[00:00:00] Speaker 04:
Our next case is Servant Health, LLC versus United States, docket number 22-2193.

[00:00:06] Speaker 04:
Attorney Carol Ann Thompson, you have reserved four minutes of time for rebuttal.

[00:00:14] Speaker 04:
That's correct, John.

[00:00:16] Speaker 04:
OK.

[00:00:16] Speaker 04:
You may proceed.

[00:00:19] Speaker 02:
Thank you, John.

[00:00:19] Speaker 02:
May it please the court, Carol Thompson on behalf of Appellants American Medical Equipment, noble attorney, Transcendence and Servant Health.

[00:00:26] Speaker 02:
And we are also joined in this courtroom today by Servant Health and Transcendence.

[00:00:30] Speaker 02:
Since Flushinger in 1968, this court has refused to sanction the abdication of the responsibility to exercise discretion when a contract requires it.

[00:00:42] Speaker 02:
The FAR's termination for cause clause requires the exercise of discretion.

[00:00:54] Speaker 02:
That clause, I apologize, I may have a sip of water, please.

[00:01:17] Speaker 02:
that clause requires the exercise of discretion.

[00:01:22] Speaker 02:
And that clause was present in every single one of Appellant's contracts.

[00:01:26] Speaker 02:
And even if it wasn't present in every single one of Appellant's contracts, then it would have been read into the contracts by virtue of the Christian doctrine, which stands on the principle that a clause with such ancient lineage, reflecting deeply ingrained public procurement policy and applied to contracts with a force and effective law, even when omitted, should not be materially modified

[00:01:47] Speaker 02:
or summarily rendered meaningless without good cause.

[00:01:51] Speaker 03:
What support do you have that the contractor officer did not exercise discretion?

[00:01:57] Speaker 02:
In every single one of appellant's cases, he used either the language from the statement of work, which said that if you fail to deliver within the 45-day strict deadline, you will automatically be terminated for cause.

[00:02:11] Speaker 02:
And he also relied on the extra contractual communication

[00:02:16] Speaker 02:
There won't be any substitutes granted.

[00:02:18] Speaker 02:
And the packaging for the gloves has to match exactly with what was being submitted in the offer.

[00:02:23] Speaker 02:
So in every single one of the appellant's cases, it was that either solicitation language or the extra contractual language that the contracting officer then relied upon in terminating the contractors for cause.

[00:02:40] Speaker 03:
You would agree that all the contracts include a firm delivery deadline, right?

[00:02:45] Speaker 02:
They did, your honor.

[00:02:47] Speaker 02:
But prior to terminating a contractor for cause, the contracting officer is required to, one, engage in that discretion if termination at that time is appropriate, whether there is excusable delay that is occurring or whether or not there were conforming products that require further testing or inspection by the contractor.

[00:03:10] Speaker 04:
Why didn't you protest that decision at that time?

[00:03:15] Speaker 02:
Contractors did not protest the decision or the solicitation.

[00:03:19] Speaker 02:
However, the solicitation was also adopted as the contract itself.

[00:03:24] Speaker 02:
And then in issuing the contract, the contracting officer further expressed, again, extra contractually, that any delivery past the 45-day strict deadline was going to automatically result in termination.

[00:03:42] Speaker 02:
But going back to the point that prior to terminating for cause, a contracting officer must exercise discretion.

[00:03:49] Speaker 02:
In this case, the contracting officer, instead of determining, again, whether or not maybe giving a little bit of an extension, especially in the case of American medical equipment, or actually inspecting the gloves in the case of noble and servant where there were deliveries that had occurred, at no point did the contracting officer actually exercise that discretion.

[00:04:12] Speaker 03:
Does exercise of discretion require accommodating a delay?

[00:04:19] Speaker 02:
It doesn't require, Your Honor, it doesn't require accommodating a delay, but I think it requires the contracting officer looking at the circumstances of the particular delay and then determining whether or not, one, it's excusable.

[00:04:33] Speaker 02:
So in the instance of AME, there was the port that the gloves were being shipped out of in China.

[00:04:40] Speaker 02:
There was a sudden outbreak of COVID.

[00:04:43] Speaker 02:
Now granted, this was during the pandemic and there were certain outbreaks at various points at different places, but that particular port experienced an outbreak and so they shut the port down for a period of time, which resulted in the delay of the shipping.

[00:04:57] Speaker 02:
But the contracting officer explicitly said, I'm not going to even consider that as potential excusable delay, which would have been a violation or an abuse of that contracting officer's discretion.

[00:05:10] Speaker 03:
How is that going to play with the on-hand requirement, which I believe is also in place?

[00:05:15] Speaker 02:
Yes, Your Honor.

[00:05:16] Speaker 02:
So the contract or the solicitation did say on-hand, but at no point in the solicitation was on-hand defined.

[00:05:24] Speaker 02:
It didn't say that had to be within the United States.

[00:05:26] Speaker 02:
It didn't say that had to be in a particular facility.

[00:05:30] Speaker 02:
To that point, each one of the appellants in their offer noted that the gloves that they were procuring were all from overseas.

[00:05:39] Speaker 03:
So are you interpreting on hand as encompassing it being overseas?

[00:05:46] Speaker 02:
Well, with each one of the appellants, they did state in their offers that the gloves were overseas.

[00:05:52] Speaker 02:
Specifically, Noble and AME, they put that it was located in China.

[00:05:57] Speaker 02:
Servant Health indicated that it was located in Thailand.

[00:06:01] Speaker 02:
And the contracting officer saw that in the offer.

[00:06:04] Speaker 02:
And still, knowing that those gloves weren't located within the continental United States,

[00:06:09] Speaker 02:
still offered the award.

[00:06:12] Speaker 04:
It sounds like you're shifting the burden here.

[00:06:16] Speaker 04:
Shouldn't your clients have foreseen that there's delay due to the COVID crisis?

[00:06:25] Speaker 04:
And why did you agree to have delivery by a certain date, knowing that the supply chain was already at peril?

[00:06:34] Speaker 02:
You're correct, Your Honor.

[00:06:35] Speaker 02:
And many of my clients are the appellants

[00:06:39] Speaker 02:
They had prior government contracting experience, and so relying upon that prior contracting experience, knowing that there have been instances maybe where they might have had delay and they worked with the contracting officer and being able to excuse that delay, they believed, based on assurances that they had with their particular suppliers, that they were going to be able to deliver that product within the 45 days.

[00:07:00] Speaker 04:
That's like taking a risk, right?

[00:07:02] Speaker 02:
Admittedly, it is taking a risk, Your Honor.

[00:07:05] Speaker 04:
They lost.

[00:07:06] Speaker 04:
They got to pay now.

[00:07:09] Speaker 04:
They guessed wrong.

[00:07:11] Speaker 04:
They said we're going to deliver by this so-and-so date, and yet they didn't.

[00:07:17] Speaker 02:
Yes, Your Honor.

[00:07:18] Speaker 02:
But at the end of the day, what I find concerning about this case is for a contracting officer to be able to write into a statement of work that

[00:07:28] Speaker 02:
No matter what, no matter what the circumstances, I will not exercise any discretion.

[00:07:32] Speaker 02:
I am going to automatically terminate you for cause.

[00:07:35] Speaker 02:
That's concerning, because one, not only does it not square with Schlesinger in this court saying that it will refuse to sanction a complete abdication of that responsibility, but two, if this lower court allows, or if this court allows the lower court's decision to stand, then it gives contracting officers in the future

[00:07:55] Speaker 02:
the opportunity to write whatever they want into a statement of work that then either modifies or removes a requirement based on the FARC.

[00:08:05] Speaker 02:
And again, these contracts included the termination for cause clause, which does require the exercising of discretion.

[00:08:14] Speaker 02:
So if a contracting officer purposely... Do you have access to the appendix?

[00:08:18] Speaker 02:
I apologize, Your Honor.

[00:08:19] Speaker 03:
Do you have access to the appendix?

[00:08:21] Speaker 03:
Yes, Your Honor.

[00:08:22] Speaker 03:
Can you turn to page appendix 277?

[00:08:25] Speaker 02:
I do not.

[00:08:33] Speaker 03:
Well, at least in the appendix on page 277, it mentions that on hand, it has a parenthetical, is described as in stock and available for immediate delivery.

[00:08:45] Speaker 03:
So I'm not sure, and this is just circling back to my colloquy with you previously about on hand.

[00:08:51] Speaker 03:
how that would be encompassing something that would be overseas?

[00:08:57] Speaker 02:
Yes, Your Honor.

[00:08:57] Speaker 02:
And the only thing that I can point to is, again, with each one of the contractors putting in their offer that the gloves are located in a foreign country.

[00:09:09] Speaker 02:
So specifically,

[00:09:17] Speaker 02:
Specifically, Transcendence stated that theirs was located in China.

[00:09:22] Speaker 02:
And that's at appendix 1626.

[00:09:24] Speaker 02:
Servant Health stated that theirs was located in Thailand.

[00:09:32] Speaker 02:
And that's at appendix 263, 265.

[00:09:36] Speaker 02:
OK.

[00:09:37] Speaker 03:
And I won't belabor the on-hand point.

[00:09:39] Speaker 03:
Maybe turning to your other argument about allowing substitutes.

[00:09:43] Speaker 03:
Do you have any contractual language to point to to support the allowance of substitutes?

[00:09:52] Speaker 02:
No, Your Honor.

[00:09:53] Speaker 02:
For the allowance of substitutes, we would point to the fact that these particular contracts were for brand name or equal product, meaning there were a set number of requirements listed in the solicitation for the gloves that, as a part of the offer, each one of the contractors had to state how their gloves met each one of those requirements.

[00:10:13] Speaker 02:
So it wasn't for a particular brand name.

[00:10:15] Speaker 02:
It was the VA wanted gloves that met those particular requirements.

[00:10:20] Speaker 02:
So in the instance of Noble and Servant Health, when they learned that their supplier was no longer able to provide the gloves that they were contracting for, they pivoted.

[00:10:30] Speaker 02:
Well, especially Servant Health, they pivoted to another supplier.

[00:10:34] Speaker 02:
But with both Noble and Servant Health, they delivered gloves

[00:10:39] Speaker 02:
that were from the same original equipment manufacturer that met the same requirements that were listed in the solicitation.

[00:10:48] Speaker 02:
And I would also point, as a part of the abuse of the discretion, is at no point, despite there being the inspection clause listed in the contract, at no point did the contracting officer actually open the boxes and inspect the gloves to determine whether or not the delivered product met the requirements.

[00:11:10] Speaker 03:
Did you submit any documentation to support showing that the delays were caused or related to pandemic related restrictions or something like that?

[00:11:21] Speaker 02:
Yes, your honor.

[00:11:23] Speaker 02:
It was the various email correspondence between the respective contractors and the contracting officer.

[00:11:31] Speaker 02:
So the various correspondence between Servant Health and the contracting officer, AME and the contracting officer.

[00:11:37] Speaker 03:
Do you have appendix pages?

[00:11:41] Speaker 02:
Yes, Your Honor.

[00:11:56] Speaker 03:
And also, while you're looking for that, what is the support in the record that the gloves are the same?

[00:12:01] Speaker 03:
You mentioned that as part of your argument in response to my questions on substitutes that they were also the same.

[00:12:07] Speaker 03:
So I'd love appendix pages on both.

[00:12:09] Speaker 01:
Yes, Your Honor.

[00:12:12] Speaker 03:
And if you don't have them right now, you could always do it when you get back up on rebuttal.

[00:12:15] Speaker 02:
Yes, Your Honor.

[00:12:16] Speaker 02:
That may be a better use of time, Your Honor.

[00:12:24] Speaker 02:
Again, I want to reemphasize the point that at the end of the day, discretion is required.

[00:12:34] Speaker 02:
It has been recognized within the circuit at the Court of Federal Claims that a termination for default essentially is a nuclear option for a contractor.

[00:12:44] Speaker 02:
And a large reason for that is, one, getting the negative performance evaluation reports, which the contractors in this case did receive, that impacts their ability to engage in any further contracting with the government.

[00:12:55] Speaker 02:
And when you have instances such as Transcendence or Servant Health or AME who had, or I'm sorry, Noble,

[00:13:03] Speaker 02:
who had extensive government contracting experience, the negative CPARS that they received are now impacting their ability to continue contracting and then has a direct impact on their ability to survive as a small business.

[00:13:22] Speaker 04:
Counselor, I think you're into your rebuttal time.

[00:13:25] Speaker 02:
Oh, I apologize.

[00:13:26] Speaker 02:
Yes, Your Honor, so I will sit down.

[00:13:27] Speaker 04:
Before you sit down, I wanted to point something out.

[00:13:30] Speaker 04:
Page 29 of your blue brief.

[00:13:33] Speaker 04:
Do you have that?

[00:13:35] Speaker 02:
Yes, Your Honor.

[00:13:52] Speaker 01:
Yes, Your Honor.

[00:13:53] Speaker 04:
Okay, and there's a block, a quote there.

[00:13:55] Speaker 01:
Yes, Your Honor.

[00:13:57] Speaker 04:
And you quote that.

[00:13:58] Speaker 04:
You say, it's neatly summarized by this circuit.

[00:14:01] Speaker 04:
But that quote is not of the circuit.

[00:14:04] Speaker 04:
That's a quote from the Court of Federal Claims.

[00:14:07] Speaker 04:
So I'm going to, I ask, I point this out just to ask you to be careful with your citations.

[00:14:14] Speaker 04:
And also, there's certain language in your brief that I take to be uncivil and unprofessional.

[00:14:21] Speaker 04:
Your characterization of intent of mens rea on part of the contracting officer.

[00:14:27] Speaker 04:
And I beseech you to not use that type of language in your

[00:14:31] Speaker 04:
in your briefings before this court, okay?

[00:14:34] Speaker 02:
Understood, Your Honor.

[00:14:34] Speaker 04:
Thank you very much.

[00:14:35] Speaker 02:
Thank you, Your Honor.

[00:14:48] Speaker 04:
Counselor Geddes, is that correct?

[00:14:50] Speaker 00:
Geddes, yes.

[00:14:50] Speaker 04:
Thank you.

[00:14:54] Speaker 00:
Good morning, Your Honors.

[00:14:55] Speaker 00:
May it please the Court?

[00:14:57] Speaker 00:
All that the VA attempted to do in this case was ask for

[00:15:01] Speaker 00:
gloves on hand within 45 days.

[00:15:03] Speaker 00:
And as part of that request, it asked the contractors show them images of the specific gloves it intended to provide with information about who the distributor was, who the manufacturer was, what the product number was, so that VA could vet that specific information and confirm that these were legitimate gloves that matched the specification.

[00:15:23] Speaker 00:
This was at a time when the market was flooded with counterfeit goods, so-called gray market goods, and other issues such as that.

[00:15:31] Speaker 04:
There seems to be a pattern in the way the marketplace works.

[00:15:36] Speaker 04:
And it's a pattern that I recognize in other sectors as well, where you have an OEM manufacturer, let's say in China or Thailand or somewhere that manufactures certain products, you may have three different suppliers that go to that manufacturer and purchase from that manufacturer and put their own label on there.

[00:15:55] Speaker 04:
But yet those are the gloves that meet the specifications that are requested for.

[00:16:00] Speaker 04:
Why isn't that the case here?

[00:16:03] Speaker 00:
It's true that that is sometimes how the market works and that the fact that the labeling is different or a different distributor is used does not necessarily mean the gloves don't match the specifications.

[00:16:14] Speaker 00:
But the VA is entitled to determine what it wants in its contract and to define what it considers to be conforming goods.

[00:16:22] Speaker 00:
And in this case, yes, it asked for a brand name or the equivalent, but it also asked contractors

[00:16:28] Speaker 00:
provide specific information upfront about which specific distributors they were using, what specific branding they would be providing.

[00:16:36] Speaker 00:
So that's not to say that by providing something with a different label, the gloves necessarily don't meet the specifications, but they are non-conforming goods.

[00:16:44] Speaker 00:
because the VA had vetted the particular distributors identified and the particular packaging identified.

[00:16:50] Speaker 00:
That's because unauthorized distributors might attempt to sell goods, might attempt in that case to sell counterfeit goods, and the solicitation and contract were clear that one of the goals of these requirements was to avoid counterfeit or gray market goods.

[00:17:03] Speaker 00:
So nobody was saying that gloves in different packaging could not have been from the same manufacturer or could not have met the specifications.

[00:17:12] Speaker 00:
It's just that that was not what VA asked for.

[00:17:14] Speaker 00:
VA reasonably asked for gloves on hand for information about those gloves and for the gloves provided to match so that VA could vet that information.

[00:17:23] Speaker 04:
What's the understanding, your understanding behind gloves on hand?

[00:17:32] Speaker 04:
Is that at the warehouse down the street or at the warehouse in China?

[00:17:38] Speaker 04:
What does that mean?

[00:17:39] Speaker 00:
Yes, Your Honor.

[00:17:40] Speaker 00:
So as this Court has pointed out, there is language.

[00:17:45] Speaker 00:
I believe it was in a series of questions asked where it said in parentheses next to gloves on hand that they would be in stock and available for immediate delivery.

[00:17:54] Speaker 00:
Whether gloves located in China would be considered on hand is a closer question.

[00:17:59] Speaker 00:
But what I think this indisputably means is gloves that exist, which was not the case for two of the plaintiffs who

[00:18:06] Speaker 00:
begin manufacturing gloves after they were awarded the contract, or gloves that the contractor had some right to deliver to VA, which was not the case for plaintiffs who said, actually, we can't get the gloves we thought we were going to get.

[00:18:19] Speaker 00:
We're going to try and find other suppliers, try and find alternatives.

[00:18:23] Speaker 00:
Gloves on hand meant gloves that were in the control of the contractor to provide to VA.

[00:18:28] Speaker 00:
Now, maybe they had some agreement from a... In control of the contractor?

[00:18:34] Speaker 04:
Is that what you said?

[00:18:35] Speaker 00:
Well, at the very least, they should have the right to ship those gloves to VA.

[00:18:38] Speaker 00:
Obviously, the fact that some third party has gloves does not mean that they are on hand.

[00:18:43] Speaker 00:
Perhaps they had some agreement from distributors and believed that the gloves were on hand and the distributors backed out of that obligation.

[00:18:49] Speaker 00:
Frankly, that's an issue between the contractor and that distributor.

[00:18:53] Speaker 00:
The VA pretty reasonably expected these to be gloves that the contractor had the power to deliver to VA.

[00:18:59] Speaker 00:
And in most of these cases, that turned out not to be correct.

[00:19:03] Speaker 00:
In the only case where they did not try and or yeah in the case of Yeah, they were either trying to manufacture them or trying to secure them from alternative suppliers so that clearly violates the definition of on hand whether The plaintiffs did provide try to provide some documentation at the points where they were offering substitutes

[00:19:29] Speaker 00:
As this court has pointed out, there was no contractual language saying that substitutes had to be accepted under any circumstances.

[00:19:36] Speaker 00:
There's not an analog to the excusable delay clause in this case.

[00:19:42] Speaker 00:
But yeah, so for instance, Transcendence tried to offer a different sort of glove from a different manufacturer called ATX.

[00:19:49] Speaker 00:
In support of that, they submitted a letter from ATX saying it was, quote, either the manufacturer authorized distributor, authorized sub-distributor, or title holder, which VA reasonably sound not to be particularly reassuring.

[00:20:05] Speaker 00:
Servant Health said that it was going to provide dong-tie gloves through distributor SGH.

[00:20:11] Speaker 00:
When there was no reference to SGH on any of the packaging, Servant Health first provided a series of communications suggesting

[00:20:18] Speaker 00:
that they were, in fact, STH gloves before ultimately admitting that they were from alternate suppliers, but saying that they were still from Dongtai.

[00:20:29] Speaker 00:
I don't remember how strong any attempt at documenting that they were still Dongtai gloves was, but at that point when they admitted that they were using a different distributor, as I've said, VA asked them to provide that specific information upfront so it could vet the distributors and ensure that they weren't counterfeits.

[00:20:47] Speaker 00:
Noble attorney did provide an email from the manufacturer asserting that the gloves still match the specifications, even though they were different product numbers and different packaging.

[00:21:00] Speaker 00:
But again, VA had the right to require the parties to provide the gloves that they had assured VA it would provide with that upfront documentation.

[00:21:10] Speaker 00:
So I guess my answer is it varied, but the documentation was often not very strong or convincing.

[00:21:16] Speaker 00:
And VA had defined the gloves it was requesting based on the information that the parties provided upfront.

[00:21:23] Speaker 00:
So these were substitute goods.

[00:21:25] Speaker 00:
VA had no obligation to accept them, and VA ultimately decided not to accept them.

[00:21:30] Speaker 00:
With respect to the 45-day deadline, which was the other cause for breach in most cases, VA was very upfront throughout the entire process that the 45-day deadline would be strictly enforced.

[00:21:41] Speaker 00:
plaintiff appears to be focusing primarily on this argument they've made that by saying it was a strict deadline and warning plaintiffs upfront about the consequences of breach, it was actually breaching the contract or abusing its discretion.

[00:21:57] Speaker 00:
Frankly, it seems like plaintiffs are suggesting it would have been better for VA to hide the ball and say, well, I don't know.

[00:22:02] Speaker 00:
Maybe we'll give you an extension, but we won't know until we get there.

[00:22:06] Speaker 00:
Clearly, VA was only trying to provide more information and be as clear as possible

[00:22:11] Speaker 00:
by saying at every step of the way, we don't intend to give any extensions.

[00:22:15] Speaker 00:
I don't believe they ever use the word automatically, which plaintiffs keep saying that it would automatically be terminated.

[00:22:21] Speaker 00:
They simply said that they don't anticipate granting any extensions

[00:22:24] Speaker 00:
And the expectation was that the contract would be terminated for cause.

[00:22:27] Speaker 03:
What about the impact of the pandemic?

[00:22:30] Speaker 03:
And would that provide a reason for excusable delay?

[00:22:35] Speaker 00:
So excusable delay would be unforeseen circumstances.

[00:22:38] Speaker 00:
So in this case, we were well into the pandemic.

[00:22:40] Speaker 00:
The whole purpose of this solicitation was to get gloves in pandemic circumstances.

[00:22:46] Speaker 00:
So the fact that a pandemic was happening alone would certainly not constitute excusable delay.

[00:22:51] Speaker 00:
And the contracting officer reminded the parties of that repeatedly.

[00:22:56] Speaker 04:
This is a disruption to shipping that was unprecedented.

[00:23:02] Speaker 00:
It was.

[00:23:02] Speaker 04:
There was hundreds of ships locked outside of Long Island or Long Beach, California.

[00:23:10] Speaker 04:
This wasn't a regular atmospheric delay, was it?

[00:23:14] Speaker 04:
This was unprecedented.

[00:23:16] Speaker 00:
It was unprecedented, but that was known and foreseen.

[00:23:19] Speaker 00:
At the point where VA put out the solicitation, it was clear with the offerors that it wanted these gloves within 45 days under the current circumstances, which were pandemic circumstances.

[00:23:30] Speaker 00:
So yes, there might have been unusual delays, but they were not unforeseeable.

[00:23:35] Speaker 00:
And as the trial court emphasized, the primary reason for delay in this case was not typical pandemic issues.

[00:23:41] Speaker 00:
It was the fact that two of the contractors decided not to provide

[00:23:45] Speaker 00:
at least in addition to providing gloves on hand, or instead of providing gloves on hand, they would manufacture gloves on hand after the contract was awarded, which used up a significant amount of those 45 days.

[00:23:57] Speaker 00:
They chose to ship the gloves from overseas, which, well, I don't think it clearly violates the terms of the contracts.

[00:24:05] Speaker 00:
They were not required to source gloves from overseas.

[00:24:08] Speaker 00:
That was a risk that they chose to take on.

[00:24:10] Speaker 00:
And under pandemic circumstances, choosing to source gloves from China with a strict 45-day deadline, that was a very risky decision that they chose to make.

[00:24:19] Speaker 03:
Did they provide documentation to support up the cause of the delay?

[00:24:24] Speaker 00:
Not really.

[00:24:25] Speaker 00:
So pretty much all the citations in their brief cite to emails that they sent to the VA using very generalized language about the delay.

[00:24:34] Speaker 00:
So to take some examples,

[00:24:38] Speaker 00:
servant kept mentioning the Suez Canal blockage.

[00:24:41] Speaker 00:
They have an email that says, quote, that says there were many weeks delay at ports due to Suez Canal issue.

[00:24:47] Speaker 00:
And they mentioned other extenuating global market conditions due to pandemic that are directly affecting the California port.

[00:24:55] Speaker 03:
Do you have a specific JA page that you're referring to?

[00:24:58] Speaker 00:
Yeah.

[00:24:58] Speaker 00:
So I'm looking at, I believe that's in appendix 415 through 25.

[00:25:04] Speaker 00:
That was what they cited in support of the Suez Canal.

[00:25:07] Speaker 00:
So these were just very general assertions with no supporting documentation that they made.

[00:25:13] Speaker 00:
Yeah, and there was another email where they said that the quote major reason for their excusable delay was the quote supply chain crisis that was caused by the pandemic without any further detail or without any supporting documentation.

[00:25:29] Speaker 00:
So the trial court recently found that based on this record,

[00:25:32] Speaker 00:
It could not support a finding that there was excusable delay Nobody's disputing at least with respect to the 45-day deadline that there was no prima facie case of default and Yeah, this record would not support a finding that there was excusable delay Especially considering the risks that the plaintiffs chose to take

[00:25:58] Speaker 04:
Can you have a situation where solicitation is per se unreasonable?

[00:26:06] Speaker 00:
In general, yes, I imagine a solicitation could be per se unreasonable.

[00:26:12] Speaker 04:
Why wouldn't this be one of those cases?

[00:26:16] Speaker 00:
Oh, in the sense that what it's asking for is impossible to accomplish.

[00:26:21] Speaker 04:
Well, I'm not sure... Well, if the chain supply process is getting worse,

[00:26:28] Speaker 04:
as we go on.

[00:26:30] Speaker 04:
And it enters a stage that's much more egregious than at the beginning of a solicitation.

[00:26:38] Speaker 04:
And yet the government doesn't yield not an inch, unless of course it receives free product, but it doesn't yield an inch on recognizing the delay that exists and the strain that that puts on small businesses and other solicitors like these.

[00:26:58] Speaker 00:
Well, respectfully, Your Honor, none of the plaintiffs ever gave any evidence or argued, really, that the situation was getting worse by the day and that the situation 35, 40 days in was significantly worse than the situation at the beginning.

[00:27:14] Speaker 04:
Would that make a difference, you think?

[00:27:16] Speaker 00:
If there had been... I shouldn't ask you to guess, but... Yes, I certainly don't want to speculate as to what the contracting officer might have decided, but excusable delay

[00:27:26] Speaker 00:
requires some sort of unforeseen circumstance.

[00:27:29] Speaker 00:
So, yes, an unforeseen circumstance within the world of pandemic related issues might have arisen.

[00:27:35] Speaker 00:
I think the closest thing here would be that AME claimed that there was a COVID outbreak at their particular port in China.

[00:27:43] Speaker 00:
Part of the reason the trial court was not sympathetic to this argument was that, again, they decided to manufacture gloves that were supposed to have been on hand.

[00:27:52] Speaker 00:
But also, the court noted that the bills of laden they submitted showed that even the supply that left China on time was still not supposed to make it to New York by the deadline.

[00:28:02] Speaker 00:
And frankly, that's a recurring issue.

[00:28:04] Speaker 00:
These cases involved a series of misleading and evasive communications

[00:28:08] Speaker 00:
such that it wasn't as though it was smooth sailing up until day 44 when they said, we're so sorry, we need an extra week.

[00:28:15] Speaker 00:
They were not clear on what the updated timeline would be.

[00:28:18] Speaker 00:
They were evasive about why they were providing substitute goods.

[00:28:22] Speaker 00:
They would say that it was the same distributor and then later admit that it was a different distributor.

[00:28:26] Speaker 00:
And after the series of behavior, in all cases, the contracting officer ultimately decided to terminate for default.

[00:28:34] Speaker 00:
But the key point here is that in all cases, there was prima facie default.

[00:28:38] Speaker 00:
With respect to substitution, there was no contractual requirement that the contracting officer even consider substitute gloves.

[00:28:45] Speaker 00:
And with respect to the 45-day deadline, the only requirement was that the contracting officer grant an extension for excusable delays, which there was not in this case.

[00:28:54] Speaker 00:
To the extent that they're arguing that the contracting officer exercised no discretion,

[00:28:59] Speaker 00:
That's clearly not true.

[00:29:01] Speaker 00:
In several cases, the contracting officer even did attempt to negotiate and attempt to be more generous than he had initially planned to be in order to help these contractors out and to try and get the gloves that were needed for our VASA facilities.

[00:29:15] Speaker 00:
But ultimately, they weren't able to reach an agreement.

[00:29:17] Speaker 00:
The plaintiffs cite the request for consideration as though it's some kind of extortion, when really it's no more than the law requires when plaintiffs ask a contractor to modify a contract.

[00:29:28] Speaker 00:
And finally, to the extent they argue that there's some abuse of discretion issue beyond what's been discussed so far, they would have to be able to prevail on one of the McDonald Douglas factors.

[00:29:39] Speaker 00:
The only one that they've made a serious argument about is the amount of discretion given to the contracting officer.

[00:29:45] Speaker 00:
The contracting officer had as much discretion here as in any case.

[00:29:49] Speaker 00:
Even if he had wanted to unilaterally reduce his own discretion at the beginning of the process He didn't have the authority to do so sort of by definition This was his exercise of discretion and this simply cannot support a finding that any of the McDonald Douglas factors are satisfied So in conclusion we respectfully ask that this court uphold the decision below Thank you

[00:30:19] Speaker 04:
You have 58 seconds, but we're going to restore you to your four-minute rebuttal time if you do that should we need it, okay?

[00:30:29] Speaker 02:
Judge Cunningham to circle back to your question regarding citations to the appendix on any evidence of the The delays that the contractors experienced as my opposing counsel did note most of them were email communication there wasn't any

[00:30:45] Speaker 02:
A lot of additional evidence outside of the email communication, but the email communication is located for Servant Health at appendix 417 through 427, and 438 through 441, for AME at appendix 2251, and for Transcendence at appendix 1808.

[00:31:03] Speaker 02:
And going to your question, Judge Raina, on was the solicitation per se unreasonable, I do think it bears reminding that

[00:31:15] Speaker 02:
According to the testimony of both the contracting officer and the contracting specialist during depositions, at no point was there any need at any particular VA facility for these gloves.

[00:31:26] Speaker 02:
The solicitations were issued because at some point the VA recognized that there were supply issues, that there were going to be shortages of gloves, so they decided to create a stockpile.

[00:31:36] Speaker 02:
A stockpile to sit in a warehouse for some unknown date when a VA facility might need the gloves.

[00:31:41] Speaker 02:
And the 45 days was only determined because

[00:31:44] Speaker 02:
A prior solicitation had included 30 days, but the contracting officer realized that there weren't sufficient offers because of probably the supply chain issues.

[00:31:55] Speaker 02:
So was it unreasonable for the contracting officer to set this arbitrary 45-day deadline without any consideration of the supply chain issues?

[00:32:06] Speaker 02:
I certainly would say so, and also in consideration with what truly were the VA's needs.

[00:32:11] Speaker 02:
They just wanted to create a stockpile at the end of the day.

[00:32:13] Speaker 04:
Is the issue whether the solicitation created an impossible situation to perform?

[00:32:19] Speaker 04:
Is that issue moot or is it aligned?

[00:32:23] Speaker 02:
We don't believe so, Your Honor, because in this particular case, the solicitation essentially became the contract award itself.

[00:32:29] Speaker 02:
And then also, circumstances changed after the awards were issued.

[00:32:34] Speaker 02:
In some of these instances, the time from the offer being submitted to the time that the award was issued, it was in excess of 30 days.

[00:32:42] Speaker 02:
And so when you're dealing with

[00:32:44] Speaker 02:
Again, supply chain issues.

[00:32:46] Speaker 02:
The contractors, when submitting that offer, may have preemptively lined up certain shipping channels or shipping avenues, but things changed quickly during that spring of 2021.

[00:33:04] Speaker 02:
So the time, from the time that they submitted their offer to the time that they were issued the contract.

[00:33:09] Speaker 03:
There was at least, I think in some instances, requests for weekly communication.

[00:33:13] Speaker 03:
So there could be regular updates.

[00:33:15] Speaker 03:
Were those provided to identify any concerns about delays?

[00:33:20] Speaker 02:
Yes, Your Honor.

[00:33:21] Speaker 02:
And I believe that in some of the circumstances, the contractors were relaying that information as they received it.

[00:33:27] Speaker 02:
So they were receiving information from their suppliers or from the particular shipping avenues that they had utilized, saying everything is on track.

[00:33:35] Speaker 02:
I know that in AME circumstances,

[00:33:38] Speaker 02:
The second they were notified that there was a shipping delay, they immediately emailed the contracting officer.

[00:33:46] Speaker 03:
What about, and I can't remember which one this relates to, so hopefully you'll be able to clarify for me, but what about the fact that I think there was something that indicated that it was actually going to arrive at least a day after, like maybe June 8 rather than June 7, even though

[00:34:01] Speaker 03:
It was the deadline was June 7th.

[00:34:02] Speaker 03:
Can you identify which one that relates to and maybe respond to that?

[00:34:06] Speaker 02:
Yes, your honor.

[00:34:07] Speaker 02:
Um, and, and I know that what is in the record is, um, I believe it was just the subsequent notice from the shipping company.

[00:34:17] Speaker 02:
It wasn't the original bill of lading showing when it was originally supposed to arrive.

[00:34:21] Speaker 02:
So, um, candidly that document is not before the court.

[00:34:25] Speaker 02:
Um, but,

[00:34:27] Speaker 02:
AME upon learning that there was going to be a shipping delay, they sent the email.

[00:34:32] Speaker 02:
And that's the document that is a part of the record, is that email that they received saying it's now going to arrive in New York after the time.

[00:34:39] Speaker 03:
My last question is, was there anything beyond emails that were submitted to support up the reasons that you thought you had for excusable delay?

[00:34:51] Speaker 02:
No, Your Honor.

[00:34:54] Speaker 02:
And unfortunately, what we have before this court is just the email, the communication from the contractor saying, hey, there's an issue.

[00:35:01] Speaker 02:
Candidly, the contracting officer didn't ask for more information.

[00:35:04] Speaker 02:
And that's why in AME situation, you only have that one document saying that the shipping was not going to arrive until June 9, because the contracting officer never asked for that follow-up information regarding the delay itself.

[00:35:24] Speaker 02:
And with that, Your Honors, I do respectfully request that you reverse a little course of session.

[00:35:29] Speaker 01:
OK.

[00:35:29] Speaker 01:
Thank you very much.