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Wednesday, April 1, 2015

Protests are meant to be pushy, not polite

Hattip to Federal Circuit Invokes Blue & Gold to Affirm Dismissal of Two Protests re: Government Contracts written by attorneys Lily Rudy and Scott A. Freling of the firm Covington & Burling LLP, published online by The National Law Review, for pointing out the following case from the US Court of Appeals for the Federal Circuit. 

This case decides an appeal from a protest in the Court of Federal Claims trial court, and is interesting for its split of the hairs: it reached the same result but on different grounds. 

As usual, when cases or articles or other sources are cited, do not rely on my version as authoritative or accurate; I cut, paste, rearrange, edit, paraphrase, leave out essential information and otherwise adapt the subject matter to suit myself, and that may not suit you or the original author(s) at all. Read all sources at their link.

Bannum, Inc. v U.S., March 12, 2015, No. 2014-5085
Bannum, Inc. protests decisions of the Bureau of Prisons of the United States Department of Justice to award two contracts to other bidders. In two actions brought in the Court of Federal Claims, Bannum complained that the awards were improper, alleging a common defect in the terms of the solicitations and, also, problems in the evaluation of competing bids. In each case, the Court of Federal Claims dismissed Bannum’s suit.

Finding that Bannum’s proposal, by failing to commit Bannum to a fixed price, was materially out of compliance with the terms of the solicitation, the court concluded that Bannum was not an “interested party” entitled to bring its protest.

We affirm the dismissals of Bannum’s suits, but on a different basis. We conclude that, because Bannum did not adequately present its objection to the solicitations before the awards, Bannum waived its ability to challenge the solicitations in the Court of Federal Claims. We also conclude that, on appeal, Bannum failed to preserve its separate challenges to the bid evaluations.

We do not reach the “interested party” ground of the Court of Federal Claims’ decisions.

After the RFP was issued and attracted two bidders, the government sent notices to the two bidders altering the contract requirements and requesting updated proposals, adding a requirement that the facility be operated in compliance with the Prison Rape Elimination Act of 2003 (PREA). The government asked both bidders to sign the amendment and submit a final proposal revision, including any necessary changes in price.

Bannum responded with a six-page letter labeled “Final Proposal Revision #3 and AGENCY PROTEST,” in which it restated its earlier price proposal and noted that those prices “do not, and cannot, reflect any consideration for the effects of Amendment 5” because of the “enormous amount of information [that] is required prior to pricing this new contract requirement.” Bannum attached a signed copy of Amendment No. 5, placing an asterisk next to the term requiring PREA compliance and stating: “Subject to and limited by Bannum’s response to [Final Proposal] #3 . . . submitted herewith; also, subject to Bannum’s reservation of all rights and protests.”

Bannum did not get the award. After the award, Bannum filed a protest with the Government Accountability Office (GAO), alleging defects in the government’s evaluation of the proposals. When its GAO protest failed, Bannum filed suit in the Court of Federal Claims. When its Court of Federal Claims appeal failed, it filed this appeal.

In the courts, Bannum challenged the bid evaluation as flawed and added a new allegation that the solicitation itself was “materially defective” because of the PREA-compliance requirement and the government’s refusal to provide pricing guidance. The Claims Court dismissed that appeal, concluding that Bannum was not an “interested party” under § 1491(b) because it submitted a bid that was materially out of compliance with the terms of the solicitation, thus depriving the court of jurisdiction to hear the appeal.

Because Bannum’s two distinct grounds for protesting the awards — (a) a defect in the solicitations and (b) defects in the bid-evaluation process — entail different remedies and are subject to different legal standards, we address them separately.

A bidder that challenges the terms of a solicitation in the Court of Federal Claims generally must demonstrate that it objected to those terms “prior to the close of the bidding process.” It is undisputed that the government received notice of Bannum’s dissatisfaction with the PREA-compliance requirement before awards were made. We conclude, however, that mere notice of dissatisfaction or objection is insufficient to preserve Bannum’s defective-solicitation challenge.

The solicitations at issue and the governing regulations put Bannum on notice of the formal requirements for filing a “protest” that would trigger an agency obligation of response and prompt resolution. Bannum did not comply with those requirements; nor did it pursue other available means of formal protest (e.g., to the GAO or the Court of Federal Claims) until after the awards. In these circumstances, it waived its solicitation challenges.

A waiver rule implements this statutory mandate by reducing the need for the “inefficient and costly” process of agency rebidding “after offerors and the agency ha[ve] expended considerable time and effort submitting or evaluating proposals in response to a defective solicitation.”

We have previously suggested that filing a formal, agency- level protest before the award would likely preserve a protestor’s post-award challenge to a solicitation as might a pre-award protest filed with the GAO.

Bidders that file a formal protest are entitled to a scheduling conference within five days of filing, an automatic stay of the award pending disposition of the dispute, and a guarantee of prompt resolution of the protest. The Justice Department’s acquisition regulations, promulgated in 1998 after an executive order directed agency heads to “provide for inexpensive, informal, procedurally simple, and expeditious resolution of protests,” Exec. Order No. 12979, 60 Fed. Reg. 55171 (Oct. 25, 1995). In the GAO, the act of filing a protest generally triggers an automatic stay of any award of the contract and requires the GAO to issue a decision within 100 days.

Bannum does not contend that its objections amounted to a formal protest. Bannum also has not asserted that there was good cause for excusing its failure to comply with them. See COMINT, 700 F.3d at 1382 (failure to mount a pre-award protest may be excusable where doing so “is not practicable”).

We therefore need not address whether, regarding its solicitation challenge, Bannum is an “interested party” under our case law, which itself has taken into account, in certain circumstances, whether a party has timely presented and diligently pressed its protest.

In its complaints, Bannum pleaded grounds for protest that fall into two categories: a defect in the solicitations; and defects in the bid-evaluation processes. As the government agreed at oral argument, at least as a general matter, a bidder cannot be expected to challenge an agency’s evaluation of bids, in contrast to the terms of solicitation, until the evaluation occurs. Nevertheless, we need not address Bannum’s bid-evaluation challenges, because we conclude that Bannum has failed to preserve those challenges on appeal.

In its arguments and briefs before this court, Bannum has not contended that it has standing independent of the resolicitation remedy it seeks or that resolicitation would be the result of a successful challenge to the evaluation processes. It has focused entirely on the solicitation challenge and has not asserted that, even if it cannot press that challenge, it nevertheless is entitled to reversal of the denial of standing to press its evaluation challenges. “An issue that falls within the scope of the judgment appealed from but is not raised by the appellant in its opening brief on appeal” may properly be deemed waived. We see no reason to depart from that practice here.
See also Firstdigital Telecom LLC v. Procurement Policy Board, Court of Appeals of Utah, No. 20130899–CA February 26, 2015, as another illustration of the failure of a putative protestor to step up to the plate with a formal protest. There, by
email, the subject of which was identified as “Proposed meeting to discuss.” McDougal stated, “We configured our proposal based on your current set up and usage. We are not sure you or other competitors fully understood the services you are receiving,” and complained that the Board did not correctly compare certain technical areas in evaluating the proposals. Finally, McDougal proposed to meet with McRae and Jex to discuss the evaluation comparisons. After this meeting, McDougal on August 30 emailed the Board representative Richard Davis to reiterate flaws McDougal perceived in the proposal evaluations. McDougal stated, “[W]e are weighing whether we will file a formal protest to the bid.” He added, “[W]e don't believe, among other things, that our network architecture, service nor pricing were evaluated correctly,”
Although the initial email was timely, this communication did not pass muster as a "protest", and was therefore rejected. The Board
disputed McDougal's characterization of the August 14 email as a protest because the subject line merely stated “[p]roposed meeting to discuss” and “nowhere in the email was there a statement indicating a protest was being made.” McRae pointed out that in a conversation with Davis on August 29, and in McDougal's August 30 email to Davis, McDougal mentioned that FirstDigital was still considering filing a protest, and therefore “your 8/14/13 email did not initiate the protest process.”

The authors of the article first cited above offer this salient take-away: "While contractors often prefer to express their dissatisfaction over a solicitation provision with a softer touch, as Bannum did here with its written objections, a decision not to file a pre-award protest can leave an unsuccessful offeror without an opportunity to be heard at the Court of Federal Claims." 

The culture on Guam, as is also practiced in much of the Pacific and indeed around the world, especially in non-Western societies, is to be non-confrontational, especially to authorities; a more deferential and circuitous approach is deemed respectful and proper.

Thus, when faced with a regulation expressing the requirement that, "Complainants should seek resolution of their complaints initially with the Procurement Officer or the office that issued the solicitation. Such complaints may be made verbally or in writing" (see, ABA MPC § R9-101.02; 2 GAR § 9101(b), persons with objections to a solicitation tend to do as told; that is, complain. They do so at their peril. 

This "softer touch" complaint process, demanded by regulation, is way too polite to constitute a protest, and without proof of diligently pressing the objection, the protest may fail on technical timing rules (see, decision statement above, "Bannum also has not asserted that there was good cause").

It should be first pointed out that the COMINT case cited in the decision above states: "To be sure, where bringing the challenge prior to the award is not practicable, it may be brought thereafter."

Further, if there is "good cause" justifying why a complainant or other objector did not timely formally protest, the doctrines of equitable tolling or estoppel may be relied on.  See, How Draconian are those time limits, really?

The U.S. Supreme Court, in Irwin v. Department of Veterans Affairs, 498 US 89 (1990), a case affording "an opportunity to adopt a more general rule to govern the applicability of equitable tolling in suits against the Government", noted,  "Time requirements in lawsuits between private litigants are customarily subject to "equitable tolling"."

The Court then alluded, unlike private affairs, the government, as a sovereign, is immune from suit, except where it waives sovereign immunity.   But:
"Once Congress has made such a waiver, we think that making the rule of equitable tolling applicable to suits against the Government, in the same way that it is applicable to private suits, amounts to little, if any, broadening of the congressional waiver. ... We therefore hold that the same rebuttable presumption of equitable tolling applicable to suits against private defendants should also apply to suits against the United States."
On Guam, the Guam Supreme Court has also recognized the application of equitable estoppel (in a private commercial context*, but one very analogous to the timing issues arising from the resolution of procurement disputes).  In GHURA v Dongbu, 2001 Guam 24, ¶ 1,the Court plainly said: “We adopt the doctrine of equitable tolling...."

In explaining the rationale for the doctrine, the Guam Supreme Court said (see, ¶¶ 11-13):
"The purpose of equitable tolling is to protect an insured’s claim during the time an insurer is conducting its investigation, thereby avoiding the premature filing of a suit before an insurer has even denied the claim. ... In order to prevent excess litigation, the time a claimant has to bring a claim is tolled. This practice encourages the settlement of claims by requiring an insurer to investigate claims diligently before denying liability and simultaneously securing an insured’s rights.

"Safeguarding the claim during this interim period also prevents an insurer from stalling the processing of a claim in order to invoke a technical forfeiture of the policy’s benefits. Without equitable tolling, an insurer may wait until the statute of limitations has expired before denying coverage. An insurer may also purposely conduct a lengthy investigation, hoping to lull the policy holder into thinking the claim will be settled, and then deny coverage after the twelve months have expired. The doctrine of equitable tolling protects the reasonable expectations of the insured by demanding good faith and fair dealing on behalf of the insurer.

"Finally, the doctrine of equitable tolling remains consistent with the policies underlying the imposition of a limitations period. A statute of limitations prevents unfair surprise and promotes justice by leaving stale claims in slumber. An insurer must receive prompt notice of a claim in order to properly adjust valid claims and guard against invalid ones. However, an insured is likewise entitled to the time necessary to initially prepare a claim and later pursue legal remedies."
Although the Guam Supreme Court has not expressly applied the doctrine of equitable estoppel to procurement cases, the Guam Superior Court has, on at least two separate occasions.

Furthermore, since the Guam procurement law (5 GCA § 5480), following the ABA Model Code (§ 9-401) expressly provides for waiver of sovereign immunity in procurement disputes, separate from the provision (5 GCA § 5425) dealing with the process, and time limits, for determining such disputes, it might reasonably be expected that the Guam Supreme Court would be guided by the Irwin decision, noted above:
"Once Congress has made such a waiver, we think that making the rule of equitable tolling applicable to suits against the Government, in the same way that it is applicable to private suits, amounts to little, if any, broadening of the congressional waiver."

* But note, the Guam Supreme Court has also adopted the doctrine of equitable estoppel against the government, in a civil service administrative remedy context: "we adopt with approval the Appellate Division's use of estoppel against the Government." See, Limtiaco v. Guam Fire Department, 2007 Guam 10, at paragraphs 57 et seq.

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