Reo Solution, LLC v. United States
125 Fed. Cl. 659
Fed. Cl.2016Background
- HUD issued an IDIQ solicitation (DU204SA-13-R-0005) for marketing/sales of HUD-owned single-family properties in multiple regions; Area 1P (Michigan) was a small-business set-aside.
- Proposals were first pass/fail; technically acceptable offers were then evaluated on two approximately equal factors: price and past/present performance (adjectival confidence ratings from Excellent to Neutral).
- Nine proposals for Area 1P were technically acceptable; IEI-Cityside (lowest price) initially won, but SBA found IEI non-small, so HUD terminated that award and later awarded Area 1P to Sage. REO (highest-priced offer) protested.
- REO challenged HUD’s past performance evaluation (arguing arbitrary treatment of subcontractor references versus Sage’s references) and alleged improper discussions under FAR § 15.306; REO sought injunctive relief and reopening of discussions.
- The government moved to dismiss for lack of jurisdiction, arguing REO lacked standing because it did not have a substantial chance of award given its much higher price and its adjectival rating.
- The Court concluded REO failed to show a substantial chance of award absent the alleged errors and dismissed for lack of jurisdiction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Standing — substantial chance of award | REO says HUD arbitrarily evaluated past performance (penalized REO for using subcontractor references while not penalizing Sage), so but for the error REO had a substantial chance. | HUD says REO was the highest-priced offer (about 20% higher than Sage) and had a lower confidence rating; even correcting ratings would not have plausibly produced award to REO. | Dismissal for lack of jurisdiction: REO failed to show a substantial chance of award. |
| Arbitrary past-performance evaluation | REO: agency applied an undisclosed ceiling/weight against subcontractor-only references and misapplied relevancy/recency rules. | HUD: solicitation warned agency may adjust confidence up/down based on relevancy and prime vs subcontractor work; no fixed weighting shown. | Court: no evidence of an undisclosed formula; agency discretion reasonable; plaintiff’s disagreement insufficient. |
| FAR § 15.306 (discussions) violation | REO: agency failed to discuss significant weaknesses/adverse past performance (i.e., the subcontractor-reference issue) during discussions. | HUD: no adverse past performance existed; assigned Fair rating was not a deficiency or significant weakness requiring discussion. | Court: not a deficiency/adverse matter under FAR; agency not required to identify every improvable area. |
| Prejudice/Price reduction speculation | REO: if informed of adverse rating it might have lowered price to be competitive. | HUD: agency had already notified REO that its price was highest; it is speculative that REO would have cut price enough to win. | Court: speculative; too many "but-for" contingencies to establish prejudice. |
Key Cases Cited
- Brandt v. United States, 710 F.3d 1369 (Fed. Cir.) (plaintiff bears preponderance burden to establish jurisdiction)
- Weeks Marine, Inc. v. United States, 575 F.3d 1252 (Fed. Cir.) (definition of "interested party" — actual/prospective bidder and direct economic interest)
- Rex Serv. Corp. v. United States, 448 F.3d 1305 (Fed. Cir.) (economic-injury/standing requirements in bid protests)
- Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312 (Fed. Cir.) (substantial chance standard for prejudice)
- Labat-Anderson, Inc. v. United States, 42 Fed. Cl. 806 (Ct. Cl.) (agencies need not conduct all-encompassing discussions)