Bradley attorney Aron Beezley was quoted in Law360 on a dispute over whether the president interfered with a high-profile, $10 billion Pentagon contract, as well as cases that may define the limits of contract preferences and prototyping deals, are among a number of important cases for government contractors to watch in 2020.
Disputes Over the Pentagon's $10B Cloud Contract
Amazon Web Services Inc. has challenged the U.S. Department of Defense’s Joint Enterprise Defense Infrastructure, or JEDI, contract, intended to put much of the DOD’s legacy information technology infrastructure into the cloud.
Amazon’s challenge is notable not only for the high-stakes nature of the contract — a single-award deal that could run for up to a decade and is worth up to $10 billion — but because of the unusual nature of Amazon’s allegations.
The company claims the DOD ignored its inherent advantages and overrated the bid of Microsoft Corp., the eventual awardee — not an unusual basis for a bid protest.
But Amazon’s claims for the reasons behind the alleged disparity in assessments between the companies are unusual, if not completely unique. It argues the disparity was due to pressure from President Donald Trump to make sure Amazon did not win the deal, saying Trump has pursued a “vendetta” against the company and its founder and CEO, Jeff Bezos, driven by alleged unfair coverage of Trump by the Washington Post, also owned by Bezos.
“The stakes are high,” Amazon said in its complaint. “The question is whether the president of the United States should be allowed to use the budget of DOD to pursue his own personal and political ends.”
The shadow of potential presidential interference hanging over the dispute is a “very unique aspect of the case,” and given both that and the range of other issues at play, any ruling the claims court makes will be significant, Bradley Arant Boult Cummings LLP partner Aron Beezley said.
Complicating the dispute, Oracle Corp. is also pursuing a protest that argues the terms of JEDI had been unfairly tipped toward Amazon, the perceived front-runner for much of the JEDI procurement. DOD employees who had ties to Amazon allegedly wrote the terms of the deal to favor Amazon and help limit its competition for the deal, Oracle alleged in its protest, currently on appeal at the Federal Circuit.
And that case presents its own unusual legal issues, including the potential to set important precedent on the appropriate standard for prejudice in pre-award disputes over exclusion from the competitive range for a contract, after the Court of Federal Claims rejected the “non-trivial competitive injury” standard that typically applies in those circumstances, according to Beezley.
"Instead, the [court] applied the traditional post-award standard for prejudice, which is the ‘substantial chance of receiving the contract award,'" he said. “So I think it’s very likely that the Federal Circuit’s ultimate decision in the Oracle case will clear up the prejudice standard to be applied in the competitive range exclusion context.”
The cases are Amazon Web Services Inc. v. U.S., case number 1:19-cv-01796, in the U.S. Court of Federal Claims and Oracle America Inc. v. U.S. et al., case number 19-2326, in the U.S. Court of Appeals for the Federal Circuit.
Courts to Explore Jurisdiction for ‘Other Transactions’
Federal agencies have in recent years ramped up their use of Other Transaction Authority agreements, intended to be used for prototype or pilot deals, and the limits to litigating those deals are now being tested out in courts.
Designed to cut through red tape in the traditional acquisition pathways, OTAs are meant to enable the rapid development of cutting-edge technologies and other work that needs a quick and relatively inexpensive turnaround.
They’re especially popular with the DOD as a method to encourage “non-traditional” contractors that haven’t previously done business with the DOD to get on board, and DOD OTA deals have increased from $1.4 billion in fiscal year 2016 to $3.7 billion in 2019, Undersecretary for Acquisition and Sustainment Ellen Lord said in December.
A key aspect of an OTA, however, is that — although it can help kick off a later acquisition contract if a prototype is successful — it is not formally a contract, and companies that miss out on OTA deals have had a tough time trying to protest their exclusion from consideration, with two ongoing OTA-related cases worth watching to see how courts will treat those claims.
In the first of those cases, helicopter manufacturer MD Helicopters has alleged the U.S. Armyunfairly left it out of an OTA deal to submit a proposal for the Army’s Future Attack Reconnaissance Aircraft Competitive Prototype program.
MD first unsuccessfully appealed to the U.S. Government Accountability Office, which noted that it “[does] not review the award of non-procurement instruments issued under an agency’s OTA authority.”
The company then took the dispute to Arizona federal court in April 2019, arguing the refusal to grant it an OTA deal was a “final agency action,” able to be challenged as “arbitrary and capricious,” and the court is currently considering summary judgment motions.
Commercial space company SpaceX also launched an OTA-related protest in May 2019, telling the Court of Federal Claims that the Air Force wrongly left the company out of $2.2 billion in space launch service agreements that had been awarded to all of its domestic competitors.
As with the GAO, the U.S. Court of Federal Claims ruled in August that it doesn’t have the jurisdiction to consider an OTA dispute, because those agreements aren’t procurement contracts, sending the case to California federal court. SpaceX asked for judgment on the administrative record in December.
The cases both present a chance for the courts to rule on a “huge growth area for the government contracting space,” as many agencies are “enamored” with using the prototyping deals given their effectiveness in quickly delivering products and services, Holland & Knight LLP partner Eric Crusius said.
OTAs are “still a small percentage of all the contracting that is done, but where those guardrails are will be interesting to see,” he said.
The cases are MD Helicopters Inc. v. U.S. et al., case number 2:19-cv-02236, in the U.S. District Court for the District of Arizona, and Space Exploration Technologies Corp. v. U.S., case number 2:19-cv-07927, in the U.S. District Court for the Central District of California.
High Court May Set New Limits on the VA’s ‘Rule of Two’
The U.S. Supreme Court ruled in its 2016 Kingdomware decision that the U.S. Department of Veterans Affairs must use the “rule of two” whenever possible, after the VA had ignored a line of related, non-binding GAO decisions, instead arguing the rule was effectively discretionary after it had already met its small business participation contracting goals.
The rule of two, introduced in the 2006 Veterans Benefits, Health Care and Information Technology Act, requires the VA to give preference to veteran-owned small businesses for contracts whenever it expects at least two such businesses will bid on a deal and can do the work at a fair market price.
But although the high court was unequivocal that the use of the rule of two is mandatory, it didn't address what happens when the rule clashes with the AbilityOne program, a mandatory contracting preference for certain items made by the blind and significantly disabled that applies across the whole government.
The Federal Circuit, addressing a dispute over the purchase of eyewear and related prescription services, ruled in October 2018 that the more specific nature of the rule of two overrides the more general AbilityOne preference, and the VA issued a class deviation to that effect in May 2019.
Winston-Salem Industries for the Blind, backed by several other AbilityOne firms in amicus briefs, has urged the Supreme Court to have the final word on the issue. In its September 2019 petition, the nonprofit said the Federal Circuit’s ruling has had “devastating effects” on hundreds of blind and severely disabled workers, with the VA canceling its AbilityOne contracts en masse following the Federal Circuit ruling.
“If the Supreme Court takes up that case, that certainly will be one of the main cases to watch in 2020,” Beezley said. “Any time the Supreme Court takes up a government contracts case it’s noteworthy. And also, there is constant debate about which set-aside programs take precedence over another, and in which context.”
The U.S. House of Representatives recently weighed in on the issue, agreeing by voice vote on Dec. 16 to pass H.R. 4920, the Department of Veterans Affairs Contracting Preference Consistency Act.
The bill would split who takes top preference for VA deals, directing the agency to continue purchasing AbilityOne products it had purchased prior to 2006 when the rule of two was created, while applying the rule of two to all other contracts — a solution unlikely to fully satisfy either side. The Senate, however, did not take up the bill before the end of 2019.
The case is Winston-Salem Industries for the Blind v. PDS Consultants Inc. et al., case number 19-329, in the Supreme Court of the United States.
The complete article, “Top Gov't Contracts Cases To Watch In 2020” first appeared in Law360 on January 1, 2020. (login required.)