________________________________________________ PROTESTER'S MOTION FOR RECONSIDERATION GRANTED; DENIED ON RECONSIDERATION: July 22, 1994 ________________________________________________ GSBCA 11915-C-R(11736-P/11745-P) LITTON SYSTEMS, INC., Intervenor, v. DEPARTMENT OF TRANSPORTATION, Respondent. David V. Anthony, Michael W. Clancy, and Richard P. Rector of Pettit & Martin, Washington, DC, appearing for Intervenor. Richard J. McCarthy, John R. McCaw, Jr., and Anthony L. Washington, Office of the Chief Counsel, Federal Aviation Administration, Washington, DC, appearing for Respondent. Before Board Judges NEILL, HYATT, and WILLIAMS. HYATT, Board Judge. Litton Systems, Inc. has moved for reconsideration of, and relief from, the Board's decision dismissing as untimely filed its application for the recovery of bid and proposal preparation costs that were wasted as a result of agency actions that the Board overturned in deciding protests filed by Denro, Inc. and Westinghouse Electric Corporation. In dismissing Litton's application, the Board did not reach the related issue concerning whether Litton, as an intervenor supporting the Government's position in the underlying protests, is an appropriate interested party to recover such costs. Litton Systems, Inc. v. Department of Transportation, GSBCA 11915-C (11736-P/11745-P), 94-1 BCA 26,400, 1993 BPD 254. Litton has moved that the Board reconsider and vacate its decision that the filing was untimely and reach the underlying issue of whether Litton was an "appropriate interested party" to recover wasted proposal preparation costs.[foot #] 1 After reviewing the arguments made by Litton in its briefs and at the oral argument held in this case, we are now persuaded that its motion for costs should be deemed timely filed. With respect to the underlying issue, however, whether Litton is eligible to recover its proposal preparation costs, applicable Board decisions preclude such an award to Litton, which was an intervenor supporting the Government's position. Accordingly, although we grant the motion for reconsideration as to the timeliness issue, we must nonetheless deny Litton's motion for costs because, under existing precedent, it is not an appropriate interested party to recover such costs. Background The protests underlying Litton's application challenged the exclusion of two firms, Denro, Inc. and Westinghouse Electric Corporation, from the competitive range of an FAA procurement for voiceband switching boxes. As a result of the Government's initial determination that Denro and Westinghouse should be excluded from the competitive range of the procurement, the remaining competitor, Litton, had effectively been selected for award. Accordingly, Litton intervened in the protests in support of the Government's position. The Board granted the protests. Denro, Inc. v. Department of Transportation, GSBCA 11736-P, et al., 93-1 BCA 25,315, 1992 BPD 196. In its decision on the merits of the protests, the Board held, inter alia, that operational capability demonstrations (OCDs) involving Denro and Westinghouse were improperly conducted and that, thereafter, the Denro and Westinghouse proposals were unfairly evaluated as to the ability of their products to meet the Government's requirements. One of the options presented to the Government in the Board's decision was that of conducting another round of OCDs, which the Government ultimately elected to do. Shortly after the Board issued its decision, the Government filed a very narrow request for "reconsideration and clarification" of the Board's decision. This motion was limited to the rather precise issue of whether the FAA was obligated to obtain all new personnel to perform evaluations or could continue to use evaluators not associated with the flawed OCDs. The Board issued a decision on August 31, 1992, granting in part the Government's request for clarification with respect to the relief that had been ordered. ----------- FOOTNOTE BEGINS --------- [foot #] 1 When it filed its motion for reconsideration of the panel decision, Litton also moved for full Board consideration of the matter. The case was referred to the panel to decide the reconsideration motion and the full Board motion was dismissed without prejudice to reinstatement within ten days after issuance of the reconsideration decision. ----------- FOOTNOTE ENDS ----------- Denro and Westinghouse filed cost applications on June 29, 1992, within the thirty-day period then provided by the Board's Rule 35.[foot #] 2 On July 2, 1992, a few days after the thirty-day period had expired, Litton filed its motion for proposal preparation costs. Litton characterized its motion as a premature, informational filing, indicating that although it was not able to calculate the actual costs that were wasted, it wanted to put the Government and the Board on notice of this potential claim. The FAA opposed the motion, arguing that it was untimely and that Litton, as an intervenor that had supported the Government's position, was not an "appropriate interested party" to recover proposal preparation costs. Without addressing the latter issue, the Board dismissed Litton's petition as untimely filed, reasoning that Litton had not made a persuasive showing that good cause existed to extend the deadline because the other parties had been in no better position to determine the full extent of costs incurred, but had nonetheless filed within the thirty days provided by the Board's rule, reserving the right to supplement the initial application with more accurate cost information as available. Discussion Timeliness of the Application for Proposal Preparation Costs In its decision dismissing the matter as untimely, the Board relied on Emulex Corp., GSBCA 9357-C(9259-P), 89-1 BCA 21,349, 1988 BPD 276, which strictly construed the Board's Rule 35 to require that cost motions be filed within thirty days after issuance of the decision sustaining the protest. In Emulex, the Board stated that "[w]e will not enlarge the time for the filing of a motion for costs unless a party shows good cause for enlargement." 89-1 BCA at 107,625, 1988 BPD 276, at 4. Both Denro and Westinghouse had filed their cost petitions, including requests to recover wasted proposal preparation costs, within thirty days after the Board's decision was issued. The Board, principally relying on this point, dismissed the Litton application as untimely filed because it was not persuaded that Litton had shown good cause for enlarging the deadline. Litton argues that the Board should reconsider this decision for several reasons. First, it notes that Emulex does not ----------- FOOTNOTE BEGINS --------- [foot #] 2 48 CFR 6101.35(b) (1991). The Rule stated in pertinent part: Within 30 days after a decision sustaining a protest, an interested party may submit a motion, with supporting documentation and certification of accuracy, requesting the Board to issue an order requiring respondent to pay the costs described in paragraph (a) of this rule. ----------- FOOTNOTE ENDS ----------- mandate the dismissal of its application as untimely because that case reserved for future resolution the question whether a petition for costs must be filed within thirty days of the date of the protest decision in cases where a motion for reconsideration has been filed. Here, the Government had filed such a motion. Second, Litton points out that it was virtually impossible for parties to comply rigorously with the requirement that proposal preparation costs be accompanied by supporting documentation and a certification of accuracy at that point in time, further militating against a strict construction of the rule's thirty-day deadline. Litton has not requested protest litigation costs, such as attorney fees, and urges that none of the parties could have realistically been in a position to determine how much, if any, of the proposal preparation costs had been wasted since the Government had not yet decided how to proceed with the procurement. The Board's initial decision did not treat the Government's motion as one for reconsideration because the issue raised in that motion, requesting that the Board advise the Government as to whether all or only some evaluators must be replaced, did not seek to change the outcome of the protest itself, but sought only to have the Board explain more clearly or modify the extent of the relief ordered. Litton, however, points out that regardless of the scope of the motion, nonetheless, it was pending and the Government had not yet decided how to proceed, thus making it particularly difficult for Litton to comply with the procedures delineated in Rule 35. In addition, Litton notes that in contrast to protests, time is not of the essence in processing an application for costs. Thus, it questions the need to apply strict timeliness standards to the filing of cost applications. Finally Litton points out that the Board itself has recognized this is the case in its new Rule 35[foot #] 3, effective as of January 1994, which permits a much longer period of time (up to 150 days after issuance of the decision granting the protest if the decision is not appealed, and possibly longer if it is) for filing protest cost applications, thus effectively overruling the harsh consequences of Emulex. Ordinarily, as stated in Emulex, the Board construes its filing deadlines strictly. Further consideration of the ----------- FOOTNOTE BEGINS --------- [foot #] 3 58 Fed. Reg. 69,264 (1993) (to be codified at 48 CFR 6101.35). Rather than requiring submission of an application within thirty days after the issuance of an opinion sustaining a protest, this rule, as amended, now provides that an application will be timely if filed within thirty days after final disposition of the protest, which is defined to be after the expiration of the appeal period or, in a case that is settled, within thirty days after receipt of the Board's dismissal order. ----------- FOOTNOTE ENDS ----------- circumstances here, however, persuades us that we should not have dismissed this application as untimely. Litton has demonstrated that it had good cause to file beyond the thirty-day deadline established in Rule 35 because 1) it would be proper to treat the Government's motion for reconsideration and clarification as a factor that may toll the deadline for filing and 2) it was not feasible for Litton to comply fully with the spirit of the Rule's certification requirement because it could not determine with a reasonable degree of certainty what proposal preparation costs, if any, would be wasted. Moreover, the Government was not particularly prejudiced by the late filing because it had not at that point decided how to proceed, and thus was on notice of Litton's claim before it selected its course of action in continuing the procurement. The relaxation of the deadline for filing created under the Board's new rules also supports a more lenient approach in these circumstances. It is within the Board's discretion to relax the time frame provided under this rule and Litton has persuaded us that we should do so here. Cf. Suncos Inc. v. Department of Commerce, GSBCA 11901-P, 93-1 BCA 25,277, 1992 BPD 190 (untimely intervention permitted because timely filing was not a jurisdictional matter, lateness was due to circumstances beyond counsel's control, and no other party would be prejudiced). Accordingly, we grant Litton's motion for reconsideration as to this issue and hold that the application for proposal preparation costs was timely submitted. Interested Party Status We turn next to Litton's arguments concerning whether it is an appropriate interested party entitled to recover its wasted proposal preparation costs. Litton offers several thoughtful arguments to support its application for these costs. First, it points to the language of the statute that authorizes the Board to exercise its discretion to award costs to appropriate interested parties: Whenever the board makes such a determination [that a challenged agency action violates a statute, regulation or the conditions of any delegation of procurement authority issued pursuant to this section], it may, in accordance with section 1304 of title 31, United States Code, further declare an appropriate interested party to be entitled to the costs of -- (i) filing and pursuing the protest, including reasonable attorney's fees, and (ii) bid and proposal preparation. 40 U.S.C. 759(f)(5)(C) (1988).[foot #] 4 The starting point is the term "appropriate interested party." Looking at the "plain language" of the statute, Litton urges that there is no reason, with respect to an award of proposal preparation costs under subpart (ii), to restrict the interpretation of this term to a "prevailing party," a term that is not used in the Brooks Act. Litton recognizes that it may be proper for the Board to limit the recovery of attorney fees under subsection (i) to "prevailing parties," since these are the parties who have "pursued" the protest. In contrast, the plain language of the statutory provision does not explicitly so limit the award of bid and proposal preparation costs provided for under subsection (ii). The award of bid and proposal preparation costs is unusual in a cost-shifting statute and, as the Brooks Act provision is drafted, stands on its own as a separate element of cost recovery. Thus, Litton contends, the award of such costs need not be pegged to the "prevailing party analysis that accompanies many statutes providing for the recovery of costs of litigation." Rather than limiting the recovery of bid and proposal preparation costs to "prevailing parties," Litton urges that the Board should reexamine the term "appropriate interested party." An intervenor is by definition an "interested party," regardless of the position taken in the protest. The common meaning of the term "appropriate" is "suitable" or "fitting." For several reasons, Litton maintains that it is both a "suitable" and "fitting" candidate to recover its wasted proposal preparation costs. Litton, like the two protesters, unnecessarily expended funds in conducting an OCD that was invalidated as a result of the agency's violations of law. The harm sustained by Litton, through no fault of its own, was identical to that incurred by Denro and Westinghouse. Thus, Litton concludes, as a matter of basic fairness, and to preserve the competitive balance in the recompetition, even a non-prevailing party like Litton should be equally eligible to recover such costs. The statutory framework does not prevent the Board from making such an award. Litton derives support for its position from the recent decision rendered by the United States Court of Appeals in Sterling Federal Systems, Inc. v. Goldin, 16 F.3d 1177 (Fed. Cir. 1994). In Sterling Federal, the Court recognized that the Board's cost-shifting authority is derived from CICA alone and that the limits of the Board's authority to award costs in protest proceedings should be construed entirely apart from provisions prescribing the fee-shifting authority for federal courts. Id. at 1184. In addition, the Court recognized the Board's discretion to interpret CICA's cost-shifting provisions, with respect to both litigation costs and bid and proposal costs, ----------- FOOTNOTE BEGINS --------- [foot #] 4 This provision was added to a statute popularly known as the Brooks Act by the Competition in Contracting Act of 1984 (CICA), Pub. L. No. 98-369, 98 Stat. 1175. ----------- FOOTNOTE ENDS ----------- and "to define precisely what those costs are." Id. at 1187. Litton also views the Court's statement that subsection (ii) of CICA's cost-shifting provision "underscores the non-traditional nature of procurement protest litigation," id. at 1186 n.14, to support a broader interpretation of the term "appropriate interested party" for purposes of subsection (ii). Thus, just as the limitations on recoverable costs prescribed under federal fee-shifting statutes need not be adopted by the Board to restrict cost recovery under subpart (i), the term "appropriate interested party" should not be unnecessarily circumscribed by the more narrow "prevailing party" concept found in these cases. In addition to its legal arguments, Litton advances cogent policy reasons to support an award of its proposal preparation costs in the circumstances of this case. Litton incurred significant costs in performing the initial OCD just as did Denro and Westinghouse. Both protesters recovered these expenditures. All of the parties ultimately participated in another round of OCDs. Litton, if not compensated for the proposal costs it incurred through no fault of its own, indeed suffers an unfair competitive disadvantage vis-a-vis its competitors, whose costs have been effectively subsidized. The award of wasted proposal preparation costs to all parties who incurred such costs on account of a violation of statute or regulation serves to maintain all players in the competitive arena on a level playing ground which enhances CICA's objective of obtaining full and open competition in the Federal Government's procurement of goods and services. Thus, the less restrictive construction of the term "appropriate interested party" serves to effectuate the goals of the statute. We agree that there is a reasonable rationale which supports Litton's argument as to the equities of the situation, and that the statute could be construed as Litton suggests. Nonetheless, we are obliged to recognize that on at least two occasions, the Board has flatly rejected arguments of this nature and instead adopted a construction whereby only successful protesters may be permitted to recover proposal preparation costs. In TRW Inc., GSBCA 9320-C(9176-P), 88-3 BCA 20,849, 1988 BPD 116, the intervening awardee, like Litton, argued that it should be awarded proposal preparation costs when a protest was granted and its contract terminated because of errors made by the Government in evaluating proposals. TRW had pointed out that all offerors incur proposal preparation costs with the expectation that offers will be fairly considered and that its economic interests, like those of the successful protester, had been significantly impaired. The Board, reasoning that the cost- shifting provision in the Brooks Act, as a waiver of sovereign immunity, must be strictly construed, held that "[a] firm which did not prevail in proceedings before us is not an 'appropriate interested party' for the purpose of entitlement to protest and proposal preparation costs, so we will not award costs to such a firm." 88-3 BCA at 105,443, 1988 BPD 116, at 3. The Board further observed that: In the instant case, TRW consistently alleged that its award was properly made. TRW did not prevail in the protest. Although TRW did, as it contends, unnecessarily expend its costs of proposal preparation, we will not require the Government to indemnify it for those costs. Id. TRW was followed in Trinet, Inc., GSBCA 9903-C(9746-P), 89-3 BCA 21,960, 1989 BPD 166, in which an intervenor/awardee tried to recoup protest and proposal preparation costs. Trinet, which had intervened in a protest initially to protect its award, argued that once it independently concluded that the protest was valid, it had effectively "joined in" the protest by actively participating in settlement negotiations and working to resolve the protest. The Board also rejected this effort to distinguish TRW, reasoning that awards of either protest costs or proposal preparation costs are restricted to prevailing protesters. Although Litton is correct that this statutory interpretation creates an inherent inequity among competitors who are returned to the drawing board, its situation is squarely covered by the holdings in TRW and Trinet. Both of these parties suffered the same inequity. The general guidance provided by the Federal Circuit in Sterling Federal is not so explicit as to permit or require this panel to overrule this controlling line of precedent. Cf. Sysorex Information Systems v. Department of the Treasury, GSBCA 10781-C(10642-P-REIN), 93-1 BCA 25,428, 1992 BPD 235 (recently issued Federal Circuit cases did require Board to reverse prior practice of awarding litigation costs incurred in appeals process in protest cases). On occasion it may be proper for a later panel to clarify or refine holdings in its precedent that have been interpreted too broadly. See Woodward v. Sage Products, Inc., 818 F.2d 841, 851 (Fed. Cir. 1987). The TRW and Trinet cases are not susceptible to any clarification or refinement that would permit the recovery of proposal preparation costs by Litton as a non-prevailing party. This panel cannot outright disregard the holdings of the prior cases. See Communications Resource Group, Inc. v. General Services Administration, GSBCA 11038-C(10998-P), 92-2 BCA 24,769, at 123,578, 1992 BPD 29, at 6-7 (Borwick, J., concurring); cf. Johnston v. IVAC Corp., 885 F.2d 1574, 1579 (Fed. Cir. 1989) (decisions of one panel are binding on subsequent panels); Fricker v. Town of Foster, 596 F. Supp. 1353, 1356 (D.R.I. 1984) (absent unusual circumstances, judges of coordinate jurisdiction should follow one another's rulings). Litton's motion must be denied because Litton is not an "appropriate interested party" to recover proposal preparation costs. Decision For the reasons stated, Litton's motion for reconsideration is GRANTED; Litton's motion for costs is DENIED. ________________________________ CATHERINE B. HYATT Board Judge We concur: _____________________________ ________________________________ EDWIN B. NEILL MARY ELLEN COSTER WILLIAMS Board Judge Board Judge