United States: COFC Splits With GAO On IDIQ Awardee's Standing To Protest Additional Awards

Last Updated: May 11 2016
Article by Daniel E. Chudd and Locke Bell

The Court of Federal Claims signaled recently, in a split with Government Accountability Office (GAO) case law, that the court would entertain a bid protest brought by an Indefinite Delivery Indefinite Quantity (IDIQ) contract awardee challenging an agency's decision to award additional contracts under the same solicitation.

In Nat'l Air Cargo Grp., Inc. v. United States, No. 16-362C, Judge Lettow held that increased competition for task orders under an IDIQ contract could constitute a "non-trivial competitive injury," creating standing in court to challenge an award to another contractor where the Government allegedly failed to follow the terms of a solicitation or applicable procurement law. This directly contradicts GAO's ruling on the same issue and facts in Nat'l Air Cargo Grp., Inc., B-411830.2, Mar. 9, 2016, 2016 CPD ¶ 85, in which GAO stated that, "where a solicitation contemplates multiple awards, an existing contract awardee is not an interested party to challenge the agency's decision to award another contract." GAO's refusal in this regard, coupled with GAO's jurisdictional limits prohibiting consideration of protests challenging task order awards under $10 million, can often leave parties with no means of recourse to challenge an agency's alleged improper or unlawful inclusion of an IDIQ contractor in the potential task order awardee pool. The court's ruling in Nat'l Air Cargo may change that.

In both the initial GAO protest and the subsequent protest at the court, National Air challenged the United States Transportation Command's ("TRANSCOM's") decision to award a contract for international cargo shipping services to United Air Lines after the agency had already awarded IDIQ contracts to five other providers, including National Air. Specifically, National Air alleged that TRANSCOM violated the terms of the solicitation by awarding more than four IDIQ contracts, as originally anticipated, and by "reopening" competition to award a sixth contract to United without following procedures outlined in the solicitation. National Air additionally argued that TRANSCOM unreasonably evaluated United's past performance.

An initial string of protests at GAO and the court led TRANSCOM to voluntarily take corrective action. After reevaluating proposals, TRANSCOM affirmed its decision to award a contract to all six awardees. National Air again filed a protest at GAO, which GAO dismissed, finding that National Air was not an "interested party," as required by GAO's Bid Protest Regulations, 4 C.F.R. § 21.0(a)(1). According to GAO, National Air "did not explain why it believes that the addition of United's contract will result in National receiving a volume of orders valued less than its minimum guarantee or why a sixth award will prevent National from competing for future task orders."  GAO noted that, although the addition of a sixth awardee had the potential to increase competition at the task order level, it would not necessarily do so because IDIQ contract holders were not required to compete for future orders. Further, GAO noted that the addition of United would not reduce the total volume of orders issued. GAO cited its decision in Recon Optical, Inc.; Lockheed-Martin Corp., Fairchild Sys., B-272239, B-272239.2, July 17, 1996, 96-2-CPD ¶ 21 at 3-4, for the proposition that "to constitute a cognizable protest when a solicitation contemplates multiple awards, an existing contract holder must credibly allege direct economic harm in order to challenge the award of another contract." Because National Air had failed to make such an assertion, according to GAO, National Air was not an interested party to challenge TRANSCOM's award to United.

National Air filed a subsequent protest at the court, in response to which the Government filed a motion to dismiss for lack of standing. National Air filed a cross-motion seeking a preliminary injunction.

Before reaching the issue of National Air's status as an "interested party" with standing, Judge Lettow first addressed the court's jurisdiction under the Tucker Act, 28 U.S.C. § 1491(b)(1), to hear the protest. As GAO recently held in Aegis Defense Servs., LLC, B‑412755, Mar. 25, 2016, 2016 CPD ¶ 98 at 3, the Government argued that National Air, as a contract awardee, was categorically precluded from bringing a bid protest, regardless of any alleged economic interest. Judge Lettow disagreed, pointing to Systems Application & Techs., Inc. v. United States, 691 F.3d 1374 (Fed. Cir. 2012) as a case where a contract awardee was permitted to file a bid protest in the court. As Judge Lettow notes in his decision, the Federal Circuit in Systems Application stated that the protester's status as the contract awardee was not material to the question of jurisdiction. GAO in Aegis, on the other hand, limited the Systems Application holding to cases where a proposed corrective action essentially returned the procurement to a pre-award status.

In fact, in Aegis, GAO cited for support many of the same Court of Federal Claims cases Judge Lettow distinguished in Nat'l Air Cargo, though in many instances the distinction is less than clear.  For instance, GAO in Aegis quoted Outdoor Venture Corp. v. United States, 100 Fed. Cl. 146, 152 (2011) (Hewitt, C.J.), which states:

Once a bidder has received a contract, it is no longer an actual or prospective bidder or offeror with regard to the particular procurement. Instead, the bidder has become an awardee, who is not an interested party for purposes of 28 U.S.C. § 1491(b)(1) and therefore lacks standing to bring a bid protest to protect its award.

In Nat'l Air Cargo, Judge Lettow does not address this language specifically, but rather lumps the court's decision in Outdoor Venture into a group of cases "holding that claims by an existing contractor on its contract or 'contract administration' claims, which are within the exclusive remedial scheme of the Contract Disputes Act ('CDA')." In those cases, according to Judge Lettow, the contractors alleged violations of rights arising out of existing contracts with the Government. By contrast, National Air alleged a violation of procurement law arising out of TRANSCOM's selection of awardees, and therefore its protest was not covered by the CDA.

Having determined that a parties status as a contract awardee does not, by itself, deprive the court of the court's protest jurisdiction, Judge Lettow moved on to the issue of standing. Like the GAO, the court requires a protester to be an "interested party" to have standing to bring a bid protest. Indeed, the court and GAO both define an interested party to be "an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract."  The court in Nat'l Air Cargo split with GAO, however, in its definition of "direct economic interest." In contrast to GAO, which in Nat'l Air Cargo stated that "[a] protester is not an interested party where it would not be in line for contract award were its protest to be sustained," the court held that "not all protesters seek the award of a contract" and recognized that the nature of a protest will dictate what factors may show a direct economic interest.

Judge Lettow, in Nat'l Air Cargo, identified two standards the court will apply depending on the nature of the protest at hand. In the more common type of bid protest, where a disappointed offeror seeks award, the protester must show that, but for the Government's actions, it would have had a "substantial chance" of winning the award. However, in cases where the "substantial chance" test is inapplicable – for instance, where the protester has already received award – the protester must instead demonstrate "a non-trivial competitive injury which can be redressed by judicial relief." As the court was ruling on the Government's Rule 12(b) motion to dismiss, it viewed the facts as they were most favorable to National Air to determine whether such a non-trivial competitive injury existed for the purposes of standing. Thus, whereas GAO required National Air to show as a preliminary matter that National Air would be prevented from competing for future task orders or would receive less than the stated $2,500 minimum value on the contract, the court found that, if National Air's alleged facts were correct, the competition for a total of nearly $296 million of task orders available to the IDIQ pool would be affected to National Air's detriment. Directly calling out GAO's decision, the court noted that the standard $2,500 minimum "satisfies the law of consideration, but it does not mean that IDIQ contractors lack a 'direct economic interest' in the competition for task orders." Instead, because the Government's alleged misconduct would significantly increase competition, National Air would be prejudiced by a non-trivial competitive injury and therefore had standing to protest.

Although the court denied the Government's motion to dismiss, National Air was similarly unsuccessful in its cross-motion for preliminary injunction, as the court held that National Air had failed to prove a substantial likelihood of prevailing on the merits of its protest. Nevertheless, the court's holding with regard to standing could have a significant effect on the court's bid protest jurisprudence, and may affect future GAO decisions. Although GAO and the court derive their standards for standing from different sources – GAO from 4 C.F.R. § 21.0(a)(1) and the court from the Tucker Act, 28 U.S.C. § 1491(b)(1) – the definitional language is identical, and Judge Lettow's decision clearly presents his disagreement with GAO's interpretation of that language.

When it all boils down, though, the GAO's and the court's decisions differ primarily in the angle from which they approach National Air's assertion that it will be competitively harmed by the introduction of United into the IDIQ pool. The court's willingness to take National Air at its word that it will face a non-trivial competitive injury was generated in large part by the fact that the court was viewing the standing issue through the lens of the Government's Rule 12(b) motion to dismiss, in addition to the Government's apparent admission that United will be a significant source of competition at the task order level. Perhaps if the court were considering the standing question while ruling on motions for judgment on the administrative record, the court would require National Air to more affirmatively prove this injury, as GAO did. Regardless, Nat'l Air Cargo signals the court's recognition that increased competition for task orders under a multiple-award IDIQ contract may create a competitive injury that provides contract awardees standing to challenge additional IDIQ contract awards.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Morrison & Foerster LLP. All rights reserved

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Daniel E. Chudd
Locke Bell
 
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