HHS Seeing Stars After Recent Loss in Court of Federal Claims Bid Protest
In Starry Associates, Inc. v. United States, No. 16-44C (Fed. Cl. July 27, 2016), the Court of Federal Claims (“COFC”) sharply criticized a Department of Health and Human Services (“HHS”) decision to cancel a solicitation following two bid protests at the Government Accountability Office (“GAO”). The history and outcome of the case are exceptional among bid protests — an area of the law characterized by deference to agency decisions and arbitrary-and-capricious review.
HHS’s Program Support Center (“PSC”) issued a lowest-price, technically acceptable solicitation to procure business-operations services in support of HHS’s financial management system. Protestor Starry Associates, Inc. was the incumbent, but Intellizant, LLC won the award as the lowest-price offeror. Starry ended up filing three protests at GAO and the instant protest at the COFC, alleging that the procurement process was “tainted” in favor of Intellizant. Protests accusing the agency of bias rarely prevail, but the COFC’s decision laid out in detail “a series of actions which,” by the court’s description, “reflect a lack of fidelity to the procurement process.” And while the court declined to formally determine whether the procurement was tainted by bias, it functionally ended up in the same place.
The COFC’s decision was informed by the fact that the Accounting Services Division Manager at PSC, who was formerly employed by Intellizant, not only was involved in the procurement, but submitted a signed declaration to GAO inaccurately representing that he had recused himself. Under a Technical Evaluation Panel of his choosing, HHS made award to Intellizant. After Starry protested the initial award decision at GAO, the agency took corrective action. Upon the agency’s re-award to Intellizant, Starry protested at GAO again. GAO held a hearing and ultimately sustained the protest in part, recommending that the agency reevaluate Intellizant’s proposal. Rather than following GAO’s recommendation, the Accounting Services Division Manager decided to cancel the solicitation and planned to reissue a revised version that would be more favorable to Intellizant.
Starry filed a third protest at GAO, this time challenging the agency’s cancellation decision. GAO denied the protest, and Starry filed at the COFC. The COFC granted judgment for Starry, observing that “[o]nce the initial decision to award to Intellizant had been made,” agency officials “ma[d]e clear that any other result was unwelcome and not seriously considered. Instead they viewed their task as bolstering the initial decision, and not reevaluation.” For instance, one HHS employee testified “[i]t was her understanding that the purpose of the reevaluation” following Starry’s initial protest “was to ‘provide more support to our original evaluations.’” And while the agency offered an ostensible rationale for canceling and revising the solicitation — that the requirements tripping up Intellizant were duplicative of other agency resources — the court rejected that justification as “completely illusory,” because “the record contains no basis on which the agency can pin the rationality of its decision to cancel.”
The relief awarded to Starry was just as unique as the facts of the case. Not only did the COFC set aside the cancelation of the solicitation and order that any reevaluation (or re-cancelation) be consistent with the opinion, but it also prohibited the Accounting Services Division Manager and two other individuals from participating “in any subsequent agency actions regarding this solicitation.” The court also expressed sympathy for Starry’s “considerable” investment of “time and resources in fighting the agency’s continued capricious conduct” after “[t]hree protests at GAO, two corrective actions, and one law suit.”
The COFC’s decision in Starry is a satisfying example of a wrong being righted, but it is also an extreme outlier in the universe of bid protests. Virtually every aspect of the case was unusual — from the agency’s plainly improper behavior, to the hearing at GAO, to the COFC’s decision to allow Starry to depose four HHS employees. Nonetheless, it demonstrates that where the facts support it, protestors can successfully bring a claim of agency bias.