[00:00:00] Speaker 01:
I now turn to case 21230, Landshark Shredding versus United States.

[00:00:07] Speaker 01:
Mr. Whitcomb, whenever you're ready.

[00:00:11] Speaker 00:
Good morning, Chief Judge.

[00:00:12] Speaker 00:
My name is Joe Whitcomb, and I am representing Landshark Shredding, the appellant in this case, and protester in the underlying bid protest.

[00:00:21] Speaker 00:
The issue that Landshark is asking the court to decide today

[00:00:27] Speaker 00:
we believe is a case of first impression related to the term in 38 USC 8127, fair and reasonable price that offers best value to the United States.

[00:00:39] Speaker 00:
I think the court is aware that in the underlying case, what's happened in this protest is that the Veterans Administration competed a document destruction contract under the federal supply schedule or GSA schedule

[00:00:55] Speaker 00:
which we believe is governed by 8.404 in this case, but the government argues is governed by 8.405 2D.

[00:01:04] Speaker 00:
The government ultimately, the VA ultimately rejected Landshark's price submission as being unreasonable based on two tests that applied.

[00:01:14] Speaker 00:
The first test was that Landshark's price exceeded the independent government cost estimate, and the second test was that it was the highest price

[00:01:21] Speaker 00:
offered above, but understanding, the court should understand there were only a total of three prices submitted, one price, only one by a service-disabled veteran owned small business or an STVOSB.

[00:01:33] Speaker 01:
Can I just ask you on your theory of the case, and this goes to really what the statute, I'm focused more on what the statute says and what it requires and what it means to us.

[00:01:44] Speaker 01:
What's the upper limit?

[00:01:45] Speaker 01:
Is there an upper limit at all to how much you could have bid under your theory?

[00:01:51] Speaker 00:
So, Your Honor, yes, I think that there is an upper limit, and I think that upper limit would be a price at which it would be arguably illegal for the government to make an award.

[00:02:05] Speaker 00:
And in this instance, that's clearly not the case because the pricing that was submitted by Landshark, that Landshark submitted, sorry, was 35 percent lower than its

[00:02:15] Speaker 00:
GSA-approved schedule pricing.

[00:02:17] Speaker 00:
But to the court question... Wait a minute.

[00:02:19] Speaker 01:
Let me just ask you.

[00:02:20] Speaker 01:
I don't understand the question.

[00:02:22] Speaker 01:
Well, the question is, you say if it would be illegal, but that begs the question about, so what would be illegal?

[00:02:30] Speaker 01:
What right period would you use to assess whether it's illegal?

[00:02:35] Speaker 00:
So, Your Honor, our land charge position would be that, and we believe Part 31 speaks to this, which would be whether

[00:02:43] Speaker 00:
a price was so high that no prudent person, and we briefed this in our reply brief, that no prudent person, and we would argue that the GSA is in fact a prudent person or a prudent entity, would pay the price for these services.

[00:02:57] Speaker 00:
Now, for example, if Landshark had submitted a price that was higher than the government had ever paid for document destruction on a per-bend, on a per-unit basis.

[00:03:08] Speaker 00:
Remember, Your Honor, this contract was competed on a per-bend basis

[00:03:13] Speaker 00:
And if the government, or sorry, if Landshark had submitted a price that was higher than the government had ever paid for these services.

[00:03:20] Speaker 00:
I think the government would be perfectly, it would be perfectly allowable in those circumstances for the government to reject that price.

[00:03:26] Speaker 00:
If Landshark's price had come in 150% of its GSA's government price or above its GSA pricing, then I believe the government would certainly have a basis for challenging Landshark's pricing as unreasonable.

[00:03:39] Speaker 00:
But in this instance, all it has done is found that Landshark's pricing was unreasonable because it exceeded an IGCE, which was based entirely on a predecessor contract, which was performed by a large multinational publicly traded company.

[00:03:55] Speaker 01:
So I guess, I mean, we don't have that many of these cases.

[00:03:58] Speaker 01:
So is it, and then I guess the government can respond to this too, which is the relationship between this FSS

[00:04:06] Speaker 01:
GSA pricing and what goes on in the individual contracts.

[00:04:11] Speaker 01:
Is there anything, you know, there's so much paper in this area, so many FAR provisions.

[00:04:16] Speaker 01:
Is there anything that relates the reasonableness of a particular bid in a particular contract to this FSS GSA funding thing?

[00:04:27] Speaker 01:
So your position is that's what the bottom line is for reasonableness.

[00:04:31] Speaker 01:
And I'm just wondering if in all of these rules and regulations that the government has ever called out.

[00:04:38] Speaker 00:
First of all, yes, Your Honor, it is.

[00:04:39] Speaker 00:
Under 8404, the regulations governing GSA schedules, federal supply schedules, it states expressly that the GSA has in fact reviewed these prices and found them reasonable and therefore the contracting officer does not need to do an additional review.

[00:04:58] Speaker 00:
We offered that in our briefings at the lower court and in this court, and the government has responded with, well, that doesn't mean the contracting officer can't do a review.

[00:05:07] Speaker 00:
And we can see that.

[00:05:08] Speaker 00:
It doesn't mean that the contracting officer can't do a review.

[00:05:11] Speaker 00:
We just believe that the only legal conclusion that the contracting officer could come to is that these prices are fair and reasonable because they have been previously approved by the GSA.

[00:05:22] Speaker 00:
The government has also advanced an argument that in this instance, there's a statement of work, so therefore 8.404 doesn't apply.

[00:05:30] Speaker 00:
And our position is, well, wait a minute.

[00:05:32] Speaker 00:
That would be true if the statement of work made the requirements of the contract less onerous than Landshark competed in the GSA schedule.

[00:05:45] Speaker 00:
So, and I think, Your Honor, the question that Your Honor is asking is,

[00:05:48] Speaker 00:
What would be the basis?

[00:05:49] Speaker 00:
We would offer that under 8127, the very first basis of reasonableness is competition, right?

[00:05:55] Speaker 00:
And that's why the statute first requires that the contracting officer have a reasonable expectation of getting two offers.

[00:06:03] Speaker 00:
And secondly, that it has an expectation.

[00:06:07] Speaker 00:
And we believe that whether you read those two phrases together or apart, they come to the same conclusion, which is,

[00:06:14] Speaker 00:
you have to have a reasonable expectation, the contracting officer has to have a reasonable expectation of getting two offers and you can say therefore being able to make an award at a reasonable price or even if you argue separately that being able to make an award at a reasonable price.

[00:06:28] Speaker 00:
But competition is the first tool that the contracting officer has to use as to whether or not the price is fair and reasonable.

[00:06:36] Speaker 00:
Now under the GSA schedule, that competition is vetted in advance.

[00:06:40] Speaker 00:
As I'm sure the court is aware,

[00:06:42] Speaker 00:
Getting on a GSA schedule is not as simple as submitting a proposal and having GSA adopt it.

[00:06:47] Speaker 00:
The GSA spends months of that.

[00:06:50] Speaker 01:
I don't understand.

[00:06:52] Speaker 01:
I just want to be, I'm not arguing with you.

[00:06:53] Speaker 01:
I just want to make sure I understand your point.

[00:06:56] Speaker 01:
Your point, in addition to the GSA schedule being the limits on the test for reasonableness, your position is because we're only here because at least there are two competitive bids going on.

[00:07:10] Speaker 01:
then that somehow satisfies the reasonable test as well?

[00:07:17] Speaker 00:
Yes, Your Honor.

[00:07:18] Speaker 00:
We would say that where there is competition, both FAR Part 13, FAR Part 15, all lead contracting officers first to review whether there's competition.

[00:07:26] Speaker 00:
And if there is competition, normal market forces result, absent collusion, result in, competition results in fair and reasonable pricing.

[00:07:39] Speaker 00:
in the GSA schedule.

[00:07:41] Speaker 00:
Now, to be clear, in this case, Landshark was the only service-disabled veteran owned small business that vetted a proposal.

[00:07:50] Speaker 00:
But it was, its pricing was, there are three other or four other schedule holders on the federal supply schedule that are SDB OSBs, and Landshark's pricing is competitive with those other three.

[00:08:02] Speaker 00:
And the GSA has already vetted those pricing and has authorized a price 35% higher

[00:08:08] Speaker 00:
than the price Landshark submitted in this proposal as being fair and submitted that it is fair and reasonable.

[00:08:15] Speaker 00:
Again, the government's argument is, well, this particular procurement has a statement of work, therefore the 8404 finding that this price is fair and reasonable doesn't apply.

[00:08:24] Speaker 00:
But it does so without arguing, the government does that without arguing that this procurement is somehow less onerous or less burdensome to Landshark and therefore its pricing should be even lower.

[00:08:36] Speaker 00:
In fact, if anything, this particular statement of work adds requirements in the form of it requires Landshark to destroy pill bottles and not just documents.

[00:08:46] Speaker 00:
It requires that the destruction be done on site as opposed to being able to be done off site.

[00:08:51] Speaker 00:
It requires a number of things that Landshark and it requires that a certificate of destruction be submitted and so forth.

[00:08:57] Speaker 00:
All of these things are perfectly normal, but Landshark is also operating under the restraints that neither

[00:09:03] Speaker 00:
its small business competitor or its large competitor are operating under, namely 13 CFR 125.6, which is the limitations in subcontracting, which cut against the government's argument that Landshark could just subcontract a massive portion of this contract out to whomever it pleases and reap the rewards of that.

[00:09:21] Speaker 00:
That's just not... That's not... I'm not clear on that argument.

[00:09:24] Speaker 01:
I mean, you're arguing that you operate under different circumstances.

[00:09:28] Speaker 01:
What is that?

[00:09:29] Speaker 01:
I don't know how to apply that as a matter of law.

[00:09:32] Speaker 01:
that we apply the standard of reasonableness, but we include in our analysis of reasonableness that your bid might be, you know, 500% higher than the next bid, but then we evaluate subcontracting issue and all of this stuff.

[00:09:51] Speaker 01:
Can you just articulate what your argument is in that regard?

[00:09:54] Speaker 00:
Yes, Your Honor, we can.

[00:09:56] Speaker 00:
In page 29 of our reply brief, we actually point to case law on this front, which is

[00:10:00] Speaker 00:
And I'm quoting, it's a fundamental principle of government procurement.

[00:10:03] Speaker 00:
The competition must be based on an equal basis.

[00:10:06] Speaker 00:
That is, offers must be treated equally and be provided with a common basis for the preparation of their proposals.

[00:10:11] Speaker 00:
Landshark was the only one of the three offers operating under the requirement that it not subcontract more than 50% of the contract value of the situated contractors.

[00:10:23] Speaker 00:
And that means not just other contractors.

[00:10:26] Speaker 00:
In this instance, it means not just contractors that are service disabled,

[00:10:30] Speaker 00:
self-described, STVOSBs for short, but also that they had to be, the subcontractors, in order to be able to contract out more than 50%, had to be verified and listed in the VetViz database, which I'm sure this Court is aware of.

[00:10:45] Speaker 00:
And neither ShredIt nor the Small Business Concerned State Court were required to do that.

[00:10:54] Speaker 00:
Again, Landshark is, and again, the mandate under 8127, as we understand it, Your Honor, is that it starts with the government shall award, and it qualifies that shall award as long as the contracting officer has a reasonable expectation of receiving two offers and being able to make an award at a fair and reasonable price.

[00:11:16] Speaker 00:
We would ask that this court, what we're asking is that the court... So this is Judge Urana.

[00:11:23] Speaker 05:
Yes, Judge.

[00:11:24] Speaker 05:
does more than that.

[00:11:26] Speaker 05:
It goes beyond determining whether there's two or more SDVLBS submitters.

[00:11:34] Speaker 05:
And it goes on to clause number two that says that the award can be made at a fairly reasonable price.

[00:11:39] Speaker 05:
So we're looking at price, not conduct or difficulty that is performing on the contract.

[00:11:48] Speaker 05:
We're looking at price.

[00:11:50] Speaker 05:
And in this case, it appears that the price is five times more than the percent on the next level.

[00:12:01] Speaker 05:
You made a lot of argument, but you haven't gone to what I see as being the crux of the matter here.

[00:12:13] Speaker 05:
Was the price over submitted?

[00:12:14] Speaker 05:
Why is the determination that that

[00:12:18] Speaker 05:
that the award cannot be made at a fair and reasonable price that offers the best value to the United States.

[00:12:28] Speaker 00:
Why is that wrong?

[00:12:31] Speaker 00:
I'm sorry.

[00:12:33] Speaker 00:
Your Honor, I believe that it's that very bar that we're here to argue about is what is the determination that a price is fair and reasonable.

[00:12:41] Speaker 00:
In other words, if Landshark's prices

[00:12:43] Speaker 00:
need to be competitive with large concerns in order for it to reap the benefit of the set-aside, then it doesn't need to set-aside, right?

[00:12:52] Speaker 00:
The case law is sufficient that it demonstrates that the government understands that it is going to pay a premium in order to award to socioeconomics, be it STD OSBs or 8As or women owns, in order to advance the policy of awarding to these socioeconomics.

[00:13:12] Speaker 05:
It could be, but the statute puts a limitation on that.

[00:13:16] Speaker 05:
And the limitation is that the award, they must ensure that the award can be made at a fairly reasonable price that offers the best value.

[00:13:24] Speaker 05:
Here, Landshark had a price of over $2 million, and that was five times higher than the prices by the other offers.

[00:13:37] Speaker 00:
First, submit, Your Honor, that the other offers had no business being invited to invite or to bid because it was an STBOSB set aside.

[00:13:46] Speaker 00:
And secondly, that we would argue that their pricing is irrelevant to the calculus of whether the price is fair and reasonable.

[00:13:54] Speaker 00:
Again, the GSA has already determined that this price is fair and reasonable, right?

[00:13:58] Speaker 00:
That's the first and under the only definition for fair and reasonable found anywhere in the FAR,

[00:14:04] Speaker 00:
is that for a price not to be fair and reasonable, it must exceed a price that any prudent person would pay for the services.

[00:14:10] Speaker 00:
A prudent person in this instance is the GSA.

[00:14:13] Speaker 00:
They have concluded that this price is fair and reasonable under the circumstances and generally.

[00:14:21] Speaker 05:
Is it fair for me to say then that your argument is that the use of this tiered evaluation system is illegal?

[00:14:35] Speaker 00:
Well, we have argued that both at the lower court and here, Your Honor, but we believe that whether it's legal or not is irrelevant to the argument here, because it would have been relevant if, for example, no service-disabled veteran owned small business had bid.

[00:14:48] Speaker 00:
That would have given the government another place to go.

[00:14:51] Speaker 00:
But in this instance, there was an STD-OSB that submitted.

[00:14:56] Speaker 00:
That STD-OSB price was qualified by the GSA.

[00:15:03] Speaker 00:
It was therefore, in our view of the world, therefore fair and reasonable.

[00:15:08] Speaker 00:
And what we're trying to get away from, Your Honor, what we're asking this Court to determine and decide is that if the fair and reasonable pricing is based on anything other than competition between other STD OSBs, then it is inherently prejudicial to STD OSBs because they have to operate under very different circumstances than small businesses or large concerns.

[00:15:33] Speaker 00:
Whether we're talking about economies of scale or whether we're talking about the rules and regulations that they operate under, they are operating under a very different environment.

[00:15:46] Speaker 00:
Congress wrote this law in 2006 to include the word must and the Supreme Court ruled in 2016 that shall means, rather to use the word shall, in 2016 the Supreme Court ruled that shall means must and Judge Thomas in the opinion

[00:16:01] Speaker 00:
started with, you know, 81-27 instructs the government, says the government shall award.

[00:16:06] Speaker 00:
Now, again, the qualifiers are that there'd be fair and reasonable, but we believe that this fair and reasonable pricing has so far been left completely up to the discretion of the contracting officer.

[00:16:19] Speaker 00:
And we believe that there are other out, there are other restraints to include whether the GSA has already found that price is fair and reasonable, whether the government has already paid previously.

[00:16:28] Speaker 00:
I mean, land shark shredding,

[00:16:30] Speaker 00:
has at any given time twenty-five or thirty different contracts being performed at this price in different parts of the country that what the government has done and we believe is read into the statute to say fair and reasonable under these unique circumstances or best available price instead of fair and reasonable price and that that is not the mandate of the statute can I just interrupt following up on what Judge Reyna was asking about not only does the statutory provision we're debating here include the standard

[00:17:00] Speaker 01:
the award can be made at a fair and reasonable price, it continues to say, and you're saying this reasonableness standard is set by GSA and as long as that is met and not exceeded, it is by definition reasonableness.

[00:17:16] Speaker 01:
That's what I understand it to be.

[00:17:19] Speaker 01:
But the statute continues to say that offers best value to the United States.

[00:17:27] Speaker 01:
And that is another kind of,

[00:17:30] Speaker 01:
word that gives the US some discretion to what the best value is to the United States.

[00:17:38] Speaker 01:
There might be two offers that under some theory are fair and reasonable, but they're supposed to pick the one that offers the best value to the United States, right?

[00:17:48] Speaker 01:
We have to give that language some meaning, right?

[00:17:51] Speaker 00:
Well, Your Honor, yes, and I do.

[00:17:53] Speaker 00:
And I believe that the meaning has to extend to all of the policies of the United States, which include awarding as the purpose of this statute

[00:18:00] Speaker 00:
was to award contracts to service-disabled and veteran-owned small businesses.

[00:18:04] Speaker 00:
In other words, the mandate loses all of its meaning if the contracting officer's discretion of determining what is fair and reasonable under those circumstances is given full effect.

[00:18:17] Speaker 00:
It's easy to imagine a scenario or many scenarios in which the contracting officers could contrive an IGCE or find other reasons to find that the STDOSB's prices are unreasonable

[00:18:30] Speaker 00:
And again, I think that in this instance, you know, it's easy to point out that it's somewhat, it's some percentage higher than IGCE or some percentage higher than the next lowest offer, but it's not higher than the government has paid SDVOSBs for these goods and services all over the country.

[00:18:50] Speaker 00:
And we would say that what we've been arguing is that when the contracting officer under 8127 is making the determination that a price is not fair and reasonable, that what it is,

[00:18:59] Speaker 00:
What that contracting officer is doing by extension is saying it would be illegal for us to make this contract award because those are the, that's the restraints that 8127 puts on the contracting officer.

[00:19:12] Speaker 00:
You shall award, we would say you shall award unless you cannot.

[00:19:17] Speaker 01:
Okay, any further questions by my colleagues?

[00:19:22] Speaker 01:
No.

[00:19:23] Speaker 01:
Okay, why don't we hear from the government and we'll restore assembly battle time.

[00:19:31] Speaker 04:
May I please the court?

[00:19:34] Speaker 04:
Landshark shredding, preliminarily, landshark shredding offers a construction of the rule of two that we believe does not actually mean a mandate to automatically award to landshark at disproportionately high prices.

[00:19:49] Speaker 04:
We want to step back a little bit and point out that the rule of two is an initial set aside determination.

[00:19:55] Speaker 04:
That happens upfront by the VA in determining whether or not competition should be restricted

[00:20:00] Speaker 04:
or, in other words, to be set aside for SBVOSBs or VOSBs once those two prompts are met.

[00:20:07] Speaker 04:
One, the reasonable expectation that you'll get two or more of these quotes, and then the work can be made at fair and reasonable price.

[00:20:13] Speaker 04:
What we're really talking about is the price evaluations that comes later.

[00:20:17] Speaker 04:
That is a distinct and separate inquiry.

[00:20:20] Speaker 04:
And regarding the actual pricing arguments that Landshark has made in its argument, I would like to point out that we believe those are ways because they were not discussed in its opening brief.

[00:20:31] Speaker 04:
The opening brief was focused almost exclusively on this idea that the rule of two is a mandate to automatically award to Landshark regardless of total price.

[00:20:41] Speaker 04:
And I believe the court's question at the beginning was sort of, hey, what is the upper limit to the award?

[00:20:47] Speaker 04:
And Landshark responded that if the award would be illegal, and we'd submit that illegal means if it violates the Anti-Deficiency Act is one of those outer bounds.

[00:20:56] Speaker 04:
But essentially,

[00:20:57] Speaker 04:
The Landshark's opening argument was the award could be made at any price simply because a set-aside determination was made at the outset of a procurement.

[00:21:07] Speaker 04:
And now in its reply brief... Sorry, was there a question?

[00:21:11] Speaker 05:
Yeah.

[00:21:12] Speaker 05:
Counselor, this is Judge Raina.

[00:21:13] Speaker 05:
I was going to follow up with what you were just saying and point out that

[00:21:20] Speaker 05:
Your opponent also is arguing that some economy of scale problems should also be considered when looking at the rule of two in this application.

[00:21:30] Speaker 05:
Are you aware of any economy of scale problems that were in effect here in this case?

[00:21:37] Speaker 04:
I don't believe so at all, Your Honor.

[00:21:40] Speaker 04:
That is simply a peer attorney argument from Landshark that somehow SEVOSBs are more at disadvantage than anybody else.

[00:21:47] Speaker 04:
And we'd like to point out here

[00:21:49] Speaker 04:
it takes potshots at the independent government cost estimate, for example.

[00:21:55] Speaker 04:
But that IGCE was actually built off small business prices who were primarily on the federal supply schedule.

[00:22:01] Speaker 04:
So it's simply another category of small business where the owner happens to be service-disabled veteran.

[00:22:09] Speaker 04:
So other than pure attorney argument, there's nothing in the record or nothing in this particular procurement that establishes sort of the difficulties that

[00:22:17] Speaker 04:
Landshark is saying that it hasn't been able to, I guess, adequately price a procurement or price a contract or perform the work.

[00:22:27] Speaker 04:
Does that answer your question, Your Honor?

[00:22:30] Speaker 04:
Yes.

[00:22:31] Speaker 04:
Thank you.

[00:22:32] Speaker 01:
I'm sorry if you've already covered this.

[00:22:33] Speaker 01:
This is Judge Prost.

[00:22:34] Speaker 01:
But what about your friend's argument about how if the amount of money is on this FSS GSA schedule, then the government has already made a determination of reasonableness?

[00:22:47] Speaker 01:
So anything within those numbers ought to be sufficient to satisfy that requirement.

[00:22:55] Speaker 04:
Governor, we submit that the GSA pricing is irrelevant when the solicitation clearly stated that the quotes, the government was requesting quotes from the offerors for them to price the work and that the government in the solicitation would be evaluating those quotes to each other to then determine best value.

[00:23:15] Speaker 04:
And essentially, the SSS pricing is irrelevant.

[00:23:18] Speaker 04:
And Landshark concessions that a review can be done by the contracting officer should be dispositive here.

[00:23:25] Speaker 04:
Again, in its opening brief, it said there was no discretion.

[00:23:28] Speaker 04:
It actually said that the, I believe the quote is that the contracting officer could not set aside and then make an ex post facto determination later that the prices were too higher, that they were unreasonable.

[00:23:40] Speaker 04:
And now it's conceding that the review can actually be done, and that's the review that was specified in the solicitation, and that's the review that controls.

[00:23:48] Speaker 04:
The contracting officer looked at Landshark's quote, and that first tier is SBVOSB.

[00:23:53] Speaker 04:
He compared it to the next small business, so within the third tier, there was no, better known small business tier, or offer wars, and then compared that to the large business tier,

[00:24:06] Speaker 04:
And in that comparison simply found that 500% higher prices were simply unreasonable.

[00:24:12] Speaker 04:
And especially in the context of the IGCE, which again was based on FSS pricing, which is primarily made up of other small businesses.

[00:24:26] Speaker 04:
And that IGCE actually was generated, and you've got to look at that in the context of the previous contract, that was for about

[00:24:34] Speaker 04:
$250,000 versus about the $500,000 or so that is at now.

[00:24:40] Speaker 04:
And for less shredding, but even those shredding quantities previously were sometimes less per year.

[00:24:47] Speaker 04:
So there are more than, there are several markets of performance or reasonable cost performance for this procurement.

[00:24:55] Speaker 04:
The contracting officer looked at those and, again, found that price was just too far out of line with what had been submitted.

[00:25:06] Speaker 04:
And to go with sort of Landshark's theory that sort of adequate competition will determine what fair and reasonable pricing looks like, that is a typical method that is used.

[00:25:15] Speaker 04:
And if that was applied here, it's clear that Landshark is again entirely off the mark with the 500% higher prices.

[00:25:22] Speaker 04:
And it also points out that the scope of works required some additional things that were beyond the typical sort of per bin pricing that is listed on the GSA schedule.

[00:25:34] Speaker 04:
But ultimately,

[00:25:35] Speaker 04:
Landshark and all the other offerors were responsible to put their best quote forward and the government evaluated them accordingly.

[00:25:44] Speaker 04:
But to go briefly back to the point I was attempting to make before the questions came, but on the pricing, the change in tactic here by Landshark, it still seems to be keeping its rule of two argument mandate alive, but it claims the question in the reply as

[00:26:03] Speaker 04:
simply whether its prices were fair and reasonable.

[00:26:06] Speaker 04:
And for all the reasons we've discussed, we don't believe there's any basis to find that 500% prices are offering best value to the government or best value to the United States.

[00:26:21] Speaker 04:
Now, there are some other issues at play here, because we've also talked about labor, standing, and whether or not the rule two was actually satisfied here.

[00:26:32] Speaker 04:
As far as the rule of two being satisfied, point out that Bill Banshark has argued that the rule of two was actually satisfied here to restrict competition.

[00:26:44] Speaker 04:
The trial court, the VA found the opposite.

[00:26:47] Speaker 04:
It found that the market research was inconclusive to be able to restrict competition.

[00:26:52] Speaker 04:
And that was clear on the face of the solicitation.

[00:26:56] Speaker 04:
It was, it's apparent when you look at the market research, the contracting officer actually published an RFI, a request for information, and only one SDVOSB responded.

[00:27:05] Speaker 04:
That was Landshark.

[00:27:06] Speaker 04:
There were only two other SDVOSB responses.

[00:27:09] Speaker 04:
And true to the market research, only one SDVOSB responded to the solicitation.

[00:27:14] Speaker 04:
So if, in the set-aside analysis on that first prong, the contracting officer did not even have a reasonable expectation that two or more of these categories of businesses

[00:27:25] Speaker 04:
were likely to submit a quote.

[00:27:27] Speaker 04:
Therefore, the Rule of Two was not satisfied.

[00:27:29] Speaker 04:
Instead, and still to the benefit of SBVOSBs and VOSBs, it used the cascading order of precedence, giving them, essentially, preference by being able to award at other tiers, depending what prices ultimately came in.

[00:27:44] Speaker 04:
And if the Rule of Two was not satisfied and this court agrees, then Landshark's arguments regarding the Rule of Two and whatever it says about pricing should not even actually

[00:27:55] Speaker 04:
apply here, it doesn't get any benefit from its own construction of the rule to mandate a warrant here.

[00:28:03] Speaker 05:
And that issue... What's your opinion?

[00:28:06] Speaker 05:
This is Judge Rainer.

[00:28:07] Speaker 05:
What's your opinion on the statute where it says the award can be made at a fair and reasonable price?

[00:28:15] Speaker 05:
It's got to be something more than the best price or the lowest price, correct?

[00:28:21] Speaker 05:
Doesn't fair and reasonable infer that

[00:28:25] Speaker 05:
there's considerations other than the lowest price?

[00:28:31] Speaker 04:
Well, I think it's somewhat parallel to typical, you know, sort of a best value.

[00:28:36] Speaker 04:
Obviously, the statute could have said the lowest price, but that's obviously not what's being considered.

[00:28:41] Speaker 04:
But it does leave discretion to the contracting officer to determine what is fair and reasonable or what could be fair and reasonable prices enough to set aside competition to SBVOSBs.

[00:28:55] Speaker 05:
So at some point maybe even economies of scale or the competitiveness of a small business, ability of a small business to compete in a particular area, that could be elements considered in an inquiry involving fair and reasonable price, wouldn't you say?

[00:29:15] Speaker 04:
That's possible, Your Honor, if there's information in the record, if there's market research conducted, if there's knowledge with the contracting officer, again, sort of like what they know about what prices look like.

[00:29:26] Speaker 04:
Yeah.

[00:29:27] Speaker 04:
In this instance, we're talking about document shredding services.

[00:29:30] Speaker 05:
Well, it seems to me that that's what the statute is talking about.

[00:29:35] Speaker 05:
It is talking about looking at something other than just the lowest price.

[00:29:39] Speaker 05:
But I'm not sure that in this particular case that a case was made or arguments were

[00:29:45] Speaker 05:
persuasive that such, you know, competitive factors or economic scale factors exist in this case.

[00:29:58] Speaker 04:
We would agree with that, Your Honor.

[00:30:00] Speaker 04:
And I would say that the extent that Landshark has raised these are really policy arguments about what the rule of two should be doing to help veteran-owned businesses or service-disabled veteran-owned small businesses.

[00:30:12] Speaker 04:
And that's not something this court can address.

[00:30:14] Speaker 04:
And that should be directed to Congress, ultimately.

[00:30:18] Speaker 04:
And the Blanchard's brief is laden throughout with these policy arguments for which there are no clear answers that this court can provide.

[00:30:29] Speaker 02:
But again, there is no direct fear.

[00:30:32] Speaker 02:
If I can interrupt, this is Judge Hughes.

[00:30:34] Speaker 02:
I want to ask you a hypothetical, and I know that these facts aren't in this case.

[00:30:40] Speaker 02:
Let's assume the rule of two was met here and that there were two service-disabled contractors that the contractor and officer felt could submit bids.

[00:30:54] Speaker 02:
But they went ahead and still did a cascading system and allowed bids from small businesses, big businesses, everybody.

[00:31:03] Speaker 02:
And the two service-disabled businesses came in

[00:31:09] Speaker 02:
let's say 50% over the next lowest price from the small business.

[00:31:16] Speaker 02:
Would it be proper for the contracting officer to say this is not fair and reasonable by comparing the service disabled businesses to the small businesses?

[00:31:28] Speaker 02:
Or would the contractor have to, contracting officer first have to determine there are two qualified service disabled offers

[00:31:37] Speaker 02:
looking at them alone is one of them fair and reasonable and should be award.

[00:31:44] Speaker 04:
Are you also including similar language that, using the cascading language that was included in the solicitation here, Your Honor, in that hypothetical?

[00:31:52] Speaker 02:
Everything else is the same, yeah.

[00:31:56] Speaker 02:
But because, let me just make it clear though, because there are two service disabled businesses that have submitted bids

[00:32:04] Speaker 02:
The contracting officer is determined that it should be set aside for services to table businesses.

[00:32:09] Speaker 02:
But for whatever reason, goes ahead and uses a cascading solicitation as well.

[00:32:17] Speaker 04:
Well, I think in the first instance, having the cascading combined where the rule of two is satisfied, I don't think necessarily violates 8127D.

[00:32:24] Speaker 04:
And the difference here is that obviously it is using a clear set aside and the intent is to award in that first tier of businesses.

[00:32:33] Speaker 04:
sort of what the evaluation is becoming later.

[00:32:36] Speaker 02:
Sure, sure.

[00:32:37] Speaker 02:
OK, I'm not, this is not what the hypothetical is.

[00:32:39] Speaker 02:
Let me, let me, I don't want to pull my punches.

[00:32:42] Speaker 02:
What I'm getting at is when there's a cascading solicitation and there are two service, two or more service disabled businesses, can the contractor in determining whether the word should be made to a service disabled business, can it compare

[00:33:03] Speaker 02:
that the offer from their service disabled businesses with the rest of the cascading thing offers and say this is not fair and reasonable because they're higher?

[00:33:14] Speaker 02:
Or does it first have to look and determine whether in isolation the service disabled bids are fair and reasonable?

[00:33:25] Speaker 04:
Well, if it's like this solicitation here and it permitted the ability of the contracting officer to compare them across tiers to determine best value across competition of these other tiers, I think it would be permissible.

[00:33:39] Speaker 04:
But it may be preferred to do it to the first tier just across SDVOSBs.

[00:33:44] Speaker 04:
If there's independent cost estimate, they can compare that to there.

[00:33:48] Speaker 04:
But here it's allowed for sort of this broader evaluation.

[00:33:52] Speaker 02:
No, no.

[00:33:53] Speaker 02:
This is why I'm asking hypothetical because I don't think the rule of two is met here.

[00:33:57] Speaker 02:
So I think the cascading is fine.

[00:33:59] Speaker 02:
But I'm concerned when the rule of two is met that you're making the fair and reasonable determination based upon comparison with non-similarly situated offers and whether that

[00:34:14] Speaker 02:
is proper under the statute or whether you have to make the fair and reasonable determination just based upon whether the two service-disabled businesses are acceptable.

[00:34:26] Speaker 02:
And this is presuming that the FSS doesn't automatically make them acceptable and everything else.

[00:34:33] Speaker 02:
I'm just concerned that when you use these cascading things, suppose both service-disabled businesses come back

[00:34:42] Speaker 02:
Let's make the hypothetical slightly more complicated.

[00:34:45] Speaker 02:
Everybody comes back within 10% of the government estimate, either under or over.

[00:34:51] Speaker 02:
And the service disabled are both slightly over and about 10 or 15% over the small businesses.

[00:35:01] Speaker 02:
I mean, the government can award over a cost estimate, I think you agree.

[00:35:08] Speaker 02:
Why, if they're required to set aside

[00:35:11] Speaker 02:
Would the fact that it be 10% over and only 10 or 15% over the other bids make it not fair and reasonable?

[00:35:22] Speaker 04:
I would really answer your question, Your Honor.

[00:35:24] Speaker 04:
I don't believe a 10 to 50% would necessarily be unreasonable.

[00:35:29] Speaker 04:
That would be up to the contracting officer.

[00:35:30] Speaker 04:
I believe there's a GEO case law that

[00:35:33] Speaker 04:
uh... mentor fights uh... in camden in its reply pre that uh... that may talk about some of the areas where there there is some sort of uh... range uh... in the in the contract where the contracting officer can award above an i g c e or where they could be somewhat of a premium uh... simply to get an f dv usb in place but ten to fifteen percent might be within that range but there may be other considerations uh... sort of like there was here in companion case where

[00:36:02] Speaker 04:
There's only so much funding available and you can't actually award at that price.

[00:36:06] Speaker 04:
That is a different question.

[00:36:08] Speaker 04:
But there could be sufficient factors to find fair and reasonable prices with that type of price premium.

[00:36:16] Speaker 04:
Obviously, that's not what we have here with 500% higher prices.

[00:36:20] Speaker 03:
But that contracting officer is ultimately going to have that discretion to pay a little bit extra to get those to a sort of STVOSB or VEOSB tier.

[00:36:33] Speaker 04:
I believe our time is up.

[00:36:34] Speaker 04:
Unless there are any further questions, we have briefed all the other remaining issues in our briefs regarding standing and the waiver doctrine.

[00:36:42] Speaker 04:
And, but I believe we've discussed thoroughly the primary thrust of land charge arguments.

[00:36:50] Speaker 01:
Thank you.

[00:36:50] Speaker 01:
Thank you.

[00:36:55] Speaker 01:
Mr. Whitcomb, I don't know if we can, how much rebuttal time does Mr. Whitcomb have?

[00:37:05] Speaker 00:
Hello?

[00:37:07] Speaker 00:
Mr. Whitcomb is here.

[00:37:08] Speaker 00:
I'm not sure if I have any time remaining, Your Honor, because I don't... Well, we'll give you three minutes, no matter what you have left.

[00:37:15] Speaker 00:
Hopefully that's more than you have left.

[00:37:17] Speaker 00:
We'll give you three minutes.

[00:37:19] Speaker 00:
I agree, Your Honor, and I thank you.

[00:37:20] Speaker 00:
So what I want to raise is that the... One point I want to raise is that the government advanced two ideas, which I believe are internally inconsistent.

[00:37:27] Speaker 00:
One is that the federal supply schedule was not relevant because it announced that it was going to do a price analysis, and it later related

[00:37:35] Speaker 01:
the government later related, that is... Mr. Whitcomb, why don't you pause for a moment?

[00:37:40] Speaker 00:
Sure.

[00:37:41] Speaker 01:
I'm sorry to interrupt.

[00:37:42] Speaker 01:
I just got disconnected, so I was going to answer your question about how much time was remaining.

[00:37:50] Speaker 01:
Is it how much time is remaining?

[00:37:54] Speaker 01:
None of the time is remaining.

[00:37:55] Speaker 01:
Okay.

[00:37:55] Speaker 01:
Well, we've restored Mr. Whitcomb three minutes, so thank you.

[00:37:59] Speaker 01:
I apologize.

[00:38:01] Speaker 01:
Okay.

[00:38:01] Speaker 01:
Thank you.

[00:38:02] Speaker 01:
Please proceed, Mr. Whitcomb.

[00:38:04] Speaker 01:
I'm sorry.

[00:38:05] Speaker 00:
No, it's fine.

[00:38:06] Speaker 00:
Thank you, Your Honor.

[00:38:06] Speaker 00:
So the government advanced two ideas.

[00:38:08] Speaker 00:
One is that the federal supply schedule was not relevant because it announced that it was going to do a price reasonable analysis and announced cascading pricing.

[00:38:17] Speaker 00:
The second thing that it argued, the second thing the government argued was that it relied on the federal supply schedule in putting together its price estimate, its IGCE, but what is clear that the government did not do.

[00:38:29] Speaker 00:
So I think the idea, and what I'm hoping the court will conclude is that,

[00:38:33] Speaker 00:
This idea of the set-aside was sort of disingenuous because the federal supply schedule provided the government all the data it needed to come up with an independent government cost estimate.

[00:38:43] Speaker 00:
Namely, it had four SDVOSBs who were on the schedule that announced in the federal supply schedule what its price per bin would be, or at least the upper threshold of what the price per bin would be.

[00:38:55] Speaker 00:
But instead, the government looked across the entire universe of 51 offers under the federal supply schedule

[00:39:01] Speaker 00:
and came up with a number that looked like 98,000 a year.

[00:39:04] Speaker 00:
If it had limited its research, if its intent to set aside was genuine, it would have limited its research to just what SDVOSBs would be under this case and put its price estimate together accordingly.

[00:39:18] Speaker 00:
But it didn't do that.

[00:39:19] Speaker 00:
It looked at the entire universe.

[00:39:21] Speaker 00:
So I think, again, if the government, if the VA in this instance had been authentic in its desire to set this contract aside for service-disabled veterans, one, it had four

[00:39:31] Speaker 00:
qualified CVE verified STV-OSBs on the schedule.

[00:39:35] Speaker 00:
The pricing for those STV-OSBs was announced for the world to read.

[00:39:39] Speaker 00:
And it didn't look at it.

[00:39:41] Speaker 00:
It didn't restrict its analysis of its estimate.

[00:39:45] Speaker 00:
So its basis for its estimate on what this contract would cost under an STV-OSB set aside was based on what the predecessor concern had done.

[00:39:56] Speaker 00:
It argues that it looked at the universe of price offerings

[00:40:01] Speaker 00:
on the, but it averaged those out and it averaged all 51 out and came up with a number that is very different from the number it would have come up with if it had looked at just what STB OSBs had priced.

[00:40:11] Speaker 00:
If it had looked at what STB OSBs have charged for this service on the USA spending database, it would have come up with a very different number.

[00:40:18] Speaker 00:
But that's where we believe that the IGCE was arbitrary and whimsical as the definition of capricious means and therefore subject to change and not predictable

[00:40:29] Speaker 00:
for an SGV OSP to know what it's competing, up against what it's competing.

[00:40:32] Speaker 01:
It is really... We have no argument.

[00:40:34] Speaker 00:
Thank you.

[00:40:34] Speaker 01:
Thank you.

[00:40:36] Speaker 01:
Thank you.

[00:40:36] Speaker 01:
We thank both sides, and the case is submitted.

[00:40:39] Speaker 01:
The court will pause momentarily to set up the next argument.

[00:40:45] Speaker 01:
21-2-3-1, Landshark shredding versus United States.

[00:40:50] Speaker 01:
Mr. Whitcomb, you're back.

[00:40:53] Speaker 00:
Yes, Your Honor, I am back.

[00:40:57] Speaker 00:
If it pleases the court,

[00:40:58] Speaker 00:
Again, I'm Joe Whitcomb, and I represent Landshark shredding the appellant and plaintiff in this case and the underlying bid protest.

[00:41:08] Speaker 00:
Again, we're still arguing about the same statute, 38 U.S.C.

[00:41:13] Speaker 00:
8127, and what it means in a different context.

[00:41:17] Speaker 00:
In this case, the difference between this and the previous case is that this contract was competed on what was then FBO, FedBizOpps.

[00:41:26] Speaker 00:
set aside similarly to the previous case in that it was another cascading.

[00:41:31] Speaker 00:
But in this instance, there were two offers, both SDVOSBs, and their pricing was rejected as being not fair and reasonable.

[00:41:46] Speaker 00:
And in this instance, based only on the government's independent government cost estimate, which it later conceded was

[00:41:55] Speaker 00:
in some ways flawed, and it changed the IGCE on more than one occasion.

[00:42:00] Speaker 00:
But again, in that instance, even under the flawed analysis, it was the government relied on dissimilarly situated offers or predecessor contracts as a basis for its cost estimates, namely invoices from the predecessor contract as a basis for its analysis of the independent government cost estimate.

[00:42:24] Speaker 00:
Again, we offer, I'll offer first what I offered last in a previous argument, which is the government had better resources for determining what it should have expected from SDVOSB offers on this contract, namely the entire universe of offers that is publicly available to the government under USA spending, under its own internal databases, what it has paid other, what it has paid Landshark, and what it has paid other service-disabled Internet of Small Businesses for the performance of this service.

[00:42:54] Speaker 00:
So Landshark's position on this case is that creating an estimate not based on STD OSBs is arbitrary and capricious as it relates to Congress's intent under 38 U.S.C.A.

[00:43:08] Speaker 00:
8127.

[00:43:10] Speaker 00:
We would argue that the cancellation of this solicitation and the re-competition was illegal because Landshark's, again, this has the trappings of the

[00:43:24] Speaker 00:
hypothetical that Judge Hughes raised in the previous case, which was, in this instance, there was no cascading.

[00:43:31] Speaker 00:
The rule of two was satisfied.

[00:43:32] Speaker 00:
It was set aside.

[00:43:33] Speaker 00:
There were two offers, which has that baked-in competition, which should, under part 13 and 15, give the government confidence that the pricing was fair and reasonable.

[00:43:45] Speaker 05:
The government's... A couple of reasons the government has offered for refusing land charge pricing was... Counselor, why is land charge price so much higher?

[00:43:54] Speaker 05:
than the other competitors.

[00:43:57] Speaker 05:
Is there a fair or a reasonable explanation?

[00:44:03] Speaker 00:
Your Honor, there is.

[00:44:04] Speaker 00:
And we raised it in a previous case, but I'm going to try to do a better job of articulating.

[00:44:08] Speaker 00:
Now, land charge price was the lowest of the two SDVOSB offers in this instance.

[00:44:15] Speaker 00:
It was simply rejected because it exceeded the IGCE.

[00:44:18] Speaker 00:
The IGCE, or independent government cost estimate, was, in this case, based entirely on

[00:44:23] Speaker 00:
predecessors the predecessor contract which I believe in this case was shredded but it was which is a large multinational publicly traded company and it argued that it exceeded the government argued that Landshark's pricing exceeded available funding and is trying to advance the argument that it would that awarding to Landshark would have been a violation of the Anti-Deficiency Act but Landshark's reply to that is the Anti-Deficiency Act relates to the government's

[00:44:52] Speaker 00:
allotment of money for the entire year, there is no congressional allotment of money covered under the Anti-Deficiency Act.

[00:44:59] Speaker 05:
You're not answering my question.

[00:45:01] Speaker 05:
I'm sorry.

[00:45:02] Speaker 05:
The question was, was there a fair or reasonable explanation as to why Landshark's price was so much higher?

[00:45:13] Speaker 00:
The first answer to that, Your Honor, would be, again, it's a small business, it's operated, Landshark's business is operated by a profoundly disabled veteran, which is why these set of signs exist in the first place.

[00:45:28] Speaker 00:
But secondly, Landshark, and again, as we advanced in our previous argument, operates under a different set of rules than other small businesses and certainly different from large concerns.

[00:45:39] Speaker 00:
So a large concern, like ShredIt, for example,

[00:45:43] Speaker 00:
is not restricted in the amount of business that it subcontracts.

[00:45:47] Speaker 00:
It's not restricted in any of those things.

[00:45:50] Speaker 00:
There's no regulation that governs the amount of self-performance it does.

[00:45:53] Speaker 00:
Landshark, if Landshark is not going to self-perform, the very best that it can do if it gets a large concern or a small business concern that's not an STBOSB, the very lowest price it can offer is under 13 CFR 125.6.

[00:46:10] Speaker 00:
is twice the price of its subcontractors offered to it.

[00:46:14] Speaker 00:
So that's one explanation for why SDVOSBs are, if they're having to subcontract the contract, would be a higher price.

[00:46:22] Speaker 00:
But also the fact that, you know, Landshark, unlike a company like Shredit or Iron Mountain, when it goes in to perform under most contracts, it's required to start from scratch.

[00:46:34] Speaker 00:
It's got to go buy all new containers, for example, as opposed to being able to transfer containers over.

[00:46:39] Speaker 00:
it might have to buy other vehicles.

[00:46:41] Speaker 00:
Now, clearly, Landshark is not advancing the idea that the government should shoulder all of those additional costs, but we're arguing that comparing Landshark to large concerns in its IGCE, I'm sorry, I misspoke.

[00:46:57] Speaker 00:
Comparing Landshark to large offers is unfair because, again, it is an uneven playing field.

[00:47:03] Speaker 00:
Landshark has to play under different rules.

[00:47:06] Speaker 00:
has to, in many instances, start from scratch as opposed to a large company, or a large company like Shreditor or Iron Mountain.

[00:47:14] Speaker 00:
It has additional costs incorporated, obviously, and it doesn't get to operate with the economies of scale.

[00:47:19] Speaker 01:
Let me ask you, this kind of combines what we were talking about in the previous case with Judge Hughes' hypothetical.

[00:47:25] Speaker 01:
As you pointed out, this gets closer.

[00:47:28] Speaker 01:
Let's assume we meet the rule of two, and we don't have cascading.

[00:47:34] Speaker 01:
Is it your view, or I don't know if cascading matters, is it your view that the statutory fear and reasonable standard and best value of the government standard is only with respect to comparing the two offerors in this case?

[00:47:53] Speaker 01:
So even if both of the people that met this rule of two came in with $10 million that the contracting officer

[00:48:02] Speaker 01:
would be evaluating just as between the two of them is one fair and reasonable.

[00:48:08] Speaker 01:
Is one more fair and more reasonable?

[00:48:12] Speaker 00:
Your Honor, I would suggest that the only flaw in the... So the hypothetical with two offers came in at $10 million.

[00:48:19] Speaker 01:
One was $9 million and one was $10 million.

[00:48:22] Speaker 01:
But everybody else, if it had been open, let's say hypothetically, we all have in our instinct that everybody else would have been a million.

[00:48:29] Speaker 01:
So is it still fair and reasonable because the only thing we can compare is the two offers against each other as opposed to what other bidders that don't meet the rule of two would have come up with?

[00:48:42] Speaker 00:
I'm suggesting, Your Honor, that the cost comparison between two STD OSPs is not the only tool available to the contracting officer, but it is when incorporated with other tools like

[00:48:56] Speaker 00:
Our suggestion is, Landshark's suggestion is that the test for fair and reasonable, it would be that the price is so outrageous.

[00:49:05] Speaker 00:
And again, not as compared to non-STD OSBs, but compared largely to what the government has paid for these goods and services in the past.

[00:49:11] Speaker 00:
And again, Landshark has been awarded many contracts in the past at similar pricing.

[00:49:16] Speaker 00:
So again, I think that's where the hypothetical that your honor offered of the 10 million goes, is a little, it's difficult to analyze because again,

[00:49:26] Speaker 00:
this it's different from this hypothetical in that so I would suggest the answer to your question is no.

[00:49:32] Speaker 00:
In the instance where one is five million and one is ten million the government could reject it under other basis like it's never paid that price before no prudent person would ever pay it because no one ever has as an example but in both the predecessor case and the previous case and this case the government has paid that price there was

[00:49:50] Speaker 00:
So all we're trying to get to is that the fair and reasonable price is a low bar, a lower bar than the government is bringing, a low bar for the contractor to get over, not an exceptionally high bar.

[00:50:01] Speaker 00:
Again, the government, Landshark had no idea at onset of this contract what the IGCE was.

[00:50:07] Speaker 00:
It couldn't know, right?

[00:50:08] Speaker 00:
All it knew for sure is what it would cost it to perform.

[00:50:12] Speaker 00:
And it offered a price, and again, competition and market forces are supposed to be the thing

[00:50:17] Speaker 00:
that drives fair and reasonable pricing, right?

[00:50:20] Speaker 00:
And if the government were, in your honor's hypothetical, started to award contracts at $5 million, I assure you it wouldn't be doing it for very long, because there would be a rush to the market.

[00:50:30] Speaker 00:
There would be a rush to the market that would drive down pricing.

[00:50:34] Speaker 00:
But in this instance, there were two offers.

[00:50:36] Speaker 00:
Those two offers were competitive with other pricing that SDVOSBs have paid in the marketplace.

[00:50:41] Speaker 00:
And so therefore, the government's finding that this price was not, that Landshark's price was not fair and reasonable and rejecting it,

[00:50:46] Speaker 00:
is contrary to law because it's finding that it was not fair and reasonable was based on an arbitrary standard of a predecessor contract, a dated predecessor contract offers five years ago under very different circumstances.

[00:51:03] Speaker 00:
And that was its only basis for finding that Landshark's price, because it didn't have the benefit in this instance, Your Honor, of the other offers pricing until after it canceled Landshark's, but it canceled the solicitation that Landshark competed under and recompeted it.

[00:51:16] Speaker 00:
In this instance, that's what makes this case different from the previous case.

[00:51:22] Speaker 01:
All right.

[00:51:22] Speaker 01:
Unless my colleagues have further questions, why don't we hear from the government?

[00:51:27] Speaker 06:
Thank you, Your Honor.

[00:51:36] Speaker 06:
May I please report?

[00:51:39] Speaker 06:
Yes, Your Honor.

[00:51:40] Speaker 06:
I just wasn't sure if I was supposed to start.

[00:51:42] Speaker 06:
May it please the court?

[00:51:44] Speaker 06:
The primary focus of the second Landshark appeal is the decision that the lower court made that its claim should be dismissed for lack of standing.

[00:51:55] Speaker 06:
And that's where all these issues come up about Kingdomware.

[00:51:59] Speaker 06:
Kingdomware is its defense to its lack of standing.

[00:52:08] Speaker 06:
Just to get first into

[00:52:11] Speaker 06:
Our primary argument, our argument is that they lack standing because their proposed price exceeds available funding.

[00:52:18] Speaker 06:
And for that reason, they never had a substantial chance of receiving an award.

[00:52:25] Speaker 06:
As the trial court explained, Landshark cannot demonstrate that it had a substantial chance of being awarded a contract because the agency had the right to establish the level of funding.

[00:52:37] Speaker 06:
And Landshark's offer was more than four times that funding level.

[00:52:41] Speaker 06:
Courts have routinely concluded that they have neither the authority nor the expertise required to instruct an agency on how to conduct its internal affairs.

[00:52:52] Speaker 06:
And this type of interference would improperly remove management authority from the agency to which Congress delegated that authority.

[00:53:01] Speaker 06:
Landsharks' response to that issue is remarkable without explanation or support.

[00:53:10] Speaker 06:
It has simply argued that the funding levels are largely irrelevant, and it has referred to the king.

[00:53:17] Speaker 05:
Yes.

[00:53:17] Speaker 05:
Councilor, this is Dorina.

[00:53:18] Speaker 05:
Well, have we ever held that available funding that's a criteria for evaluating standing in a bid protest case?

[00:53:30] Speaker 06:
Your Honor, I don't think the court has held that.

[00:53:34] Speaker 06:
OK.

[00:53:38] Speaker 06:
But I'll just note that Mr. Whitcomb this morning talked about kingdomware as a decision that mandated the government to do something differently with its ICGE.

[00:53:54] Speaker 06:
And kingdomware speaks to a discrete period of time in the procurement process.

[00:54:01] Speaker 06:
It doesn't address the time before the contracting officer makes

[00:54:06] Speaker 06:
a decision about whether to restrict competition and it doesn't deal with, you know, the award decision.

[00:54:12] Speaker 06:
It deals with the decision about whether competition should be restricted.

[00:54:17] Speaker 06:
And so it's, Kingdomware is not the answer to the government having some requirement to make, to develop its ITGE in a different way than it has.

[00:54:30] Speaker 06:
In this case, I'll also just note that the ITGE

[00:54:35] Speaker 06:
was not ultimately the basis for the contracting officer's corrective action decision.

[00:54:43] Speaker 06:
She took another look at the record and decided that the ITG was flawed and decided to take corrective action by doing a different analysis as to whether the pricing was fair and reasonable.

[00:55:00] Speaker 06:
And she did a historical comparison and a regional comparison.

[00:55:04] Speaker 06:
And still under those comparisons, she concluded that the pricing that was offered was not fair and reasonable.

[00:55:19] Speaker 02:
This is Judge Hughes.

[00:55:20] Speaker 02:
Given that, I don't understand your standing argument here.

[00:55:23] Speaker 02:
I mean, their argument is once the contracting officer sets this aside because it

[00:55:30] Speaker 02:
It was determined that there were two service disabled businesses that could submit bids that the statute required an award to one of them.

[00:55:41] Speaker 02:
Now, that, whether we agree with that argument or not, that's a merits argument.

[00:55:47] Speaker 02:
But don't they have standing to make that argument and say that the contracting officer's determination that this wasn't fair and reasonable was,

[00:55:58] Speaker 02:
wrong on the merits because A, the statute required it, and also there are additional arguments about the supply schedule.

[00:56:07] Speaker 02:
That to me all seems like merits arguments, not standing arguments.

[00:56:15] Speaker 06:
Your Honor, I think perhaps at a certain point it crosses into merits, but there are a lot of arguments that Landshark has made that basically are to the effect

[00:56:28] Speaker 06:
that the agency has to raise the price that it's willing to spend on this project, essentially.

[00:56:38] Speaker 02:
And... Sure, that's entirely their argument, that, you know, you can't look beyond the bidding prices of the service-disabled businesses, particularly if they're confirmed by the federal supply schedule and have been paid at that rate before.

[00:56:59] Speaker 02:
And if that argument is correct, then the government's independent estimate is irrelevant.

[00:57:07] Speaker 02:
And I don't understand your anti-deficiency argument at all.

[00:57:10] Speaker 02:
If the statute requires, Congress could if it wanted to say, we don't care, the agency doesn't have discretion to develop an independent estimate for service disabled businesses.

[00:57:23] Speaker 02:
And all it can do is look at the prices that have been qualified on the supply schedule

[00:57:29] Speaker 02:
And if there are two or more service-disabled businesses on the supply schedule, you have to choose one of those prices.

[00:57:34] Speaker 02:
Congress could do that, right?

[00:57:36] Speaker 06:
Could Congress write a statute like that?

[00:57:44] Speaker 06:
Yes.

[00:57:45] Speaker 06:
I think so.

[00:57:48] Speaker 02:
Well, of course.

[00:57:48] Speaker 02:
I mean, there's nothing unconstitutional about it or anything.

[00:57:51] Speaker 02:
Congress could say, we want to give service-disabled businesses

[00:57:59] Speaker 02:
as big of an advantage as possible and as long as they're qualified on the supply schedule and they perform these services, you have to pick from them.

[00:58:07] Speaker 02:
No matter how much it costs you, as long as it fits within your appropriations, that's what you have to pay.

[00:58:16] Speaker 02:
And that's, you know, I'm sure that your friend on the other side would take exception with the way I've described it, but if that's their argument, they have standing to make that argument, don't they?

[00:58:28] Speaker 02:
And we have to address that argument on numerics.

[00:58:33] Speaker 06:
Well, you know, I guess I still see an issue of, you know, I mean, what we're talking about, and I know my colleague was more precise about standing in his brief in terms of making a distinction between Article III standing and what we sometimes call statutory standing.

[00:58:54] Speaker 06:
But, I mean, what we're talking about

[00:58:57] Speaker 06:
is whether they can show that they're an interested party by either the Substantial Chance Test or the Weeks Marine Test.

[00:59:11] Speaker 02:
And making that, so we're not talking about Article 3 standing, we're talking about, you know, zone of interest or whatever you want to call it, that they have a substantial chance of winning the thing.

[00:59:21] Speaker 02:
But in determining that, we have to look at the legal arguments they're making.

[00:59:26] Speaker 02:
And under their legal arguments, they would have a substantial chance of an award.

[00:59:37] Speaker 02:
I mean, you can't pre-decide the legal merits and then say under our statutory construction, you would never get the award because you're way outside of our independent estimate.

[00:59:48] Speaker 02:
Their argument is your independent estimate has to be disregarded because the supply schedule should be what controls.

[00:59:58] Speaker 06:
Well, Your Honor, I guess it seems to me that it's so far afield to say that Kingdomware and the statutory provision that it's construing actually establishes that they're an interested party in this case.

[01:00:17] Speaker 06:
It seems like

[01:00:25] Speaker 06:
trying to shoehorn substance into something where it just so clearly doesn't belong.

[01:00:32] Speaker 02:
I don't understand that answer at all.

[01:00:39] Speaker 02:
Are you saying that their statutory interpretation is so incorrect that whether they would qualify or not for under that word, it's so incorrect that it just can't be

[01:00:53] Speaker 02:
considered in determining whether they're standing?

[01:01:00] Speaker 06:
I'm saying first it strikes me very incorrect, but there's also the fact that I don't think it's

[01:01:19] Speaker 06:
I mean, just because the court is getting into whether or not they're an interested party because of Kingdomware, I'm not... That doesn't strike me as a merits argument.

[01:01:31] Speaker 06:
That's looking at whether they're an interested party because Kingdomware entitles them to an award.

[01:01:35] Speaker 01:
Okay.

[01:01:42] Speaker 06:
Anything else?

[01:01:46] Speaker 06:
If the court has no further questions, I'm not sure if I had time left, but if the court has no further questions, I'm happy to see the rest of my time.

[01:02:00] Speaker 01:
Okay.

[01:02:02] Speaker 01:
I don't have hearing nothing from the panel.

[01:02:04] Speaker 01:
Thank you.

[01:02:05] Speaker 06:
Thank you.

[01:02:11] Speaker 01:
Mr. Whitcomb, I think you have a little time left for rebuttal.

[01:02:16] Speaker 00:
Thank you, Your Honor.

[01:02:17] Speaker 00:
Again, I think the position that Landshark is taking is actually a simple one in this instance, and that is that the Rule 2 in this case was satisfied.

[01:02:30] Speaker 00:
The government's argument so far has been that Landshark's pricing was not fair and reasonable because it exceeded IGCE, which we argue in this case.

[01:02:41] Speaker 00:
And again, I would only take exception of Judge Hughes's position that our argument is that the IGC is in all instances irrelevant.

[01:02:48] Speaker 00:
I think if the IGCE were calculated based on what other STV OSBs have charged for the goods or services in the marketplace historically, I think that would be a completely allowable IGCE.

[01:03:02] Speaker 00:
But using this competitive, using a non-STV OSB, a non-small, a large business concern, and what it performed.

[01:03:10] Speaker 00:
The government can argue, well, look, you know, that's one of the things that the FAR allows the contracting officer to look at is historical pricing.

[01:03:16] Speaker 00:
We would say that's true.

[01:03:18] Speaker 00:
But it should not be allowed to use historical pricing as a means for sidestepping Congress's requirement that it award to STDOSBs when it can.

[01:03:27] Speaker 00:
And that's what appears has happened here.

[01:03:30] Speaker 00:
And in arguing that it's a, that Landshark wasn't eligible for award because it exceeded an arbitrarily calculated

[01:03:40] Speaker 00:
funding limit, I think, is unavailing here because that funding limit was not created consistent.

[01:03:48] Speaker 00:
It was just created solely on the contracting officer's estimate.

[01:03:53] Speaker 00:
The contracting officer had more than enough authority to go back and get additional funding if the contracting officer needed to in order to make the award.

[01:03:59] Speaker 00:
But Congress's mandate is clear.

[01:04:03] Speaker 00:
The government must award when it can.

[01:04:07] Speaker 00:
And in this instance, the government clearly could have.

[01:04:10] Speaker 00:
I mean, the government would have easily, the government had to, if we turn this around, had the government made an award to Landshark, it clearly would have survived a bid protest based on price reasonableness.

[01:04:21] Speaker 00:
If somebody else with a large offer had come along and said, hey, there's no way you can make this award to Landshark because its price is unreasonable, because it exceeds what you paid in the past, the government would have clearly prevailed in that protest.

[01:04:32] Speaker 00:
because it has the discretion to find that Landshark's price was fair and reasonable because it clearly paid that price in the past.

[01:04:40] Speaker 00:
What the government has done is make that argument in reverse and say, well, we can find that it's not fair and reasonable because we could get it at a lower price.

[01:04:48] Speaker 00:
And if the court has no other questions or concerns, I will arrest.

[01:04:54] Speaker 01:
Thank you.

[01:04:55] Speaker 01:
We thank both parties and the cases submitted.

[01:04:57] Speaker 01:
That concludes our proceedings for this morning.

[01:05:01] Speaker 01:
Thank you, Your Honor.

[01:05:02] Speaker 06:
The Honorable Court is adjourned until tomorrow morning at 10am.