Articles Posted in US Court of Appeals for the Federal Circuit

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K-Con and the Army entered into two contracts for pre-engineered metal buildings. K-Con claims that the Army subsequently delayed issuance of a notice to proceed for two years, resulting in $116,336.56 in increases in costs and labor. According to K-Con, this delay was due solely to the government’s decision to add to each contract the performance and payment bonds set forth in Federal Acquisition Regulation (FAR) 52.228-15. The Armed Services Board of Contract Appeals held that bonding requirements were included in the contracts by operation of law when they were awarded, pursuant to the Christian doctrine. The Federal Circuit affirmed. The two contracts are construction contracts and, under the Christian doctrine, the standard bond requirements in construction contracts were incorporated into K-Con’s contracts by operation of law. If the contracts had been issued using the standard construction contract form, there would have been no issue, but these contracts issued using the standard commercial items contract form. There were, however, many indications that the contracts were for construction, not commercial items. The statement of work included many construction-related tasks, including developing and submitting construction plans, obtaining construction permits, and cleaning up construction areas. The statement of work also required compliance with FAR regulations relevant only to construction contracts. View "K-Con, Inc. v. Secretary of the Army" on Justia Law

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At issue in this case was the relative priority of statutes and regulations governing the procurement process for the Department of Veterans Affairs (VA). The Federal Circuit affirmed the decision of the United States Court of Federal Claims concluding that section 502 of the Veterans Benefits, Health Care, and Information Technology Act of 2006, Pub. L. No. 109-461, 120 Stat. 30403, 3431-35 (VBA), requires the VA to consider awarding contracts for prescription eyewear based on competition restricted to veteran-owned small businesses before procuring this eyewear from any other source, including any nonprofit agency for the blind or significantly disabled designated as such under that Javits-Wagner-O’Day Act, 41 U.S.C. 8504. After considering the plain language of the VBA, as well as the legislative history and Congress’s intention in enacting it, the Federal Circuit held (1) the Claims Court properly exercised subject-matter jurisdiction over this action; and (2) the Claims Court did not err in its substantive legal analysis, and the VA is required to undertake the “rule of two” analysis as required under the VBA - even when goods and services are on the list. View "PDS Consultants, Inc. v. United States" on Justia Law

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After the Army awarded a contract for computer hardware to Appellees, including Dell, Blue Tech, and Red River, 21 unsuccessful bidders filed protests, claiming the Army’s evaluations were unreasonable because the proposal deficiencies the Army considered disqualifying were minor or “clerical errors and misunderstandings” resulting from Solicitation ambiguities that could have been resolved through clarifications. The Army instituted a corrective action to reopen procurement and conduct additional discussions with offerors. Appellees challenged the decision. The Court of Federal Claims granted Appellees judgment on the administrative record and enjoined the Army from proceeding with its corrective action. The Federal Circuit reversed. The Claims Court did not apply the proper legal standard and the Army’s corrective action was reasonable under the correct standard. The Claims Court applied a “more exacting [standard] than the APA’s ‘rational basis’ review threshold for procurement protests, and impermissibly restrict[ed] the great deference the Tucker Act requires courts to afford agency procurement officials” by its use of a “narrowly targeted” standard. The Army’s proposed corrective action to reopen procurement and allow proposals to be revised is rationally related to the procurement’s defects, i.e., failure to conduct discussions and spreadsheet ambiguities. View "Dell Federal Systems, L.P. v. United States" on Justia Law

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The VA and Department of Defense (DoD) committed to developing an integrated electronic health records (EHR) system to replace their separate systems but abandoned that plan. DoD replaced its system with a commercially-available system, consisting primarily of software developed by Cerner. The VA issued a request for information and engaged a consultant, Thornton, to assess four options—three involving an off-the-shelf EHR system, and the fourth involving modernizing its existing system. Thornton concluded that the market could support all four options and that the VA’s best option for improving interoperability with the DoD would depend on the VA’s own evaluation. The VA chose to acquire a new system and invoked the public-interest exception to the Competition in Contracting Act’s open competition requirement, 41 U.S.C. 3301, 3304(a)(7), to negotiate a sole-source contract with Cerner “for the acquisition of the [EHR] system being deployed by the [DoD] and related services.” CliniComp, an incumbent provider of EHR systems to the VA, filed a bid protest, asserting that the sole-source decision lacked a rational basis and violated the Act. The Claims Court dismissed. The Federal Circuit affirmed. CliniComp lacked standing to protest the decision. To establish standing, CliniComp had to show that it was “an actual or prospective bidder” and had a “direct economic interest in the procurement or proposed procurement.” CliniComp did not establish that it had the kind of experience that would enable it to compete for the work contemplated by the VA’s planned contract. View "CliniComp International, Inc. v. United States" on Justia Law

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Palantir filed a pre-award bid protest, challenging the Army’s solicitation for Distributed Common Ground System-Army Increment 2 (DCGS-A2), the Army’s primary system for processing and disseminating multisensor intelligence and weather information. The solicitation seeks a single contractor to be the system data architect, developer, and integrator of DCGS-A2. Palantir’s complaint alleges that the Army violated the Federal Acquisition Streamlining Act (FASA) 10 U.S.C. 2377(c) by failing to determine whether its needs could be met by commercial items before issuing the contested solicitation. The Claims Court agreed. The Federal Circuit affirmed the entry of an injunction, rejecting arguments that the trial court erroneously added requirements to section 2377, including that the Army was required to “fully investigate,” “fully explore,” “examine,” and “evaluate” whether all or part of its requirements could be satisfied by commercially available items, such as Palantir’s product. FASA requires an agency to use the results of market research to “determine” whether there are commercial items that “meet the agency’s requirements; could be modified to meet the agency’s requirements; or could meet the agency’s requirements if those requirements were modified to a reasonable extent.” While the trial court’s thorough opinion sometimes uses words other than “determine,” read in context, those words were intended to be synonymous with “determine.” View "Palantir USG, Inc. v. United States" on Justia Law

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In 1942-1943, the Government contracted with the Oil Companies to purchase aviation gasoline, vital to the war effort, permitting a profit margin “between 6% and 7%.” The manufacture of avgas from crude oil uses a 98% purity sulfuric acid as a catalyst in alkylation, a process that dilutes the sulfuric acid such that it turns it into “spent alkylation acid,” which may be used to catalyze the alkylation process again following purification; produce non-avgas petroleum by-products; or be disposed of. If spent alkylation acid is used to produce other petroleum by-products, it becomes "acidic sludge," a secondary waste with a lesser percentage of acid content that can be used to manufacture fertilizer, burned, or disposed of. Unable to reprocess the increased amount of spent alkylation acid given the prioritization of production, the Companies dumped spent alkylation acid and acid sludge in California: 12 percent of the waste was spent alkylation acid, and 82.5% was acid sludge. In 1991, the Government and California sued the Companies under the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. 9601, for costs of cleaning up the disposal site. The Companies countersued. After years of litigation, the Claims Court granted the Companies partial summary judgment to prevent discovery into insurance settlements; denied the Government’s motion for leave to assert counterclaims in fraud; held that the Government was liable for clean-up costs for nonbenzol waste--$99,509,847.32, including accrued interest. The Federal Circuit affirmed, rejecting arguments that the Claims Court failed to allocate between recoverable and nonrecoverable costs, wrongfully admitted stipulations to calculate damages, and wrongly refused to allow proof of double recovery by insurance settlements. View "Shell Oil Co. v. United States" on Justia Law

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Plaintiffs each entered into agreements to provide services to Voice of America (VOA), a U.S. government-funded broadcast service. The agreements were a series of individual purchase order vendor (POV) contracts that each plaintiff entered into over several years with the Broadcasting Board of Governors (BBG), which oversees VOA. In 2014, the Office of Inspector General for the U.S. Department of State issued a report that was critical of the BBG’s use of POV contracts, concluding that the BBG was using such contracts in some cases to obtain personal services. Plaintiffs filed a class action complaint alleging that, along with other individuals who have served as independent contractors for VOA, they should have been retained through personal services contracts or appointed to positions in the civil service. If their contracts had been classified as personal services contracts or they had been appointed to civil service positions, they alleged, they would have enjoyed enhanced compensation and benefits. The Claims Court dismissed and denied their request for leave to file a proposed second amended complaint. The Federal Circuit affirmed, rejecting several contract-based claims, seeking damages for the loss of the additional compensation and benefits to which Plaintiffs contend they were entitled. Plaintiffs have set forth no viable theory of recovery. View "Lee v. United States" on Justia Law

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The Claims Court entered judgment in favor of Starry on its bid protest claim, concluding that the Department of Health and Human Services acted arbitrarily and capriciously in canceling its solicitation seeking to procure certain business operations services. The Claims Court thereafter awarded Starry attorney fees at the rates actually billed to Starry by its counsel, finding that the “extreme measures that [Starry] was forced to pursue to vindicate its right to a rational and lawful federal procurement process, combined with the shocking disregard of the truth by” HHS, constituted a “special factor” justifying an award of fees above the EAJA’s “default rate” of $125 per hour. EAJA, the Equal Access to Justice Act, 28 U.S.C. 2412(d)(2)(A), provides that when a trial court finds that a “special factor” exists, it is authorized to increase the statutory attorney fee rate in certain cases brought by or against the government. The Federal Circuit vacated the award, holding that the Claims Court erred as a matter of law in holding that an agency’s improper or dilatory conduct during the administrative process that gave rise to the litigation between the parties can constitute a “special factor.” EAJA does not contain any reference to prelitigation activities. View "Starry Associates, Inc. v. United States" on Justia Law

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A three-year “risk corridors” program described in the Patient Protection and Affordable Care Act, 42 U.S.C. 18001, implemented by the Department of Health and Human Services (HHS), was intended to promote participation in insurance exchanges. Participating insurers, whose costs of providing coverage exceeded the premiums received (using a statutory formula) were to be paid a share of their excess costs while participating plans whose premiums exceeded their costs would pay in a share of their profits. The program “permit[ted] issuers to lower [premiums] by not adding a risk premium" for uncertainties in the 2014-2016 markets. The actual total "payments in"were less than requested "payments out" and Congress prohibited HHS from using its appropriations for the program. Prorated payments were issued. The insurer filed suit. The Federal Circuit affirmed summary judgment in favor of the government. The statute created an obligation of the government to pay exchange participants the amount indicated by the statutory formula but riders in the FY 2015 and 2016 appropriations bills repealed or suspended the obligation to make payments out in an aggregate amount exceeding payments in. Congress made the policy choice to cap payments. No statement or action by the government evinced an intention to form a contract; the risk corridors program was simply an incentive program. Because there was no contract, the insurer’s “takings” claim also failed. View "Land of Lincoln Mutual Health Insurance Co. v. United States" on Justia Law

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A three-year “risk corridors” program described in the Patient Protection and Affordable Care Act, 42 U.S.C. 18001, implemented by the Department of Health and Human Services (HHS), was intended to promote participation in insurance exchanges. Participating insurers, whose costs of providing coverage exceeded the premiums received (using a statutory formula) were to be paid a share of their excess costs while participating plans whose premiums exceeded their costs would pay in a share of their profits. The program “permit[ted] issuers to lower [premiums] by not adding a risk premium" for uncertainties in the 2014-2016 markets. The actual total "payments in"were less than requested "payments out" and Congress prohibited HHS from using its appropriations for the program. Prorated payments were issued. Moda filed suit. The Claims Court granted Moda partial summary judgment as to liability, stipulated to be $209,830,445.79. Dozens of other insurers filed actions, with mixed results. The Federal Circuit reversed. The statute created an obligation of the government to pay exchange participants the amount indicated by the statutory formula but riders in the FY 2015 and 2016 appropriations bills repealed or suspended the obligation to make payments out in an aggregate amount exceeding payments in. Congress made the policy choice to cap payments. No statement by the government evinced an intention to form a contract; the statute, its regulations, and HHS’s conduct simply created an incentive program. View "Moda Health Plan, Inc. v. United States" on Justia Law