Case: 19-1954    Document: 48     Page: 1   Filed: 06/02/2020




   United States Court of Appeals
       for the Federal Circuit
                  ______________________

                AGILE DEFENSE, INC.,
                  Plaintiff-Appellant

                             v.

                    UNITED STATES,
                    Defendant-Appellee

                      FEDITC, LLC,
                        Defendant
                  ______________________

                        2019-1954
                  ______________________

     Appeal from the United States Court of Federal Claims
 in No. 1:18-cv-01615-LAS, Senior Judge Loren A. Smith.
                  ______________________

                   Decided: June 2, 2020
                  ______________________

    STEPHANIE WILSON, Berenzweig Leonard LLP,
 McLean, VA, for plaintiff-appellant. Also represented by
 TERRENCE O'CONNOR.

     BARBARA E. THOMAS, Commercial Litigation Branch,
 Civil Division, United States Department of Justice, Wash-
 ington, DC, for defendant-appellee. Also represented by
 JOSEPH H. HUNT, MARIANA TERESA ACEVEDO, WILLIAM
 JAMES GRIMALDI, ROBERT EDWARD KIRSCHMAN, JR.,
 DOUGLAS K. MICKLE.
Case: 19-1954     Document: 48     Page: 2     Filed: 06/02/2020




2                        AGILE DEFENSE, INC.   v. UNITED STATES



                   ______________________

    Before REYNA, MAYER, and TARANTO, Circuit Judges.
 MAYER, Circuit Judge.
     Agile Defense, Inc. (“Agile”) appeals the judgment of
 the United States Court of Federal Claims granting the
 government’s motion for judgment on the administrative
 record and concluding that the United States Defense In-
 formation Systems Agency (“DISA”) did not contravene the
 terms of the solicitation when it reviewed the supporting
 documentation for certain proposed cost-reimbursement
 (“CR”) labor rates. See Agile Def., Inc. v. United States, 143
 Fed. Cl. 10 (2019) (“Federal Claims Decision”). We affirm.
                       I. BACKGROUND
                A. The Encore III Solicitation
      On March 2, 2016, DISA issued a solicitation for En-
 core III, a procurement designed to “provid[e] information
 technology . . . solutions for the development, installation,
 fielding, training, operation and life-cycle management of
 components and systems in the operational environments
 of Combatant Commands and their subordinate compo-
 nents, the military services, Defense agencies, Office of the
 Secretary of Defense . . . and other Federal agencies.”
 A. 1145; see also A. 1132–43. The solicitation stated that
 DISA would award a series of indefinite delivery/indefinite
 quantity contracts, A. 1145, and that task orders issued un-
 der the contracts would provide for payment on either a CR
 or a fixed-price (“FP”) basis. A. 1142, 1145–47.
     The solicitation identified 116 labor categories
 (“LCATs”) that a contractor would likely be required to
 staff in order to perform the various types of work required
 by task orders issued under an Encore III contract.
 A. 1263–65, 1282–313. DISA provided a description of the
 duties associated with each of the 116 LCATs; it also set
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 AGILE DEFENSE, INC.   v. UNITED STATES                      3



 forth the minimum education and experience requirements
 for each category. A. 1282–313.
      The Encore III solicitation further provided that DISA
 would make awards to the offerors of the lowest-priced,
 technically-acceptable proposals after considering three
 evaluation factors: (1) technical/management approach; (2)
 past performance; and (3) cost/price. A. 1270–80. Each
 prospective offeror was instructed to provide a “cost/price
 volume” in its proposal. A. 1256. In this volume, the offe-
 ror was required to include a “pricing template,” which
 listed the estimated hourly costs for which the offeror ex-
 pected to claim reimbursement under a CR task order for
 the labor associated with each of the 116 LCATs. A. 1263.
 Each offeror was also required to submit “supporting cost
 information” for all proposed CR labor rates. A. 1263; see
 also A. 1264 (“The offeror must provide the pricing meth-
 odology and supporting cost information utilized in the de-
 velopment of all CR rates.”).
     The solicitation provided for the award of Encore III
 contracts to two distinct sets or “suites” of twenty offerors.
 A. 1252. One suite was open to offerors of any size, whereas
 the other suite was limited to offerors who qualified as
 small-business concerns. A. 1252.
                B. The Cost Realism Analysis
     The solicitation stated that DISA would “perform a cost
 realism analysis on the proposed CR labor rates in accord-
 ance with [Federal Acquisition Regulation (“FAR”)] 15.404-
 1(d) to determine the Most Probable Cost for each Offeror.”
 A. 1280. It further provided that:
         The cost/price team will develop an average for
     each CR labor rate utilizing the proposed CR rates
     on the ‘CR Labor Rate Table’ tab from ALL com-
     plete proposals within each suite (Full and Open
     and Small Business). The team will then calculate
     the standard deviation of the average for each CR
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4                         AGILE DEFENSE, INC.   v. UNITED STATES



    labor rate. The Defense Procurement Acquisition
    Policy Contract Pricing Reference Guidelines (Vol-
    ume 2) detail the use of statistical analysis, includ-
    ing standard deviation, to organize, summarize,
    analyze, and interpret data for contract pricing.
    Standard deviation quantifies the amount of varia-
    tion amongst a set of data. In a normal distribu-
    tion, 1 standard deviation will include the data that
    is 34.1% below or above the average. Therefore,
    with normal distribution, 68.2% of the data will be
    within 1 standard deviation of the average. The
    Government considers a rate that is 1 standard de-
    viation below the average to be a realistic rate, sub-
    ject to cost analysis techniques in accordance with
    FAR 15.404. The initial calculations for [the] Av-
    erage and Standard Deviation will be utilized for
    the entirety of the evaluation and will not be recal-
    culated if a competitive range is set.
        If an offeror’s proposed CR labor rate is more
    than 1 standard deviation below the average for
    that labor rate, the Cost/Price Team will review the
    submitted supporting documentation at the compo-
    nent level for that rate. If it is determined that the
    supporting documentation supports the realism of
    the proposed rate, no adjustment will be made to
    the offeror’s rate. If inadequate or no justification
    is provided by the offeror for any component of that
    rate . . . the Government will adjust the fully bur-
    dened CR Labor rate to be equal to the average for
    purposes of calculating the Most Probable Cost for
    that offeror.
 A. 1280 (emphasis omitted).
                C. Evaluation of Agile’s Proposal
     Agile submitted a proposal in the small-business suite.
 On April 24, 2018, the Encore III contracting officer sent
 letters to all small-business offerors, including Agile,
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 AGILE DEFENSE, INC.   v. UNITED STATES                     5



 announcing that the agency’s discussions with offerors had
 concluded and that each offeror should provide its final pro-
 posal revision (“FPR”) to the agency by May 2, 2018.
 A. 2415–16. During its review of Agile’s FPR, DISA deter-
 mined that many of its proposed CR rates fell more than
 one standard deviation below average rates (“Below-Devi-
 ation Labor Rates”). A. 2658–59. DISA further determined
 that for these Below-Deviation Labor Rates Agile had
 based its proposed rates on salaries paid to pools of workers
 which included workers who did not meet minimum solici-
 tation requirements. See, e.g., A. 298–99, 2439, 2658–60.
     Concerned that Agile’s overall pricing methodology
 might be defective, A. 2659–60, DISA expanded its review
 to Agile’s proposed CR labor rates that fell within one
 standard deviation of the average rates (“Within-Deviation
 Labor Rates”). A. 2660, 2664–65, 2765–66. It sent Agile
 an evaluation notice stating that the rates it proposed for
 a total of sixty-six LCATs were based upon salaries paid to
 pools of workers which included workers not meeting the
 solicitation’s minimum education and experience require-
 ments. A. 2765–67. In response, Agile submitted a second
 FPR in which it indicated that it had “updated all the sal-
 ary surveys for the labor categories the Government in-
 cluded in” its evaluation notice. A. 2802.
     In revising its proposal, Agile increased many of its
 proposed CR rates. A. 2612–13, 3003–04. Ultimately, its
 final proposal yielded a “total evaluated price” that was too
 high to place it among the twenty lowest-priced, techni-
 cally-acceptable offerors in the small-business suite.
 A. 3106–07, 3118; see also A. 1281 (explaining that an offe-
 ror’s “total evaluated price” would be calculated by adding
 its proposed FP rates to its adjusted proposed CR rates).
 Agile was therefore not selected for a contract award.
 A. 3107.
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6                        AGILE DEFENSE, INC.   v. UNITED STATES



                    D. Agile’s Bid Protest
      Agile filed a protest in the Court of Federal Claims on
 October 18, 2018. A. 19. It argued that DISA violated the
 terms of the solicitation by expanding “its cost realism
 analysis to all labor rates in Agile’s [FPR], regardless of
 whether they were more than one standard deviation below
 the average.” Federal Claims Decision, 143 Fed. Cl. at 17
 (citation and internal quotation marks omitted). The Court
 of Federal Claims rejected this argument, however, con-
 cluding that it was “clear from the Solicitation that the
 Agency did not limit itself to only performing cost realism
 analysis on labor rates that were more than one standard
 deviation below the average.” Id. at 18. The court deter-
 mined, moreover, that “the only limitation within the So-
 licitation regarding cost realism analysis was the
 requirement that the Agency perform cost realism analysis
 on CR labor rates that were more than one standard devi-
 ation below the average.” Id.
    Agile then filed a timely appeal with this court. We
 have jurisdiction under 28 U.S.C. § 1295(a)(3).
                       II. DISCUSSION
                   A. Standard of Review
      “Interpretation of [a bid] solicitation is a question of
 law that is reviewed de novo.” Per Aarsleff A/S v. United
 States, 829 F.3d 1303, 1309 (Fed. Cir. 2016) (alteration in
 the original) (citation and internal quotation marks omit-
 ted). This court reviews the merits of a bid protest pursu-
 ant to the standards of the Administrative Procedure Act
 (“APA”). See 28 U.S.C. § 1491(b)(4) (citing 5 U.S.C. § 706);
 AgustaWestland N. Am., Inc. v. United States, 880 F.3d
 1326, 1331–32 (Fed. Cir. 2018). This means that “a bid
 award may be set aside if either: (1) the procurement offi-
 cial’s decision lacked a rational basis; or (2) the procure-
 ment procedure involved a violation of regulation or
 procedure.” Impresa Construzioni Geom. Domenico Garufi
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 AGILE DEFENSE, INC.   v. UNITED STATES                      7



 v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001); see
 also Banknote Corp. v. United States, 365 F.3d 1345, 1351
 (Fed. Cir. 2004).
                        B. Cost Realism
     The FAR defines a “[c]ost realism analysis” as “the pro-
 cess of independently reviewing and evaluating specific el-
 ements of each offeror’s proposed cost estimate to
 determine whether the estimated proposed cost elements
 are realistic for the work to be performed; reflect a clear
 understanding of the requirements; and are consistent
 with the unique methods of performance and materials de-
 scribed in the offeror’s technical proposal.” 48 C.F.R.
 § 15.404-1(d)(1); see also id. § 2.101. An agency is required
 to conduct a cost realism analysis on all CR contracts in
 order “to determine the probable cost of performance for
 each offeror.” 48 C.F.R. § 15.404-1(d)(2). As the Court of
 Federal Claims has correctly recognized, “[p]rice reasona-
 bleness generally addresses whether a price is too high,
 whereas cost realism generally addresses whether a cost
 estimate is too low.” First Enter. v. United States, 61 Fed.
 Cl. 109, 123 (2004); see 48 C.F.R. § 15.404-1.
        C. Scrutiny of Within-Deviation Labor Rates
     Agile contends that DISA’s cost realism analysis “vio-
 lated the express terms of the [Encore III solicitation].” Ap-
 pellant Br. 18. In support, it argues that while the
 solicitation required DISA to review and evaluate an offe-
 ror’s supporting documentation for Below-Deviation Labor
 Rates, it prohibited expanded scrutiny of an offeror’s
 Within-Deviation Labor Rates. According to Agile, it would
 have been selected for a contract award had DISA “adhered
 to the Solicitation’s express terms and found [its Within-
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8                        AGILE DEFENSE, INC.   v. UNITED STATES



 Deviation Labor Rates] realistic by virtue of being within
 one standard deviation of the average.” Id. at 40–41. *
      We do not find this argument persuasive. The Encore
 III solicitation required DISA to assess each offeror’s pro-
 posed CR rates “using one or more techniques defined in
 FAR 15.404” in order to determine whether those rates
 were “complete, reasonable, and realistic.” A. 1279. It also
 instructed the agency to calculate, based upon an examina-
 tion of all completed proposals in each suite of offerors, the
 average proposed labor rate for each LCAT. A. 1280. Next,
 the agency was directed to use statistical analysis to divide
 each offeror’s estimated CR labor rates into two groups: Be-
 low-Deviation Labor Rates, i.e., rates that were more than
 one standard deviation below the average rates, and
 Within-Deviation Labor Rates, i.e., rates that fell within



     *  “A bidder that challenges the terms of a solicitation
 in the Court of Federal Claims generally must demonstrate
 that it objected to those terms prior to the close of the bid-
 ding process.” Bannum, Inc. v. United States, 779 F.3d
 1376, 1380 (Fed. Cir. 2015) (citation and internal quotation
 marks omitted). Here, the government makes a cursory
 argument that Agile waived its right to argue that DISA
 was prohibited, under the terms of the solicitation, from
 analyzing the supporting documentation for its Within-De-
 viation Labor Rates because it failed to seek clarification
 on that issue prior to the submission of the last round of
 proposals. See Appellee Br. 27. Because the government
 fails to adequately develop this argument, however, we de-
 cline to consider it on appeal. See SmithKline Beecham
 Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006)
 (concluding that an insufficiently developed argument was
 waived); see also Kao Corp. v. Unilever U.S., Inc., 441 F.3d
 963, 973 n.4 (Fed. Cir. 2006) (concluding that a litigant
 waived an argument by failing to adequately address it in
 the “argument section” of its brief).
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 AGILE DEFENSE, INC.   v. UNITED STATES                       9



 one standard deviation of the average rates. A. 1280. The
 solicitation further stated that DISA was required to “re-
 view the submitted supporting documentation” for each
 Below-Deviation Labor Rate and, if the documentation pro-
 vided “inadequate or no justification . . . for any component
 of that rate,” the agency was directed to make adjustments
 to that rate when calculating the “Most Probable Cost” for
 each offeror. A. 1280.
      Contrary to Agile’s assertions, however, nothing in the
 Encore III solicitation prohibited DISA from evaluating an
 offeror’s supporting documentation for Within-Deviation
 Labor Rates. Agile’s argument that the agency was barred
 from conducting an expanded cost realism analysis on its
 Within-Deviation Labor Rates hinges on the following so-
 licitation provision: “The Government considers a rate that
 is 1 standard deviation below the average to be a realistic
 rate, subject to cost analysis techniques in accordance with
 FAR 15.404.” A. 1280. According to Agile, this statement
 means that DISA was required to accept all Within-Devia-
 tion Labor Rates as “realistic” and was therefore prohibited
 from performing any further cost realism analysis on those
 rates.
      Agile’s truncated reading falls flat. The solicitation
 does not state that Within-Deviation Labor Rates must be
 deemed “realistic,” but rather that those rates will be con-
 sidered “realistic . . . subject to cost analysis techniques in
 accordance with FAR 15.404.” A. 1280 (emphasis added).
 In other words, Within-Deviation Labor Rates are not per
 se realistic, but instead may undergo additional cost real-
 ism scrutiny pursuant to the various cost analysis methods
 and procedures sanctioned by the FAR. See Federal Claims
 Decision, 143 Fed. Cl. at 18–19 (“[T]he language in the So-
 licitation was not so limited as to prevent the Agency from
 performing cost realism analysis on labor rates that fell
 within one standard deviation of the average.”).
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 10                      AGILE DEFENSE, INC.   v. UNITED STATES



     In this regard, the Encore III solicitation specifically
 states that DISA was required to assess the “[CR] portion”
 of each offeror’s proposal to determine whether it was “re-
 alistic.” A. 1279. Agile points to nothing in the language
 of the solicitation—or in the FAR—that limited DISA’s au-
 thority to thoroughly assess the cost realism of the entire
 “[CR] portion” of its proposal, including its Within-Devia-
 tion Labor Rates.
     Agile contends that because the solicitation explicitly
 required DISA to review the supporting documentation for
 Below-Deviation Labor Rates, it implicitly precluded the
 agency from extending that review to other proposed rates.
 See Appellant Br. 18–20, 26–29. We disagree. As we have
 repeatedly recognized, “[c]ontracting officers are entitled to
 exercise discretion upon a broad range of issues confront-
 ing them in the procurement process.” Impresa, 238 F.3d
 at 1332 (citation and internal quotation marks omitted);
 see also Tinton Falls Lodging Realty, LLC v. United States,
 800 F.3d 1353, 1358 (Fed. Cir. 2015); Savantage Fin.
 Servs., Inc. v. United States, 595 F.3d 1282, 1286 (Fed. Cir.
 2010). Agile cites to no authority suggesting that a solici-
 tation, by instructing a contracting agency to perform a rig-
 orous cost analysis on certain proposed rates, thereby
 strips it of the power to conduct an expanded cost realism
 analysis on other proposed rates. To the contrary, such a
 rule would unduly circumscribe a contracting officer’s dis-
 cretion and hamstring a contracting agency’s efforts to en-
 sure that the “estimated proposed cost elements are
 realistic for the work to be performed,” 48 C.F.R. § 15.404-
 1(d)(1).
     The regular view of the Court of Federal Claims, which
 we approve, is that contracting agencies enjoy wide lati-
 tude in conducting the cost realism analysis. See, e.g., Mis-
 sion1st Grp., Inc. v. United States, 144 Fed. Cl. 200, 211
 (2019) (“It is well established that contracting agencies
 have broad discretion regarding the nature and extent of a
 cost realism analysis, unless the agency commits itself to a
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 AGILE DEFENSE, INC.   v. UNITED STATES                         11



 particular methodology in a solicitation.” (citation and in-
 ternal quotation marks omitted)); Dellew Corp. v. United
 States, 128 Fed. Cl. 187, 194 (2016) (“The Agency has
 demonstrated that it considered the information available
 and did not make irrational assumptions or critical miscal-
 culations. To require more would be infringing on the
 Agency’s discretion in analyzing proposals for cost real-
 ism.” (citation and internal quotation marks omitted));
 United Payors & United Providers Health Servs., Inc. v.
 United States, 55 Fed. Cl. 323, 329 (2003) (emphasizing
 that the procuring “agency is in the best position to make
 [the] cost realism determination” (citation and internal
 quotation marks omitted)). Such an approach comports
 with the FAR, which provides examples of cost analysis
 techniques, but does not mandate the use of any specific
 methodology. See 48 C.F.R. § 15.404-1(c). Instead, it in-
 structs that “[t]he Government may use various cost anal-
 ysis techniques and procedures to ensure a fair and
 reasonable price, given the circumstances of the acquisi-
 tion.” Id. § 15.404-1(c)(2); see also id. § 15.404-1(d)(2)(i) (ex-
 plaining that a cost realism analysis “should reflect the
 Government’s best estimate of the cost of any contract that
 is most likely to result from the offeror’s proposal”).
                   D. Rational Basis Review
      Finally, we reject Agile’s argument that a reading of
 the solicitation that would allow DISA to conduct an ex-
 panded cost realism analysis on Within-Deviation Labor
 Rates would “lead to [an] inexplicable result” because it
 would “permit[] DISA to subject a rate that is $0.01 below
 the average rate to much higher scrutiny than a rate that
 is significantly more than one standard deviation below the
 average.” Appellant Br. 31. As noted previously, we ad-
 here to APA standards when reviewing post-award bid pro-
 tests, see 5 U.S.C. § 706, and must set aside a contract
 award that does not evince rational reasoning. See, e.g.,
 Savantage, 595 F.3d at 1285 (“In a bid protest case, an
 agency’s action must be set aside if it is arbitrary,
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 12                      AGILE DEFENSE, INC.   v. UNITED STATES



 capricious, an abuse of discretion, or otherwise not in ac-
 cordance with law.”). Because an agency’s procurement
 evaluations are always subject to review under APA stand-
 ards, there is no merit to Agile’s contention that permitting
 DISA to analyze the supporting documentation for an offe-
 ror’s Within-Deviation Labor Rates would give it free rein
 to conduct a cost realism analysis that lacked a rational
 basis or otherwise led to “inexplicable result[s],” Appellant
 Br. 31.
                      III. CONCLUSION
     We have considered Agile’s remaining arguments but
 do not find them persuasive. Accordingly, the judgment of
 the United States Court of Federal Claims is affirmed.
                        AFFIRMED
