 In the United States Court of Federal Claims
                                         No. 14-735 C
                                  Filed: November 18, 2014 1

****************************************
                                       *
                                       *               Bid Protest;
LYNXNET, LLC,                          *               Competition in Contracting Act of
                                       *                  1984 (“CICA”), 31 U.S.C. § 3553
      Plaintiff,                       *                  (Automatic Stay);
                                       *               Federal Acquisition Regulations
v.                                     *                  (“FAR”) 48 C.F.R. §§ 19.508(e)
                                       *                  (Solicitation provisions and
THE UNITED STATES,                     *                  contract clauses), 52.219-14(c)(1)
                                       *                  (Limitations on subcontracting);
      Defendant.                       *               26 U.S.C. § 401K (Qualified pension,
                                       *                  profit-sharing, and stock bonus
and                                    *                  plans);
                                       *               15 U.S.C. §§ 644(o) (Awards or
STRATEGIC OPERATIONAL                  *                  Contracts);
SOLUTIONS, INC.,                       *               13 C.F.R. §125.1 (g) (Programs
                                       *                  included).
      Defendant-Intervenor.            *
                                       *
****************************************

Dorn Charles McGrath, III, Barnes & Thornberg, LLP, Washington, D.C.,
Counsel for the Plaintiff.

Meen Geu Oh, United States Department of Justice, Civil Division, Trial Attorney, Washington,
D.C., Counsel for the Government.

James Y. Boland, Venable LLP, Baltimore, Maryland, Counsel for Defendant-Intervenor.

                    MEMORANDUM OPINION AND FINAL ORDER

BRADEN, Judge.




       1
         On October 23, 2014, the court forwarded a sealed copy of this Memorandum Opinion
And Final Order to the parties to delete from the public version any confidential and/or
privileged information, and note any citation or editorial errors requiring correction. The court
has incorporated some of these comments and corrected or clarified certain portions herein.
I.     RELEVANT FACTUAL BACKGROUND. 2

       A.      Solicitation No. DJF-14-1200-R-0000040.

        On September 16, 2003, the President issued Homeland Security Presidential Directive –
6 (“HSPD – 6”) to “protect the . . . United States against acts of terrorism” by “develop[ing],
integrat[ing], and maintain[ing] . . . information about individuals known . . . or appropriately
suspected” to be involved in terrorist activities. See Directive on Integration and Use of
Screening Information To Protect Against Terrorism, HSPD-6 (Sept. 16, 2003), available at
http://www.gpo.gov/fdsys/pkg/PPP-2003-book2/pdf/PPP-2003-book2-doc-pg1174.pdf (last visited Oct.
15, 2014). Directive HSPD-6 instructed federal departments and agencies to provide “all
appropriate Terrorist Information” to the United States Attorney General to “establish an
organization to consolidate the Government’s approach to terrorism screening and provide for
the appropriate and lawful use of Terrorist Information in screening processes.” Id. The
Attorney General established a Terrorist Screening Center (“TSC”), a multi-agency operational
center in Vienna, Virginia, to manage the nation’s Terrorist Screening Database. AR Tab 1, at 1.
The TSC operates 24 hours per day, 7 days per week, with analysts working in continuous shifts
to support law enforcement officials. AR Tab 1, at 1.

        On January 16, 2014, the United States Department of Justice, Federal Bureau of
Investigation (“FBI”) solicited Request for Proposals No. DJF-14-1200-0000040 (the “RFP”) for
approximately 116 Full-Time Equivalent (“FTE”) service employees to support the TSC
Operations Branch for a base period of one year with up to four additional one-year option
periods. AR Tab 1, at 1–255. The RFP was set aside for small businesses, certified under the
Small Business Administration’s (“SBA”) Section 8(a) Business Development Program. 3 AR
Tab 1a, at 87. The RFP required potential offerors to submit proposals addressing five factors:
(1) Executive Summary; (2) Technical Evaluation; (3) Cost/Price; (4) Past Performance; and
(5) Security. AR Tab 1a, at 92–93. The RFP also informed potential offerrors that this
procurement was a best-value award, emphasizing the importance of price/cost factors and
ranking non-price criteria in descending order of importance, i.e., Technical Factor (Management
Approach, Technical, and Transition); Price (Completeness, Realism, Reasonableness); Past
Performance (Pass/Fail); and Security (Pass/Fail). AR Tab 1a, at 112. The RFP required that
“[a]t least 50 percent of the cost of contract performance incurred for personnel shall be
expended for employees of the concern.” Federal Acquisition Regulations (“FAR”) 52.219-
14(c)(1). In addition, “[t]he contracting officer shall insert the clause at 52.219-14, Limitations
on Subcontracting, in solicitations and contracts for supplies, services, and construction, if any
portion of the requirement is to be set aside for small business and the contract amount is

       2
         The facts discussed herein were derived from the August 29, 2014 Administrative
Record (“AR Tabs 1–56” that are comprised of pages 1–3585).
       3
           To qualify for the SBA’s Section 8(a) Business Development Program, which is
designed to help disadvantaged businesses compete in the marketplace, a business must meet
certain eligibility requirements. See 15 U.S.C. § 637(a); UNITED STATES SMALL BUSINESS
ADMINISTRATION,          http://www.sba.gov/category/navigation-structure/eligibility-requirements
(last visited Oct. 15, 2014).



                                                2
        STOPSO’s proposal included a February 5, 2014 letter on STOPSO’s stationary, but
signed by REDACTED, indicating that his employment was contingent on STOPSO’s receipt of
the contract. AR Tab 4b, at 1287. The letter, however, did not state whether STOPSO was
hiring REDACTED as an employee or as an independent contractor. AR Tab 4b, at 1287.

        On April 3, 2014, STOPSO submitted a final proposal revision that included a detailed
labor rate “build-up” for its current employees, but not for subcontractors. AR Tab 13, at 2508–
21 (applying fringe benefits, overhead, general and administrative, and REDACTED profit/fee as
costs for STOPSO employees, but applying only a REDACTED subcontractor handling fee to
subcontracted work). This revised proposal reflected a reduced price of $58,898,521 (AR Tab
13, at 2494), including the direct labor rate, overhead with fringe benefits of REDACTED, general
and administrative rate of REDACTED, and profit/fee of REDACTED for all STOPSO employees. 5
AR Tab 13, at 2515−21. In contrast, STOPSO applied a REDACTED handling fee to all
subcontractors, including the Industrial Hygienist position. AR Tab 13, at 2515–21.

       STOPSO’s proposal also identified three proposed subcontractors: (1) REDACTED,
(2) REDACTED, and (3) REDACTED, but did not list REDACTED. AR Tab 4a, at 1083; AR Tab 4b,
at 1110–11.

        STOPSO represented that it “thoroughly underst[oo]d all requirements of the solicitation
and its amendments” and intended to “unconditionally accept all terms and conditions with no
exceptions.” AR Tab 13, at 2496.

       C.     Lynxnet LLC’s Proposal.

        On February 19, 2014, Lynxnet, LLC (“Lynxnet”) submitted a proposal, and on April 3,
2014, submitted a final proposal revision. AR Tab 3a–f, at 277–1077; AR Tab 12 at 1637–2477.
Plaintiff’s proposal included: (1) an Executive Summary; (2) a Technical Volume; (3) a Cost
Volume; (4) a Past Performance Volume; (5) a Security Volume; and (6) a Contract
Documentation Volume. AR Tabs 3a–f, at 277–1077. Therein, Lynxnet also identified “two
second-tier subcontractors (independent contractors) as company ‘1099.’” AR Tab 20, at 2885.
Lynxnet initially quoted a proposal price of $ REDACTED, but that amount was reduced to
$77,515,540 in the final proposal. AR Tab 3c, at 760; AR Tab 40, at 3169. Lynxnet’s total
prime contractor labor cost was approximately 52%. 6


       5
         By law, the fringe benefits included in the “build-up” labor rate were available only to
employees, not to subcontractors or independent contractors. See 26 U.S.C. § 401(k) (limiting
401(k) plans to “employers” for the benefit of “employees”); see also IRS PUBLICATION 15
(Circular E), Employer’s Tax Guide § 14 (2013) (“Only the employer pays FUTA tax” on wages
of “employees”); IRS INSTRUCTIONS FOR FORM 940 (2013), EMPLOYER’S ANNUAL FEDERAL
UNEMPLOYMENT (FUTA) TAX RETURN (2013), at 2 (“You owe FUTA tax on the first $7,000 of
wages you paid to each employee during a calendar year.”) (emphasis added).
       6
        AR Tab 20, at 2885 (observing that Lynxnet’s “subcontractors account for 48% of
Lynxnet’s total price[]”).



                                               4
       D.     The Award.

        On April 24, 2014, the FBI issued a Source Selection Decision indicating that STOPSO
and Lynxnet received the highest Technical rating, “Exceptional.” AR Tab 30, at 2940. 7 The
Source Selection Decision noted that, although “REDACTED” STOPSO’s total proposal price was
$59,398,178, 8 or approximately 25%, less than Lynxnet’s proposed price. AR Tab 30, at 2936,
2940. Consequently, the FBI determined that STOPSO’s proposal “provide[d] the best overall
value to the Government” and awarded the contract to STOPSO. AR Tab 30, at 2940.

       On April 24, 2014, the FBI sent an “Unsuccessful Notification” to Lynxnet. AR Tab 39,
at 3166. On April 29, 2014, Lynxnet received a debriefing, during which the FBI explained that
both STOPSO and Lynxnet received “REDACTED” on the Past Performance and Security factors.
AR Tab 40, at 3168. In addition, both companies received a rating of “Exceptional” for three
non-price subfactors constituting the offerors’ overall Technical ratings. AR Tab 40, at 3168–69.
But, because STOPSO and Lynxnet received the same ratings on the other factors, “REDACTED.”
AR Tab 40, at 3169. As a result, the FBI awarded the contract to STOPSO, based on its
substantially lower proposal price of $59,398,178. AR Tab 40, at 3169. Lynxnet’s final price
was $77,515,540. AR Tab 40, at 3169.

II.    RELEVANT PROCEDURAL HISTORY.

       A.     The Governmental Accountability Office Protest.

        On May 2, 2014, Lynxnet filed a protest with the Government Accountability Office
(“GAO”) contesting the FBI’s evaluation of STOPSO’s proposal as to: technical ratings; price
realism; past performance; security requirements; disparate treatment; the source selection
decision; and best value determination. AR Tabs 42 & 42a–b, at 3271–3403; AR Tab 45, at
3417–28. While the GAO protest was pending, contract performance was suspended, pursuant
to the automatic stay provisions of the Competition in Contracting Act of 1984 (“CICA”), 31
U.S.C. § 3553 (2012). Pl. 8/29/14 Mem. at 8.

       On May 29, 2014, Lynxnet also filed a supplemental protest. AR Tab 45, at 3417–3493.
Specifically, Lynxnet contended that STOPSO’s representation that “it will attempt to source
[the Industrial Hygienist] position as a 1099[,] if it enables [STOPSO] to provide this highly
       7
         The April 24, 2014 Source Selection Decision also refers to both STOPSO’s and
Lynxnet’s Technical ratings as “Excellent,” instead of “Exceptional.” AR Tab 30, at 2930. It
appears that these terms were either used interchangeably or this was a clerical error, as other
documents in the Administrative Record refer to their Technical ratings as “Exceptional.”
Compare AR Tab 30, at 2930 with AR Tab 30, at 2940 & AR Tab 40, at 3169.
       8
          An April 10, 2014 FBI Memorandum, prepared as a “cursory review to assist . . . in the
evaluation of th[e] proposal,” reported that STOPSO’s original price was $60,282,068, and the
final revised price was $59,398,521. AR Tab 21, at 2888–91. The difference between the prices
quoted in STOPSO’s proposals, the FBI Memorandum, and the Source Selection Decision
appear to be attributable to differences in accounting resolved through further discussions. AR
Tab 21, at 2888–91.



                                               5
qualified position at a reasonable rate to the [G]overnment” should have led the FBI to question
whether STOPSO could comply with FAR 52.219−14(c)(1), i.e., the LOS Requirement. 9 AR
Tab 45, at 3522–23. Lynxnet also contended that STOPSO’s proposed addition of an Industrial
Hygienist as a 1099 independent contractor improperly increased STOPSO’s labor costs from
49.5% to above the 50% LOS requirement threshold. AR Tab 53, at 3573. Lynxnet
acknowledged that it was an “open question” whether STOPSO’s proposal complied with the
LOS Requirement. AR Tab 45, at 3422. In any event, Lynxnet challenged STOPSO’s
indication that it would incur 50.1% of the total labor cost under its proposal terms. AR Tab 45,
at 3423 n.1. The FBI also “failed to confirm [whether] STOPSO’s ‘profit/fee’ is a labor cost or
cost of contract performance incurred for personnel[.]” AR Tab 45, at 3423 n.1.

      On August 4, 2014, the GAO denied Lynxnet’s initial protest on the merits and rejected
the LOS Requirement issue as not timely filed. AR Tab 53, at 3574.

       B.      The SBA Protest.

       On April 30, 2014, Lynxnet also filed a size protest to the United States Small Business
Administration (“SBA”). AR Tabs 41 & 41a, at 3188–3270. On August 18, 2014, the SBA
concluded that “STOPSO will perform more than 50 percent of the contract labor with its own
employees,” as “reflected in its contract proposal and in its response to the protest.” AR Tab 56,
at 3584. On August 29, 2014, Lynxnet filed an appeal of that decision with the SBA Office of
Hearings and Appeals (“OHA”) that is currently pending. Pl. 8/29/14 Mem. at 10.

       C.      United States Court of Federal Claims.

       On August 13, 2014, Lynxnet filed a Complaint in the United States Court of Federal
Claims under seal, challenging the contract award to STOPSO. Lynxnet also filed a Motion For
Temporary Restraining Order, a Motion For Preliminary Injunction, a Motion To Seal
Document, and a Motion For Protective Order. On that same day, STOPSO filed an unopposed
Motion To Intervene. On August 14, 2014, the court held a status conference and granted the
Motion To Seal, the Motion For Protective Order, and the Motion To Intervene.

        On August 19, 2014, the court held a second status conference and entered a Scheduling
Order the next day. On August 22, 2014, the Government filed the Administrative Record under
seal. On August 29, 2014, Plaintiff filed a Motion For Judgment On The Administrative Record
(“Pl. 8/29/14 Mot.”) and Memorandum In Support (“Pl. 8/29/14 Mem.”), under seal.

        On September 5, 2014, the Government and Intervenor each filed separate Cross-Motions
And Responses (“Gov’t 9/5/14 Mem.” and “Int. 9/5/14 Mem.”). On September 10, 2014,
Plaintiff filed a Memorandum In Opposition And Reply (“Pl. 9/10/14 Opp. & Reply”). On
September 15, 2014, the Government and Intervenor each filed a separate reply (“Gov’t 9/15/14
Reply” and “Int. 9/15/14 Reply”). On September 24, 2014, the court entered an Order extending

       9
          The LOS Requirement sets aside certain government contracts for small business
requiring that “[a]t least 50 percent of the cost of contract performance incurred for personnel
shall be expended for employees of the concern.” FAR 52.219-14(c)(1).



                                                6
the voluntary stay referenced in the August 19, 2014 Scheduling Order for an additional 60 days
to November 24, 2014.

III.   DISCUSSION.

       A.     Jurisdiction.

        The United States Court of Federal Claims is required to make a threshold determination
regarding jurisdiction. See Fisher v. United States, 402 F.3d 1167, 1173 (Fed. Cir. 2005) (“[A]t
the outset [the court] shall determine . . . whether the Constitutional provision, statute, or
regulation is one that is money-mandating. If the court’s conclusion is that the Constitutional
provision, statute, or regulation meets the money-mandating test, the court shall declare it has
jurisdiction over the cause, and shall then proceed with the case in the normal course.”).

        Pursuant to 28 U.S.C. § 1491(b)(1), the United States Court of Federal Claims has
jurisdiction:

       to render judgment on an action by an interested party objecting to a solicitation
       by a Federal agency for bids or proposals for a proposed contract or to a proposed
       award or the award of a contract or any alleged violation of statute or regulation
       in connection with a procurement or a proposed procurement.

Id.

        The August 13, 2014 Complaint alleged several violations of law and/or regulation “in
connection with” this procurement. Id. Count I alleges that STOPSO failed to comply with FAR
52.219-14(c)(1), the LOS Requirement incorporated into the RFP, requiring that “[a]t least 50
percent of the cost of contract performance incurred for personnel shall be expended for
employees of the concern.” Compl. ¶¶ 32–44. Count I also alleges that the position of Industrial
Hygienist improperly was included in STOPSO’s labor costs, since REDACTED was a
subcontractor, so that STOPSO’s actual labor costs were only 49.93%. Compl. ¶ 39. Therefore,
the FBI’s review of STOPSO’s proposal was “arbitrary and capricious, contrary to law, and
unreasonable.” Compl. ¶ 41. In addition, Count I alleges that the FBI made three mistakes in its
review of STOPSO’s proposal: (1) it failed to act on an improper calculation in STOPSO’s
proposal; (2) it failed to act on STOPSO’s use of a 1099 employee for the Industrial Hygienist
position; and (3) it failed to conduct discussions with STOPSO about their proposal’s failure to
comply with the LOS Requirement. Compl. ¶¶ 37–43.

        Count II alleges that “to the extent STOPSO’s proposal was conditional, it should be
deemed unacceptable for failure to unambiguously demonstrate acceptance [of the LOS
Requirement].” Compl. ¶ 47. If STOPSO’s proposal of the Industrial Hygienist as an
independent contractor was conditional, thereby reducing the overall proposal price, then “the
assertion [was] merely a promise that STOPSO could meet the [LOS Requirement] sometime
post award,” invalidating STOPSO’s proposal. Compl. ¶ 48. Therefore, the FBI should have
discussed this issue with STOPSO or deemed STOPSO’s proposal noncompliant. Compl. ¶¶ 49–
50.




                                               7
        Accordingly, the August 13, 2014 Complaint alleges sufficient facts of a money-
mandating claim to satisfy 28 U.S.C. § 1491(b)(1), as it places at issue violations of law and/or
regulation “in connection with” this procurement.

       B.      Standing.

         As a threshold matter, a plaintiff contesting the award of a federal contract must establish
that it is an “interested party” to have standing under 28 U.S.C. § 1491(b)(1). See Myers
Investigative & Sec. Servs. v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002) (“[S]tanding is
a threshold jurisdictional issue.”). The United States Court of Appeals for the Federal Circuit
has construed the term “interested party” under 28 U.S.C. § 1491(b)(1) as synonymous with
“interested party” under CICA, 31 U.S.C. § 3551(2)(A) (2006). See Rex Serv. Corp. v. United
States, 448 F.3d 1305, 1307 (Fed. Cir. 2006) (citing decisions adopting the CICA definition of
“interested party” for 28 U.S.C. § 1491(b)(1) purposes). A two-part test is applied to determine
whether a protestor is an “interested party:” the protestor must show that “(1) it was an actual or
prospective bidder or offeror, and (2) it had a direct economic interest in the procurement or
proposed procurement.” Distrib. Solutions, Inc. v. United States, 539 F.3d 1340, 1344 (Fed. Cir.
2008) (citations omitted). In addition, to establish “interested party” status, a protestor must
show the alleged errors in the procurement were prejudicial. See Labatt Food Serv.,
Inc. v. United States (“Labatt”), 577 F.3d 1375, 1378–79 (Fed. Cir. 2009) (“It is basic that
because the question of prejudice goes directly to the question of standing, the prejudice issue
must be reached before addressing the merits.”) (internal citations and quotations omitted); see
also Myers Investigative and Sec. Serv., Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir.
2002) (“[P]rejudice (or injury) is a necessary element of standing.”). A party demonstrates
prejudice when “it can show that but for the error, it would have had a substantial chance of
securing the contract.” Labatt, 577 F.3d at 1378. Importantly, a proper standing inquiry must
not conflate the requirement of “direct economic interest” with prejudicial error. Id. at 1380
(examining economic interest but excluding prejudicial error from the standing inquiry “would
create a rule that, to an unsuccessful but economically interested offeror in a bid protest, any
error is harmful[]”).

       In this case, Lynxnet submitted a proposal in response to the RFP. AR Tab 3a–f, at 277–
1077. As an interested bidder, Lynxnet satisfies the first element of the “interested party” test.
See Distrib. Solutions, Inc., 539 F.3d at 1344.

        As to the second element, i.e., that plaintiff “must show that it had a ‘substantial chance’
of winning the contract,” Lynxnet has satisfied that element, because the FBI considered
Lynxnet’s bid competitive and awarded it a Technical rating of “Exceptional.” AR Tab 30, at
2940; AR Tab 40, at 3169. Only Lynxnet and STOPSO received this rating. AR Tab 30, at
2940. Since the FBI gave the offerors’ Technical ratings the most weight of the non-price
factors, there was a “substantial chance” that the FBI would have awarded the contract to
Lynxnet. In fact, the FBI’s April 25, 2014 Final Award Recommendation Report “REDACTED.”
AR Tab 29, at 2528. Therefore, as a matter of law, Lynxnet also meets the second element of the
“interested party” test by showing “direct economic harm.”

        As to prejudice, Lynxnet contends that the FBI failed to exclude STOPSO’s proposal,
despite the fact that it was not in compliance with the LOS Requirement. Pl. 8/29/14 Mot. at 1


                                                 8
(“STOPSO’s proposal, on its face, did not agree to comply with the Solicitation’s Limitations on
Subcontracting (‘LOS’) requirement [in FAR 52.219-14(c)(1)].”). The FBI’s failure to exclude a
proposal that did not comply with the requirements of the RFP would constitute an error. In
turn, this error would prejudice Lynxnet, because “there is a ‘substantial chance’ [that Plaintiff]
would have received the contract award but for the . . . error[] in the bid process.” Bannum,
Inc. v. United States, 404 F.3d 1346, 1358 (Fed. Cir. 2005); see also Labatt, 577 F.3d at 1380.

       For these reasons, the court has determined that Lynxnet has standing to seek an
adjudication of this bid protest.

       C.      Standard of Review.

        Pursuant to the Tucker Act, as amended by the Administrative Dispute Resolution Act,
Pub. L. No. 104-320 § 12, 110 Stat. 3870, 3874 (Oct. 19, 1996), the United States Court of
Federal Claims is authorized to review challenges to agency decisions, pursuant to the standards
set forth in the Administrative Procedure Act (“APA”), 5 U.S.C. § 706.                    See 28
U.S.C. § 1491(b)(4) (“In any action under this subsection, the courts shall review the agency’s
decision pursuant to the standards set forth in section 706 of title 5.”); see also 5
U.S.C. § 706(2)(A) (“The reviewing court shall . . . hold unlawful and set aside agency action,
findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or
otherwise not in accordance with law[.]”); Banknote Corp. of Am., Inc. v. United States, 365 F.3d
1345, 1350 (Fed. Cir. 2004) (“Among the various APA standards of review in section 706, the
proper standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A): a
reviewing court shall set aside the agency action if it is ‘arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law.’”) (citations omitted); Weeks Marine,
Inc. v. United States, 575 F.3d 1352, 1358 (Fed. Cir. 2009) (same).
        When a bid protest is based on a regulatory or procedural violation, i.e., “not in
accordance with law,” our appellate court also has imposed an additional requirement that “the
disappointed bidder must show a clear and prejudicial violation of applicable statutes or
regulations.” Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009)
(internal quotations and citations omitted). This burden is even greater when the procurement is
a “best value” procurement, as is the case here. See Galen Med. Assocs., Inc. v. United States,
369 F.3d 1324, 1330 (Fed. Cir. 2004) (“[A]s the contract was to be awarded based on ‘best
value,’ the contracting officer had even greater discretion . . . . [T]he relative merit of competing
proposals is primarily a matter of administrative discretion.”) (citations omitted); see also TRW,
Inc. v. Unisys Corp., 98 F.3d 1325, 1327 (Fed. Cir. 1996) (“In determining whether the agency
has complied with the regulation authorizing best value procurements, the [reviewing authority]
may overturn an agency’s decision if it is not grounded in reason.”).
       If an award decision is challenged, because it was made without a rational basis, the trial
court must determine “whether the contracting agency provided a coherent and reasonable
explanation of its exercise of discretion, and the disappointed bidder bears a heavy burden of
showing that the award decision had no rational basis.” Impresa Construzioni Geom. Domenico
Garufi v. United States, 238 F.3d 1324, 1332–33 (Fed. Cir. 2001) (international citations and
quotations omitted); see also Savantage Fin. Servs., Inc. v. United States, 595 F.3d 1282, 1287
(Fed. Cir. 2010) (“[W]e must sustain an agency action unless the action does not evince rational



                                                 9
reasoning and consideration of relevant factors.”) (internal alterations, quotations, and citations
omitted); Weeks Marine, 575 F.3d at 1368–69 (“We have stated that procurement decisions
invoke highly deferential rational basis review . . . . Under that standard, we sustain an agency
action evincing rational reasoning and consideration of relevant factors.”) (internal alterations,
quotations, and citations omitted).
         In the alternative, if an award decision is challenged on the grounds that an agency acted
in an arbitrary or capricious manner, the court may intervene “only in extremely limited
circumstances.” United States v. John C. Grimberg Co., Inc., 702 F.2d 1362, 1372 (Fed. Cir.
1983). “Courts have found an agency’s decision to be arbitrary and capricious when the agency
‘entirely failed to consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or [the decision] is so implausible
that it could not be ascribed to a difference in view or the product of agency expertise.’” Ala.
Aircraft Indus., Inc.-Birmingham v. United States, 586 F.3d 1372, 1375 (Fed. Cir. 2009) (quoting
Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)); see also
John C. Grimberg Co., Inc., 702 F.2d at 1372 (holding that the court may set aside agency action
“only in extremely limited circumstances”).
       In this case, the parties have filed Cross-Motions For Judgment On The Administrative
Record, requiring the court to conduct a proceeding akin to an expedited trial on the record. See
RCFC 52.1; see also Bannum, 404 F.3d at 1356 (“[T]he judgment on an administrative record is
properly understood as intending to provide for an expedited trial on the record.”). The existence
of a material issue of fact, however, does not prohibit the court from granting a motion for
judgment on the administrative record, although the court has not conducted an evidentiary
proceeding. Bannum, 404 F.3d at 1357 (authorizing the court to make “factual findings under
RCFC [52.1] 10 from the [limited] record evidence as if it were conducting a trial on the record”).

       D.      Whether The Federal Bureau Of Investigation’s Contract Award To
               Strategic Operational Solutions Violated FAR 52.219-14(c)(1).

               1.      Plaintiff’s Argument.

         Lynxnet (“Plaintiff”) argues that the FBI violated FAR 52.219-14(c)(1) (requiring that
“[a]t least 50 percent of the cost of contract performance incurred for personnel shall be
expended for employees of the concern[]”), because “STOPSO proposed an Industrial Hygienist
in a ‘1099’ position (i.e., an independent contractor),” so that 50 percent of the personnel cost of
contract performance was not for STOPSO employees. Pl. 8/29/14 Mem. at 2 (citing AR Tab
13, at 2527 (statement in STOPSO’s proposal that reads: “STOPSO will attempt to source [the
Industrial Hygienist] position as a 1099 if it enables us to provide this highly qualified position at
a reasonable rate for the [G]overnment.”)). Plaintiff also relies on REDACTED February 5, 2014
letter, indicating that his employment was contingent on STOPSO receiving the contract award.
       10
           In 2006, RCFC 56.1 “Review of a Decision on the Basis of the Administrative Record”
was repealed and replaced with RCFC 52.1, to conform to the United States Court of Appeals for
the Federal Circuit’s decision in Bannum, 404 F.3d at 1354 (holding that the court should “make
factual findings from the record evidence as if it were conducting a trial on the record”). See
RCFC 52.1, 2006 Rules Committee Notes.



                                                 10
Pl. 9/10/14 Opp. & Reply at 8–9 (citing AR Tab 4b, at 1287). In addition, “[t]he nature of an
Industrial Hygienist’s specialized skills, the STOPSO proposal, and the Solicitation SOW all
confirm that STOPSO’s proposed Industrial Hygienist is an independent contractor.” Pl. 8/29/14
Mem. at 16. Therefore, STOPSO’s actual employee cost, excluding the Industrial Hygienist, is
49.93%, or short of the 50% LOS Requirement. Pl. 8/29/14 Mem. at 18–19. 11

        Plaintiff insists that compliance with the LOS Requirement is a matter of proposal
acceptability. Pl. 8/29/14 Mem. at 12–13; Pl. 9/10/14 Opp. & Reply at 4. Therefore, the FBI
should have rejected STOPSO’s proposal for noncompliance with a material solicitation
requirement. Pl. 8/29/14 Mem. at 21–23. “[T]he issue is not whether STOPSO could comply
with the requirements of the LOS clause, but rather whether STOPSO agreed it would comply
with the requirements of the clause.” Pl. 8/29/14 Mem. at 21 (emphasis in original). In the
alternative, STOPSO’s proposal is unacceptably ambiguous, and “the FBI’s acceptance of
STOPSO’s offer despite its conditional nature . . . was an improper waiver . . . of the
Solicitation’s LOS [R]equirement.” Pl. 8/29/14 Mem. at 22–23.

              2.      The Government’s and Strategic Operational Solutions’ Response.

        The Government and STOPSO respond that Plaintiff misinterpreted the statement that
“STOPSO will attempt to source this position as a 1099 if it enables [STOPSO] to provide this
highly qualified position at a reasonable rate for the [G]overnment.” AR Tab 13, at 2527.
“STOPSO simply alerted the FBI to the fact that, during contract performance, STOPSO might
classify REDACTED as an independent contractor as a potential way to save cost (i.e., lower the
proposed ‘employee’ rate of $ REDACTED/hour).” Int. 9/5/14 Mem. at 13; see also Int. 9/5/14
Mem. at 24–25 (stating that STOPSO was “committing to . . . full compliance with the LOS
clause”); Gov’t 9/15/14 Reply at 4 (referring to the conditional statement as “a performance-
related aside”).

        The Government and STOPSO further contend that Plaintiff’s characterization of
REDACTED    as a subcontractor “ignores the record.” Gov’t 9/5/14 Mem. at 1; Int. 9/5/14 Mem. at
4 (complaining that Plaintiff “cherry-picked a single phrase to characterize STOPSO’s proposal
as something other than what it was, while ignoring the rest of STOPSO’s proposal”). STOPSO
adds that this sentence was “unnecessary and had no material impact on the proposal.” Int.
9/5/14 Mem. at 13; see also Gov’t 9/15/14 Reply at 2–5 (explaining that the sentence does not
eviscerate STOPSO’s compliance with the LOS Requirement). In fact, the staffing matrix in
STOPSO’s Technical Volume properly informed the FBI that REDACTED would be a prime
contractor hire. Gov’t 9/5/14 Mem. at 11–12; Int. 9/5/14 Mem. at 7. By coding REDACTED
position with a “P”, STOPSO “unequivocally proposed the Industrial Hygienist as a prime




       11
            Plaintiff also implies that STOPSO’s failure to hire REDACTED as an employee
evidences that he was an independent contractor. Pl. 9/10/14 Opp. & Reply 13–14. REDACTED
hire, however, was delayed by the voluntary stay entered into by the parties. See Docket No. 18,
at 2; Int. 9/15/14 Reply 7 n.2.



                                              11
employee.” Gov’t 9/15/14 Reply at 4 (citing AR Tab 4b, at 1287); Int. Mot. at 7 (citing AR Tab
4c, at 1179). 12

       The Government and STOPSO also refute Plaintiff’s characterization of REDACTED
February 5, 2014 letter, arguing that the contingency “clearly related to a condition precedent
required to occur before REDACTED would be employed—not whether he would be brought on as
a subcontractor or prime employee.” Gov’t 9/15/14 Reply at 6; Int. 9/15/14 Reply at 6–7.
STOPSO also notes that “all personnel on the contract, whether the employee currently worked
for STOPSO or not” signed identical letters of intent. Int. 9/15/14 Reply at 6.

        In addition, the Government and STOPSO cite other record evidence that confirms that
REDACTED    was a prime contractor employee. STOPSO’s proposal provided the FBI with a labor
rate build-up for each of its employees, but not for subcontractors. Int. 9/5/14 Mem. at 8–12.
These build-ups included proposed overhead, including fringe benefits. Int. 9/5/14 Mem. at 11.
STOPSO emphasized that fringe benefits applied only to employees. Int. 9/5/14 Mem. at 11–12.
Specifically, the labor rate build-up included a REDACTED profit/fee for STOPSO employees. In
contrast, STOPSO included a REDACTED handling fee for subcontractors. Int. 9/5/14 Mem. at 9–
10. STOPSO created a labor rate build-up for the Industrial Hygienist position that included
both fringe benefits and a REDACTED profit/fee. Int. 9/5/14 Mem. at 8–12. STOPSO did not
include REDACTED or the Industrial Hygienist position when listing its proposed subcontractors.
Gov’t 9/15/14 Reply at 4 (citing AR Tab 13, at 2528–30); Int. 9/5/14 Mem. at 7–8. STOPSO
listed only three “Proposed Probable Subcontractors”— REDACTED, REDACTED, and REDACTED
—as “Team STOPSO.” Gov’t 9/5/14 Mem. at 13 (citing AR Tab 13, at 2528); Int. 9/5/14 Mem.
at 7 (citing AR Tab 4b, at 1111). Finally, STOPSO unconditionally accepted all conditions of
the contract, including compliance with the LOS Requirement. Gov’t 9/5/14 Mem. at 13 (citing
STOPSO’s statement at AR Tab 13, at 2496 that it “thoroughly underst[oo]d all requirements of
the solicitation and its amendments” and intended to “unconditionally accept all terms and
conditions with no exceptions”).

              3.      The Court’s Resolution.

        Plaintiff’s noncompliance with the LOS Requirement argument is based on the following
statement in STOPSO’s nearly 500-page proposal: “STOPSO will attempt to source [the
Industrial Hygienist] position as a 1099 if it enables [STOPSO] to provide this highly qualified
position at a reasonable rate for the [G]overnment.” AR Tab 13, at 2527 (emphasis added).
STOPSO’s staffing matrix, however, identified this individual as a STOPSO employee. AR Tab
4b, at 1179. This is not inconsistent with REDACTED February 5, 2014 letter that states: “The
position is contingent upon contract award and funding for Solicitation #DJF-14-1200-
0000040[.]” AR Tab 4b, at 1287. Nothing in this letter provides any indication that REDACTED
was a subcontractor. In fact, the Administrative Record contains numerous letters of intent from
Plaintiff indicating that other potential employee positions were conditional or contingent. See
generally AR Tab 3b, at 408–523.

       12
         Although REDACTED could possibly have been coded as “P/C” for contingent hire by
the prime contractor, “[s]uch a designation still would have indicated REDACTED status as a
STOPSO employee under the proposal, not a subcontractor.” Int. 9/15/14 Reply at 7.



                                              12
        Plaintiff also suggests that the combination of REDACTED specialized skills, duties,
advanced degrees, and high hourly wage establish that the Industrial Hygienist position was that
of a subcontractor. Pl. 8/29/14 Mem. at 16–17. But, references to the Industrial Hygienist
position elsewhere in STOPSO’s proposal do not support that contention. Notably, STOPSO’s
labor rate build-up for the Industrial Hygienist position included fringe benefits and a REDACTED
profit/fee attributed only to employees. AR Tab 13, at 2515. 13 In addition, STOPSO did not list
REDACTED as a proposed subcontractor nor include the REDACTED subcontractor handling fee in
the labor rate build-up for the Industrial Hygienist position. AR Tab 4a, at 1083; AR Tab 4b, at
1111; AR Tab 13, at 2516; AR Tab 13, at 2528.

        For these reasons, the court has determined that the FBI’s contract award to STOPSO did
not violate FAR 52.219-14(c)(1).

       E.      Whether The Federal Bureau Of Investigation’s Review Of Strategic
               Operational Solutions’ Proposal Otherwise Violated The Administrative
               Procedures Act.

               1.     Plaintiff’s Argument.

        Plaintiff argues that the Government’s review of STOPSO’s proposal was arbitrary and
capricious or an abuse of discretion, and contrary to procurement law for three reasons. First, the
FBI “Fail[ed] to Act on STOPSO’s Improper Proposal Calculation (‘50.1%’) of the Cost of
Contract Performance When It Obviously Included ‘Fee’ and ‘Pass Thru’ Charges[.]” Pl.
8/29/14 Mem. at 13. Second, the FBI “Fail[ed] to Act on STOPSO’s Use of a ‘1099[.]’” Pl.
8/29/14 Mem. at 14. Third, the FBI “Fail[ed] to Conduct Discussions With STOPSO Regarding
Its Not Meeting the LOS Requirement[.]” Pl. 8/29/14 Mem. at 18.

        First, the FBI “neglected to recognize, ignored, or improperly waived a glaring issue on
the face of STOPSO’s proposal,” because it “included profit (‘[a REDACTED] fee’ and ‘pass thru’
charges)” (Pl. 8/29/14 Mem. at 13) in violation of 13 C.F.R. § 125.1(g) that defines: “Cost of
contract performance incurred for personnel” as “direct labor costs and any overhead which has
only direct labor as its base, plus the concern’s General and Administrative rate multiplied by the
labor cost.” 13 C.F.R. § 125.1(g) (emphasis added).




       13
          The Government also notes that “none of the other five competitive offerors proposed
the Industrial Hygienist as a 1099.” Gov’t 9/15/14 Reply at 4 n.4.



                                                13
addition, the SBA concluded that “STOPSO will perform more than 50% of the contract labor
with its own employees.” Int. 9/5/14 Mem. at 5 (citing AR Tab 56, at 3584). The SBA found
that STOPSO complied with the LOS Requirement, because when recalculated, STOPSO’s
proposal indicates that it would incur 50.55% of the labor costs. Gov’t 9/15/14 Reply at 3 n.2, 4
n.3. This amount complies with the LOS Requirement, as it is a .45% increase from STOPSO’s
purported miscalculation of labor costs. Gov’t 9/15/14 Reply at 4 n.3; Int. 9/15/14 Mem. at 13–
14 (“[Plaintiff] is literally arguing that the FBI committed a material mistake because STOPSO
included a table allegedly showing it would perform 50.1% of the cost of labor on its own
employees instead of 50.55%, when the requirement under the LOS clause is only 50%[.]”)
(emphasis omitted). Moreover, Lynxnet also struggled to determine the appropriate method for
calculating STOPSO’s labor costs. Int. 9/5/14 Mem. at 3–4 nn. 1–2.

         As to the allegations that the FBI’s contracting officer should have discussed these
purported mistakes with Plaintiff, the Government describes this argument as “succumb[ing] to
the logical fallacy that an absence of evidence amounts to evidence of absence” and “ignores the
more obvious reality—the Government elected not to redundantly acknowledge a point that was
clear on the face of STOPSO’s proposal.” Gov’t 9/15/14 Reply at 2 n.1; Int. 9/15/14 Reply at 15
(“The reason the FBI did not raise what [Plaintiff] terms ‘the 1099 issue’ in discussions is quite
simple, though: STOPSO’s proposal did not actually propose or price a 1099, but rather, clearly
proposed its [I]ndustrial [H]ygienist position as a STOPSO employee.”). Therefore, Plaintiff
“failed to carry its burden” in challenging the contract award to STOPSO. Gov’t 9/5/14 Mem. at
2; Int. 9/15/14 Reply at 10.

               3.     The Court’s Resolution.

        Plaintiff is correct that 13 C.F.R. § 125.1(g) does not allow a contractor to include
indirect costs, such as the REDACTED fee included in STOPSO’s proposal. AR Tab 13 at 2494
(REDACTED fee line). For that reason, the FBI contracting officer recalculated STOPSO’s
“Proposal Cost/Price Fee: Total Price Summary” to exclude the REDACTED fee. AR Tab 46a, at
3476. In doing so, the contracting officer confirmed that STOPSO’s proposal was compliant and
still well below Plaintiff’s proposed price. Although the contracting officer could have brought
this issue to the attention of STOPSO for correction, under these circumstances, the court does
not consider the contracting officer’s decision to make the correction a material error. See Axiom
Res. Mgmt., 564 F.3d at 1381 (holding that an error by the procuring agency must be “clear and
prejudicial” to overturn an award decision).

        To establish a lack of a rational basis, a plaintiff must show that the agency failed to
reduce to writing a “rational reasoning and consideration of relevant factors.” Savantage Fin.
Servs., 595 F.3d at 1287. In this case, the Administrative Record evidences that the FBI’s
decision that REDACTED was a STOPSO employee and not an independent contractor was
carefully considered, as reflected in evaluation documents. AR Tab 1a, at 98, 99; AR Tab 4a, at
1083; AR Tab 4b, at 1179, 1287; AR Tab 13, at 2528−30. Therefore, the court cannot find in
good faith that the FBI did not have a “rational basis” in awarding the contract to STOPSO. See
Bannum, 404 F.3d at 1355, 1357 (requiring the United States Court of Federal Claims to
“weigh[] the evidence” of procurement errors “as if it were conducting a trial on the record”); see
also Weeks Marine, 575 F.3d at 1368–69 (“[P]rocurement decisions invoke[] highly deferential
rational basis review . . . . Under that standard, we sustain an agency action evincing rational


                                                15
reasoning and consideration of relevant factors.”) (internal quotations and citations omitted);
Centech Group, Inc. v. United States, 554 F.3d 1029, 1037 (Fed. Cir. 2009) (requiring the court
to “determine whether the contracting agency provided a coherent and reasonable explanation of
its exercise of discretion, and the disappointed bidder bears a heavy burden of showing that the
award decision had no rational basis”) (internal citations and quotations omitted).

        To overturn an award decision as arbitrary or capricious, the court must determine that
the agency “entirely failed to consider an important aspect of the problem, offered an explanation
for its decision that runs counter to the evidence before the agency, or [the decision] is so
implausible that it could not be ascribed to a difference in view or the product of agency
expertise.” State Farm Mut. Auto. Ins. Co., 463 U.S. at 43; see also John C. Grimberg Co., 702
F.2d at 1372 (holding that the court may set aside agency action “only in extremely limited
circumstances”).

        Finally, Plaintiff’s allegations that the contracting officer did not consider nor discuss
STOPSO’s purported mistakes is not dispositive. The court cannot assume that the contracting
officer did not consider STOPSO’s compliance with the LOS Requirement, based on the absence
of an explicit reference in the Administrative Record of that fact. Plaintiff’s request that the
court establish a rule whereby agencies affirmatively must document compliance with each and
every proposal requirement is not the law. See John C. Grimberg Co., 702 F.2d at 1372 (“[The
United States Court of Federal Claims’] equitable powers should be exercised in a way which
best limits judicial interference in contract procurement and administration.”); see also Ala.
Aircraft Indus. Inc.-Birmingham, 586 F.3d at 1375 (holding that the court must find that “the
agency entirely failed to consider an important aspect of the problem, offered an explanation for
its decision that runs counter to the evidence before the agency, or [the decision] is so
implausible that it could not be ascribed to a difference in view or the product of agency
expertise”) (internal quotation marks and citations omitted). The court has been authorized by
Congress to adjudicate cases only when the contracting officer’s decision lacked a rational basis
or was arbitrary or capricious, which Plaintiff has not established.

        For these reasons, the court has determined that the FBI’s decision to award the contract
to STOPSO was not “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance
with law[.]” 5 U.S.C. § 706(2)(A); see also 28 U.S.C. § 1491(b)(4). Assuming, arguendo, there
is a violation, Plaintiff failed to establish that the FBI’s best value procurement decision was not
“grounded in reason.” Unisys Corp., 98 F.3d at 1327; see also Galen Med. Assocs., Inc., 369
F.3d at 1330 (holding that a contracting officer has great discretion in best value procurement
decisions).

IV.    CONCLUSION.

      For reasons discussed herein, Plaintiff’s August 29, 2014 Motion For Judgment On The
Administrative Record is denied. The Government’s and Intervenor’s September 5, 2014 Cross-
Motions are granted. Accordingly, the Clerk is direct to enter judgment on behalf of the
Government and Intervenor.

       No costs.




                                                16
IT IS SO ORDERED.
                         s/ Susan G. Braden
                         SUSAN G. BRADEN
                         Judge




                    17
