[00:00:00] Speaker 01:
because of confidentiality and we're going to allow all parties to file a post-argument letter brief hopefully in the order of five pages providing any further confidential information that relates to the oral argument that would be useful to the panel.

[00:00:21] Speaker 01:
And I guess perhaps you should do that within a week following the oral argument.

[00:00:30] Speaker 01:
Are there any questions about this procedure?

[00:00:36] Speaker 04:
Your Honor, if I may?

[00:00:38] Speaker 04:
Yeah.

[00:00:39] Speaker 04:
Is the transcript of the hearing going to be released online immediately?

[00:00:45] Speaker 04:
Because if possible, we respect the request, an opportunity in the event of inadvertence for the parties to review and notify the court within 24 hours of any potential problems that we may have

[00:00:58] Speaker 01:
We'll give you 24 hours before we release it.

[00:01:01] Speaker 04:
Thank you, Your Honor.

[00:01:04] Speaker 01:
Okay, so the courtroom should be open now.

[00:01:08] Speaker 00:
All right, I think we've... Patrick, perhaps you can open the door or... This is everyone who will wait.

[00:01:22] Speaker 07:
Okay.

[00:01:25] Speaker 07:
All right, then let us proceed with the order of presentations.

[00:01:29] Speaker 07:
We have Mr. Colley and Pellet.

[00:01:37] Speaker 03:
You please the court.

[00:01:39] Speaker 03:
GAO's prediction that it would sustain Northrop's misleading discussion protest did not provide a rational basis for the agency's corrective action, both because Northrop failed to clarify a solicitation ambiguity and because Northrop has not demonstrated prejudice.

[00:01:55] Speaker 03:
This court has established that when a competing contractor encounters an ambiguous agency communication, it must seek clarification.

[00:02:03] Speaker 06:
Excuse me.

[00:02:03] Speaker 06:
Can I ask?

[00:02:04] Speaker 03:
Yes.

[00:02:05] Speaker 06:
This is, I guess, a question that seems to me to run through the several arguments.

[00:02:10] Speaker 06:
It seems to me it's one thing to say when the GAO or the Court of Federal Claims and we would conclude that the government in

[00:02:24] Speaker 06:
awarding a contract and sticking with it must be reversed.

[00:02:29] Speaker 06:
And it's another thing, and there are various rules about waiver and when certain objections need to be made timely, but that we don't really have that.

[00:02:40] Speaker 06:
What we have here is a question of what the government may reasonably choose to do that we might not, through a protest, force the government

[00:02:51] Speaker 06:
And it seems to me most of your arguments are about the forcing standards, not the permissive standards.

[00:02:59] Speaker 03:
Your Honor, the arguments that we're putting forward, we believe, is a forcing standard on the contractor at this point.

[00:03:06] Speaker 03:
The government, the question is, what happens when this ambiguous statement appears in front of the contractor?

[00:03:12] Speaker 03:
The rule that this court laid down in Statistica and Blue and Gold and Comment and others cases

[00:03:17] Speaker 03:
is that if that ambiguity is presented, the obligation lies on the contractor to bring it to the attention of the government in a timely way to fix the problem.

[00:03:26] Speaker 06:
On pain of not being able to win a protest that would undo the government decision.

[00:03:33] Speaker 03:
Correct.

[00:03:34] Speaker 06:
But that's not this context.

[00:03:36] Speaker 06:
We have a context in which, I mean, one way to put it might be, the government has waived its right to invoke constructive

[00:03:47] Speaker 06:
acceptance or knowledge, which it can do and therefore conclude on its own reasonably, there was a problem here, we would like to correct it.

[00:03:59] Speaker 03:
In this particular instance, Your Honor, that's an interesting hypothetical, but it's not the situation that we encounter.

[00:04:05] Speaker 03:
In this case, the government defended its decision

[00:04:08] Speaker 03:
and did not intend to take corrective action and felt exactly as we maintain here.

[00:04:13] Speaker 06:
Until it was persuaded otherwise by the GAO lawyer.

[00:04:19] Speaker 03:
Actually, Your Honor, the court of federal claims below recognized as a matter of fact that the agency took the corrective action, regardless of whether GAO was right or wrong.

[00:04:29] Speaker 03:
It took the corrective action because the GAO said, we are going to sustain these two protest grounds.

[00:04:34] Speaker 03:
And the government said, okay, we don't want to have a protest sustained, so we will take corrective action on those two protest issues.

[00:04:40] Speaker 03:
That's what the Court of Federal Claim understood from the only documentary evidence of the agency's decision.

[00:04:46] Speaker 03:
The agency's decision was announced in a letter to GAO that says, in accordance with what you just said, we'll take corrective action.

[00:04:53] Speaker 03:
There is no evidence anywhere of any independent assessment by the government that the government agreed that it had made a mistake that it needed to fix.

[00:05:01] Speaker 03:
It simply took corrective action based on what it was told by the GAO.

[00:05:06] Speaker 03:
Under Turner, the responsibility for the Court of Federal Claims and this court today is to decide whether or not that statement from GAO provided a rational basis for the government to take that action.

[00:05:17] Speaker 01:
Well, in other words, whether the statement from GAO was correct or not.

[00:05:21] Speaker 03:
Not so much whether the statement from GAO was correct, Your Honor, because in our view, the statement from GAO didn't matter.

[00:05:28] Speaker 03:
That protest never should have been heard.

[00:05:30] Speaker 01:
I'm not understanding your answer.

[00:05:32] Speaker 01:
I thought your theory was that the GAO said we're going to sustain the protest and the government under duress agreed to rebid the contract.

[00:05:41] Speaker 01:
And the question is whether the GAO tentative decision or whatever it is was rational.

[00:05:47] Speaker 03:
Yes.

[00:05:48] Speaker 03:
And the reason that it was not rational, Your Honor, is that that decision by the GAO was premised on the idea that Northrop's misleading discussion argument should have been taken forward.

[00:05:57] Speaker 03:
Okay.

[00:05:58] Speaker 01:
Well, let me ask you a question.

[00:05:59] Speaker 01:
I think you're right that under General's contract standards, if there were a mistake in the evaluation letter and nobody objected to it or said anything about it, that the failure

[00:06:16] Speaker 01:
under the blue and gold case, to raise it at the time would foreclose raising it later as an objection to the award.

[00:06:25] Speaker 01:
So let's assume that.

[00:06:26] Speaker 01:
But it seems to me that we have here a somewhat different situation where the government has told one of the bidders that it made a mistake in the evaluation notice with respect to research and development costs, but it didn't tell another bidder, that is Northrop, the same thing.

[00:06:47] Speaker 01:
And that seems to me potentially quite different from the usual blue and gold situation, and particularly in light of the FAR provision about treating everybody equally.

[00:06:57] Speaker 03:
Your Honor, I would submit that there is no reason to create a different rule just because the agency didn't correct the mistake.

[00:07:04] Speaker 03:
Northrop claims that it was deterred from relying on IR&D.

[00:07:07] Speaker 03:
Because it did correct the mistake.

[00:07:08] Speaker 03:
Well, but it didn't correct the mistake with Northrop.

[00:07:11] Speaker 03:
Right.

[00:07:11] Speaker 03:
And Northrop claims that it was deterred from using IR&D reliance

[00:07:16] Speaker 03:
because of this statement in EN.

[00:07:17] Speaker 03:
That was the problem.

[00:07:19] Speaker 03:
There wasn't a new or different problem that arose because the agency didn't correct the error.

[00:07:24] Speaker 03:
In fact, in blue and gold and Statistica, the error never gets corrected before the award is made, but the ability to bring the protest case is waived nevertheless because the obligation... Why isn't there a legitimate concern under this FAR provision about equal treatment, about

[00:07:40] Speaker 01:
telling one bidder that they made a mistake and not telling another bidder that they made a mistake.

[00:07:47] Speaker 03:
Your Honor, I think that the FAR provision that you're referring to is one of a series of things that the government has to take into consideration as it decides how to shape its discussions going forward.

[00:07:58] Speaker 03:
In this case, we really see why that decision, that discretionary judgment, shouldn't be the basis for applying a different rule from Statistica.

[00:08:07] Speaker 03:
The government here knew about the Northrop pricing strategy.

[00:08:10] Speaker 03:
It's had communications with Northrop about it.

[00:08:13] Speaker 03:
And based on that dialogue, it understood what Northrop was doing.

[00:08:17] Speaker 03:
It understood Northrop's technical approach.

[00:08:19] Speaker 03:
This was the issue that we were talking about a moment before in the closed session.

[00:08:23] Speaker 03:
And I refer the court to pages 58 and 59 of our opening brief, as well as page 19 of our reply brief.

[00:08:31] Speaker 03:
told the government something, and it had to make a decision about balancing the factors that are in the FAR about how to structure that discussion, including what it would do in terms of revealing information about another competitor's technical and pricing information.

[00:08:46] Speaker 03:
The government's decision was, we don't want to revisit IRND at this point because of what do we know about Northrop's approach?

[00:08:54] Speaker 03:
They told people something that was wrong.

[00:08:56] Speaker 01:
And they told one bidder,

[00:08:59] Speaker 01:
that they made a mistake and they didn't tell another bitter Northrop about the mistake.

[00:09:06] Speaker 03:
What they did was apply the RFP language which was we're going to apply IRND pursuant to the FAR.

[00:09:13] Speaker 03:
When Northrop was confronted with a statement that said we're not going to follow the FAR, Northrop said nothing.

[00:09:18] Speaker 03:
The agency then had to decide whether or not in its discussions it was going to revisit the IRND question with Northrop and concluded that it should have, shouldn't.

[00:09:26] Speaker 03:
We can debate the agency's judgment about that.

[00:09:29] Speaker 03:
about whether or not it might have done something different.

[00:09:32] Speaker 03:
The question is, faced with the obligation to raise that ambiguity, does Northrop's failure preclude its ability to bring that protest, not withstanding the subsequent conduct by the agency?

[00:09:43] Speaker 03:
We submit that that bright line rule is already established by this court, produces efficiency in the world of procurement, and ought to be applied here.

[00:09:52] Speaker 01:
Let me come back to the question that Judge Toronto asked at the beginning.

[00:09:58] Speaker 01:
Well, let's narrow it down to the question of prejudice, because you argue that there needed to be a showing of prejudice in order to re-bid.

[00:10:06] Speaker 01:
I'm not sure I understand why that's the case, because if the government thinks it made a mistake and violated the FAR in treating people unequally, why does it have to find prejudice to re-bid the contract?

[00:10:18] Speaker 03:
Your Honor, this Court has made clear that disrupting a procurement decision like this requires not only a mistake,

[00:10:26] Speaker 03:
but some prejudice, some impact that makes it worthwhile.

[00:10:29] Speaker 01:
Well, to have a court order rebid, yes.

[00:10:31] Speaker 03:
Well, I would submit, Your Honor, that even when the government is going to completely blow up a procurement, to do it when there hasn't been any consequence would be an arbitrary and capricious action.

[00:10:41] Speaker 01:
Suppose the GAO had never been involved here.

[00:10:43] Speaker 01:
The government discovered its own mistake after the award, and it said, gee, we think we violated the FAR by not telling Northrop that we've given erroneous information in the evaluation, and we think

[00:10:59] Speaker 01:
we should rebid.

[00:11:00] Speaker 01:
And let's assume in this hypothetical that that's correct, that they did violate the FAR.

[00:11:06] Speaker 01:
Do they really have to find prejudice in order to order a rebid under those circumstances?

[00:11:10] Speaker 03:
Your Honor, I think your question assumes prejudice.

[00:11:13] Speaker 03:
If they felt like this communication had not had any impact, then I don't know why it would be rational for them to take a dramatic step like rebidding the contract.

[00:11:21] Speaker 03:
If it had a consequence, then they would take that step.

[00:11:25] Speaker 03:
But in this case, what we have is a situation not where the agency thought that it had done anything wrong.

[00:11:30] Speaker 03:
We have a situation where the GAO told them, go back and fix this procurement because we decide that you did something wrong.

[00:11:37] Speaker 03:
The government never found that there was any prejudice, and GAO never found any prejudice to validate a statement that says, we're going to find that this protest should be sustained.

[00:11:46] Speaker 01:
Try to answer my hypothetical.

[00:11:48] Speaker 01:
My hypothetical, could the government

[00:11:50] Speaker 01:
legitimately re-bid the contract because it violated the FAR without having made a finding of prejudice?

[00:11:58] Speaker 03:
I think if the government were to re-bid the entire contract after the proposals had gone in and then evaluated and an award made and the prices revealed in the kind of situation we're talking about and then decided that, well, we're going to scrub that and start over, even though the mistake that they identified had no consequential impact, that might well be an arbitrary and capricious action.

[00:12:19] Speaker 03:
The idea that it had no impact is my point.

[00:12:21] Speaker 03:
And the court has said minimum errors in a procurement don't justify a remedy.

[00:12:26] Speaker 03:
I don't know that that changes just because the agency takes, implements the remedy on its own rather than being forced to do so.

[00:12:32] Speaker 06:
Right.

[00:12:32] Speaker 06:
But I mean, isn't there this question of impact and no impact is not either or there is a range of

[00:12:43] Speaker 06:
probabilities or possibilities of impact and the prejudice standard that would apply in a protest challenge to sticking with the award.

[00:12:54] Speaker 06:
Why wouldn't that be higher than any standard that would make the government's voluntary decision to rebid?

[00:13:04] Speaker 06:
My hypothesis here, rational.

[00:13:07] Speaker 06:
We can't be sure that there was no impact.

[00:13:10] Speaker 06:
There might well have been, maybe not enough that we could be dinged if they sued us, but enough that it's reasonable for us to say, let's redo this.

[00:13:21] Speaker 03:
Your honor, I'm prepared to... hypothetically, there may come a point where the agency has made what this court and others might view as a rational judgment call based on its determination of what would be the appropriate thing to do.

[00:13:36] Speaker 03:
And I'm not going to debate that.

[00:13:38] Speaker 03:
Frankly, I think that's a possibility.

[00:13:41] Speaker 03:
In this particular case, we don't have any of that.

[00:13:44] Speaker 03:
We don't have any statement by the agency finding that there was any content that it considered there to be any content.

[00:13:50] Speaker 06:
That seems to me to go back to the point that you've made several times about focusing just on what recorded determination

[00:14:03] Speaker 06:
before the GAO or right after the GAO got into this, as opposed to what the record would support that they are now asserting in this litigation.

[00:14:18] Speaker 06:
And that feels to me like a separate matter because of the timing here.

[00:14:24] Speaker 03:
Actually, I don't think there's a separate matter because the same

[00:14:27] Speaker 03:
prejudice record that we've been talking about in terms of what was articulated below and what's been articulated, whether at GAO or the Court of Federal Claims, the record doesn't support any prejudice finding.

[00:14:39] Speaker 03:
And we've reached that argument, Your Honor.

[00:14:41] Speaker 03:
I have a little less than two minutes left in my entire time.

[00:14:44] Speaker 03:
But I would simply say that we feel like Raytheon, in this case, acted in the appropriate way by raising this question in a timely manner when that ambiguity was presented.

[00:14:55] Speaker 03:
Northrop did not.

[00:14:56] Speaker 03:
It is fundamentally unfair to have an outcome where Raytheon, who did the right thing, is penalized and Northrop, who didn't live up to its obligation, did the wrong thing.

[00:15:05] Speaker 06:
Can I ask you a question before you sit down?

[00:15:08] Speaker 06:
We've talked really only about the first of the two identified grounds for not sticking with the award.

[00:15:18] Speaker 06:
If the first grant, the one that we've talked about, if the government

[00:15:24] Speaker 06:
decision to re-bid is upheld.

[00:15:28] Speaker 06:
Is the second issue still, is it a live issue as a technical mootness matter?

[00:15:34] Speaker 06:
Is it something that we still need to decide?

[00:15:36] Speaker 06:
Or could it be that if the government is going to go through our re-bidding, they certainly can reasonably say, we're going to re-evaluate this one thing that we didn't evaluate quite enough the first time.

[00:15:52] Speaker 03:
Your Honor, we believe it remains a live issue because without a judge's direction from this court otherwise, the agency is going to be compelled to make a second award decision.

[00:16:01] Speaker 03:
We don't think that award decision was necessary because we don't think either of the two grounds that GAO identified provided a rational basis for an award decision.

[00:16:09] Speaker 01:
Yeah, but I think the hypothetical is that you lose on the first issue.

[00:16:13] Speaker 01:
And we hold that the government was correct in rebidding this because of the error and disparate treatment

[00:16:22] Speaker 01:
With respect to research and development costs, I think the question is if hypothetically, I know you don't like the hypothetical, but hypothetically if that's what we decide, why do we need to reach the second issue?

[00:16:34] Speaker 03:
Your Honor, the question really is whether or not the agency was right or wrong.

[00:16:38] Speaker 03:
I think he reached the issue to decide whether or not the agency's award decision is going to be based on its prior action or its future action.

[00:16:46] Speaker 03:
It may be that at this point the agency has completed that part of the corrective action.

[00:16:51] Speaker 03:
If the corrective action goes forward on one issue, I'm not sure that it's going to matter a whole lot whether it goes on on the second one.

[00:16:58] Speaker 01:
Could I ask you on the second issue, one of the questions here is whether the requirement of substantiation required testing, right?

[00:17:06] Speaker 01:
Yes.

[00:17:07] Speaker 01:
And do you understand that that's the issue or does it go beyond that?

[00:17:13] Speaker 03:
Your Honor, we think that the only issue is what's in the, what the solicitation required.

[00:17:19] Speaker 01:
Right, but is that limited to the question of whether testing is required or does it, or for example, is there a question as to whether the evaluators looked at the revised proposal and sufficiently reached an opinion about the fact that it really didn't change much?

[00:17:37] Speaker 03:
Your Honor, based on the review of the court below, we don't think that there remains an issue about whether the evaluation was reasonable or correct in terms of whether or not they knew the information about the design change or whether or not they came to a reasonable judgment that the design change was still left the system at a TRL 6 level.

[00:17:53] Speaker 03:
So it's a testing issue.

[00:17:54] Speaker 03:
It's a question of testing or what other substantiation is required.

[00:17:58] Speaker 01:
Our view of that... When you go on to that second thing, I'm not sure what you're saying.

[00:18:04] Speaker 01:
The question about the substantiation requires testing, but I don't understand the second part of that.

[00:18:10] Speaker 03:
The only thing I did was take that substantiation and try to find it as broadly as you want.

[00:18:15] Speaker 03:
There's nothing in the solicitation that says what you have to present as substantiation, testing or anything else.

[00:18:23] Speaker 03:
But nothing was presented, right?

[00:18:26] Speaker 03:
What was presented was the testing and substantiation that had been accomplished in the prior procurement phase.

[00:18:33] Speaker 03:
Right.

[00:18:33] Speaker 03:
was that substantiation enough?

[00:18:37] Speaker 03:
In the view of the evaluators, it was.

[00:18:40] Speaker 03:
And the solicitation says, you give us the substantiation, Mr. Offerer, that you think is appropriate.

[00:18:46] Speaker 03:
And then the RFP turns to the evaluators and says, you decide if it's enough.

[00:18:50] Speaker 03:
Here Raytheon relied on the prior testing and analysis and gave that to the evaluators as the basis for the

[00:18:58] Speaker 03:
to show the substantiation, the evaluators per the RFP then looked at that and said, we think that's enough.

[00:19:04] Speaker 03:
There was a reasonable approach and a reasonable finding based on a reasonable interpretation of the solicitation.

[00:19:10] Speaker 03:
There wasn't any basis for a corrective action.

[00:19:12] Speaker 07:
You're saying that at that stage the issue really is at what point do we defer to the evaluator?

[00:19:20] Speaker 03:
Yes, Your Honor, because the solicitation says the substantiation comes in, whatever it's going to be.

[00:19:25] Speaker 03:
It doesn't define what's required.

[00:19:27] Speaker 03:
the role of deciding whether it was enough or not is left by the solicitation to the evaluators.

[00:19:32] Speaker 07:
Okay.

[00:19:33] Speaker 07:
So let's hear from the other side.

[00:19:34] Speaker 07:
We'll save you rebuttal time.

[00:19:35] Speaker 03:
Thank you.

[00:19:36] Speaker 07:
Okay.

[00:19:38] Speaker 01:
Thank you, your honor.

[00:19:46] Speaker 01:
May it please the court?

[00:19:48] Speaker 01:
Just on that last point, is the government's position that substantiation requires testing?

[00:19:53] Speaker 04:
Yes, because it

[00:19:55] Speaker 04:
You can't simply take the word substantiation as Raytheon does out of context.

[00:20:00] Speaker 04:
And much as the solicitation provides, the government will evaluate.

[00:20:04] Speaker 04:
The next question, well, evaluate is ambiguous.

[00:20:07] Speaker 04:
Does that mean the government has complete discretion of what it will evaluate?

[00:20:10] Speaker 04:
No.

[00:20:11] Speaker 04:
You read further and you see that it will evaluate the offers of proposed design solutions and determine the self-factors are met based upon, and that goes through a list.

[00:20:18] Speaker 04:
Similarly, substantiation is followed by substantiation of at least a TRL level of

[00:20:24] Speaker 04:
for all critical technology elements for the design solution that have changed.

[00:20:29] Speaker 04:
So it's incorporating the notion that a critical technology element has changed.

[00:20:34] Speaker 04:
It's also incorporating TRL 6.

[00:20:36] Speaker 04:
And TRL 6, as defined by the Department of Defense's guidance, requires testing.

[00:20:43] Speaker 04:
It requires that there will be operation that's shown to operate in the relevant environment.

[00:20:49] Speaker 04:
So when you define that critical technology element, as it does in the solicitation,

[00:20:55] Speaker 04:
as a module, if the government is not requiring, ultimately, substantiation of testing of that module, then you have a difficulty.

[00:21:04] Speaker 04:
I mean, one of the problems we have here is the government's focus was wrong, ultimately.

[00:21:12] Speaker 04:
It was looking about how things relate to other parts without focusing upon requirements and solicitations.

[00:21:19] Speaker 04:
It would be a rational focus, and we've contended this below at the trial court, and we still maintain that absent the language of solicitation, absent section M241, the government's action would have been rational.

[00:21:33] Speaker 04:
But unfortunately, there were requirements that were set in solicitation, and we needed to make certain that our evaluation complied.

[00:21:39] Speaker 01:
What is M241?

[00:21:41] Speaker 04:
What is that?

[00:21:42] Speaker 01:
What is M241?

[00:21:43] Speaker 04:
M241 is the section that talks about substantiation of at least

[00:21:48] Speaker 04:
The government evaluating substantiation of the least technology readiness level of six for all critical technology elements for the defined solution of the change since the pre-EMD preliminary design.

[00:21:59] Speaker 01:
I understand.

[00:21:59] Speaker 01:
But I thought a minute ago you made some reference to another document other than the solicitation which talked about testing.

[00:22:07] Speaker 01:
What document is that?

[00:22:09] Speaker 01:
Where do we find that in the record?

[00:22:11] Speaker 04:
That document is, I believe it said, A279 to 280 of the Joint Appendix.

[00:22:18] Speaker 04:
It is what is the DOD TRA guidance.

[00:22:24] Speaker 04:
And that is expressly incorporated into solicitation.

[00:22:27] Speaker 04:
It's referenced in section L5A13, which is found at A358 of the solicitation.

[00:22:37] Speaker 04:
And that provides and defines what TRL6 is.

[00:22:41] Speaker 04:
Because TRL6 does have a specific name.

[00:22:43] Speaker 01:
Where's the reference to testing here?

[00:22:46] Speaker 04:
It specifically talks about the required representative model or prototype be tested in the relevant environment.

[00:22:53] Speaker 01:
Where do I find it on the page?

[00:22:57] Speaker 04:
It's on TRL 6.

[00:22:58] Speaker 04:
279 and number 6.

[00:23:01] Speaker 04:
There's a chart and there's a TRL 6, if I believe correctly.

[00:23:12] Speaker 04:
The chart goes down to various levels of TRL.

[00:23:16] Speaker 04:
And one other thing to note about the TRL level is it's a progressive step up.

[00:23:20] Speaker 04:
So in other words, at TRL 6, you've met TRL 4.

[00:23:23] Speaker 04:
You've met TRL 5.

[00:23:25] Speaker 04:
You're now at TRL 6.

[00:23:26] Speaker 04:
And to be TRL 7, you will have met TRL 6.

[00:23:29] Speaker 01:
What is meant by, when it says examples, include?

[00:23:33] Speaker 04:
Well, it provides representative models.

[00:23:37] Speaker 04:
I'm sorry, what are you focused on?

[00:23:40] Speaker 01:
The next to the last line on 279.

[00:23:42] Speaker 01:
in the description column.

[00:23:46] Speaker 04:
Examples of sort of testing include testing prototype and we do actually have in this case we have demo C in which prior to having any changes Northrop Grumman did test all the parties tested a prototype of what they were going to offer to the government.

[00:24:05] Speaker 04:
So we do actually have that and then of course we have a change that occurs and that change

[00:24:11] Speaker 04:
triggers the requirements for further testing data in this case.

[00:24:18] Speaker 04:
Turning with regards to the unequal discussions point, as the trial court found, as a matter of fact, the agency engaged in misleading and unequal discussions.

[00:24:36] Speaker 04:
The issue isn't whether, at the end of the day,

[00:24:40] Speaker 04:
Northrop had an obligation to raise a particular issue.

[00:24:43] Speaker 04:
It's about unequal discussions.

[00:24:44] Speaker 04:
This isn't a case about waiver.

[00:24:47] Speaker 04:
If the agency had applied the same rules to everyone, had not engaged in unequal treatment, there would be an argument that it was too late for Northrop County to complain about things.

[00:25:00] Speaker 04:
If we had stuck with the evaluation plan, if no one was allowed to include IR&D within their proposals,

[00:25:08] Speaker 04:
then there would be no problem here.

[00:25:10] Speaker 04:
It would be too late for North to come in, but that's not the case here.

[00:25:13] Speaker 06:
Can I ask you, I guess, a version of the question that I began with on the other side?

[00:25:21] Speaker 06:
Is the question before us, which is to say, is the question that was before the Court of Federal Claims, the same question about whether there were unequal discussions or there was prejudice

[00:25:36] Speaker 06:
in exactly the same way it would be if you were defending the original award and it was the protest against the award to Raytheon?

[00:25:46] Speaker 04:
I mean, it's been our position all along that ultimately Raytheon has the burden of demonstrating his case.

[00:25:52] Speaker 04:
And the court should be looking at whether the agency's corrective action was rational.

[00:26:00] Speaker 01:
Does that depend on our including that there was an error?

[00:26:05] Speaker 04:
doesn't necessarily require an error because it's rationality.

[00:26:09] Speaker 04:
Rationality can be different from an error.

[00:26:11] Speaker 04:
In this case, the agency does have an error and obviously it is hard to imagine a case where there is an error and it would not be rational for the government to fix it.

[00:26:23] Speaker 06:
While Raytheon tends to... That's not hard to imagine under some imaginary or under some view of prejudice.

[00:26:33] Speaker 06:
where one says it was committed an error and it is absolutely clear had no effect on the bidding process.

[00:26:41] Speaker 06:
That might in fact be irrational to say we're going to do it over again.

[00:26:44] Speaker 04:
Well, the government also has an interest in the integrity of the procurement process.

[00:26:49] Speaker 04:
The government interest is different from private parties entering into contracts.

[00:26:54] Speaker 04:
I mean, if we make an error and we view that error as significant, yes,

[00:26:59] Speaker 06:
you know, obviously it would be... But even if it's not... Let me... This is limited time, so... So, do I have to decide that the government is now correct that there was an error, or is it enough for me to decide that it was a rational interpretation of the set of regulations and of the sequence of events that there was an error?

[00:27:23] Speaker 06:
Do I have to decide that there was perhaps

[00:27:26] Speaker 06:
prejudice or that it is a reasonable thing for the government to do in these circumstances to say there was enough of a chance of a difference in outcome that you can go ahead, even if, if the government was saying the opposite, the government would win in court.

[00:27:41] Speaker 04:
No, the government only needs to have a rational basis to take its action, to take corrective action in a case like this.

[00:27:46] Speaker 04:
So it is enough that the government had a rational basis to conclude

[00:27:50] Speaker 04:
that there was a need for corrective action here.

[00:27:52] Speaker 01:
Well, how would it be a rational basis if there wasn't an error?

[00:27:54] Speaker 01:
Put aside the question of prejudice.

[00:27:57] Speaker 01:
I mean, if the government says this was an error and we say, no, it wasn't an error, how can the government's action be rational if it's based on that mistake of law?

[00:28:09] Speaker 04:
If it's based upon a mistake.

[00:28:10] Speaker 04:
Well, that's a fair point, Your Honor.

[00:28:14] Speaker 04:
But at the end of the day, it is still whether the agency rationally determined there was an error

[00:28:20] Speaker 04:
not whether or not there was necessarily an error.

[00:28:23] Speaker 04:
So you can go through a rational process and reach the wrong conclusion.

[00:28:26] Speaker 04:
You don't want to reach that process.

[00:28:28] Speaker 04:
It is much harder to justify the rationality of your action when you're wrong.

[00:28:32] Speaker 04:
But you can still be rational.

[00:28:34] Speaker 01:
I find that a little troubling in a way because this whole procurement system is based on competitive bids and free and open competition.

[00:28:44] Speaker 01:
If somebody secures an award,

[00:28:47] Speaker 01:
for the government to say, well, we're going to re-bid it because we might have made an error, seems to me very troublesome.

[00:28:54] Speaker 04:
Well, because the government has reasonably concluded that it has made an error, not that we might have made an error.

[00:29:00] Speaker 07:
I mean, it's... That's not reasonable.

[00:29:04] Speaker 07:
If it's not reasonable to rationalize ignorance of the law, very hard to say there's a rational basis for not understanding the law.

[00:29:14] Speaker 07:
Don't you have to go farther in order to support

[00:29:18] Speaker 07:
A discretionary act that's at the edge of supporting.

[00:29:24] Speaker 04:
Well, and again, your honor, I don't feel this is anywhere near the edge, but it is harder to support something.

[00:29:31] Speaker 04:
The further you get away from being correct, the harder it is going to be to justify the agency's action.

[00:29:38] Speaker 04:
Obviously, if the agency is correct, it is very simple to say that the agency acted rationally because we're right.

[00:29:45] Speaker 04:
When an agency is right, it is hard to say the agency was irrational.

[00:29:48] Speaker 04:
may be not impossible, but ultimately very difficult to say the agency is acting rationally.

[00:29:54] Speaker 04:
On the other hand, when the agency is actually incorrect, it is difficult.

[00:29:59] Speaker 04:
I have to acknowledge it's very difficult to say that the agency ultimately is acting rationally.

[00:30:05] Speaker 04:
But that would all depend on facts of the case ultimately.

[00:30:08] Speaker 01:
I don't think that this case is anywhere near as far afield to that.

[00:30:15] Speaker 01:
showing that there might have been an error or was reasonable to think there might have been an error seems to me that opens up all sorts of opportunities for manipulation of the bidding process by the government saying, well, we don't like what happened so we want to, even though we ordinarily be stuck with it, we want to reopen this and here let's see if we can find some possible error in the procurement process, something that would be reasonably seen as a possible error so that we can reopen the thing.

[00:30:44] Speaker 04:
I suppose if you're starting with the presumption of good faith, I don't find it troubling because I don't believe the government would do that.

[00:30:54] Speaker 04:
I believe there are restrictions on the government's ability to actually simply reopen a competition similar to those that would be to the government's restrictions to terminate contracts with the convenience of the government.

[00:31:05] Speaker 04:
You can't terminate in bad faith.

[00:31:06] Speaker 04:
You can't terminate for the convenience of the government simply to engage in a

[00:31:13] Speaker 04:
because you want to find a better price.

[00:31:15] Speaker 04:
For example, the government found that Raytheon had a price, but we felt we could get a lower price from Raytheon if we reopen the competition.

[00:31:26] Speaker 04:
We could not terminate them for convenience, and we certainly would not be considered rational agency action to be able to do that.

[00:31:32] Speaker 04:
I think that if we're going with the presumption of good faith and there's no evidence of bad faith there, I think that we're fine.

[00:31:39] Speaker 04:
It concerns me less beginning with presumption of good faith and starting from that understanding.

[00:31:46] Speaker 04:
I would agree that the agency is actually deliberately taking action.

[00:31:50] Speaker 04:
If there's evidence in the record that the agency is effectively manipulating the process, then that would not be justifiable.

[00:31:57] Speaker 07:
Any more questions?

[00:32:00] Speaker 06:
Can I ask you the same question that I asked at the end of Mr. Colley's argument?

[00:32:05] Speaker 06:
Suppose that you are right

[00:32:08] Speaker 06:
about the disparate information issue so that the rebidding is permissible.

[00:32:16] Speaker 06:
Do we need to decide the second question, the one about whether there was a deficiency in substantiation or the resulting evaluation?

[00:32:29] Speaker 04:
I don't believe so given a number of factors that I cannot discuss at this time in open court.

[00:32:38] Speaker 04:
I'd be happy to address that in the subsequent filing if the court would like.

[00:32:42] Speaker 04:
But I do believe the answer to that question depends on getting into details of the current procurement that I cannot get into at this time.

[00:32:50] Speaker 01:
But without the details, is the answer yes or no that we have to reach the second question?

[00:32:56] Speaker 04:
The answer would be no, you don't need to reach the second question.

[00:32:59] Speaker 04:
But I would have to get into further detail about that to explain.

[00:33:04] Speaker 04:
And I respectfully apologize for that, Your Honor.

[00:33:08] Speaker 07:
More questions for the government?

[00:33:10] Speaker 07:
More questions for the government?

[00:33:12] Speaker 07:
Okay.

[00:33:12] Speaker 07:
Thank you, Mr. Meagher.

[00:33:14] Speaker 07:
Ms.

[00:33:14] Speaker 07:
Madsen, you've asked for one minute.

[00:33:17] Speaker 07:
Are you going to talk fast?

[00:33:20] Speaker 05:
Yes, Your Honor.

[00:33:21] Speaker 05:
I'll try to talk fast.

[00:33:22] Speaker 05:
Thank you for the minute.

[00:33:24] Speaker 05:
Mr. Colley suggested with respect to the subject of substantiation that Your Honor has asked him about, that it was permissible under the RFP for

[00:33:35] Speaker 05:
the evaluators to rely on data that predated the change that Raytheon proposed in its proposal.

[00:33:43] Speaker 05:
And we respectfully submit that that answer is wrong and that issue is directly answered by the RFP in section L.5.3.1.3.

[00:33:53] Speaker 05:
What page in the appendix?

[00:33:58] Speaker 05:
In the page A358 of the J&A, of the Joint Appendix, which

[00:34:04] Speaker 05:
is specific that all... I'm sorry, where on that page am I looking at?

[00:34:11] Speaker 05:
It's section L.5.3.1.3.

[00:34:13] Speaker 05:
That's right at the bottom?

[00:34:17] Speaker 05:
Yes.

[00:34:17] Speaker 05:
Okay.

[00:34:18] Speaker 05:
And that provision says that all CTEs that changed had to be identified and then it required that the offeror provide the current

[00:34:30] Speaker 05:
a technology readiness level of the CTE in its proposal, the source of the rating, and full substantiation and supporting data of the TRL of each changed CTE.

[00:34:42] Speaker 06:
Let me just try to test this a little bit.

[00:34:45] Speaker 06:
It might be a ridiculous hypothetical, but suppose in the first phase they said this thing is painted red, and then this thing is painted red, and then the next, they say we've made a change, it's painted green now, and they say,

[00:34:59] Speaker 06:
This doesn't change anything.

[00:35:01] Speaker 06:
And the evaluator said, right, this doesn't change anything.

[00:35:04] Speaker 06:
So their substantiation was look at what we said before.

[00:35:10] Speaker 06:
We addressed everything that mattered before.

[00:35:13] Speaker 06:
No further testing is necessary.

[00:35:16] Speaker 05:
Your honor, our position is that, and that may be somewhat hypothetical, but that the RFP, the agency decided for its own reasons.

[00:35:26] Speaker 05:
They deprived the evaluators of that discretion.

[00:35:29] Speaker 05:
It doesn't say de minimis.

[00:35:30] Speaker 05:
It doesn't say minor.

[00:35:32] Speaker 05:
It doesn't say immaterial.

[00:35:34] Speaker 05:
It says all changes have to be supported with substantiation to a TRL 6 level.

[00:35:40] Speaker 06:
But why can't the experts say the earlier substantiation is substantiation for this when the change makes no difference?

[00:35:54] Speaker 06:
They might be right or wrong about that, but that would be an argument about the specifics of whether they're right or wrong, but not about the idea that substantiation requires new testing always.

[00:36:12] Speaker 05:
Again, I think it's our view, and I think this is the low court below agreed, or the GAO agreed, that for whatever reasons the agency had, which we believe are to support

[00:36:25] Speaker 05:
without question, the technical maturity of the TR module, which is the basic building block of the radar, that the offeror had to provide the current TRL and full substantiation and supporting data of each change.

[00:36:46] Speaker 05:
It doesn't say minor.

[00:36:48] Speaker 05:
It doesn't say de minimis.

[00:36:50] Speaker 05:
It says each.

[00:36:51] Speaker 05:
And I can explain what I think the rationale is.

[00:36:55] Speaker 05:
If you're interested, this program has been through two levels of technology development.

[00:37:01] Speaker 05:
The module here, the transmit and receive module, not its pieces, the module as an integrated circuit, is the basic building block for this radar.

[00:37:11] Speaker 05:
It uses new technology that is higher power, and the little device we're talking about here, the circulator, controls the

[00:37:21] Speaker 05:
It's outflow of power and the receipt of the signal.

[00:37:24] Speaker 05:
If it doesn't function properly, it's a microwave device.

[00:37:28] Speaker 05:
If it doesn't function properly, the radar can't do its job of detecting small things at long distances.

[00:37:34] Speaker 05:
So the agency made the decision that it would constrain changes.

[00:37:40] Speaker 05:
They thought the development had been demonstrated at demonstration C, that the design had been validated at preliminary design review, and the solicitation is unambiguous.

[00:37:51] Speaker 05:
You have to validate the current TRL with full substantiation for each change.

[00:38:00] Speaker 05:
I know government council cited the Section M provision as well, 2.4.1.3, which is the JA 396, that substantiation is required for all CTEs have changed.

[00:38:14] Speaker 05:
The solicitation in two places says all.

[00:38:17] Speaker 05:
It says in Section L, the current TRL.

[00:38:21] Speaker 05:
And we know that that TRL 6 requires testing.

[00:38:24] Speaker 05:
So it doesn't leave room for the evaluators to make discretionary decisions about that's good enough.

[00:38:32] Speaker 01:
Let me ask you one last question before you sit down.

[00:38:35] Speaker 01:
Do you agree that the government can order a rebid without finding an error?

[00:38:40] Speaker 01:
I'm sorry, Your Honor, I didn't... Do you agree with the government that the government can order a rebid of the contract even if it doesn't find an error?

[00:38:50] Speaker 01:
in the award just because it rationally thinks there could have been an error.

[00:39:05] Speaker 05:
Are you talking about a legal error or a factual error?

[00:39:08] Speaker 01:
An error that's a violation of the solicitation or a legal error, something that would invalidate the award.

[00:39:17] Speaker 05:
Your Honor, I think the way that

[00:39:19] Speaker 05:
the rational test is applied if the government has a reasonable cause to believe that its procurement has been compromised, that its competition has been compromised, and that it did not get the best value that it intended to get, that it has the discretion to take corrective action even if it has not found an exact legal error.

[00:39:43] Speaker 01:
Is there any authority for that?

[00:39:46] Speaker 05:
I believe that there is, Your Honor.

[00:39:49] Speaker 05:
I mean, could I cite it to you off the top of my head at the moment?

[00:39:53] Speaker 01:
No.

[00:39:53] Speaker 01:
You have an opportunity to supplement.

[00:39:55] Speaker 01:
I understand.

[00:39:56] Speaker 01:
I'm happy to do that.

[00:39:58] Speaker 07:
Okay.

[00:39:59] Speaker 07:
Okay, any more questions for Ms.

[00:40:01] Speaker 07:
Madsen?

[00:40:02] Speaker 07:
Thank you.

[00:40:03] Speaker 07:
Thank you.

[00:40:05] Speaker 07:
Okay, Mr. Schauber.

[00:40:13] Speaker 01:
Thank you, Your Honor.

[00:40:15] Speaker 01:
Did you get the same answer on the error point?

[00:40:17] Speaker 01:
Can they rebid without finding an error?

[00:40:20] Speaker 01:
I think the answer is yes.

[00:40:21] Speaker 02:
They have wide but not infinite latitude.

[00:40:25] Speaker 02:
And so that does give courts like this a standard by which to measure that.

[00:40:32] Speaker 02:
In this instance, the record was sufficient.

[00:40:37] Speaker 02:
And in response to your question,

[00:40:40] Speaker 02:
What would happen had there been no GAO protest?

[00:40:43] Speaker 02:
How do you analyze that situation?

[00:40:45] Speaker 02:
In this instance, the record as it developed was sufficiently questionable that it seems perfectly reasonable for the agency to say something so fundamental as different instructions about a critical issue leads us to feel that it's a rational decision to institute corrective action.

[00:41:06] Speaker 02:
And that seems perfectly within the latitude that the agency would have in a circumstance like this.

[00:41:13] Speaker 01:
The facts in the case... Has this sort of thing ever happened before that the government says, well, we don't think it was an error, but we think that it would be a good thing to repent the contract?

[00:41:26] Speaker 02:
Well, the short answer is I don't know, but I don't think the government is saying there's no error.

[00:41:33] Speaker 02:
I think the government here acknowledged

[00:41:36] Speaker 02:
that there were material unequal treatment of bidders and as a consequence.

[00:41:42] Speaker 01:
They are arguing that there was an error, but they're also saying even if it wasn't an error, we still have discretion to re-bid.

[00:41:48] Speaker 02:
Even if there's no particular finding that there was all of the requirements, had there been a GAO decision that there was an error,

[00:41:59] Speaker 02:
That's not the Air Force's task and it's not their expertise.

[00:42:03] Speaker 02:
I think they look at the record and they say, there's enough here that we need to redo this for not only in this procurement, but there's a procurement integrity writ large issue here about a significant disparity in how the offers were treated.

[00:42:21] Speaker 02:
And under those circumstances, it's hard to argue that it was not a rational decision to say, we're going to step back and make this right.

[00:42:31] Speaker 02:
The issue that we're talking about is an instruction to the offers about evaluation criteria and price realism.

[00:42:44] Speaker 02:
And it was so fundamental to this procurement

[00:42:48] Speaker 02:
that when you look at the results, and this is something that we would submit in our post-argument paper, when you look at the results, it's clear that the people who got one instruction acted one way and the people who got a different instruction acted a different way, and that differential is dispositive.

[00:43:08] Speaker 02:
And under those circumstances, whether there's a particular finding of all of the necessity that there was

[00:43:15] Speaker 02:
an error, a legal error.

[00:43:18] Speaker 01:
Let's put aside the question of credit.

[00:43:19] Speaker 01:
I'm just saying, was what they did in violation of the FAR?

[00:43:25] Speaker 01:
Absolutely.

[00:43:25] Speaker 01:
And I know your position is yes, but it is.

[00:43:28] Speaker 01:
But suppose we were to conclude, well, no, actually that didn't violate the FAR, but the government could still rebid because it was rational for them to think it was wrong.

[00:43:38] Speaker 02:
But with all due respect, I think you're sort of assuming the answer.

[00:43:43] Speaker 02:
If it wasn't a violation of the FAR,

[00:43:46] Speaker 02:
And it was a minuscule error, an administrative error.

[00:43:51] Speaker 01:
Those are the ends of the spectrum.

[00:43:55] Speaker 01:
It seems to the government that it was unfair, even though it wasn't a violation of the FAR, and therefore we all are regretful.

[00:44:02] Speaker 01:
I'm a little surprised, frankly, that your client would want contracts rebid in the absence of an error.

[00:44:12] Speaker 02:
You're asking me, though, in the spectrum of

[00:44:16] Speaker 02:
a rational basis and an infinite basis that the Air Force has to make a decision to take corrective action.

[00:44:26] Speaker 02:
Yes, there's a spectrum there.

[00:44:28] Speaker 02:
And I think we know when we see it, when we see something that is rationally based, it seems obvious and this seems obvious.

[00:44:40] Speaker 02:
When we see something that is infinite

[00:44:43] Speaker 02:
and all the way at the other end of the spectrum, maybe it will be obvious.

[00:44:48] Speaker 02:
But I don't think there would be a requirement that there be a kind of sort of black and white finding before the Air Force could rationally say, we want to take corrective action here.

[00:45:04] Speaker 02:
My time is limited.

[00:45:09] Speaker 02:
The point I wanted to make

[00:45:12] Speaker 02:
There was no ambiguity and it wasn't really a mistake in the instruction that Northrop received.

[00:45:22] Speaker 02:
It was an evaluation criteria.

[00:45:25] Speaker 02:
The record suggests that at some point later, the Air Force, and this is their words, changed its mind about how the evaluation criteria would be applied, but only one person was not

[00:45:42] Speaker 02:
informed of that change of mind.

[00:45:46] Speaker 02:
And under those circumstances, it seems to me very difficult to say that the corrective action wasn't reasonable.

[00:45:56] Speaker 02:
This isn't a mistake of law.

[00:45:58] Speaker 02:
This is the Air Force saying our evaluation criteria is going to be X. That can be more restrictive than what the law applies.

[00:46:07] Speaker 02:
That can be a particular application of price realism in this particular procurement.

[00:46:14] Speaker 02:
But when Northrop received that instruction, it understood that to be an evaluation criteria.

[00:46:22] Speaker 02:
The fact that that evaluation criteria was 100% consistent with other indications from the same agency.

[00:46:31] Speaker 07:
I don't think it's disputed that it was a mistake of law.

[00:46:36] Speaker 07:
A misunderstanding, not current, the FAR hadn't been updated.

[00:46:41] Speaker 07:
Don't we have to accept a different, more permissive theory that even if it was a mistake of law, it was, if not irrational, it was not unreasonable?

[00:46:58] Speaker 02:
Let me answer that in two ways, Your Honor.

[00:47:01] Speaker 02:
First, whatever the law is.

[00:47:04] Speaker 02:
in this circumstance.

[00:47:05] Speaker 02:
The government, the Air Force, has the ability to impose an evaluation criteria on price realism that is more restrictive than what the law would allow.

[00:47:18] Speaker 02:
And keep in mind, this is an instruction to be sure that that's true.

[00:47:25] Speaker 02:
Well, I would be happy to submit on that issue, Your Honor.

[00:47:30] Speaker 02:
But in this instance,

[00:47:32] Speaker 02:
The Air Force said we're going to evaluate your proposal under this approach.

[00:47:43] Speaker 02:
We feel that it was perfectly acceptable for the Air Force to, with all due respect, have a somewhat more restrictive view.

[00:47:52] Speaker 02:
The Air Force did not say we are making a decision about the allowability ultimately of these kinds of costs.

[00:48:00] Speaker 02:
They're saying in this instance,

[00:48:02] Speaker 02:
our price realism analysis is going to have these criteria.

[00:48:07] Speaker 02:
That statement to Northrop was 100% consistent with the defense contract audit agency's manual about how, in fact, IR&D costs are to be treated.

[00:48:21] Speaker 06:
So I'm sorry, just to locate this in the argument, this is all a way of your saying that the premise of Raytheon, namely that this was a

[00:48:32] Speaker 06:
plainly erroneous legal position, the original Air Force position, and that you are attributed legally, constructively, the knowledge that it was plainly erroneous.

[00:48:48] Speaker 06:
You're saying, no, that's not right.

[00:48:49] Speaker 06:
It was actually a believable position.

[00:48:52] Speaker 02:
Yes.

[00:48:53] Speaker 02:
We're saying not only was it a believable position because the other parts of the

[00:48:59] Speaker 02:
Department of Defense had, in fact, endorsed that position in their own publications.

[00:49:04] Speaker 02:
The issue about the allowability of IRMD and what circumstances it's allowable and how it should be treated is one that is subject to a fair amount of conversation, dispute, nuance, and subtlety.

[00:49:18] Speaker 02:
And you could find, as many lawyers are sitting in this room, different understandings of precisely how it should be treated.

[00:49:25] Speaker 01:
What do you understand our THIA call decision has set?

[00:49:28] Speaker 01:
I thought that was pretty clear that it set a standard for how to treat these research and development costs, which was inconsistent with what the evaluation letter said here.

[00:49:39] Speaker 02:
Well, let me just give you an example, an example about how some lawyers could distinguish that case.

[00:49:49] Speaker 02:
The Thiokol case is a production contract.

[00:49:52] Speaker 02:
This is a development contract.

[00:49:55] Speaker 02:
Do the same rules about independent research and development apply in a production setting as in a development setting?

[00:50:03] Speaker 02:
That, I believe, is a fair question to ask.

[00:50:07] Speaker 02:
But we don't, the issue here was not an argument about what the ATK, Siakho case, means and the different interpretations.

[00:50:16] Speaker 02:
The issue here is the Air Force said, here's what we want you to conform your

[00:50:22] Speaker 02:
proposal to.

[00:50:24] Speaker 02:
And let's assume for a moment, just for the argument's sake, let's assume that the Air Force was wrong when they gave us those instructions.

[00:50:33] Speaker 02:
Once the Air Force said, my golly, we now have spoken to four or five other people and we're changing our mind about how we want these costs to be treated, there was a requirement in the FAR and from the idea of pure fairness to tell all of the

[00:50:52] Speaker 02:
And the fact that one offer was not told is amply played out in the consequences and in the way each of the offers treated those costs in their proposals.

[00:51:05] Speaker 02:
And under those circumstances, whatever you call the argument about the application of the rules of how IRND should be treated, whatever you call that, not to tell one person that you are changing your exact

[00:51:22] Speaker 02:
specific instructions to them for which there's great deal of support in the world seems to me the definition of unequal treatment.

[00:51:31] Speaker 06:
This question might not be one that you can answer but you referred to the extended discussions between offer and the government and there's an argument that in the context of the extended discussions

[00:51:49] Speaker 06:
It might well have been quite reasonable and correct for discussions with your client for the government not to talk to you about the IRD and its changed position about how those kinds of costs might be accounted for under this contract or shared between contracts because it wasn't really relevant to you.

[00:52:18] Speaker 02:
Well, the answer to that question I would like to address in my post-argument submission, because I think when you look at the actions of the other offers, it does amply demonstrate that without that impediment of the Air Force's instruction,

[00:52:41] Speaker 02:
the actions of the other offers are different.

[00:52:47] Speaker 02:
And I think without getting into the details, I think it's quite clear from the record entirely that Northrop would have acted differently and would have analyzed the pricing strategy differently had the Air Force said, oh, by the way, those instructions, we are changing our mind and giving you these instructions.

[00:53:10] Speaker 02:
And we've identified both in our briefing and the recorded claims also found in citing those issues that this is an issue on which Northrop has expanded itself in a number of other procurements.

[00:53:28] Speaker 02:
There were commonality.

[00:53:29] Speaker 02:
with other programs for which Northrop could have found the common IRND funds to apply.

[00:53:38] Speaker 02:
And so in a circumstance where we're told X, I think having done dozens of other procurements in which we've applied all kinds of different applications and bidding strategies based on the instructions and the evaluation criteria that we've received

[00:53:59] Speaker 02:
from our customers, we respond to what's available and what's allowable.

[00:54:05] Speaker 02:
And I don't think there's any doubt that from this record, those instructions had a material effect on our decisions.

[00:54:13] Speaker 02:
And as you can see from the submission that we'll provide on the activities and bidding strategies of the others.

[00:54:22] Speaker 07:
Okay.

[00:54:23] Speaker 07:
Okay.

[00:54:25] Speaker 07:
Thank you, Mr. Schauer.

[00:54:27] Speaker 07:
Okay.

[00:54:28] Speaker 07:
enough time to tell us what we need to know in rebuttal.

[00:54:35] Speaker 03:
Thank you, Your Honor.

[00:54:40] Speaker 03:
Just to start with this last point about the discussions issue, I think it is very clear to understand what Northrop was told in that EN statement.

[00:54:50] Speaker 03:
It was a very specific message that said how

[00:54:53] Speaker 03:
indirect cost or how IRND would be treated whether it was implicit or explicitly required.

[00:54:59] Speaker 03:
The ATK-Thiacol decision is not ambiguous on this point.

[00:55:03] Speaker 03:
The statement in the EN was flatly contrary to that statement.

[00:55:06] Speaker 03:
So what Northrop was presented with was an EN that said, in accordance with the FAR, we will not follow the FAR.

[00:55:14] Speaker 03:
In the same context where the RFP had said, we will follow the FAR with regard to IRND.

[00:55:20] Speaker 03:
I don't think this court should walk away from the rulings of Statistica and Blue and Gold and other cases without taking clear recognition of what that communicated to Northrop Grumman.

[00:55:32] Speaker 03:
It got it in an EN statement.

[00:55:33] Speaker 03:
There was no RFP amendment.

[00:55:36] Speaker 03:
There was no way for Northrop to know that any other offeror had heard this same communication.

[00:55:40] Speaker 03:
It was amazing to have Northrop simply rely on that and say, okay, we will bid in accordance with this

[00:55:46] Speaker 03:
flatly ambiguous statement and go forward on that basis without raising any questions.

[00:55:51] Speaker 03:
The statistical principle is that when an offer sees that kind of ambiguity, the system benefits efficiently from having those kinds of questions raised in a timely way so they can be resolved without complication and not wait until the end of the procurement after everything is all over with.

[00:56:08] Speaker 03:
In this case, Northrop brought its protest anyway.

[00:56:11] Speaker 03:
Northrop did sue.

[00:56:12] Speaker 03:
Northrop did bring a protest.

[00:56:14] Speaker 03:
And it shouldn't have been allowed to bring that argument forward because it had not lived up to its obligation to work the system the way this court has instructed it should be worked.

[00:56:22] Speaker 03:
These kinds of ambiguities are raised at the time and clarified so the system isn't jammed up the way it has been in this case.

[00:56:32] Speaker 01:
The other idea that Northrop- Can you address the question of whether the government has the authority to rebid

[00:56:41] Speaker 01:
without finding an actual error in the first award?

[00:56:48] Speaker 03:
Your Honor, I believe the citation is to 10 USC 2305F.

[00:56:52] Speaker 03:
The head of the agency may determine that the solicitation award does not comply with the requirements of law or regulation.

[00:57:01] Speaker 03:
That's when the agency is allowed to take corrective action.

[00:57:04] Speaker 03:
So no, there needs to be an error.

[00:57:06] Speaker 03:
And in this case, the agency concluded that it had not made an error.

[00:57:10] Speaker 03:
and defended against the charge that it had made an error.

[00:57:13] Speaker 03:
The only question that's before this court is the one that this court identified in Turner.

[00:57:18] Speaker 03:
Did the GAO's direction to the agency supply the agency with a rational basis for taking corrective action?

[00:57:25] Speaker 03:
There has been no agency decision here.

[00:57:28] Speaker 03:
There has been no agency finding that we made a mistake, and we've got to go out and fix it.

[00:57:33] Speaker 03:
The agency's only decision that's in the record is,

[00:57:36] Speaker 03:
We didn't make a mistake.

[00:57:37] Speaker 03:
We're defending this decision that we made before the GAO.

[00:57:41] Speaker 03:
When GAO said, no, we disagree, we're going to sustain these protests, the agency said, on that basis exclusively, that was the finding of the court below, we're going to take corrective action.

[00:57:52] Speaker 03:
The question before this court, as it was before the Court of Federal Claims is, did that GAO statement provide a rational basis for the agency to act?

[00:58:00] Speaker 03:
Not whether or not we can create some other theoretical basis or

[00:58:04] Speaker 03:
Gee, if I was sitting in the agency shoes at the time, or what if the agency thought this, or if certainly the agency might have thought that, there's nothing in the record about any kind of agency assessment along that point.

[00:58:15] Speaker 03:
And it's not for this court to come up with new reasons, any more than it was for the court below, for the agency to have come to a different result.

[00:58:22] Speaker 03:
The question is whether the agency acted on a rational basis.

[00:58:26] Speaker 03:
The only basis they acted on was the GAO decision.

[00:58:29] Speaker 03:
Our position is that the GAO decision was not one that should have provided that basis because Northrop should have raised the question on its own and because there had never been any showing that whatever the problem you might say the agency engaged in through its discussions did not prejudice Northrop.

[00:58:46] Speaker 01:
It is true, isn't it, that the GAO didn't address the question of prejudice?

[00:58:52] Speaker 03:
The GAO made one statement during the outcome prediction that says, we didn't hear Northrop disclaim any

[00:58:58] Speaker 03:
reliance on IRND.

[00:59:00] Speaker 03:
That's not the prejudice standard.

[00:59:02] Speaker 03:
The GAO never articulated any finding of prejudice that aligns with any test of prejudice that has ever been announced in any decision we can find.

[00:59:12] Speaker 03:
GAO did not find that but for the mistake in the discussions, there was a substantial chance that Norfolk might have won the award, could have come up with enough

[00:59:22] Speaker 01:
If the rationality of the government's decision is based on the GAO award, then prejudice, the finding of prejudice is not part of the government's decision, right?

[00:59:35] Speaker 03:
That's correct, Your Honor.

[00:59:36] Speaker 03:
There hasn't been any finding of prejudice by anybody.

[00:59:39] Speaker 03:
The GAO didn't make a finding of prejudice.

[00:59:42] Speaker 03:
The Court of Federal Claims undertook it upon itself, which it shouldn't have done, to try to articulate what it thought the GAO may have surmised about prejudice.

[00:59:50] Speaker 03:
Based on the kind of claims you've heard today from counsel.

[00:59:52] Speaker 01:
What you want us to do is to say you can't reopen without finding prejudice.

[00:59:57] Speaker 01:
And what case is that that's true?

[01:00:02] Speaker 03:
I think the cases that this court has ruled on in JWK, LeBlatt Foods, this court has held regularly that a protest finding of sustain requires a finding of prejudice.

[01:00:16] Speaker 03:
The only basis on which the agency acted was a statement that there's going to be a protest sustained.

[01:00:23] Speaker 03:
If it didn't have that second component, that essential component of prejudice, that protest sustained statement doesn't have a rational basis to it.

[01:00:31] Speaker 03:
Without a prejudice finding, you can't have a protest sustained.

[01:00:35] Speaker 03:
This court's ruling, and it was applied, and that's GAO's standard.

[01:00:39] Speaker 03:
And GAO never said there was prejudice.

[01:00:41] Speaker 03:
There has never been any finding of prejudice.

[01:00:43] Speaker 03:
Frankly, there isn't any evidence of prejudice.

[01:00:45] Speaker 03:
We'll talk about this in our middle, too.

[01:00:47] Speaker 06:
This is a different point.

[01:00:48] Speaker 06:
I don't have it in front of me, but just remembering what you read from 10 USC 2305F, that doesn't require prejudice for the agency to correct its decision.

[01:01:00] Speaker 06:
It only requires the agency to determine that the award was not in compliance with whatever.

[01:01:07] Speaker 03:
Prejudice is probably a term of art that's used in the protest realm that may not have found its way into the statute, Your Honor, but I submit that someone would have a pretty good case against the government if it blew up a procurement because it found a mistake that didn't matter to anybody.

[01:01:21] Speaker 01:
Is there any case law about that, interpreting that provision of the statute?

[01:01:26] Speaker 03:
I don't know, Your Honor, but certainly there is plenty of case law that the government can't act in an arbitrary and capricious fashion.

[01:01:33] Speaker 03:
If they've created a procurement and made an award and had offers go through millions of dollars of effort and expense and expose their prices and do all the things that are involved, and then to upset it because they find a de minimis error.

[01:01:46] Speaker 03:
This court has said that you don't sustain protests for de minimis errors.

[01:01:49] Speaker 03:
I don't know why that rule shouldn't be applied if the agency's acting on its own.

[01:01:53] Speaker 03:
That's just a rational sort of judgment.

[01:01:54] Speaker 03:
I don't have a case that I can cite for you, Your Honor.

[01:01:56] Speaker 03:
But it seems to me that if you are acting on a basis that isn't triggered,

[01:02:02] Speaker 03:
by some compelling reason, even if you've found a de minimis mistake, why would you do that?

[01:02:07] Speaker 03:
Why wouldn't this court find that to be arbitrary and capricious?

[01:02:16] Speaker 03:
Let me just talk about for a moment also the issue of the agency having changed its mind.

[01:02:21] Speaker 03:
The agency did not change its mind.

[01:02:24] Speaker 03:
That is very clear.

[01:02:26] Speaker 03:
What the agency did is come to a better understanding of the existence of the ATK-Thiokol decision and that it has made a mistake.

[01:02:33] Speaker 03:
The question then before the agency was, now what do we do?

[01:02:37] Speaker 03:
Now what do we do with Northrop?

[01:02:39] Speaker 03:
Raytheon did the right thing.

[01:02:41] Speaker 03:
It came forward and asked the question.

[01:02:43] Speaker 03:
Northrop did not.

[01:02:44] Speaker 03:
The agency had a judgment call to make.

[01:02:47] Speaker 03:
In the FAR, when it talks about discussions, the only regulation that keeps getting waved around here is the one that says, treat anybody more favorably than the other.

[01:02:55] Speaker 03:
The regulations also direct the agency to tailor their discussions in a way that don't unnecessarily reveal information about price and technical proposals.

[01:03:04] Speaker 03:
The agency had a judgment to make, and that judgment about how to tailor those discussions is entitled to deference.

[01:03:11] Speaker 06:
Let me just ask, I guess I keep thinking about exactly that, namely there are two regulations in play.

[01:03:16] Speaker 06:
There's no self-evident, non-discretionary way of figuring out how the combination of those two regulations apply in a particular circumstance.

[01:03:26] Speaker 06:
And therefore, there is a range of reasonable judgments about whether there is error.

[01:03:33] Speaker 06:
It's not there was error, there was no error.

[01:03:36] Speaker 06:
There's a range of reasonable judgments.

[01:03:39] Speaker 03:
I would agree with you, Your Honor.

[01:03:40] Speaker 03:
And there's also a raised reasonable judgments about how the agency could decide to go forward with its

[01:03:47] Speaker 03:
discussions.

[01:03:48] Speaker 03:
And that's why I think that the better course, rather than trying to get into that debate in this case, is to apply the straightforward rule of statistical, say this issue didn't even need to come into play.

[01:03:59] Speaker 03:
If Northrop had done what it was supposed to have done, we wouldn't be here.

[01:04:03] Speaker 03:
The agency would have been forced into that judgment.

[01:04:06] Speaker 03:
If that rule applies, there was no basis for a protest, and there was no problem with this procurement.

[01:04:11] Speaker 03:
Let me make just one comment about the TRL level.

[01:04:15] Speaker 03:
Ms.

[01:04:15] Speaker 03:
Madsen comes up to you and quotes the language from the RFP but completely misrepresents it.

[01:04:22] Speaker 03:
The language of the RFP does not say that you have to come in and substantiate your changes.

[01:04:29] Speaker 03:
What it says, and that's a very important difference, what it says is you have to come in and substantiate the TRL of any system that has been changed.

[01:04:39] Speaker 03:
The green to red example is a terrific hypothetical.

[01:04:43] Speaker 03:
If the TRL had already been established for the system, and it was, the entire system, not parts, the entire system was tested and proven and demonstrated as mature in the pre-EMD phase.

[01:04:57] Speaker 03:
In the post-EMD phase, Raytheon put forward as its representation of maturity for that system the same assessment and testing that had been done before.

[01:05:06] Speaker 03:
It said, you know, the change we made here is so innocuous, the maturity of this technology is not effective.

[01:05:13] Speaker 03:
It's like the red to green.

[01:05:14] Speaker 03:
We don't need it.

[01:05:15] Speaker 03:
So we're going to prove the current TRL of this system based on the prior testing that was done.

[01:05:22] Speaker 03:
It's still valid.

[01:05:23] Speaker 03:
And you know what?

[01:05:24] Speaker 03:
The evaluators agreed with that and said it's perfectly mature.

[01:05:27] Speaker 03:
It's still fine.

[01:05:28] Speaker 03:
We don't need any new testing.

[01:05:30] Speaker 03:
The RFP didn't require anything more, and the evaluators got it right.

[01:05:33] Speaker 03:
And that's what the Court of Federal Claims recognized below.

[01:05:36] Speaker 07:
Any more questions?

[01:05:40] Speaker 07:
Thank you.

[01:05:41] Speaker 07:
Thank you.

[01:05:41] Speaker 07:
We'll take the case under submission.

[01:05:44] Speaker 07:
Judge Dyck, what do you think?

[01:05:46] Speaker 07:
Will we receive submissions from anyone who wishes to write to us?

[01:05:53] Speaker 01:
Can we say 10 days from now?

[01:05:57] Speaker 07:
I think 10 days and 10 pages, if you can limit it from any party, intervener.

[01:06:05] Speaker 07:
who wishes to tell us something that we need to know that we haven't covered.

[01:06:10] Speaker 07:
Anything else we need to cover?

[01:06:15] Speaker 07:
Good.

[01:06:15] Speaker 07:
All right, the cases of your submission.

[01:06:18] Speaker 01:
All right.

[01:06:29] Speaker 01:
The honorable courses start tomorrow morning at 10 a.m.