Arkray USA, Inc. v. United States
118 Fed. Cl. 129
Fed. Cl.2014Background
- DHA issued a solicitation requiring offerors to "have an existing FSS Contract" at quote submission and BPA execution to receive a Blanket Purchase Agreement (BPA) under the Federal Supply Schedule (FSS) for test strips on the TRICARE uniform formulary.
- ADCSC submitted the winning BPA quote but does not itself hold an FSS contract; an affiliate, Abbott Laboratories Inc. (ALI), holds the applicable FSS (VA contract V797P-2032D).
- On remand the DHA Contracting Officer concluded ADCSC could "hold itself out" as having an FSS because (a) Abbott entities jointly market and supply the strips, (b) ALI’s FSS expressly authorized certain Abbott officers (including Duncan Williams) to quote and negotiate, and (c) ALI would support ADCSC’s performance.
- ARKRAY protested, arguing ADCSC is not an FSS contract holder and the FAR and solicitation require the BPA awardee to be a schedule contractor; agency’s conclusions that ADCSC acted as ALI’s agent or could rely on ALI’s FSS were legally deficient.
- The court reviewed the remand decision, found the Contracting Officer’s rationales arbitrary and capricious, concluded ARKRAY was prejudiced, and granted a permanent injunction setting aside the BPA to ADCSC.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ADCSC could be awarded a BPA when it does not itself hold an FSS contract | Solicitation and FAR require the BPA be with a schedule contractor; ADCSC is not an FSS contract holder so award is improper | ADCSC (and Gov) argued ADCSC could rely on ALI’s FSS because ALI authorized Abbott personnel to quote and ALI would support performance | Held for ARKRAY: award arbitrary and capricious because ADCSC is not an FSS contract holder and could not lawfully receive the BPA |
| Whether Mr. Williams’ signature and authorizations made ADCSC an agent acting for ALI | Agency theory fails: Williams signed as ADCSC VP and did not sign on ALI’s behalf; ALI’s documents show the FSS was in ALI’s name and VA declined separate ADCI/ADCSC FSS | Gov claimed Williams was authorized under ALI FSS and thus acted for ALI; any omission was curable | Held for ARKRAY: record shows Williams did not bind ALI; agent theory unsupported; Contracting Officer’s conclusion arbitrary and capricious |
| Whether ADCSC could rely on ALI’s FSS or on affiliate resources despite solicitation language | Plaintiff: FAR 8.405–3 and solicitation prohibit awarding an FSS BPA to a non-schedule contractor; affiliate reliance is not permitted here | Gov relied on precedent allowing agencies to credit affiliates’ resources where solicitation does not prohibit it (T&S, Femme Comp) | Held for ARKRAY: unlike cited cases, FAR and solicitation expressly required the awardee be an FSS contractor, so affiliate-reliance doctrine cannot cure the defect |
| Prejudice and remedy (injunctive relief) | ARKRAY: inclusion of Abbott strips in P&T review and award to ADCSC deprived ARKRAY of a substantial chance to win the BPA and $166.5M in potential revenue | Gov/Intervenor: delaying award harms savings; alleged lack of proven lost profits | Held for ARKRAY: prejudice shown (substantial chance lost); irreparable harm and public interest favor injunctive relief; permanent injunction setting aside BPA granted |
Key Cases Cited
- Weeks Marine, Inc. v. United States, 575 F.3d 1352 (Fed. Cir.) (arbitrary and capricious standard where procurement violates regulation)
- Galen Med. Assocs. v. United States, 369 F.3d 1324 (Fed. Cir.) (procurement error standard)
- Centech Grp., Inc. v. United States, 554 F.3d 1029 (Fed. Cir.) (agency cannot override statute/regulation by policy)
- PGBA, LLC v. United States, 389 F.3d 1219 (Fed. Cir.) (standards for injunctive relief in bid protests)
- Glenn Defense Marine (ASIA), PTE Ltd. v. United States, 720 F.3d 901 (Fed. Cir.) (prejudice requirement in bid protests)
- Data General Corp. v. Johnson, 78 F.3d 1556 (Fed. Cir.) (protester must show reasonable likelihood of award but for the error)
- FMC Corp. v. United States, 3 F.3d 424 (Fed. Cir.) (balance of equitable factors; weaknesses can be offset by other factors)
- T & S Prods., Inc. v. United States, 48 Fed. Cl. 100 (Fed. Cl.) (agency may consider parent/affiliate resources absent prohibition in solicitation)
- Femme Comp Inc. v. United States, 83 Fed. Cl. 704 (Fed. Cl.) (same)
- Am. Anchor & Chain Corp. v. United States, 331 F.2d 860 (Ct. Cl.) (agency/agency-binding principles)