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Three Rulings That Could Make 2022 Easier for Contracts Lawyers

Dec. 13, 2021, 11:00 AM

Attorneys for federal contractors are taking lessons from three key decisions in bid protest cases from the past year. Together, the decisions can help attorneys decide whether an agency action is worth challenging.

The decisions clarified jurisdiction questions for implied-in-fact contract claims and other transaction agreement protests and clarified when a protester waiver rule can’t be applied.

Implied-in-Fact

Contractors now know that the U.S. Court of Federal Claims can hear a claim that the government breached an implied-in-fact contract to fairly review a bidder’s proposal in the procurement context.

In a matter of first impression, the U.S. Court of Appeals for the Federal Circuit held in Safeguard Base Operations LLC v. United States that it could review Safeguard’s challenge to the Department of Homeland Security’s award of a $78 million dormitory management services contract to B&O Joint Venture LLC.

Safeguard contended that DHS arbitrarily disqualified its bid and violated an implied contract to properly consider it.

The Federal Circuit said the Administrative Dispute Resolution Act—enacted in 1996—allowed the claims court to hear Safeguard’s argument.

Claims court judges had disagreed as to whether implied-in-fact contract jurisdiction in the procurement context existed post-ADRA, the Federal Circuit said in its March 4 ruling.

“I can’t say for all potential protesters whether the questionable jurisdiction dissuaded some from pursuing an implied-in-fact claim,” said Meghan A. Douris of Oles Morrison Rinker & Baker LLP in Seattle. “But I would certainly say it weighed into the decision as to whether or not a protester would pursue a cause of action,” she said.

Other Transaction

The circumstances when the claims court has jurisdiction over an Other Transaction agreement protest are now “materially clearer,” said Jason N. Workmaster of Miller & Chevalier Chartered in Washington.

OTAs are legally binding but non-contractual instruments that allow contractors to provide agencies with prototypes and research services without having to comply with certain regulations.

In Kinemetrics Inc. v. United States, the protester asserted that the Air Force unreasonably awarded Nanometrics Inc. a $10 million OTA for seismic equipment used to monitor nuclear treaty compliance under a Commercial Solutions Opening Acquisition.

Kinemetrics’ protest could be reviewed because it was raised “in connection with a procurement,” the claims court said Sept. 17. The seismic equipment solicitation Kinemetrics challenged had a direct effect on the award of a contract, it said.

The court distinguished Kinemetrics’ claim from the one in its 2019 decision in Space Exploration Techs Corp. v. United States. There it said that it couldn’t hear a protest of an OTA solicitation for space launch infrastructure because SpaceX’s protest involved a multi-phase procurement that wasn’t connected to an eventual contract.

Unlike in Space Exploration, rejecting Kinemetrics’ bid in the evaluation phase of the seismic equipment solicitation “did disqualify plaintiff from consideration for the follow-on production contract,” the court said.

Contractors knowing the circumstances under which they can protest an OTA in court is vital given how the Government Accountability Office generally won’t review such protests, and because of the growing commitment to OTAs by federal agencies.

“OTA usage has grown significantly over the past 5 years, with obligations increasing from $1.7 billion in 2016 to $16.5 billion in fiscal year 2020,” a June Government Accountability Office report said.

Waiver

A contractor doesn’t waive the right to protest a procurement’s terms—despite a delay in filing the protest in court—if it timely pursued a protest at the agency-level, the Federal Circuit ruled Dec. 7.

In Harmonia Holdings Grp. LLC v. United States, a contractor filed an agency-level protest of a U.S. Customs and Border Protection procurement for cargo systems support.

The agency denied the protest in December 2018. Harmonia filed a protest at the claims court in May 2019.

The claims court said that the five-month delay between the denial and the court filing constituted waiver under Blue & Gold Fleet LP v. United States, which held that a protest is waived if a contractor knew of an alleged defect but failed to timely object.

But the Federal Circuit said the waiver rule didn’t apply because Harmonia raised an “undisputedly timely, formal challenge of the solicitation” before the agency.

Harmonia was therefore allowed to assert before the claims court the same grounds of objection it asserted before the agency, the court said.

The ruling confirms Blue & Gold is satisfied once a protester challenges solicitation terms—at the agency, GAO, or in court—before the proposal submission deadline, said Nathaniel Castellano of Arnold & Porter Kaye Scholer LLP in Washington.

The government argued in Harmonia that Blue & Gold requires contractors to move at some unspecified pace from an agency-level protest to another forum to preserve a challenge to solicitation terms, Castellano said.

“This argument creates a good deal of anxiety because often protesters file their solicitation challenge with the agency or GAO right before the proposal submission deadline, so by the time the initial denial comes, the proposal submission deadline is long gone,” he said.

Castellano added that if “the protester is considering proceeding to the court, there has been a vague risk that, if there is a delay between the GAO or agency denial and filing a complaint, the government will try to leverage Blue & Gold, claiming that the protester waited too long to raise the protest in court,” he said.

The cases are Safeguard Base Operations LLC v. United States, Fed. Cir., No. 2019-2261, 3/4/21; Kinemetrics Inc. v. United States, Fed. Cl., No. 21-1626, 9/17/21; and Harmonia Holdings Grp. LLC v. United States, Fed. Cir., No. 2020-1538, 12/7/21.

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com