The language of
10 U.S.C. § 2377(a) instructs that “[t]he head of an agency shall
ensure that, to the maximum extent practicable” the “requirements of the agency with
respect to a procurement of supplies or services are stated in terms of” the functions, the
characteristics, and the required performance, and that “offerors of commercial items and nondevelopmental items other than commercial items are provided an opportunity to
compete in any procurement to fill such requirements.” 10 U.S.C. § 2377(a) (emphasis
added). As the statute contemplates that offerors of commercial items have an
opportunity to compete in any procurement, the court interprets an issue of 10 U.S.C.
§ 2377 to fall within the court’s bid protest jurisdiction and proper for consideration.
As an initial matter, the court notes that the application of 10 U.S.C. § 2377 has
not been squarely addressed in this court in the context of a bid protest. Turning to the language of 10 U.S.C. § 2377, Palantir first focuses on the two instances of the phrase
“to the maximum extent practicable.” In 10 U.S.C. § 2377(a), the statute instructs: “The
head of an agency shall ensure that, to the maximum extent practicable . . . such
requirements are defined so that commercial items or, to the extent that commercial items
suitable to meet the agency’s needs are not available, nondevelopmental items other than
commercial items, may be procured to fulfill such requirements,” and “offerors of
commercial items and nondevelopmental items other than commercial items are provided
an opportunity to compete in any procurement to fill such requirements.” Id. In 10 U.S.C.
§ 2377(b), the statute requires that “[t]he head of an agency shall ensure that procurement
officials in that agency, to the maximum extent practicable,” “acquire commercial items or
nondevelopmental items other than commercial items to meet the needs of the agency,”
and “modify requirements in appropriate cases to ensure that the requirements can be
met by commercial items or, to the extent that commercial items suitable to meet the
agency’s needs are not available, nondevelopmental items other than commercial items.”
10 U.S.C. § 2377(b). Palantir argues that:
[T]he Army has a requirement for a Data Management Platform; Palantir
has a Data Management Platform that is available as a commercial item;
and the law requires the Army to meet its requirements through the
procurement of commercial items “to the maximum extent practicable.” 10
U.S.C. § 2377. Yet the Army chose to issue a Solicitation that makes it
impossible for Palantir to compete through a bid that meets the Army’s
requirements by supplying its commercial item. That is a blatant violation of
§ 2377.
Palantir further argues that: “The use of the word ‘maximum’ in the phrase ‘to the
maximum extent practicable’ cannot be ignored.” (footnote omitted). Defendant, by
contrast, argues that “[t]he language, ‘to the maximum extent practicable,’ qualifies all of
the agency’s responsibilities, e.g., its responsibility to define requirements in terms of
functions, performance, or essential physical characteristics, and its responsibility to
define requirements so that commercial items may be procured to fulfill such
requirements.” In addition, defendant argues, citing Hydro Engineering, Inc. v. United
States, 37 Fed. Cl. at 474, that “[t]his discretionary language – ‘to the
maximum extent practicable [sic] - qualifies the agency’s obligations.”
The phrases “to the maximum extent practicable” and
“appropriate to the circumstances” in 10 U.S.C. § 2377 are not further defined in the statute or the
implementing regulations. Moreover, the same phrases “to the maximum extent
practicable” and “appropriate to the circumstances” in the context of 10 U.S.C. § 2377,
have not been judicially defined to date and are not easily subject to bright line tests.
Turning to dictionary definitions, “maximum” is defined as “as great, high or intense as
possible as permitted” New Oxford American Dictionary 1082 (3d ed. 2010); “practicable”
is defined as “able to be done or put into practice successfully,” id. at 1372; and
“appropriate” is defined as “suitable in the circumstance.” Id. at 77. Although these
dictionary definitions provide little further clarification, the words chosen by Congress
make it clear that a factual, case-by-case, compliance approach with the statutory dictate
that an agency consider commercially available alternatives is expected.
(sections deleted)
After the three Requests for Information, the Army generated the July 2015 Market
Research Report, which, although it was over fifty pages long, contained only two
sentences about “Commercial Services.” Regarding “Commercial Services,” the Market
Research Report stated in its entirety: “Significant portions of the anticipated Increment 2
scope of work such as Data Fusion, Intelligence Support to Cyber, and DIB upgrade are
not available as a commercial product. As such, the DCGS-A Increment 2 development
effort cannot be procured as a commercial product.” The Market Research Report also
separately discussed each respondent, and for Palantir, only stated: “The Palantir
response did not provide any examples of past experience relevant to the development of Increment 2, and was therefore found non-responsive.” (emphasis added). Just as the
Market Research Report dismissed a commercial product approach, the Army’s focus on
Palantir’s short comings centered on Palantir’s lack of experience related to development.
The focus on development continued as reflected in the draft Performance Work
Statement distributed by the Army in July 2015. The Scope of the Performance Work
Statement begins:
This Performance Work Statement (PWS) defines the efforts required for
the acquisition of services for the development and integration of Distributed
Common Ground System – Army (DCGS-A) Increment 2, Engineering,
Manufacturing and Development (DCGS-A INC2 EMD). The requirements
for Increment 2, EMD include, development of new data architecture,
standards based enhanced visualization and analytical tools, cloud
computing and “big data” analytic capabilities; cyber analytics and data
integration, visualization capabilities, Cyber Operations, Interoperability,
Counter Intelligence/Human Intelligence (HUMINT), Weather, Geospatial
Intelligence (GEOINT) and Sensor Management. (emphasis added).
Furthermore, the July 1, 2016 “DETERMINATION OF NON-COMMERCIAL ITEM”
(capitalization in original; emphasis removed), authored by Contracting Officer
Christopher Fisher for the solicitation at issue, and Bryon Young, the Principal Assistant
Responsible for Contracting, stated that regarding the market research, the three “RFIs
were to canvas the market and determine the availability of commercial/nondevelopmental
items/services available for satisfying the DCGS-A’s Increment 2
requirements.” The Determination of Non-Commercial Item continued:
Based upon market research conducted by Program Manager (PM) DCGSA,
I find that some commercial software applications exist that could
potentially satisfy portions of the DCGS-A Increment 2 requirement. The
market research showed that significant portions of the scope of work, such
as, the military unique capabilities classified up to the Top Secret level
needed to meet the requirements associated with Signals Intelligence
(SIGINT), Human Intelligence (HUMINT), Military Weather, Interoperability,
Data Fusion, Intelligence Support to Cyber, and DCGS Integrated
Backbone (DIB) upgrade are not available as commercial items.
The Determination of Non-Commercial Item concluded:
I find, based upon the requirements of this procurement and the market
research performed, that this requirement is not appropriate as a
commercial item procurement because no single commercial item of a type
customarily used by the general public or one that can meet the
Government’s requirement through minor modification is available; nor is
there a combination of commercial items that can satisfy the DCGS-A
Increment 2 requirement.
Palantir argues that “the Army felt the need to create and execute such a document
after Palantir filed its lawsuit reveals that the Army knew it had not made the
‘determinations’ required by § 2377(c),” (first emphasis in original; second emphasis
added). The court notes that, certainly, the timing is unusual. The Determination of NonCommercial
Item,
36 was made the day after the protest was filed in this court. Defendant
attempts to argue that the Determination of Non-Commercial Item could be made any
time, and asserts that “there is no statutory language addressing the documentation of
agency determinations based on market research, and the implementing regulation, FAR
10.002(e), does not require that such determinations must be documented, or that they
must be documented before issuance of a solicitation.” The court agrees that there is not
a specific documentation requirement in 10 U.S.C. § 2377 or the implementing
regulations, but disagrees with defendant that “the July 1, 2016 D&F was not a post-hoc
document as asserted by Palantir.” (emphasis in original). The direction of a
developmental approach and conclusion that no commercial items were available to meet
the Army’s requirements was evident in the October 21, 2015 Determination & Findings
for “Award of a Single Source Indefinite-Delivery Indefinite-Quantity (IDIQ) Single Award
Contract Exceeding $103M for Distributed Common Ground System (DCGS)-Army
Increment 2, Engineering Manufacturing and Development IAW DFARS
216.504(c)(1)(ii)(D)(i),” signed by Ms. Shyu. And, clearly, when the Army issued Request
for Proposals No. W56KGY-16-R-0001 for engineering, manufacturing, and development
services, seeking a single contractor to be the system data architect, developer, and
integrator of DCGS–A Increment 2, the decision that no suitable commercial items were
available was definitively made. Furthermore, although there is a not a documentation
requirement in 10 U.S.C. § 2377, the Army cannot point to any contemporaneous
document issued before the solicitation was issued that demonstrates that, in compliance
with 10 U.S.C. § 2377, the Army had carefully considered whether commercial items were
available. The absence of any determination or indication that the Army had seriously
considered whether a commercial item was available at any point in the procurement
process, prior to the issuance of the solicitation, together with the numerous documents
in the Administrative Record documenting the choice for a developmental approach, is a
strong indication that the Army had not met the requirements of 10 U.S.C. § 2377 prior to
the July 1, 2016 Determination of Non-Commercial Item, which, as noted above, was
issued after the closing date of the solicitation.
Even if the court were to consider the July 1, Determination of Non-Commercial
Item as timely, it does not meet the requirements of compliance with 10 U.S.C. § 2377.
Palantir argues that “[t]he July 1, 2016 Declaration appears to be merely parroting what
the July 13, 2015, Summary of Market Research found. That document used exactly the
same words—with exactly the same lack of any support whatsoever – in making the
unsubstantiated assertion about the unavailability of commercial or nondevelopmental
items.” (internal citation omitted). The court agrees that the language in the determination
mirrors that of the Market Research Report, and, although slightly longer, the court agrees with Palantir that “[t]here is no evidence . . . to support this repeated assertion” of the
unavailability of a commercial item sufficient to meet the Army’s needs. Although the
Determination of Non-Commercial Item cites the Requests for Information to support the
finding that a commercial item was not available, the Administrative Record reflects that
even the first Request for Information was seeking information for “development projects,”
and, therefore, the court does not consider the Requests for Information as demonstrable
evidence that no commercial items were available. This is consistent with all the market
research, and, on balance, the court disagrees with defendant that the market research
was “clearly appropriate” to the circumstances. The focus of the market research was
only on development and did not consider the possibility of commercial or
nondevelopmental items. Although it is perhaps laudable that the Army issued three
separate Requests for Information, as well as held multiple Industry Days, all of the
market research appears to have been designed to elicit responses about the offerors
developmental capabilities and did not address commercial items or seek information
from respondents about their commercially available products even after commercially
available alternatives were suggested to the Army in responses to the Requests for
Information. The market research, therefore, was not appropriate for the circumstances
because the market research did not appear to examine what, if any, commercial items
were available.
In the protest currently before the court, the Army did market research,
including three Requests for Information, Industry Days, and one-on-one meetings with
potential respondents and generated reports based on the information that it learned from
its market research. Unlike the Corps in Tyler, in the procurement now at issue before the
court, the Army did not comply with the requirements of 10 U.S.C. § 2377, and did not
evaluate whether a suitable commercial item could meet the agency’s needs, even after
protestor Palantir attempted to offer such an alternative.
(sections deleted)
Without a doubt, there are circumstances in which it is clear that a “commercial
alternative” offered by a prospective commercial bidder is not suitable for a procurement.
The overwhelming evidence in the Administrative Record in this protest, however,
demonstrates that the Army was on notice of a realistic, possible, commercially available
alternative product, placing the onus on the Army to more fully consider the potential
commercial options suggested before pursuing a developmental only approach to the
procurement. The Army did not do so, and, therefore, acted arbitrarily and capriciously,
and in violation of 10 U.S.C. § 2377, by neglecting to full investigate possible commercially
available alternatives to meet the requirements of the Army’s acquisition.
(sections deleted)
CONCLUSION
Accordingly, because Palantir has demonstrated success on the merits, and
because the equitable factors weigh in Palantir’s favor, a permanent injunction is
warranted and awarded. The Army is permanently enjoined from issuing a contract award
under solicitation number W56KGY-16-R-0001, as issued on December 23, 2015. The
Army must satisfy the requirements of 10 U.S.C. § 2377, which, thus far, the Army has
failed to do. Only after the Army has properly and sincerely complied with 10 U.S.C.
§ 2377 should defendant proceed to award a contract to meet its DCGS-A Increment 2
requirements. (Palantir
USG, Inc. v. U. S., No. 16-784C November 9, 2016) |