[00:00:00] Speaker 00:
Our next case is Pernix Federal LLC v. U.S. 24-2327. Counselor Howell.

[00:00:09] Speaker 00:
You reserved three minutes of your rebuttal time.

[00:00:13] Speaker 00:
Just as a preliminary matter, we did receive the letter from the government notifying us that the patent had been, excuse me, that the bid had been withdrawn.

[00:00:25] Speaker 00:
That raises the issue of whether your case has been mooted or not, and we'd like for you to address that issue first. And that came by way of a motion, and we'll rule on that motion today.

[00:00:39] Speaker 01:
I'm sorry, Your Honor, you'll move the rule on a motion when?

[00:00:43] Speaker 00:
Today. Today. Part of our case, yeah.

[00:00:45] Speaker 01:
Thank you.

[00:00:47] Speaker 01:
Well, Perdix Federal LLC clearly does not believe that this appeal is moot. We believe that a live controversy exists because PFL is entitled to a $1.5 million stipend under Section L.10 of the terminated contract.

[00:01:07] Speaker 03:
Now, do I understand correctly that that is a claim that's currently pending in front of maybe the contracting officer?

[00:01:17] Speaker 01:
No, it is not. It is not. We would have to file a certified claim, go through the Contract Disputes Act process.

[00:01:24] Speaker 02:
But something's pending in front of the State Department, right?

[00:01:27] Speaker 01:
What's that?

[00:01:28] Speaker 02:
something is pending in front of the State Department. You submitted a letter in May 2024 seeking recovery of costs related to your bid preparation proposal.

[00:01:40] Speaker 01:
That is correct. It has not been acted on.

[00:01:43] Speaker 02:
Under Section L10, right?

[00:01:45] Speaker 01:
Correct.

[00:01:45] Speaker 02:
So there is something pending. And part of your complaint with the State Department is that they haven't yet decided that on your request, submitted in that letter.

[00:02:01] Speaker 01:
That is correct. That is correct.

[00:02:05] Speaker 01:
I would add, too, that Pernix's complaint asks for such other and further relief as the court may deem just and proper. But I want to make it clear that at this point, Pernix has not filed a certified claim under the CDA for this amount. Go ahead.

[00:02:21] Speaker 03:
I just want to clarify. The important thing is that this issue that you've identified as being an issue that it's important for us to hear this case on, is not in this case, right?

[00:02:35] Speaker 01:
It is in this case.

[00:02:36] Speaker 03:
But you just said this is something that's pending before the State Department. It's not pending before this court.

[00:02:48] Speaker 01:
Pernix believes that the State Department inevitably will deem that the Pernix phase three proposal, that Pernix was ineligible to submit a Phase 3 proposal because it did not meet the strictures of the Omnibus Security Act.

[00:03:07] Speaker 01:
That's really the same issue that this court is being asked to adjudicate.

[00:03:13] Speaker 03:
I understand there's a difference. What you're saying is that if we were to go ahead and adjudicate this case, it would make your future case, if you have one, easier to argue. It will probably resolve maybe an issue in that case, but that's different. I was asking you specifically whether the issue you've raised, this $1.5 million, is an issue in this case, and I think the answer is no.

[00:03:40] Speaker 01:
The answer is no, because we're aware that we would have to, in all probability, file a certified claim under the CDA and go through that process. That being said, the Safeguard Base Operations case cited by the government, an unpublished Federal Circuit 2019 case, that involved a completely separate appeal, completely separate appeal, where this issue as to whether Pernick's Federal LLC was an eligible author or under Phase 3 directly relates to its ability to obtain that stipend to which it believes it's totally entitled, having submitted a technically acceptable proposal.

[00:04:30] Speaker 00:
I would add, for what it's worth, the Department of State... So what happens to whatever is pending before the State Department, what happens to that claim if we were to dismiss a claim here?

[00:04:47] Speaker 01:
Well, I think what Pernix would do they would file, again, a certified claim under the CDA. We can't force them to act. It's been two years since the request for the stipend came in. Probably shouldn't even have had to make the request. I would note that one other off-roar, BL Harbor, Department of State did pay that stipend. I don't know what's going to happen with Cadell Construction, the company that the Department of State has terminated its contract for convenience recently.

[00:05:24] Speaker 01:
But Harvard did get paid. Pernix Federal LLC has not.

[00:05:30] Speaker 01:
And there's no contention that the proposal is not technically acceptable. The question is... were they eligible to submit it? Department of State says they weren't. PFL says we were.

[00:05:43] Speaker 02:
Is it possible they haven't paid your Section L10 cost recovery request yet because they're waiting to see whether or not you're going to succeed in reopening the competition for the contract and then receive the contract award? Because if you were to receive the contract award, then you would no longer be eligible under Section L10 for it. recovery of your bid proposal costs.

[00:06:09] Speaker 01:
Well, it's possible, Your Honor, but truthfully, we do not expect any wise, you know, the RFP to be reissued.

[00:06:20] Speaker 02:
Right, but I'm just saying this whole time, while this litigation's been ongoing...

[00:06:27] Speaker 02:
there was an off chance that you would eventually get the contract award, and Section L10 cost recovery is strictly limited to those offerors that qualify under Phase 3 for a technically acceptable proposal, but don't get the contract award.

[00:06:42] Speaker 01:
Your Honor, you're absolutely correct, but again, I would point out it's been two years.

[00:06:48] Speaker 03:
The government and its reply brief doesn't challenge, I guess, your... request for if we were to agree that um the case is moved to have the underlying opinion vacated they don't seem to uh oppose that but at the same time to suggest that maybe you're not asking for that so i wanted to give you an opportunity to address whether you're asking for a fake or in the event we were to say the case is moved do you want the lower decision vacated

[00:07:26] Speaker 01:
We would, Your Honor. We would.

[00:07:31] Speaker 01:
And I would add, again, if we're forced to go through the CDA process, it's going to be a situation where the same arguments are going to have to be addressed. So there's an issue of judicial economy here, too, as well as whatever the State Department's actually going to do over in Turkey. We don't know.

[00:07:56] Speaker 01:
You know, so one more point.

[00:08:00] Speaker 00:
We want to be careful as to what we decide today, how that affects your outstanding interests that you may have in the future. But what it sounds like to me is that there's two separate, distinct actions pending. This appeal and the claim that you have before the State Department. They're separate and distinct. Is that true?

[00:08:27] Speaker 01:
We view them as intertwined.

[00:08:30] Speaker 01:
Because of the seminal issue of this appeal as to whether Pernick's federal LLC was an eligible offeror on its security act, we absolutely anticipate that state would take a position that PFL is not entitled to that stipend, even though it submitted a technically acceptable proposal because it was not an eligible offeror. So we view these issues... This issue is intertwined.

[00:09:00] Speaker 01:
And we also view the $1.5 million stipend as tantamount to basically bidding proposal costs. The government made the point that we didn't specifically ask for B&P costs. The government is right on that. But the stipend, in essence, was intended to provide what is tantamount to B&P costs.

[00:09:26] Speaker 00:
Does your complaint state that you're seeking bid preparation and proposal costs?

[00:09:31] Speaker 01:
It did not, Your Honor.

[00:09:33] Speaker 00:
Well, how can we grant you relief on something that it's not in your complaint?

[00:09:39] Speaker 01:
Because we ask for other and further relief, generic requests for any relief the court could give. And we think if you were to reverse and remand that The Court of Federal Claims might well look at our entitlement to that stipend and not force us, frankly, to do a completely separate CDA claim that would almost inevitably result in a Court of Federal Claims case.

[00:10:19] Speaker 01:
Are there other questions on mootness, Your Honor?

[00:10:23] Speaker 01:
I'd like to address a couple more things, if I may, in the time I have left.

[00:10:29] Speaker 01:
And that is, I'd like to remind the court that throughout this entire procurement process, PFL relied on the DOS's own regulations, which have not changed whatsoever during the course of the litigation and appeal.

[00:10:47] Speaker 01:
And in particular, the DOSAR, Carbon State Acquisition Regulation, which provided and provides that a prospective bidder or offeror may be an individual organization or firm, a formal joint venture in which the co-venturers have reduced their arrangement in writing, or a de facto joint venture where no formal agreement has been reached, but the offering entity relies upon the experience of a related U.S. firm that guarantees performance.

[00:11:17] Speaker 01:
Again, that's from the Statement of Qualifications in the record.

[00:11:22] Speaker 01:
And it's at, you've seen it, I know, but, and let me see, I don't have the site right here, but PFL's reliance on this was eminently reasonable.

[00:11:36] Speaker 01:
You know, that the offering entity, you know, could be the phase three offeror. Then, you would come down to, you know, the issuance of, you know, the, RFP that resulted in the Copsley protest.

[00:11:56] Speaker 01:
And for the first time when that RFP came out, it included Section L.23.2.1.10.1. That's that Appendix 07219. And that said, in two sentences, two critical sentences, to the extent it all relies on its related entities for meaningful involvement and contract performance, the Department of State considers those entities to be the offeror for purposes of SAM registration and for evaluation purposes under the solicitation.

[00:12:28] Speaker 01:
And that was not PFL's situation, where PFL was going to perform 100% of the contract work as opposed to its co-venturer guarantors, Pernix Group, Inc., and B, E, and K. And as if to foreclose any further inquiry, Department of State added a second sentence, a note really, stating for purposes of the solicitation, de facto joint ventures are not entities where both firms share in performance of the work but merely an arrangement where one firm guarantees the performance of the other.

[00:13:07] Speaker 01:
First sentence suggested clearly to PFL that it could be the off-roar because PFL is going to do 100% of the contract work.

[00:13:19] Speaker 01:
The second sentence suggested that the co-guarantors under the de facto joint venture were not offerors.

[00:13:30] Speaker 01:
So they relied on that.

[00:13:32] Speaker 01:
But the next point I'd like to raise in terms of blue and gold, and it's been an issue in this case, let's suppose, for the sake of argument, that the government is correct that, Regardless of what the documentation shows, that Pernix writ large submitted its Phase 2 qualification materials in the name of the de facto joint venture, it was that de facto joint venture that was evaluated.

[00:14:02] Speaker 00:
You're into your rebuttal time.

[00:14:04] Speaker 01:
Oh, I'm sorry, Your Honor.

[00:14:05] Speaker 00:
Thank you. That's okay. You can keep going. I'll keep going. Use it up.

[00:14:08] Speaker 01:
Yep, I'll use it up.

[00:14:10] Speaker 01:
Okay. And let's suppose that... PFL protested that, knowing that it was impossible to register a de facto joint venture in SAM.

[00:14:22] Speaker 01:
And let's suppose they got some forum to agree. You know, you're right. Go ahead, state, you're going to have to amend that solicitation and permit this company to formally establish the de facto joint venture as an LLC – and submit. Well, what would have happened? There's a latent defect in Section M.1 of the solicitation that basically said the Phase 2 off-roar and the Phase 3 off-roar.

[00:14:54] Speaker 01:
And I use the expression off-roar in air quotes. They have to be the same. Demostrably, a de facto joint venture for DOS purposes, an unincorporated entity not even a contractual joint venture, is not the same, would not be the same as a formally established LLC joint venture. Let's call it Pernick's Federal Joint Venture, LLC.

[00:15:24] Speaker 01:
They're not the same.

[00:15:26] Speaker 01:
One is an entity, one is demonstrably not. So what would have happened? State would have said, you're still not eligible. You're still not eligible. So we think that blue and gold...

[00:15:39] Speaker 01:
It was not a bar to this suit, and I'm past my time, but in any event, PFL thought that it could absolutely be a phase three off-roar.

[00:15:51] Speaker 00:
Okay. Thank you.

[00:15:52] Speaker 01:
Thank you, Your Honor.

[00:16:01] Speaker 00:
Thank you.

[00:16:03] Speaker 04:
Good morning, Your Honors. May it please the Court. I'll start by addressing some of the mootness questions that the Court provided at the start of this argument.

[00:16:11] Speaker 04:
The key issue here is, what is the claimed relief? There's a difference between legal issues, which may or may not be overlapping and relevant, but the question is, what is the relief that is being sought in this case, and is there anything concrete that can be granted? Our position is there has never been a claim for bid prep and proposal costs in this lawsuit, and it's not just based upon the text of the complaint, although we think that's obviously dispositive. It's also because of the fact that we would have seen arguments and briefing at any lower stage of these proceedings about this stipend issue.

[00:16:43] Speaker 04:
Admittedly, the first time I personally became aware that this issue was even a dispute or unpaid was in my conversations with Mr. Howell over the last several weeks discussing how we were going to proceed in light of the cancellation of the project. So this is not just omitted from the complaint. It was never raised in the briefing. There was never any evidence submitted about the lack of payment. There was never any argument presented by either party about the reasons for that lack of payment.

[00:17:07] Speaker 00:
Were you aware of the State Department claim pending?

[00:17:09] Speaker 04:
I was not, Your Honor.

[00:17:11] Speaker 04:
And so I'll be as transparent as I can be with my conversations with the State Department about this issue, understanding we don't have a body of evidence that I can point the court to to support those statements. But what the State Department has advised me is that The dispute over the unpaid stipend has nothing to do with the eligibility determination at issue here.

[00:17:30] Speaker 00:
Counselor, on the other side says that the two claims are intertwined.

[00:17:35] Speaker 04:
And, again, I will state that they are not. I have nothing in the record to point to because, again, this was not an issue that had been raised at any point before the briefing on the motion to dismiss. But there are other contracts that Pernix has with the State Department. There has been a termination for default. There have been claims and disputes over that termination for default.

[00:17:54] Speaker 03:
That's it. Is it true that the State Department is not addressing that question until the appeal here is resolved?

[00:18:02] Speaker 04:
That's just not true, Your Honor. The State Department has advised me that this appeal and this proceeding has absolutely no relationship to the failure to pay the stipend.

[00:18:13] Speaker 02:
So you're telling me that if the State Department ultimately declines to pay out the Section L-10 costs... It'll have nothing to do with whether or not Pernix was an eligible offeror for Phase 3 purposes?

[00:18:31] Speaker 04:
Yes, Your Honor.

[00:18:32] Speaker 02:
What I've been advised by the State Department is that there – I could imagine a rationale for why they would kick out the request for L-10 costs on the ground that, well, you weren't a qualified offeror. there was a pre-qualified offer under Phase 1, Phase 2, and that was the de facto joint venture. But the de facto joint venture didn't show up for Phase 3 and submit a proposal. It was something else, just PFL. And because you weren't a pre-qualified offeror, you get no L-10 costs.

[00:19:06] Speaker 02:
You're telling me in this court that that will not be a rationale for why the State Department declines to... grant their request for L-10 costs.

[00:19:17] Speaker 04:
I can make that firm commitment prior.

[00:19:20] Speaker 02:
It'll be, if they decline, it'll be for some other reason, perhaps a review of the proposal and conclude that it wasn't actually a technically acceptable proposal or something like that.

[00:19:30] Speaker 04:
And I want to be careful because these are still pending disputes, and I don't want to commit the agency standing here at the podium. What I've been told I can commit the agency to is that they will not decline to pay on the basis that Pernix Federal or the joint venture was ineligible. that there is a possibility of offset related to a separate termination for default proceeding. There may be other issues that arise through that proceeding that the State Department's not aware of, which is why I hesitate to be firmer about some of the other eventualities.

[00:20:01] Speaker 04:
But the State Department has authorized me to state concretely that there will not be a decision that the eligibility determination is the basis for nonpayment of the stipend, that they have already made that decision and it will not come back for reconsideration from their perspective. Go ahead.

[00:20:19] Speaker 03:
I was just going to confirm that the government does not oppose a request to vacate the decision below. Is that correct?

[00:20:26] Speaker 04:
We do not. And admittedly, we don't see much consequence from this issue based on the fact that the regulation has been rescinded. We understand why it's a big issue for Pernix, but writ large for the State Department's procedures, this is not something that's going to come back. So we have no position on vacater.

[00:20:44] Speaker 00:
Does the State Department have plans to reinstate the project at some time in the future?

[00:20:49] Speaker 04:
Not currently, Your Honor. I think there was some reference in the diplomatic note to a continued diplomatic presence in southeastern Turkey. Obviously, the State Department is continuing to reevaluate its needs on the ground.

[00:21:02] Speaker 04:
At the moment, there is no plan for a new consulate structure.

[00:21:05] Speaker 00:
I think you recall, yeah, that there was plans for an embassy being built in another country.

[00:21:13] Speaker 04:
No, I don't believe so, Your Honor. I think maybe Pernick's made some reference to general activities in that area of the Middle East. What's going on here is that there was a plan for a new structure, a completely new consulate to be built. That has been canceled. There may be expansion of the facility.

[00:21:31] Speaker 04:
But the other thing I'll point out for the same reasons I just answered with Judge Stoll's question is if there is a new project and a new solicitation, we don't think that's likely, but even if there were, this regulation won't be present because it has been rescinded. The only reason we're talking about this is because there was an active solicitation that yielded a contract. There will not be this issue. The whole de facto joint venture concept has been removed from the regulations, so that cannot recur.

[00:21:59] Speaker 02:
You gave us a copy of the diplomatic note to Turkey referencing that this contract had been terminated on April 29th. But you didn't give us an actual copy of the termination notice.

[00:22:15] Speaker 02:
Why not?

[00:22:16] Speaker 04:
That was just my judgment call, Your Honor. We have it. I thought that the diplomatic note would be a stronger assertion.

[00:22:22] Speaker 02:
That's more communication that you're sending along. It's not an actual official termination.

[00:22:28] Speaker 04:
We view, well, I'll say that. We view that the diplomatic note is the official position of the United States government being presented to the government of Turkey. So we view that as having as much formality as the termination document. Our reason for providing the court with the diplomatic note was because it not only addressed the termination of the contract, but also addressed the fact that the project as a whole is canceled. The termination in and of itself just says, we're terminating your contract for convenience, it doesn't provide any explanation about why or whether there might be a re-award under the solicitation.

[00:23:00] Speaker 04:
So we viewed the diplomatic note as the more comprehensive document explaining not only was the contract terminated, but also the project as a whole has been terminated and will not be revived in its current form. So that's why we provided the diplomatic note to the court in lieu of the termination document.

[00:23:18] Speaker 04:
If the court has any questions on the merits, I can address them, but we believe mootness is dispositive here.

[00:23:24] Speaker 04:
If there are no questions, we'll ask for a dismissal. Thank you.

[00:23:27] Speaker 00:
Thank you.

[00:23:32] Speaker 00:
Counselor Howell?

[00:23:36] Speaker 00:
We've got three minutes of time. Three minutes?

[00:23:41] Speaker 00:
What's going on?

[00:23:44] Speaker 00:
Oh, I'm sorry. You ran out of time. Yes. Okay. You're out of time altogether. Thank you, Your Honor. But we thank you for your argument. Thank you.

[00:23:55] Speaker 00:
We thank all parties for their arguments.