The Court of Federal Claims recently considered the extent to which its Tucker Act bid protest jurisdiction extends to Government “make-or-buy” decisions. In VFA, Inc. v. United States, No. 14-173 (Fed. Cl. Oct. 21, 2014), VFA protested a Department of Defense (“DOD”) announcement that it would “standardize” the various facility-assessment software tools used by its component departments with a single DOD-owned “Sustainment Management System” (“SMS”). VFA, a provider of facility-assessment software and processes, argued that DOD’s action violated the Competition in Contracting Act, and that DOD should obtain the software via the competitive procurement process. The Court reduced the underlying issue to a simple analogy: “if the Government owned an apple orchard, must it go to the market and compare prices of other apples before picking in its orchard?” The Court concluded no, it must not, and dismissed VFA’s protest.
In so doing, the Court acknowledged that the Tucker Act authorizes jurisdiction over “any alleged violation of statute or regulation in connection with a procurement or proposed procurement,” a phrase that the Federal Circuit broadly interpreted in Distributed Solutions, Inc. v. United States, 539 F.3d 1340 (Fed. Cir. 2008), to cover “all stages” of the procurement process. The Court in VFA explained that the viability of VFA’s protest turned on the question of whether DOD’s action constituted a procurement, and that question turned on whether DOD actually owned the SMS. The Court answered the latter question in the affirmative after noting DOD’s 40-year effort to develop the software, its ownership of related patents, and the fact that DOD does not have to pay for the use of any aspect of the SMS. Because DOD had chosen to standardize its operations using software it already owned, the Court held that Distributed Solutions notwithstanding, it lacked jurisdiction over VFA’s protest because “in this case there was no procurement at all.”
The Court also explained that DOD’s ownership distinguished VFA’s protest from other software standardization challenges over which the Court had previously exercised jurisdiction, because those cases involved agency decisions to standardize using software provided by commercial vendors. The Court also distinguished VFA’s case from numerous recent DOD “insourcing” cases (actions in which DOD had determined to procure services “in-house” after considering outside vendors) over which it had previously exercised jurisdiction because in those cases, DOD had compared the costs of obtaining the services commercially versus in-house, which the Court described as “a significant step in the procurement process.” DOD undertook no similar comparison as part of its SMS standardization decision.
Though the Court’s decision ostensibly narrows its Tucker Act bid protest jurisdiction, its import is unclear. The VFA ruling was predicated entirely upon DOD’s ownership of all aspects of the software, and therefore may offer future protesters ample opportunity to distinguish the holding based upon its facts. At the same time, the Court noted that in VFA’s case, the appropriate time to challenge DOD’s action would have been “at the time of the software’s original development.” Accordingly, contractors should be cognizant of agency efforts to develop internally goods or services that could foreclose future procurements. Although not always possible, early identification may afford the contractor an opportunity to challenge the agency’s action.