Hyperion, Inc. v. United States
115 Fed. Cl. 541
| Fed. Cl. | 2014Background
- The Army issued an LPTA, small-business set-aside solicitation to install, test, and sustain long-haul and last-mile fiber‑optic infrastructure in Jordan; proposals were evaluated on technical acceptability (technical + past performance) and price.
- FAR § 52.219-14 (50% limitation on subcontracting for services) and FAR § 15.404-3(b) (requirement to conduct and include subcontract price analyses) were incorporated into the solicitation.
- Four offerors submitted proposals (Hyperion, TCSC, Offeror A, Offeror B). After discussions, all four were rated technically acceptable and the Army awarded the contract to the lowest‑priced offeror, TCSC.
- Hyperion, the highest‑priced offeror, protested, arguing that TCSC, Offeror A, and Offeror B were facially noncompliant with the 50% self‑performance requirement and failed to include required subcontract price analyses; Hyperion sought to set aside the award.
- The Court found that the three awardees’ proposals contained facial indicia (mischaracterized labor as material, ambiguous staffing/pricing, missing subcontract price analyses) that made it unreasonable for the Army to conclude they would comply with the limitation on subcontracting and FAR § 15.404-3(b).
- The Court concluded Hyperion alleged prejudice, succeeded on the merits, and granted partial relief: it set aside the award to TCSC and awarded Hyperion costs, but declined to direct specific corrective measures.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether awardees’ proposals were facially noncompliant with FAR § 52.219-14 (50% limitation on subcontracting) | Hyperion: TCSC, Offeror A, and Offeror B subcontracted virtually all in‑country, labor‑intensive work (trenching, laying, splicing), so their proposals show they would not meet the 50% self‑performance requirement. | Government: Offerors did not affirmatively state noncompliance; their agreement to comply makes subcontracting issues a contract‑administration matter, not a technical acceptability defect. | Held: Court found the proposals (miscategorized labor as material; ambiguous staffing/pricing; large subcontractor role) sufficiently facial to render Army’s acceptability finding unreasonable; award set aside. |
| Whether TCSC mischaracterized subcontractor labor as material, undermining its claimed self‑performance share | Hyperion: TCSC’s spreadsheets categorize substantial subcontractor labor (excavation/civil work) as "material," masking true subcontractor labor costs and making 50% self‑performance impossible. | Government: The labor summaries showed sufficient self‑performed labor (program management, engineering) to meet requirement. | Held: Court concluded TCSC improperly categorized subcontractor labor as material; on the face of the proposal, TCSC could not be shown to meet the 50% limit. |
| Whether Offeror A and Offeror B complied with FAR § 15.404-3(b) (subcontract price analyses and inclusion in proposal) | Hyperion: Offeror A provided no subcontract pricing analysis or clear allocation of staffing between prime and subcontractor; Offeror B’s subcontract price materials were inconsistent with its proposed totals and lacked explanation. | Government: Offerors’ submissions were sufficient and any ambiguities could be resolved in contract administration or further discussions. | Held: Court found Offeror A failed to include required subcontract price analysis (technically unacceptable); Offeror B’s submission was inconsistent and insufficient under FAR § 15.404-3(b). |
| Prejudice and remedy — did Hyperion have a substantial chance and is equitable relief warranted? | Hyperion: If the other proposals had been found unacceptable or properly examined, Hyperion had a substantial chance to win; wrongful award caused irreparable competitive and economic harm. | Government: Hyperion was fourth in line; cannot show substantial chance; procedural defects, if any, do not merit relief. | Held: Court found Hyperion sufficiently prejudiced; equitable factors favored relief (merits, irreparable harm, balance of hardships, public interest) and set aside the award to TCSC. |
Key Cases Cited
- Centech Grp., Inc. v. United States, 554 F.3d 1029 (Fed. Cir. 2009) (proposal that on its face shows noncompliance with subcontracting limitation is technically unacceptable)
- Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 (Fed. Cir. 2001) (agency action lacks a rational basis may be set aside under APA)
- PGBA, LLC v. United States, 389 F.3d 1219 (Fed. Cir. 2004) (standards for equitable relief in procurement protests)
- Chapman Law Firm v. United States, 63 Fed. Cl. 519 (2005) (agency reasonably corrected subcontracting concerns through discussions; contrasts where no inquiry was made)