v.
United States
Nos. 22-573, 22-620, 22-630
(Filed: 30 November 2022 *)
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MICHAEL STAPLETON ASSOCIATES, *
LTD, *
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Plaintiff, *
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v. * No. 22-573 * THE UNITED STATES, * Pre-Award Bid Protest; Organizational * Conflict of Interest; Mail; USPS; Defendant, * Resolicitation; Bid Protest; Patent * Ambiguities; Injunctive Relief; Arbitrary and * and Capricious; APA Rational Basis. * AMERICAN K-9 DETECTION * SERVICES, LLC, * * Defendant-Intervenor. * * *************************************** *************************************** GLOBAL K9 PROTECTION SERVICES, * LLC, * * Plaintiff, * * v. * No. 22-620 * THE UNITED STATES, * * Defendant. * * *************************************** *************************************** AMERICAN K-9 DETECTION * SERVICES, LLC, *
*
This opinion was originally filed under seal on 23 November 2022 pursuant to the protective order in this case. The Court provided the parties an opportunity to review this opinion for any proprietary, confidential, or other protected information and submit proposed redactions by 30 November 2022. The USPS, MSA, and GK9 proposed redactions on 30 November 2022. The Court accepts the parties’ proposed redactions and reissues the order, with a few minor, non-substantive corrections and redacted language replaced as follows: “[XXXXX].”
*
Plaintiff, *
*
v. * No. 22-630 * THE UNITED STATES, * * Defendant. * * ***************************************
Daniel J. Strouse, of Cordatis LLP, with whom was Joshua D. Schnell, both of Arlington, VA, for plaintiff American K-9 Detection Services, LLC.
W. Brad English, of Maynard, Cooper & Gale, PC, with whom were Jon D. Levin, Emily J. Chancey, Mary Ann Hanke, and Nicholas P. Greer, all of Huntsville, AL, for plaintiff Global K9 Protection Group, LLC.
Ryan C. Bradel, of Ward & Berry PLLC, with whom was P. Tyson Marx, both of Tysons, VA, for plaintiff Michael Stapleton Associates, Ltd.
John J. Todor, Senior Trial Counsel, Commercial Litigation Branch, with whom were Reginald T. Blades Jr., Assistant Director, Patricia M. McCarthy, Director, Brian M. Boynton, Principal Deputy Assistant Attorney General, Civil Division, Department of Justice, and Shoshana O. Epstein, Attorney, United States Postal Service, all of Washington, DC, for defendant.
OPINION AND ORDER
HOLTE, Judge.
Plaintiffs, Michael Stapleton Associates, Ltd. (“MSA”), Global K9 Protection Group, LLC (“GK9”), and American K-9 Detection Services, LLC (“AMK9”), bring three separate pre-award bid protests, consolidated on 13 June 2022, against the United States Postal Service (“USPS”) in which the USPS solicitated a contract for canine explosive detection and alarm resolution services under Solicitation No. 2B-20-A-0087. Pending before the Court are plaintiffs’ motions for judgment on the administrative record (“MJAR”), the government’s cross-MJAR, MSA’s motion for a stay or injunction pending appeal, MSA’s motion to expedite consideration of its motion for a stay or injunction pending appeal, and GK9’s and AMK9’s motions for a status conference.
For the multiple protests and remands related to this solicitation, the Court has formally issued 129 pages of opinions and orders—and USPS has written 117 pages of reports, decisions, and exhibits—documenting the potential for organizational conflicts of interest (“OCIs”) and problems with contracting. The Court continues adding to the page count, again addressing the government’s actions, the persisting OCIs, and the slew of other motions recently filed. All plaintiffs ask for injunctive relief: GK9 argues, the “USPS’s corrective action is irrational because it failed to adequately consider or evaluate MSA’s immitigable . . . OCIs that should have resulted in MSA being disqualified from the competition[,]” GK9’s MJAR at 7, ECF No. 53, while AMK9 contends, “MSA stands to potentially receive an award that USPS should prohibit MSA from receiving[,]” AMK9’s MJAR at 13, ECF No. 51. MSA previously asked the Court for a temporary restraining order and preliminary injunction; MSA requests the same relief here. Tr. of 21 Oct. 2022 OA on Cross-MJARs (“Tr.”) at 220:19–221:3.
[*2]After extensive conversation at oral argument held 21 October 2022, see id., the Court determined it did “not have enough information to make [an equitable] determination.” 26 Oct. 2022 Order at 5, ECF No. 72. Accordingly, the Court issued an order “to seek USPS guidance on several reevaluation or resolicitation factors to craft an equitable remedy, if any, in [the present] order.” Id. at 2. While the Court found “the OCIs connected to the 2020 solicitations remained in the 2022 resolicitation process and are immitigable, which may prompt the need to disqualify MSA from participation in the 2022 resolicitation[,]” the Court “ask[ed] USPS to offer guidance on the prospect of resoliciting or reevaluating the 2022 resolicitation in the event the Court’s equitable remedy disqualifies MSA from participation in the 2022 resolicitation[.]” Id. at 4–5. The USPS filed two supplemental statements offering guidance and only plaintiff GK9 responded with its concerns. See Gov’t’s First Resp. to 26 Oct. 2022 Order, ECF No. 71; GK9’s Resp. to 26 Oct. 2022 Order, ECF No. 75. The Court now makes its equitable determination on the motions and generally agrees with the USPS’ proposed plans to phase-out MSA and disqualify MSA from future performance as a result of OCI-tainted solicitations.
For the following reasons, the Court grants AMK9’s motion for judgment on the administrative record, grants in part GK9’s motion for judgment on the administrative record, grants in part and denies in part the government’s cross-motion for judgment on the administrative record, and denies MSA’s motion for judgment on the administrative record. The Court grants AMK9’s request for injunctive relief, grants in part GK9’s request for injunctive relief, and denies MSA’s request for injunctive relief. The Court has no choice but to enjoin MSA and ask the USPS to reevaluate the solicitation in a manner that does not violate its Supplying Principles and Practices. The Court finds as moot MSA’s motion for stay pending appeal, MSA’s motion to expedite, and GK9’s and AMK9’s motions for a status conference.
I. Factual Background
This case relates to another pending case before the Court, American K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020), which is a consolidated bid protest filed by disappointed offerors following the USPS’s decision to award a contract for canine explosive detection and alarm resolution services to MSA. See Notice of Directly Related Case, ECF No. 7; Compl. (“2020 Compl.”), ECF No. 1, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020); Order, ECF No. 59, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Apr. 21, 2021) (consolidating cases).
A. Aircraft Operator Standard Security Program Following the September 11th attacks, the National Commission on Terrorist Attacks Upon the United States (“9/11 Commission”) issued a federal mandate to the Transportation Security Administration (“TSA”) requiring “100% screening of all air cargo on passenger airlines by 2020.” Admin. R. at 3 (USPS Supply Management Competitive Purchase Plan), ECF No. 23-2 (“2020 AR”), Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020); see also 49 U.S.C. § 44901 (“The Administrator of the [TSA] shall provide for the screening of all passengers and property, including United States mail, . . . that will be carried aboard a passenger aircraft . . . .”). The USPS “is held to this mandate by the TSA/[Federal Aviation Administration] regulations under the Aircraft Operator Standard Security Program . . . , which includes mail over sixteen (16) ounces, Military Mail, [and] registered mail[.]” 2020 AR at 3. Currently, local law enforcement, funded by the TSA, provides screening of mail delivered on airplanes. Id. at 4. Under this system, the USPS has “little, to no, oversight or ability to manage the screenings or the locations as the program is run directly by the TSA.” Id.
[*3]To grant the USPS control over the package screening process and facilitate development of a program expanding the number of sites with screening capabilities, TSA is currently developing a policy to relieve TSA from package screening and “require the shift of the explosives detection screening to [the USPS].” Id. TSA has “regulatory authority under 49 CFR [§ 5144] . . . to modify the procedures for air cargo security[,] [a]nd using that regulatory authority for the purposes of this new contract, the [Third-Party Canine-Cargo (‘3PK9’ or 3PK9-C’)] program, for [the USPS] to conduct screening, part of that authority has set up procedures by which it would have the screening be permitted so that it could be part of the same overall screening process that goes onto airlines.” Tr. of 8 Feb. 2021 OA on Cross-MJARs (“2021 OA Tr.”) at 111:9–17 (quoting the government), ECF No. 44, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020).
B. The USPS Pilot Program
In 2019, the USPS developed a pilot program to test the 3PK9-C program to conduct screening for mail weighing more than 16 ounces for transport via air carriers at Phoenix Sky Harbor airport. 2020 AR at 1899–1901 (2–11 February 2021 Supplier Disagreement Resolution Official Questions to the Unites States Postal Inspection Serive (“USPIS”), and their responses via email), ECF No. 62-4, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020), 812 (USPS Supplier Disagreement Resolution No. SDR-21-CS-001), ECF No. 62-3, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020). The USPS conducted this pilot program jointly with MSA for three months through a noncompetitive (nonformal) contract to MSA. See id. at 816. On completion of the program, the USPIS distributed a presentation to airlines. 2020 AR at 1906–36. The 6 July 2020 presentation was entitled “USPIS-3PK9 Mail Daily Best Practices—Airlines.” Id. MSA was featured heavily in the presentation. Id. The USPIS Playbook sent to airlines did not identify any other TSA-certified 3PK9-C vendors, even though the USPS was aware other such companies existed, 2020 AR at 6–7 (USPS Supply Management Competitive Purchase Plan), ECF No. 23-2, Am. K- 9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020), such as GK9, which has provided the same or similar services to all major airlines and at all major airports for several years. Id. at 988 (GK9 Proposal Cover Letter).
[*4]MSA’s role with the USPS program did not end with the pilot program. After the pilot program, MSA continued to consult with the USPS to develop the 3PK9 program. 2020 AR at 3678 (Contracting Officer (“CO”) Franklin’s Decision Following Second Remand), ECF No. 125-5, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020). After the pilot program, the USPS did not execute a formal contract with MSA for the consulting work. Id. Without a formal contract, the USPS did not include OCI restrictions or expectations for MSA. Id. Until at least July of 2020, MSA actively assisted the USPS in designing the entire USPS 3PK9 mail screening program, including preparing “internal quality control audit documents, program fundamentals documents, and what appears to be fairly extensive work on the playbook.” Id. The USPS described MSA as being “instrumental in program development[,]” essentially working as a consultant to develop the program as a whole. Id. MSA was “heavily involved in the designing of processes and procedures for the USPIS 3PK9 program.” Id. at 3682.
As it consulted with the USPS, MSA understood the USPS planned to enter a noncompetitive contract with MSA for expanded 3PK9 services across the country. 2020 AR at 3679. In its consulting role, MSA obtained a list of intended USPS locations, mail volumes, and required hours. Id. at 3678. Further, “concepts that MSA appears to have assisted the USPIS with developing appear in the [2020 Statement of Work (“SOW”)], including quality control concepts.” Id. at 3679–80.
On 14 August 2020, the USPS issued a request for information (“RFI”) inviting “vendors in the marketplace to register their interest in providing services to the USPS should the USPS decide to develop the [3PK9-C] program.” Id. at 24 (RFI). The RFI was sent to seven potential offerors “from TSA’s list of SAFETY Act certified and in-process SAFETY Act certified organizations[.]” Id. at 6–7 (USPS Supply Management Competitive Purchase Plan). In the RFI, the USPS stated it was “peppering the market” regarding the “potential and ability” for suppliers to “provide the USPS with the canines and program management necessary, should the USPS invest in and develop a 3PK9-C program to screen cargo and mail being transported on domestic and international passenger commercial air carriers on a nationwide basis.” Id. at 24 (RFI). If the 3PK9-C program were to be developed, the RFI stated the USPS would need “an Alarm Resolution protocol for instances when a canine alerts to a mail piece,” among other “detection, analysis, and interpretation technology” services. 2020 AR at 24. Anticipating its need for alarm resolution services, the RFI inquired about offerors’ “capabilities around Alarm Resolution” and “procedure for clearing Alarms[.]” Id. at 25.
The USPS’s Competitive Purchase Plan (“CPP”) explained its need for mail screening and resolution services. Id. at 3–4 (USPS Supply Management CPP). “Due to the ongoing COVID-19 pandemic,” Air Transportation Operations predicted “a package shift in the global network of air carriers[,]” resulting in “a Peak Season shortfall on [the USPS]’s planned capacity with FedEx.” Id. at 3. The CPP described a preference for offerors who “have SAFETY Act certified technology and processes to provide Real-Time X-Ray analysis and interpretation by trained bomb technicians for alarm resolution[.]” Id. at 7. The government acknowledged requiring SAFETY Act certification would limit the number of offerors who could submit responsive proposals but determined “this will not preclude diversity in the types and sizes of offerors.” Id. The CPP reiterated such a contract “will allow [the USPS] to control the [mail] screening process[.]” Id. at 4.
[*5]Although the USPS and MSA collaborated with the expectation MSA would receive a noncompetitive award, 2020 AR at 3678–79, other companies could compete (which several iterations of the USPS purchasing plans have subsequently acknowledged), and, with external pressure (i.e. the Alabama legislature, see Tr. at 123:20–124:19, ECF No. 74), the USPS held a competition. The USPS issued a solicitation in September of 2020 (“2020 solicitation”). Id. at 53–151 (2020 SOW, 2020 Solicitation Instructions and Evaluation Criteria, and 2020 Solicitation).
C. The Solicitation
On 22 September 2020, the USPS issued Solicitation No. 2B-20-A-0087 for “the procurement of Third-Party Canine-Mail Screening with Real-Time X-ray Analysis [and] Interpretation.” Id. at 118 (2020 Solicitation). The solicitation contemplated “a four-year base period award with two two-year renewal options.” Id. at 97 (2020 SOW). The pricing method for the contract contemplated: (1) a contract for 3PK9-C services; (2) a contract for alarm resolution services; or (3) a combined contract for both 3PK9-C services and alarm resolution. Id. The USPS specifically sought service contracts which included:
1. The services of a TSA-approved [3PK9-C teams] explosive detection canine team offeror to screen Priority Mail and mail weighing 16 ounces or greater transported on domestic and international passenger commercial air carriers on a nationwide basis. The offeror shall have the capability for 3PK9-C teams to respond at the request of a USPIS Postal Inspector on a nationwide basis . . . for investigative and preventative call-outs. [2]. Alarm Resolution protocols for instances when a canine alerts to a mail piece. [the USPS] requires a combined comprehensive improvised explosive device (IED) screening, detection, analysis and interpretation solution which includes technology used in conjunction with [the USPS] or air transportation offerors’ (air carriers) owned x-ray screening machines to facilitate remote alarm resolution analysis by FBI Hazardous Device School (HDS) or Naval School Explosive Ordinance Disposal (NAVSCOLEOD) certified bomb technicians.
Id. at 96–97.
Offerors would be evaluated under three factors: (1) capability (explosive detection canines (“EDC”) service); (2) capability (alarm resolution); and (3) past performance. 2020 AR at 112–13. The government instructed offerors to “respond to the evaluation factors that are only relevant to what they plan on bidding on (Evaluation Factor One or Evaluation Factor Two) in addition to Evaluation Factor Three, which all bidders must respond to.” Id. at 77 (2020 Solicitation Instructions and Evaluation Criteria). Under the first capability factor, EDC service, an offeror would be evaluated on its “ability to provide canine handler resources[,]” “ability to meet the required or proposed delivery schedules[,]” “management and staffing plan[,]” and its “ability to obtain the necessary certifications and security badges required at each location” “relative to the SAFETY Act . . . and Certificate of SAFETY Act Designation.” Id. at 78. The second capability factor, alarm resolution, would consider the “offeror’s alarm resolution plan,” the “offeror’s management and staffing plan for K9s and handlers,” and the “offeror’s quality assurance and performance tracking plans.” Id. (cleaned up). The evaluation of past performance would include, but would not be limited to: “demonstrated support for the execution of canine handler teams across the U.S., including the planning and administration of such a national level program”; “proven experience in developing national level canine handler programs”; and “offeror’s national roll-out canine support experience.” Id. (cleaned up).
[*6]The intention of the procurement was “to award one or more contracts based on a best value determination.” Id. at 56 (2020 SOW), 96 (2020 Solicitation). The solicitation evaluation criteria noted the USPS’s “strong preference for awarding one award that will encompass all as [sic] requirements of the SOW[,]” although the USPS was “willing to consider multiple awards, if that were determined to provide best value.” 2020 AR at 113 (2020 Solicitation Instructions and Evaluation Criteria). First, the USPS would “make a preliminary best value decision among offerors who have proposed on the entire scope of work”; then, if satisfied with its first best value determination, the USPS would “proceed to award without further best value considerations.” Id. In making its best value determination, the USPS would consider “whether pricing is reasonable compared to internal cost estimates and whether it is satisfied with the overall technical abilities for the proposed awardee of the single award.” Id.
D. Contract Award
Each of the seven offerors submitted a proposal for combined 3PK9-C services and alarm resolution services, but MSA was recommended for the award as the CO determined MSA “provide[d] the best tradeoff between technical, risk, and price.” Id. at 805 (Award Recommendation). On 9 November 2020, the USPS informed AMK9 and GK9 it awarded the contract to MSA. See AMK9 2020 Am. Compl., Ex. [1] at 2 (Unsuccessful Offeror Notice), ECF No. 20-1, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020); GK9 2020 Am. and Restated Compl. at 5, ECF No. 82, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020).
E. AMK9’s Post-Award Administrative Dispute and Appeal
AMK9 filed a post-award business disagreement with the USPS on 27 November 2020, challenging the award of the contract to MSA. 2020 AR at 1976–90 (AMK9’s Post-Award Protest Before the CO). AMK9 alleged an “unreasonable and inconsistent” evaluation of its proposal and “clear [OCIs] that should have warranted MSA’s removal from consideration for award.” Id. at 1976. AMK9 further alleged the USPS used an “unstated evaluation factor” to evaluate AMK9’s proposal, assigned unreasonable weakness to AMK9’s proposal, “ignored portions of AMK9’s proposal[,]” conducted an unreasonable tradeoff analysis, and “failed to consider the [OCI].” Id. at 1981–90.
F. GK9’s Administrative Dispute and Appeal On 30 November 2020, GK9 filed a post-award business disagreement with the USPS. Id. at 1937–45 (GK9’s Post-Award Protest Before the CO). GK9 disputed USPS’s effective identification, and resolution, of an “obvious” OCI involving MSA. Id. at 1942–44. GK9 further alleged the USPS improperly evaluated technical aspects of its proposal, including aspects related to x-ray technology, the number of command center locations, past rollouts, and projected staffing to meet the rollout schedule. Id. at 1944.
[*7]G. The USPS’s Second Pre-Award Investigation of MSA’s Potential OCI
The CO denied AMK9’s post-award business disagreement on 7 December 2020. 2020 AR at 1991–98 (CO’s Response to AMK9’s Post-Award Protest). On 17 December 2020, AMK9 appealed to the Supplier Disagreement Resolution Official (“SDRO”), who denied the appeal on 21 April 2021. Id. at 1999–2016 (AMK9’s Appeal to the SDRO), 2017–26 (SDRO’s Response to AMK9’s Appeal). The USPS CO denied GK9’s post-award business disagreement on 10 December 2020. Id. at 1946–51 (CO’s Response to GK9’s Post-Award Protest). On 17 December 2020, GK9 appealed the CO’s denial to the USPS SDRO. Id. at 1952–63 (GK9’s Appeal to the SDRO). On 13 April 2021, the SDRO denied GK9’s appeal. Id. at 1964–72 (SDRO’s Response to GK9’s Appeal).
H. American K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020)
The protesters disputed the USPS’s decision to combine several requirements into one procurement in a way that benefitted MSA, and the protestors further argued MSA had distinct advantages due to purported conflicts of interest. 2020 Compl. at 1. After briefing and oral argument, this Court twice remanded the case to the USPS to conduct a full OCI investigation. See Am. K-9 Detection Servs., LLC v. United States, No. 20-1614, 2021 WL 1086225 (Fed. Cl. Mar. 19, 2021); Am. K-9 Detection Servs., LLC v. United States, 155 Fed. Cl. 248 (2021). After the second remand, the CO found MSA had OCIs involving unequal access to information and biased ground rules. See 2020 AR at 3665–84 (“CO Franklin’s Report”). The USPS took corrective action on 18 February 2022 to mitigate the OCI by shortening MSA’s contract by one year and cancelling all renewal options for the contract. Id. at 3682–83. The USPS also issued two new solicitations—one for Third-Party Canine Mail Screening (“Canine Screening”) services and one for Mail Screening Alarm Resolution (“Alarm Resolution”) services (collectively, “2022 resolicitation”). Admin. R. at 6806–6962 (Canine Screening Solicitation), ECF No. 48-4 (“2022 AR”); 2022 AR at 5877–5966 (Alarm Resolution Solicitation), ECF No. 44-5.
I. MSA’s Post-Award Business Disagreement Protest
MSA filed a business disagreement with the CO on 7 April 2022 arguing the services should remain bundled and alleging the 2022 solicitations contained patent ambiguities. See 2022 AR at 6525–34 (MSA’s Initial Disagreement), ECF No. 44-13. The CO denied MSA’s disagreement, stating the USPS learned “that a single award to one supplier was unnecessary[,]” and “separating the services would allow for more companies to compete . . . [and] this increased competition would better serve [the USPS]’s objective of obtaining best value.” Id. at 6535 (CO Baker’s Decision Letter to MSA). The CO also found MSA’s allegations of patent ambiguities in the solicitations were unfounded. Id. at 6537–38. MSA appealed the denial to the SDRO, who upheld the CO’s decision. See id. at 6597–6605 (SDRO’s Decision Letter to MSA), ECF No. 44-12.
[*8]J. AMK9 and GK9’s Post-Award Business Disagreement Protests
Around the same time as MSA’s agency-level challenges, offerors GK9 and AMK9 submitted business disagreements; they argued the USPS’s 18 February 2022 corrective actions were insufficient because MSA was still allowed to compete despite allegedly having an unfair advantage. See 2022 AR at 6326–43 (AMK9’s Initial Business Disagreement), ECF No. 44-10, 6344–50 (GK9’s Initial Business Disagreement). The CO initially denied AMK9’s and GK9’s business disagreements. See id. at 6395–6402 (CO’s Decision Regarding AMK9’s Business Disagreement), 6403–11 (CO’s Decision Regarding GK9’s Business Disagreement). GK9 and AMK9 appealed, and the SDRO denied AMK9’s and GK9’s business disagreements in part and sustained them in part. See 2022 AR at 6412–28 (AMK9’s 2022 Appeal to the SDRO), 6455–63 (GK9’s 2022 Appeal to the SDRO), ECF No. 44-11, 6606–20 (“SDRO’s AMK9 Decision”), 6630–48 (“SDRO’s GK9 Decision”). The agency amended the 2022 resolicitation to mitigate MSA’s advantage as an incumbent but declined to exclude MSA from competing for awards under the 2022 resolicitation. Id. at 6619, 6646–47.
II. Procedural History
MSA filed this bid protest on 25 May 2022 and moved for a preliminary injunction and temporary restraining order (“TRO”) the same day. See Compl., ECF No. 1; Pl.’s Mot. TRO & Prelim. Inj. On 25 July 2022, the Court denied MSA’s motion for a preliminary injunction and TRO. Michael Stapleton Assocs., Ltd v. United States, 161 Fed. Cl. 151 (2022). GK9 then filed its complaint and motion for preliminary injunction on 6 June 2022. See Compl., ECF No. 1, Global K-9 Detection Servs., LLC v. United States, No. 22-620 (Fed. Cl. June 6, 2022); Pl.’s Mot. Prelim. Inj., ECF No. 5, Global K-9 Detection Servs., LLC v. United States, No. 22-620 (Fed. Cl. June 6, 2022). The USPS responded to MSA’s preliminary injunction and TRO motion on 8 June 2022. See Def.’s Resp. Mot. TRO & Prelim. Inj., ECF No. 15. GK9 then filed a motion to withdraw its motion for a preliminary injunction, ECF No. 38, after the parties agreed to an expedited briefing schedule on the parties’ MJARs. See id.
The Court held a status conference on 13 June 2022, in which the parties agreed to consolidate case numbers 22-620 and 22-630 with 22-573. See Order, ECF No. 17. The Court then consolidated the cases under Rule 42(a)(2) of the Rules of the Court of Federal Claims (“RCFC”), making this case the lead case. See Order at 2, ECF No. 19. The parties filed a joint status report (“JSR”) on 14 June 2022 in which the USPS agreed to delay its award date for the 2022 solicitations until after 30 June 2022, mooting MSA’s motion for a TRO. See JSR at 3–4, ECF No. 20. The next day, MSA filed a reply to the USPS’s response to MSA’s motion for a preliminary injunction as well as a supplemental motion for a preliminary injunction. See MSA’s Reply, ECF No. 24; MSA’s Suppl. Mot. Prelim. Inj., ECF No. 22. The USPS filed its response to MSA’s supplemental motion for preliminary injunction on 21 June 2022, see ECF No. 39, and MSA replied in support of its motion on 28 June 2022, see ECF No. 45. The Court then held oral argument on 29 June 2022. See Order, ECF No. 40.
[*9]On 14 July 2022, AMK9, MSA, and GK9 filed their respective MJARs, ECF Nos. 51, 52, and 53. On 28 July 2022, the government filed its responses to the MJARs as well as its cross-MJAR, ECF No. 56. Subsequently, AMK9, GK9, and MSA filed their respective replies in support of their MJARs, ECF Nos. 59, 60, and 61. The government filed its reply in support of its cross-MJAR on 18 August 2022, ECF No. 62. On 9 September 2022, the USPS awarded Canine Screening contracts to MSA, AMK9, and a third-party service and the Alarm Resolution contract to MSA. See JSR, ECF No. 66.
The Court held oral argument on 21 October 2022 to address remaining pre-award challenges in relation to the cross-MJARs. [1] See 15 September 2022 Order at 1. At oral argument, the parties confirmed, for purposes of this order, their challenges are limited to pre-award protests notwithstanding the award of the contracts. See Tr. at 218:13–219:17. The Court thus limits its discussion in this case to protests challenging the terms of the USPS’s 2020 solicitation and 2022 resolicitation and does not address protests filed after the bid was awarded and contractors selected on 9 September 2022.
III. Legal Standard
A. Bid Protest Jurisdiction and APA Standard of Review
The Tucker Act grants this Court jurisdiction to “render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1). To be an “interested party,” a protestor must show it is an “actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” PDS Consultants, Inc. v. United States, 907 F.3d 1345, 1356 (Fed. Cir. 2018) (internal quotation marks omitted) (quoting 31 U.S.C. § 3551(2)(A)).
In rendering such judgment, courts “review the agency’s decision pursuant to the standards set forth in section 706 of title 5 [of the Administrative Procedure Act (‘APA’)].” 28 U.S.C. § 1491(b)(4); see also Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001). 2 “Among the various APA standards of review in section
1 On 8 March 2022, the CO noted in his remand investigation analysis he conducted “a much more thorough review of the potential OCI” of Christopher Shelton, who served as the Supervisory Air Marshal in Charge of the TSA Canine Training Center before working at MSA, and concluded no OCI existed. 2020 AR at 1869 (CO Decision After Remand). At oral argument, the parties agreed they were no longer arguing about Mr. Shelton. Tr. at 19:19–20:12. 2 MSA previously argued the Court has jurisdiction under the APA according to Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970). See 2021 OA Tr. at 14:24–16:25. MSA now agrees this Court has jurisdiction pursuant to the Tucker Act. See MSA’s Post-Award Cross-MJAR at 13, ECF No. 94, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020); Tr. of 22 June 2021 OA on Cross-MJARs at 81:15–17 (counsel for MSA agreeing MSA “no longer suggests the Scanwell jurisdiction[.]”), ECF No. 104, Am. K-9 Detection Servs., LLC v. United States, No. 20-1614 (Fed. Cl. Nov. 18, 2020). As stated in the
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706, the proper standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A): a reviewing court shall set aside the agency action if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” Banknote Corp. of Am. v. United States, 365 F.3d 1345, 1350–51 (Fed. Cir. 2004) (citing Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054, 1057–58 (Fed. Cir. 2000)). Under this standard, “a court is not to substitute its judgment for that of the agency.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983). “Courts have found an agency’s decision to be arbitrary and capricious when the agency ‘entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or [the decision] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.’” Ala. Aircraft Indus., Inc.-Birmingham v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009) (quoting Motor Vehicle Mfrs., 463 U.S. at 43). “The arbitrary and capricious standard applicable here is highly deferential” and “requires a reviewing court to sustain an agency action evincing rational reasoning and consideration of relevant factors.” Advanced Data Concepts, 216 F.3d at 1058 (citing Bowman Transp., Inc. v. Ark.-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974)).
B. Judgment on the Administrative Record in a Bid Protest
“RCFC 52.1(c) provides for judgment on the administrative record.” Huntsville Times Co. v. United States, 98 Fed. Cl. 100, 104 (2011) (Bush, J.); see also Bannum, Inc. v. United States, 404 F.3d 1346, 1353–54 (Fed. Cir. 2005). Rule 52.1(c) was “designed to provide for trial on a paper record, allowing fact-finding by the trial court.” Bannum, 404 F.3d at 1356.
This Court may set aside a contract award if: “(1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure.” Garufi, 238 F.3d at 1332. “[D]e minimis errors do not require the overturning of an award.” Grumman Data Sys. Corp. v. Dalton, 88 F.3d 990, 1000 (Fed. Cir. 1996) (emphasis omitted). “De minimis errors are those that are so insignificant when considered against the solicitation as a whole that they can safely be ignored and the main purposes of the contemplated contract will not be affected if they are.” Id. (internal quotation marks omitted) (quoting Andersen Consulting v. United States, 959 F.2d 929, 935 (Fed. Cir. 1992)). A bid protest plaintiff must establish alleged “errors in the procurement process significantly prejudiced” plaintiff by showing “there was a ‘substantial chance’ it would have received the contract award but for the errors[.]” Bannum, 404 F.3d at 1353 (quoting Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319 (Fed. Cir. 2003)).
Moreover, “to prevail in a protest the protester must show not only a significant error in the procurement process, but also that the error prejudiced it.” Data Gen. Corp. v. Johnson, 78 F.3d 1556, 1562 (Fed. Cir. 1996). To establish prejudice, “a protester must demonstrate that but for the alleged error, there was a substantial chance that it would receive an award.” Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996) (cleaned up).
Court’s first remand order, “jurisdiction in this USPS bid protest [is] pursuant to the Tucker Act as amended by the [Administrative Dispute Resolution Act of 1996], which ‘subsumed’ Scanwell APA jurisdiction.” Am. K-9 Detection Servs., LLC v. United States, No. 20-1614, 2021 WL 1086225, at[*11] (Fed. Cl. Mar. 19, 2021) (citing 28 U.S.C. § 1491(b)(1)).
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C. Organizational Conflict of Interest
Application of 5 U.S.C. § 706 to OCI investigations enables courts to determine whether an agency’s assessment lacked a rational basis. Courts deem an agency’s decision as arbitrary and capricious when the agency “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or [the decision] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.” Motor Vehicle Mfrs., 463 U.S. at 43. Application of 5 U.S.C. § 706 does not substitute a court’s judgment for the agency’s judgment. Id.
Federal Acquisition Regulation (“FAR”) Subpart 9.5 governs OCIs in federal procurements. See FAR Subpart 9.5. Under FAR 2.101, an OCI is a situation where “a person is unable or potentially unable to render impartial assistance or advice to the Government, or the person’s objectivity in performing the contract work is or might be otherwise impaired, or a person has an unfair competitive advantage.” FAR 2.101. Contracting officers are required to “[i]dentify and evaluate potential [OCIs] as early in the acquisition process as possible” and “[a]void, neutralize, or mitigate significant potential conflicts before contract award.” FAR 9.504(a). There are three situations leading to an OCI: “biased ground rules,” “unequal access to information,” and “impaired objectivity.” ARINC Eng’g Servs., LLC v. United States, 77 Fed. Cl. 196, 202 (2007) (Allegra, J.) (citations omitted).
Congress specified “no Federal law dealing with public or Federal contracts [or] property . . . shall apply to the exercise of the powers of the [USPS].” 39 U.S.C. § 410(a). Neither the Competition in Contracting Act, 31 U.S.C. § 3553, nor the FAR are identified as applying to the USPS. See id.; see also Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071, 1079 n.7 (Fed. Cir. 2001). There are a number of laws governing purchasing and material management at the USPS: “Some of those laws are mandated in 39 CFR either as enacted or since amended, and others are applied to the [USPS] by its own terms.” Supplying Principles and Practices (“SP&Ps”) § 7-7. To supplement the USPS’s purchasing regulations contained in 39 C.F.R. Part 601, “[t]he Supplying Principles [of the SP&Ps] are the overarching business principles which the [USPS] will follow in its [supply chain management] efforts” by its own terms. The USPS, Introduction to the Postal Service Supplying Principles and Practices (Rev. Sept. [1], 2022). “It is the policy of the [USPS] and in the interest of suppliers to resolve supplier business disagreements at the contracting officer . . . level.” SP&Ps § 7-4.
“This court will not overturn a contracting officer’s determination unless it is arbitrary, capricious, or otherwise contrary to law.” PAI Corp. v. United States, 614 F.3d 1347, 1352 (Fed. Cir. 2010) (citing John C. Grimberg Co. v. United States, 185 F.3d 1297, 1300 (Fed. Cir. 1999)). “To demonstrate that such a determination is arbitrary or capricious, a protester must identify ‘hard facts’; a mere inference or suspicion of an actual or apparent conflict is not enough.” Id. (citing C.A.C.I., Inc.-Fed. v. United States, 719 F.2d 1567, 1581 (Fed. Cir. 1983); Filtration Dev. Co. v. United States, 60 Fed. Cl. 371, 380 (2004) (holding the disappointed bidder failed to provide “any factual basis” to establish the existence of an OCI)).
- 12 - “Hard facts” and “concreteness” are necessary to show a CO’s OCI determination lacked a rational basis under the APA’s arbitrary and capricious standard; “sufficient alignment of interests[,]” “vague allegations[,]” and “mere suspicion and innuendo” are not enough. Turner Constr. Co. v. United States, 645 F.3d 1377, 1385 (Fed. Cir. 2011) (internal quotation marks omitted). “Hard facts do not need to show an actual conflict—a potential conflict can be sufficient.” Id. at 1387 (cleaned up). Mitigation actions contemplated by the SP&Ps “may include, but are not limited to”: (a) developing a solicitation provision restricting competition to offerors without conflicts of interest, (b) including a contract clause limiting the supplier’s eligibility for future contracts and subcontracts, and (c) the adoption of other measures to ensure as fair a competition as possible. Any limit on future contracts must be for a reasonable period sufficient to avoid unfair competitive advantage or potential bias. SP&Ps 7-15.2.1. The SP&Ps further guide: If it becomes apparent when proposals are received that participation by a particular offeror could lead to an [OCI] and unfair competition, the offeror may be disqualified and its proposal rejected. The [CO] may take actions necessary and in the interest of the [USPS] and the offerors, to avoid, neutralize or mitigate the potential or apparent conflict of interest. Id. “A CO’s post-award evaluation can clear the air of any OCI taint by showing that no significant OCI existed. If, however, the CO’s post-award evaluation shows that a significant potential OCI did exist and went unmitigated . . . then serious remedial actions are appropriate.” Turner Constr. Co., 645 F.3d at 1386. D. Permanent Injunction When deciding whether a permanent injunction is warranted, a court considers: (1) whether, as it must, the plaintiff has succeeded on the merits of the case; (2) whether the plaintiff will suffer irreparable harm if the court withholds injunctive relief; (3) whether the balance of hardships to the respective parties favors the grant of injunctive relief; and (4) whether it is in the public interest to grant injunctive relief. PGBA, LLC v. United States, 389 F.3d 1219, 1228–29 (Fed. Cir. 2004) (citations omitted). IV. The Parties’ Arguments A. AMK9’s Arguments - 13 - AMK9 moves for judgment on the administrative record on four primary grounds, all supporting AMK9’s request for injunctive relief. See AMK9’s MJAR. First, the AMK9 alleges “[t]he corrective action imposed by the SDRO is not rationally related to the 2022 [r]esolicitation’s defects and does not reasonably alleviate the problem.” Id. at 13. AMK9 states, “T]he SDRO sustained AMK9’s protest finding that the procurement had a defect based on MSA’s tainted incumbent advantages[,]” but the subsequent “corrective action [taken by the USPS] does not sufficiently resolve the defects found by the SDRO.” Id. at 14–15. Second, AMK9 argues the “USPS acted arbitrarily, capriciously, and contrary to law by not disqualifying MSA from the competition[,]” and “[t]he SDRO’s justification of allowing MSA to submit a proposal for the sake of ‘competition’ is irrational.” Id. at 19–20. Third, AMK9 contends the “USPS’s conclusion that MSA did not have a biased ground rules OCI . . . is arbitrary, capricious, and contrary to law.” Id. at 25. AMK9 finds evidentiary support for this claim by asserting: (1) “MSA played a direct role in crafting documents that are part of the 2022 [r]esolicitation”; (2) “CO Baker’s finding that MSA did not have a biased rules OCI because it performed ‘development and design’ work subject to an exception under the FAR is arbitrary, capricious, and contrary to law”; (3) “CO Baker’s reversal of CO Franklin’s decision has no rational basis and is arbitrary, capricious, and contrary to law”; and (4) “CO Baker’s reliance on changes between the 2020 [s]olicitation and 2022 [r]esolicitation is insufficient to support a finding that MSA no longer has a biased ground rules OCI.” Id. at 25–30. Fourth, AMK9 considers the “USPS[’s] continued inclusion of [XXXXX] in the 2022 [r]esolicitation [to be] unreasonable.” AMK9’s MJAR at 31. AMK9 claims these actions, findings, and inclusions resulted in “irreparable harm” to the company, and “the balance of hardships and the public interest” support the Court entering an injunction. See id. at 32–34 (emphasis omitted). B. GK9’s Arguments GK9 moves for judgment on the administrative record on similar grounds to AMK9’s arguments. See GK9’s MJAR. First, GK9 contends “MSA has immitigable OCIs[,]” and the appropriate “remedy is exclusion from competition.” Id. at 9. The “USPS acknowledged that MSA worked on the development and design of the program,” and GK9 lists a multitude of alleged “entanglement[s] between USPS and MSA[,]” resulting in the “USPS: (1) adopt[ing] lessons learned from MSA; (2) ma[king] changes to the 2022 [s]olicitation [that] do not alter the most important factors; [and] (3) continu[ing] to use a substantial portion of the documents MSA developed.” GK9’s MJAR Resp. & Reply at 2–4. As a result of these entanglements, GK9 purports “[t]he balance of hardships weighs in GK9’s favor[,]” and GK9 states it “will suffer irreparable harm if MSA is allowed to compete for [the] award[.]” GK9’s MJAR at 18; GK9’s MJAR Resp. & Reply at 6. In addition, GK9 claims the “public’s interest in a fair competition free from OCIs” requires the Court to enter an injunction. GK9’s MJAR Resp. & Reply at 6. C. MSA’s Arguments In MSA’s MJAR, MSA raises four arguments, similar to those raised in its motion for a preliminary injunction and TRO, 3 regarding the USPS’s 2022 resolicitation. See MSA’s MJAR 3 MSA moved for judgment on the administrative record on the same four grounds as its motion for a preliminary injunction and TRO. See MSA’s MJAR; MSA’s Mot. TRO & Prelim. Inj. In its motion for a preliminary injunction, MSA first asserted the USPS’s “2022 [re]solicitation w[as] arbitrary and capricious and lacked a rational - 14 - at 1. First, MSA contends the USPS’s “decision to conduct separate solicitations for 3PK9 and Alarm Resolution services was arbitrary and capricious.” Id. at 30 (cleaned up). To this point, MSA indicates a lack of “evidence in the record that explains, from a technical perspective,” why the two services were unbundled. Id. at 33. Second, MSA contends that the 2022 resolicitation contains patent ambiguities. MSA’s MJAR at 35. MSA argues the 2022 resolicitation is ambiguous because it requires the 3PK9 and Alarm Resolution service providers to interact, but “provide[s] no further instruction as to expected protocols or chain of command for these required interactions.” Id. Without “further instructions and guidance,” MSA explains, “offerors will likely submit proposals that take a number of divergent approaches to screening the mail and thus make fair comparison of proposals improbable.” MSA’s MJAR Resp. & Reply at 7. Third, MSA contends USPS’s mitigation strategies were inadequate both in reducing the look-back period from thirty-six to twenty-four months and treating mail and cargo screening experience equally. MSA’s MJAR at 37–41. The goal of this reduction in the look-back period was to deemphasize “the past performance MSA accrued as incumbent on the 2020 Contract[,]” MSA argues; however, this mitigation is not rational because it is not related to MSA’s past performance. Id. at 37–38. (internal quotation marks omitted) (quoting AR at 6647). MSA explains that it “was not performing the 2020 Contract 36 or even 24 months ago.” Id. at 39. The goal of treating mail and cargo screening experience equally was also to deemphasize MSA’s past performance for mail screening under the 2020 contract. Id. at 40. MSA argues this is not a rational mitigation strategy, because “the agency neglected to consider ‘an important aspect of the problem.’” Id. (citing Ala. Aircraft Indus. v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009)). MSA explains the quicker pace in mail screening stems from the requirement to screen more items than in a cargo operation. MSA’s MJAR at 40. MSA also explains mail and cargo screening involve different protocols and requirements for when a dog hits on a bag. Id. Fourth, MSA argues that it should not be disqualified from competition, because the USPS’s “determination that MSA is eligible is rational and well-supported by the record.” Id. at 41. MSA argues the USPS’s mitigation efforts following the unequal access to information OCI were sufficient and rational. Id. at 43. Any OCI related to past performance of the 2020 basis.” Michael Stapleton Assocs., Ltd. v. United States, 161 Fed. Cl. 151, 158–59 (2022). Specifically, MSA argued: “(1) the decision to unbundle the contracts for Canine Screening from the Alarm Resolution was arbitrary; (2) the 2022 [re]solicitation[] contained patent ambiguities as to how the two potential awardees would interact; (3) the decision to decrease the look-back period from thirty-six months to twenty-four months was arbitrary; and (4) the decision to consider past cargo screening experience to be equivalent to past mail screening experience was arbitrary.” Id. at 159. Regarding MSA’s contract unbundling claim, the Court reasoned “USPS provided a reasonable explanation sufficiently detailed to follow its reasoning . . . [so] MSA is unlikely to demonstrate USPS’s decision to carry out separate solicitations for Canine Screening and Alarm Resolution services was arbitrary and capricious.” Id. at 162. Regarding the patent ambiguities claim, the Court found “MSA is unlikely to succeed in proving the 2022 [re]solicitation[ is] so ambiguous as to be arbitrary and capricious.” Id. at 163. For MSA’s claim regarding the look-back period, the Court reasoned MSA is “unlikely to prove USPS lacks a rational basis for reducing the look-back period . . . to mitigate MSA’s purported incumbency advantage and promote fair competition.” Id. at 164. The Court further explained the “reduction in the look-back period . . . is roughly proportional to the period of MSA’s incumbency.” Id. For MSA’s cargo and mail screening equivalency claim, the Court reasoned “MSA is . . . unlikely to prove USPS’s decision to evaluate cargo screening experience and mail screening experience equivalently was arbitrary and capricious[,]” because “a reasonable method of mitigating MSA’s unfair advantage regarding mail-screening experience would be to evaluate other offerors’ cargo-screening experience equivalently.” Michael Stapleton Assocs., 161 Fed. Cl. at 164–65. The Court ultimately held MSA’s claims were unlikely to succeed on the merits and, as a result, denied MSA’s motion for a preliminary injunction. Id. The Court also denied as moot MSA’s motion for a TRO. Id. at 166; see supra Section II. - 15 - contract, MSA argues, has been neutralized and therefore should not disqualify MSA’s participation in the 2022 procurements. Id. at 49. D. The Government’s Arguments The government argues three main points: (1) “the Court should deny MSA’s” MJAR; (2) “the Court should deny GK9’s and AMK9’s” MJARs; and (3) “the Court should deny plaintiffs’ requests for injunctive relief.” Gov’t’s Cross-MJAR & Resp. at i–ii (cleaned up).