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The United States Court of Appeals for the Federal Circuit is now open and in session.

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God save the United States and this honorable court.

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The first case for argument this morning is 20-2041, DynCorp International versus the United States.

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Mr. Panner, whenever you're ready.

[00:00:24] Speaker 02:
Thank you, Judge Prost, and may it please the court.

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Section 15.404-1B2 and 3 of the FAR make clear that the government in analyzing prices to ensure that they are fair and reasonable must begin with a comparison of proposed prices or historical prices in some cases because normally adequate price competition establishes a fair and reasonable price.

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In this case, however, there's no dispute that the Army was required to

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But initially did not conduct a price reasonableness evaluation of all offers prices and in the words of the trial judge this evaluation error is particularly egregious given that some offers proposed prices one to 2000% higher than those of the lowest price offers.

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I'm sorry to interrupt, but time is short.

[00:01:16] Speaker 04:
I guess I understand you were talking historically what the Court of Federal Claims did, but now here, what precisely are you arguing should have been done?

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Is it your view that the insufficient to determine that the price is fair and reasonable is what requires the contracting officer to go back to get more information from you?

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Tell me precisely what should have happened that didn't happen.

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Certainly.

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So what should have happened that didn't happen is that the determination had to be made that DynCorp's proposed prices were reasonable.

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And that had to be done pursuant to the price analysis techniques set out in 4041b2 as

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clarified in B3.

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And what that means is that what the contracting officer or what the Army had to do was to compare, as a first step, is to compare DynCorp's prices to those of other offers.

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And had it done so, it would have been evident that DynCorp's prices were quite high.

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And the reason that matters is because had those prices been determined to be unreasonable,

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there would have had to be further discussions.

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DynCorp would have had to be alerted to the fact that the prices were unreasonable and therefore that DynCorp had a significant weakness.

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Indeed, the Army doesn't contest that.

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And therefore that would have led to DynCorp improving its proposal and DynCorp laid out in the appendix at 550 how it would have responded

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had it been alerted that its prices were too high.

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In fact, the discussions that it had had, had suggested that there was an issue with its prices being actually too low.

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But in all events, what did not happen is that the Army failed to alert, failed to engage in the required discussions.

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And I think it's worth... Go ahead.

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Go ahead.

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I'm sorry, Your Honor.

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No, I'm a little unclear on the rationality of the cost reasonableness.

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You're not alleging that your staffing, labor rights, or other aspects of your prices were unreasonable in light of your technical approach, right?

[00:03:49] Speaker 04:
You're not saying the technical approach was unreasonable, but just that they should have concluded that all you say is the total price is unreasonable.

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Am I right?

[00:03:58] Speaker 02:
Well, I think that

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I think, Your Honor, that what we would say is that the aspects, including the labor staffing model, that the first step should have been to recognize that Dine Corp's proposal was substantially higher than those of other offers.

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And then there had to be a reckoning as to why that difference occurred.

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Now, what did not occur

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Well, let me ask you, I just want to get some clarification because if the technical approach, if you come up with hypothetical or hypothetically a technical approach, but it's so more sophisticated than anything else, so it's going to result in a higher price.

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Now, the technical approach in your view is, well, the technical approach here you've not alleged is unreasonable.

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So the analysis isn't just, is this higher than the others, right?

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Is the price unreasonable given the technical aspects of your proposal?

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And why isn't that an answer to that yet?

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I think the reason that the answer to that is not, first of all, I don't think that, I think the first thing to recognize your honor is that that is not a course of reasoning that the army engaged in.

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The army did not begin by saying,

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that we have to compare these prices and we recognize that the price that we're seeing for DynCorp is substantially higher and let's account for that difference.

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Instead there was a determination in isolation that DynCorp's approach was adequate to meet the needs of the RFP and that the price for the proposal that was made was consistent with that proposal.

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But the very purpose of the

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price analysis technique set out in B2 Romanet 1 is to require the contracting officer to confront the disparity in price that existed.

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And I think that... This question also relates to even whether or not you have standing, whether you would have had a substantial chance of winning an award.

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We would have to assume that you could revise your price proposal downward to have markedly lower prices, but there would be no adverse impact on your technical rating.

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Isn't that a lot of speculation at this point?

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I don't think so, Judge Romali.

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I mean, I think that that is exactly the remedy that this court should.

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direct the court of federal claims to require.

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Because as has been laid out in the record, the labor staffing model and the labor rates that DynCorp used could be revised, and they could do so without affecting the technical merit of the proposal.

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There was very little difference

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between DynCorp and other competing... Mr. Panner, this is Judge Proutz.

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My question to you earlier was if those parameters were not unreasonable, I guess you could change your whole proposal and completely rewrite it.

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But isn't the inquiry whether the price was reasonable?

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And isn't that predicated on whether or not it matched the needed costs for what you were proposing in terms of technical stuff?

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Well, Your Honor, I think that this is actually where the hypothetical that I think all the parties have used to illustrate their positions is very helpful, because... But they use different cards, which is interesting.

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Yes.

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Everyone seems to have their favorite make.

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But I actually am happy to embrace the government's choice, which is the Ferrari versus the Corolla.

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Um, and, uh, I think it does illustrate exactly what the problem is here.

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If you get a proposal and it calls for, um, uh, a car, uh, and, uh, a Ferrari is indeed a car and it will indeed, um, suffice to transport, um, you know, people, uh, it would be, I think quite arbitrary for the army to say, well, it's a Ferrari, Ferraris cost $180,000.

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No problem.

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as opposed to saying, it's actually quite unreasonable if there's not a reason that, you know, if the RFP does not call for a car that can go 150 miles an hour, there's really no reason to propose a Ferrari.

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And even in the case that the intervener suggested, which was a Tesla versus a Prius, it at least would be

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I think the price analysis technique at least requires confronting the disparity.

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And that's what did not occur here.

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And, you know, I actually... To understand what?

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I mean, if you're a contractor and the Army just wants cars that run.

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and you make a choice that you think the Ferraris would be the best for the government, and they look faster, they have a longer life, and so you propose that.

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And it turns out, as one would expect, that the cost of your proposal is astronomically larger than the Ford.

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Does that mean that the government is supposed to tell you it was unreasonable for you to pick the Ferrari as opposed to the Ford?

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You shouldn't have known that yourself, that the government has to alert you to that, to have further discussions about that?

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Is that the hypothetical here, that it was unreasonable for you to pick the Ferrari and the government should have told you that?

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Yes, Your Honor.

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With the qualification that the kind of disparity that you're talking about.

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So for example, if it's one better

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suggest the Ferrari, um, there would be reason to say, wait a minute, that Ferrari is really not appropriate for what we're looking for.

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And the price is completely unreasonable given the technical requirements of the RFP.

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And again, that is what didn't occur here.

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You know, I, I think we would really embrace the analysis of the court of federal banner.

[00:10:44] Speaker 00:
Excuse me.

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Yes, you're a judge.

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So, um, but

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Why is it really the place of the agency to do that?

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I mean, your client, as are the other, as are the intervenors here, is a sophisticated contractor.

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It's presumed to have read the requirements of the specification and know about the procurement and has experience.

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And if it chooses to offer the Ferrari,

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why should the government come in and, and second guess that I guess I'm sort of just amplifying a bit, maybe what judge pros was asking you about.

[00:11:19] Speaker 02:
Sure.

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Thank you, your honor.

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I think that that's, I actually think there's not really a dispute that the government has to do that in the sense that the government concedes that if I think there's a number of points that the government concedes here, the government concedes,

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that it was required to evaluate the reasonableness of all of the offeror's prices.

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It conceives that it failed to do that in the initial set of, in the initial evaluation.

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It conceives that if it found the prices to be unreasonable, that it was required to engage in discussions.

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There's no dispute about any of those points.

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And so really the only dispute is did, when the government took the corrective action,

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following the remarks from the trial judge.

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Did the government adequately address the problem?

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And our submission is that they didn't, and that is clear from the terms of the FAR, which state that in conducting the price analysis, the first step must be to engage in these price comparisons.

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And had the government done that,

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You're getting... Can I get... I'm sorry, Judge Schall, go ahead.

[00:12:38] Speaker 00:
No, this will be just quick.

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You're getting now, Mr. Panetta, the argument that the government did not, in your view, adequately explain why it used option little seven of the various options that you can use instead of the two preferred ones, correct?

[00:12:57] Speaker 02:
Yes, Your Honor, although I would say that it's also

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I think it also goes to the arbitrariness of the approach that the government took, given the price disparities, to fail to confront those disparities in its evaluation.

[00:13:13] Speaker 04:
Mr. Paner, we'll not, I don't want to cut into your rebuttal time, but I just have one further question, which is just generally, I really want to know what the, we've been talking this morning about 15-404, and we've also got 15-306, right?

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And that seems to indicate about how that also seems to speak to the kind of discussions that are required by the contracting officer.

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Is that your read of those two?

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Those two kind of go together?

[00:13:45] Speaker 02:
Yes, Your Honor.

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But I would say that what's specifically at issue here is the question of price reasonableness analysis that

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you know, that the, that was at issue.

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So we are relying here on, we are relying here on specifically on the manner in which the price analysis was undertaken.

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And again, there's no contest, there's no dispute I should say that if the contracting officer,

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had determined that DynCorp's prices were unreasonable, that they would have had to engage in discussions, which did not occur.

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If they were to use the comparison with the other offerors, is it your view that they have to do that comparison in a vacuum and not in the context of what it was the offerors were pricing?

[00:14:52] Speaker 02:
No, I wouldn't say that, Your Honor.

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What I would say is that

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What's clear is that the contracting officer must confront and explain that disparity.

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And that's really what did not occur here because, I mean, by the terms of what the contracting officer said and the corrective action, it was using, it essentially went in two steps.

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It said the technical team has said that the technical approach satisfies the proposal.

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And I've gotten information about costs and it lines up.

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And therefore, that satisfies price reasonableness.

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And what's missing is.

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Basically, you want.

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Basically, you would want.

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I'm sorry.

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You would want the contracting officer to basically help you do a whole new proposal?

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I wouldn't put it.

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I mean, discussions are for the purpose of alerting.

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uh... the better to weaknesses in the proposal so that they can improve them that benefits the public because the public and get the benefit of better prices and better proposals uh... and that again there's really the government does not contest that had it recognized that uh... dying corpse uh... pricing with unreasonable that it would have had to alert that corp and give it an opportunity to approve its proposal

[00:16:16] Speaker 04:
But again, it's not clear to me why you're not saying that it would have had to determine that the technical aspects of Don Court's proposal were unreasonable.

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If the price was reasonable in terms of the technical aspects of the proposal, then it's just

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than necessarily if they're saying the price is too high and unreasonable, it's because you either had too much in your technical aspects or didn't need them or something like that, right?

[00:16:51] Speaker 04:
Is that what you're saying?

[00:16:52] Speaker 02:
Yeah, I don't want to fight you too hard on that, Your Honor, because I think that you have a fair point, which is to say that it is correct that the price is not evaluated in a vacuum, that you do need to, you know, what we're saying had to happen

[00:17:07] Speaker 02:
uh... is that there had to be an accounting for the disparity there had to be an explanation in the record of why given that comparison of prices that uh... uh... there's nothing that that i could propose it was nevertheless reasonable in the discussions were not required uh... and that's really what didn't occur uh... on the contrary there was a recognition that dine corpse prices very high uh... and substantially higher than the other

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other offerors, and there was a deliberate decision made not to engage in those discussions.

[00:17:42] Speaker 04:
Okay.

[00:17:43] Speaker 04:
Thank you, and we'll restore three or three minutes of rebuttal.

[00:17:46] Speaker 04:
Let's hear from the government.

[00:17:50] Speaker 01:
Thank you, Your Honor.

[00:17:51] Speaker 01:
May it please the court?

[00:17:53] Speaker 01:
This is an odd-bid protest.

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Dine Corp's allegation is not that its proposal represented the best value to the government and that the Army erroneously failed to recognize this.

[00:18:01] Speaker 01:
Rather, DynCorp alleges that the Army erred by failing to find that DynCorp's own prices were so high as to be considered unreasonable.

[00:18:08] Speaker 00:
Mr. Rayl, this is Judge Saul here.

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I have just one sort of preliminary question that intrigues me.

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What is the status of this procurement right now?

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Is it ongoing or is it halted or what?

[00:18:21] Speaker 01:
It is ongoing.

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different regions where task orders have been awarded.

[00:18:29] Speaker 01:
For some of those regions, the transition to Log Cap 5 has been completed.

[00:18:33] Speaker 01:
Others, it's ongoing due to COVID, I think.

[00:18:36] Speaker 01:
And at least one, it hasn't actually started yet.

[00:18:39] Speaker 01:
So it's at various stages, depending on the region.

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But it has, to an extent, gotten off the ground, so to speak.

[00:18:45] Speaker 01:
Yes, very much so.

[00:18:47] Speaker 00:
OK, thank you.

[00:18:49] Speaker 01:
So DynCorp has not demonstrated any error in the Army's final price reasonableness evaluations, nor has DynCorp demonstrated that it was prejudiced by the errors it alleges on appeal.

[00:19:00] Speaker 01:
DynCorp lost the LawCat 5 competitions because of its own business decisions, not because of any errors by the Army.

[00:19:06] Speaker 01:
So the trial court's judgment should be affirmed.

[00:19:09] Speaker 04:
Can I ask you, Mr. Rael, about the FAR provision that we were discussing with Mr. Penner earlier?

[00:19:15] Speaker 04:
I mean, portion of the language says if the information on competitive price, proposed prices or previous prices is insufficient to determine the price is fair and reasonable.

[00:19:27] Speaker 04:
Insufficient suggests, does it not, like, that you have to go back and ask?

[00:19:33] Speaker 04:
I mean, can it be insufficient if you don't sort of go back to the party proposing it and ask for more information and discuss it with them?

[00:19:41] Speaker 04:
or as you just look at the face of the numbers and say, it's insufficient, we move on to the next step?

[00:19:48] Speaker 01:
Well, if you're talking about competitive prices, then I think it would just be with the prices that were proposed.

[00:19:56] Speaker 01:
I mean, insufficient could mean that maybe that you don't have enough offers competing independently, or it could mean

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that there's simply a wide disparity of prices and the awardees may be at the higher end and so you can't say strictly by adequate price competition in that particular case that the awardee's price is in fact fair and reasonable or in this case every price is fair and reasonable since the trial court determined that the agency had to look at every price.

[00:20:31] Speaker 01:
That could be a situation where it's insufficient to determine that a price is fair and reasonable.

[00:20:36] Speaker 01:
In that case, it makes sense to go back to the offers and seek more information as necessary to determine that a price is in fact fair and reasonable.

[00:20:48] Speaker 03:
Well, there's lots of discussion in these memos, in the 78 memos, but I don't see any actual

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determination that says that they couldn't use the original methodologies, the ones that are preferred.

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And so I guess what I'm trying to understand is why wouldn't they just walk through the original ones and either say they answer the question or they don't?

[00:21:17] Speaker 01:
But I guess the answer to that is because far

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the FAR provision doesn't be subsection B3 doesn't require the agency to do that.

[00:21:27] Speaker 01:
It certainly doesn't require such a determination to be documented.

[00:21:31] Speaker 01:
I mean here it's really undisputed that the information on competitive proposed prices was in fact insufficient to determine that all of the offers prices were reasonable.

[00:21:41] Speaker 01:
I mean the agency did compare

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the total proposed cost plus 60 prices and the total proposed firm fixed prices for each region and did not determine that the offers were fair and reasonable based on that.

[00:21:55] Speaker 01:
The cost price factor chair only determined that the lowest price offer or the lowest price offer in each competition was fair and reasonable.

[00:22:04] Speaker 03:
So the agency was not required to... So are you saying that the agency actually went through the first comparison of proposed prices

[00:22:12] Speaker 03:
and determined that that could not answer the question and then said it had to move on?

[00:22:20] Speaker 03:
I don't see that in any of those memos.

[00:22:23] Speaker 01:
It didn't go that far, but the agency did do a comparison of the offeror's proposed prices to each other for each of these 78 separate comparisons, and that's an appendix 1069, 866 through 94.

[00:22:42] Speaker 03:
And so you're saying that the Court of Federal Claims was in error when it said that they didn't do that comparison of all the proposed prices.

[00:22:50] Speaker 01:
Well, so they did the comparison.

[00:22:51] Speaker 01:
What they didn't do is find that each offeror's price was reasonable based upon that comparison.

[00:22:56] Speaker 01:
The agency didn't believe it needed to determine that every offeror's price was reasonable.

[00:23:01] Speaker 01:
It believed that it only needed to determine that the awardee's prices were reasonable in accordance with the FAR.

[00:23:07] Speaker 01:
And the Court of Federal Claims found that the solicitation

[00:23:10] Speaker 01:
required the agency to make a determination for every single offer.

[00:23:14] Speaker 01:
And we're not contesting that particular determination on appeal.

[00:23:19] Speaker 01:
But the agency did do the comparison.

[00:23:21] Speaker 01:
It determined that there was adequate price competition, but it didn't determine that every single offeror's price was reasonable based on that adequate price competition.

[00:23:33] Speaker 04:
Kate, Judge O'Malley, if you want to finish, go ahead, sorry.

[00:23:36] Speaker 03:
No, I was just going to say, in connection with that FAR provision where you say that it was not, that even though they call them preferred techniques, that you're saying they're not mandatory, but I don't really understand how you explain the however transition that is used for the second sentence.

[00:23:55] Speaker 03:
It does seem to say that they're not just preferred, but you don't get to the other

[00:24:01] Speaker 03:
analyses until after they're done.

[00:24:06] Speaker 01:
But I think the however fits in with the rest of the provision, which is framed in terms of permissive language.

[00:24:13] Speaker 01:
It talks about preferred techniques.

[00:24:15] Speaker 01:
It doesn't talk about mandatory techniques.

[00:24:17] Speaker 01:
And it describes a circumstance where the agency may use any of the remaining techniques.

[00:24:23] Speaker 01:
So whether the however is in there or not, it's not taking away the discretion that's expressly granted by

[00:24:31] Speaker 01:
by subsection B2 for the agency to use any of the seven techniques.

[00:24:36] Speaker 01:
To be sure, it is encouraging the agency to use the preferred techniques and giving a circumstance where it's appropriate for the agency to use one of the non-preferred techniques, but that provision doesn't mandate anything.

[00:24:49] Speaker 04:
Well, I mean, this is Judge Prost.

[00:24:52] Speaker 04:
Let me follow up with Judge O'Malley's question because I have the same.

[00:24:55] Speaker 04:
It's just Kagan, I think, has told us we're all textuous now.

[00:24:59] Speaker 04:
So we've got the however if.

[00:25:02] Speaker 04:
That language in isolation would seem to not embrace your interpretation, right?

[00:25:09] Speaker 04:
So you need to look more globally at the context and how mays are used in the FAR and how shalls are used in the FAR.

[00:25:18] Speaker 04:
Am I correct about your analysis?

[00:25:22] Speaker 04:
How do you get to the point where you say, however, if, then, and you're saying that you conclude that's discretionary?

[00:25:31] Speaker 04:
And I'm wondering how you can reach that based on those words by themselves.

[00:25:36] Speaker 01:
Well, the context is of course important and we've laid that out that, you know, the FAR certainly knows how to use the term shall not if it wants to prohibit the agency from using a particular technique in particular circumstances.

[00:25:51] Speaker 01:
But just the context of this provision alone, if subsection B3 were in isolation and we didn't have subsection B2 and this was the sole authority for using

[00:26:04] Speaker 01:
a price analysis technique like data, analyzing data other than certified cost or pricing data, then that argument might work.

[00:26:13] Speaker 01:
But here, the FAR has expressly granted the agency the authority in B2 to use the seven price analysis techniques.

[00:26:23] Speaker 01:
And so it takes something more than preferred and may use to remove that authority.

[00:26:30] Speaker 01:
B3 doesn't remove any authority.

[00:26:33] Speaker 04:
And is your reading that the contracting officer is not even limited to those enumerated seven techniques?

[00:26:42] Speaker 01:
Yes, that's also clear from the plain language of B2 where it says examples of such techniques include but are not limited to the following.

[00:26:51] Speaker 01:
So yes, that's absolutely correct.

[00:26:58] Speaker 01:
There's been no violation of subsection B3 in this case, and the price reasonableness determinations that the agency did make were reasonable.

[00:27:11] Speaker 01:
It's undisputed that the Army was well aware that there was a wide disparity in some offeror's prices, and the Army elected to perform a detailed analysis of offeror's cost and pricing information, spanning more than 1,000 pages, and ultimately concluding that each offeror's prices were reasonable,

[00:27:26] Speaker 01:
in light of their technical approach.

[00:27:28] Speaker 01:
While some offers took more robust approaches to fulfilling some of the solicitation requirements, that doesn't make those approaches or the resulting prices unreasonable.

[00:27:39] Speaker 03:
Counsel, before you finish, can you address the standing question?

[00:27:45] Speaker 01:
Sure.

[00:27:47] Speaker 01:
DynCorp has not demonstrated that it was prejudiced by the errors that it alleges on appeal.

[00:27:53] Speaker 01:
DynCorp's theory of prejudice is that

[00:27:56] Speaker 01:
if the agency had performed what it believes to be proper price reasonableness analyses, it would have determined that DynCorp's own prices were unreasonable and would have been required to tell DynCorp about that.

[00:28:13] Speaker 01:
And that DynCorp would have then proceeded to alter its proposal to give itself a substantial chance of winning the awards.

[00:28:21] Speaker 01:
And it simply hasn't made that demonstration

[00:28:24] Speaker 01:
On the last point, DynCorp's prices were not only substantially higher than the awardees in the six relevant regions, but DynCorp was also inferior for the significantly more important non-price factors.

[00:28:37] Speaker 01:
So without a showing that it would have lowered its prices below an awardee in response to additional discussions, DynCorp could not demonstrate a substantial chance of winning a best value trade-off because the awardee would have had both a lower price and a superior proposal

[00:28:51] Speaker 01:
for the non-price factors combined.

[00:28:53] Speaker 01:
In other words, there's nothing to trade off.

[00:28:56] Speaker 01:
DynCorp never provided any calculations showing how it would have lowered its prices sufficiently to beat any one of the awardees, even though it was informed of the awardees' prices before it filed its protest as part of a debriefing.

[00:29:08] Speaker 01:
It's DynCorp's burden to demonstrate a substantial chance of award, and it has not done so.

[00:29:13] Speaker 04:
And you're talking about, you're making that argument with respect to standing, not the merits, right?

[00:29:18] Speaker 01:
We've made the argument with respect to prejudice.

[00:29:22] Speaker 01:
To the extent prejudice goes to the standing to raise this particular claim, I suppose that that could be a fair characterization as well.

[00:29:32] Speaker 01:
But we haven't specifically argued standing, but the prejudice, the prejudice determination that would have to be made if nine court were successful on the merits.

[00:29:42] Speaker 01:
Which, of course, it's our position that they are not successful on the merits, that the trial court was correct to

[00:29:48] Speaker 01:
grant the government judgment on the administrative record, and accordingly, the court should affirm the trial court's judgment.

[00:29:54] Speaker 01:
Thank you.

[00:29:57] Speaker 04:
Anything further?

[00:29:58] Speaker 04:
No.

[00:29:59] Speaker 04:
Thank you.

[00:30:02] Speaker 04:
Mr. Panner, we're restored three minutes of rebuttal.

[00:30:05] Speaker 04:
Do you need it?

[00:30:08] Speaker 02:
Thank you very much, Judge Crost.

[00:30:11] Speaker 02:
Clearly, if the panel has questions, I'd be very happy to respond.

[00:30:14] Speaker 02:
Maybe I can speak briefly to the prejudice issue.

[00:30:18] Speaker 02:
I think that with regard to that, as Mr. Rayl noted, the government hasn't contested DynCorp standing to pursue this, didn't contest it in the Court of Federal Claims and hasn't done so here.

[00:30:37] Speaker 02:
And I do think that it would be inappropriate

[00:30:42] Speaker 02:
for that jurisdictional question to sort of foreclose the factual inquiry that's required in the event that an error is determined on the merits.

[00:30:59] Speaker 02:
But in all events, as we've explained in our briefs, DynCorp did establish prejudice.

[00:31:06] Speaker 02:
And I think that this court can

[00:31:12] Speaker 02:
grants deference to the determination of the Court of Federal Claims, which really does go to this question in the initial opinion.

[00:31:25] Speaker 02:
It was actually issued contemporaneously, but in the first opinion in the appendix, the trial judge determined, based on the record, that there was a substantial chance that had discussions been

[00:31:40] Speaker 02:
pursued with respect to pricing that there was a substantial chance that the awards would have been different and that DynCorp did demonstrate a substantial chance with regard to that.

[00:32:00] Speaker 04:
Anything further?

[00:32:02] Speaker 02:
Unless the court has further questions, Your Honor, thank you for the additional time.

[00:32:06] Speaker 04:
Thank you.

[00:32:07] Speaker 04:
We thank both sides and the case is submitted.

[00:32:09] Speaker 04:
Thank you.

[00:32:11] Speaker 02:
Thank you.