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In a significant ruling issued June 15, the U.S. Court of Appeals for the Federal Circuit for the first time applied its Blue & Gold waiver rule to circumstances beyond terms of a solicitation. The appeals panel in Inserso Corp. v. United States[1] found that Inserso forfeited its alleged organizational conflict of interest (OCI) challenge by waiting to protest until after award.
The Inserso decision addresses a key question raised by progeny of the landmark Blue & Gold decision, issued by the Federal Circuit in 2007, about the reach of the waiver rule beyond the narrow context of solicitation language. In a 2-1 decision, Circuit Judges Taranto and Mayer affirmed the interpretation of multiple Court of Federal Claims (COFC) judges over the past several years who have applied the Blue & Gold waiver rule to bar untimely post-award OCI claims.
In 2016, the Defense Information Systems Agency (DISA) solicited for multiple awards to provide information technology services to the Department of Defense and other federal agencies under its $17.5 billion Encore III procurement. The competition was divided into two pools, with up to 20 contracts available for small businesses and another 20 available in full and open competition. Although bidders in both competitions submitted proposals at the same time, DISA made award decisions, and thus provided debriefings, to offerors in the full-and-open pool almost a full year earlier than it did in the small business pool.
Inserso protested, first at GAO and then at the COFC, after receiving notification of its unsuccessful bid for one of the small business awards in September 2018. Inserso claimed that the debriefing in the full-and-open competition back in November 2017 afforded certain offerors who also competed in the small business pool an unfair competitive advantage by disclosing total evaluated prices and information regarding DISA’s evaluation methodology. COFC denied the protest, finding Inserso did not show it was prejudiced by the disclosures. The Federal Circuit affirmed judgment in favor of the Government but on a different ground. The Court held that, under Blue & Gold, Inserso waived its right to object to the disparity in competitive information provided to offerors because it failed to protest until after awards were made in the small business competition.
In Blue & Gold, Fleet, L.P. v. United States, the Federal Circuit established that a party who has the opportunity to object to terms of a solicitation containing a patent error and fails to do so prior to the close of the bidding process waives its ability to raise that objection in a subsequent bid protest.[2] The Court later held, in COMINT, that this reasoning “applies to all situations in which the protesting party had the opportunity to challenge a solicitation before the award and failed to do so.”[3] Although the Federal Circuit applied the waiver rule to protests of solicitation terms and amendments in at least ten decisions since COMINT, it had yet to issue an opinion – prior to Inserso – applying the waiver rule to challenges beyond solicitation language.
The Inserso panel held that Inserso knew, or should have known, that DISA would disclose pricing and other competitive information as part of the full-and-open competition debriefing, at or around the time of award, since the FAR sets forth such requirements for debriefings. Inserso also knew that the solicitation expressly allowed offerors to take part in both the full-and-open and small business competitions (either directly or through joint ventures or partnerships), and Inserso knew when the first competition was completed. The Circuit found that “[t]he law and facts made patent that the solicitation allowed, and that there was likely to occur, the unequal disclosure regarding prices [and other competitive information] that Inserso now challenges.”
The panel rejected Inserso’s argument that it was reasonable to believe DISA would delay debriefing the full-and-open pool for many months, noting that the debriefing process “is an important part of the award process,” and the FAR rule setting a 5-day clock for the debriefing, to the maximum extent practicable, “demonstrates the very short time scale understood to be important.” Significantly, the decision points out that “[t]he Blue & Gold forfeiture standard exists in recognition of the need for interested bidders to call the agency’s attention to solicitation problems of which they reasonably should be aware.” Because Inserso failed to raise its challenge alleging an OCI before the small business awards were made, it forfeited its right to do so.
The Circuit also highlights the policy rationale behind the Blue & Gold rule, to reduce “the inefficient and costly process of agency rebidding” due to a defective solicitation, which implements Congress’s directive that courts “shall give due regard to . . . the need for expeditious resolution” of protest claims.[4] Inserso sought the same relief it could have obtained from DISA earlier before the agency expended substantial time and effort in evaluating offerors’ proposals.
Judge Reyna dissented, disagreeing that the waiver rule applied to Inserso’s claims which, in his view, arose from latent errors not apparent from the solicitation. More fundamentally, Judge Reyna also attacked the validity of the Blue & Gold rule, pointing to the Supreme Court’s holding in SCA Hygiene that the equitable timeliness doctrine of laches does not override a congressionally-enacted statute of limitations.[5] Based on that reasoning, the dissent argued that the Circuit cannot override COFC’s six-year statute of limitations with a “timeliness bar” based on its own policy concerns.
The majority responded to the dissent’s attack on Blue & Gold, disputing the “broad implication” drawn from SCA Hygiene. It explained that, in contrast to the equitable doctrine of laches, the Blue & Gold rule was established under the Tucker Act’s specific statutory authorization, with support from “longstanding substantive contract law and from regulations under a related statutory regime specific to bid protests.” Notwithstanding the split panel, the Inserso decision marks a notable addition to Federal Circuit precedent on the Blue & Gold rule.
The Federal Circuit’s extension of the Blue & Gold rule to challenges that go beyond the “four corners” of a solicitation, such as an OCI claim, ratifies prior COFC decisions and is generally consistent with the position GAO has adopted on timeliness. GAO has applied its analogous waiver rule, 4 C.F.R. § 21.2(a)(1), to bar untimely bias and OCI claims that were known to the protester prior to award. See Adams and Associates, Inc., B-417120; B-417125, Jan. 16, 2019, 2019 CPD ¶ 21 (dismissing bias claim as untimely); Honeywell Tech. Solutions, Inc., B-400771, B-400771.2, Jan. 27, 2009, 2009 CPD ¶ 49 (dismissing OCI claim as untimely). These decisions from GAO, and the authoritative statement from the Federal Circuit in the Inserso opinion, underscore the need for contractors to remain alert to potential bias and OCI issues during the pre-award stage of procurements.
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[1] Case No. 2019-1933 (Fed. Cir., June 15, 2020).
[2] 492 F.3d 1308, 1313 (Fed. Cir. 2007).
[3] COMINT Sys. Corp. v. United States, 700 F.3d 1377, 1382 (Fed. Cir. 2012) (emphasis added).
[4] Citing 28 U.S.C. § 1491(b)(3).
[5] Citing SCA Hygiene Products Aktiebolag v. First Quality Baby Products, LLC, 137 S. Ct. 954 (2017).
