Procurement Licensing Requirement Enjoined As Unduly Restrictive of Competition

Procurement Licensing Requirement Enjoined As Unduly Restrictive of Competition

One of the fundamental principles of federal procurement is that solicitations must allow for full and open competition. Solicitations may include restrictive requirements only to the extent they are necessary to satisfy the agencies’ legitimate needs or as otherwise authorized by law.

The U.S. Court of Federal Claims recently enjoined a federal agency from proceeding with a solicitation after finding that its requirements ran afoul of this principle.

The United States Coast Guard issued a solicitation for the overhaul and repair of aircraft propeller components. The solicitation required that the contract awardee be a licensee of the Original Equipment Manufacturer (“OEM”) of the propellers.

The incumbent contractor filed a pre-award protest challenging the terms of the solicitation. According to the protester, the license requirement was unduly restrictive because the USCG failed to show how it was necessary to meet the USCG’s minimum needs.

According to the USCG, the OEM license was necessary to allow for the highest possible access to proprietary repairs, technical information, and other benefits.

However, the court found there was no support for the USCG’s conclusion that an OEM license actually provided these benefits. The court reached this conclusion because the OEM entered into unique license agreements with differing terms. As a result, simply requiring an offeror to be an OEM licensee meant little without additional context.

Additionally, the court noted that the government admitted that it never viewed an actual OEM license agreement and that it did not actually know what exactly was included in the sole OEM license agreement that existed for propeller system repairs.

In sum, because access to repairs and data were seemingly different in any given OEM license agreement, the court concluded that the USCG did not act rationally in requiring the contractor to be an OEM licensee.

Moreover, the court further concluded that, because the USCG did not actually understand what capabilities were inherent to an OEM licensee, placing the OEM license requirement in the solicitation was unreasonable, especially where—as here—that requirement limited competition.

After finding that the USCG’s error of irrationally including the OEM license requirement in the solicitation prejudiced the protester, the court enjoined the government from proceeding with the solicitation at issue unless and until the OEM license requirement at issue in this case is removed or the government is able to justify that the inclusion of such a provision is necessary to meet its minimum needs.