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Morphotrust USA, Inc. v. District of Columbia Contract Appeals Bd.

Court of Appeals of Columbia District

May 28, 2015


Argued October 23, 2014.

Page 572

Appeal from the Superior Court of the District of Columbia. (12-CAP-9430). (Hon. Brian F. Holeman, Trial Judge).

Jessica Ring Amunson, with whom Daniel E. Chudd and Damien C. Specht were on the brief, for appellant.

James C. McKay, Jr., Senior Assistant Attorney General, with whom Irvin B. Nathan, Attorney General for the District of Columbia at the time the brief was filed, Todd S. Kim, Solicitor General, and Loren L. AliKhan, Deputy Solicitor General, were on the brief, for appellee.

Before BLACKBURNE-RIGSBY and EASTERLY, Associate Judges, and FARRELL, Senior Judge. OPINION by Associate Judge EASTERLY. Concurring opinion by Senior Judge FARRELL. Dissenting opinion by Associate Judge BLACKBURNE-RIGSBY.


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Easterly, Associate Judge :

This case requires us to interpret the Procurement Practices Reform Act of 2010 (the " PPRA" ), D.C. Code § 2-351.01 et seq., legislation which the Council of the District of Columbia passed to promote competition, fairness, and public confidence in the District government's contracting process. Specifically, we consider the work an agency must do before including limiting specifications in a request for proposals (" RFP" ) and, relatedly, the role that the statutorily created Contract Appeals Board (" Board" ) must play in reviewing pre-award protests to RFPs to ensure that limiting specifications are justified under the PPRA and corresponding regulations.

The RFP in question sought proposals for a contract to produce driver's licenses for issuance by the District of Columbia's Department of Motor Vehicles (" DMV" ). MorphoTrust USA, Inc. (" MorphoTrust" ) filed a protest with the Board, asserting that a number of the specifications in the RFP were overly restrictive and needlessly chilled competition. After the Board denied the protest and the Superior Court

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affirmed the Board, MorphoTrust filed this appeal. MorphoTrust argues that the Board improperly deferred to the judgments of the DMV regarding the challenged specifications, failed to resolve important disputed facts, and made findings that were unsupported by the record.

We agree that the Board's review of MorphoTrust's protest to the DMV's RFP was inadequate, and neither complied with the PPRA's text and its corresponding regulations nor fulfilled their goals. Particularly at the initial stage of the procurement process, when the issue is who will be eligible even to submit a proposal, the Board may not defer broadly to agency decision-making. Rather, the Board has a duty to assess " de novo" --the statutory term--whether challenged specifications that limit competition only do so because they reflect the District's stated minimum needs. We question whether the information currently in the record would have permitted the Board to make such a de novo determination, but the point is that this determination is the Board's to make in the first instance. Accordingly, we reverse the order of the Superior Court and remand for proceedings not inconsistent with this opinion.

I. Overview of the Relevant Procurement Law and Regulations

The procurement of goods and services by the District of Columbia government is generally governed by the PPRA and corresponding regulations.[1] Among the Act's central purposes are " foster[ing] effective and equitably broad-based competition in the District," " obtain[ing] full and open competition by providing that contractors are given adequate opportunities to bid," and " increas[ing] public confidence in the procedures followed in public procurement." [2] The Act itself provides that it shall be " liberally construed and applied to promote its underlying purposes and policies." [3]

One means by which a District agency may procure goods and services under the PPRA is through a request for " competitive sealed proposals," which are solicited by the Office of Contracting and Procurement on the agency's behalf.[4] Consistent with the statute's general focus on fostering competition, such proposals must be " solicited from the maximum number of qualified sources." [5]

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The District's procurement regulations specify steps that agencies must take to ensure " full and open competition" [6] from the outset of the solicitation. An agency with a need for a particular good or service must first, before it actually drafts an RFP, " perform procurement planning and conduct market surveys," [7] gathering information about the " entire available market." [8] The agency must then use this market research to " develop [the] specifications and purchase descriptions" to be included in the RFP, " in a manner designed to promote competition to the maximum extent possible, with due regard to the nature of the goods or services to be procured." [9] Any specifications that the agency ultimately decides to include in its RFP " shall state only the District's actual minimum needs," [10] must " reflect . . . the market available to meet those needs," [11] and may include " restrictive provisions and conditions only to the extent necessary to satisfy the minimum needs of the District, or as authorized or required by law." [12]

If a prospective offeror believes that an agency has failed to adhere to the above-described statutory and regulatory provisions promoting competition, and wishes to challenge the specifications of an RFP as unduly restrictive, the PPRA directs the offeror to seek relief from the Contract Appeals Board.[13] The Board is an independent, neutral, executive-branch entity, comprised of administrative law judges who are licensed attorneys with, inter alia, " no less than 5 years experience in public contract law." [14]

The PPRA authorizes the Board, after hearing from both the protestor and the District,[15] to resolve disputed issues of fact.[16] The PPRA also directs that " the

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Board shall decide whether the solicitation . . . was in accordance with the applicable law, rules, and terms and conditions of the solicitation." [17] The statute provides that the Board's review " shall be de novo," and " [a]ny prior determinations by administrative officials shall not be final or conclusive." [18] If the Board sustains the protest, it has broad remedial power, including the power to order the District to terminate any contract awarded under the challenged solicitation and to issue a new RFP.[19]

II. Facts and Procedural History

In 2012, the Office of Contracting and Procurement issued an RFP on behalf of the DMV, RFP No. Doc62682, for a " Centralized Security Credentialing System" to produce driver's licenses and ID cards equipped with " the most secure credentialing features." In order to " improve and increase card security to deter fraud and deter attempts to illegally duplicate identity credentials," the RFP called for the system to " use the latest technology" and to manufacture cards that would " be tamper proof to the highest extent possible."

The RFP set forth numerous specifications. Particularly with respect to the driver's licenses that would be manufactured under the contract, the RFP listed seventeen particular features that would, " at minimum," be required, including a solid polycarbonate card base and four laser-engraved details.[20] In addition, the RFP listed particular security requirements for the facility where the cards would be manufactured, among them " outside security to include fences, distance from entrance to parking[,] etc." The District made clear that these specifications were nonnegotiable.[21]

Before a contract was awarded, MorphoTrust filed a formal protest with the Board, challenging the specifications of a solid polycarbonate card base, the four laser-engraved details, and outdoor fencing.[22] MorphoTrust produces driver's licenses

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and ID cards for 41 states and, prior to this litigation, the District of Columbia. MorphoTrust's ID cards, however, are made from Teslin, as opposed to polycarbonate, and they are not laser-engraved.[23] MorphoTrust's production facility is also not secured by outdoor fencing. MorphoTrust asserted that the challenged specifications in the RFP far exceeded the " actual minimum needs of the District" for secure digitized driver's licenses and facility security, and that they were therefore unduly restrictive, improperly narrowed competition, and violated the District's procurement regulations. MorphoTrust further claimed its Teslin cards were just as durable and tamper-proof as laser-engraved cards made from polycarbonate, and its production facilities had security comparable (if not superior) to outdoor fencing. MorphoTrust asked the Board to recommend that the District amend the RFP and eliminate these requirements.

In response to MorphoTrust's protest, the District filed an Agency Report, defending the contents of the RFP. Repeatedly asserting without explanation the District's " singular security needs" as the nation's capital, the District argued that the " DMV [had] established a minimum need for the most secure credentials possible."

The District preliminarily claimed that " DMV experts" had " engaged in an extensive three-year market study to develop specifications that met the need." To support this latter assertion, the District cited to a single-page declaration submitted by DMV's Chief Information Officer, Mr. Amit Vora. Mr. Vora's declaration in turn adopted as " accurate" a four-page, undated, anonymous " summary of steps taken by the Department of Motor Vehicles to Develop Secure Credentialing RFP" (" summary attachment" ).

The undated, anonymous summary attachment briefly addressed the actions taken by the DMV prior to issuing the RFP. It stated that unidentified individuals at unidentified times had " [a]ttend[ed] [c]onferences and research[ed] new technology and trends surrounding secure identification cards," but did not state what the DMV had learned. The summary stated that " DMV also gathered information by visiting and contacting the Department of Motor Vehicles in other jurisdictions," but likewise failed to detail any information the DMV had acquired.[24] The summary also listed " [r]ecent network opportunities that the Director of DMV and DMV's Driver's Services have attended for the past three years," but it did not identify with whom the DMV had " networked" ; nor did it explain how these efforts related to its ultimate decision to include the challenged specifications in the RFP.

This was the " market research" on which the District relied in the Agency Report when it asserted that the " DMV [had] justified the minimum need for a polycarbonate card." [25] Specifically, the

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District claimed that " [i]n the Declaration of Amit Vora, DMV set forth the reasons why no other material has the security of polycarbonate." In fact, the Vora Declaration said nothing about the minimum need for a polycarbonate card and the District's citation was to the summary attachment to the Vora Declaration. The summary attachment in turn did not explain why " no other material" would suffice. It contained no mention of potential alternatives to polycarbonate. It simply provided a description of the features of polycarbonate cards, repeating almost verbatim--but without attribution--portions of a 2008 marketing brochure of a polycarbonate manufacturer, Gemalto.[26] The summary attachment and the Agency report specifically touted the fact that polycarbonate cards are non-delaminable (i.e., the layers of the card are fused together and cannot be peeled apart), and thus tamper-proof, and that the card " has over a ten year durability."

The District also asserted that the DMV had " justified the minimum need for additional facility security." The District asserted that, given the sensitivity of the information gathered from individuals seeking identification, the offeror needed to have a production facility " at least as secure as the District's own DMV facilities." The District did not detail DMV's security features, but it asserted that they met the " standards of the American Society of Industrial Security ('ASIS')." The District claimed that the security specifications were likewise prepared in accordance with ASIS standards, but it supplied no supporting documentation for this assertion, not even the standards themselves. The District did, however, list in the Agency Report a number of the standards it represented as ASIS standards; none of these mentioned fencing.[27]

Following submission of the Agency Report, MorphoTrust filed Comments on the Agency Report in which it observed that the District had failed to provide a credible justification for the challenged specifications. Asserting that the District had " confused" its minimum needs with " design preferences," MorphoTrust argued that the District had failed to rebut MorphoTrust's evidence that its cards and production facility would fully satisfy the District's security needs at a better price. More particularly, MorphoTrust argued that it had presented evidence that there was " no consensus among the states on whether polycarbonate or another material are more secure or durable," and it argued that certain features of a polycarbonate card, including laser-engraving (which the Agency Report made no attempt to defend as a specification), " do not automatically make it a more secure card." [28] On the

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issue of the use of fencing to ensure security of an offeror's production facility, MorphoTrust similarly argued that the fencing requirement was not compelled by any industry standards that the District purported to follow and that the District had not shown that its DMV facilities were protected by fencing, even as it had claimed that it needed the offeror's facility to be as secure as DMV facilities.

In response, the District moved for and received leave to file a Reply along with additional exhibits. The exhibits were submitted to buttress the District's selection of polycarbonate as the material from which an offeror must make identification cards,[29] but the District made no representation that anyone had consulted these documents or was aware of the information contained therein prior to the issuance of the RFP. The Reply, like the Agency Report, did not separately defend the four laser-engraved details and did not respond to MorphoTrust's challenge to the agency's fencing requirement.

In a brief order that was long on background facts and recitation of the parties' arguments, and short on analysis of the merits, the Board denied MorphoTrust's protest. It preliminarily accepted without question the District's assertion that it had undertaken three years of market research before selecting the specifications for the manufacture of the identification card. Then, without any acknowledgement of disputes of fact, much less any fact-finding, the Board " deferred" to the District's assessment that the challenged specifications reflected its minimum needs. The Board thus concluded that MorphoTrust had failed to carry what the Board understood to be the challenger's " heavy burden" to show that the challenged specifications were " unreasonable."

MorphoTrust unsuccessfully sought to overturn the Board's decision in the Superior Court of the District of Columbia, arguing that the Board had employed the wrong standard of review and substantive standard in evaluating its protest, that the Board's decision lacked substantial support in the agency record, and that the decision was clearly erroneous as a matter of law. This appeal followed.

III. This Court's Jurisdiction and Standard of Review

Before we identify our standard of review, we must first clarify our jurisdiction.[30] This case comes to us from the

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Superior Court, where MorphoTrust sought review of the Board's decision denying its pre-award protest of the DMV's RFP.[31] We have jurisdiction to review a Superior Court order only so long as the Superior Court had jurisdiction to issue it.[32]

Nothing in the PPRA directed MorphoTrust to proceed first to Superior Court, but our cases interpreting the predecessor procurement statute and its regulations have required protesting parties to seek relief in the first instance in Superior Court. See, e.g., Abadie v. District of Columbia Contract Appeals Bd., 916 A.2d 913, 918 (D.C. 2007); Jones & Artis Constr. Co. v. District of Columbia Contract Appeals Bd., 549 A.2d 315, 317-18 (D.C. 1988). Reviewing the predecessor statute in Jones & Artis, we concluded that protests were not " contested cases" within the meaning of the D.C. Administrative Procedure Act (" DCAPA" ) and therefore were properly routed through Superior Court before we could review them. See Jones & Artis, 549 A.2d at 317-18. Our analysis turned on both the absence of statutory language indicating that protest proceedings required a hearing,[33] as well as the failure of the Board to adopt any " regulations whatsoever . . . that would suggest the Board might use a trial-type hearing to resolve a protest." Id. at 317. We distinguished the absence of such provisions for " protests" from the provisions addressing contractor appeals, which provided for " hearings," " oaths, discovery, and subpoena power." See id.

In 2002, however, the Board enacted regulations that allow it to use a trial-type hearing to resolve a protest.[34] Following the analysis of Jones & Artis, one might conclude that bid protests litigated pursuant to these regulations are, in fact, " contested cases." Nevertheless, this court has continued to hold that protests are not contested within the meaning of DCAPA. See Abadie, 916 A.2d at 918 (citing Jones & Artis ). See ...

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