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Cleveland Assets, LLC v. United States

United States Court of Appeals, Federal Circuit

March 5, 2018

CLEVELAND ASSETS, LLC, Plaintiff-Appellant
v.
UNITED STATES, Defendant-Appellee

         Appeal from the United States Court of Federal Claims in No. 1:17-cv-00277-EDK, Judge Elaine Kaplan.

          Steven D. Gordon, Holland & Knight, LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Mary Beth Bosco, Gordon Griffin, Robert C. MacKichan, Jr.; Elizabeth Jochum, Tysons, VA.

          Kara Westercamp, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Chad A. Readler, Robert E. Kirschman, Jr., Deborah A. Bynum.

          Before Moore, Hughes, and Stoll, Circuit Judges.

          MOORE, CIRCUIT JUDGE.

         Cleveland Assets, LLC appeals the United States Court of Federal Claims' ("Claims Court") order dismissing its pre-award bid protest claim and granting the government's motion for judgment on the administrative record that General Services Administration's choice of maximum rental rate in its acquisition was not arbitrary or capricious or lacking a rational basis. For the reasons discussed below, we affirm.

         Background

         The Federal Bureau of Investigation ("FBI") is currently the sole tenant in a building in Cleveland, Ohio, pursuant to a lease between Cleveland Assets and the General Services Administration ("GSA"). The current lease began on February 1, 2002, and was originally set to expire on January 31, 2012. Due to delays in securing a new lease, the existing lease with Cleveland Assets has been extended multiple times. Pursuant to the terms of the extensions, GSA has paid, and continues to pay, Cleveland Assets a penalty rate of $44.72 per rentable square foot ("PSF") since the expiration of the original 10-year period.

         In accordance with 40 U.S.C. § 3307, GSA must seek the approval of the Senate Committee on Environment and Public Works and the House Committee on Transportation and Infrastructure before obligating funds on a lease exceeding an amount published at GSA's Annual Prospectus Threshold. GSA Annual Prospectus Thresholds, http://www.gsa.gov/annualprospectusthreshold. To secure consideration for approval by the congressional committees, GSA must send the congressional committees a prospectus of the proposed facility, including a brief description of the space and "an estimate of the maximum cost to the Government." 40 U.S.C. § 3307(b).

         In 2009, GSA began preparing a congressional prospectus for a new lease for the Cleveland FBI office. A series of documents demonstrate GSA considered a range of rental values for inclusion in its prospectus. A November 2009 appraisal report concluded that the total gross rent for the type of facility sought by the FBI ranged from $29.48 to $50.47 PSF. An unsigned, undated draft prospectus prepared before 2010 but not approved by GSA, along with a series of other undated and unsigned documents, estimated a maximum proposed rental rate of $42.00 PSF. An undated document titled "Lease Project Data Sheet - FY 2010 Program" projected a maximum rental rate of $50.47 PSF. And a document titled "Analysis of Replacement Lease Rental Rate" set forth an estimated rental rate of $26.00 PSF.

         On December 21, 2010, GSA approved a prospectus with a maximum proposed rental rate of $26.00 PSF and an escalation clause for inflation.[1] By the end of September 2011, both the United States Senate Committee on Environment and Public Works and the United States House of Representatives Committee on Transportation and Infrastructure adopted resolutions approving the prospectus at the $26.00 PSF rate.

         On March 10, 2016, GSA issued a request for expressions of interest in leasing a building for the FBI's Cleveland office. GSA directly invited a subset of the responses received, including Cleveland Assets, to submit proposals to the subsequent Request for Lease Proposals No. 6OH0241 ("RLP"), which was posted on December 7, 2016. The RLP stated that, in accordance with 40 U.S.C. § 3307, GSA would "only award a lease pursuant to this RLP if the offered rental rate d[id] not exceed the Congressionally-imposed rent limitation" of $26.00 PSF. J.A. 1070. The RLP also indicated that negotiations may be conducted, and "GSA will negotiate the rental price for the initial term, any renewal periods, and any other aspect of the offer as deemed necessary." J.A. 1075. It indicated any offeror "will be provided a reasonable opportunity to submit revisions to their initial offer including any cost or price, technical, or other revisions that may result from the negotiations." Id. The RLP stated the lease "will be awarded to the responsible Offeror whose offer will be most advantageous to the Government, " considering a combination of factors including technical quality, site characteristics, and the offeror's qualifications and past performance. Id. For a proposal to be considered responsive, the RLP stated it must include a proposed rental rate "under the prospectus threshold." J.A. 1077.

         On February 28, 2017, the last day proposals under the RLP could be submitted, Cleveland Assets filed the suit underlying this appeal in the Claims Court. Relevant to this appeal, Count II of Cleveland Assets' complaint asserted that the RLP is unlawful because it exceeds the scope of GSA's authority to solicit offers under 40 U.S.C. § 3307. In Counts III and IV of its complaint, Cleveland Assets alleged that the rental cap of $26.00 PSF is unreasonably low, imposes an undue restriction on competition, and shifts all risk to the contractor, thereby negating the technical factors.

         The Claims Court dismissed Count II. The court noted that "[i]t is unclear" whether Cleveland Assets' allegations were sufficient to establish its status as an "interested party" for the purposes of 28 U.S.C. § 1491(b), but "even assuming that such an injury has been alleged, " it held Cleveland Assets failed to demonstrate that it was within the zone of interests protected by 40 U.S.C. § 3307. Cleveland Assets, LLC v. United States, 132 Fed.Cl. 264, 275 (2017). The Claims Court also granted judgment on the administrative record in favor of the ...


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