justification for sole source: it assumes a finding of actual need for the acquisition in the first place. See, for instance, FAR Subparts 7 and 11. Was there a need for 50 new pieces of the equipment? Maybe, maybe not, especially if it had plans to review the curriculum. The government should not be allowed to place itself in a perpetual sole source situation, especially where other competitors are known to exist.]

The J&A also describes the agency's ostensibly fruitless "Effort to Obtain Competition":

Multiple searches via the Internet, General Services Administration (GSA) Multiple Award Schedule (MAS), trade magazines and catalogs for products by technical and contracting personnel to satisfy the Government's requirement have been conducted; this market research, including attendance by technical personnel at relevant curriculum-based conferences have resulted in no known sources that could satisfy the Government's requirement. This requirement was also advertized last fiscal year as a sources sought notice yielding no other sources in response.

The J&A also states that at the next five-year curriculum review, DODEA would "conduct further market research using the Internet, catalogs, [and] trade magazines, including direct contact with potential sources at both regional and national education conferences in effort to increase competition for this requirement."

Also on that day, Sky-Skan, Inc., another planetaria maker, contacted DODEA in response to the published notice to express interest in bidding on the contract and requested DODEA's specifications and requirements. [This is critical on the issue of the reasonableness of the timing, an issue the Court refrained to decide. It is critical because the Court of Appeal decision characterized this act, not as a expression of interest, but of an actual filing of a statement of capability.]

DODEA promptly contacted M&L, requesting "immediate assistance in providing additional specification to add to the requirement." M&L replied with a lengthy email detailing its hardware, software, accessories, and warranty, highlighting several aspects it claimed to be superior to its competitors' systems.

The next day, September 21, DODEA modified the posted notice, adding the following language:

DoDEA has standardized curricula developed exclusively for the STARLAB portable planetarium. Curriculum standards and specific lessions [sic] for the STARLAB components are alredy [sic] in place and there are teacher trainers for this product in all respective areas of operation.

DODEA's contract specialist noted in this email that "this [procurement] does not fit into my standard sole source template."

On September 23, 2010, DODEA requested M&L to complete a Request For Quotations ("RFQ") and return it by 6:00 a.m. the next morning. M&L responded with a quote later that day. On Saturday, September 25, DODEA awarded a sole source contract for 50 digital planetaria to M&L in the amount of $2,292,498.21. The contract originally called for delivery of the planetaria on November 30, 2010. About a week later, a modification changed the delivery date to February 28, 2011.

On October 11, 2010, after becoming aware of the award to M&L, Digitalis sent a letter to Congressman Norm Dicks objecting to the manner in which the contract was awarded and expressing its interest in the contract. [Bad idea: procurement officials and the Courts bristle at bringing politicians into the game. Use the political process to try to correct future errors; not to try to influence a pending decision-making review process.]

On December 2, 2010, Digitalis submitted a letter directly to the DODEA contracting officer expressing concern over the sole source procurement and describing Digitalis' portable planetaria.

The trial court held,

Although the procurement was subject to multiple errors, ultimately none prevented Digitalis from submitting a capability statement or protesting the procurement in a timely manner. Accordingly, we cannot sustain Digitalis' protest.

The Court of Appeals affirmed:

Digitalis argues that the Court of Federal Claims should have first determined whether the Department was required to conduct a full competition for the contract rather than a sole-source notice. Then, if we find that the Department should have conducted a full competition, Digitalis argues that it is clear that it would have had a substantial chance of prevailing.

Digitalis also argues that its failure to submit a statement of capability is "irrelevant" to the analysis. It contends that the filing of a capability statement would have been futile based on the Department's response to Sky Skan that basically required it to emulate Science First. Further, Digitalis argues that the period for submitting statements of capability was unreasonably short.

The government argues that Digitalis was not an "actual or prospective bidder" because it failed to submit a capability statement. It analogizes to Rex Service where we held that if a party does not bid during the bid period, it does not have standing regardless of any illegalities by the government in the bid process. (citing Rex Serv., 448 F.3d at 1308).

The Court of Federal Claims held that Digitalis could not demonstrate prejudice, a prerequisite for standing, because it did not have a substantial chance of winning the contract. Id. at 93. Because Digitalis failed to review fedbizopps and submit a statement of capability during the prescribed period, the court explained that "[e]ven if the procurement had proceeded flawlessly, Digitalis's chances to get the contract would not have been any different." Id. The court reasoned that a longer response time would have led to the same result because Digitalis did not check fedbizopps for weeks.

In a sole-source award such as this one, the notice of intent issued by the government is analogous to a request for a proposal. Interested parties are invited to submit statements of capability in order to convince the government that it should hold a full competition for the contract rather than sole-source the contract to the proposed contractor. We therefore hold that in order to be an actual or prospective bidder, a party must submit a statement of capability during the prescribed period. Failure to do so also means that a party does not have the requisite direct economic interest because it cannot have a "substantial chance" of convincing the government to hold a formal competition and subsequently bid on the contract. Rex Serv., 448 F.3d at 1308.

It has to be emphasized that this is a POST-AWARD case. In critical contrast, in a PRE-AWARD context, a bidder should protest defects in the solicitation before bid opening and probably not bid. But if it has no notice of the defects, it should bid, because the standing test, in US Federal cases, require participation in the bid process absent some very compelling evidence that, as a potential bidder, it was deceived or misled into not bidding.

Getting back to the unsavory "vibe"* of the case above, the Court of Appeals said

As the Court of Federal Claims noted, "the administrative record lends credence to a number of Digitalis's allegations of hasty and shoddy contracting."

This holding should not be read, however, as foreclosing challenges to the reasonableness of the procurement time period. Digitalis attempts to do this by challenging the five-day period. Digitalis argues that the selected time period is unreasonably short and that therefore Digitalis should be permitted to challenge the procurement despite not having filed a statement of capability within the time period.

The government seemed to argue that a party who fails to submit a statement of capability during the prescribed period may only object to the reasonableness of the time period if it is so short that it was impossible for the contractor to bid. We do not agree.

Determining whether the time period is reasonable is necessarily a fact intensive analysis. In the context of commercial item procurement, regulations require that the government "establish a solicitation response time that will afford potential offerors a reasonable opportunity to respond . . . ." 48 C.F.R. § 5.203(b). Because commercial items are often readily available to the public, a brief time period for soliciting responses may be reasonable. See, e.g., Cal. Indus. Facilities Res., Inc. v. United States, 80 Fed. Cl. 633, 635-36 (2008) (holding that a period of six days was reasonable in a solicitation for commercial items).

Contrary to the government's argument, the proper inquiry is not whether it is possible for a party to submit a statement of capability during the time period, but whether it is reasonable to expect contractors to see a notice and respond.

Yet at least one potential offeror, Sky Skan, saw the notice and filed a statement of capability, which suggests that the time period was not unreasonably short.

We do not need to decide whether the posting time was unreasonable, however, because Digitalis did not check fedbizopps or otherwise notice the sole-source award to Science First for more than twenty days.

As the Court of Federal Claims held, a twenty-day period would have http://www.blogger.com/img/blank.gifcertainly been reasonable and Digitalis would still hhttp://www.blogger.com/img/blank.gifave failed to file a statement of capability. Because Digitalis did not even discover the procurement posting for more than twenty days, we conclude it was not an interested party.

This comes across as somewhat harsh on the protester, and it must have felt that way to Digitalis. After the all, after chronicling the many misfeasances of the Government, the Court penalized Digitalis for not pulling its Digitalis out.

It has to be remembered, that the Courts' role in procurement review is not to clean up procurement. Its standard of review very clearly is limited to "clearly erroneous" matters, to malfeasances, not misfeasances. Use politicians to help clean up the misfeasances that Courts cannot address.

* See this quote from a classic Australian movie, The Castle:

Dennis Denuto: It's the vibe of the thing, your Honour.