Velocity Training, LLC v. United States

In the United States Court of Federal Claims

No. 18-1125C

(Filed under seal July 31, 2022)

(Reissued August 9, 2022)†

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VELOCITY TRAINING, LLC, *

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Plaintiff, *

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v. *

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THE UNITED STATES, *

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Defendant, *

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and *

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AIR CENTER HELICOPTERS, *

INC., *

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Defendant–Intervenor. *

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Ira E. Hoffman, Butzel Long, of Washington, D.C., for plaintiff.

Richard P. Schroeder, Trial Attorney, Commercial Litigation Branch, Civil

Division, Department of Justice, of Washington, D.C., for defendant.

Sharon L. Larkin, The Larkin Law Group, LLP, of Washington, D.C., for

defendant-intervenor Air Center Helicopters, Inc.

ORDER

WOLSKI, Senior Judge.

† This order was initially filed under seal so that the parties could request

redactions. None having done so, the order is now reissued for publication with

some minor, non-substantive corrections.

The question posed by this post-award bid protest is whether an offeror had

standing to challenge procurement decisions, when a subcontractor it proposed to

perform an important portion of the solicited work had withdrawn from

participation in its proposal following the deadline for submitting final proposal

revisions. Under the peculiar circumstances of this case, the Court concludes the

answer is no, and thus the government’s motion to dismiss the case for lack of

subject-matter jurisdiction under Rule 12(b)(1) of the Rules of the United States

Court of Federal Claims (RCFC), ECF No. 23, is GRANTED.

Plaintiff Velocity Training, LLC (Velocity) was the initial awardee of a

General Services Administration (GSA) small business set-aside contract to provide

the U.S. Air Force with rotary-wing aircraft support for training purposes. Compl.

¶¶ 8–11, 29; see Ex. I to Compl. at 3. Defendant-Intervenor Air Center Helicopters,

Inc. (Air Center) filed a protest of the award with the Government Accountability

Office (GAO) and submitted a size protest to the Contracting Officer, which was

submitted to the relevant Area Office of the U.S. Small Business Administration

(SBA). Compl. ¶30; see Ex. C to Compl. at 4, ECF No. 1-2 at 15. The following

business day, performance of the Velocity contract was suspended by GSA,

presumably due to 31 U.S.C. § 3553(d)(3)(A)(ii), the Competition in Contracting Act

(CICA) stay. See Compl. ¶¶ 2(d), 31. The next day, GSA informed the GAO that it

had decided to take corrective action, to reevaluate Velocity’s proposal and

potentially make a new award. Id. ¶¶ 2(e), 31; Ex. O to Compl. at 1. As a

consequence, the GAO protest was dismissed as academic. Id. ¶¶ 2(f), 32.

As part of the corrective action, GSA reopened discussions with offerors,

requesting responses to discussion points that would constitute final proposal

revisions. Compl. ¶¶ 33–34; see Ex. P to Compl. at 1–3. Velocity was asked to

update a chart displaying the relative contributions of its teaming partners to

depict the dollar values of the contributions and to incorporate the activities of a

large business, AAR Airlift Group, Inc. (AAR). Ex. P to Compl. at 1–2. This large

business had been added to the Velocity proposal during previous discussions, see

Exs. M & N to Compl., in response to GSA’s assessment of a deficiency due to the

lack of Commercial Airlift Review Board (CARB) certification documentation, Ex. A

to Compl. at 1–2; Compl. ¶¶ 27–28. This certification was at that time possessed by

AAR. See Ex. N to Compl. at 1–2, 8–10. In addition to updating the chart, in the

second round of discussions Velocity was also asked if any other members of its

team possessed the relevant CARB certification; was informed of a significant

weakness in its past experience; was asked if any of its team had been registered

and performed services under a particular North American Industry Classification

System (NAICS) code; and was offered the chance to revise its price proposal. Ex. P

at 2–3.

Due to a miscommunication within the business, Velocity failed to timely

submit its final proposal revision, and the document was not considered by GSA.

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Compl. ¶ 36 & n.4; Ex. 1 to Pl.’s Resp., ECF No. 35-1 at 6; Ex. 5 to id., ECF No. 35-5

at 2. That document did confirm, however, that only AAR among the proposal’s

team members had the relevant CARB certification. Ex. Q to Compl. at 2.1 Within

a month after it missed the final proposal revision deadline, Velocity was notified by

the SBA Area Office that Air Center had protested plaintiff ’s status as a small

business under the “Ostensible Subcontractor rule,” 13 C.F.R. § 121.103(h)(4)

(2018), due to the large business AAR allegedly having been proposed to perform

“the primary and vital requirements of the contract.” Ex. R to Compl. at 1; Compl.

¶ 36.

The following month, in an email response to a request for additional

information that Velocity sent to the SBA (and copied GSA), Velocity asked that the

size protest be dismissed as moot because “AAR rescinded its offer to subcontract

with” Velocity. Ex. B to Compl. at 1–2. As a replacement for AAR, Velocity

apparently recruited a small business, Hillsboro Aviation, Inc. (Hillsboro), which

possessed the applicable CARB certification. Id. Velocity posited that “if GSA were

to either reinstate the award to [Velocity] or invite revised proposals, then [Velocity]

would substitute Hillsboro for AAR, and the issue of any potential ‘ostensible

subcontractor’ would be moot.” Id. at 2. Instead of dismissing the size protest, the

Area Office found that Velocity was not a small business under the awarded

contract due to its reliance on AAR for the CARB certification, triggering the

Ostensible Subcontractor rule. Ex. C to Compl. at 6–10; Compl. ¶ 38. Three days

later, GSA issued a termination for convenience notice for the Velocity contract,

with no reason given other than the termination was “in the Government’s best

interest.” Compl. ¶ 40; Ex. D to id.

Velocity timely appealed the size determination to the SBA’s Office of

Hearing and Appeals (OHA), Ex. E to Compl. at 1–12, arguing that the Area Office

erred in its understanding of the certification requirements, id., and noting in

passing that it contended before the Area Office that the matter was moot following

the withdrawal of AAR from the proposal, id. at 7. Eight weeks later, OHA issued

an order dismissing Velocity’s appeal, on the ground that the cancellation of

Velocity’s award meant its “proposal is no longer an issue and no live case or

controversy exists,” because the “ostensible subcontractor rule is a contract-specific

issue.” Ex. F to Compl. at 2. Somewhat confusingly, the order seemed to use the

term “procurement” as a synonym for “contract,” as it explained that the type of size

1 When considering an RCFC 12(b) motion to dismiss a case, the Court must

assume all factual allegations are true and construe them reasonably in the

plaintiff ’s favor, Henke v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995), unless

they are disputed jurisdictional facts---as the plaintiff bears the burden of

establishing subject-matter jurisdiction by a preponderance of the evidence, see

Thomson v. Gaskill, 315 U.S. 442, 446 (1942); Reynolds v. Army & Air Force Exch.

Serv., 846 F.2d 746, 748 (Fed. Cir. 1988).

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determination in question “is rendered moot by cancellation or termination of the

underlying procurement,” and that Velocity’s “proposal became irrelevant” once “the

[Contracting Officer] terminated for convenience the instant procurement.” Id. at

2–3; Compl. ¶ 42. Velocity took this to mean the solicitation was cancelled,

emailing the GSA contracting officer (CO) the next day to inform the agency

plaintiff was “ready, willing and able to perform the requirements for the Rotary

Wing contract,” and asking to be included in communications with prospective

offerors. Ex. G to Compl.; see Compl. ¶ 43. But the context---including the

references to the proposal, the award, and termination for convenience---as well as

the reliance upon an earlier order in which it was clear that the appeal was found

moot due to the cancellation of a contract although the agency had neither cancelled

nor revised the solicitation, see HRCI-MPSC PASS, LLC, SBA No. SIZ-5500, 2013

WL 6389271, at *1–2 (Sept. 18, 2013), indicate that OHA did not mistakenly believe

the solicitation was cancelled.

In any event, the CO responded a few days later, informing Velocity that the

“solicitation and procurement were never cancelled” and that an award would be

based on timely final proposal revisions and the SBA size determination. Ex. G to

Compl. She also revealed that the termination of Velocity’s award was based on the

SBA’s size determination. Id.; Compl. ¶ 44. A few weeks later, Velocity received

the post award notice informing it that Air Center had been awarded the contract,

and explaining that the SBA size determination concerning the Velocity proposal

(which was not timely revised during the second round of discussions) rendered

plaintiff “not eligible for award consideration.” Ex. H to Compl. After Velocity

requested a debriefing, Compl. ¶ 45, GSA supplied debriefing points, which included

the statement that OHA’s dismissal of Velocity’s SBA appeal kept the Area Office

size determination in effect, precluding consideration of plaintiff for the award. Ex.

S to Compl. at 2. In a follow-up question, Velocity asked why its email notice that it

recruited a small business to replace AAR was not considered “a late modification of

an otherwise successful offer” under 48 C.F.R. § 52.212-1(f)(2)(ii), and was told that

it was not otherwise successful due to the SBA size determination. Ex. T to Compl.

at 2.

A little more than a month later, Velocity filed its post-award bid protest,

challenging as arbitrary the SBA OHA dismissal of its appeal, the GSA cancellation

of its contract, the SBA Area Office’s size determination, and the resulting award to

Air Center. Compl. ¶¶ 56–58, 63–65. Velocity traces its problems back to what it

terms were “misleading” initial discussions, as under its interpretation the

solicitation did not require CARB certification to be included with proposals, and

GSA’s interpretation to the contrary induced it to add AAR as a team member

because the large business had the relevant certification. Compl. ¶¶ 20, 27–28, 55–

56, 61–62. Regardless of the appropriateness of the “misleading” label placed on

these discussions, Velocity’s allegation boils down to the claim that it was put on

notice that GSA misinterpreted the solicitation to its competitive disadvantage---but

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rather than formally protest this decision with the agency, it revised its proposal to

accommodate the misinterpretation. Such acquiescence does not ripen a challenge,

but instead waives it under Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308,

1313–15 (Fed. Cir. 2007). The Court holds that this waiver rule, designed by the

Federal Circuit to require that challenges to patent errors in solicitation terms be

preserved by the lodging of a formal objection prior to the proposal deadline, see

Harmonia Holdings Grp., LLC v. United States, 20 F.4th 759, 766–67 (Fed. Cir.

2021), applies in these circumstances. When an offeror is informed during

discussions that it was assessed a deficiency based on what it believes is a

misinterpretation of solicitation terms, this patent disagreement requires the

offeror to raise its objection in the form of a formal protest with the agency or this

court before the submission of its final proposal revision. See QTC Med. Servs., Inc.

v. United States, 132 Fed. Cl. 610, 622 (2017) (applying Blue & Gold waive rule to

challenge to discussions). When presented with such an alleged error, an offeror

cannot “wait and see whether it would receive an award of the contract,” COMINT

Sys. Corp. v. United States, 700 F.3d 1377, 1383 (Fed. Cir. 2012), but must act to

preserve its objections in a timely manner.2

Similarly, to the extent the corrective action taken by GSA contributed to

Velocity’s loss of the contract award, by requiring proposal revisions and a new

award, any challenge to that aspect of the process was waived when Velocity failed

to protest prior to the proposal revision deadline. It is well-established that a

challenge to a procurement decision ripens when the decision forces an awardee or

proposed awardee to compete a second time for the award. See Sys. Appl. & Techs.,

Inc. v. United States, 691 F.3d 1374, 1382–85 (Fed. Cir. 2012). But if an offeror fails

to challenge such a decision prior to the deadline for submitting proposals in the

ensuing stage of the procurement, this protest ground is waived. See NVE, Inc. v.

United States, 121 Fed. Cl. 169, 173, 179 (2015).3

2 The Court notes that the Federal Circuit has not confined the Blue & Gold waiver

rule to protests of patent errors regarding solicitation terms, but has applied the

rule in a broader context. See Inserso Corp. v. United States, 961 F.3d 1343, 1350–

51 (Fed. Cir. 2020) (applying Blue & Gold to the protest of the disclosure of

information in a debriefing process for a related procurement under the same

solicitation which the offeror “should have known . . . was likely” to have occurred

before the submission of final proposals and the award decision).

3 The undersigned has applied the Blue & Gold waiver rule in analogous

circumstances. See, e.g., Land Shark Shredding, LLC v. United States, No. 18-

482C, 2018 WL 2306869, at *1 (Fed. Cl. May 21, 2018) (finding challenge to

cancellation of earlier solicitation waived by participation in subsequent

procurement); Cargo Transp. Sys. Co. v. United States, No. 16-1481C, 2017 WL

1406862, at *1 (Fed. Cl. Apr. 20, 2017) (finding challenge to negative responsibility

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Velocity’s challenge is thus limited to the interplay of three procurement

decisions: the SBA Area Office size determination, Ex. C to Compl.; the GSA

termination of its contract due to this determination, Exs. D & G to id.; and the

SBA OHA dismissal of its appeal due to the contract termination, Ex. F to id.; see

Compl. ¶¶ 56– 57, 63–64. Normally, these types of decisions could be the basis for

a protest in our court. See, e.g., Tinton Falls Lodging Realty, LLC v. United States,

800 F.3d 1353, 1357–60 (Fed. Cir. 2015). Indeed, although the merits have not been

explored due to the procedural posture of the case, it seems odd that OHA would

dismiss the appeal of a size determination as moot merely because the procuring

agency acted on the determination and cancelled the contract.4 But a protester

must establish that it has standing to challenge procurement decisions, and the

government and Air Center have called Velocity’s standing into question. See Def.’s

Mot. to Dismiss, ECF No. 23 at 6–28; Def.-Int.’s Br. in Supp. of Def.’s Mot., ECF No.

24 at 1–6.

Our bid protest jurisdiction is limited to protests brought “by an interested

party,” 28 U.S.C. § 1491(b)(1), a term which the Federal Circuit has interpreted by

borrowing the CICA definition to mean “actual or prospective bidders or offerors

whose direct economic interest would be affected by the award of the contract or by

failure to award the contract.” Am. Fed’n of Gov’t Employees v. United States, 258

F.3d 1294, 1302 (Fed. Cir. 2001); see 31 U.S.C. § 3551(2)(A). To have standing to

pursue a post-award bid protest, an offeror must “show there was a ‘substantial

chance’ it would have received the contract award but for the alleged error in the

procurement process.” Info. Tech. & Appls. Corp. v. United States, 316 F.3d 1312,

1319 (Fed. Cir. 2003) (citation omitted). As this is not a protest which challenges

the eligibility of the other offerors to receive the award, see Tinton Falls, 800 F.3d at

1359–60, to have had a “substantial chance” at an award, Velocity must show that

its proposal could have been the basis for an award, see, e.g., United States v. IBM

Corp., 892 F.2d 1006, 1012 (Fed. Cir. 1989) (holding that “interested party”

standing requires a responsive bid); Bannum, Inc. v. United States, 115 Fed. Cl.

148, 155 (2014) (same).

But the reason Velocity gave to the Area Office in arguing that the size

protest was moot---that its proposal was no longer operative due to the withdrawal

of AAR, see Ex. B to Compl. at 1–2---also demonstrates that plaintiff no longer had a

determination waived because this decision prevented award to the protester, which

knew of its baseless nature prior to submitting a revised proposal).

4 The Court presumes that this was due to OHA not being privy to the reason for

the termination, which was not explained in the notice. See Ex. D to Compl. The

SBA might consider altering its practice and obtaining the reason for such

terminations before finding appeals moot, so that OHA (and not our court) can be

the initial appellate forum for such determinations.

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proposal that was responsive to the solicitation. It cannot be disputed that AAR

was the only team member in Velocity’s proposal that possessed the CARB

certification. See Ex. Q to id. at 2. And, as we have seen, Velocity has waived its

ability to challenge GSA’s interpretation of the solicitation to require proposals to

contain this certification, under the Blue & Gold doctrine. Simply put, Velocity’s

proposal minus AAR’s participation cannot meet the solicitation requirements.5

Velocity suggests that it has standing to challenge GSA’s failure to allow it to

submit, after the deadline, a revised proposal substituting Hillsboro as a

subcontractor in place of AAR. See Pl.’s Suppl. Br., ECF No. 47 at 10; Pl.’s Reply to

Defs.’ Suppl. Brs., ECF No. 49 at 13. Perhaps, had Velocity made a formal request

for leave to submit such a revised proposal, GSA’s denial of it could be a “decision,”

28 U.S.C. § 1491(b)(4), reviewable for rationality in a bid protest. But far from

making a request to reopen discussions, plaintiff rather passively told the SBA, in a

communication copied to GSA, that “if GSA were to . . . invite revised proposals,

then [it] would substitute Hillsboro for AAR.” Ex. B to Compl. at 2. As plaintiff has

failed to identify any law or regulation requiring an agency to make such an

invitation, and did not itself make a request for leave to submit a revised proposal,

there is no “decision” denying it this opportunity that can be reviewed by our court.6

Thus, even if Velocity is correct that the SBA decisions, and GSA’s

cancellation of its contract, were improper, it cannot challenge these in our court---

as without the participation of AAR, its proposal fails to meet the solicitation

requirements. With no substantial chance of an award, Velocity fails to establish

“interested party” standing. For the reasons stated above, defendant’s motion to

dismiss Velocity’s complaint under RCFC 12(b)(1) for lack of subject matter

jurisdiction is hereby GRANTED. The Clerk shall close the case.

IT IS SO ORDERED.

s/ Victor J. Wolski

VICTOR J. WOLSKI

Senior Judge

5 Moreover, it appears that the reason AAR withdrew is because it no longer had

the requisite certification due to recent Federal Aviation Administration

reclassifications. See Ex. B to Compl. at 1; Tr., ECF No. 44 at 93–94.

6 For this same reason, any claim regarding the non-existent revised proposal

concerning Hillsboro would also be dismissed under the alternative ground of RCFC

12(b)(6), for failure to state a claim upon which relief can be granted.

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