In the United States Court of Federal Claims
                                No. 16-152C
                      (Originally filed: April 22, 2016)
                         (Re-filed: June 30, 2016)1

**********************

ULTIMATE CONCRETE, LLC,

                     Plaintiff,

v.                                             Post-Award Bid Protest;
                                               Independent Government
THE UNITED STATES,                             Estimate; Unbalanced Bid;
                                               Responsiveness; Modification
                     Defendant,                of Bid; Anti-Deficiency Act;
                                               Advanced Payment
and

FORTIS NETWORKS, INC.,

                     Intervenor.

**********************

       Bret Steven Wacker, Detroit, MI, for plaintiff.

       Joshua Ethan Kurland, United States Department of Justice – Civil
Division, Washington, DC, for defendant, with whom was Charles L.
Webster, III, Assistant District Counsel, Army Corps of Engineers, of
counsel.

       David Allen Rose, Valdosta, GA, for intervenor.

                                   _______



1
 This opinion was originally issued under seal to afford the parties an
opportunity to propose redactions of protected information. The parties have
not proposed any redactions.
                                  ________

                                  OPINION
                                  ________

BRUGGINK, Judge

       This is a post-award bid protest. Plaintiff, Ultimate Concrete, LLC
(“Ultimate”) alleges that the decision of the United States Army Corps of
Engineers, Fort Worth District (“Agency” or “Corps”) to enter into a contract
with Fortis Networks, Inc. (“Fortis”) was arbitrary and capricious and in
violation of procurement law. Before the court are cross motions for judgment
on the administrative record. Oral argument was held on April 5, 2016. For the
reasons set forth below, and as we announced at the conclusion of argument,
the court grants defendant’s motion and denies plaintiff’s motion.

                              BACKGROUND

       A. Factual History

        In August of 2015, the Corps issued a small business solicitation for
sealed bids whereby the winning bidder would provide approximately 2.5
miles of fencing, various service roads and culverts, and associated work along
the United States-Mexico border near Anapra, New Mexico. Administrative
Record (“AR”) 105, 276. The bid schedule contained a total of eleven contract
line item numbers (“CLINs”). CLIN 0001 was identified as the base item and
called for the removal and replacement of approximately 3,850 linear feet of
fence and the construction of an associated patrol road, a retaining wall,
culverts, and vehicle/drainage gates. AR 219. The time period to complete
CLIN 0001 was originally set at 180 calendar days but was amended to extend
the performance period to 210 days. AR 712-713. CLIN 0004 was identified
as “Option 1 Fence Replacement” and called for the removal and replacement
of additional 3,100 linear feet of fence as well as the construction of a patrol
road, culverts, and gates. AR 220. Performance time for this option was listed
as 120 days. CLIN 0007 was listed as “Option 2 Eastern Access Road” and
called for the construction of an access road approximately 890 feet in length.

for this option was listed as 45 days. 

eight CLINs encompassed various minor aspects of the work, including the
project staging area and bond premiums. AR 219-21.


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        Although the Corps intended awarding both option items and noted that
option work was ideally to be finished concurrent with completion with the
base item, the agency realized that option work may have to commence after
work on the base item commenced. AR 220. Accordingly, the agency intended
to issue an individual notice to proceed (“NTP”) for the base item and each
option item. 

response to a query by plaintiff asking for
clarification on the performance periods, the Corps noted that the period of
performance for each item “will begin when the contractor receives the notice
to proceed for that item. They will probably run simultaneously, but could
require extension . . . based upon when they are exercised.” AR 737.

       The solicitation noted that the award would be made to the responsible
bidder with the lowest overall price - no factors other than price would be
considered in making the award. AR 220. Further, the solicitation stated that
the Corps was under no obligation to exercise any of the option items and
while the government intended to award all option items, there was no
guarantee when they would be awarded, if at all. 

ultimately received five sealed bids, including those
submitted by plaintiff and intervenor. On September 11, 2015, the Corps held
a public bid opening at Fort Worth, Texas. AR 803. Fortis submitted the
lowest bid with a price of $10,086,116.00, while Ultimate submitted the
second lowest bid at $10,393,119.00. 

were lower than the
independent government estimate (“IGE”) of $10,879,721.00. The following
chart shows the breakdown of the major CLINs for both Fortis’ and Ultimate’s
bid, along with the IGE:

   Item No.       Fortis Bid       Ultimate            IGE        Balance
                                        Bid                     IGE CLIN
                                                                  as % of
                                                                  total (of
                                                                     IGE)
    Total Bid    $10,086,116    $10,393,119    $10,879,722
  CLIN 0001       $3,017,500     $6,991,543      $6,759,616            62%
  CLIN 0004       $2,528,000     $3,029,991      $3,760,500            35%
  CLIN 0007       $4,301,682       $196,485       $174,143              2%



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Plaintiff’s Motion for Judgment on the Administrative Record (“PMJAR”) at
8. As this chart illustrates, Fortis’ bid placed a far greater value in the optional
item CLIN 0007. On September 14, 2015, the Corps requested by email that
Fortis verify its bid price due to the imbalance in CLIN values. AR 808. The
next day, Fortis replied “we have reviewed our submission and are confident
we can [per]form for the stated price” and that “[w]e can fully complete all
CLINs for our proposed price.” AR 821. Fortis noted that the imbalance was
due to its calculation method - it had calculated a total price for the project
work and placed all road work due to be completed under all CLINs into CLIN
0007. 

to Fortis’ verification, the Corps again contacted Fortis to
explain that “[a]lthough we plan on awarding CLIN 0007 Option 2 . . . at the
time of contract award, notice to proceed (NTP) could be delayed as the
Government must go complete condemnation procedures prior to issuing the
NTP.” AR 819. Accordingly, the Corps cautioned Fortis that if the government
was unable to acquire title to the land, there was a chance that CLIN 0007
would have to be terminated for convenience and that in such a situation,
Fortis would not be able to bill for the amount it assigned to that item. AR 819-
20. The Corps also informed Fortis that “[y]our bid cannot be altered, however
you can withdraw your bid. If you do not withdraw your bid and we award the
contract to you, you cannot bill for any of CLIN 0007 until after NTP has been
issued for that CLIN and a percentage of that work has been completed and
agreed upon by the Government as complete.” 

this communication, Fortis conferred with its counsel
and replied to the Corps, requesting that it be allowed to amend its bid in order
to redistribute the CLIN numbers to be more balanced. AR 815-816. Between
September 15 and September 24, 2016, Fortis submitted various materials to
the Corps to support its assertion of a mistake-in-bid. FAR § 14.407-3 provides
that if a bidder requests permission to correct a mistake, the agency may permit
it to do so only if the bidder provides clear and convincing evidence
establishing both the existence of the mistake and the bid actually intended.
During that time period, the Corp drafted a memo to the Principal Assistant
Responsible for Contracting (“PARC”) which analyzed both Fortis’ original
bid and its assertion of a mistake-in-bid. AR 903-905. With regard to the
original bid, the Corps concluded that although the bid was mathematically
imbalanced when compared to the IGE, it was not materially unbalanced such
that it posed an unacceptable risk to the government that it would pay
unreasonably high prices for the contract work. 

Corps concluded

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that rejection of the bid was unwarranted. 

to the mistake-in-
bid, the Corps concluded that Fortis had demonstrated by clear and convincing
evidence the existence of a mistake in the original bid with respect to cost
allocation, and recommended that the PARC approve the request of bid
correction. AR 904-905. On September 25, 2015, the PARC confirmed that
Fortis should be allowed to correct its original bid. AR 1411-12.

        On September 25, 2015, the contracting officer issued a memorandum
entitled “Determination of Fair and Reasonable Price.” In that memorandum,
the contracting officer determined that Fortis was the lowest bidder, that it
submitted a request to correct its bid mistake which was approved, and that
this did not affect the total cost of the bid. AR 1414-1417. The contracting
officer also issued another memorandum, titled “Determination of
Responsibility,” which concluded that Fortis was a responsible contractor with
the ability to obtain adequate financial resources to perform the contract,
including average bank deposits in the low 7-figure range and a $5,000,000
line of unutilized credit. AR 1415. Subsequently, on September 25, 2015, the
Corps awarded the contract in the amount of $10,023,839.00 to Fortis. The
contract included both optional CLINs (0004 and 0007).

       B. Procedural History

        Ultimate first objected to Fortis’ bid by way of a letter to the Corps
dated September 15, 2015. Ultimate argued that, should all work on the project
commence simultaneously, the contract would “result in an ‘overpayment’ to
Fortis . . . assuming the IGE Estimate reflects the reasonable value of that
work.” AR 811. Thus, Ultimate argued, the government “would be exposed to
significant financial risk for the balance of the work should Fortis fail to
complete it.” 

that the bid was unbalanced and thus
unresponsive. 

responded to this letter on September 28, 2015,
noting that while the bid was indeed unbalanced, it was not materially
unbalanced and thus it was responsive. Further, the Corps noted that “[t]he
base item, which will be awarded, is priced lower than appears correct and an
option item, which may or may not be awarded, is priced higher than appears
to be correct. Therefore the Contracting Officer has determined that the Fortis
bid is not materially unbalanced” and would not pose a risk to the government
of overpayment on the contract. AR 1526.

     On October 5, 2015, Ultimate filed a protest with Government
Accountability Office (“GAO”), asserting substantially the same claims it

                                      5
raised in its initial letter, and that it raises in the instant case, namely that
Fortis’ bid was tantamount to an advanced payment, which is prohibited by
FAR § 52.214-19(d). AR 1534. Additionally, on October 28, 2015, Ultimate
filed a supplemental protest challenging the Corps’ decision to permit Fortis
to correct its original bid. AR 1845-1924.

       On January 13, 2016, GAO denied Ultimate’s protest. GAO held that,
although the Corp’s determination to allow Fortis to correct its bid was
improper, Ultimate had failed to establish that the error resulted in competitive
prejudice, and that Fortis’ bid, while mathematically unbalanced, was not
materially unbalanced. AR 2895-2911. Finally, GAO held that the Corps had
reasonably determined that Fortis’ unbalanced bid did not pose a risk of
overpayment to the government. 

its complaint here on February 1, 2016. The
administrative record was filed on February 12, 2016. Plaintiff filed its motion
for judgment on the administrative record on February 29, 2016, and defendant
filed its cross-motion for judgment on the administrative record on March 22,
2016. Oral argument was held on April 5, 2016, after which the court granted
defendant’s motion and denied plaintiff’s motion.

                                 DISCUSSION

        The central issue for the court to decide is whether the Corps’ decision
to accept Fortis’ unbalanced bid as responsive was arbitrary and capricious or
otherwise in violation of the FAR. Plaintiff argues that the agency failed to
“reject the Fortis bid as nonresponsive; analyze the risk imposed by an
unbalanced bid; verify the erroneous Fortis bid; require clear and convincing
evidence to permit a bid modification; reject the original Fortis bid as so out
of line or clearly erroneous that it was not fair to other bidders; and/or consider
the original Fortis bid as submitted.” PMJAR at 18. Plaintiff also argues that
the agency’s decision to award the bid was erroneous and lacked a rational
basis because “[t]he AR is devoid of any evidence that the Agency analyzed
the risks imposed by the original Fortis bid and fails to provide any evidence
of a rational basis for the Agency’s decision.” 

court can address plaintiff’s substantive claims, it first must
determine if plaintiff has standing to pursue those claims. A plaintiff bears the
burden of establishing the court’s subject matter jurisdiction by a
preponderance of the evidence. See Brandt v. United States, 

,

                                        6
1373 (Fed. Cir. 2013). The Tucker Act provides that the Court of Federal
Claims:

       shall have jurisdiction to render judgment on any action by an
       interested party objecting to a solicitation by a Federal agency
       for bids or proposals for a proposed contract or to a proposed
       award of the award of a contract or any alleged violation of
       statute or regulation in connection with a procurement or a
       proposed procurement.

28 U.S.C. § 1491(b)(1). To establish jurisdiction under this statute, a plaintiff
must demonstrate that it is an “interested party.” This “imposes more stringent
requirements than Article III.” Weeks Marine, Inc. v. United States, 

, 1359 (Fed. Cir. 2009). Although the term “interested party” is not
defined within the statute, courts have construed it to consist of two elements:
first, plaintiff must establish that it “is an actual or prospective bidder” and
second, that it “possess[es] the requisite direct economic interest.” 

Serv. Corp. v. United States, 

, 1308 (Fed. Cir. 2006)). A
plaintiff “must show that there was a ‘substantial chance’ it would have
received the contract award but for the alleged error in the procurement
process.” Info. Tech. & Applications Corp. v. United States, 

,
1319 (Fed. Cir. 2003). Although a plaintiff need not show that it was next in
line for the award but for the alleged error, demonstrating prejudice requires
the plaintiff to show “more than a bare possibility” of receiving the award.
Precision Asset Mgmt. Corp. v. United States, 

, 233 (2016).

        In this case, plaintiff satisfies both requirements. Plaintiff is obviously
an actual bidder as it submitted a timely bid. Furthermore, plaintiff has shown
that there was a substantial chance it would have received the award but for the
alleged error. Price was to be the only factor considered in awarding the
contract, and, while Fortis was the lowest bidder, Ultimate was the second
lowest bidder. Thus, were the court to find that the agency erred in selecting
Fortis’ bid, Ultimate would be next in line and would receive the award.
Accordingly, the court finds that plaintiff has standing to pursue its claims.

        The court next turns to plaintiff’s substantive argument. Plaintiff
advances several arguments which hinge upon one general premise: that
Fortis’ original bid was materially unbalanced, and that such imbalance leads
to numerous material defects. First, it points out that an unbalanced bid could
result in an impermissible advanced payment, as contemplated by FAR §
14.201-6(m). PMJAR at 2. Second, it could lead to a situation in which the

                                        7
agency is at risk for overpayment of goods and services. 

government could be at risk for non-performance in the event it did not award
CLIN 0007 because Fortis might default if forced to abide by its unbalanced
bid, which would create greater costs for the government. 

that the agency acted arbitrarily and capriciously by failing to take these risks
into account.

       The court first turns to whether Fortis’ original bid was materially
unbalanced. FAR § 14.404-2(g) provides that “[a]ny bid may be rejected if the
prices for any line items or subline items are materially unbalanced.”
(emphasis added). FAR § 52.214-19(d) further provides:

       The Government may reject a bid as nonresponsive if the prices
       bid are materially unbalanced between line items or subline
       items. A bid is materially unbalanced when it is based on prices
       significantly less than cost for some work and prices which are
       significantly overstated in relation to cost for other work, and if
       there is a reasonable doubt that the bid will result in the lowest
       overall cost to the Government even though it may be the low
       evaluated bid, or if it is so unbalanced as to be tantamount to
       allowing an advance payment.

        The first thing to note about both of the aforementioned FAR provisions
is that they contain permissive language - both sections state that materially
unbalanced bids may be rejected. This is in contrast to other FAR provisions
which contain mandatory language. E.g., FAR § 14.404-2(c) (“Any bid that
fails to conform to the delivery schedule or permissible alternates stated in the
invitation shall be rejected.”) (emphasis added). The second important point
is that FAR § 52.214-19(d) highlights two factors a bid must meet in order to
be materially unbalanced. First, prices must be significantly overstated or
understated in relation to other costs; second, there must be a reasonable doubt
that the bid will not result in the lowest overall cost to the government or it
must appear that the bid is unbalanced to the point of being tantamount to an
advance payment.

       There can be no doubt that Fortis’ original bid is unbalanced. Going by
the IGE, the work to be done under CLIN 0007 amounted to approximately 2%
of the overall value for the contract. In Fortis’ bid, CLIN 0007 accounts for
approximately 42.6% of the overall value for the contract. Indeed, the agency
noted that Fortis’s original bid was “mathematically unbalanced.” AR 903-
905. Although plaintiff argues that “no further analysis should be necessary”

                                       8
in order for the bid to be rejected as nonresponsive, PMJAR at 19, the FAR
clearly contemplates further analysis. To be materially unbalanced, plaintiff
must show that there was a reasonable doubt that the bid would not result in
the overall price or that acceptance of the bid would be tantamount to an
advance payment.

         Plaintiff raises three claims of agency error. Pl’s Resp. at 4. The first is
that the agency permitted Fortis to modify its original bid. 

is the
agency’s failure to reject Fortis’ original bid as nonresponsive. 

is that the agency did not (a) reject Fortis’ original bid as too far out of line or
so clearly erroneous so as to make its acceptance unfair, or (b) the agency
failed to consider Fortis’ original bid as submitted. 

that if
any of these prejudiced Ultimate, it must prevail.

         Both sides agree that it was error for the agency to allow Fortis to
modify its bid. Before considering whether that prejudiced plaintiff, the court
will first examine whether the agency erred by not finding Fortis’ original bid
to be nonresponsive. The court’s inquiry is whether the agency’s action is
“arbitrary, capricious, an abuse of discretion, or otherwise contrary to law” or
“without observance of standard procedure required by law.” 5 U.S.C. §
706(2). The Federal Circuit has described the standard of review as whether
the procurement decision “lacked a rational basis” or “involved a violation of
regulation or procedure.” Impresa Construzsioni Geom. Domenico Garufi v.
United States, 

, 1332 (Fed. Cir. 2001); see also Med. Devel.
Int’l., Inc. v. United States, 

, 700 (2009). The scope of review
is narrow: “[t]he Court will look to see if an agency ‘examine[d] the relevant
data and articulate[d] a satisfactory explanation for its action.” Gulf Grp. Inc.
v. United States, 

, 351 (2004) (quoting Motor Vehicle Mfrs.
Ass’n of the United States, Inc. v. State Farm Mut. Auto. Ins. Co., 

,
43 (1983). The protestor bears a “heavy burden” of showing that the award had
no rational basis and the burden is even higher in a “best value” procurement.

document illustrating the agency’s decision making process
is a memorandum sent by the contracting officer to the PARC, dated
September 17, 2015, and digitally signed on September 19, 2015. AR. 903-905
It reflects that, prior to awarding the bid to Fortis, the agency considered many
of the issues that plaintiff now brings before the court. The memorandum notes
that “[r]ejection of the Fortis bid was considered for line items being
materially unbalanced in accordance with FAR 14.404-2(g)” but that “the
Contracting Officer determined the bid, while unbalanced, is not materially

                                         9
unbalanced” because “since the base item is priced lower than appears to be
correct, and an option item, which may not be awarded, is priced high, there
is no risk that award of the contract will result in paying unreasonably high
prices for contract performance.” 

clear that the agency flagged the
imbalance and considered whether such an imbalance should lead to rejection
of the bid. Ultimately, the agency determined that there was no risk of
overpayment. If all options on the project were exercised, the government
would be getting the lowest price for all the work, and if it ultimately could not
award CLIN 0007, the government would stand to benefit from a potential
underpayment rather than an overpayment.

        With respect to whether or not that created a risk of default, the Corps
received a letter from Wells Fargo bank, indicating that Fortis maintained an
“average deposits relationship in the low 7-figure range” and also had an
active line of credit for $5,000,000, which was currently undrawn. This letter
was received before the award of the contract, demonstrating that the Corps
did its due diligence in ascertaining Fortis’ ability to perform the contract at its
original, unbalanced price. It is simply too speculative to conclude that, absent
the award of CLIN 0007, Fortis would have been financially unable to
complete the project at its quoted price.

       Plaintiff also argues that Fortis’ original unbalanced bid would be
tantamount to allowing it to receive an advanced payment, which it argues is
disallowed by both FAR § 52.214-19 and the Anti-Deficiency Act, 31 U.S.C.
§ 3324. Plaintiff contends that, if all NTPs were issued at the same time and
all work was to commence simultaneously, Fortis would receive an advance
payment because CLIN 0007 would be completed first and Fortis would be
entitled to collect the full value from that CLIN, which would be
disproportionate to the work actually completed. Defendant, on the other hand,
contends that this argument is flawed because the agency knew that, at the time
of award, it was likely that CLIN 0007 would be awarded on a delayed NTP.

       The record confirms that the agency considered this advanced payment
risk when assessing the viability of Fortis’ unbalanced bid. Although
throughout the entire process the Corps asserted that it intended on awarding
CLIN 0007, it also knew that it might be delayed due to the need to obtain an
easement, or that it might not be issued at all. See AR 99 (Internal acquisition
plan noting that acquiring real estate for the project would be difficult and that
the NTP might be delayed). Because the agency knew it was unlikely that
performance for CLIN 0007 would commence simultaneously with the other
CLINS, it concluded that there was no risk of advance payment because it was

                                        10
extremely unlikely that Fortis would be able to recover $4,301,682 within the
first 45 days of performance commencement. This is not, as plaintiff contends,
the agency “not disclosing its superior knowledge” to the detriment of
plaintiff. PMJAR at 24. Fortis’ unbalanced bid certainly did not give it an
advantage over any other bidder - if anything, it can be said that the imbalance
created greater risk to the contractor. The agency merely took into account the
likelihood that CLIN 0007 would be awarded on a delayed NTP (or not at all)
and determined there was no risk of advance payment or overpayment by the
government if it awarded the contract to Fortis under the unbalanced price
schedule.

        Accordingly, when considering Fortis’ bid, the contracting officer noted
that there was no risk to the government because the high priced option item
might not ultimately be awarded. AR 903. This was further confirmed by the
contracting officer’s post-award letter to Ultimate, which responded to
concerns of advance payment by noting that “the imbalance presents no risk
of allowing an advance payment.” AR 1526. The agency was first notified on
September 15, 2015, by Ultimate regarding a potential issue with advance
payment. It is reasonable to conclude that the contracting officer considered
these issues when explaining to the PARC why Fortis’ bid, while unbalanced,
was not materially unbalanced. We are satisfied that the agency reasonably
considered the risk of advance payment to Fortis.

       Regarding the error of allowing Fortis to revise its bid, Ultimate cannot
show that, in the end, this caused it prejudice. As discussed above, while the
agency determined that Fortis should be allowed to modify its bid, it also
determined that Fortis’ original bid was not materially unbalanced, did not put
the government at risk for overpayment, and did not create a situation in which
Fortis would reap a windfall from an advanced payment. The evidence
strongly suggests that the agency and Fortis were prepared to move forward
with the bid as it was originally submitted by Fortis. Thus, even if the PARC
had not erred and Fortis was required to perform pursuant to its proposal, there
is nothing to suggest that the Corps would have rejected the bid as
unresponsive, or that Fortis would have backed out. Plaintiffs argument that
but for the agency error, Fortis would have withdrawn is bid is simply too
speculative and on its face contrary to the evidence. See AR 821 (Fortis
confirming it could perform at the stated prices in the face of the agency noting
the overall imbalance of the proposal). Accordingly, Ultimate was not
prejudiced because, even if the error were eliminated, Fortis would still have
received the award.


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                              CONCLUSION

        For the reasons set forth above, the court finds that the government’s
decision to award the contract to Fortis was not arbitrary or capricious or
otherwise in contravention of the law. Accordingly, the court grants
defendant’s motion for judgment on the administrative record and denies
plaintiff’s motion for judgment on the administrative record. The clerk shall
enter judgment for defendant. No costs.


                                                        s/Eric G. Bruggink
                                                        Eric G. Bruggink
                                                        Senior Judge




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