Duck Hunt – The VA Cannot Escape The Medline Protest, And Takes A Few Shots In The Process | Sheppard Mullin Richter & Hampton LLP

Ignore our previous prediction – the US Federal Court is definitive NOT Medline Industries, Inc., referring the protest back to the authorities for remedial action (“Medline Protest”). In a surprisingly damning statement by Judge David A. Tapp on June 22, 2021, the court made one thing very clear: the transfer of the requirements of the Department of Veterans Affairs (“VA”) of its Medical Surgical Prime Vendor (“MSPV 2.0”) to the Defense Logistics Agency (“DLA”) is dead on arrival. After the court issued a brief order on June 17 to deny the authorities pre-trial detention for corrective action, the court explained its rationale in a statement that followed in a parallel protest Published by Owens & Minor Distribution, Inc. questioning (slightly) different aspects of the changing MSPV 2.0 Procurement (“O&M Protest”). The government had requested pre-trial detention in both protests, and since the Medline and O&M protests involved the same parties and many common operational facts, the court issued a single statement denying pre-trial detention in both cases – and telegraphed, that the outlook for the government in both cases is grim. Later on, the court took a couple of shots at the government for its litigation and (more generally) its lack of acquisition planning.

Despite the fact that in both protests on June 8, the government held status reports that “the [VA] canceled the planned transfer [of MSPV to the DLA], and re-examines whether a future transfer will take place at all and if so, for what reasons and at what point in time, ”the court refused to waive. The court found that the VA changed course so frequently that any account of its future plans simply could not be trusted. Given the VA’s unpredictability, the court expressed its intention to examine the merits of the protest – a statement that undoubtedly gives plaintiffs great encouragement.

After a great dose of general awe and disapproval at how the government has so far mishandled essentially everything in the VA’s MSPV 2.0 program, the court set out to determine whether pre-trial detention was warranted as the government had requested. The court used a newly introduced three-step test that was used in the Keltner v. USA, 148 Fed. Class 552 (2020). According to Keltner, an authority’s concerns are “relevant and justified” if: (1) the authority provides compelling reasons for its request for an investigation; (2) the necessity of finality does not outweigh the justification submitted by the agency for the voluntary pre-trial detention; and (3) the scope of the agency’s inquiry is reasonable. Only if all three criteria are met will the court consider pre-trial detention, but even then, pre-trial detention is not guaranteed.

Here the court found that the government did not meet all three factors:

Factor 1 failed because the government’s request for an investigation did not include both citations from the administrative files and affidavits from the authorities that would provide a compelling reason for the pre-trial detention. Mere allegations made by government officials on behalf of the agencies were not enough to convince the court that the agency’s motion was not “just a trial tactic.”

Factor 2 failed because the court found that the VA’s deeply flawed plan was in dire need of finality. In particular, the court pointed to a judicial admission by the government during the June 4, 2021 hearing on the inquiry into the Medline protest. During the hearing, the government admitted that the administrative acts lacked the rational basis necessary to survive the protest, an admission that the court equated with “losing the United States.” This is not an issue that the court believes needs to be dragged on for another six months for the government to lose at a later date. Finalizing now would allow the parties and the government to plan better for the future.

Factor 3 failed because the size of the investigation request was a problematic half a deal. In particular, the request for inquiry elaborated on the VA’s plans to continue broadcasting to the DLA on the Veteran Integrated Service Network (“VISN”) 6 – a broadcast that the VA (conveniently) completed just two days before applying for pre-trial detention. The court has made it clear that it does not approve of the VA infiltration of VISN 6, so we would not be surprised if the court finally resolved this transfer in its final decision on the matter.

Usually courts work hard to show deference to the government. But that’s not the case here – the court is not being remanded and the government doesn’t seem to get what it wants on either of the protests. In the words of the court: “A decision on the matter is imminent.” And while many on the contractor side may find it refreshing that the government is held accountable for a move that annoys many vendors, what is the practical difference between a judgment that transfers from the VA to the DLA? found to be illegal (back to the agencies) as opposed to pre-trial detention so that the agencies can get their ducks in a row for the next six months. Perhaps this means that the VA and DLA are limited in how and when to exercise options under the existing MSPV contracts. However, the VA now knows it cannot plow through the transition to DLA with its head down, hoping for the best; the VA and the DLA have to time-consuming and laboriously cross their Ts and puncture their egos or be dragged back to court in order to answer for their mistakes. While the protests have some issues to clear up, it looks like the MSPV 2.0 providers will fulfill the contracts as planned, albeit with little expectation that the VA will exercise option deadlines. Ultimately, it may be wise for industry players to learn about DLA if they haven’t already. And the VA would be wise to figure out how to legitimately improve the MSPV process, rather than just putting the records on paper to get where they want to go.