     In the United States Court of Federal Claims
                                   No. 16-1549C
                             (Filed: January 25, 2017)
                           (Re-filed: February 3, 2017)1

**********************

ECOSYSTEM INVESTMENT PARTNERS,

              Plaintiff,
                                            Bid protest; Standing; Waiver; 28
                                            U.S.C. § 1491(b)(1); Interested
v.
                                            Party; Prospective Bidder.

THE UNITED STATES,

              Defendant,

and

CROSBY DREDGING, LLC,

              Defendant-Intervenor.

**********************

       Thomas L. McGovern, Washington, DC, with whom were Brendan M.
Lill and Katherine L. Morga, for plaintiff.

        Geoffrey M. Long, United States Department of Justice, Civil Division,
Commercial Litigation Branch, Washington, DC, with whom were Benjamin
C. Mizer, Principal Deputy Assistant Attorney General, Robert E. Kirschman,
Jr., Director, and Martin F. Hockey, Jr., Assistant Director, for defendant.

       John F. Emmett, New Orleans, LA, for intervenor.




1
 This opinion was originally issued under seal pursuant to the protective order
entered in this case. The parties conferred and did not propose any redactions
of protected information.
                                    OPINION

        Plaintiff, Ecosystem Investment Partners (“EIP”), protests the United
States Army Corps of Engineers’ (the “Corps”) award of a contract to
intervenor, Crosby Dredging, LLC (“Crosby Dredging”), for the provision of
dredging and construction services as part of a compensatory environmental
mitigation plan to offset other work the Corps was doing to safeguard against
possible future storm damage. EIP was not a bidder in connection with this
dredging solicitation, but it operated an environmental mitigation credit bank,
which it argues should have been selected as part of an earlier environmental
administrative action to accomplish the necessary mitigation effects. In other
words, plaintiff has no critique to offer of the current dredge and fill
solicitation other than its argument that the solicitation would have been
unnecessary if the Corps had correctly assessed its environmental options
earlier. The case raises the novel question of whether a challenge to the
Corps’ actions in connection with developing a plan to mitigate its own
environmental impacts can be heard as a bid protest.

        On December 9, 2016, defendant moved to dismiss the complaint for
lack of subject-matter jurisdiction or, in the alternative, to dismiss the
complaint in part for failure to state a claim.2 Oral argument was held on
January 5, 2017. As we announced at the conclusion of oral argument, we find
that plaintiff was not an “interested party” within the meaning of 28 U.S.C. §
1491(b)(1) (2012), and, in any event, waived its right to challenge the terms
of the solicitation by not filing a protest prior to bid opening. In addition, we
conclude that plaintiff’s real dispute here does not raise a matter “in
connection with a procurement or a proposed procurement” and thus we lack
subject-matter jurisdiction for a third reason. We therefore grant defendant’s
motion to dismiss for lack of subject-matter jurisdiction.

                                BACKGROUND

        In response to the damage caused by Hurricanes Katrina and Rita in
2005, the Corps set out to build a flood risk reduction system surrounding the
New Orleans metropolitan area known as the Hurricane and Storm Damage
Risk Reduction System (“HSDRRS”). During construction of the $14.5
billion project, various wetland habitats, including wildlife refuges in the area,


2
    Intervenor joined defendant’s motion without separately filing any briefing.

                                         2
were damaged. The Clean Water Act (“CWA”) and the Water Resources
Development Act of 1986 (“WRDA”), as amended, require that the Corps, as
would any private party, act to mitigate such damage by implementing a plan
to offset environmental impacts. Specifically, the Corps is required to ensure
that impacts to a particular habitat are mitigated through measures to preserve
that same type of habitat.

         Required habitat mitigation can be accomplished through different
means, including mitigation banking (buying credits from an authorized
“bank”), contracting with an “in-lieu” fee provider (explained below), or
through a Corps-constructed restoration project. In the case of mitigation
banking, the credit provider places a permanent encumbrance on its land in
exchange for a certain amount of credits, which it can then sell to private
developers, or, in this case, to the Corps itself. A second option, not relevant
in this case, is the use of in-lieu fee providers, where the credit provider is
given provisional credits that it can market. Once it completes a transaction,
the in-lieu fee provider then has the responsibility of securing land and placing
a conservation easement on that land. See generally Pioneer Reserve, LLC v.
United States, 128 Fed. Cl. 483 (2016). A third option for the Corps here was
that it could design and implement its own restoration project. The mitigation
plan adopted by the Corps in this case included both the purchase of mitigation
credits and Corps-constructed restoration projects.

       One factor limiting the Corps’ options was a policy of the United States
Fish and Wildlife Service to the effect that, when the impacts occur on national
wildlife refuge property, mitigation also must take place on refuge property.
See Final Policy on the National Wildlife Refuge System and Compensatory
Mitigation under the Section 10/404 Program, 64 Fed. Reg. 49229 (September
10, 1999). As a practical matter, this policy had the effect of removing the
option of purchasing private mitigation banking credits in order to mitigate for
environmental impacts occurring on national wildlife refuge property.

       The Corps’ initial proposed mitigation plan was described and
evaluated in Programmatic Individual Environmental Report #36 (“PIER
#36”), which was prepared in accordance with the National Environmental
Policy Act, 42 U.S.C. §§ 4321-4370h (2012). PIER #36’s stated purpose was
to compensate for habitat losses caused by the construction of HSDRRS. It
addressed six types of habitats: swamp, bottomland hardwood (“BLH”)-dry,
BLH-wet, fresh marsh, intermediate marsh, and brackish marsh. PIER #36
proposed to meet nearly 40% of its total mitigation needs through the purchase

                                       3
of mitigation credits for the swamp and BLH wet/dry habitat impacts. In
relevant part, the plan also proposed that the Bayou Sauvage Marsh
Restoration project would provide all the necessary mitigation for both on- and
off-refuge brackish marsh impacts. This plan meant that EIP would not be
able to sell the brackish marsh mitigation credits generated by its Chef
Menteur Pass Mitigation Bank (“Chef Bank”) in connection with the
mitigation plan. PIER #36 was released for public review and comment from
August 12, 2013 to September 25, 2013. During this time, EIP made a number
of comments, including a recommendation that PIER #36 recognize its Chef
Bank “as a source of brackish marsh mitigation available for HSDRRS use
either as the preferred alternative (subject to credit availability and price at
time of solicitation) or at least as a source of alternative mitigation if the corps-
constructed alternatives prove to be unfeasible or overly expenses.” AR 1509.

       On October 20, 2015, the Corps issued the Individual Environmental
Report Prepared to Supplement: Programmatic Individual Environmental
Report (PIER) 36 Bayou Sauvage, Turtle Bayou & New Zydeco Ridge
Restoration Project Saint Tammany & Orleans Parishes, Louisiana PIER 36,
Supplement 1 (“SIER 1”). SIER 1 explained that, due to increased cost
estimates, the Bayou Sauvage Marsh Restoration project was no longer
considered feasible. The Corps decided to move the location of these
restoration features within the same area in order to lower the cost of the
project. SIER 1 stated that “[t]his relocation brought the cost of the project
back down such that the exploration of other options to mitigate the
requirement was unnecessary.” AR 1924.

       The new Bayou Sauvage Floodside Brackish Marsh project, however,
only met roughly 81% of the Corps’ brackish marsh mitigation needs. The
Corps proposed to mitigate for the remaining amount of brackish marsh
impacts that the Bayou Sauvage Floodside Brackish Marsh project could not
produce, along with brackish marsh impacts incurred in order to provide
construction access for several restoration projects on national wildlife refuge
properties, by creating approximately 82.3 acres of new brackish marsh as part
of the New Zydeco Ridge Restoration project on the Big Branch Marsh
National Wildlife Refuge. EIP argues as part of this proceeding that it owned
mitigation credits that should have been used to compensate for the off-refuge
brackish marsh mitigation needs left unfulfilled by the Bayou Sauvage
Floodside Marsh project, rather than those needs being satisfied as part of the
New Zydeco Ridge Restoration project. It contends that federal law prioritizes
mitigation in a way that favors use of mitigation banks, and that the Corps’

                                         4
actions violated that law. See 33 U.S.C. §2317b (2012); 33 C.F.R. §
332.3(b)(2) (2017). It did not, however, comment on SIER 1 when it was
distributed for a 30-day comment period from July 9, 2014 to August 8, 2014.

        The Corps issued solicitation No. W912P8-16-B-0027 (the
“Solicitation”) on May 13, 2016, seeking bids for work to be performed in
connection with the New Zydeco Ridge Brackish Marsh Restoration,
mentioned above. The solicitation stated the following as its description of
work: “The work consists of wetland restoration in existing shallow open
water via borrow dredging from a designated borrow pit within Lake
Pontchartrain. . . . The work requires retention dike construction, board road
placement, and a jack-and-bore effort to provide the dredge disposal pipeline
access to the construction site.” AR 885. After several amendments to the
solicitation, the final bid opening date was set for August 4, 2016. EIP did not
submit a bid in response to the solicitation. Crosby Dredging was the lowest
bidder of the six bids submitted at the time of the bid opening and was
awarded the contract on November 18, 2016.

       Throughout the solicitation process for the dredging work, EIP was
involved in a number of discussions with the Corps attempting to reopen the
question of whether mitigation banking credits should have been used rather
than owner-initiated mitigation. It questioned both the scoring methods used
to determine the available amount and cost of credits at Chef Bank and the
Corps’ planned restoration efforts at New Zydeco Ridge. On June 16, 2016,
EIP sent a letter to the Corps expressing its concerns. The letter stated that it
was “essential that there is a consistent, fair and transparent process for the
evaluation of mitigation options.” AR 290-91. Finally, on August 3, 2016, EIP
sent a letter to the Commander and District Engineer of the New Orleans
District, Colonel Michael N. Clancy, seeking “to provide comments for the
District’s consideration on [SIER 1] and [the solicitation].” AR 293. It did not
characterize itself as a protest to the solicitation.

       After the bid opening, EIP filed a protest at the Government
Accountability Office (“GAO”) on August 15, 2016, which GAO dismissed
on November 15, 2016, as untimely because EIP had not protested the terms
of the solicitation prior to the bid opening on August 4, 2016. Specifically,
GAO held that EIP’s August 3, 2016 letter was not intended to be an agency-
level protest, and that, if it was, it failed to conform with the requirements set
out in the solicitation for an agency-level protest. Ecosystem Investment
Partners, B-413587, at 4 (Comp. Gen. Nov. 15, 2016). Three days after its

                                        5
protest was dismissed at GAO, EIP filed the present action on November 18,
2016.

                                 DISCUSSION

        The Tucker Act, as amended in 1996, provides the Court of Federal
Claims with jurisdiction over actions “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.” 28 U.S.C. § 1491(b)(1). Thus, to establish jurisdiction under
this statute, a plaintiff must demonstrate that it is an “interested party.” This
“imposes more stringent standing requirements than Article III” of the
Constitution. Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1359 (Fed.
Cir. 2009). Although the term “interested party” is not defined within the
statute, it has been construed to consist of two elements: first, plaintiff must
establish that it “is an actual or prospective bidder” and second, that it
“possess[es] the requisite direct economic interest.” Id. (citing Rex. Serv. Corp.
v. United States, 448 F.3d 1305, 1308 (Fed. Cir. 2006)).

        There are three independent reasons we cannot entertain this protest,
although, given the unique nature of the protest, it is challenging to frame them
in traditional bid protest language. They all relate, however, to the same
deficiency: plaintiff’s real complaint is with the Corp’s administrative action
in electing to mitigate the environmental impact of its own construction
activities by doing dredge and fill on federally-owned submerged lands rather
than by purchasing mitigation credits from plaintiff. Plaintiff could not
compete for that construction work, and it did not challenge the earlier, critical
decision, namely, how to do mitigation.3

I. Plaintiff Is Not An “Interested Party” And Thus Lacks Standing

         Defendant argues that the complaint must be dismissed because
plaintiff lacks standing. Specifically, defendant asserts that EIP cannot show
that it is an “interested party” under 28 U.S.C. § 1491(b)(1) because plaintiff


3
 We are not suggesting that the court would have had bid protest jurisdiction
if plaintiff had challenged the decision to reject environmental banking credits.
Presumably, such an action would have to be brought in a district court.

                                        6
is neither an actual nor a prospective bidder. Given that EIP did not submit a
bid in response to the solicitation, we find that EIP is not an actual bidder.
Defendant argues that EIP also failed to establish its status as a prospective
bidder by not filing a protest prior to the close of the proposal period on
August 4, 2016. Plaintiff, on the other hand, argues that it can qualify as a
prospective bidder without having submitted a bid because it was deprived of
an opportunity to do so as a result of the Corps’ allegedly unlawful conduct.
Plaintiff alleges that the Corps’ decision to solicit a construction restoration
project was improper because it ignored the preference for mitigation banking
by not acknowledging its Chef Bank mitigation credits as the preferred source
of compensatory mitigation.

        EIP is correct in that, under certain circumstances, a plaintiff can have
standing to protest a solicitation without being eligible to bid on it. See CCL,
Inc. v. United States, 39 Fed. Cl. 780, 790 (1997) (holding that “where a claim
is made that the government violated CICA by refusing to engage in a
competitive procurement, it is sufficient for standing purposes if the plaintiff
shows that it likely would have competed for the contract had the government
publicly invited bids”). Plaintiff does not fit into this line of argument,
however, because it failed to diligently pursue its protest rights. In order for
EIP to have standing to challenge the validity of the solicitation, it needed to
either submit a bid or protest prior to the bid opening. See MCI Telecomms.
Corp. v. United States, 878 F.2d 362 (Fed. Cir. 1989) (solicitation must be
pending when protested). As discussed in more detail below, we find that the
August 3, 2016 letter that EIP’s managing partner sent to the Corps was not an
agency-level protest. EIP’s “opportunity to qualify as either an actual or a
prospective bidder end[ed] when the proposal period end[ed]” on August 4,
2016, and it failed to protest the solicitation by this date. Rex Serv. Corp., 448
F.3d 1305, 1308 (Fed. Cir. 2006) (quoting MCI Telecomms., 878 F.2d at 365).
Accordingly, we hold that EIP did not timely establish its status as a
prospective bidder and thus lacks standing to assert its challenge to the
solicitation because it is not an “interested party” within the meaning of
§1491(b)(1).

II. Plaintiff Waived Its Right To Challenge The Terms Of The Solicitation

       For related reasons, plaintiff waived its claim by failing to file a timely
agency-level protest to the terms of the solicitation. Thus, even if we were to
find that plaintiff has standing to challenge the solicitation, plaintiff has
waived its ability to do so. In Blue & Gold Fleet, L.P. v. United States, the

                                        7
Federal Circuit recognized a waiver rule for bid protests, holding that a party
that “has the opportunity to object to the terms of a government solicitation
containing a patent error and fails to do so prior to the close of the bidding
process waives its ability to raise the same objection subsequently in a bid
protest action in the Court of Federal Claims.” 492 F.3d 1308, 1313 (Fed. Cir.
2007). Here, the Corps’ alleged error in not using brackish mitigation credits
as part of the mitigation plan was obvious when the solicitation was issued on
May 13, 2016. In order to avoid waiver, EIP was thus obligated to protest
prior to the “close of the bidding process,” which was the date of bid opening
on August 4, 2016.

        Plaintiff argues that the waiver rule should not work to defeat its claim
because it diligently pursued its objections prior to the bid opening date.
Specifically, plaintiff asserts that the letter it sent to the Corps on August 3,
2016, served as an agency-level protest and preserved its right to challenge the
solicitation in this action. Defendant counters by pointing out that this letter
was not filed with the contracting officer, as directed by the solicitation and
Federal Acquisition Regulation (“FAR”) § 33.103(d)(3), and plaintiff also
failed to include certain substance required under FAR § 33.103(d)(2).
Moreover, defendant disputes whether EIP even intended the letter to serve as
a protest. Defendant points to the first sentence of the letter, which simply
states that it was written “to provide comments for the District’s consideration”
of SIER 1 and the solicitation. AR 293.

        We hold that the August 3, 2016 letter was not an agency-level protest
and that plaintiff thus waived its objections to the solicitation by not properly
asserting them prior to the August 4, 2016 bid opening date. The solicitation,
along with the relevant regulations, put EIP on notice as to the requirements
of a formal agency-level protest.4 The letter that EIP now argues was a timely
protest was not addressed to the contracting officer as required by FAR §
33.103(d)(3). Rather, the letter was sent to the Commander and District
Engineer of the New Orleans District. EIP also failed to obtain the written
acknowledgment of receipt of the letter from the contracting officer, which
was expressly required in the Solicition for agency-level protests. AR 893. Nor


4
    The solicitation incorporated by full text FAR § 52.233-2, which instructs that
any protests, as defined in FAR § 33.101, were to be served on the contracting
officer and must seek a written and dated acknowledgment of the contracting
officer’s receipt. AR 893.

                                          8
did the letter include the solicitation number, copies of documents relevant to
the alleged protest, or an express request for a ruling by the agency—all of
which are required under FAR § 33.103(d)(2).

      In Bannum, Inc. v. United States, the Federal Circuit spoke to the
importance of protest formalities, stating that

       [r]equiring that the prescribed formal routes for protest be
       followed (to avoid waiver) reduces uncertainty about whether
       the issue is joined and must be resolved, and thereby helps
       prevent both the wasted and duplicative expenses (of all bidders
       and the government) and the delayed implementation of the
       contract that would likely follow from laxer standards of timely
       presentation of solicitation challenges.

779 F.3d 1376, 1380 (Fed. Cir. 2015) (holding that “mere notice of
dissatisfaction or objection is insufficient to preserve” a defective-solicitation
challenge). As discussed above, EIP’s letter disregarded numerous formal
requirements for an agency-level protest. In sum, the letter seems merely to
be the latest in a continuing series of communications between EIP and the
Corps. Accordingly, we hold that EIP waived its ability to challenge the
solicitation.

III. The Compensatory Mitigation Plan Was Not Formulated “In Connection
With A Procurement”

       Even if there had been a timely protest, there is a more fundamental
problem with this suit. The government action complained of, namely, the
decision to implement a Corp-constructed project rather than purchase
mitigation credits from Chef Bank, was not an act “in connection with a
procurement or a proposed procurement” and thus we do not have jurisdiction
under 28 U.S.C. § 1491(b)(1).

       We recognize that the term “procurement” has been defined broadly,
leaving “[t]he operative phrase ‘in connection with’ . . . very sweeping in
scope.” RAMCOR Services Group, Inc. v. United States, 185 F.3d 1286, 1289
(Fed. Cir. 1999). In Distributed Solutions, Inc. v. United States, 539 F.3d 1340
(Fed. Cir. 2008), the Federal Circuit considered what constitutes a
“procurement” for the purposes of § 1491(b)(1). It borrowed the definition
that Congress provided in 41 U.S.C. § 403(2) (re-codified at 41 U.S.C. § 111),

                                        9
which relates to the creation of the Office of Federal Procurement Policy.
Based on that definition, a procurement thus includes “all stages of the process
of acquiring property or services, beginning with the process for determining
a need for property or services and ending with contract completion and
closeout.” 41 U.S.C. § 111 (2012).

       Plaintiff alleges that the Corps violated federal law by not complying
with a regulatory preference for mitigation credits when it adopted the New
Zydeco Ridge Restoration project as part of its mitigation plan. Plaintiff
considers this to be a “violation of a statute or regulation in connection with
a procurement or a proposed procurement” because of the causal link between
the decision not to use mitigation credits and the issuance of the solicitation.
We disagree.

        Plaintiff directs the court to a handful of cases that involve claims that
it believes are analogous to its challenge to the process of forming the
mitigation plan leading to the solicitation. Unlike the present action, however,
in the cases plaintiff cites, the government was either attempting to avoid or
otherwise directly violating federal procurement law. For example, in
Distributed Solutions, the government issued a request for information but
then used the responses to determine the scope of services it required so it
could then add work to an existing contract. In effect, “the Government
initiated a type of procurement competition without actually committing to
award a contract to the best offeror, thereby circumventing applicable federal
procurement laws.” VFA, Inc. v. United States, 118 Fed. Cl. 735, 740 (2014)
(holding that “[w]hile many courts have cited Distributed Solutions for the
proposition that Tucker Act bid protest jurisdiction is broad, the holding
remains limited by the facts of the case”). Here, the Corps did not seek to
avoid a competitive procurement and EIP does not suggest the solicitation at
issue otherwise violated federal procurement law.

        Plaintiff’s reliance on LABAT-Anderson, Inc. v. United States, 65 Fed.
Cl. 570 (2005), is also misplaced. There, the protester successfully challenged
the Defense Logistics Agency’s decision to perform certain distribution
services in-house without first performing a cost comparison, which it alleged
“violated numerous sources of law that mandate the procurement of supplies
and services from the private sector.” Id. at 574. Plaintiff argues that, as in
LABAT-Anderson, it has made “allegations that a Government agency violated
applicable laws during the pre-solicitation stage of a procurement.” Pl.’s Resp.
at 13. As defendant points out, however, unlike EIP’s challenge, the allegedly

                                       10
violated regulations in LABAT-Anderson were part of the agency’s overall
procurement scheme for the services it sought to acquire. Here, at the time the
Corps was considering its options, it was subject to a web of environmental
policies and regulations that have no necessary connection to the solicitation
for the subsequent dredge and fill contract.

        The Corps’ decision making in connection with how to mitigate the
effects of its own hurricane protection project may have lead to a procurement
in this case, but it is a distortion of Ramcor to suggest that its preliminary
environmental decision making was done “in connection with” a procurement.
As defendant points out, settling on an appropriate compensatory mitigation
plan involves trying to maximize ecological benefits in light of a number of
ecological factors which are wholly unrelated to the proper procurement of
services by the government. Accordingly, we hold that the alleged violation of
a statute with respect to the Corps’ decision to adopt the New Zydeco Ridge
Restoration project as part of its compensatory mitigation plan was not “in
connection with a procurement” pursuant to § 1491(b)(1). The court thus lacks
subject-matter jurisdiction over the claim.

                               CONCLUSION

       For the reasons stated above, we grant defendant’s motion to dismiss
for lack of jurisdiction. The clerk’s office is directed to enter judgment
accordingly. No costs.


                                                  s/Eric G. Bruggink
                                                  Senior Judge




                                      11
