ARKRAY USA, INC., Plaintiff, v. The UNITED STATES, Defendant, and Abbott Diabetes Care Sales Corporation, Defendant-Intervenor.
No. 14-233C
United States Court of Federal Claims.
September 9, 2014
117 Fed. Cl. 129
FIRESTONE, Judge.
*Opinion originally filed under seal on August 27, 2014
Given the uncertain state of the record and the allegations that plaintiff raises here for the first time, the Court has concluded (and the parties have agreed) that the appropriate action would be to remand this matter back to ICE to permit plaintiff to supplement the record and to allow ICE to issue a new determination based on a complete record. See Albino v. United States, 93 Fed. Cl. 405, 409 (2010) (“To the extent that evidence may not have been—or, in fact, was not—considered below by the [administrative agency], the ‘proper course ... is to remand to the agency for additional investigation or explanation.’ “) (quoting Fla. Power & Light Co. v. Lorion, 470 U.S. 729, 744, 105 S.Ct. 1598, 84 L.Ed.2d 643 (1985)); Riser v. United States, 93 Fed. Cl. 212, 217 (2010) (noting that it is “not appropriate for this court now to supplement the record with materials that were not available to the [administrative agency]“);
Accordingly, the case is REMANDED to ICE for further proceedings consistent with this opinion. The following schedule shall govern the remand proceedings:
- Within 60 days of this order, on or before November 12, 2014, the plaintiff shall submit to ICE such evidence as he considers relevant concerning his entitlement to recover the $15,000 immigration bond.
- ICE shall render a decision on remand on or before January 12, 2015, setting forth its findings and explaining its determination regarding plaintiff‘s entitlement to recover the immigration bond.
- The parties shall file a joint status report on or before January 26, 2015, proposing a plan for further proceedings in this matter.
In the meantime, the cross motions for judgment on the administrative record are DENIED as moot, and proceedings in this Court are STAYED pending the remand.
IT IS SO ORDERED.
Sonia M. Orfield, Civil Division, United States Department of Justice, Washington, DC, with whom were Stuart F. Delery, Assistant Attorney General, and Robert E. Kirschman, Jr., Director, for defendant.
Donna L. Yesner, Washington, DC, for defendant-intervenor. Stephen E. Ruscus, Washington, DC, of counsel.
Bid Protest; Federal Supply Schedule; FAR 8.405-3; Blanket Purchase Agreement; Necessity hold FSS contract; Balance of Equities Weighs in Favor of Injunction
OPINION AND ORDER
FIRESTONE, Judge.
On June 18, 2014, the court issued an opinion remanding to the Defense Health Agency (“DHA“) its decision to award to Abbott Diabetes Care Sales Corporation (“ADCSC” or “defendant-intervenor“) a Blanket Purchase Agreement (“BPA“) for the self-monitoring blood glucose system test strips (“test strips“) that are provided to TRICARE beneficiaries under the uniform formulary (“the formulary” or “UF“).1 ARKRAY USA, Inc. v. United States, 117 Fed. Cl. 22 (Fed.Cl.2014). The remand was intended to give the DHA Contracting Officer the opportunity, in the first instance, to determine whether ADCSC could properly hold itself out as having a Federal Supply Schedule (“FSS“)2 contract as required by the solicitation. Under the terms of the solicita-
The court has reviewed the Contracting Officer‘s July 7, 2014 decision and, after additional briefing and argument, the court concludes that the Contracting Officer‘s decision to proceed with the BPA award to ADCSC was arbitrary and capricious because ADCSC does not have an FSS contract as required by the solicitation and
I. BACKGROUND
The background facts surrounding this case were set forth in detail in the court‘s June 26, 2014 decision and are not repeated here. At the core of the remaining dispute is whether ADCSC is eligible to receive a BPA under
As noted, it is undisputed that ADCSC—the company that submitted the bid to DHA for the test strips—is not, itself, a party to an FSS Contract. Instead, the FSS contract that offers the subject test strips is held by an ADCSC affiliate—Abbott Laboratories Inc.—under FSS contract number V797P-2032D. On remand, the Contracting Officer undertook an evaluation of ALI‘s FSS contract and ADCSC‘s rights under that contract. According to the materials provided in the newly supplemented Administrative Record, the Contracting Officer (1) researched the websites of the VA, ALI, and Abbott Diabetes Care, Inc. (“ADCI“); (2) reviewed ALI‘s offer to the VA and subsequent FSS contract (i.e., V797P-2032D); and (3) solicited performance assurances and information concerning ADCSC‘s legal relationships with ALI and other Abbott-affiliated companies from Duncan Williams, the ADCSC vice-president who signed ADCSC‘s BPA bid. In addition, the Contracting Officer received a declaration from Stephanie Organ, the ALI employee who executed ALI‘s FSS contract with the VA.
Based on his review of the aforementioned websites, the Contracting Officer concluded that multiple entities within the Abbott family of companies work together to manufacture and sell the test strips at issue in this case. AR 2226. The Contracting Officer noted that ADCSC‘s bid listed the same FSS contract number and same corporate point of contact (with the same contact information) as was associated with ALI‘s FSS contract in
In reviewing ALI‘s FSS Contract, the Contracting Officer determined that it was clear that ALI‘s affiliates—rather than ALI itself—are responsible for providing the products under ALI‘s FSS contract. AR 2226-27. For example, a letter accompanying ALI‘s FSS offer listed two of ALI‘s corporate affiliates, Abbott Point of Care (“APOC“) and ADCSC/ADCI, as supplying certain products through ALI‘s FSS contract. AR 2230. The Contracting Officer also noted that two provisions of ALI‘s FSS contract authorized Duncan Williams—the individual who signed ADCSC‘s bid—to also submit quotes under ALI‘s FSS contract. AR 2226. The FSS contract authorizes any
... Divisional Vice President ... or Manager or any Administrator of any one of Contracts, Pricing, Marketing; Sales or Commercial Operations; or any Divisional Government Sales Manager ... to quote prices and tender bids, and to enter into contracts for the sale of any products or services of [ALI] to, and with, any and all customers of [ALI], including specifically the United States and any of its offices, agencies or departments, having full authority in their discretion as to prices, terms, conditions, warranties, or any other provisions necessarily relating to said bids and contracts.
AR 2232. The FSS also expressly lists Mr. Williams as an “authorized negotiator,” who is “authorized to negotiate with the Government in connection with this request for proposals or quotations[.]” AR 2248.
The Contracting Officer noted that Duncan Williams’ letter and the attached declaration from Stephanie Organ, the Senior Manager of Contracts & Pricing at ALI, reconfirmed that ADCSC was authorized to submit a BPA quote under ALI‘s FSS contract. AR 2248. In his letter, Mr. Williams explained that Abbott Laboratories is the parent company of ALI, APOC, and ADCI, and that ADCSC is a wholly-owned subsidiary of ADCI. AR 2375-76. Further, Mr. Williams explained that ALI does not make products, but instead acts as a “trading company” or “contracting agent” for other Abbott Laboratories companies, including ADCI/ADCSC and APOC. In this connection, Mr. Williams explained that when ALI‘s FSS Contract V797P-2032D was negotiated, the VA, ADCI/ADCSC and APOC considered establishing separate FSS contracts with ADCI and APOC, but elected to continue, out of administrative convenience, selling ADCI and APOC‘s products on ALI‘s FSS contract. AR 2376. Accordingly, Mr. Williams stated that although “the ALI-executed contract is the only contract through which users of the FSS can order diabetes care products from ADC[SC],” AR 2377, ALI‘s FSS contract authorized various Abbott-affiliated employees—including Mr. Williams—to quote prices and tender bids “for the purpose of establishing a Blanket Purchase Agreement ... under the FSS contract.” AR 2376.
Stephanie Organ, in her declaration on behalf of ALI, stated that Mr. Williams “was authorized to negotiate pricing under the FSS Contract on behalf of ALI, including through a subsequent Blanket Purchase Agreement established under the FSS.” AR 2378. However, she also confirmed that the FSS contract “was executed in the name of ALI,” and that the BPA “price quote that was submitted to and ultimately accepted by the Defense Health Agency on November 12, 2013 ... was executed in the name of ADC[SC]” and “does not specifically mention ALI by name....” AR 2378-79.
Based on the aforementioned evaluation, the Contracting Officer determined that3
The Contracting Officer concluded his decision on remand by noting that there was “no reason to question ADCSC‘s ability to deliver the quoted strips at the quoted pricing ... because of ALI‘s history of performance.” Id. This conclusion was further consistent, the Contracting Officer stated, with the contractual commitment of ADCSC and ALI, as well as the representations made in Mr. Williams’ letter and the declaration from Stephanie Organ. Id.
II. DISCUSSION
It is well-established that an award may be set aside as arbitrary and capricious where the procurement procedure involved a clear violation of regulation or procedure. Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir.2009); Galen Med. Assocs. v. United States, 369 F.3d 1324, 1331 (Fed.Cir.2004). Additionally, it is undisputed that an offeror must be a “schedule contractor” to be eligible to enter into a BPA against an FSS contract.4 See, e.g.,
Given that the government and defendant-intervenor concede that ADCSC is a separate legal entity from ALI and ADCI, the court agrees with ARKRAY that whether ADCSC was eligible for award of the BPA turns on whether the Contracting Officer correctly concluded that ADCSC was ALI‘s agent and could enter into the BPA on ALI‘s behalf or could otherwise rely on ALI‘s FSS to satisfy the FSS requirement.
a. The Contracting Officer‘s Conclusion that ADCSC Was Eligible to Enter into the BPA Because ADCSC Was Acting on Behalf of ALI Was Arbitrary and Capricious
The government and defendant-intervenor contend that the Contracting Officer‘s decision is consistent with the solicitation and FAR because ADCSC was authorized, through Duncan Williams, to negotiate on behalf of ALI with regard to ALI‘s FSS contract. The government goes so far as to state that Mr. Williams was actually acting on behalf of ALI, Def.‘s Suppl. Br. 7 n.2, 8, and that Mr. Williams failure to “explicitly invoke” ALI‘s name constitutes a non-material defect in the award that can be cured. Id. at 9-10 n.3. In this connection, the government relies on Am. Anchor & Chain Corp. v. United States, 331 F.2d 860, 861 (Ct.Cl.1964), for the proposition that Mr. Williams could and did act as ALI‘s agent when he signed the BPA quote. As explained below, however, the government‘s agency theory is unsupported by the record evidence, to include Mr. Williams’ letter in response to the Contracting Officer, Ms. Organ‘s carefully worded declaration, and the BPA quote itself. Accordingly, the court concludes that the Contracting Officer‘s decision to award a BPA to ADCSC on the grounds that it was ALI‘s agent was arbitrary and capricious.
The record reflects that Duncan Williams was not actually acting as an agent on behalf of ALI when he signed the BPA quote. While it is no doubt true that he was authorized to offer items from ALI‘s FSS contract, this authorization does not, in and of itself, make ALI the BPA awardee or ADCSC the FSS contract holder. Notably, rather than state that he signed the BPA on behalf of ALI, Mr. Williams’ letter to the Contracting Officer focuses on ADCSC‘s rights under ALI‘s FSS contract. AR 2377. Moreover, the fact that Mr. Williams stated that he “considered” ALI‘s FSS contract to actually be ADCSC‘s contract is undermined by his admission that the VA had considered and purposefully declined to enter into a separate FSS contract with ADCSC out of “administrative convenience.” AR 2376.
Ms. Organ‘s carefully worded declaration further demonstrates that Mr. Williams did not execute the BPA on behalf of ALI. Although she acknowledges that ALI would agree to be bound by the price offered by5
In light of the foregoing, the mere fact that ADCSC listed ALI‘s FSS contract number in its bid is insufficient to show that Mr. Williams entered into a BPA as an agent on behalf of ALI, or that ADCSC held an FSS contract. See Am. Anchor & Chain Corp., 331 F.2d at 861 (agent binds principal by taking actions on behalf of principal). Accordingly, the government‘s argument that ADCSC satisfied
b. The Contracting Officer‘s Alternative Conclusion that ADCSC Could Rely on ALI‘s FSS Contract Was Arbitrary and Capricious
In the alternative, the government and defendant-intervenor contend that, regardless of whether ADCSC was ALI‘s actual agent, the relationship between ADCSC and ALI was sufficiently close to allow ADCSC to rely on ALI‘s FSS contract to satisfy the terms of the solicitation and
In contrast to the reliance at issue in T & S Prods. and Femme Comp, ADCSC‘s reliance on ALI‘s FSS contract is clearly prohibited by
c. ARKRAY Was Prejudiced by the Contracting Officer‘s Error
The court also concludes that ARKRAY has carried its burden of demonstrating that it was prejudiced by the Contracting Officer‘s error. Glenn Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d 901, 908 (Fed.Cir.2013) (to prevail in bid protest, error must be prejudicial); Data Gen. Corp. v. Johnson, 78 F.3d 1556, 1562 (Fed.Cir.1996) (protester must demonstrate that “had it not been for the alleged error in the procurement process, there was a reasonable likelihood that the protester would have been awarded the contract“). In its initial cost-effectiveness review, the P & T Committee concluded that “[t]here are no clinically relevant differences between the ... test strips” offered by the seven manufacturers that met the final technical and contracting requirements. AR 571. The P & T Committee also concluded that ADCSC‘s strips reflected the most cost-effective among the offerors, followed by ARKRAY. Id. Thus, ARKRAY‘s test strips were the highest rated test strips after ADCSC‘s.
The court cannot agree with defendant-intervenor that “any harm to Plaintiff would result not from [the BPA] award, but from the DHA formulary decision effectively making [ADCSC] the sole provider of test strips to TRICARE beneficiaries.” Intervenor‘s Reply 18, ECF No. 71. In connection with the
d. ARKRAY is Entitled to Injunctive Relief
Plaintiff seeks, inter alia, an injunction setting aside the BPA award to ADCSC. The decision to issue an injunction setting aside an award falls within the discretion of the trial court. PGBA, LLC v. United States, 389 F.3d 1219, 1232 (Fed.Cir.2004).6 Nevertheless, injunctive relief is an extraordinary remedy that this court should award “in a way that best limits judicial interference in contract procurement.” Cardinal Maint. Serv., Inc. v. United States, 63 Fed.Cl. 98, 110 (2004) (quoting Parcel 49C Ltd. P‘ship v. United States, 31 F.3d 1147, 1153 (Fed.Cir.1994)). When deciding whether to issue a permanent injunction setting aside an award, the court considers whether8 (1) the plaintiff has succeeded on the merits, (2) the plaintiff will suffer irreparable harm if the court withholds injunctive relief, (3) the balance of hardships to the respective parties favors the grant of injunctive relief, and (4) the public interest is served by a grant of injunctive relief.” Centech Grp., Inc., 554 F.3d at 1037. The decision to grant injunctive relief requires a careful balancing of these factors, and “the weakness of the showing regarding one factor may be overborne by the strength of the others.” FMC Corp. v. United States, 3 F.3d 424, 427 (Fed.Cir.1993).
Looking to the first factor, ARKRAY has demonstrated success on the merits by showing that the Contracting Officer clearly violated the solicitation and
Turning to the second factor, ARKRAY argues that it will suffer irreparable harm if the court withholds injunctive relief due to lost profits and denial of “the opportunity to compete for the BPA on a level playing field.” Pl.‘s Resp. & Reply 43, ECF No. 64. Defendant-intervenor responds that plaintiff has provided no allegations or evidence that ARKRAY would have profited from the BPA, particularly in light of the discounts ARKRAY‘s quote offered off of its FSS prices. Intervenor‘s Reply 18-19, ECF No. 71. Although some decisions of this court have refused to find irreparable harm absent clear and convincing evidence of lost profits, CSE Const. Co. v. United States, 58 Fed.Cl. 230, 262 (2003), others have found an irreparable injury due to the loss of an opportunity to have its bid “fairly and lawfully considered,” Klinge Corp. v. United States, 82 Fed. Cl. 127, 138 (2008); Cardinal Maint. Serv., 63 Fed.Cl. at 110 (“Irreparable injury includes, but is not limited to, lost profits which would flow from the contract.“).
Although ARKRAY would suffer potentially irreparable harm absent an injunction, the court must balance this harm against the potential harm to DHA and the awardee. See PGBA, 389 F.3d at 1231; BCPeabody Constr. Servs., Inc. v. United States, 112 Fed.Cl. 502, 514 (2013). Setting aside the award in this case would not deny TRICARE beneficiaries from receiving test strips because test strips are presently available through a different contract (albeit at a higher price) with ADCSC and other manufacturers. The government has, however, indicated that it will save as much as $64.8 million per year by implementing the P & T Committee‘s recommendation to transition entirely to ADCSC‘s test strips. Def.‘s Cross-Mot. 51. Elsewhere in its briefing, the government contends that it will save $5 million per month. Def.‘s Reply 36, ECF No. 70. Defendant-intervenor claims that the government will lose over $3.1 million per month. Intervenor‘s Reply 19. It is not disputed that the government will save money under the new BPA. Plaintiff argues, however, that the government‘s cost savings are not sufficient to tip the balance of hardships in its favor, where any delay in cost savings is due to the government‘s own mistakes in the procurement process. The court agrees with plaintiff that although the financial cost is not insubstantial, the government and defendant-intervenor have not demonstrated any special consequence to delaying the BPA award.9
See PGBA, 389 F.3d at 1231; BCPeabody, 112 Fed.Cl. at 514. Accordingly, the government and intervenor have failed to show that the balance of hardships weighs in their favor.
Finally, the court turns to the matter of the public interest. It is well-established that “[t]here is an overriding public interest in preserving the integrity of the procurement process by requiring the government to follow its procurement regulations.” Turner Const. Co. v. United States, 94 Fed.Cl. 561, 586 (2010), aff‘d, 645 F.3d 1377 (Fed.Cir.2011). There is also a public interest in ensuring that test strips remain available. Here, TRICARE beneficiaries have continued to receive their test strips throughout the protest period, and there is no reason to doubt that they will continue to receive test strips while the agency takes action to correct its prior errors. On this record the public interest favors ARKRAY.
The court has considerable discretion in fashioning relief in a bid protest.
III. CONCLUSION
For the foregoing reasons, plaintiff‘s motion for judgment on the administrative record and for an injunction is GRANTED. The government‘s and defendant-intervenor‘s cross-motions are DENIED.
IT IS SO ORDERED.
BANNUM, INC., Plaintiff, v. The UNITED STATES, Defendant, Alston Wilkes Society, Inc., Intervenor Defendant.
No. 14-429 C
United States Court of Federal Claims.
September 10, 2014
1. This opinion was issued under seal on August 15, 2014. Pursuant to ¶ 7 of the ordering language, the parties were invited to identify source selection, proprietary or confidential material subject to deletion on the basis that the material was protected/privileged. No redactions were proposed by the parties. Thus, the sealed and public versions of this opinion are identical, except for the publication date and this footnote.