[00:00:00] Speaker 02: Next case for argument is 21-1696 Superior Optical Labs versus United States. [00:00:08] Speaker 02: Mr. Gallacher, please proceed. [00:00:11] Speaker 01: Thank you, Your Honors. [00:00:12] Speaker 01: May it please the court? [00:00:14] Speaker 01: There are three key points that I want to emphasize this morning. [00:00:17] Speaker 01: First, the lower court misapplied the arbitrary and capricious standard of review under the Administrative Procedure Act and DelFederal. [00:00:26] Speaker 01: The agency's decision to take corrective action should have been reviewed under a highly deferential rational basis test, but it wasn't, and the record on appeal shows it wasn't. [00:00:35] Speaker 01: Second, this appeal considers a simple question, whether the VA provided a coherent and reasonable explanation for its exercise of discretion to take corrective action. [00:00:47] Speaker 01: The answer is yes. [00:00:51] Speaker 00: I'm kind of confused here. [00:00:52] Speaker 00: You say that they applied the wrong standard, but the predicate [00:00:55] Speaker 00: for the VA's decision was the finding of an ambiguity. [00:00:59] Speaker 00: I mean, they had to find an ambiguity before they even went beyond that. [00:01:04] Speaker 00: And so in this case, you're objecting to the fact that the Court of Federal Claims looked to see whether there was an ambiguity. [00:01:14] Speaker 00: How is that not the correct analysis? [00:01:17] Speaker 01: Well, Your Honor, with all due respect, that's not completely correct. [00:01:23] Speaker 01: The standard that Dell Federal requires is that the agency has substantial discretion in making decisions relating to taking corrective action. [00:01:34] Speaker 01: Dell Federal does not require an actual error in order for an agency to take corrective action. [00:01:40] Speaker 01: Dell Federal recognizes that corrective action can be taken in the face of a perceived error or in the absence of an error to improve the competitive process. [00:01:49] Speaker 01: So the fact that the court below actually started by focusing on its own analysis, independent of the agency, regarding whether the solicitation was ambiguous, and then in the second place, turned to the agency's rationale, expressing its six-page notice of corrective action. [00:02:07] Speaker 01: That turned the standard of review on its head, and it demonstrated that the court was substituting its own judgment for that of the agency. [00:02:16] Speaker 01: There was no deference in the first place, Your Honor, because the court reached its own conclusion and then matched up what the... Wait, I just want to make sure I understand. [00:02:27] Speaker 00: So you're saying that the Court of Federal Claims had no right to exercise judicial review over the predicate question of whether the solicitation was ambiguous. [00:02:37] Speaker 01: You know, that's not what I'm saying, and thank you for allowing me to clarify. [00:02:42] Speaker 01: What I am saying is that under Dell Federal and APA, the standard of review is whether the agency acted arbitrary or capricious, and that has been clarified in Dell Federal to mean whether the agency provided a coherent and reasonable explanation of its exercise of discretion. [00:02:59] Speaker 01: That analysis should have started with the agency's notice of corrective action, and then followed as to whether or not, with due deference to the agency, the agency expressed a rational and reasonable explanation of why it was doing what it was doing. [00:03:15] Speaker 01: The court below inverted that. [00:03:17] Speaker 01: It turned it on its head. [00:03:18] Speaker 01: It started by reaching its own conclusions to whether there was an actual ambiguity, notwithstanding the fact that DelFederal does not require an actual ambiguity or an actual error [00:03:29] Speaker 01: in order to support corrective action. [00:03:32] Speaker 00: But that was the rationale that the VA used. [00:03:34] Speaker 00: So if they're supposed to look to see whether their rationale was supported, then how could they not look at that question? [00:03:42] Speaker 01: Well, and absolutely, Your Honor, but the problem is, again, as to whether or not deference was served, whether deference was given. [00:03:49] Speaker 01: And when the court started by reaching its own conclusion as to what the solicitation said, that deference was never really reached. [00:03:56] Speaker 01: What needed to happen here was the lower court needed to start with the agency's six page notice of corrective action. [00:04:03] Speaker 01: It needed to consider whether or not the agency reached a coherent and reasonable, or provided a coherent and reasonable explanation of its decision. [00:04:13] Speaker 01: What the agency did in the six page notice of corrective action was look at the language that it concluded was in fact ambiguous due to references to plural [00:04:23] Speaker 01: and references to the singular, confusing what the issue was as to what the sample submittals of these eyeglasses needed to look like. [00:04:33] Speaker 01: But the agency, and frankly, I am open to the fact that reasonable minds can disagree as to the language here because that is the very nature of an ambiguity. [00:04:44] Speaker 01: But where the VA reached the conclusion that the language was ambiguous, or was at the very least perceptually ambiguous, that is all that was required for the agency to take corrective action. [00:04:56] Speaker 01: And the lower court's substitution of its own judgment in the first place did not give the agency decision the due deference that's required under the Administrative Procedure Act in DelFederal. [00:05:09] Speaker 00: But didn't the lower court [00:05:11] Speaker 00: expressly find that the conclusion that the solicitation was ambiguous was unreasonable. [00:05:19] Speaker 01: The lower court did reach that conclusion, but with all due respect to the lower court, that conclusion was reached ignoring certain record evidence that demonstrates that there was ambiguity. [00:05:33] Speaker 01: The language in question here has been subject to at least three different interpretations. [00:05:39] Speaker 01: The first, advanced by the Department of Veterans Affairs, indicated that they were hoping to get two identical sample sets so that they could be evaluated separately due to COVID concerns. [00:05:53] Speaker 01: Those circumstances changed. [00:05:55] Speaker 01: The agency actually in the end did not need two different sample sets. [00:06:04] Speaker 00: is an ambiguity that arises from the very language used? [00:06:08] Speaker 00: Wouldn't that be a patent ambiguity? [00:06:11] Speaker 01: Well, even to the extent that that's patent or latent, Your Honor, that's really immaterial. [00:06:17] Speaker 00: Well, it's important because if it's patent, you had additional obligations, right? [00:06:22] Speaker 01: Well, that's not necessarily true, Your Honor. [00:06:24] Speaker 01: The question as to a patent or latent ambiguity might be relevant with regard to PDS's original protest ground. [00:06:32] Speaker 01: But with regard to the issue in this case, which is whether the agency had discretion to take corrective action, the patent versus latent ambiguity is really immaterial. [00:06:44] Speaker 01: The lower court in Delft Federal made this point [00:06:49] Speaker 01: very clearly recognizing that that issue was, the issue of Payton v. Layton in the first place did not really apply and impact the agency's decision to take corrective action. [00:07:04] Speaker 01: Now, with regard to the differing interpretations here, I mentioned the VAs, the idea that they had originally intended that the VA admitted in its notice of corrective action that they wanted identical sets, but that word identical never appears in the solicitation. [00:07:20] Speaker 01: PDS understood this, that it would be submitting a set, meaning the entire sample submittal would be reviewed by the VA with two sets packaged separately. [00:07:34] Speaker 01: And there's nothing in the solicitation that necessarily makes that a wrong conclusion. [00:07:39] Speaker 02: Counsel, this is Judge Moore. [00:07:41] Speaker 02: If that's true, that's not even the way you submitted. [00:07:43] Speaker 02: You submitted duplicates of nearly everything. [00:07:48] Speaker 02: So if you really understood it was one complete set divided in half in whichever way you meant, your submission was significantly not [00:08:00] Speaker 02: consistent with that. [00:08:01] Speaker 02: So your argument about what you supposedly thought was required is inconsistent with the actual actions you took. [00:08:07] Speaker 01: No, Your Honor, I disagree. [00:08:09] Speaker 01: I mean, that is certainly the conclusion that the lower court reached, but I think that that's not necessarily borne out by the record. [00:08:16] Speaker 01: I think that that's a conclusion, an assumption that the lower court reached. [00:08:21] Speaker 02: Do you... Council, what are you talking about? [00:08:24] Speaker 02: You submitted multiple copies of the same sample. [00:08:28] Speaker 02: Is that not right? [00:08:30] Speaker 01: That is incorrect, Your Honor. [00:08:31] Speaker 01: We submitted three different proposals. [00:08:34] Speaker 01: My client submitted three different proposals at three different levels of frame quality. [00:08:41] Speaker 01: One was a medium level, the second was higher, and the third was highest. [00:08:44] Speaker 01: And each of them had different price points, and each of them had different samples associated with those submittals. [00:08:50] Speaker 01: With regard to the medium offering here, or the lowest price offering, which was dismissed as technically unacceptable because it was incomplete, PDS did submit the total number of required samples as set forth in the solicitation as spread across those two sets. [00:09:09] Speaker 01: But it did not include necessarily everything separately in each of the package set one versus package set two. [00:09:18] Speaker 00: Well, how can you interpret sets to not include everything when they specifically tell you what the sets are supposed to include? [00:09:27] Speaker 01: Well, I understand, Your Honor. [00:09:28] Speaker 01: And the point is, frankly, it's a little bit like packing a bag for my kids' camp this summer. [00:09:34] Speaker 01: And you spread that pack across two different duffel bags. [00:09:37] Speaker 01: When you arrive at camp, yes, you've gone through, you've checked off, you have everything that you need off the list, and it's spread across the two duffel bags, and you have what you need. [00:09:46] Speaker 01: The fact that it didn't have one of each item. [00:09:48] Speaker 00: Wait, wait, wait. [00:09:50] Speaker 00: This is not submit a total group of stuff and submit it in two separate packages. [00:10:00] Speaker 00: It says submit two sample sets, right? [00:10:04] Speaker 01: You're right, Your Honor, but it does also talk about how the submittal singular will be evaluated. [00:10:11] Speaker 01: I mean, frankly, this discussion here just highlights the ambiguity there in the language indicating that, well, there are reasonable minds could disagree. [00:10:19] Speaker 01: And the lower court reached a different conclusion, but the VA also had a differing interpretation, and it recognized that PDS's interpretation was reasonable. [00:10:31] Speaker 01: a p d s reached a different conclusion with regard to this ambiguous language that was the whole point that the agency was trying to do was to clarify this through taking corrective action just to make sure that everything was improved but importantly your honors there's a third interpretation here that the lower court completely ignored and that is that the lower excuse me that the evaluation board actually they use they apply a third interpretation of this ambiguous language set they didn't interpret the language is requiring to identical sets [00:11:01] Speaker 01: They merely took one of the sets, reviewed it, and if it met the minimum checklist requirements, then they moved on. [00:11:07] Speaker 01: Importantly, Your Honor, there's no evidence in the record that the awardees actually submitted a fully compliant proposal with both identical sample sets. [00:11:18] Speaker 01: The same standard that the lower court said PDS should have understood and was the only reasonable interpretation. [00:11:25] Speaker 01: There's nothing in the record demonstrating that the awardee actually also satisfied that because both of the awardee's sample sets were not required. [00:11:34] Speaker 01: This ambiguity just highlights that, well, that the agency should have had the discretion in the first place to fix this and to clarify its actual needs, especially given that circumstances had changed and it no longer needed two sets, two sample sets, whether they were identical or otherwise. [00:11:58] Speaker 01: If there's no other questions, Your Honor, I reserve the balance of my time for rebuttal. [00:12:02] Speaker 02: That's fine. [00:12:04] Speaker 02: Mr. Sneckenberg, will you please proceed? [00:12:08] Speaker 03: Thank you, Your Honor, and may it please the Court. [00:12:10] Speaker 03: I think Your Honor's questions home in on the most pertinent issues here with respect to the standard of review. [00:12:18] Speaker 02: I have a question about confidentiality. [00:12:20] Speaker 02: Why in the world is the number of eyeglasses that you each submitted confidential, like whether you submitted four of this kind or five of this kind? [00:12:28] Speaker 02: Why is that confidential? [00:12:30] Speaker 02: I want to ask specific questions. [00:12:31] Speaker 02: I wanted to ask specific questions to Mr. Gallacher because I don't agree with the answer he gave me, but it would require me to disclose confidential information to discuss. [00:12:39] Speaker 02: the specifics of his proposal, even just the number of, for example, women's frames of a certain type that were in fact submitted. [00:12:47] Speaker 02: Why is all of that confidential? [00:12:50] Speaker 03: Your Honor, I believe Mr. Gallagher, I believe it's his information, and he would take the position that, given that it's his specific number of frames, and I think there's also information about [00:13:03] Speaker 03: the lowest price to offer a specific number of frames. [00:13:07] Speaker 03: The agency had treated that information as confidential. [00:13:09] Speaker 03: I believe Mr. Gallacher would state that that information was confidential. [00:13:12] Speaker 03: As it doesn't involve superiors' information, we don't take a position on that. [00:13:16] Speaker 02: Okay, I see. [00:13:16] Speaker 02: I should have directed this to him because I will on his rebuttal. [00:13:19] Speaker 02: I don't understand why if the solicitation said five pairs of men's frames of a certain type and he submitted four pairs in set one and three pairs in set two, I don't understand why those numbers would be confidential. [00:13:32] Speaker 02: That doesn't make any sense to me and it also inhibits my ability to ask questions, but obviously this is not your issue. [00:13:39] Speaker 02: Sorry, I used your time. [00:13:40] Speaker 02: Please proceed. [00:13:42] Speaker 03: No problem, Your Honor. [00:13:45] Speaker 03: Regarding the standard of review that is PDS's principal contention on appeal, I think Your Honor's question is home in on the correct issue. [00:13:53] Speaker 03: Um, the court, uh, the standard is the traditional rational basis, uh, standard of review that was announced in systems application that was confirmed in Dell where this court, uh, mentioned that it has been consistently applied in corrective action cases. [00:14:07] Speaker 03: And as, uh, even Mr. Gallagher, uh, repeatedly stated, the rational basis test asks whether the contracting provided a coherent and reasonable explanation for its exercise of discretion. [00:14:18] Speaker 03: Now, that's exactly what the court here did. [00:14:21] Speaker 03: The court examined whether or not the VA's rationale for corrective action was coherent and reasonable, and the court identified properly multiple independent flaws in the VA's rationale, concluding in fact that it was, quote, implausible and, quote, utterly lacking in support. [00:14:40] Speaker 03: Regarding the, and there are a few issues. [00:14:42] Speaker 03: First, the solicitation was not ambiguous. [00:14:45] Speaker 03: The lower court parsed the language of the solicitation. [00:14:49] Speaker 03: As your honors highlighted, the solicitation clearly referred to two sample sets labeled as set one and set two. [00:14:57] Speaker 03: As the court below found, there would have been no rational explanation why offers could divide up their sets in any way they so chose. [00:15:06] Speaker 03: that would only add confusion to the process. [00:15:10] Speaker 03: Second, the court found that in addition to not being ambiguous, there was no evidence that any offers relied on the supposed ambiguity. [00:15:20] Speaker 03: And this is an important independent basis to affirm the decision below because the VA's rationale for taking corrective action [00:15:28] Speaker 03: was that it found an ambiguity and that ambiguity prejudiced the offerors. [00:15:32] Speaker 03: That was the VA's finding. [00:15:34] Speaker 03: So again, the court was required to analyze the VA's finding and to determine if it was coherent and reasonable. [00:15:40] Speaker 00: And as your offer... What about the fact, I mean, if you look at the face of this, it seems like you submit two and they looked at one to see if it was compliant. [00:15:52] Speaker 00: And so why did they say that if we were, why did they even go on to say that if we were to look at all of them, we would be able to find essentially put together a set? [00:16:03] Speaker 00: Why did any of the reviewers even do that? [00:16:06] Speaker 03: Well, the reviewers didn't do that when they evaluated proposals. [00:16:10] Speaker 03: In the corrective action rationale, I believe the VA was just referring to PDS's protest allegation where PDS said that [00:16:17] Speaker 03: Yes, neither of the two sets in our lowest price proposal, neither of them were complete. [00:16:22] Speaker 03: But you had them and if you put them together, then they would have had more than enough. [00:16:27] Speaker 03: In fact, nearly double the amount. [00:16:28] Speaker 00: But if they didn't contemplate, why did they say that? [00:16:32] Speaker 03: I think they were just saying, they were just noting that [00:16:37] Speaker 03: Assuming that PDS had followed the interpretation it was alleging in its GAO protest, then that would have established the prejudice. [00:16:44] Speaker 03: But the VAA was again assuming that PDS had followed the interpretation it was espousing, which the record belied that conclusion and that assumption. [00:16:52] Speaker 03: The record shows that PDS's proposal did not follow its GAO protest interpretation. [00:16:58] Speaker 03: PDS's lowest price proposal included two nearly complete sets. [00:17:02] Speaker 03: It just made errors in each of them, and that's why it was unacceptable. [00:17:06] Speaker 03: And then PDS's middle price proposal included at least one independently complete set, which again, under PDS's GAO protest and its arguments before this court, [00:17:15] Speaker 03: there would have been no reason for PDS to provide a single independently complete set in that middle proposal. [00:17:23] Speaker 03: So that was another independent flaw in the VA's analysis that the court properly found. [00:17:31] Speaker 03: Additionally, Your Honors, we raised this before the Court of Federal Claims and it's in our appeal brief. [00:17:37] Speaker 03: The court, because it found that the solicitation was not ambiguous, it did not reach the question of whether or not any ambiguity was patent or latent. [00:17:46] Speaker 03: However, should this court [00:17:49] Speaker 03: in any way find that the solicitation was ambiguous, this court would also need to assess whether the ambiguity was patent or latent. [00:17:56] Speaker 03: The VA's corrective action rationale expressly concluded that there was an ambiguity, obviously, and that the ambiguity was latent, i.e. [00:18:06] Speaker 03: it wasn't obvious and apparent on the face of the solicitation. [00:18:10] Speaker 03: That's a critical finding because if the ambiguity were patent, then PDS would have been required to protest that before award. [00:18:19] Speaker 03: Here, the VA made an express finding that the ambiguity was latent. [00:18:23] Speaker 03: However, as Judge O'Malley, your questions reflected, the ambiguity, we maintain there was none, but if there was an ambiguity, it stemmed directly from the face of the solicitation and from the supposedly inconsistent terms in the solicitation. [00:18:39] Speaker 03: So the VA's expressed conclusion that there was a latent ambiguity was also not coherent and not reasonable. [00:18:47] Speaker 03: And that provides another independent alternative basis for affirming the decision below, that the VA's decision to take corrective action was irrational. [00:18:57] Speaker 03: Your Honors, there are many arguments in PDS's brief. [00:18:59] Speaker 03: I believe we've addressed them in our response brief. [00:19:02] Speaker 03: If you have any further questions for me, I'm happy to address them. [00:19:06] Speaker 03: But we believe the decision below was well-reasoned and provides multiple basis to affirm, and thus we request that this court affirm. [00:19:14] Speaker 02: Thank you, Mr. Sneckenberg. [00:19:16] Speaker 02: Mr. Gallagher, you have some rebuttal time. [00:19:19] Speaker 01: Indeed. [00:19:19] Speaker 01: Thank you very much, Your Honors. [00:19:21] Speaker 01: Let me begin by addressing the confidentiality issue that was raised. [00:19:26] Speaker 01: These are issues that my client reviewed the record had identified as confidential. [00:19:33] Speaker 01: So I start with that. [00:19:34] Speaker 01: I am not fluent in the eyeglass industry, and so it is hard for me to say exactly what is and is not definitively proprietary, but I do note [00:19:44] Speaker 01: that the specific mix of these specific types of frames and specifically where the allegations were that we maybe didn't carry or that we didn't offer a particular mix, those particular issues were deemed as proprietary and having a potential competitive impact with the competitor. [00:20:02] Speaker 02: Yes, but the kinds of things you marked as confidential, I'm just going to make something up now so that nobody thinks I'm breaching confidential. [00:20:08] Speaker 02: Suppose you had to give two sets of five doggy frames. [00:20:13] Speaker 02: Clearly, this is not something I don't know that dogs wear glasses, but doggy frames. [00:20:17] Speaker 02: So you, in fact, just put five doggy frames in one sample and four in the other. [00:20:23] Speaker 02: That's the kind of question I want to be able to ask you. [00:20:27] Speaker 02: I can't imagine for the life of me why the number of a particular style of glasses that you submitted with your proposal would, in fact, be confidential. [00:20:35] Speaker 02: And by marking it as such, you've prevented me from being able to ask you meaningful questions like that. [00:20:42] Speaker 01: Well, I apologize for that, Your Honor. [00:20:44] Speaker 01: That certainly was not our intent. [00:20:45] Speaker 01: Again, it was just with an eye toward ensuring that to the extent this competition, this particular procurement goes back to a competitive process, which is what the VA wanted to do in the first place and what PDS has been trying to push for here to try to make sure that the competition is preserved and that no party is unduly prejudiced. [00:21:10] Speaker 02: But I can't understand for the life of me why the number of eyeglasses you submitted with your proposal is confidential. [00:21:17] Speaker 02: Can you? [00:21:17] Speaker 02: Can you give me any reason why it makes sense that that be marked confidential? [00:21:21] Speaker 01: Again, Your Honor, I don't know that I can answer the question to perfect clarity for you. [00:21:26] Speaker 01: The issue does certainly relate to the mix and to the purported failures, I believe, that may or may not, if there's questions that it may raise as far as revealing what the scope of the catalog is, [00:21:39] Speaker 01: and uh... that but with regard to the specific numbers i i don't know that i can answer that question perfectly for you your honor i'm sorry okay well um... then why don't you use my hypo if you if the if the [00:21:54] Speaker 02: Request for submission included a request for two sets of five doggie glasses and you submitted five doggie glasses in one set and then four doggie glasses in the other. [00:22:05] Speaker 02: How is that consistent with what you're now alleging is your potential interpretation of the submission requirement, which is that you could divide between the two sets that required five doggie glasses? [00:22:18] Speaker 01: Well, Your Honor, the answer is that the sample sets actually included scores of different types of eyeglasses. [00:22:25] Speaker 01: some of which were metal, some of which were plastic, some of which were... But in each case, they were broken down by number, right? [00:22:31] Speaker 02: There were five doggie glasses, there were seven metal glasses, there were 16 plastic glasses. [00:22:36] Speaker 02: I'm making these up because I'm not allowed to talk about it. [00:22:39] Speaker 02: But each of them were broken down by number. [00:22:41] Speaker 02: And your submission isn't consistent with your suggestion that you thought you could take that number and just divide it between the two samples. [00:22:51] Speaker 02: Yours didn't do that. [00:22:53] Speaker 01: Yeah, Your Honor, with all due respect, [00:22:55] Speaker 01: If I may answer your question, please. [00:22:58] Speaker 01: Yes, please. [00:22:59] Speaker 01: With all due respect, it is consistent. [00:23:01] Speaker 01: PDS assembled its samples and it assembled it in a way of giving the VA full view of what was going to be included in the total. [00:23:11] Speaker 02: If the solution said five doggie glasses and you put five in one and four in the other, how many total doggie glasses is that? [00:23:21] Speaker 01: That would be nine, I believe, on the math, right? [00:23:24] Speaker 02: Yeah. [00:23:24] Speaker 02: So how is that consistent with a submission that requires five? [00:23:29] Speaker 01: Well, Your Honor, the answer is that there were, like I said, scores of various glasses that were submitted in it. [00:23:36] Speaker 01: For all of these things, there was PDS, I think, rarely submitted the bare minimum. [00:23:41] Speaker 01: It was over and above. [00:23:43] Speaker 01: The list, the specific checklist that was listed in the proposal, listed somewhere in the neighborhood of, I believe, about 35 or 40 specific types or frames. [00:23:53] Speaker 01: But the sample set itself was actually much broader than that, and it was designed to frankly show off the whole of PDS's offering amongst its proposal. [00:24:05] Speaker 01: The important point, Your Honor, I think here is that it demonstrates that the solicitation required five, and PDS offered nine in this particular hypothetical. [00:24:15] Speaker 01: And that means that sitting in front of the evaluation board asking did PDS provide the necessary samples [00:24:21] Speaker 01: they had in front of them nine of this particular sample set that would certainly seem to meet the solicitation's minimum. [00:24:30] Speaker 01: So the arbitrary, the confusing distinction between these sample sets which may or may not have needed to be identical versus the single submittal that the solicitation says was going to be reviewed, that right there frankly just demonstrates the ambiguity. [00:24:48] Speaker 01: As to whether that's patent versus latent, that issue was not ruled on below, and I don't know that it would be appropriate to rule on that issue here from this court. [00:24:59] Speaker 02: Okay. [00:24:59] Speaker 01: I'm out of time, Your Honors. [00:25:01] Speaker 01: I'm happy to answer any additional questions, but I also want to respect... I thank both counsel for their argument. [00:25:06] Speaker 02: This case is taken under submission. [00:25:07] Speaker 01: Thank you.