Sheila Widnall, Secretary of the Air Force, and Logistics Techniques, Inc. v. B3h Corporation, Intervenor, and Martin Marietta Technical Services, Inc., Intervenor. B3h Corporation v. Sheila Widnall, Secretary of the Air Force, and Logistics Techniques, Inc., Intervenor, and Martin Marietta Technical Services, Inc., Intervenor

Citations: 75 F.3d 1577; 40 Cont. Cas. Fed. 76,891; 1996 U.S. App. LEXIS 1843Docket: 95-1042

Court: Court of Appeals for the Federal Circuit; February 7, 1996; Federal Appellate Court

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The United States Court of Appeals for the Federal Circuit addressed the appeals of the Secretary of the Air Force, Sheila Widnall, and Logistics Techniques, Inc. (LOGTEC) against a decision by the General Services Administration Board of Contract Appeals (GSBCA) concerning a procurement by B3H Corporation. The GSBCA had granted B3H's protest regarding a best value procurement decision while dismissing B3H's claims of procurement improprieties related to Air Force personnel and LOGTEC.

The case involved a solicitation issued by the Air Force for technical support contracts, where evaluations were based on technical, managerial, and cost factors. Despite LOGTEC’s higher estimated costs compared to B3H and Aries Systems International, both LOGTEC and Aries received higher technical ratings, leading to their selection for contract awards based on a best value assessment conducted by the Source Selection Authority (SSA).

B3H protested the award, claiming that the Air Force did not select the best value offeror and alleged improprieties due to pre-award interactions between Air Force personnel and LOGTEC. The GSBCA dismissed the impropriety allegations as untimely but later considered B3H's motion for reconsideration. The appellate court reversed the GSBCA's decision on the best value issue while affirming the dismissal of the impropriety claims.

On July 28, 1994, the GSBCA denied B3H's motion regarding the timeliness of its protest but granted its protest concerning the best value issue. The GSBCA found that the SSA failed to adequately justify the higher costs of LOGTEC and Aries, concluding that their added value did not justify the price difference. Although B3H's best value protest was upheld, the GSBCA permitted the Air Force to maintain its contracts with LOGTEC and Aries, but restricted the renewal of contract options unless a new source selection affirmed the awards.

The review of a decision by an agency board of contract appeals is governed by 41 U.S.C. 609(b), which states that agency board decisions on legal questions are not final, while decisions on factual questions are conclusive unless specific conditions are met (e.g., fraud or lack of substantial evidence). This case centers on the proper review method for a best value procurement decision under 48 C.F.R. 15.605(c), where the government can select a source based on greatest value concerning performance and other factors, specifically for the procurement of automatic data processing equipment. The review is also governed by the Competition in Contracting Act of 1984 (CICA).

If the board finds that an agency's action violates statutes, regulations, or delegated procurement authority, it may suspend or revise the procurement authority. The Board's review focuses on whether the agency's procurement decision is reasonable, deferring to the agency's choice if it is well-grounded, regardless of the Board's potential preference for a different proposal. Previous cases under CICA illustrate that the Board has upheld protests when agencies failed to conduct appropriate analyses, such as price realism, leading to improper procurement decisions based solely on lower prices without adequately assessing technical merits.

Agencies assess proposals by independently rating them against contract solicitation requirements, followed by a tradeoff analysis evaluating differences, known as discriminators, between qualifying proposals. These discriminators do not require precise dollar values. Even if a General Services Board of Contract Appeals (GSBCA) finds some agency justifications unreasonable, it may still uphold procurement decisions if the remaining analysis is sufficient. For instance, in the Computer Sciences Corp. case, the agency awarded a contract to Boeing over a cheaper proposal from CSC after determining that CSC's lower cost would lead to significantly higher future expenses for upgrades. The GSBCA, despite identifying irrational elements in the agency's analysis, upheld the decision, noting that Boeing's technically superior proposal was only marginally more expensive. Conversely, in Network Solutions, Inc. v. Department of Air Force, the GSBCA overturned the agency’s decision to award a contract to a more expensive offeror due to a failure to document a rational cost/technical tradeoff, highlighting that unsupported claims of efficiency cannot justify higher costs.

The court reviewed two cases where the Board initially rejected an agency's procurement decision due to insufficient justification for the selected proposal. In International Business Machines Corp. v. Lockheed Missiles & Space Co. (Lockheed I), the Board overturned the IRS's acceptance of AT&T's proposal for a project that would cost $500-700 million more than lower bids, as the IRS could not substantiate the higher cost with a reasoned explanation, despite AT&T's proposal being only 15% technically superior. The IRS was instructed to either justify the award or restart the procurement process. Following a reassessment by a working group, which conducted a price/technical tradeoff analysis and evaluated various discriminators, the IRS concluded that AT&T's technical superiority justified the higher price.

Subsequently, in Lockheed Missiles & Space Co. v. Department of Treasury (Lockheed II), Lockheed and IBM's protests were denied after the Board determined that the IRS merely needed to provide a reasoned analysis showing expected benefits relative to the price premium. Notably, the Board noted that while the IRS's consideration of training as a quantified discriminator was questioned, it did not constitute an abuse of discretion. The appeal affirmed this judgment, stating that a marginally better proposal could be selected if it demonstrated added value commensurate with the higher cost.

In Grumman Data Systems Corp. v. Department of the Air Force (Grumman I), the Board sustained Grumman's protest against the Air Force's award of a contract to Contel, as the selection authority failed to adequately justify the $33.9 million price difference based on the technical enhancements claimed by Contel. The Board emphasized that simply ranking technical merit over cost without a clear explanation was inadequate, directing the Air Force to either provide justification or re-initiate the procurement.

In compliance with the GSBCA's directive, the Air Force conducted a detailed cost/technical tradeoff analysis that compared two proposals, identifying both quantifiable factors (such as user friendliness, systems administration, and technical support) and non-quantifiable factors. Quantifiable factors were broken down into subfactors, each assigned a dollar value reflecting the superior technical expertise of Contel, which was determined to be worth $42.25 million more than Grumman's proposal. The Air Force also assessed non-quantifiable factors, concluding that Grumman's proposal required more maintenance and training and was less capable of multitasking. After Grumman protested the award, the Board upheld the Air Force's decision, affirming the advantages of Contel's proposal regarding training time, productivity from powerful processors, support team capacity, user friendliness, and lower system administration time. Subsequent decisions by the GSBCA continued to support the acceptance of higher-cost proposals deemed to provide better value, citing examples where proposals were rejected due to technological risks and reliance on unproven subcontractors. In a separate solicitation, the Air Force evaluated technical, managerial, and cost factors, finding LOGTEC and Aries superior technically. However, both were more expensive than B3H. A price/technical tradeoff working group determined that although B3H had a higher price risk, LOGTEC's and Aries' value adjusted costs remained significantly higher than B3H's.

Six non-quantified discriminators were identified by the P/TTO Group for evaluating offerors: experience with relevant Air Force software, hardware maintenance experience, hardware sizing experience, data management experience, co-location of offices near the Air Logistics Centers (ALC), and the subcontractor control plan. LOGTEC received a positive rating for the subcontractor control plan, while Aries and B3H received neutral ratings. LOGTEC and Aries had negative ratings for hardware maintenance experience, but were rated superior to B3H in all other categories. The P/TTO Group predicted B3H's proposal would lead to longer task completion times and lower quality.

The SSA, relying on the P/TTO Group's analysis, supported awarding LOGTEC's higher-cost proposal, citing its management excellence and the anticipated benefits in quality and cost control. Similarly, Aries was awarded based on its technical superiority despite its higher estimated costs compared to B3H, which had more negative evaluations.

During the B3H protest hearing, the SSA provided extensive testimony explaining the rationale for selecting LOGTEC and Aries, emphasizing that prior experience in the relevant areas would lead to economic benefits, including shorter start-up times and improved quality. The SSA justified the higher costs associated with LOGTEC and Aries by stating that their superior management would lead to a higher quality product and better cost control, thereby mitigating the risk of cost overruns associated with B3H's inferior management ratings.

The Air Force argues on appeal that the Board erred legally by introducing an additional burden of proof related to the "reasonable certainty" standard established in Lockheed III, which could unjustly shift the burden of proof to the agency during protests and allow the Board to override agency procurement decisions. The court agrees that Lockheed III does not impose a different proof standard than previously established and maintains that the Board's review should be limited to verifying if the agency's decision is grounded in reason. 

The Board reviewed the Air Force's procurement decision under 41 U.S.C. 607(e) and found one non-quantified discriminator, ALC co-location, lacking rational basis, but otherwise upheld the SSA's methodology. The Board criticized the SSA for emphasizing certain discriminators (software experience and data management) over others, arguing that it did not support the emphasis placed. However, the court asserts that determining which discriminators to prioritize is within the SSA's discretion. 

The Air Force used seven discriminators to evaluate proposals, and the SSA reasonably concluded that the technical and managerial advantages of LOGTEC's and Aries' proposals justified their higher costs, aligning with the solicitation’s criteria that cost was a lesser factor. The case parallels prior decisions where the Board deferred to reasonable best value decisions. Thus, the court reverses the Board's decision granting B3H's protest, affirming that established legal principles remain intact.

B3H filed a protest on April 18, 1994, claiming that the Air Force improperly awarded a contract to LOGTEC despite the knowledge of frequent golf matches between Air Force Program Manager Jerry George and LOGTEC's CEO M.H. Mynhier during the evaluation period. B3H did not specify when it learned of these alleged improprieties. The GSBCA dismissed B3H's protest as untimely due to the lack of evidence regarding when B3H became aware of the issues. B3H's motion for reconsideration also failed to provide this critical date, leading to a denial by the Board on July 8, 1994.

On appeal, the focus is on the timeliness of B3H's protest, as the underlying merits of the alleged impropriety are not under review. The Board's rules, particularly 48 C.F.R. Part 6101, emphasize the need for prompt resolution of protests, requiring that any protest be filed within ten working days of when the basis for it was known. B3H's assertion that it learned of the improprieties only after the contracts were awarded does not clarify when it became aware of the golf matches specifically. Consequently, the Air Force contended that B3H failed to meet its burden to demonstrate compliance with the timeliness requirements, as it did not state when it learned of the alleged impropriety.

The court agreed that B3H did not adequately plead the necessary facts to establish the timeliness of its protest, affirming the GSBCA’s dismissal of the procurement integrity issue. However, it reversed the GSBCA's decision regarding the best value issue and remanded the case, directing that B3H's protest be dismissed entirely and that appropriate relief for LOGTEC and Aries be provided consistent with the opinion. The decision is reversed in part, affirmed in part, and remanded, with no costs awarded.