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January 6, 2020

Federal Circuit Provides Clues On Competition In Contracting Issue

Aerospace & Defense Law360, Appellate Law360, Government Contracts Law360, Hospitality Law360

US Court of Federal Claims judges have long been divided as to the standards that apply when reviewing an agency decision to override the automatic Competition in Contracting Act stay in response to a US Government Accountability Office protest. Those hoping the US Court of Appeals for the Federal Circuit might clarify the standards for CICA override challenges may feel dissatisfied with its resolution of Safeguard Base Operations LLC v. United States.1

Instead of reaching the merits, the Federal Circuit dismissed the appeal as moot in a nonprecedential decision. The panel agreed with the government and the awardee that Safeguard's appeal was moot because the GAO had denied its bid protest, which would have terminated the CICA stay even in the absence of a US Department of Homeland Security's override.2 The Safeguard decision does, however, provide meaningful insight into the fate of future CICA override challenges:

  • By dismissing the appeal as moot primarily because the GAO decided the underlying protest long before the Federal Circuit decided the appeal, the Safeguard decision implicitly suggests that most, if not all, CICA override appeals would suffer the same fate. It is difficult to imagine a realistic scenario where the Federal Circuit might decide an appeal within the 100-day timeframe for GAO protests. That being said, because the opinion is designated as nonprecedential and rests on somewhat fact-specific mootness findings, a future panel could disagree with or distinguish the decision and consider the merits of a CICA override challenge.
  • Assuming the Federal Circuit does not weigh in, CICA override challenges are left largely to the discretion of the assigned Court of Federal Claims judge. Without binding guidance, the Court of Federal Claims judges remain divided as to the standards that apply in CICA override challenges. This often has the practical impact of forcing parties to CICA override litigation to brief their cases against several alternative standards.

Although nonprecedential, the decision includes a not-so-subtle suggestion that override decisions should be reviewed under the general Administrative Procedure Act standard, as opposed to more demanding or nuanced standards particular to bid protest litigation. Parties to CICA override challenges should be prepared to address this language in the Safeguard opinion.

It will be interesting to see whether the protester petitions for en banc rehearing, or whether any party seeks to have the Safeguard decision redesignated as precedential.3 The practice notes to Federal Circuit Rule 35 warn that a "petition for rehearing en banc is rarely appropriate if the appeal was the subject of a nonprecedential opinion by the panel of judges that heard it."

While this article focuses on Safeguard, it is noteworthy that this marks the Federal Circuit's third significant, nonprecedential procurement decision of 2019.

In Secretary of the Army v. Kellogg Brown & Root Services Inc., a merits panel provided helpful (but nonprecedential) analysis of the notoriously complex line of decisions following the Federal Circuit's decision in M. Maropakis Carpentry Inc. v. US, as well as calculating interest for Contract Disputes Act claims.4

In American Relocation Connections LLC v. United States, a panel of three of the Federal Circuit's most recently appointed judges provided significant (but nonprecedential) analysis of the prejudice requirement in bid protests.5

These nonprecedential decisions reinforce that it is important for practitioners to: (1) be mindful of whether a decision carries precedential weight and binds future merits panels, and (2) not focus exclusively on precedential procurement opinions, instead keeping an eye on the Federal Circuit's full docket for insight as how the judges decide government contract appeals.6

Context for CICA Override Challenges

CICA override challenges are a special flavor of bid protest litigation. One of the most significant features of the CICA is the automatic stay. Assuming compliance with strict timeliness requirements, once the GAO notifies an agency of a pre-award protest, the agency may not make award until the GAO resolves the protest. In the context of a post-award protest, the agency must automatically stay performance of the protested contract award until the GAO protest is resolved.7

Critical here — by statute, the GAO must issue its decision with 100 days from the date the protest is filed, effectively limiting the potential stay duration.8 Absent this automatic stay, successful protesters would often be denied a meaningful remedy unless they obtained a preliminary injunction from the Court of Federal Claims.

The CICA provides that agencies may, in narrow circumstances, override the automatic stay and proceed with a procurement as the GAO protest process unfolds. For both pre- and post-award protests, override may be justified by "a written finding that urgent and compelling circumstances which significantly affect interests of the United States will not permit waiting for the decision."9

For post-award protests, an additional basis for overriding the CICA stay exists where "performance of the contract is in the best interests of the United States."10 These are referred to as the "best interests" and "urgent and compelling" standards for CICA stay overrides. The override decision is documented in a written "determination and findings" document.

Other than stating these authorities for overriding a CICA stay, neither CICA nor the Federal Acquisition Regulations give agencies guidance on the standards to consider when drafting a determination and findings document to support a CICA override. Instead, the primary guidance comes from Court of Federal Claims decisions.

The Federal Circuit confirmed in RAMCOR Services Group Inc. v. United States that the Court of Federal Claims has jurisdiction to decide a protester's challenge to an override decision.11 Following RAMCOR, the Court of Federal Claims developed a complex and often conflicting body of case law addressing the legal standards used to review an override decision. The most prominent of these opinions came in 2006 from Reilly's Wholesale Produce v. United States.12

The Reilly's opinion explained that, while "override decisions are, by nature, fact specific, it is possible to distill from the relevant cases a variety of factors that an agency must consider in making an override decision based on urgent and compelling circumstances."13 The Reilly's decision then identifies four factors for consideration:

(i) whether significant adverse consequences will necessarily occur if the stay is not overridden, (ii) conversely whether reasonable alternatives to the override exist that would adequately address the circumstances presented, (iii) how the potential cost of proceeding with the override, including the costs associated with the potential that the GAO might sustain the protest, compare to the benefits associated with the approach being considered for addressing the agency's needs, and (iv) the impact of the override on competition and the integrity of the procurement systems, as reflected in the [CICA].14

While almost any CICA override challenge will likely address Reilly's to some extent, the Court of Federal Claims judges are divided on many critical aspects of how those factors should be applied, if at all:

  • Some decisions hold that an agency failure to fully consider and address even one of the Reilly's factors is arbitrary.15
  • Some reject Reilly's altogether, finding that the only appropriate standard is the APA's general arbitrary and capricious standard of review and declining to require agencies to address any specific element in the override D&F.16
  • Others engage with the Reilly's analysis but decide the case more broadly in terms of the general APA standard.17
  • The decisions are divided as to whether the Reilly's factors are limited to overrides invoking "urgent and compelling" circumstances or whether they extend to overrides that invoke a "best interests" justification.18
  • The decisions are also divided as to whether a plaintiff has to separately prove entitlement to injunctive relief in order to overturn the stay, or whether defeating the override under the Reilly's test is adequate to restore the stay.19

This conflicting body of caselaw leaves agencies and protesters in a tough position. It is difficult (if not impossible) to anticipate what standards will apply in an override challenge, at least until a Court of Federal Claims judge is assigned to the case. Even then, not every judge will have published a definitive position on each issue relevant to a CICA override challenge.

This often has the practical impact of requiring the parties to brief their (likely expedited) case against multiple alternative standards. With this context, it is not surprising that many in the procurement community have long anticipated that the Federal Circuit would weigh in and add some clarity.

The Safeguard Base Operations Protest, Appeal & Dismissal

Safeguard filed a protest at the GAO in September 2018, challenging a DHS contract award. The DHS overrode the CICA stay, and Safeguard filed suit in October 2018 at the Court of Federal Claims seeking a temporary restraining order and preliminary injunction setting aside the CICA stay override.

By the end of October 2018, the Court of Federal Claims denied Safeguard's motions. By decision issued Dec. 14, 2018, the GAO denied Safeguard's protest.20

Safeguard appealed, arguing that the Court of Federal Claims should have strictly applied the Reilly's factors. Almost a full year after the GAO denied Safeguard's initial protest, on Dec. 13, 2019, the Federal Circuit dismissed Safeguard's appeal as moot in a nonprecedential decision. The unanimous decision was authored by Judge Alan Lourie and joined by Judges Kimberly Moore and Raymond Chen.

The panel agreed with the government and the awardee that "Safeguard's appeal is now moot because the GAO has denied its bid protest, and that decision would have terminated the CICA stay even in the absence of DHS's override."21 The panel rejected Safeguard's argument that deciding the CICA override issues could impact Safeguard's separate appeal from the Court of Federal Claim's decision denying the merits of Safeguard's protest.

The panel also rejected the argument that Safeguard's appeal qualified for the narrow mootness exception for issues capable of repetition, yet evading review. Rejecting Safeguard's attempted analogy to the US Supreme Court's mootness analysis in Kingdomware Technologies Inc. v. US, the panel describes the attenuated chain of events that would need to occur for Safeguard's CICA override challenge to repeat itself: Safeguard — which has never received a federal contract22 — would have to submit another unsuccessful bid, file a GAO protest, and suffer another CICA stay override. Moreover, Safeguard would have to show that the CICA stay override occurred because the agency was not required to justify its decision in light of the Reilly's factors.23

The decision couches its holding on the panel's finding that: "Safeguard has not shown a reasonable likelihood that it will be subject to the same action again, and thus it has not presented an exceptional situation justifying invocation of the 'capable of repetition yet evading review' exception to mootness."24

Nonprecedential, but Important Guidance

Although nonprecedential, the Safeguard decision does speak to the standard of review applicable to CICA override challenges. Specifically, the panel decision includes language that seems to cast doubt on the idea that agencies must address the Reilly's factors to justify an override, or that the Court of Federal Claims must apply the Reilly's framework.

Instead, the Safeguard opinion seems to reaffirm that the Court of Federal Claims reviews protests through the APA's general arbitrary and capricious standard. In doing so, the decision cites Federal Circuit precedent for the proposition that Court of Federal Claims decisions are not binding in future Court of Federal Claims cases. It also cites the Federal Circuit's recent decision in Dell Federal Systems LP v. US, which rejected the Court of Federal Claims' application of a heightened "narrow targeting" standard when reviewing corrective action protests:

We note that the Reilly's factors do not even bind the Claims Court, AINS, Inc. v. United States, 1336 n.1 (Fed. Cir. 2004), abrogated on other grounds by Slattery v. United States, 635 F.3d 1298 (Fed. Cir. 2011), let alone comprise an indispensable aspect of an agency rational basis. Cf. Dell Fed. Sys., L.P. v. United States, 906 F.3d 982, 992 (Fed. Cir. 2018) (holding that "highly deferential" rational basis test governed Claims Court review of agency action for purposes of deciding injunctive relief in protest of bid reopening).25

Takeaways

Safeguard offers several important takeaways.

First, Safeguard suggests that the Federal Circuit may never decide the merits of an appeal from a Court of Federal Claims' override decision. Although perhaps conceivable through some series of emergency and/or interlocutory motions for stay pending appeal, expedited proceedings, petition for writ of mandamus, etc., it is difficult to conceive of a realistic circumstance where the Federal Circuit could receive full briefing and decide an appeal of a Court of Federal Claims' decision in a CICA override challenge before the 100-day GAO protest deadline expires.

As mentioned above, the Federal Circuit's opinion in Safeguard came almost a full year after the GAO denied Safeguard's protest. Even that outcome was relatively quick, as the Federal Circuit's own statistics reflect that the median time for deciding an appeal reached 15 months in FY 2019.26

Second, because the Safeguard decision is designated as nonprecedential and rests on somewhat fact-specific mootness findings, a future panel could disagree with or distinguish the Safeguard decision and find that the appeal of a CICA override challenge does pass the mootness bar.

Third, assuming the Federal Circuit does not weigh in to clarify the standards that apply to CICA override challenges, the default rule seems to be that any given override challenge will be decided largely at the discretion of the assigned Court of Federal Claims judge. As discussed above, many of those judges have expressed differing views on many of the most important issues relevant to CICA overrides.

Accordingly, the safest practice for practitioners will often be to take a conservative approach and cover all bases when preparing a decision and findings document, or motion for temporary restraining order or preliminary injunction. That may require addressing alternative standards for many issues, particularly if the assigned judge has not issued a definitive position on any given CICA override issue.

Fourth, even though the Federal Circuit's Safeguard decision is not precedential, it should not be ignored. Beyond acknowledging that the final word will likely fall to the assigned Court of Federal Claims judge, parties to CICA override litigation should also be prepared to grapple with the panel's commentary regarding the nonbinding nature of Reilly's and the significance of the Dell Federal Services decision.

At bottom, Safeguard may not have been the precedential guidance that some in the procurement community hoped would finally unify and clarify the standards applicable to CICA override challenges. But, the decision does offer several important insights regarding the future of CICA override challenges.

  1. Safeguard Base Operations LLC v. United States, No. 2019-1160, 2019 WL 6799643 (Dec. 13, 2019

  2. Id. at 4-5

  3. See Federal Circuit Rule 32.1(e), Rule 35.

  4. Army v. Kellogg Brown & Root Services. Inc., 2018-1022, 2019 WL 2932769 (July 9, 2019).

  5. American Relocation Connections LLC v. United States, 2019-1245, 2019 WL 5092892 (Oct. 11, 2019).

  6. See also The Hon. Jimmie v. Reyna & Nathaniel E. Castellano, "Successful Advocacy in Government Contracts Appeals Before the Federal Circuit: Context Is Key," 46 Pub. Cont. L.J. 209 (2016).

  7. 31 U.S.C. §§ 3553(c)(1), 3553(d)(3)(A).

  8. 31 U.S.C. § 3554(a)(1).

  9. 31 U.S.C. §§ 3553(c)(2), 3553(d)(3)(C).

  10. 31 U.S.C. § 3553(d)(3)(C).

  11. RAMCOR Services Group Inc. v. United States,185 F.3d 1286 (Fed. Cir. 1999).

  12. Reilly's Wholesale Produce v. United States, 73 Fed. Cl. 705, 709 (2006).

  13. Id. at 711.

  14. Id. (internal citations omitted).

  15. See Nortel Gov't Sols. v. United States, 84 Fed. Cl. 243, 247-48 (2008).

  16. See Dyncorp International LLC v. United States, 113 Fed. Cl. 298, 302 & n.4 (2013); PlanetSpace Inc. v. United States, 86 Fed. Cl. 566, 567-68 (2009); Frontline Healthcare Workers Safety Foundation Ltd. v. United States, No. 10-17C, 2010 WL637790 (Fed. Cl. Feb 4, 2010).

  17. See The Analysis Grp. LLC v. United States, No. 09-542C, 2009 WL 3747171 at *3 (Fed. Cl. Nov. 5, 2009).

  18. See PMTech Inc. v. United States, 95 Fed. Cl. 330, 344-45 (2010).

  19. See e.g., Reilly's, 73 Fed. Cl. at 708-09 n.7;Superior Helicopter LLC v. United States, 78 Fed. Cl. 181, 194 (2007);Supreme Foodservice GmbH v. United States, 109 Fed. Cl. 369, 396-97 (2013).

  20. Safeguard Base Operations, 2019-1160 at 2-4.

  21. Id. at 4-5.

  22. As discussed at length during the oral argument, the protester was a joint venture.

  23. Id. at 6.

  24. Id. at 7.

  25. Id. at 6-7.

  26. Median Disposition Time for Cases Decided by Merits Panels

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