Background
General Dynamics Information Technology, Inc. challenged the Centers for Medicare and Medicaid Services’ award of a task order to Peraton, Inc. for support of Medicare’s Durable Medical Equipment claims-processing system. GDIT, the incumbent, and Peraton each received high-confidence ratings under all three non-price factors, but Peraton’s quoted price was approximately $16 million lower.
GDIT argued that CMS irrationally evaluated Peraton’s proposed level of effort, accepted a noncompliant data-center solution, failed to issue a solicitation reflecting its actual needs, treated the offerors unequally in evaluating their quality-assurance plans, and made an unreasonable best-value determination. GDIT also sought to complete or supplement the administrative record with materials concerning a possible post-award transition to CMS’s CACHE data center.
The Court’s Holding
The court held that CMS’s evaluation of Peraton’s proposed level of effort was arbitrary and capricious because the evaluation record contained material discrepancies in Peraton’s total labor hours. Although Peraton proposed approximately 466,000 hours, portions of the Technical Evaluation Panel report and award memorandum referred to approximately 547,541 hours. The record did not permit the court to determine whether CMS evaluated Peraton’s staffing approach using the correct figures.
Because the labor-hours error may have affected both the level-of-effort assessment and the source-selection decision, the court found prejudice and remanded the procurement to CMS. It directed the agency to reevaluate Peraton’s proposed level of effort using the accurate labor-hour and full-time-equivalent figures and then conduct a new best-value determination. The court rejected GDIT’s remaining protest grounds and denied its request to complete or supplement the administrative record.
Key Takeaways
- An agency’s evaluation is vulnerable when the contemporaneous record uses materially inconsistent proposal figures and does not reveal which figures informed the decision.
- The court did not hold that Peraton’s proposed staffing level was inherently too low; it required CMS to evaluate that staffing level using accurate numbers.
- Suspicions arising from possible post-award events did not justify adding extra-record material where GDIT disclaimed bad faith or pretext and failed to show supplementation was necessary for meaningful review.
Why It Matters
The decision underscores that judicial deference to technical and best-value judgments depends on a coherent administrative record. Even when the awardee offers a substantially lower price and receives top technical ratings, unexplained numerical errors affecting its proposed workforce can require agency reconsideration.
The court did not set aside the award outright. Instead, it stayed the case and gave CMS 45 days to correct the level-of-effort evaluation and determine anew which proposal offered the best value.