Rotech Healthcare, Inc. v. United States

In the United States Court of Federal Claims

No. 14-1129C

(Filed: June 1, 2015)

*Opinion originally filed under on May 11, 2015

)

ROTECH HEALTHCARE, INC., )

)

Plaintiff, )

)

v. )

) Bid Protest; Technical Evaluation; Past

THE UNITED STATES, ) Performance Evaluation; Price

) Evaluation; Deference to Agency;

Defendant, ) Requirements in the Solicitation;

) Denial of Motion to Supplement

and ) Administrative Record

)

COMMUNITY SURGICAL )

SUPPLY, INC., )

)

Defendant-Intervenor. )

)

Kyle R. Jefcoat, Washington, DC, for plaintiff. David. R. Hazelton, Dean W.

Baxtresser, Kellyn M. Goler and Yannick B. Morgan, Washington, DC, of counsel.

Christopher K. Wimbush, Civil Division, United States Department of Justice,

Washington, DC, with whom were Joyce R. Branda, Acting Assistant Attorney General,

Robert E. Kirschman, Jr., Director, and Deborah A. Bynum, Assistant Director. Jeanne S.

Morris, Office of Regional Counsel, U.S. Department of Veterans Affairs, Leeds, MA, of

counsel.

Daniel R. Forman, Washington, DC, for defendant-intervenor. Joshua I. Skora

and Lisa K. Smith, Amarillo, TX, of counsel.

OPINION ON CROSS-MOTIONS FOR JUDGMENT ON THE

ADMINISTRATIVE RECORD

FIRESTONE, Judge.

1

Plaintiff Rotech Healthcare, Inc. (“Rotech”), the incumbent contractor, is

challenging the decision of defendant Department of Veterans’ Affairs (“VA,” “agency,”

or “government”) to award a contract to defendant-intervenor Community Surgical

Supply, Inc. (“CSS”).1 Pursuant to Rule 52.1(c)(2) of the Rules of the United States

Court of Federal Claims (“RCFC”), the parties have filed cross-motions for judgment on

the administrative record. Rotech has also filed a motion to supplement the

administrative record.

This case concerns a contract to provide home health care services in New

England. During the evaluation process, the agency awarded Rotech and CSS the same

rating on the Technical and Past Performance factors, and CSS’s bid was approximately

$5.6 million less than Rotech’s final bid. Therefore, the VA found that CSS proposal

represented the best value to the government and awarded the contract to CSS. Rotech

argues that CSS’s ratings on the Technical and Past Performance factors were

unsupported by CSS’s experience and bid, and that the agency did not follow the terms of

the solicitation in giving CSS its high ratings on those factors. In particular, Rotech

argues that CSS would not have been able to complete a transition in the time period

specified by the contract, and therefore the company’s ratings were unreasonable. Rotech

also argues that CSS’s price was so low that it was unrealistic for the job. Rotech asserts

that the solicitation required the agency to perform a price realism analysis, and that the

VA failed to perform such an analysis.

1

The court will refer to CSS and the government collectively as “the defendants.”

2

For the reasons that follow, the court now GRANTS the government and CSS’s

respective motions for judgment on the administrative record and DENIES Rotech’s

motion for judgment on the administrative record. The record demonstrates that the VA

acted reasonably and complied with the terms of the solicitation in its evaluation of

CSS’s bid. The court also DENIES Rotech’s motion to supplement the administrative

record. The documents Rotech seeks to add to the record, which only came into

existence after the agency made its decision to award the contract to CSS, do not shed

light on any issue this court must decide in this case, and thus are properly excluded.

I. FACTS

A. The Solicitation

On January 17, 2014, the VA issued Request for Proposals (“RFP” or “the

solicitation”) No. VA241-14-R-0003 for a contract to provide home respiratory supplies

and services to veterans and beneficiaries in all the states in New England, which is

classified by the Veterans Integrated Service Network (“VISN”) as geographical area No.

1, or “VISN 1.” AR 48. The VISN 1 contractor is to run the VA’s Home Respiratory

Care Program, Pulmonary Section, Medical Service, at all VISN 1 facilities. The VISN 1

contractor admits patients into the Home Respiratory Care Program after performing

assessment of their clinical condition, furnishes home oxygen and respiratory equipment,

conducts in-home pulmonary assessments and re-assessments by respiratory therapists,

sets up and completes overnight oximetries, and provides documentation of patient

education. Id. at 52. The RFP stated that the contractor “shall provide all transportation,

labor, fuel, parts, and supervision for the furnishing of home respiratory care as identified

3

within the Statement of Work.” Id. The RFP contemplated the award of a five-year firm,

fixed-price, indefinite quantity contract. Id. at 156.

The RFP specified that the contract would be awarded on a best value tradeoff

basis, and proposals were to be evaluated under three factors: (1) Technical; (2) Past

Performance; and (3) Price. Id. at 135. The RFP explained that non-price factors, when

combined, “are significantly more important than price,” and stated that after all the

factors are considered together the contract “may be awarded to other than the lowest

priced offeror or other than to the highest technically rated proposal.” Id. at 140.

Though the evaluators were instructed to consider multiple subfactors when awarding a

rating for the Past Performance and Technical factors, no ratings were to be given on the

subfactor level, nor would an offeror receive a rating from any individual evaluator. See

id. at 41. Instead, “[r]atings are given by team consensus and at the Factor level only.”

Id.

1. Technical Factor

The Technical factor is further divided into five subfactors: (1) Management

Approach; (2) Personnel Qualifications; (3) Operations & Quality Assurance; (4)

Contingency Plan & Security; and (5) Veterans Preference. Id. 137. Each subfactor

listed multiple elements that the proposal was to discuss, and required bidders to provide

information on, among other things, its plan to ensure continuity and care; procedures

regarding compliance with VA rules; and information about personnel (including

respiratory therapists and management) who would implement the contract. Id. at 135-

138.

4

Offerors were assigned a Technical Factor rating on a five-level scale. The

possible ratings were, from highest to lowest, “Blue,” “Green,” “Yellow,” “Pink,” and

“Red.” Id. at 138. The highest rating, “Blue,” represents a proposal that “meets all

solicitation requirements, demonstrates an excellent understanding of the requirements

and offers approaches that offer significant advantage to the Government.” Id. . The

worst Technical Factor rating a proposal could receive was “Red,” which represents a

proposal that “demonstrates little to no understanding of the requirements; or approach

fails to adequately meet acceptable performance expectations.” Id. A “Yellow” rating

was the lowest rating a proposal could receive and still be considered technically

acceptable. Id.

2. Past Performance Factor

In order to determine an offeror’s score on the Past Performance factor, the RFP

required the government to conduct a two-part analysis of the (1) relevancy of the

bidder’s past experiences and (2) the quality of the bidder’s past performance. Id. at 139.

Offerors were instructed to “identify three or more Federal, State, or private sector contracts

of similar type, scope, size, and complexity that are ongoing, and/or have been completed

within the last five years.” Id. In order to determine relevancy, the VA instructed that all

proposals were to “[p]rovide the details of those contracts to include dates of contract, dollar

value, patients served and scope of services provided.” Id. If the offeror did not have a

record of relevant past performance, it would not necessarily be fatal to the offeror’s

proposal; however, “an offeror with no record of past performance, while rated ‘neutral’ in

past performance, may not be the most advantageous proposal to the government all factors

5

being considered.” Id. The quality of an offeror’s past performance would then be assessed

based on the references the offeror provided, with the government instructed to consider

“whether or not they believe (1) that the offeror was capable, efficient, and effective, (2)

that the offerors performance conformed to the terms and conditions of its contract, (3)

that the offeror was reasonable and co-operative during performance, and (4) that the

offeror was committed to customer satisfaction.” Id. Offerors would then be assigned

an overall past performance rating ranging from “Very Low Risk” to “High Risk,” with

offerors lacking relevant past experience rated as “Neutral.” Id. at 140.

3. Price Factor

Pursuant to the RFP, the Price Factor was weighed less than the Technical and

Past Performance factors. Id. at 140. The solicitation instructed that the Source Selection

Authority (SSA) would evaluate the proposed price for reasonableness. The government

provided an Independent Government Cost Estimate (“IGCE”) for the procurement of

$51,950,000, which was not broken down by CLIN, in order to test the proposals for

reasonableness. Id. at 36. Id. However, the Source Selection Evaluation Board (“SSEB”) was

instructed to “evaluate pricing only as to whether it is realistic to the effort.” Id. The RFP

explained that “[u]nrealistically low proposed prices may be grounds for eliminating a

proposal from competition either on the basis that either the offeror does not understand

the requirement or the offeror has made an unrealistic offer.” Id. The solicitation asked

bidders to fill in unit prices on a Contract Line Item Number (“CLIN”) table. Id. The

solicitation did not require bidders to provide supporting data or a narrative explanation

for the bidder’s price for each CLIN.

6

B. The Evaluation and Best Value Determination

The VA received proposals from six companies: Rotech; CSS; [. . .]; [. . .]; [. . .];

and [. . .] by the solicitation’s close date of February 19, 2014. No offerors challenged

the terms of the solicitation prior to submitting a proposal or before the award of the

contract. All proposals first evaluated by the individual members of the SSEB. Id. at

4267. The SSEB then “met after evaluation of each proposal to achieve general

consensus for each offeror and then provided a recommendation to the SSA.” Id.

Rotech and CSS both received “Blue” ratings on the Technical factor. [. . . ] and [.

. .] received “Yellow” ratings, the lowest acceptable rating. Id. at 4267. [. . .] and [. . .]

each received unacceptable “Pink” ratings on the Technical element of their proposal. Id.

The VA found that CSS and Rotech each had “very relevant” experience that, when

combined with the quality assessment, resulted in a “Low Risk” proposal. Id. at 4267; id.

at 7461 (CSS relevancy assessment); id. at 6972 (Rotech relevancy assessment). The other

four offerors received either “Neutral Risk” or “Average Risk” ratings. Id.

After initial evaluations, the VA performed a competitive range down-select. The

VA decided to eliminate all proposals rated “Yellow” or lower on the Technical factor,

and all proposals with Neutral or Average Risk ratings on Past Performance. Id. at 4267.

As a result, only CSS and Rotech remained in the running. During this round of

evaluations, CSS received eight questions on Technical factor issues, including questions

regarding facilities and personnel in VISN. Id. at 4268. In response to the VA’s concern

that CSS’s proposal did not include enough facilities to serve patients in Maine, CSS

agreed to increase the number of facilities it would open in that state. Id. The Agency

7

determined that CSS’s discussions response resolved all concerns and/or ambiguities in

the CSS technical proposal. Id. at 4268. CSS received no questions with respect to its

proposed price, which remained unchanged throughout the process.

Rotech received six questions relating to its technical proposal and one relating to

its pricing. Id. The price inquiry stated that the VA was “unable to back into your

pricing proposal” and asked Rotech to “verify [its] pricing and resubmit.” Id. at 4369.

CSS’s price of $46.3 million ranked third out of six offerors, while Rotech’s price of

$62.8 million was the highest. Id. at 4247 (Price Negotiation Memo). CSS’s pricing was

the closest to the IGCE of any of the six original offerors. Id. On July 29, 2014, the VA

informed Rotech that “their pricing was too high” and asked both CSS and Rotech to

submit their best proposal. Id. at 4270. Rotech subsequently reduced its price from

$62.8 million to $51.9 million. Id. at 4214-4244.

In the evaluation of final proposal revisions, Rotech and CSS’s Past Performance

and Technical factor rankings carried forward to the final round. The following chart,

included in the Best Value Determination, summarizes the SSEB’s findings:

[. . .] [. . .] [. . .] [. . .]

[. . .] [. . .] [. . .] [. . .]

[. . .]

8

Id. at 4267. In the combined non-price evaluation, CSS received 34 strengths and two

weaknesses.2 Id. at 4259-61. Rotech received 21 strengths and no weaknesses. Id. at

4266-67.

Both Rotech and CSS received ratings of “Blue,” on the Technical factor, which

was the best technical rating available, and a “Low-Risk” rating on the Past Performance

factor. Id. at 4267. In addition, CSS’s proposed price of 10.8% lower than Rotech’s

reduced final price proposal. Id. As a result, the Agency determined that CSS’s proposal

presented the “best value” to the Government:

This offer [CSS] represented the best value to the government based on

Best Value to the government by offering the Highest combined Technical

and Past Performance Rating along with the lowest price determined to be

fair and reasonable by the contracting officer.

Id. at 4270. On August 1, 2014, the VA notified the offerors that the contract was

awarded to CSS. Id. at 4306.

C. Post-Award Activities and Rotech’s Protest in the Government

Accountability Office

On August 7, 2014, the VA conducted Rotech’s debriefing. According to Rotech,

during that meeting, the SSA on the contract, Lorrie Baines, stated that the VA believed

that CSS would not be able to complete the transition process within ninety days. See

Pl.’s Mot to Supplement the AR, ECF No. 34 (“Mot. to Supp. AR”). Rotech has

submitted declarations stating that Ms. Baines told Rotech that the transition would take

2

CSS’s weaknesses were that it did not have a respiratory technician in Vermont and that CSS’s

bid had not proposed enough drivers or customer service personnel. AR 4261. The solicitation

categorized negative aspects of proposals as either “Weaknesses” or “Significant Weaknesses,

with CSS’s weaknesses being the former. Id.

9

that amount of time because CSS needed to open facilities and purchase equipment to

service the VISN 1 service area. Id. at 2. According to Rotech, Ms. Baines stated that

the VA would extend Rotech’s existing contract until CSS was able to complete the

transition. Id.

Rotech filed a protest with the Government Accountability Office (“GAO”) on

August 11, 2014. AR 4309-4462. As in this protest, Rotech claimed that (1) VA’s

evaluation of the Technical Factor was flawed; (2) VA failed to follow the Solicitation’s

evaluation criteria for Past Performance; (3) the VA’s price evaluation did not comply

with the Solicitation because the VA did not conduct a price realism analysis; and (4) the

VA failed to conduct a proper best value determination. Id. In a supplemental protest

filed on August 18, 2014, Rotech expanded the basis of its protest, claiming that CSS’s

proposal should have been disqualified or substantially downgraded because it lacked a

viable transition plan. Id. at 7168-7176. The VA subsequently submitted an agency

report addressing Rotech’s allegations on September 10, 2014. Id. at 4463-7167. The

agency also submitted a brief supplemental contracting officer narrative addressing

Rotech’s supplemental allegations on September 29, 2014. Id. at 7177-7185. CSS

participated in the protest as an intervenor for the defendant.

The GAO denied Rotech’s protest on November 5, 2014. Id. at 7186-7195. The

GAO found that Rotech’s claim that CSS’s transition plan was unrealistic lacked merit

because the question of whether CSS could complete the transition in the time specified

by the contract is a matter of contract administration. Id. at 7189. Regarding Rotech’s

claims that the VA’s evaluation of the Technical Factor was flawed because CSS did not

10

operate facilities or employ qualified personnel within VISN 1, GAO held that the

argument was without merit because the solicitation did not require the offeror to already

have established operations within VISN 1. Id. at 7188. Nor did the solicitation require

an offeror to “identify their proposed facilities or identify all the personnel that would

perform the requirements.” Id. The GAO noted that in accordance with the solicitation’s

requirements, CSS’s proposal:

. . . identified various facilities that it was considering throughout the New

England area, that it planned to identify and secure 10 locations as part of

its transition process, it identified specific individuals who would be

involved with transition, and indicated that [CSS] had initiated the process

of obtaining licensure and insurance certification necessary to provide

services in VISN 1.

Id. at 7188.

The GAO also held that “the record fails to support the protester’s argument that

[CSS] failed to identify a local management team and the respiratory therapists,” noting

that CSS’s technical proposal identified “its president, vice president, general manager,

operations manager/regional project manager, director of business development/primary

point of contact, director of customer service, director of billing, director of quality

control, human resources manager, and alternate project manager.” Id. at 7189.

Similarly, with respect to respiratory therapists, the GAO held “the mere fact that the

individuals identified are prospective hires does not demonstrate that the evaluators could

not reasonably have viewed [CSS’s] plan for providing qualified therapists as low risk.”

Id. at 7190. The agency found that “the level of risk associated with the awardee’s plan

to hire qualified personnel is a matter of agency judgment, and the mere fact that the

11

protester disagrees with the agency’s assessment does not demonstrate that the agency’s

judgment was unreasonable.” Id.

The GAO likewise held that Rotech’s past performance claims lacked merit,

finding that VA did not act unreasonably when it determined that CSS’s performance

within VISN 10 was very relevant for evaluative purposes given that the VISN 10

contract required CSS to provide services to more patients than the estimated number that

would be served under the VISN 1 contract and more complex services than were to be

provided under the VISN 1 contract. Id. at 7193. The GAO also noted that CSS received

more favorable quality evaluations for its performance of the VISN 10 contract than

Rotech received for its comparably relevant past performance. Id. at 7193.

Finally, with respect to Rotech’s claim that the VA had failed to perform a price

realism analysis, the GAO concluded that “the analysis performed by the contracting

officer was adequate to establish the realism of [CSS’s] price.” Id. at 7194. Therefore,

the GAO rejected Rotech’s assertion that the VA failed to document its rationale for

awarding the contract to CSS, concluding “a documented tradeoff analysis is not required

where, as here, the lower-priced proposal is not lower rated technically.” Id. at 7195.

The GAO issued its decision denying Rotech’s protest on November 5, 2014. Id.

at 7186. On November 19, 2014, Rotech filed its bid protest complaint in this court. The

parties subsequently filed cross-motions on the administrative record. In addition,

Rotech moved to supplement the administrative record to include statements that the VA

allegedly made during Rotech’s debriefing. The court held an oral argument on the

parties’ motions on March 11, 2014.

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II. STANDARD OF REVIEW

A. Standard for Judgment on the Administrative Record

RCFC 52.1 provides for review of agency action based upon the administrative

record. “Unlike summary judgment standards, genuine issues of material fact do not

preclude a judgment on the administrative record.” Young v. United States, 497 F.

App’x 59, 61 n.8 (Fed. Cir. 2012) (citing Bannum Inc. v. United States, 404 F.3d 1346,

1355-56 (Fed. Cir. 2005)). Instead, this court is to “resolve[] questions of fact with

references to the administrative record. . . . In such instances, the Claims Court may

make factual determinations and legal conclusions based on the administrative record in

the first instance.” Id. at 59 n.8 (citing Bannum, 404 F.3d at 1356, 1354). Under this

standard, “the focal point for judicial review should be the administrative record already

in existence, not some new record made initially in the reviewing court.” Axiom Res.

Mgmt., Inc. v. United States, 564 F.3d 1374, 1379 (Fed. Cir. 2009) (quoting Camp v.

Pitts, 411 U.S. 138, 142 (1973)).

B. Standard for Procurement Challenges

The standard of review of an agency’s action is governed by the Administrative

Procedure Act (“APA”), 5 U.S.C. § 706. 28 U.S.C. § 1491(b)(4). The Court’s standard

of review in bid protests is “highly deferential.” Advanced Data Concepts, Inc. v. United

States, 216 F.3d 1054, 1058 (Fed. Cir. 2000). The court may not set aside an agency’s

action unless the action was “arbitrary, capricious, an abuse of discretion, or otherwise

not in accordance with law.” Palladian Partners, Inc. v. United States, --F.3d---, No.

2014-5125, 2015 WL 1810863, at *6 (Fed. Cir. Apr. 22, 2015) (quoting Savantage Fin.

13

Servs. v. United States, 595 F.3d 1282, 1285 (Fed. Cir. 2010)). In that connection, “[t]he

court’s task is to determine whether ‘(1) the procurement official's decision lacked a

rational basis; or (2) the procurement procedure involved a violation of regulation or

procedure.’” Id. (quoting Savantage, 595 F.3d at 1285).

When challenging a procurement on the ground of a regulatory violation, the

protester “must show a clear and prejudicial violation of applicable statutes or

regulations.” Banknote Corp. of Am., Inc. v. United States, 365 F.3d 1345, 1350-51

(Fed. Cir. 2004) (citation omitted). The Competition in Contracting Act of 1984, Pub. L.

No. 98-369, 98 Stat. 1175, mandates that agencies evaluate sealed bids and competitive

proposals, and award a contract, “based solely on the factors specified in the solicitation.”

41 U.S.C. § 3701(a); see also 48 C.F.R. § 15.608(a). Therefore, if an agency fails to

comply with the terms of the solicitation, such failure may “constitute grounds for

overturning the bid award.” Advanced Data Concepts, Inc. v. United States, 43 Fed. Cl.

410, 417 (1999). However, when the Court finds a “reasonable basis” for an agency’s

action, the Court should “stay its hand even though it might, as an original proposition,

have reached a different conclusion as to the proper administration and application of the

procurement regulations.” Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1371

(Fed. Cir. 2009) (quoting Honeywell, Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir.

1989)). “This standard recognizes a zone of acceptable results in each particular case and

requires that the final decision reached by an agency is the result of a process that

‘consider[s] the relevant factors’ and is ‘within the bounds of reasoned decision

making.’” Mgmt. Solutions & Sys., Inc. v. United States, 75 Fed. Cl. 820, 827 (2007)

14

(quoting Balt. Gas & Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 105

(1983)).

When a protester alleges a lack of a rational basis for the agency action, the test is

“whether the contracting agency provided a coherent and reasonable explanation of its

exercise of discretion, and the disappointed bidder bears a ‘heavy burden’ of showing that

the award decision had no rational basis.” Banknote, 365 F.3d at 1351 (Fed. Cir. 2004)

(citation omitted). The agency has a “particularly” high degree of discretion when, as in

this case, “the contract is to be awarded to the bidder or bidders that will provide the

agency with the best value.” Croman Corp. v. United States, 724 F.3d 1357, 1363 (Fed.

Cir. 2013) (citing Banknote Corp., 365 F.3d at 1355.This is because a best value

determination is “necessarily a subjective process.” One Largo Metro, LLC v. United

States, 109 Fed. Cl. 39, 97 (2013)

Even if the Court were to determine that an agency’s decision-making “fails the

APA review under 5 U.S.C. § 706(2)(A),” the court must still decide whether the

government’s conduct prejudiced the protester. See Bannum, 404 F.3d at 1351. “‘[T]o

prevail in a protest the protester must show not only a significant error in the procurement

process, but also that the error prejudiced it.’” Galen Med. Assocs. v. United States, 369

369 F.3d 1324, 1330 (Fed. Cir. 2004) (quoting Data Gen. Corp. v. Johnson, 78 F.3d

1556, 1562 (Fed. Cir. 1996)). Prejudice requires the protester to show a “substantial

chance” that it would have received the contract award absent the agency’s error. See

Bannum, 404 F.3d at 1358. Therefore, even if the plaintiff is able to show agency error,

the court must uphold the agency’s decision if the error did not alter the results of the

15

procurement. See, e.g., Statistica, Inc. v. Christopher, 102 F.3d 1577, 1583 (Fed. Cir.

1996).

Finally, a challenger may not use a bid protest as an opportunity to challenge the

terms or requirements of the solicitation itself. In Blue & Gold Fleet, L.P. v. United

States, the Federal Circuit held that “a party who has the opportunity to object to the

terms of a government solicitation containing a patent error and fails to do so prior to the

close of the bidding process waives its ability to raise the same objection subsequently in

a bid protest action . . . .” 492 F.3d 1308, 1313 (Fed. Cir. 2007). This rule prevents the

“inefficient and costly” process of conducting a second round of bidding “after offerors

and the agency ha[ve] expended considerable time and effort submitting or evaluating

proposals in response to a defective solicitation.” Bannum, Inc. v. United States, 779 F.3d

1376, 1380 (Fed. Cir. 2015) (quoting Blue & Gold, 492 F.3d at 1314) (internal quotation

marks omitted).

III. DISCUSSION

A. The VA Conducted a Reasonable Technical Evaluation that Complied

with the Terms of the RFP

Rotech argues that the VA’s evaluation of CSS’s technical proposal was arbitrary

and capricious. Specifically, Rotech argues that because CSS did not have employees or

facilities already positioned in VISN 1, CSS would not be able to complete the transition

in forty-five days. Rotech also argues that CSS’s bid was deficient with respect to

describing the personnel and facilities CSS would use to implement the contract. Finally,

Rotech argues that CSS’s proposal should have been rejected because CSS materially

16

misrepresented its intentions with respect to the respiratory therapists it intended to argue

if awarded the contract.

However, as CSS and the government point out, the record demonstrates

Rotech’s arguments with respect to the Technical factor are insufficient to overcome the

degree of deference this court is required to give to agency decision making. The record

shows that the VA did conduct a reasonable evaluation of CSS’s technical proposal in

conformity with the RFP’s requirements. Further, contrary to Rotech’s claims, the forty-

five day transition deadline is a matter of contract administration rather than a

requirement for the procurement.

1. The VA’s review of CSS’s proposed transition was reasonable

and conformed with the RFP

Rotech’s primary argument is that the VA failed to evaluate CSS’s ability to

comply with the solicitation’s requirement that the transition be completed within forty-

five days. Rotech argues that based on CSS’s proposal, CSS would not have been able to

complete the transition within the time period, and therefore the VA did not properly

evaluate CSS’s proposal under the Technical factor. As evidence of the VA’s failure to

evaluate CSS’s proposal, Rotech notes that “no documents in the AR discuss CSS’s

ability to comply with the 45-day transition requirement,” and therefore, “the VA never

evaluated CSS’s proposal for this requirement.” Pl.’s MJAR 4. According to Rotech,

“[i]f the VA had actually considered the 45-day transition requirement—which it did

not—the VA would have disqualified CSS’s proposal for an inadequate transition plan

that failed to propose a transition within 45 days of the contract award.” Id. 5-6. The

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VA’s action, according to Rotech, “is a violation of procurement law and regulation, and

is also arbitrary and capricious.” Id. at 17.

The defendants counter that CSS never stated that it could not complete the

transition within forty-five days and that the agency’s review of CSS’s transition plan

complied with the regulations. According to the defendants, Rotech’s arguments

represent an improper attempt to add requirements to the RFP post award.

At the outset, it is important to note the relative importance of the transition plan

in the context of the RFP as a whole. The contract contemplated a contractual

arrangement to provide a wide variety of services over a five year period, and the

structure of the RFP demonstrates that a bidder’s transition plan was less important than

the many substantive aspects of a bidder’s proposal. Though the agency was required to

evaluate the transition, a bidder’s transition plan represented only one out of six areas of

discussion in the Management Approach subfactor, which in turn is only one of five

subfactors in the Technical factor, which in turn is only one of the three factors that the

RFP required the agency to consider and evaluate. Further, a bidder’s description of its

transition plan was limited to ten pages. This limitation indicates that the RFP did not

contemplate a bidder submitting a transition plan containing every detail.

Turning to the forty-five day time limit for the transition, the court finds that he

language and structure of the solicitation demonstrate that the agency was not required to

specifically find that a bidder must be able to complete the transition within forty-five

days, and that an inability to do so would not automatically disqualify a bidder from

consideration. The statement of work explains that during the forty-five day period

18

following the award of the contract to a new offeror, the outgoing and new contractors

shall coordinate the transfer of care, and contains the obligations of the outgoing

contractor, the incoming contractor, and the government during that time period. AR 60.

The solicitation explains that, during this transition period, the VA will continue to pay

the outgoing contractor for services provided to patients while the incoming contractor is

setting up its equipment. Id. The solicitation states that this equipment transfer “will be

accomplished within the time frame established ‘as soon as possible after award, but not

to exceed 45 days.’” Id. at 53.

However, the same provision specifically contemplates the possibility that an

awardee may not complete the transition within that time, and provides an alternative

plan for that scenario: “Failure to perform the switch-outs as specified will result in a

forfeit of payment to the provider currently used for every day thereafter until switch-out

is complete. Payments will be assessed based on that providers established rate and

prorated from setup date.” Id. at 53 (emphasis added). Therefore, the forty-five day

transition period is not a determinative solicitation requirement, but merely sets a limit on

the government’s obligation to the outgoing contractor. The contract provides an

incentive for the incoming contractor to complete the transition within forty-five days,

and requires the incoming contractor to pay the outgoing contractor’s rate after that time

period. Consequently, the length of the transition is a matter of contract administration,

and not a requirement for a successful bid, because penalties for untimely performance

could only be assessed after a contract was awarded. See Allied Tech. Grp., Inc. v.

United States, 649 F.3d 1320, 1330 (Fed. Cir. 2011) (finding that an “offeror’s potential

19

failure to comply with the proposal requirements is ordinarily “a matter of contract

administration,’ which does not go to the propriety of accepting the bid.” (quoting

Centech Grp., Inc. v. United States, 554 F.3d 1029, 1039 (Fed. Cir. 2009))).

According to Rotech’s argument, the agency was required to specifically find that

CSS could the complete the transition within forty-five days and eliminate all bidders

who the VA found could not do so. But Rotech’s reading of the solicitation conflicts

with the RFP’s provisions describing the transition process. Rotech is asking this court to

add a determinative condition to the solicitation, which this court cannot do. The Federal

Circuit recognized the Court of Federal Claim’s duty “to determine whether the agency’s

[evaluation] was consistent with the evaluation criteria set forth in the RFP, . . . [and] not

to introduce new requirements outside the scope of the RFP.” Alabama Aircraft Indus.,

Inc.-Birmingham v. United States, 586 F.3d 1372, 1375-76 (Fed. Cir. 2009) (holding that

the Court of Federal Claims’s “attempt to rewrite the RFP” went beyond the scope of the

court’s review) (citation omitted). Because the agency’s decision was rational, the court

must defer to its judgment.

In addition, CSS never stated—and the agency did not find—that CSS could not

complete the transition within forty-five days, a position CSS reiterated at oral argument.3

3

Rotech asserts that the VA’s “evaluation CSS’s transition plan also conflicts with its evaluation

of other offerors’ transition plans.” Pl.’s MJAR 5. Specifically, Rotech argues that [. . .] was

disqualified “in large part because” [. . .]’s transition plan “conflicted with the Solicitation’s 45-

day transition requirement . . . .” Id. Therefore, according to Rotech, “the VA should have come

to the same conclusion with CSS—and also disqualified CSS based on its inability to meet the

transition requirement.” Id. However, unlike [. . .], CSS never stated that it could not complete

the transition within forty-five days.

20

At oral argument, CSS again asserted its position that the transition could be completed

within that time period. Rotech’s arguments are based on its assumptions that a non-

incumbent could not find adequate facilities and staff within that time period. However,

as discussed above, the agency’s review of the transition plan with respect to these issues

was adequate and conformed with the RFP. Nothing in Rotech’s briefs shows that

review to be irrational

2. The agency reasonably evaluated CSS’s transition plan with

respect to personnel and facilities

Rotech argues that the VA failed to evaluate the fact that at the time CSS

submitted its proposal, CSS did not have personnel or facilities in VISN 1. Therefore,

according to plaintiff,

[i]n order to become fully operational in New England, CSS would have

to, among other things, (1) find, lease and prepare

at least 10 facilities, (2) hire new or transfer current employees to New

England, and (3) secure insurance and accreditation for each facility.

Pl.’s MJAR at 7. Rotech argues that the VA’s failure to downgrade CSS due to its lack

of local personnel or facilities was in violation of the solicitation. Had VA done an

adequate evaluation of the risks posed by CSS’s proposal, Rotech argues, Rotech would

have had a substantially higher chance of being awarded the contract. In response, the

government argues that each of these arguments are an attempt by Rotech “to inject new

requirements into the solicitation in areas where it perceives CSS’s Technical Factor

proposal to be lacking.” Gov’t MJAR 18.

The agency’s review of CSS’s transition plan is documented in the record. After

the agency received a summary of its transition plan as part of its proposal, the VA

21

reviewed the proposal and responded asking for additional information. AR 4268.

Specifically, the VA asked CSS to list the names of personnel, by name and credential,

who would be responsible for the transition, and asked CSS to provide information about

any experience those individuals had in contract transition. Id. CSS responded to the

agency and provided the list of responsible employees, some of which had previous

experience in transitioning VA contracts in other VISNs. Id. at 4135. The agency found

that CSS’s response to its question addressed all of the concerns raised in the discussions,

noting that CSS’s response “named specific and adequate personnel to meet the needs of

the transition.” Id. at 4268.

The agency also raised concerns about CSS’s proposal’s inclusion of only one

facility in the state of Maine. Id. at 4268. The agency estimated that at least three

locations would be needed to meet the demand in that area. Id. In response, CSS

committed to opening three facilities in Maine, “and any additional locations, as needed.”

Id. at 4134. CSS’s response to the agency’s questions also included a commitment to

identify and secure ten locations in the VISN. Id. at 4135.

With respect to personnel, the solicitation required offerors to submit the

following information about proposed respiratory therapists:

Summary sheet listing the number of Respiratory Therapists to be assigned

to this requirement. Also include type of credentials (resumes) and years of

experience performing home oxygen services and production of Consult

Reports. Information should describe the qualifications of the personnel,

i.e., types of experience years of experience, education, requisite trainings

(and frequency of trainings) and certifications of therapist personnel to be

assigned in the performance of this contract. Please include copies of

certifications of the therapist staff intended for the effort

22

Id. at 137. The RFP also required summary sheets listing key management staff “who

will work with the VA on day-to-day operational issues.” Id.

As required, CSS provided the resumes and licensing information of respiratory

therapists within the VISN 1 region to be assigned to the contract together with a sheet

summarizing the number of therapist it intended to hire and their respective credentials..

Id. at 537-616. CSS stated that “[t]he process for licensure and insurance certification

has already been initiated and we are well on our way to meeting the regulations and

guidelines for providing respiratory services to the patients in VISN 1.” Id. at 534, 553-

619. CSS’s proposal also included a summary sheet and additional information regarding

the members of its senior management team, including the company’s president, vice

president, and general manager. Id. at 551. CSS also listed the personnel that would be

responsible for managing CSS’s relationship with VA in VISN 1, including its operations

manager/regional project manager, director of business development/primary point of

contact, director of customer service, director of billing, director of quality control,

human resources manager, and alternate project manager. Id. at 553.

The agency found that CSS’s discussion of the transition process in its proposal

and responses to the agency’s question was acceptable, and merited a “Blue” rating on

the Technical factor. The court finds that the procedures the agency used complied with

the solicitation and that its conclusions were rational. In light of this evidence in the

record, Rotech’s arguments that the agency failed to adequately assess CSS’s transition

plan as it applied to personnel and facilities are unavailing. To the extent that Rotech is

arguing that the VA failed to adequately weigh CSS’s lack of personnel and facilities

23

when evaluating CSS’s proposal, the court finds that the solicitation left the question to

the agency’s discretion.4

To the extent that Rotech is arguing that the solicitation required bidders to have

personnel and facilities already in place, Rotech is simply incorrect. As the GAO rightly

found, the RFP did not require an offeror to have employees and facilities at the time the

offer was made:

The solicitation did not require a previously established presence in the

coverage area, as Rotech’s arguments would suggest. In fact, the

solicitation did not expressly require offerors to identify their proposed

facilities or identify all the personnel that would perform the requirements.

Nor did it indicate that such facilities or personnel would be considered in

the evaluation.

Id. at 7188-89 (emphasis added). Rotech argues that providing a list of respiratory

therapists was insufficient because these therapists were not currently employed by CSS

at the time it submitted its proposal, and CSS found many of the resumes on employment

websites. However, the RFP required only that offerors identify the respiratory therapists

“to be assigned in the performance of this contract.” Id. at 137 (emphasis added). There

was no requirement that those therapists already be employed by the offeror, and

4

Rotech’s claim that the VA did not assess Rotech’s past experience as part of the Technical

factor lacks merit. Rotech’s only evidence of this claim is that the words “past experience” do

not appear in the Best Value Determination. However, the record contains numerous instances

of CSS’s past experience being evaluated as part of the Technical factor. The evaluation

worksheets for the technical evaluation demonstrate that the evaluators had a specific worksheet set

aside for this aspect of the Subfactor 1 evaluation. The individual evaluators completed this

worksheet during the CSS evaluation. See, e.g., AR 3589, 3611, 3622. In these worksheets, the

evaluators recommended assigning specific subfactor color ratings, and provided suggested strengths

and weaknesses. The fact that the Best Value Determination does not specifically state which of

Rotech’s strengths come from this particular element does not mean that no evaluation was

performed.

24

therefore, the court may not add such a requirement to the solicitation. See Blue & Gold,

492 F.3d at 1313.

3. There was no material misrepresentation in CSS’s proposal with

respect personnel

Finally, Rotech argues that though CSS listed the resumes of respiratory therapists

found on an employment website as prospective employees in its proposal, CSS actually

intended to hire Rotech’s employees if it were awarded the contract. Rotech

characterizes CSS’s alleged plan as a “bait and switch” and a material misrepresentation

that disqualifies it from being awarded the contract. Rotech relies on Planning Research

Corp. v. United States, a case that upheld an agency’s finding that an offeror’s bid

included a material misrepresentation when the offeror proposed using one set of

employees knowing that it fully intended to hire the incumbent’s employees when the

offeror had been informed that hiring the incumbent’s employees would be a weakness in

its proposal and the offeror assured the agency that it did not plan to hire them. 971 F.2d

736 (Fed. Cir. 1992).

However, there is no evidence in the administrative record to support Rotech’s

assertion that CSS was untruthful in its proposal. Even if CSS ultimately did hire

individuals other than those listed in its proposal, including some of Rotech’s current

employees, that would not be evidence that CSS misrepresented itself given the fact that

so much time has passed since it submitted its proposal. In addition, Rotech has shown

no reason why, even if CSS did intend to hire Rotech’s personnel to perform certain

work, this information would have been material to the VA’s decision making process.

25

Further, CSS identified all of its own key management personnel and there is no evidence

to suggest that these individuals will not be available, as CSS has promised.

B. The VA Conducted a Reasonable Past Performance Evaluation that

Complied with the Terms of the RFP

Rotech argues that the VA failed to apply the RFP’s selection criteria with respect

to Past Performance factor when evaluating CSS’s proposal. Pl.’s MJAR 27. Rotech

makes two arguments with respect to the Past Performance factor. First, Rotech argues

that it and CSS were not evaluated using the same forms, and therefore the agency’s

decision was arbitrary and capricious. Second, Rotech argues that the VA wrongly

evaluated CSS to have “very relevant” experience, which in turn led to an incorrect “Low

Risk” rating. With respect to Rotech’s first argument, the government and CSS counter

that Rotech was not prejudiced by the use of different forms because the two forms

collected essentially the same information. Defendants also argue that, under the

deferential standard of review granted to an agency’s past performance reviews, the

administrative record demonstrates that the VA’s decision to rate CSS’s proposal as “low

risk” was reasonable. For the reasons discussed below, the court agrees with the

defendants.

1. The VA’s assessment of CSS’s prior contracts was reasonable

As discussed above, the Past Performance factor consists of two subfactors:

relevancy and quality. Rotech argues that the VA acted arbitrarily and capriciously with

respect to its evaluation of the relevancy of CSS’s past experiences and wrongly

classified CSS’s former contracts as “Very Relevant.” As a result, Rotech argues, CSS’s

26

“Low Risk” rating on the Past Performance factor is incorrect for two reasons: first; that

the VA did not evaluate the relevancy of CSS’s past and current contracts; and second,

that as a factual matter, CSS’s other contracts are not comparable to the procurement at

issue in this case. Rotech asserts that the record in this case “contains no documents that

indicate that the VA performed the required interim assessment of the relevance of any of

CSS’s past or present contracts.” Pl.’s MJAR 20.5 But the record simply does not

support this position. The record contains evidence which show that the VA did in fact

evaluate Rotech’s past contracts for relevancy. In addition, the fact that CSS had such

positive reviews with respect to the quality subfactor supports the defendant’s assertion

that the overall “low risk” rating is a reasonable assessment.

The solicitation thus explained that the VA would evaluate offerors’ ability to

perform successfully “based on the offerors’ demonstrated past and present

performance,” and that both the relevancy and quality of performance in past contracts

was to be taken into account. AR 140. The solicitation defined recent and relevant

contracts as ones performed at either the Federal or state level, or within the private

sector “of similar type, scope, size, and complexity that are ongoing, and/or have been

completed within the last five years.” Id. at 139. Contracts were considered “very

5

Rotech also takes the position that the VA was required to assign ratings between “Very

Relevant” and “Not Relevant” to each offerors proposals, and states that “the VA and CSS do

not dispute that the VA failed to assign the required ratings.” Pl.’s Reply 20-21. But the RFP

contradicts Rotech’s assumption. While the RFP called for evaluators to designate a level of

relevancy to an offeror’s specific past projects, an overall “rating will not be given at the

subfactor level or by an individual rater. Ratings are given by team consensus at the Factor level

only.” AR 41.

27

relevant” if they involved the same effort and complexities as the one being awarded,

“relevant” if they involved much of the same effort and complexities, and “somewhat

relevant” if they involved some of the effort and complexities. Id. at 139.

The solicitation made clear that VA would consider information obtained from

references, as well as information provided by offerors and other sources. Id. at 139.

The solicitation went on to explain that the past performance evaluations would yield

performance assessments rating reflecting “the Government evaluation team’s judgment

of the probability of an offeror successfully accomplishing the proposed effort[.]” Id. at

140. Both Rotech and CSS ultimately received ratings of “low risk,” which the

solicitation defined as a “good probability of success with overall low degree of risk in

meeting the government’s requirements.” Id. at 4108, 140.

A summary of the agency’s review of the relevancy of CSS’s past contracts can be

found in CSS’s evaluation summary, and demonstrates that the agency did consider

relevancy as required by the solicitation. See AR 4278. The record supports the agency’s

finding that CSS’s performance of a similar contract in VISN 10 is “very relevant” to the

work to be performed under this contract. Though the VISN 10 contract was initially much

smaller than the VISN 1 contract in terms of dollar amount, the contract has grown

significantly over the years and covers a large number of patients. The VISN 10 also

involved similar levels of complexity, including treating patients in their homes across

multiple states. The Federal Circuit has recognized that procuring agencies are afforded

“broad discretion” to make judgments regarding past performance relevancy. Glenn Def.

Marine (ASIA), PTE Ltd. v. United States, 720 F.3d 901, 910 (Fed. Cir. 2013); PlanetSpace,

28

Inc. v. United States, 92 Fed. Cl. 520, 539 (2010) (“[I]t is important to note that what does or

does not constitute ‘relevant’ past performance falls within the [Source Selection

Authority’s] considered discretion.”). In this case, the plaintiff has not given the court any

reason to believe that agency’s evaluation of the relevancy and quality of CSS’s past

experience was not rational.

In addition, with respect to the quality subfactor, CSS’s positive references on past

contracts adequately support the fact that the “low risk” rating it received from the

evaluators was rational, and thus entitled to deference. In CSS’s past performance

questionnaire for the VISN 10 contract, [. . .], the VISN Prosthetic Representative, stated

that CSS provided “oxygen very timely and systematically in accordance to our contract

and has never deviated from the prescription. Id. at 7379.6 CSS received an overall

rating of “exceptional,” meaning “the contractor’s performance record within the area of

evaluation exceeded that required by the contract[,]” and a report that “Community

Surgical Supply has been excellent and have satisfied all aspects of our veterans oxygen

needs” for its VISN 10 contract, under which it successfully served a population of over

4,500 patients, including ventilator patients, for five years across all of Ohio, and parts of

Kentucky, Indiana and Pennsylvania. Id. at 7381, 4482.

6

The SSEB also received a past performance questionnaire related to CSS’s performance of a

smaller contract (approximately 630 patients) for respiratory services for the Erie, Pennsylvania

VA Medical Center. AR 7371-7375. That questionnaire rated CSS’s performance as

satisfactory but also noted that “[t]he service level has greatly improved in the past two years[.]”

Id. at 7375.

29

Further, Mr. [. . .] noted that “VISN 10 has a stringent contract oversight process

that reports to VISN and medical center leadership, Community Surgical has provided

oxygen to veterans under any weather related conditions and exceeds the Joint

Commission standards related to homecare.” Id. Answering whether CSS was able to

handle the volume of patients within the deadlines required under the contract, Mr. Floyd

answered “Yes, and very well.” Id. Mr. [. . .] also noted that “Community Surgical staff

are very courteous and professional, [and] the VA have received reports of veterans

insisting that we keep this company forever.” Id. at 7379-7380. When asked whether he

would award another contract to CSS, Mr. [. . .] stated simply “YES.” Id. at 7380.

The SSA also followed up with Mr. [. . .] by telephone in July 2014 to review his

past performance questionnaire responses. Id. at 7184. During that call, Mr. [. . .]

affirmed his satisfaction with CSS’s performance of the VISN 10 contract, noting that

“[t]he feedback from the Home Oxygen Coordinators has always been positive, CSS is

responsive” and that the company “display[ed] a high level of effective management of

respiratory services.” Id. Citing CSS’s purchase of all new equipment to support the

VISN 10 contract (a fact the SSEB cited as a strength of CSS’s VISN 1 proposal), “high

levels of contractor performance and satisfaction” and effective management a major

weather emergency, Mr. [. . .] concluded that the company was an “excellent vendor and

supplier of home oxygen products and services.” Id. at 7185. In the agency’s review of

CSS’s strengths, the VA specifically identified CSS’s “proven track record” and

“[e]xceptional rating” in the VISN 10 contract, and “[l]engthy [h]istory describing patients

30

served, id. at 4260, demonstrating that the quality of CSS’s past performance was in fact

taken into consideration.

Therefore, the court finds that the VA adequately reviewed the relevancy of CSS’s

past contracts and finds that its overall “low risk” rating on past performance was

reasonable.

2. Rotech has not shown prejudice from the use of different forms.

Rotech argues that the VA “arbitrarily and capriciously [used] different

worksheets to evaluate CSS and Rotech.” Pl.’s MJAR 36. Specifically, Rotech argues

that the VA used both the Subfactor 1 and Subfactor 2 worksheets to assess Rotech’s Past

Performance, the VA used only the Subfactor 2 worksheets to evaluate CSS’s Past

Performance. Id. at 36 (citing AR 7382-413; 7351-70).7 Rotech argues that

[H]ad the VA properly reviewed the relevance of CSS’s Past

Performance—and the Subfactor 1 worksheet would have assisted in this

effort—the VA would have found that CSS’s Past Performance was no

more than ‘SOMEWHAT RELEVANT’ and CSS would have received a

lower overall Past Performance score. Even if CSS had received a

“RELEVANT” Past Performance rating, that change may have resulted in a

lower adjectival rating for CSS, which would have provided Rotech with a

substantial chance of winning the competition.

Pl.’s Rep. 24-25.

The government and CSS argue that Rotech is overstating the importance of the

worksheets, and that Rotech suffered no prejudice as a result of the agency using the

7

“Subfactor 1” refers to the relevancy of past contracts, the first factor to be considered in the

past performance ratings, while “Subfactor 2” refers to the quality assessment of past

performances. On the Subfactor 1 worksheet, evaluators could note whether an offeror had

identified three or more contracts of similar type, scope, size, and complexity, and whether the

firm had provided the dates, dollar value, number of patients served, and the scope of the

services provided. AR 7388.

31

extra worksheet to evaluate it and not CSS. According to the defendants, the extra

worksheets were used primarily as “scrap paper” and did not meaningfully contribute to

the agency’s decision. In addition, CSS stated that the missing worksheets “seem[] more

like an issue of VA record retention than an allegation of procedural misconduct in the

procurement.” CSS MJAR 30.

The court agrees with the defendants. The Subfactor 1 worksheets provided the

evaluators with a tool to summarize some information about the bidders’ previous

contracts, but were not the source of that information. All of the data that would have

been reflected in the Subfactor 1 worksheets would have also been found in the

questionnaires the agency sent to the bidders’ references. Further, the record shows that

the Subfactor 1 worksheets were not used to evaluate Rotech in any meaningful way.

Though the worksheets may have reflected the impressions of individual evaluators, they

do not appear to have been an evaluative mechanism for the relevancy factor. The

worksheets contained checkboxes for scoring various elements, but the checkboxes do

not appear to have been used. Therefore, the agency’s failure to use the Subfactor 1

worksheets to evaluate CSS is also not meaningful.

Most importantly, Rotech fails to establish prejudice. Rotech’s argument—that

the use of these forms would have assisted the VA in giving CSS a lower adjectival

description on the relevancy subfactor, which in turn could have led to CSS receiving a

worse rating on overall past performance, which in turn could have provided Rotech with

a substantial chance of winning the competition—is too speculative. The record shows

that the VA did a reasonable review of both the relevancy and quality of CSS’s past

32

work, leading to a “Low Risk” final assessment. The absence of the Subfactor 1

worksheets is not sufficient to call the rationality of the VA’s decision into question.

C. The VA Conducted a Rational Price Determination that Complied with

the Terms of the RFP

Finally, Rotech challenges the VA’s evaluation under the Price factor. Rotech

alleges that the RFP required the VA to conduct a price realism analysis on CSS’s bid. A

“price realism” analysis may be called for if a bidder’s price appears to be “so low that

performance of the contract will be threatened.” DMS All-Star Joint Venture v. United

States, 90 Fed. Cl. 653, 657 n.5 (2010). 8 Rotech claims that, contrary to the RFP’s

instructions, the VA never “made any determination or conducted any review as to price

realism for CSS or any other offeror.” Pl.’s MJAR 15. According to Rotech, the

language of the solicitation, specifically, the statement that “Unrealistically low proposed

prices may be grounds for eliminating a proposal” required the agency to conduct a price

realism review. Pl.’s Rep. 31. Rotech asserts that had the VA undertaken such an

analysis, it would have found that CSS’s prices were unrealistic. Rotech suggests that the

VA could have used additional methods of evaluation, such as historic prices,

comparisons to rates paid in other VISNs, and comparisons to Medicare reimbursement

rates to determine realism. Rotech points out that CSS’s price were 10% lower than the

IGCE, and even lower still than Rotech’s final bid. Rotech also notes that for certain line

items, CSS’s prices were more than 33% lower than Rotech’s. Rotech argues that the

8

Price realism analysis is not to be confused with price reasonableness analysis, which an

agency may employ if a bidder’s offer appears to be too high. DMS, 90 Fed. Cl. at 657 n.5.

33

fact that CSS’s prices were higher than two of the original bids is not relevant because

those offerors were eliminated on the bases of their past performance and technical

proposals before the VA had conducted any evaluation of their prices.

The government and CSS both argue that the price comparisons the VA

conducted satisfied the requirements of the RFP. The government claims that Rotech’s

reading of the RFP is an attempt to “introduce new requirements outside the scope of the

RFP.” Gov’t MJAR 44 (citing Alabama Aircraft Indus., Inc.-Birmingham v. United

States, 586 F.3d 1372, 1375-76 (Fed. Cir. 2009)). The government argues that had the

RFP contemplated a detailed price realism analysis, it would have requested additional

information and instructed the agency to conduct a specific method of analysis. The

government also challenges the logic of Rotech’s argument that CSS’s offer was

unreasonable because it was 10% lower than Rotech’s final offer.

The court agrees with the defendants. Absent instruction from the RFP, the

agency would not be required to consider realism in a fixed-price contract because “the

fixed price task order puts the risk of underpriced offers on the contractor.” Afghan Am.

Army Servs. Corp. v. United States, 90 Fed. Cl. 341, 356 (2009) (citing Femme Comp

Inc. v. United States, 83 Fed. Cl. 704, 755 (2008)). Therefore, the only reason any

consideration of realism is necessary is the language in the RFP stating that

unrealistically low offers may be eliminated. The Federal Circuit has instructed that a

“trial court’s duty was to determine whether the agency’s price-realism analysis was

consistent with the evaluation criteria set forth in the RFP.” Alabama Aircraft, 586 F.3d

at 1375-76 (citing Galen Med. Assocs., Inc. v. United States, 369 F.3d 1324, 1330 (Fed.

34

Cir. 2004)). The RFP states that an “unrealistically low price may be grounds for

eliminating a proposal.” AR 140. Other courts have found that similar language in an

RFP necessitated some type of price realism analysis, see Afghan Am. Army Servs.

Corp. v. United States, 90 Fed. Cl. 341, 357 (2009) (finding that a price realism analysis

was required when the solicitation stated that the agency would “evaluate price proposals

to determine whether the offered price reflects a sufficient understanding of the contract

requirements and the risk inherent in the offeror's approach” and that proposals with “an

unreasonable (high or low) price may be deemed to be unacceptable and may not receive

further consideration.”).

However, the RFP did not make any commitments to perform a price realism

analysis in any particular manner. Therefore, the methodology is left to the agency’s

discretion. Ne. Military Sales, Inc. v. United States, 100 Fed. Cl. 103, 118 (2011)

(finding that because the “Solicitation does not describe the methodology required to

conduct the price realism analysis[,]” the agency “enjoy[s] broad discretion in conducting

its price realism analysis.”); see also FCN, Inc. v. United States, 115 Fed. Cl. 335, 375

(2014) (“The extent of a price realism analysis for each procurement can vary, and

generally is within the discretion of the agency.” (citing Mil-Mar Century Corp. v. United

States, 111 Fed. Cl. 508, 541 (2013))).

In her Supplemental Agency Report before the GAO, Lorrie Baines, the SSA on

this contract, explained the process of price analysis:

As SSA, I reviewed the pricing for realism and reasonableness and found

CSS’s pricing to be realistic. They were the fourth highest quote of six

offers. They were comparable to the IGCE and a thorough review of the

35

line-by-line cost elements revealed no unbalanced pricing and no

mathematical error. This was the basis of my conclusion that the CSS offer

is realistic and reasonable.

AR 7182. Therefore, according to the agency, the VA evaluated the realism of CSS’s

price by comparing its total price to all the other offers and the IGCE. This court and the

GAO have recognized that comparing the line items of different offers is a valid way to

determine price realism. See Afghan, 90 Fed. Cl. at 358 (citing B–291725.3 et al., 2003

CPD ¶ 148, 2003 WL 21982424, at *6 (Comp. Gen. July 22, 2003) (price realism

analysis can be reasonably conducted by “evaluat[ing] each line item and the total price

for each proposal and compar[ing] them with [the] independent estimate and with other

offerors’ prices”). The following chart, which was prepared as part of the price

negotiation with Rotech and CSS after all of the other bidders had been eliminated,

shows the initial price offers from the six offerors who submitted bids:

[. . .]

[. . .]

[. . .]

[. . .]

[. . .]

36

AR 4247. The VA also prepared an IGCE which estimated that the procurement was

valued at $51,950,000 for five years. Id. at 36. Of six initial offers, CSS was the closest

to the IGCE, and was the third lowest bid. Rotech’s initial bid of $62.9 million was the

highest bid. Where, as here, CSS’s initial bid was also the closest to the IGCE, the VA

properly recognized its price was realistic. See Acad. Facilities Mgmt. v. United States,

87 Fed. Cl. 441, 467 (2009).

Rotech has not pointed to anything in the record or the language of the solicitation

that would persuade the court that a more in-depth analysis is needed in this case. See

Info. Sciences Corp. v. United States, 73 Fed. Cl. 70, 102 (2006) (finding that comparing

prices to each another and the government estimate, as well as reviewing the proposal for

compliance with the solicitation and for mathematical accuracy, satisfied the agency’s

obligation to conduct a price realism analysis (quoting Matter of Burns & Roe Servs.

Corp., B–296,355 2005 CPD ¶ 150, 2005 WL 2037620 (GAO July 27, 2005))). Further,

because the RFP in this case only requested all-inclusive pricing for each CLIN, the

agency was limited in how closely it could examine the pricing methodology. This also

shows that the RFP did not contemplate a price realism analysis beyond comparing the

bids and checking them for accuracy.9 The also court rejects Rotech’s argument that

eliminated proposals should not be used to determine realism. As the GAO noted,

9

Rotech has cited no case law, nor given this court any logical reason, to support its argument

that CSS’s offer was somehow per se unreasonable because it was approximately 11% lower

than the Rotech’s bid, and that CSS’s bid for one of the CLINs was 33% lower than Rotech’s bid

for that same CLIN. To the contrary, other cases have found that bids far lower than the

government estimate could nonetheless be realistic. See, e.g., Preferred Systems, 110 Fed. Cl. 48

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While the protester argues that the prices of the two lowest-priced

proposals should not be considered valid points of comparison since these

proposals were ‘essentially deemed unrealistic’ by the agency for failing to

display an understanding of the Solicitation’s requirements, there is no

evidence in the record that the agency regarded these proposals as

unrealistic.

AR 7194. Further, the two bidders with lower bids than CSS, Lincare and First

Community, each received a “Yellow” rating on the Technical factor, meaning that their

proposals were technically acceptable. Id. at 4267. Therefore, the court finds that it was

reasonable for the agency to use those bids as data points when considering the realism of

CSS’s bid.

Rotech further argues that the agency failed to document its price realism analysis,

and, relying on Cohen Fin. Servs., Inc. v. United States, 110 Fed. Cl. 267 (2013), asserts

that this is sufficient to set aside the award. In Cohen, the agency stated that a price

realism analysis was performed but gave no indication how the analysis was done. Id. at

286-87. The court found that “[w]ithout a description of the facts analyzed, and the

reasoning that connects the facts with the conclusions, the court is not in a position to

determine whether an agency exercised its discretion in a non-arbitrary manner. Id. at

287. However, this case differs from Cohen in several important respects. Unlike the

agency in Cohen, Ms. Baines explained the methodology behind her conclusion, and the

record supports her assertion that she compared Rotech and CSS’s proposals CLIN-by-

CLIN to determine if anything was unbalanced. See AR 4298-99 (spreadsheet

(2013) (finding that a price was realistic despite the bid being 40% lower than the incumbent’s

bid and 60% lower than the IGCE).

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documenting side-by-side comparisons of the two proposals). Further, the solicitation in

Cohen specifically requested more information regarding pricing than the RFP in this

case, stating that “Labor rates that do not reflect a reasonable compensation for the skill

required in a labor category will be considered unrealistic.” Cohen, 110 Fed. Cl. at 271.

Therefore, the court rejected the agency’s attempt to conduct the realism analysis in its

briefs by comparing the bid to outside data on labor rates when the record did not reflect

that the agency had already done so in the bidding process. Id. at 287. In this case, the

information that the agency relied on for its realism analysis is documented in the record.

Finally, Rotech argues that the fact that CSS agreed to open three additional

facilities in Maine without raising its price shows that CSS’s price was unrealistic. The

court does not find this argument persuasive. As an initial matter, Rotech’s argument is a

bit perplexing in light of the fact that, during the evaluation process, Rotech lowered its

proposed total price by approximately $10 million without any corresponding cut in

services. At oral argument, Rotech explained that the drop in price represented an

reduction in overhead and profit, but could not give any reason why CSS would not be

entitled to make similar types of cuts other than the fact that Rotech was the incumbent

and therefore knew the costs better. Rotech also attempted to argue that cutting prices

while keeping services the same was not equivalent to adding services while keeping the

price the same. This is a distinction without a difference. Rotech has not given any

reason why the agency’s decision to accept CSS’s proposal including the increased

services was irrational.

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In sum, after considering all of Rotech’s arguments regarding price realism, the

court finds that, based on the record, Rotech’s argument that the VA’s decision lacked a

rational basis or was contrary to the solicitation fails. In light of the fact that “this

procurement involves a fixed price contract” and CSS is experienced in this field, along

with the “discretion afforded to an agency’s price realism analysis,” the court finds that

none of the alleged errors in the price realism analysis “warrant disrupting the [contract]

award.” Mil-Mar, 111 Fed. Cl. at 552 (quoting Ceres Envtl. Servs., Inc. v. United States,

97 Fed.Cl. 277, 307-08 (2011)).

D. Rotech’s Motion to Supplement the Administrative Record is Denied

In addition to moving for judgment on the administrative record, Rotech has also

moved to supplement the administrative record in this case to include two declarations

which Rotech argues supports its argument that Rotech was prejudiced by the VA’s

failure to evaluate CSS’s ability to complete the transition within forty-five days. See

Pl.’s Mot. to Supp. AR. Rotech offers declarations from two of its employees, Tamara

Tait, Vice President for Reimbursement Services, and Dania Vega, Quality Improvement

Manager, concerning statements that the contracting officer for the solicitation, Lorrie A.

Baines, made at Rotech’s post-award debriefing. According to the declarations, Ms.

Baines told Rotech’s employees that CSS did not have any locations in VISN 1, and that

she expected the transition to take upwards of 90 days. Ms. Baines further allegedly

stated that the VS would extend Rotech’s contract until the transition was completed.

Rotech argues that these statements reflect the agency’s evaluation of CSS’s

proposal and “should properly be considered part of the AR to the extent that the VA

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failed to document its determination.” Mot. to Supp. AR 2. The government and CSS

counter that these declarations should not be a part of the administrative record because

even if the statements described in the declarations are true, they do not assist the court in

answering the question of whether the VA’s decision to award the contract to CSS was

reasonable and lawful. Therefore, defendants argue the that declarations do not meet the

standard for supplementing the administrative record.

The court agrees with the government. “The focus of judicial review of agency

action remains the administrative record, which should be supplemented only if the

existing record is insufficient to permit meaningful review consistent with the APA.”

Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009). This

court’s review is limited to the record before the agency in order to “guard against courts

using new evidence to ‘convert the “arbitrary and capricious” standard into effectively de

novo review.’” Id. at 1380 (quoting Murakami v. United States, 46 Fed. Cl. 731, 735

(2000). Therefore, “[t]he ability to supplement the administrative record before the

Claims Court is a limited one.” Res-Care, Inc. v. United States, 735 F.3d 1384, 1391

(Fed. Cir. 2013) (citing Axiom, 564 F.3d at 1378). Supplementation is permitted “only

if the existing record is insufficient to permit meaningful review consistent with the

APA.” Axiom, 564 F.3d at 1381.

To determine whether the existing record is sufficient, the court must consider

whether consideration of the proposed supplement is “necessary in order not ‘to frustrate

effective judicial review.’” Id. (citing Camp v. Pitts, 411 U.S. 138, 142-43 (1973)).

Supplementation is unnecessary when the documents a litigant seeks to add to the record

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do not shed light on an issue that the court must consider in order to decide the case. See

Allphin v. United States, 758 F.3d 1336, 1344 (Fed. Cir. 2014) (finding that because a

proposed supplement was only relevant to a nonjusticiable claim, the documents could

not be added to the administrative record). Because the court has already found that the

solicitation did not require the VA to specifically find that CSS could complete the

transition within forty-five days, the declarations are not useful to further support

Rotech’s argument that the VA failed to make such a determination. Rotech itself argues

that it is merely attempting to complete the record, and “rather than attempt[ing] to add

anything new,” the declarations are “documenting the VA’s own conclusions.” Pl.’s

Mot. to Supp. 9. Therefore, it can hardly be said that that supplementing the record is

“necessary in order not to frustrate effective judicial review.” Axiom, 564 F.3d at 1381.

Rotech argues that that supplementation is permitted when “the record raises

serious questions concerning the rationality of the award decision” or if the information is

“probative of potential agency bias or bad faith.” Mot. to Supp. AR 7 (quoting Arkray

USA, Inc. v. United States, 2014 U.S. Claims LEXIS 571, *14 (Fed. Cl. June 26, 2014)

(additional citations omitted)). But, as discussed above, the record is sufficient to show

that the VA conducted an evaluation of CSS’s transition plan in conformity with the

solicitation, and that the agency’s decision to give CSS a “Blue” rating on the Technical

factor was reasonable. Nor do the declarations give any indication that the agency acted

in bad faith. Therefore, plaintiff’s motion to supplement the is DENIED.

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IV. CONCLUSION

For the reasons stated above, Plaintiff’s Motion for Judgment on the

Administrative Record is DENIED. Plaintiff’s Motion to Supplement the Administrative

Record is DENIED. The Government’s Motion for Judgment on the Administrative

Record is GRANTED. Defendant-Intervener CSS’s Motion for Judgment on the

Administrative Record is GRANTED. The clerk is instructed to enter judgment

accordingly. No costs.

The parties shall have until Wednesday, May 27, 2015 to submit their requests

for the redaction of protected/privileged material before the court issues its published

opinion. The parties shall submit the proposed redactions to the court via e-mail at the

following address: firestone_chambers@ao.uscourts.gov.

IT IS SO ORDERED.

s/Nancy B. Firestone

NANCY B. FIRESTONE

Judge

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