Government Contracts Monitor

Another Corrective Action Challenge Sustained in Case Complicated by “Curious Agency Actions”

April 8, 2014

The Court of Federal Claims (COFC) recently sustained another corrective action challenge, and enjoined the Veterans Administration (VA) from proceeding with the challenged award. Manus Medical, LLC v. United States (“Manus-3”), No. 14-26C (Fed. Cl. March 19, 2014). The Court stated that “[t]his is a relatively simple case made more complicated by some curious agency actions.”

The case began when the original award resulted in a sustained Government Accountability Office (GAO) protest. VA’s initial corrective action was protested before the COFC. (Manus-1) However, before the case was decided, the agency announced its intent to implement a different form of corrective action, involving referral to the Small Business Administration (SBA) for Certificate of Competency (COC) consideration. The agency’s new plan was then challenged before the COFC, but was dismissed as premature (Manus-2), causing the protester to wait and file the same challenge once the corrective action was complete. In short, while the ultimate issue was simple, the procedural process was anything but, and ended up as another, drawn-out and expensive, small business nightmare, with a GAO protest and three successive Court actions, before the COFC ultimately concluded that “the irony of this procurement is that the VA’s only correct decision was its first one, and the ‘corrective’ actions [VA] has taken since then have served only to lead matters further astray.”

In this relatively straight-forward procurement, VA received proposals from six firms, including Manus and Marathon Medical, LLC (Marathon). Initially Marathon submitted the lowest price, while Manus was second low. However, Marathon failed to submit the required past performance references and, therefore, VA found Marathon technically unacceptable and awarded to Manus. The long series of protests followed. In the end, the VA decided to award to Marathon, and Manus filed the third and (so far) last COFC challenge.

The COFC made short shrift of VA’s defense.

First, the Court reaffirmed that it will review corrective action challenges. While the Court acknowledged that contracting officers are afforded “broad discretion” in deciding to take corrective action “‘where the agency determines that such action is necessary to ensure fair and impartial competition,’” the Court stated that “Nevertheless, corrective action must still be ‘reasonable under the circumstances and appropriate to remedy the impropriety.’” Note that this standard imposes a two-prong test: (1) there must be a procurement impropriety, and (2) the corrective action must be reasonable and appropriate to remedy such impropriety.

Second, the Court stated that (i) “Discretion, by definition, involves the freedom to choose between certain options,” and (ii) “[h]ere, the issue is which options were available when VA received Marathon’s incomplete proposal.” The Court states that VA could have either (1) rejected Marathon’s proposal as incomplete, or (2) opened discussions and allow Marathon to correct its deficiencies. Once VA rejected Marathon’s proposal, the Court stated “this proposal evaluation should have ended.”

Third, the Court held that the VA’s referral of Marathon to SBA for a COC was improper because technical acceptability and responsibility are two separate matters, and a COC does not address, and cannot cure or overcome, technical unacceptability. Citing FAR 19.602-1(a), the Court stated that “referral to the SBA is necessary only ‘[u]pon determining and documenting that an apparent successful small business offeror lacks certain elements of responsibility.”

Fourth, the Court concluded there was no procurement “impropriety” here, since VA properly rejected Marathon’s proposal as incomplete.

Fifth, the Court concluded that injunctive relief was appropriate, in view of (i) Manus’s success on the merits, (ii) its irreparable harm in losing a contract that it would have won but for VA’s errors, (iii) the balance of harms, and (iv) the “crucial” public interest in maintaining the integrity of the procurement process.

A troubling aspect of this sad saga is that the COFC permitted VA’s second corrective action COC referral to go forward in the first instance, and did not step in at that stage and rule, as the Court ultimately decided, that the proposed corrective action was improper. Manus valiantly tried to raise this issue. However, the Government successfully, albeit in this writer’s opinion erroneously, argued the issue was premature and not ripe. Ironically, the Government later reversed course, and argued that Manus’s challenge to the proposed award to Marathon based on the COC was too late and untimely.

It certainly would be in the best interests of all if the Court, in the future, would examine more critically, and ensure the viability and sufficiency of, proposed agency corrective action before allowing such action to proceed. Indeed, in a number of cases, the COFC has done this. This didn’t happen here, resulting in the further delays and costs to the Government, as well as unnecessary burdens and costs on Manus.

Hopewell Darneille is the attorney responsible for the content of this article.