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State v. United States

United States District Court, S.D. Georgia, Brunswick Division

May 30, 2019

THE UNITED STATES OF AMERICA, by and through the HONORABLE PATRICK SHANAHAN, Secretary of Defense; and the HONORABLE RICHARD V. SPENCER, Secretary of the Navy, Defendants.



         Before the Court is Plaintiffs the State of Georgia, by and through the Georgia Vocational Rehabilitation Agency's, and Base Services of Athens, Inc.'s Application for a Preliminary Injunction. Dkt. No. 9. This application has been fully briefed, and with the benefit of an evidentiary hearing held on May 15, 2019, dkt. no. 23, it is ripe for review. For the following reasons, Plaintiffs' Application for a Preliminary Injunction is GRANTED.


         I. The Randolph-Sheppard Act

         1. "Congress enacted the [Randolph-Sheppard Act] ¶ 1936 to 'provid[e] blind persons with remunerative employment, enlarg[e] the economic opportunities of the blind, and stimulat[e] the blind to greater efforts in striving to make themselves self-supporting.'" Ga. Dep't of Human Res, v. Nash, 915 F.2d 1482, 1483 (11th Cir. 1990) (quoting Ch. 638, 49 Stat. 1559, 1559 (1936) (codified at 20 U.S.C. § 107(a) (1982))).

         2. To accomplish this goal, the Randolph-Sheppard Act (''RSA") gives blind persons "priority in the bidding of contracts 'to operate vending facilities on any Federal property.'" Kan, by & through Kan. Dep't for Children & Families v. SourceAmerica, 874 F.3d 1226, 1231 (10th Cir. 2017) (quoting 20 U.S.C. § 107(a)).[1]

         3. ''Although the RSA applies to all federal agencies, Congress charged the Secretary of the Department of Education (DOE) with administering, interpreting, enforcing, and resolving disputes arising under the RSA." Id. (citing 20 U.S.C. §§ 107(b), 107a, 107d-1).

         4. The RSA provides that ''[t]he Secretary, through the Commissioner, shall prescribe regulations to establish a priority for the operation of cafeterias on Federal property by blind licensees when he determines, on an individual basis and after consultation with the head of the appropriate installation, that such operation can be provided at a reasonable cost with food of a high quality comparable to that currently provided to employees, whether by contract or otherwise." 20 U.S.C. § 107d-3 (e).

         5. "Those regulations provide that all contracts 'pertaining to the operation of cafeterias on Federal property' are subject to the RSA." Kan. Dep't for Children & Families, 874 F.3d at 1231 (quoting 34 C.F.R. § 395.33(c)).

         6. ''Under the RSA, the Secretary designates a State Licensing Agency (SLA) in each state to issue licenses to qualified blind persons to operate vending facilities on federal property." Id. (citing 20 U.S.C. § 107a(a)(5)). The Tenth Circuit has summarized how a designated SLA works with a blind vendor and a federal agency to procure vending-facilities services as follows:

When a federal agency procures vending-facility services, it does not contract directly with a blind vendor. The agency instead negotiates a contract directly with the SLA or solicits competitive bids for the contract. If the federal agency solicits bids, it must invite the SLA to bid on the contract. The SLA then selects a licensed blind vendor and submits a bid on that vendor's behalf if the vendor can provide services ''at comparable costs and of comparable high quality." If the SLA's bid is ''within a competitive range and has been ranked among those proposals which have a reasonable chance of being selected for final award," then the procuring agency must consult with the Secretary. The Secretary must then give priority to the blind vendor if she determines that the "operation can be provided at a reasonable cost" and at a comparatively ''high quality." If the SLA and its blind vendor are awarded the contract, then the blind vendor operates the dining facility and manages the day-to-day operations.

Kan. Dep't for Children & Families, 874 F.3d at 1231-32 (quoting 34 C.F.R. § 395.33(a), (b)).

         7. The RSA also "provides for arbitration of all disputes between an SLA and a federal agency that has solicited vending-facility services." Id. The Act states that whenever any SLA determines that any federal agency ''is failing to comply with the provisions" of the RSA, the SLA ''may file a complaint with the [Secretary of Education] who shall convene a panel to arbitrate the dispute pursuant to section 107d-2 of this title." 20 U.S.C. § 107d-l(b). If the arbitration panel finds the agency to have violated the RSA, then the head of the federal agency at issue "shall cause such acts or practices to be terminated promptly and shall take such other action as may be necessary to carry out the decision of the panel." Id. § 107d-2(b) (2) .

         8. ''The arbitration panel's decision is subject to judicial review as a final agency action under the Administrative Procedure Act (APA) . . . see 5 U.S.C. § 706(2)(A)." Kan. Dep't for Children & Families, 874 F.3d at 1232.

         II. The Solicitation and Plaintiffs' Bid

         9. On July 31, 2018, the United States Navy (''the Navy") issued a Solicitation, Solicitation No. N68836-18-Q-0099, for "a new dining facilities contract (''the Solicitation") at the Naval Submarine Base, Kings Bay, Georgia (''Naval Base"), which requested proposals by August 23, 2018. Dkt. No. 9-1 ¶ 4; Dkt. No. 12-3.

         10. At that time, the dining facilities services were being provided by Plaintiff Base Services of Athens, Inc. (''BSA"). Dkt. No. 12-1 ¶ 4.

         11. The incumbent contractor, BSA, saw an opportunity to team with The Georgia Vocational Rehabilitation Agency (''GVRA") (collectively ''Plaintif f s")-Georgia's SLA under the RSA-to participate in the RSA program and continue to help GVRA operate the contract. Transcript (hereinafter ''TR") 72, Dkt. No. 22.

         12. BSA and GVRA agreed that BSA would provide technical and management assistance to GVRA for preparing a proposal for and performing the contract awarded by the Solicitation. Id.

         13. Although the exact relationship between GVRA and BSA is unclear, the evidence shows the following: GVRA and BSA agreed to submit a proposal for the Solicitation and had an unwritten agreement to operate the contract if GVRA won the award; GVRA, as the designated SLA for Georgia and with the assistance of BSA's incumbent status and expertise, drafted and submitted a bid for the Solicitation; BSA would continue to work on the Naval Base performing the same dining services under the new contract; BSA would train and mentor a new blind manager to operate the entire contract on the base. TR 84-87, 99-101, 104-05, 108-109.

         14. GVRA had already contacted the Navy, specifically the Fleet Logistics Center Jacksonville (''FLCJ") that handles these contracts, to notify the agency of its interest in competing for the Solicitation on March 14, 2018, and the FLCJ determined that the Solicitation was subject to the provisions of the RSA. Dkt. No. 12-1 ¶ 6.

         15. The Solicitation indicated that the award would be set aside for small business concerns because it qualified under the HUBZone program, unless it was determined that award should be made to the SLA under the regulations implementing the RSA. See Dkt. 12-3 at 80.

         16. The Solicitation also provided that ''[p]ursuant to 20 USC 107 and 34 CFR 395.33, a Randolph-Sheppard Act (RSA) State Licensing Agency (SLA) that submits an offer will be granted a priority in the source selection. If an SLA submits an offer that is in the competitive range, the Contracting Officer may initiate discussions solely with the SLA for the purpose of facilitating an award to the SLA without further consideration of the other Offerors." Id. A contracting officer, Libia Cristancho, sent an email to GVRA on behalf of FLCJ stating the same and requesting some additional information after Plaintiffs submitted their proposal. Exhibit 7.

         17. Four entities, including GVRA, bid on the Solicitation, and GVRA's proposal presented the highest price. Defendants' maintain that GVRA's initial price was $134, 700 per month. Dkt. No. 12-1 ¶ 8. Plaintiffs contend that it was $134, 100 per month. TR 89.

         III. Competitive Range Determination and Subsequent Negotiations

         18. The FLCJ Contracting Officer determined that all four offers were among the most highly rated proposals and, therefore, fell into the competitive range. Dkt. No. 12-1 ¶ 8. As such, FLCJ entered into sole-source discussions with GVRA for the purpose of facilitating an award to GVRA without further consideration of the other proposals. See Exhibit 7.

         19. At this point, FLCJ contacted cost analyst Stacy McClendon and asked her to perform calculations to determine what price would be reasonable for the Solicitation contract. TR 11, 18. Ms. McClendon testified that she was told to review the proposal and negotiate with GVRA. TR 11.

         20. To determine whether GVRA's price was "fair and reasonable," Ms. McClendon developed a target price, a minimum price, and a maximum price based on performance data provided by GVRA and BSA and what she understood to be a decrease in the amount of meals served under the new Solicitation contract as compared to BSA's prior contract. TR 18-19. She testified that she was told about the decrease in meals served-what she remembered as a decrease of about 600, 000 to 400, 000 a year-from the contracting specialist. TR 20.

         21. Contrary to Ms. McClendon's understanding, the ''Daily Workload Estimate" in the Solicitation, which provides contractors with estimated future information about the anticipated labor costs to use in constructing their bids-including the number of meals-was identical to the estimate given in BSA's prior contract with the Naval Base and with the bridge contracts that BSA subsequently entered into with the Naval Base. See Exhibits 4, 5, 6.

         22. In other words, any alleged drop in meals was not reflected in the ''Daily Workload Estimate" of the Solicitation. See Exhibits 4, 5, 6.

         23. Moreover, Don James, the CEO of BSA, testified that even if the meal numbers had decreased, such a decrease would not affect operating costs as compared to the earlier contract because the dining services labor costs would be about the same. TR 76. That is, even if meals served decrease from 600, 000 to 400, 000, the cost to the operator to serve these meals would not decrease much, if at all.

         24. Regarding Ms. McClendon's minimum, target, and maximum price values, she testified that the minimum and maximum would be about five percent below and above the target price. TR 24.

         25. With her minimum, target, and maximum price values in hand, Ms. McClendon held two conference calls on the same day with Charlie Garrett from GVRA, Don James for BSA, and others to discuss GVRA's proposal. TR 89-91, 107.

         26. Ms. McClendon testified that after speaking with Plaintiffs' representatives during the call, she was concerned about the explanations given for ''some cost elements and no explanations on others," specifically the lack of explanation for profit increase and the general and administrative rate. TR 35-36.. She also testified that Plaintiffs refused to lower their initial bid price, so the conversation ended with her telling Plaintiffs that she would let the contracting officer know. TR 26, 34. Based on the phone conversation and the explanations given by Plaintiffs' representatives, Ms. McClendon determined that their proposal was not fair and reasonable. TR 35.

         27. Ms. McClendon's testimony was contradicted by two witnesses. Don James and Charlie Garrett testified that they did lower their price two times to a final number of $130, 000. TR 88, 90, 109.

         28. Both Mr. James and Mr. Garrett explained that their higher price of $134, 100 was predominantly due to the addition of a blind manager who would be trained and mentored by BSA and would operate the contract. TR 85-87, 108-109. The addition of the blind manager added $6, 000 per month to the contract bid.[2] TR 89.

         29. Mr. James and Mr. Garrett testified that FLCJ wanted them to substitute the blind manager for one of BSA's two existing managers, but both of them testified that because of the complexities of operating a dining services contract on a large military base like the Kings Bay Naval Station, the blind manager would not have the knowledge necessary to perform either of the other two managers' jobs. TR 87-89, 108-109.

         30. Mr. James and Mr. Garrett testified that they lowered their bid in an effort to alleviate FLCJ's concerns about the price of including the blind manager. TR 88-90, 108-109.

         31. Mr. Garrett testified that the conversation ended with FLCJ's representatives saying that they would talk about it and get back to them, but FLCJ never gave a counter offer or continued negotiations. TR 109-110.

         32. Based on Ms. McClendon's determination that GVRA's proposal was not fair and reasonable, FLCJ sent GVRA a letter on January 22, 2019, informing GVRA that FLCJ had eliminated GVRA's bid from the competitive range because it determined that GVRA's proposal was ''no longer considered to be among the most highly rated proposals being considered for award" and was not ''ranked among those proposals which have a reasonable chance of being selected for final award." Dkt. No. 9-1 (Letter from Mark Brock). Mark Brock, the Director of Large Service Contracts for FLCJ and the contractor officer for the Solicitation, testified that had GVRA's price been reasonable, it would have been awarded the contract. TR 7 0-71.

         33. It is undisputed that neither FLCJ nor anyone else with the Navy consulted with the Secretary of Education before eliminating GVRA's bid from consideration. See Dkt. No. 12 at 16-17.

         III. Prior Contract and Bridge Contracts

         34. BSA's initial contract with the Naval Base ran from 2015 until September 30, 2018 for a price of ...

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