The United States Court of Federal Claims has denied a bid protest from National Energy Security Operations, LLC (“National Energy”) regarding the Department of Energy’s (DOE) decision to award a contract to Strategic Storage Partners, LLC (“SSP”) for the management and operation of the United States’ Strategic Petroleum Reserve (SPR). The court found that while DOE made a minor error in evaluating National Energy’s proposal, the error did not prejudice National Energy, and therefore the award to SSP stands.
The SPR, a crucial national asset, is the world’s largest emergency supply of crude oil, stored in underground salt caverns in Louisiana and Texas. The contract at the heart of this dispute is a Management and Operations (M&O) contract, a cost-plus-award-fee performance-based agreement, with a five-year base period and an option for an additional five years.
The Bidding Process and the Key Players
DOE issued the solicitation for the M&O contract on January 4, 2024. Proposals were due by April 3, 2024. Six companies submitted bids, and the Source Evaluation Board (SEB) evaluated the proposals, preparing a report for the Source Selection Authority (SSA), who ultimately made the award decision.
National Energy, whose parent company owns the current incumbent contractor, FFPO, received ratings of “Good” for Management Approach, “Outstanding” for Key Personnel and Organization, and “Satisfactory” for Past Performance from the SEB. SSP, on the other hand, was deemed technically superior to all other offerors, receiving “Outstanding” ratings for both Management Approach and Key Personnel and Organization, and a “Good” rating for Past Performance.
The Core of the Dispute: Evaluation of National Energy’s Proposal
National Energy raised several claims, primarily focusing on how DOE evaluated its proposal. The court addressed three main areas of contention:
1. Contractor Assurance System (CAS) Approach: National Energy argued that DOE applied unstated evaluation criteria when assessing its CAS approach. The Solicitation instructed offerors to demonstrate their approach to managing the contract, including implementing a CAS that identifies and corrects deficiencies. The court agreed with National Energy, finding that the DOE appeared to have used a special contract clause (H.38) as a grading rubric, which contained more detailed requirements than were explicitly stated in the evaluation criteria. This clause, which was to be implemented after the contract was awarded, was used to assess the proposals. The SEB gave National Energy a “Weakness” for its CAS proposal, citing a lack of detail. The court determined that DOE’s use of this post-solicitation contract clause as an evaluation benchmark was arbitrary and capricious.
2. Life Extension 2 (LE2) Project: National Energy also challenged DOE’s evaluation of its approach to the LE2 project, an initiative to extend the lifespan of the SPR. The PWS set out several requirements for the awardee’s work on the LE2 project. The SSA concluded that National Energy’s LE2 approach “lacks the detail to justify a strength.” The court found that DOE’s focus on the incumbent’s past issues with the general contractor was a reasonable consideration and that the Agency was well within its purview to analyze FFPO’s past issues with that general contractor in evaluating National Energy’s proposed approach.
3. Past Performance: National Energy further contested DOE’s evaluation of its past performance. The court rejected this challenge, finding that DOE did not unreasonably evaluate National Energy’s past performance by not considering a 2023 settlement agreement between DOE and FFPO. National Energy argued that the Settlement Agreement was “seemingly strong proof” that FFPO’s position on the disputed fee reductions from those years had merit. The court found that the Settlement Agreement only concerned the amount of fees awarded to FFPO in 2020 and 2021; it did not agree to any changes to the incumbent’s performance assessments or modifications to the Agency’s fee determination letters in those years. The court further found that DOE did not abuse its discretion by not allowing clarifications regarding National Energy’s negative PPQs and the Agency was not obligated to seek clarification.
The Court’s Decision: No Prejudice, No Injunction
Despite finding that DOE erred in its evaluation of National Energy’s CAS approach, the court ultimately denied the bid protest. The court concluded that the error was not prejudicial, meaning it did not deny National Energy a substantial chance of winning the contract. SSP’s proposal was far superior in other areas, and the court determined that correcting the error would not have changed the outcome of the award. Because National Energy failed on the merits, the court denied its request for a permanent injunction.
The court’s decision highlights the importance of adhering to the stated evaluation criteria in solicitations and the high burden that bidders face in proving prejudice in bid protest cases.