Academic journal article Harvard Law Review

Administrative Law - Bid Protests - Federal Circuit Holds That Agency Was Arbitrary and Capricious in Following a Government Accountability Office Recommendation

Academic journal article Harvard Law Review

Administrative Law - Bid Protests - Federal Circuit Holds That Agency Was Arbitrary and Capricious in Following a Government Accountability Office Recommendation

Article excerpt

The Competition in Contracting Act of 19841 formalized the role of the Government Accountability Office (GAO) as an alternative, independent, (2) and nonjudicial forum for resolving protests alleging agency violations of federal procurement laws. (3) Losing bidders that seek to dispute an agency's selection of the winning contractor have "overwhelmingly preferred" the GAO to other bid-protest forums, such as courts, due partly to the GAO's procurement expertise, lax procedural requirements, and speed. (4) Despite the fact that the GAO's decisions in bid protests are merely nonbinding recommendations, (5) agencies almost always follow them, (6) to such an extent that one might believe GAO decisions are treated as having the de facto force of law. (7) This status is in part due to the significant, though not absolute, deference traditionally afforded GAO recommendations by courts--a deference currently embodied in the Federal Circuit's decision in Honeywell, Inc. v. United States. (8)

It may be concerning that the GAO--a body that possesses expertise about the process of government contracting but not necessarily the substance of what is being contracted for (9)--is given such deference by courts and by agencies with substantive expertise. Recently, in Turner Construction Co. v. United States, (10) the Federal Circuit held that the U.S. Army should not have followed the GAO's recommendation that the Army reverse a contract award decision and exclude the original winner from further consideration due to perceived organizational conflict of interest (OCI) issues. (11) This decision will have the counterintuitive but beneficial result of incentivizing the development of expertise within acquisition agencies and the GAO.

In June 2007, the Army contracted with a subsidiary of AECOM Technology Corporation (AECOM) to prepare the specifications for the construction of a government Hospital (12) and to provide advice during the Army's procurement and proposal-selection process. (13) In June 2008, the Army began its solicitation of construction contractors, (14) eventually selecting Turner Construction's proposal from a field of three competing bidders. (15)

During the solicitation process, one of Turner's minor subcontractors, Ellerbe Becket (EB), (16) was in off-and-on confidential merger talks with AECOM (17)--creating a potential OCI given AECOM's role in advising the Army about whether to select a proposal that included EB as a subcontractor. The announcement of a consummated merger two months after the award decision (18) prompted the losing bidders to file bid protests at the GAO alleging that the award to Turner was invalid due to OCI issues. (19) Although prior to the contract award the Army's Contracting Officer had not conducted a comprehensive investigation into the existence of OCIs, upon the filing of the bid protest the officer conducted and submitted a thorough investigation finding that no OCIs existed prior to the contract award. (20)

Despite the Army's OCI findings, the GAO sustained the bid protest based on its own finding of OCI issues and recommended that the Army recompete the contract while excluding Turner/EB from further consideration. (21) The GAO based its OCI conclusion primarily on a lack of process undertaken by AECOM to prevent an unfair advantage from accruing to Turner/EB--rather than on any finding that Turner/EB actually received an unfair advantage. (22) The Army subsequently announced that it would accept the GAO's recommendation and terminate Turner's contract. (23|)

Turner then filed its own protest in the Court of Federal Claims seeking an injunction to force the Army to reinstate its hospital contract. (24) The court found that "the Army was arbitrary and capricious in implementing the GAO's decision" and ordered the Army to restore Turner's contract. (25) The court found that the GAO's decision lacked a rational basis (26) and "emphasized that the GAO failed to meaningfully consider the [agency's] detailed factual findings and improperly substituted its own judgment for that of the [agency]. …

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