Government
Contract
Andrews Litigation Reporter
VOLUME 22 h ISSUE 17 h december 29, 2008
Expert Analysis
GAO Protestors: Stand Up for Your Right
To a Stay of Performance
By Jason P. Matechak, Esq., Lawrence S. Sher, Esq., and Steven D. Tibbets, Esq.
When a Government Accountability Office bid protest is timely filed, the Competition in Contracting Act, 31 U.S.C. § 3553, imposes an automatic stay on all
performance of the protested contract. An agency can, under certain limited circumstances, override the CICA stay but can do so only upon a written finding that
performance of the contract is “in the best interests of the United States” or that
other “urgent and compelling circumstances” will not permit waiting for resolution
of the underlying bid protest.”1
GAO protestors can effectively and efficiently challenge
and void agency override decisions.
Although judicial review by the federal courts tends to afford broad deference to
the agency’s override decision, a contractor’s recent success before the U.S. Court of
Federal Claims in e-Management Consultants Inc. v. United States2 demonstrates
that GAO protestors can effectively and efficiently challenge and void agency
override decisions that are not rationally based or not sufficiently supported by
the administrative record.
The e-Management decision serves as instructive guidance to protestors
seeking to enforce a CICA stay in order to prevent an agency from ignoring
congressional intent by continuing contract performance before the merits of the
protest are resolved by the GAO.
Background of the Case
On Sept. 16, 2008, e-Management, the incumbent contractor, filed a bid
protest before the GAO, alleging that the National Highway Transit Safety
Administration had erred and acted with bias in awarding an information
technology services contract to Centech Consulting Corp.3 The protest complied
with applicable time limits regarding notice to the government, so NHTSA was
required under the CICA to stay performance of the contract until the GAO
resolved the protest.
government contract Litigation Reporter
However, NHTSA announced Sept. 24 that it would
override the CICA stay and direct the awardee to begin performing IT services for the agency under the
protested contract.
The agency’s written determination said the override
was in the best interests of the United States because if
performance did not proceed:
•
NHTSA would be without vital services for a
period of time;
•
There were no viable contract vehicles that would
permit the award of an interim contract; and
•
The competition process would be best served
by allowing the awardee to proceed since the
agency had determined that e-Management did
not have a reasonable chance of prevailing on
the merits of its bid protest.
On Sept. 25 e-Management filed a complaint and
emergency motion for a declaratory judgment and injunctive relief with the U.S. Court of Federal Claims.
The parties briefed the underlying issues, and the court
held expedited oral argument. In addition, the parties
submitted briefs concerning the government’s motion to
supplement the agency record by introducing the declarations of two NHTSA employees in an attempt to
provide hindsight rationales for agency actions taken in
connection with the decision to override the CICA stay.
On Oct. 8, less than two-weeks after e-Management
filed its complaint and emergency motion, Judge Emily C.
Hewitt granted the motion for declaratory relief — voiding
the override decision and restoring the CICA stay — and
denied NHTSA’s motion to supplement the record.4
Legal Standards Applicable on Review
Of Override Determinations
Under the Administrative Procedures Act,5 courts
generally will set aside agency override decisions upon a
showing that they are arbitrary and capricious, an abuse
of discretion, or otherwise not in accordance with law.
An agency’s decision is considered arbitrary and
capricious if:
•
The agency relied on factors that Congress did
not intend it to consider;
•
It entirely failed to consider an important aspect
of the problem;
•
It offered an explanation for its decision that
runs counter to the evidence; or
•
The decision is so implausible that it could not
be ascribed to a difference in view or the product
of agency expertise.6
Courts examine whether an agency override decision
violates the APA in the context of the CICA’s fundamental purposes. “The overarching goal of the stay is
preserve competition in contracting and ensure a fair
and effective process at the GAO.”7
“A decision to override the automatic CICA stay
provisions is a very serious matter and requires a determination that the interests of the United States, not just
the agency involved, will be significantly affected.”8
Courts have held that where an agency decides to
override a CICA stay and fails to take into account the
possibility that incumbent contractor personnel could
provide the services being procured under the protested contract award, the determination is arbitrary and
capricious.9
The e-Management Decision
The court in e-Management held that NHTSA’s override decision was arbitrary and capricious. Specifically, it concluded that “NHTSA, by failing to consider
the impact of its override on the procurement system,”
had “failed to consider an important aspect of the
problem” and had “therefore failed to act rationally
and in accordance with law.” The court added that
NHTSA’s override memorandum “failed to meet even
the deferential standards of APA review and the court
must set aside the override.”
The court specified the four operative factors it considered in determining whether the override decision
passed muster under the APA:
•
Whether significant adverse consequences
would occur if the agency did not override the
stay;
•
Whether reasonable alternatives to the override
were available;
•
How the benefits of overriding the stay compared
to the potential costs, including costs associated
with the potential that the protester might
prevail before the GAO; and
•
The impact of the override on the competition
and integrity of the procurement system.10
Addressing the first factor (adverse consequences), the
court acknowledged that NHTSA complained that it had
“neither the staff nor the requisite expertise to maintain
©2009 Thomson Reuters
VOLUME 22 h ISSUE 17 h december 29, 2008
[its IT] systems for several months on its own without
outside support.”
The court recognized, however, that NHTSA did not
state that an interruption in services would necessarily
occur if it observed the CICA stay. The court explained
that “NHTSA has shown some possible adverse consequences of not having an IT contractor but, in light
of the possible availability of reasonable alternatives,
the [override decision] does not support the conclusion that such consequences would necessarily occur if
NHTSA did not override the automatic stay.”
A decision to override the automatic CICA
stay provisions is a very serious matter.
With regard to the second factor (reasonable alternatives), the court considered NHTSA’s explanation that it
could not extend the incumbent contract with e-Management but found this conclusion to be inconsistent with
information in the record.11
Specifically, the administrative record that NHTSA
filed contained communications in which a member
of the agency’s personnel had presented the option of
extending the incumbent contract and analyzed the
method for doing so consistent with available contract
vehicles. The court observed that the agency seemed to
have ignored the options the employee presented. In
addition, the court noted that there was a “lack of evidence of a serious exploration of options for obtaining
temporary IT services.” These factors led the court to
conclude that NHTSA failed “to consider an important
aspect of the problem.”12
The court reasoned that the third factor (cost-benefit
analysis) militated against overriding the stay. Specifically, the court found that NHTSA’s cost-benefit analysis was flawed because it identified the potential cost
of the GAO’s sustaining the protest as “reprocurement
costs.” The court said “one additional cost for an agency
to consider is the cost to the integrity of the procurement
system” and chastised NHTSA for discounting the
importance of this cost.
Evaluating the fourth factor (impact on competition and
procurement integrity), the court concluded that NHTSA’s
claim that it considered such impact was inadequate.13
In particular, the court emphasized that the agency’s
opinion that it believed it had a reasonable chance of
prevailing in the GAO bid protest was irrelevant to the
effect its override might have on procurement integrity.
©2009 Thomson Reuters
According to the court, “The CICA stay was meant
to prevent the ‘fait accompli’ of a contractor establishing a relationship in a new contract with an agency
long before GAO issued its decision.” The court concluded that NHTSA, as a practical matter, failed to
consider whether or how its override decision would
affect competition or procurement integrity.
Thus, e-Management convinced the court that NHTSA’s override decision was arbitrary and capricious because it failed to satisfy any of the four factors, and the
court was persuaded that the agency had acted irrationally and unlawfully in overriding the stay. The court therefore granted e-Management’s motion for a declaratory
judgment and voided the override.
The Agency’s Motion to Supplement
The Record
The court also denied NHTSA’s motion to supplement the record by adding declarations of agency personnel — created after e-Management had filed its action — purporting to explain the agency’s justification
in issuing its override decision. E-Management opposed the motion, arguing that these declarations were
an improper attempt to introduce, post hoc, rationales
for the override decision that were not evidenced by
the documents in the record.
The court explained that supplementation of the record is appropriate in only two situations: when the
record is insufficient for the court to render a decision,
and when the issues are so complex or technical that
the supplementary evidence is “evidence without which
the court cannot fully understand the issues.”14
The court found that neither situation was present
in e-Management’s case and cautioned that NHTSA
could always supplement the record if the court were
to defer to the government’s claim that “additional information is needed to show that an agency possessed
‘sufficient’ information to decide a matter.”
In denying NHTSA’s motion to supplement the record,
the court concluded that the supplemental declarations,
“prepared after the start of litigation,” were “written, intentionally or not, with the perspective obtained
through the ‘lens of litigation,’” and thus the agency’s
override decision and the administrative record had to
“stand on their own.”
Lessons Learned
The e-Management case illustrates that an agency’s
decision to override a CICA stay should be carefully
government contract Litigation Reporter
examined by the protester and evaluated critically
against the four-factor test identified above to ensure
its literal compliance with the APA — that the agency
rationally explained the reasons why the override is in
the “best interests” of the United States; as opposed to
merely agency preferences.
Protesters should be satisfied that the
override decision is well-supported
by the contemporaneous record.
Protesters also should be satisfied that the override
decision is well-supported by the contemporaneous
record. If an agency fails in either of these regards,
protesting contractors should not merely accept the
agency’s override decision. Rather, if the agency’s written rationale is implausible or irrational based on the
facts of the protested procurement and the contemporaneous agency record, protesters should aggressively
stand up for their right to stay contract performance
under the CICA.
The e-Management case further demonstrates that a
protestor’s challenge to an agency’s override decision
of a CICA stay can be conducted efficiently and timely
concluded. As e-Management’s experience shows, by
filing a complaint supported by a well-researched and
supported motion, a protester can swiftly and effectively prevent an agency from moving forward with a
contract awarded to another party and ensure that the
interests of competition and procurement integrity are
preserved.
Finally, the case illustrates that protestors can successfully limit judicial review of the written agency
override decision itself and the contemporaneous
agency record and prevent the government from trying to justify improper agency override actions with
post hoc rationalizations developed through the lens
of litigation.
Notes
1
2
3
4
31 U.S.C. § 3553(d)(3)(c).
E-Management Consultants v. United States, 84 Fed. Cl. 1 (Fed.
Cl. Oct. 8, 2008).
Protest of e-Management Consultants Inc., GAO Docket No.
B-400585.1.
In some instances, the U.S. Court of Federal Claims has held that
declaratory relief is sufficient to set aside an override decision in
order to achieve the status quo CICA is designed to maintain.
Advanced Sys. Dev. v. United States, 72 Fed. Cl. 25, at 37 (Fed.
Cl. 2006). In other instances, however, the court has held that
injunctive relief is necessary to restore the status quo of the
CICA stay. PGBA LLC v. United States, 57 Fed. Cl. 655, 663 (Fed.
Cl. 2003).
5
Advanced Sys, 72 Fed. Cl. at 31.
6
Id. at 30; Altos Fed. Group v. United States, 60 Fed. Cl. 832, 835
(Fed. Cl. 2004).
7
Advanced Sys., 72 Fed. Cl. at 31.
8
Reilly’s Wholesale Produce v. United States, 73 Fed. Cl. 705, 707
(Fed. Cl. 2006).
9
Advanced Sys., 72 Fed. Cl. at 32-33; PGBA, 57 Fed. Cl. at 662.
10
The court cited Superior Helicopter v. United States, 78 Fed. Cl.
181, 189 (Fed. Cl. 2007) (citing Reilly’s Wholesale Produce, 73
Fed. Cl. 705), as support for its consideration of these particular
four factors.
11
The court noted that many of the government’s arguments
for failing to pursue reasonable alternatives were “reflective of
problems of the government’s own making.” E-Management,
84 Fed. Cl. at n. 10.
12
The court quoted Motor Vehicle Manufacturers Association v.
State Farm, 463 U.S. 29, 43 (1983).
13
The court said, “The claimed consideration of the impact on
the procurement system do not (sic) recognize or vindicate the
purpose of the automatic stay.”
14
The court quoted Al Ghanim Combined Group Co. v. United
States, 56 Fed. Cl. 502, 508 (Fed. Cl. 2003).
Jason P. Matechak and Lawrence S. Sher are
partners, and Steven D. Tibbets is an associate, with
Reed Smith LLP in Washington, where they practice in
the global regulatory enforcement group and represent
protestors and awardees in all aspects of government
contract disputes. Mr. Matechak and Mr. Sher served as
counsel for plaintiff e-Management Consultants Inc. in
the decision highlighted in this article.
©2009 Thomson Reuters. This publication was created to provide
you with accurate and authoritative information concerning the subject
matter covered, however it may not necessarily have been prepared
by persons licensed to practice law in a particular jurisdiction. The
publisher is not engaged in rendering legal or other professional advice,
and this publication is not a substitute for the advice of an attorney.
If you require legal or other expert advice, you should seek the services
of a competent attorney or other professional.
For authorization to photocopy, please contact the Copyright Clearance
Center at 222 Rosewood Drive, Danvers, MA 01923, USA (978) 750-8400;
fax (978) 646-8600 or West’s Copyright Services at 610 Opperman
Drive, Eagan, MN 55123, fax (651) 687-7551. Please outline the specific
material involved, the number of copies you wish to distribute and the
purpose or format of the use.
For subscription information, please visit www.West.Thomson.com.
©2009 Thomson Reuters