Arkray USA, Inc. v. United States

118 Fed. Cl. 129, 2014 U.S. Claims LEXIS 934, 2014 WL 4425467
United States Court of Federal Claims·Decided September 9, 2014·No. 1:14-cv-00233·Published·Cited by 4 cases

Opinion

Bid Protest; Federal Supply Schedule; FAR 8.405-3; Blanket Purchase Agreement; Necessity hold FSS contract; Balance of Equities Weighs in Favor of Injunction

OPINION AND ORDER

FIRESTONE, Judge.

On June 18, 2014, the court issued an opinion remanding to the Defense Health Agency (“DHA”) its decision to award to Abbott Diabetes Care Sales Corporation (“ADCSC” or “defendant-intervenor”) a Blanket Purchase Agreement (“BPA”) for the self-monitoring blood glucose system test strips (“test strips”) that are provided to TRICARE beneficiaries under the uniform formulary (“the formulary” or “UF”). 1 AR-KRAY USA, Inc. v. United States, 117 Fed. C1.22 (Fed.C1.2014). The remand was intended to give the DHA Contracting Officer the opportunity, in the first instance, to determine whether ADCSC could properly hold itself out as having a Federal Supply Schedule (“FSS”) 2 contract as required by the solicitation. Under the terms of the solicita *132 tion, offerors were required to “have an existing FSS Contract for any pharmaceutical agent(s) quoted ... at the time the quote is submitted, and at the time the [BPA] is executed.” AR 118, 225. It is not disputed that ADCSC did not and does not have an FSS contract. The government argued, however, that ADCSC was authorized to rely on the FSS contract held by ADCSC’s affiliate, Abbott Laboratories Inc. (“ALI”), to meet the requirements of the solicitation. On remand, the Contracting Officer was charged with determining whether ADCSC could hold itself out as having an FSS contract by virtue of its relationships with other Abbott-affiliated entities. On July 7, 2014, the DHA Contracting Officer issued a decision finding that ADCSC could properly hold itself out as having an FSS contract and therefore concluded that ADCSC was entitled to keep the BPA for the subject test strips.

The court has reviewed the Contracting Officer’s July 7,2014 decision and, after additional briefing and argument, the court concludes that the Contracting Officer’s decision to proceed with the BPA award to ADCSC was arbitrary and capricious because ADCSC does not have an FSS contract as required by the solicitation and FAR 8.405-3. For the reasons explained below, the court concludes that ARKRAY’s request for a permanent injunction setting aside the BPA award to ADCSC for test strips should be GRANTED.

I. BACKGROUND

The background facts surrounding this case were set forth in detail in the court’s June 26, 2014 decision and are not repeated here. At the core of the remaining dispute is whether ADCSC is eligible to receive a BPA under FAR 8.405-3 when it does not hold an FSS contract. FAR 8.405-3 discusses the procedures for establishing and using BPAs created against an FSS contract. See 48 C.F.R. § 8.403(b) (procedures in subpart 8.4 apply to “BPAs established against Federal Supply Schedule contracts.”). These are BPAs that “[ordering activities [such as ■DHA] may establish ... under any [FSS] contract to fill repetitive needs for supplies or services.” 48 C.F.R. § 8.405-3(a)(l). The regulation further states that “ [ordering activities shall establish the BPA with the schedule contractor(s) that can provide the supply or service that represents the best value.” Id. (emphasis added). Consistent with this regulation, the solicitation in this case stated that companies submitting bids for the subject BPA “must have an existing FSS Contract for any pharmaceutical agent(s) quoted in this UFBPA at the time the quote is submitted, and at the time the UFBPA is executed.” Administrative Record (“AR”) 118, 225. The solicitation further provided that in the event that the offeror’s “existing FSS Contract ... terminates for any reason ... this UFBPA automatically expires.” AR 225.

As noted, it is undisputed that ADCSC— the company that submitted the bid to DHA for the test strips — is not, itself, a party to an FSS Contract. Instead, the FSS contract that offers the subject test strips is held by an ADCSC affiliate — Abbott Laboratories Inc. — under FSS contract number V797P-2032D. On remand, the Contracting Officer undertook an evaluation of ALI’s FSS contract and ADCSC’s rights under that contract. According to the materials provided in the newly supplemented Administrative Record, the Contracting Officer (1) researched the websites of the VA, ALI, and Abbott Diabetes Care, Inc. (“ADCI”); (2) reviewed ALI’s offer to the VA and subsequent FSS contract (i.e., V797P-2032D); and (3) solicited performance assurances and information concerning ADCSC’s legal relationships with ALI and other Abbott-affiliated companies from Duncan Williams, the ADCSC vice-president who signed ADCSC’s BPA bid. In addition, the Contracting Officer received a declaration from Stephanie Organ, the ALI employee who executed ALI’s FSS contract with the VA

Based on his review of the aforementioned websites, the Contracting Officer concluded that multiple entities within the Abbott family of companies work together to manufacture and sell the test strips at issue in this case. AR 2226. The Contracting Officer noted that ADCSC’s bid listed the same FSS contract number and same corporate point of contact (with the same contact information) as was associated with ALI’s FSS contract in *133 the VA Contract Catalog Search Tool available on the VA website. Id. The Contracting Officer also noted that ADCI manufactures and holds the trademarks for some of the test strips sold by ADCSC, which is a wholly-owned subsidiary of ADCI. Id. The Contracting Officer concluded, based on this evidence, that there was a “joint involvement in the sale of diabetes products.” Id.

In reviewing ALI’s FSS Contract, the Contracting Officer determined that it was clear that ALI’s affiliates — rather than ALI itself — are responsible for providing the products under ALI’s FSS contract. AR 2226-27. For example, a letter accompanying ALI’s FSS offer listed two of ALI’s corporate affiliates, Abbott Point of Care (“APOC”) and ADCSC/ADCI, as supplying certain products through ALI’s FSS contract. AR 2230. The Contracting Officer also noted that two provisions of ALI’s FSS contract authorized Duncan Williams — the individual who signed ADCSC’s bid — to also submit quotes under ALI’s FSS contract. AR 2226. The FSS contract authorizes any

... Divisional Vice President ... or Manager or any Administrator of any one of Contracts, Pricing, Marketing; Sales or Commercial Operations; or any Divisional Government Sales Manager ... to quote prices and tender bids, and to enter into contracts for the sale of any products or services of [ALI] to, and with, any and all customers of [ALI], including specifically the United States and any of its offices, agencies or departments, having full authority in their discretion as to prices, terms, conditions, warranties, or any other provisions necessarily relating to said bids and contracts.

AR 2232. The FSS also expressly lists Mr.

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Arkray USA, Inc. v. United States, 118 Fed. Cl. 129, 2014 U.S. Claims LEXIS 934, 2014 WL 4425467 (uscfc 2014).

118 Fed. Cl. 129 (Arkray USA, Inc. v. United States) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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