Where to Protest: The GAO Versus the CFC

Two Forums, Different Grounds

Practitioners seeking on behalf of a client to challenge a particular Procurement outside the internal processes offered by a Federal Agency are given a choice of two forums: (a) the United States Government Accountability Office (GAO), and (b) the United States Court of Federal Claims (CFC).[1] The GAO forum is non-exclusive.

The GAO is an arm of the Congress and is empowered by 31 U.S.C. § 3552(a) to take action only on violations of statute or regulation affecting a Procurement. Systems Applications & Technologies, Inc. v. United States, Fed. Cl. No. 11-280C, August 25, 2011, 2011 U.S. Claims LEXIS 1784, *72. If GAO decides that Agency action violates a statute or regulation affecting a Procurement, GAO may “recommend,” 31 U.S.C. § 3554(b)(1), that an Agency correct the violation. Agencies which do not adopt GAO recommendations are reported to the Congress, 31 U.S.C. § 3554(e)(1). There is no provision for review of GAO actions save that corrective action taken by Federal Agencies in response to a matter pending before GAO or to a GAO decision may be challenged at the CFC. Honeywell, Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir. 1989).

The CFC is an Executive Branch tribunal, 28 U.S.C. § 171(a), whose Procurement Protest jurisdiction is set out in 28 U.S.C. § 1491(b). Under this jurisdictional statute, the CFC may award declaratory and injunctive relief, and the CFC may award monetary relief, limited to bid preparation or proposal costs. 28 U.S.C. § 1491(b)(2). Final Judgments of the CFC are reviewed, as of right, by the United States Court of Appeals for the Federal Circuit. 28 U.S.C. § 1295(a)(3).

Procurement Protests may be filed with the CFC either Pre-Award, else Post-Award. To succeed on a Pre-Award Procurement Protest, a vendor must establish a non-trivial competitive injury which can be remedied by declaratory or injunctive relief. ICP Northwest, LLC v. United States, 98 Fed. Cl. 29, 35-36 (2011). Success on a Post-Award Procurement Protest requires that an actual bidder or offeror demonstrate that it suffered disparate treatment or particularized harm, and that but for these circumstances, it had a “substantial chance” of receiving an Award under the challenged Procurement.Labatt Food Service, Inc. v. United States, 577 F.3d 1375, 1379-80 (Fed. Cir. 2009).

There are two Grounds for challenges to Agency actions which may be asserted in a Procurement Protest filed with the CFC: (a) Agency actions in violation of statute, or regulation, or controlling Agency guidelines and therefore “not in accordance with law,” 5 U.S.C. § 706(2)(A) , 5 U.S.C. § 706(2)(D), and 28 U.S.C. § 1491(b)(1), Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 n. 5 (Fed. Cir. 2001); else (b) Agency actions which are demonstrated to be “arbitrary, [or] capricious, [or] an abuse of discretion,” 5 U.S.C. 706(2)(A) and 28 U.S.C. 1491(b)(4), Advanced Data Concepts, Inc. v. United States, 216 F.3d 1054, 1057 (Fed. Cir. 2000).

The first of these Procurement Protest Grounds at the CFC is the only Procurement Protest Ground which may be asserted before GAO. The second of these Procurement Protest Grounds is an additional Procurement Protest Ground available at the CFC. Thus, the CFC provides two protest grounds while the GAO only offers one.  This paper analyzes both of these Procurement Protest Grounds available at the CFC.

Violations of Procurement Statute, or Regulation, or Controlling Agency Guidelines

This category of protest may be adjudicated by either the GAO or the CFC.  The statutes affecting a Procurement most frequently at issue in Procurement Protests before the CFC are those set out for the Military Departments in the United States Code, Title 10, Chapter 137, “Procurement Generally,” and for the other Federal Agencies, in Title 41, Chapter 33, “Planning and Solicitation.” The regulations affecting a Procurement most frequently at issue in Procurement Protests before the CFC are those set out in the applicable version of Title 48, Code of Federal Regulations, Parts 1 through 99, the “Federal Acquisition Regulations System.”

Any statute enacted by Congress and any regulation adopted by the Executive Branch to implement a statute may affect a Procurement and may be violated in a particular Procurement.[2] An example is Section 508 of the Rehabilitation Act of 1973, 29 U.S.C. § 794(d), which requires that electronic and information technology procured by Federal Agencies must be accessible to people with disabilities. Allied Technology Group, Inc. v. United States, Fed. Cir. No. 2010-5131, June 9, 2011, 2011 U.S. App. LEXIS 11687, *25.

Pre-Award Procurement Protests most often turn on violations of statute or regulation and do not present occasions for review of challenged Agency actions under the “arbitrary, [or] capricious, [or] an abuse of discretion” Procurement Protest Ground. There are, of course, exceptions to this syllogism, an example being an announced price evaluation methodology successfully challenged as irrational in a Pre-Award Procurement Protest because it did not accurately reflect the cost to the taxpayers. Arch Chemicals, Inc. v. United States, 64 Fed. Cl. 380, 402 (2005).

Agency Actions Demonstrated to be Arbitrary, or Capricious, or Abuses of Discretion

The CFC, unlike the GAO may consider an entire category of protests – actions deemed arbitrary, capricious, or abuses of discretion.  Such agency actions are those for which the Agency has not provided a coherent and reasonable explanation and lack a rational basis. Centech Group, Inc. v. United States, 554 F.3d 1029, 1037 (Fed. Cir. 2009). Obviously, Agency action in violation of statute or regulation is irrational.United States v. Amdahl Corp., 786 F.2d 387, 392-93 (Fed. Cir. 1986).

What about Agency actions taken in good faith?

Simply put, the law requires that Agency actions must be neither arbitrary, nor capricious, nor abuses of discretion, and these are substantive review criteria independent of any violations vel non of statute or regulation. RAMCOR Services Group, Inc. v. United States, 185 F.3d 1286, 1290 (Fed. Cir. 1999). Good faith is not a defense to such Agency actions. Impresa, 238 F.3d at 1333.

There is a four-part test for proof of Agency actions claimed to be arbitrary, or capricious, or an abuse of discretion, and this four-part test is set out in a 1983 Decision of the Supreme Court of theUnited States of America:

“Normally, an agency [decision] would be arbitrary and capricious if the agency has [1] relied on factors which Congress has not intended it to consider, [2] entirely failed to consider an important aspect of the problem, [3] offered an explanation for its decision that runs counter to the evidence before the agency, or [4] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.”

Motor Vehicles Manufacturers Assoc. v. State Farm Mutual, 463U.S. 29, 43 (1983).

An example of element (2) of this four-part test for proof of Agency actions claimed to be arbitrary, or capricious, or an abuse of discretion is CRAssociates, Inc. v. United States, 95 Fed. Cl. 357 (2010). At issue in CRAssociates was an Army Solicitation for facilities and support services as required for a successor Contract to furnish health care services to military beneficiaries out of two facilities to be located in Northern Virginia.

One of the Procurement Protest Grounds asserted in CRAssociates was that the Army had failed to evaluate proposed professional compensation so as to ensure that the successor Contractor’s ability to attract and retain competent professional employees would not be impaired. Id., at 369-70. This is element (2) of the State Farm test.

In fact, the Army had not explicitly conducted this required analysis, and instead the Army argued, from various snippets in the contemporaneous Administrative Record, that the substance of the required analysis had in fact been accomplished, albeit in a disparate fashion. The Court rejected this argument, concluding that the Army could not baste together from these various snippets the set of findings required to be made for a successor Contractor’s professional compensation plan. Id., at 374.

It turned out that the CRAssociates Protester had first filed at GAO and that there the Army Contracting Officer had submitted, as provided by 31 U.S.C. § 3553(b)(2), a post hoc rationalization of his Actions. As required by 31 U.S.C. § 3556, this Contracting Officer Report became a part of the Administrative Record before the CFC. But noting that there is nothing in this statute which requires the CFC to give any particular weight to this post hoc Contracting Officer Report, the CFC in CRAssociates held that such documents could not serve to bring about redemption for the missing consideration of the successor Contractor’s professional compensation plan—“they can neither fill in gaps in the agency’s reasoning for an award nor supply missing documentation of that reasoning.” Id., at 378.

An example of elements (3) and (4) of the four-part test for proof of Agency actions claimed to be arbitrary, or capricious, or an abuse of discretion is EREH Phase I LLC v. United States, 95 Fed. Cl. 108 (2010). Here a Solicitation required that leased premises not be in a flood plain unless the Agency determined “that there is no practicable alternative.” As it turned out, portions of the leased premises (parking spaces, vehicle security station, and portions of the access road and perimeter security fencing) along Arlington Boulevard in Northern Virginia were within a designated flood plain, and the Agency did not make the required determination. Id., at 114-15.

The Agency attempted to support its failure to make this required determination by (a) documents in the Administrative Record and by a submission by a consultant to the successful Offeror, and (b) by an electronic mail exchange between the Agency and the successful Offeror, an electronic mail exchange that consisted of a one-sentence question from the Agency, and less than an hour later, a one-word response from the successful Offeror.

As to (a), the EREH Phase I Court holds that the documents in the Administrative Record do not reflect any informed Agency analysis and that the submission could not have been “rational” because the hand-drawing included with it is not to scale, cites neither authorship nor any information as to when or why it was rendered, and is circular in its conclusion. Id., at 116-17.

As for (b), the EREH Phase I Court holds that this electronic mail exchange demonstrates only the Agency relied on the successful Offeror’s one-word representation and that the Agency did not make its own determination. Here the Court specifically notes that Agency Action which irrationally relies only upon an Offeror’s submission is itself arbitrary, or capricious, or an abuse of discretion. Id., at 117.

The Administrative Record assembled for review of challenged Agency action defines just what it is which may be reviewed by the CFC upon a challenge to a Procurement, i.e., the Administrative Record must be documents relied upon by the Agency when it undertook the challenged Procurement action as well as any documentation which reveals the Agency’s decision-making process. Procurement Protest review is not de novo review of Agency actions and there is a clear distinction between admitting new evidence not before the Agency (improper) and incorporation of materials generated or considered by the Agency itself before the challenge (proper). Joint Venture of Comint Systems Corp. and EyeIT.com, Inc. v. United States, Fed. Cl. Nos. 11-400C & 11-416C, July 15, 2011, 2011 U.S. Claims LEXIS 14332, *22-*27.

Agency actions challenged in a Procurement Protest must pass muster, or not, based on this Administrative Record. As is explained in State Farm, Agency action which is not supported by the documents in the Administrative Record is arbitrary, or capricious, or an abuse of discretion.

Agencies must demonstrate they fairly and reasonably could find the facts as they supposed them to be, and the Court may not meekly accept Agency conclusions at variance with the Administrative Record.Braniff Airways, Inc. v. Civil Aeronautics Board, 379 F.2d 453, 466-67 (D.C. Cir. 1967).

Agency conclusions found at variance with the Administrative Record provide the basis for setting aside a challenged Procurement unless there is no “substantial doubt whether the administrative agency would have made the same ultimate finding with the erroneous findings or inferences removed from the picture.Id., at 466. A challenged Procurement supported by Agency conclusions at variance with the Administrative Record must be set aside unless “a mistake of the administrative body is one that clearly has no bearing on . . . the substance of the decision reached,” Massachusetts Trustees of Eastern Gas & Fuel Associates v. United States, 377 U.S. 235, 248 (1964), else “there is reason to think that the remand might lead to a different result,” Federal Express Corp. v. Mineta, 373 F.3d 112, 118 (D.C. Cir. 2004).

Demonstrated variances between the Administrative Record and Agency action supporting a challenged Procurement are not the only circumstances sufficient to conclude that Agency action lacks a rational basis. Generally, the test is whether the Administrative Record provides a coherent and reasonable explanation of Agency action and whether the Administrative Record demonstrates consideration of relevant factors. PAI Corp. v. United States, 614 F.3d 1347, 1351 (Fed. Cir. 2010).

Challenges to Agency action premised on lack of a rational basis must overcome the presumption that Agencies act in a reasonable and rational manner and thus must go beyond simple disagreement with Agency conclusions or procedures. This burden is elevated when the challenges concern “best value” selections (a weighing of price/cost against perceived technical advantage) or evaluations of technical excellence or quality. Northeast Military Sales, Inc. v. United States, Fed. Cl. No. 11-181C, May 31, 2011,2011 U.S. Claims LEXIS 1091, *16-*17.

Agencies lose the benefit of these presumptions when they ignore principles of integrity, fairness, and openness and engage in gamesmanship to avoid any review of a Procurement. Thus where it is shown that an Agency has simply concocted records to support a challenged Procurement, the Procurement is properly set-aside. California Industrial Facilities Resources, Inc. v. United States, Fed. Cl. No. 11-299C, July 8, 2011, 2011 U.S. Claims LEXIS 1330, *22, *25-*26 (data supporting price reasonableness justification not obtained until long after sole-source justification was signed).

Where the Agency’s decision-making process is revealed in the Administrative Record (and it usually is), then CFC review of the challenged Agency decision is limited to the rationale supplied in those documents, S.E.C. v. Chenery Corp., 332 U.S. 194, 196 (1947) (“[A] reviewing court in dealing with a determination or judgment which an administrative agency alone is authorized to make, must judge the propriety of such action solely on the grounds invoked by the agency. If those grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it considers to be a more adequate or proper basis.”), and the CFC may not supply a different rationale from elsewhere in the Administrative Record. OMV Medical, Inc. v. United States, 219 F.3d 1337, 1344 (Fed. Cir. 2000).

[1] What is a “Procurement” open to such challenges? The statutes provide an answer. A “Procurement” open to challenge is Agency action at any stage “of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” 41 U.S.C. § 111; Distributed Solutions, Inc. v. United States, 539 F.3d 1340, 1345 (Fed. Cir. 2008). Such Agency actions ripe for review are those which are final, not merely tentative or interlocutory; those from which legal consequences will flow, Bennett v. Spear, 520 U.S. 154, 177-78 (1997); and those which have an immediate and severe impact on a private party, Gardner v. Toilet Goods Association, 387 U.S. 167, 170 (1967).

[2] What about Executive Orders and internal Federal Agency operating procedures? Well here the law becomes a little murky.

The accepted mantra is that violations of Executive Orders, which are often issued as managerial direction to Executive Branch Agencies, are not judicially enforceable. But there is a distinction, the same distinction under which the CFC enforces violations of the Federal Acquisition Regulations, and this is that Executive Orders and controlling Agency guidelines implementing or expressly tied to particular statutes are clearly reviewable at the CFC. Knowledge Connections, Inc. v. United States, 79 Fed. Cl. 750, 758 (2009).

Claimed violations of internal Federal Agency procedures are likewise generally not judicially enforceable. This results from the deference afforded Federal Agencies—Federal Agencies are free to change or waive their internal policies, and in the case of Procurement Protests, Source Selection Plans are a frequent instance of internal policies the violation of which are not judicially enforceable. USfalcon, Inc. v. United States, 92 Fed. Cl. 436, 452-53 (2010).

But Executive Orders and internal Federal Agency operating procedures, while not themselves the proper subject of Procurement Protests, can bolster the rationality of Agency Procurement Actions, else may be relied upon along the way to demonstrating, by a preponderance of the evidence, the absence of any rational basis for Agency actions in challenged Procurements. Fort Carson Support Services v. United States, 71 Fed. Cl. 571, 592-93 (2006)