Oral argument — Harmonia Holdings Group, LLC v. United States

The United States Court of Appeals for the Federal Circuit is now open in the session. God save the United States in this honorable court Good morning, ladies and gentlemen, we have three cases on the calendar this morning Only one of which is being argued and that is Harmonia Holdings Group versus the United States 2020 1703 Mr. English, please proceed Good morning, and may it please the court This court should reverse the claims court's judgment for three reasons first and primarily The claims court had Tucker Act jurisdiction over count two of Harmonia's amended and restated complaint Which alleged that the face of a lethics as proposal gave the contracting officer reason to question its size representation The claims court aired when it decided to dismiss that count for lack of jurisdiction Second assuming the court decides to reach the underlying evaluation issues the claims court aired when it held That the government reasonably evaluated Harmonia's proposal under factor one Despite the conflicting strengths and weaknesses of find the same proposal factor same proposal elements under the same evaluation factors You're you're putting off. This is judge Laurie. You're putting off on The contracting officer responsibility which belonged to your to your own client Well, well your honor, I think that in some respects as it relates to the fair reading of the proposal I think that is an obligation that the contracting officer had to give a fair read the proposal and as we relate as it relates to the ETL tool and the Peer peer reviews our proposal made clear that we were not proposing to pre-review another developers code and that the ETL tool that was Proposed was an example the specific name that was mentioned, which I think is under the protective order was an example That was mentioned as one that the Harmonia had used successfully for another agency It was not wedded to that particular tool and the contracting officer decided that or the evaluation team did that? The particular tool could potentially be incompatible and Harmonia wouldn't use another tool if that was the case And we don't think that's a fair read. But the point is the point is questioning whether Alatrix was benefited by having a non small business Being associated with it. It was a size question Well, your honor what we've we stated in our in our complaint was we believe a bid protest we alleged that there was a violation of law in connection with a Procurement and that violation of law was the contracting officers failure to recognize the obvious or we think apparent ostensible subcontractor issue on the face of a left X's proposal and under 19301-1 B as it existed at the time that gave the contracting officer an obligation To refer the matter to the SBA for a size determination not to make one not to make a size determination But to recognize there's a potential issue here and to bring that matter to the SBA for resolution Even if we were to agree to you that that you know once more the Court of Claims used Jurisdiction as a shortcut And that they should have looked at something else Don't you have a real problem with whether or not you have stated a claim where the regulation is is not for the benefit of The contractor it's for the benefit of the government Well, your honor our view is that the the regulation gives the the contracting officer an obligation And in this instance it would be for the benefit of the contractor because if it is a small business procurement and this was And we were a small business, but the awardee is not Then the benefit would be you know both to the government in terms of Honoring the set-aside and meeting the mandates But also for the other contractors who wouldn't be in a position with competing with the largest integrators in the world For a contract that's supposed to be set aside for a woman on a small business I can understand why you think the first clause in the regulation is for the contractor where the contractor has the right to make a size challenge, but the second clause which gives the government the discretion to do it to a sponte would seem to be Something that benefits the government and and not intended to directly benefit the contractor But your our view is if we're going to have set-aside procurements and the eligibility rules are what governs and and here that would have Been the case then the second clause of the regulation would have to benefit the competing eligible small businesses Because otherwise you're competing potentially with large business contractors And if it's not read as a whole So that the contracting officer has an obligation if there's reason to question the representation and make the referral Then you have a situation where The largest businesses in the world can compete for small business contracts, and there's nothing that the eligible small businesses can do Or have to say about it, and that's the situation we put but shouldn't the obligation be on on the purported small business Because it's it's neck is in the news so to speak it loses a contract as as it did here as it did here Because it was purportedly competing Had to compete unfairly with a large company Which is what you're saying so isn't isn't the obligation on on harmonia? to have raised the issue Well your honor. We believe we did raise. I'm sorry Go ahead I believe we did raise the issue in the only way that was allowable by law our deadline to file a timely size protest Which is how you would normally raise this issue expired five years before the procurement? When all ethics was awarded the schedule contract under which this task order was competed and so any size protest we filed Would have been dismissed by the field office as a matter of law it would have been that dismissal would have been affirmed by the Office of hearings and appeals as a matter of law and that certainly would have allowed us to go to the court of claims But the court of claims standard of review would have been just to determine whether the SBA Acted reasonably when it dismissed an untimely size protest it could not have gotten to the merits of this issue Under the government argues the government argues that you could have raised it with the government Who then would have the ability under the second clause of the regulation to? Make the referral even if yours would have been untimely And we think we did your honor we did not write a separate letter as a size protest to the contracting officer but the contracting officer Propitiated excuse me in this process from the very beginning of the case at the court of claims It was in the initial status conference and when we raised this ground the SBA was admitted to those proceedings as well And admitted the protective order so they participated at every phase they had the briefs They attended oral argument And if that information was going to spur an action by either of the contracting officer or the SBA We feel like we've put the information in front of them and allowed them to take that action It's sending a separate letter to the contracting officer with the same information in it and expecting a different result We think the government's position on that is speculative because they did nothing in the face of all this information In the record that they had access to And that in our judgment really is as it relates to the exhaustion element that the court of claims focused on Is the biggest problem we don't feel like there was a remedy that was available to us to exhaust It would have been a futile act to file a size Protest and go all the way up the chain just to get an affirmance of a dismissal as untimely everybody agrees that it's untimely And it would have been but it was your argument that this is not a size protest or that it is but but that Exhaustion should be forgiven Our argument your honor is that it is not a size protest We asked the court of claims to evaluate whether the contracting officer acted reasonably in in light of the face of a lethics as proposal and Did he act reasonably by failing to refer the matter to the SBA for its termination? There was no time where we asked the court of claims or this court to look at a size determination or to make a size Determination just to determine whether under these circumstances It was reasonable for the contracting officer to fail to refer the matter to the SBA And in our mind the difference that in between that and a size protest is pretty fundamental because we weren't asking for its termination It is true that that referral would have resulted in a determination But there was never a time when the claims court had to review or make one and I think that's an important distinction between the two different processes a bid protest And a size protest all we wanted the court of claims court to do was evaluate the reasonableness and lawfulness of the government's action And that's something it does on a daily basis and and it should have done it here We look at the GAO whose jurisdiction under competition and contracting act is more limited than Tucker And they have absolutely no question that they have jurisdiction to deal with this specific issue That is when a protester alleges that the face of the awardees proposal should have given the contracting officer reason to question a size Representation that's all we asked for here and the claims court didn't reach that ground It said there there was no jurisdiction to reach that issue because we didn't exhaust administrative remedies But even judge O'Malley even if it was a size protest and we did we did not agree that it was We think that any exhaustion requirement should have been excused because there was no remedy available to us the only thing we could have done is filed an untimely size protest and work through the layers of Dismissal to get to the court of claims and it could not have reached the merits either There was no way for us to bring a size protest At the time we found out about this issue And if the if the size protest Avenue was available to us if it worked the way the government claims it did then there's really no timeliness issue at all because if the court of claims Could review the Office of Hearings and Appeals decision de novo at any time Then any time untimely size protests can be revived just by working through the SBA process whenever the issue arises that would completely circumvent SBA's timeliness rules and and I think that's how would that affect at all if at all The contracting officers best value determination when the best value determination didn't include size status as a factor Well our point as it relates to the best value determination is that there were two issues one the contracting officer and the SSA and this SSA's job is to take a final look at the Procurement and determine if there are any errors and address them and we think that is a stage at which this obvious issue on the Face of a leftovers proposal should have been recognized. But secondly and some of this is under the protective order The we believe that even as evaluated because the decision came down to factor one. We believe we were the awardee That was the best value given the constraints of the solicitation that the government was not going to make An award to a higher priced offeror for only slightly technical advantages, I Think I'm into my rebuttal time your honor. So if there are no more questions Yield back or I'll stop at this point Thank You. Mr. English. We will save your rebuttal time. Mr. Bird for the government Yes, good morning, your honor may it please the court in this case Harmonia primarily seeks to overturn the trial court's sound conclusion that it did lack jurisdiction over harmonia's Size protest which was in the claims court was masquerading as a bid protest When harmonia had not first exhausted SBA's procedures for size protests Harmonia's complaint here is a result of it sitting on its own right Had harmonia filed a size protest with the contracting officer As is prescribed by the SBA's regulations and the federal acquisition regulation It could have gotten the remedy that harmonia wanted in the trial court, which was a review of the awardee of a fixes size Therefore the trial court's dismissal of harmonia's size challenge should be affirmed by this court Secondarily the trial court's denial of harmonia. What is what is your point? I mean, well, how do you respond to the fact that they couldn't have filed a size protest Well, your honor harmonia harmonia could have actually filed a size protest as prescribed by the SBA's regulations Which require a size protest in the first instance to be filed with the contracting officer It is not the contracting officer who has a regulation that requires dismissal of an untimely size protest But rather the SBA has a regulation that requires them to dismiss an untimely size protest and the parties in this case Agree that a protest at the point harmonia made the challenge to the awardee size would have been untimely however filing a size protest with the contracting officer would have put the contracting officer on notice of harmonia's allegations regarding the ostensible subcontractor arrangement that harmonia was alleged to have with a subcontractor and the contractor credible and Attempted to remedy the situation and and that remedy as we detail in our brief could have resulted in a recertification request that would have Would not necessarily have been futile Correct your honor the the act of harmonia filing a size protest as prescribed by SBA's regulation In the first instance with the contracting officer would not have been a futile act as the trial court recognized the futility exception to exhaustion of administrative remedies is one that this court has applied narrowly and Generally in circumstances where it would have been obviously useless for the parties to go through the administrative remedy process in this Most of the arguments in your Red Brief are merits arguments I mean it seems to me that that the court might have jumped the gun by calling this a jurisdictional question when all that you need for a bid protest is a non-frivolous allegation of a violation of a regulation and Their allegation is not that Regulations regarding size determinations the government had an obligation To request a size determination Whether that's true or not is a question that goes to the merits So why is this a jurisdictional question as opposed to something that relates to failure to state a claim or standing? You honored the trial courts opinion doesn't Detail the the reason why it dismissed for lack of jurisdiction in the case it notes Supreme Court precedent around a the trial court generally lacking power to hear a case When the administrative process has not run its course as promulgated by statute or regulation however, in this case even if the trial court had exercised jurisdiction over harmonious size protest and Allowed harmonia to basically commandeer the contracting officer as an involuntary proxy for its untimely size challenge Harmonious challenge to elitism size still would have failed There's no regulation as our as our brief details That required the contracting officer to presume the falsity of the awardee size certification in this federal supply schedule task order procurement in Accordance with the far provision that harmonious seeks to have the allegations adjudicated under for 19.301 dash 1b at the time the contracting officer was required to accept a leaf fixes representation regarding its status unless These are all questions so that the that the court of federal claims never got to In other words correct you be asking us to decide those questions in the first instance And your honor, this is a question of law as far as the interpretation of the regulation that harmonia seeks to Indicate that the contracting officer somehow was obligated under to refer a leaf fix to the SBA And we do detail in our brief why the interpretation that harmonious seems to go forth However does not actually explain to this court. How the regulation warrants the result that they say it does that that has been briefed before the court and in In summary that that regulation Is that page 19 note 3 of our brief, and I'm happy to discuss Why the interpretation harmonia put forth does not actually comport with the language in the regulation? Harmonia appears to suggest that the word shall in the first sentence of the regulation should be disregarded because the CEO does not have A duty to accept a size representation, but that's simply incorrect The regulation in that first sentence provides that the contracting officer shall accept a representation But for then provides two instances in which the contracting officer need not do so Those exceptions provide the contracting officer discretion not to accept the representation which he otherwise must do The shall and the last sentence of the regulation simply means that any challenge of and questions concerning a representation Must go to the SBA So you're laughing in preference. We can make essentially a harmless error determination if we think there was jurisdiction And we can do that in the first instance because it's really just a straight-up Interpretation of the regulation That's correct your honor the the regulation as a matter of its plain meaning does not Warrant the result that harmonia says it does which is that the contracting officer somehow? was obligated to have Referred the awardee a lead fix to the SBA Based on any allegations that harmonia made before the trial court At Base harmonia's argument before this court as it was before the trial court Recognized that harmonia lacks standing to challenge a lead to size before the SBA As we argue in our brief established in our brief harmonia cannot overcome that lack of standing by filing a size protest in Masquerading as a bid process in the trial court Which then seeks to have the contracting officer use his discretionary standing to file a size protest? Permitting such a result by harmonia as the trial court recognized would significantly undermine compliance with SBA Regulations by allowing a plaintiff to circumvent the established time frame for filing a timely size protest You want to make any comments on the merits Yes, you're right if even if the the trial court had exercised jurisdiction over harmonia size protest as we did detail in our brief Harmonia's allegation that a lead fixes proposal somehow revealed an undue reliance between a lead fix and it's other than small Subcontractor the name of that company is under the protective order in this case is simply based on speculation and a misunderstanding of a lead Proposal and we detail that in our brief on pages 32 through 39 Additionally and for those reasons we do request that the trial court card that this court affirmed the trial court's dismissal of count two of harmonia's amended complaint Regarding the denial of harmonia's motion for judgment The the administrative record in the case demonstrates the trial court correctly denied harmonia's motion Although harmonia continues to disagree before this court with two risks that the technical of panel assigned to harmonia's technical proposal Harmonia still provides no reason to overturn the trial court's conclusion that assignment of those risks was not irrational instead as the trial court appropriately recognized there's a lot of discretion when making technical evaluations and As it was amply supported by the record There was some discussion about risks associated with cross-training and peer testing Even though the technical evaluation panel determined that there was some benefit to that. There was also a caution in that benefit Even though harmonia appears to point to the contracting officer not giving a fair read to their proposal The there was no error by the technical evaluation panel in assigning both a strength and a risk For the same proposal aspect that the agency reasonably believed could present both benefits and risks for example with the cross-training the there could be benefits by For by eliminating single points of failure, but there also could be delays through the action of having to cross-train people Regarding the strain the extract transform and load tool that harmonia References in their briefing before this court the challenge there is similar Even though Harmonia contends that the agency should have understood his proposal to name that tool as an example Given the number of times that harmonia mentioned the specific tool in its proposal Which appears for example at appendix 10 6 5 7 and 10 7 4 0 harmonia had the burden to make clear that it was not proposing to use that particular tool and The agency was grounded in its thinking that the tools compatibility with its systems could have caused delays and increased costs At in the end the assignment of these risks should be upheld and in any event as we detail in our brief Harmonia has not established that it was significantly prejudiced by the assignment of those risks regarding the best value determination Similarly harmonia's challenge to that determination continues to be meritless like with the technical evaluation Harmonia has provided no reason to overturn the trial courts conclusion that the best value determination Was irrational was not be irrational the trial court correctly discerned the agency's wide discretion when making a best value determination particularly Particularly where here there was a lot of technical expertise involved With that backdrop and what the trial court found to be a well-documented trade-off analysis that Noted the technical superiority of the awardee a leaf fixes proposal in accordance with the terms of the RFQ The solicitation in this case this protest ground continues to fail And if there are no further questions from the court in conclusion We respectfully request that the trial court affirm the judgment that this court affirmed the judgment of the trial court. Thank you Thank You. Mr. Berg. Mr. English has some rebuttal time remaining Thank you, your honor Briefly to touch on a couple of points that mr. Bird raised I believe I heard him to say that harmonia could have gotten this the remedy it wanted which is a Size review by filing a size protest and that's just simply not true as we discussed earlier The most we could have gotten out of a size protest from the SBA in terms of actually making a determination Would have been a denial or dismissal of our untimely protest The the contracting officer would have had an obligation to send that protest forward to the SBA But the contracting officer doesn't make this decision, but we've never asked that he make the decision We've only alleged that under the circumstances. He should have recognized that there was a question to ask The contracting officer being on notice is another point that mr. Bird raised and there's no question He was he participated in the initial status conference and in every stage of the proceedings before the claims court And so if he was going to take action, he had all the information. He had the briefs He had the administrative record hit all the information he would have needed to take any action He thought was appropriate and if he wanted to ask for a recertification But but his failure to do that Worked to the disadvantage of harmonia And so why shouldn't harmonia have taken the action in its own best interest? Well, I think your honor we took the action that we harmonia thought it could take and the only action it was available to it Once it realized this ostensible subcontractor issue Which we didn't know until we got the administrative record in the protest below Was to challenge that the contracting officers failure to make to recognize the problem And refer the matter of the SBA. There's nothing we could have done at the SBA To to get any sort of remedy that that was foreclosed to us All we could have gotten was a denial of an untimely SBA protest And and so that's we the only thing that was available is exactly what harmonia did which is to challenge the failure to recognize the problem I want to briefly mention the Rima consulting case that we cited in our brief And this is the only case on point We think from the Court of Claims, but in that instance Judge Allegra conducted the very issue Analysis that we think the claims court should have conducted in this case and speaking specifically to 19 301 dash 1b Judge Allegra on page 531 of that opinion Wrote quote under this regulation the CEO here was thus required to accept the awardees Representations regarding its size unless one of the two exceptions to that rule was triggered as Will be seen neither of those exceptions were triggered So as we allege here always all we have challenged is the contracting officers failure to recognize That there was a potential issue that gave him reason to question Olympics the size Representation and that would have required him to refer them out of the SBA to answer that question We've never asked him or the argued that he or the claims court should have made a determination or reviewed one We'd ask the court to reverse the judgment of the claim Thank you, we appreciate the arguments of both counsel and we take the case on the submission The Honorable Court is adjourned until tomorrow morning at 10 a.m.