THOMAS C. WHEELER, Judge.
This bid protest is before the Court again following a remand in which the Court invited the Navy to conduct a new responsibility determination of the proposed awardee, Louis Berger Aircraft Services. More than four months ago, the Court had permanently enjoined the Navy from proceeding with its proposed Louis Berger contract due to multiple failures to disclose rampant criminal conduct by parent company officers and principals. Based upon new information, the Navy disagreed with the Court's decision, asserting that it had reasonable explanations for each of the violations identified by the Court. The Navy has now submitted three volumes of new information demonstrating a much more thorough review, and it requests the Court to lift the permanent injunction so that it may proceed with the contract award to Louis Berger Aircraft Services.
On March 4, 2016, the Court issued an opinion and order setting aside the Navy's October 7, 2015 award to Louis Berger Aircraft Services for air terminal and ground handling services at Naval Station Rota, Spain.
On March 28, 2016, the Government filed a motion for reconsideration of the Court's opinion and order or, alternatively, a stay of judgment pending appeal. The Government based its request on new information not included in the Administrative Record. Based on the new information and after a hearing on March 29, 2016, the Court vacated its judgment and remanded the case to the Navy for 45 days to permit the Navy to make an updated responsibility determination and to consider issuing a new business clearance memorandum in light of the Court's March 4, 2015 opinion and order. The Court kept the permanent injunction in place. In remanding to the Navy for further consideration, the Court left open the possibility that the Navy, after considering the newly presented evidence, would disagree with the Court's conclusions. In this circumstance, the Court instructed the Navy that it would have to explain why it came to a different conclusion from the Court.
On June 1, 2016, the Government filed a status report informing the Court that the Navy had updated its responsibility determination, and assessed the Court's legal and factual determinations based upon 2,500 pages of new information included in the remand Administrative Record. Administrative Record ("AR") 1752-80. The Navy concluded that Louis Berger Aircraft Services is a responsible offeror and should be awarded the contract. As discussed below, the Navy weighed and considered each of the Court's principal reasons for finding that Louis Berger Aircraft Services had made material misrepresentations. Now, the sole question before the Court is whether the Navy's determinations in its updated responsibility determination are arbitrary and capricious, or lack a rational basis. Even though the Court may not have reached the same conclusion as the Navy, the Court cannot say that the Navy's determinations are unreasonable or unlawful.
In a bid protest, this Court reviews an agency's decision under the standards in the Administrative Procedure Act ("APA"). 5 U.S.C. §§ 701-706 (2000);
The APA standard allows this Court to cancel an agency's procurement decision if it lacked a rational basis or if the agency's decision-making involved a violation of regulation or procedure. Impresa, 238 F.3d at 1332. The arbitrary and capricious standard is "highly deferential" and the "protestor bears the burden of proving that a significant error marred the procurement in question."
A protestor faces a "high hurdle" in challenging a responsibility determination.
In its March 4, 2016 opinion and order, the Court provided a detail factual history supporting its conclusion that Louis Berger Aircraft Services had made material misstatements.
As guided by the Court's previous opinion and order, the Contracting Officer's inquiry on remand focused primarily on the awardee, Louis Berger Aircraft Services, and its parent corporation, Berger Group Holdings.
In its previous opinion and order, the Court concluded that Louis Berger Aircraft Services falsely certified that neither it nor "any of its principals . . . within five years, in connection with the award to or performance by the offeror of a Federal contract or grant, have been the subject of a proceeding . . . that resulted in . . . a conviction." AR 419. Derish Wolff, the former chairperson of Louis Berger Aircraft Services' parent corporation, had been indicted for and pleaded guilty to defrauding the U.S. Agency for International Development within five years of Louis Berger Aircraft Service's proposal. AR 1432. Relying on language in the Department of Justice indictment, the Court concluded that Mr. Wolff was a "principal" as he owned 25 percent of Louis Berger Aircraft Services' parent corporation at the time of his guilty plea. Louis Berger Aircraft Services asserted that the company had converted Mr. Wolff's stock to non-voting trust certificates before his guilty plea, extinguishing Mr. Wolff's ownership interest.
On remand, the Navy fully developed the record on this issue. The Navy considered whether: (1) Derish Wolff was a principal under FAR 52.209-7; and (2) his criminal conviction was in connection with the award to or performance by Louis Berger Aircraft Services of a Federal contract or grant under FAR 52.209-7. AR 1765. The Navy answered both of these questions negatively and concluded that Louis Berger Aircraft Services did not provide false certifications.
The Navy determined that Mr. Wolff had no stock ownership after 2010, five years before his guilty plea, in Berger Group Holdings, the parent corporation of Louis Berger Aircraft Services. Mr. Wolff's 2010 separation agreement required him to sell half of his shares to Berger Group Holdings and exchange the remaining shares for non-voting trust certificates within 30 days of executing the agreement. AR 1764; AR 3759 (Separation Agreement). On September 20, 2010, Mr. Wolff and Berger Group Holdings executed a promissory note selling half of his shares to the company. AR 3765-70 (Promissory Note). On September 28, 2010, Mr. Wolff and Berger Group Holdings entered an agreement exchanging his remaining shares of voting stock for non-voting trust certificates. AR 1764; AR 3785-87 (Exchange Agreement).
Algese asserts that the Contracting Officer should have viewed any indicia of ownership conferred by the non-voting trust certificates as sufficient to make Mr. Wolff an owner, and thus, a principal under FAR 52.209-7. In essence, Algese argues that actual stock ownership is not necessary for the Contracting Officer to conclude Mr. Wolff was an owner: non-voting trust certificates are sufficient to require Louis Berger Aircraft Services to disclose Mr. Wolff's 2015 plea agreement. The Contracting Officer disagreed.
Based on this new evidence, the Navy concluded that the promissory note and non-voting trust certificates did not give Mr. Wolff an ownership interest in Louis Berger Aircraft Services' parent company. AR 1766;
Further, the trust "is intended to dissociate ownership of the economic interest in the shares . . . from any of the elements of control or influence ordinarily associated with actual record ownership." AR 4024. Thus, under the terms of the trust and shareholders' agreements, Mr. Wolff retained no title in any company shares and by transferring ownership of his shares to a trust, his remaining financial interest was severed from any ownership rights. He had no remaining contingent interest as the trust agreement would never permit him to own stock. AR 3778 (shareholders' agreement explaining that only active employees may own stock); AR 3785 (Mr. Wolff "hereby transfers, assigns and delivers all of his right, title and interest in the Deposited Shares free and clear"). Even assuming that incidental benefits of ownership are sufficient to make Mr. Wolff a principal, he redeemed all of his trust certificates prior to his guilty plea. AR 1765, n.5. Therefore, it was reasonable for the Contracting Officer to conclude that the trust certificates do not confer ownership and that Mr. Wolff is not an owner.
Algese mounts a similar argument under FAR 52.209-5(a) which requires an offeror to certify whether it or its principals have within a three-year period preceding the offer, been convicted of or had a civil judgment rendered against the offeror or its principals. FAR 52.209-5(a)(1)(i)(B). According to Algese, the Contracting Officer's conclusion that Louis Berger Aircraft Services was not required to make an affirmative certification due to Mr. Wolff's conviction was unreasonable. This argument too fails. As with the last, this FAR provision requires disclosure if a principal has been convicted. As the Contracting Officer determined, Mr. Wolff was not a principal at the time of his conviction. Even assuming Mr. Wolff was a principal at the time of the guilty plea, Louis Berger Aircraft Services updated its certification to be consistent with the Court's view that Mr. Wolff was a principal at the time of his conviction. Algese does not contest that Louis Berger Aircraft Services updated its certification. Nor does Algese dispute that the Contracting Officer considered the impact of Mr. Wolff's misconduct and conviction on Louis Berger Aircraft Services' present responsibility. The Contracting Officer has broad discretion in these procurement matters.
Alternatively, Algese argues that, even if Mr. Wolff was not a principal at the time of his plea agreement, the Navy's responsibility determination must be rejected because Mr. Wolff was a principal when he committed the misconduct. Its argument continues that this former principal status requires an affirmative certification under FAR 52.209-7(c)(1)(i). Assuming, without deciding, that Algese's former principal theory is correct, the Contracting Officer's determination that Louis Berger Aircraft Services was not required to disclose Mr. Wolff's guilty plea was not irrational. Relying on the plain language of the FAR provision, the Contracting Officer reasoned that Louis Berger Aircraft Services was not required to make an affirmative certification because the provision applies to proceedings that were "in connection with the award to or performance by the offeror of a Federal contract or grant." FAR 52.209-7(c)(1) (emphasis added); AR 1767. Mr. Wolff's conviction was not in connection with any contract or grant either performed by or awarded to Louis Berger Aircraft Services. Rather, his conduct was associated with Berger Group Holdings.
Admittedly, FAR 52.209-7 does not expressly require offerors to disclose information about former principals. Assuming that the clause could be construed as ambiguous, the Contracting Officer's interpretation of an ambiguous clause is entitled to deference so long as it is reasonable.
Addressing another of the Court's primary concerns, the Navy considered whether Berger Group Holdings was "otherwise criminally charged" in connection with a 2015 deferred prosecution agreement against Louis Berger Aircraft Services' sister corporation Louis Berger International. Previously the Court concluded that Berger Group Holdings was "otherwise criminally charged" under FAR 52.209-5 for two reasons: (1) the Department of Justice formally accused Berger Group Holdings of engaging in a long-term scheme to bribe foreign officials to win public contracts; and (2) the company's conduct presented adequate evidence of irregularities seriously reflecting on the propriety of further Federal Government dealings. In the briefs leading to the Court's March 2016 opinion, the parties contested the scope of the 2015 deferred prosecution agreement. The disagreement arose from the agreement's definition of "company." The deferred prosecution agreement defined "company" to include Berger Group Holdings. Then, it detailed the alleged misconduct perpetrated by the "company."
In a new declaration, one of the Assistant U.S. Attorneys who oversaw the drafting of the criminal complaint and deferred prosecution agreement stated that Berger Group Holdings was not included in the definition of "company." In fact, the Department of Justice did not "accuse Berger Group Holdings of any . . . crimes." AR 1821-22. Also, the prosecutorial team evaluated Berger Group Holding's reorganization of its subsidiaries that led to creation of the Louis Berger International. Contrary to the Court's finding, the team concluded that Berger Group Holdings did not create Louis Berger International as a shell company in which to dump its criminal liabilities. AR 1821-22. The Department of Justice's Criminal Division confirmed the prosecutorial team's contentions. AR 3546.
Algese argues that the Assistant U.S. Attorney's explanation of the definition of "company" should be dismissed because other parts of the deferred prosecution agreement contradict it. Algese asserts that "company" encompasses more than just Louis Berger International because the deferred prosecution agreement mentions two Louis Berger Group executives' culpable acts. However, the Contracting Officer decided that the executives' actions were properly attributable to Louis Berger International. Due to corporate restructuring, Louis Berger Group was collapsed into Louis Berger International. AR 1770; AR 3095, 3098. As the Department of Justice explained, it prosecuted Louis Berger International because it assumed all liability for the previous entity during the restructuring process. As previously explained, the Department of Justice did not intend to implicate Berger Group Holdings in its description of Louis Berger International's misconduct.
In vacating its prior judgment and remanding for further consideration, the Court expressly invited the Navy to reconsider the facts surrounding the 2015 deferred prosecution agreement. The Court instructed that if the Navy reached a different conclusion from that of the Court, the Navy must fully explain its basis for doing so. The Navy has complied with this instruction. While the Court may disagree if it were in the shoes of the Contracting Officer, it will not substitute its judgment for that of the Navy, recognizing that reasonable minds could reach differing conclusions.
Relatedly, the Contracting Officer's revised responsibility determination properly weighed Louis Berger Aircraft Services' misleading statement that Berger Group Holdings was not, and has not been, investigated, accused, or charged with any misconduct by the Government and is not subject to the 2015 deferred prosecution agreement. AR 1413. In its previous opinion, the Court concluded that this was a material misrepresentation.
To the extent Algese asserts Louis Berger Aircraft Services made other material misstatements, the Navy contends, and the Court agrees, that the Navy was fully aware of all pertinent facts before proceeding with its award to Louis Berger Aircraft Services.
On remand, the Navy reconvened its Past Performance Evaluation Board to evaluate the factual bases for the Court's and Algese's stated concerns with an award to Louis Berger Aircraft Services. After reviewing all available information, the Evaluation Board concluded that Louis Berger Aircraft Services is capable of successfully performing the Rota contract, and that any concerns for affiliated corporations' bad acts are irrelevant to the awardee's performance capabilities. Ultimately, the Evaluation Board awarded Louis Berger Aircraft Services a substantial confidence rating. AR 1754.
Regarding the integrity of Louis Berger Aircraft Services' affiliates, the Evaluation Board reviewed the Court's prior decision, Algese's April 15, 2016 letter to the Navy raising integrity concerns, and the awardee's responses to the Navy's requests for information.
Although the Court's inquiry into the facts supporting the Navy's decision is to be searching and careful, the ultimate standard of review is a narrow one.
This decision was filed under seal on July 21, 2016. The Court invited the parties to carefully review this opinion for competition-sensitive, proprietary, confidential or other protected information and submit to the Court any proposed redactions on or before July 28, 2016. As the parties did not propose redactions, the Court reissues the opinion in its entirety for publication.
IT IS SO ORDERED.
