Federal Contracting Disputes: Do All Roads Lead to Rome? Part I
“All Roads Lead to Rome,” has come to mean that one can reach the same result in many different ways.[1] Putting aside ancient history, when a government contractor decides to protest a bid or make a claim on a federal contract, there is more than one way to approach the effort. This article explores those options, but often, whether protesting a bid or making a claim, the best option may be the Court of Federal Claims.
This article is divided into two parts. The first part introduces two hypothetical clients with government contract issues. One client has a claim for additional time and money. The other client has an issue with the contract award to a competitor. Both of these post-award disputes require analysis of several factors when deciding whether and how to protest a government contract or bring a claim. The second part of this article further examines a bid protest in greater detail.
Imagine you have a client, Annie. She owns a small construction company that she inherited from her grandmother, who won it in a poker game in Hallandale in the 1930s (yes — women played poker in Hallandale back then!).[2] Imagine Annie secured a lucrative federal contract with the Department of Transportation (DOT) to build several public rest stops along a new federal highway. She hired several new employees and times were good. Now imagine in the middle of the contract, Annie’s contracting officer (CO) at the DOT changes her contract. She is told to add several new features to her roadside rest stops and upgrade many of the materials originally approved. The changes will cost a lot more in time and money. Annie’s informal discussions with the CO fail to result in any revisions to the contract sum or completion time. She comes to you to see about what she can do. Her DOT contract, which seemed like a dream come true at the time she secured it, is now a nightmare threatening to take her 90-year-old company down with it.
Now imagine you have a second client, Betty, a service-disabled veteran. She tried for years to find a good federal contract for her portable heating and air conditioning company — a contract both well-suited for her expertise and large enough to be worth the lengthy process she knew would be required to get the contract award. Recently, the COVID-19 pandemic created a need that Betty’s company was particularly qualified to fill — providing portable air purification systems under an Environmental Protection Agency (EPA) solicitation for federal buildings throughout Florida. When Betty saw the request for proposal (RFP), she was sure she had a fair shot at receiving the award, so she spent months preparing her bid. Unfortunately, the contract was awarded to her competitor. Betty feels certain that her Washington-state-based competitor is less qualified to do the job. Betty is confident that her company is an overall better fit, not just geographically, but also with superior equipment. She comes to you to see what she can do.
Both of your clients need help dealing with the largest purchaser of goods and services in the world — the U.S. federal government. Without accounting for COVID-19 pandemic spending, recent U.S. government spending on federal contracts reached nearly $600 billion.[3] Of that figure, over $200 billion came from agencies other than the Department of Defense.[4] And of that $200 billion, over $165 million of it was for services, rather than products.[5] Over 80% of these contracts were awarded competitively under the governing rules of the federal government’s procurement of goods and services regulations, the Federal Acquisitions Regulations (FAR), a collection of principal rules codified at Ch. 1 of Tit. 48 of the Code of Federal Regulations.[6]
The government must set aside 23% of its contract awards for small businesses like Annie’s and Betty’s.[7] Within those contracting goals, federal agencies are required to award a certain percentage of small business contracts to women-owned businesses, to small, disadvantaged businesses, to service-disabled veteran-owned small businesses, and to businesses located in certain HUBZone areas.[8] Moreover, every federal government purchase made with a value between a micro-purchase threshold and a simplified acquisition threshold must be automatically and exclusively set aside for small businesses.[9] In those cases, the “rule of two” must be implemented, i.e., at least two or more responsible small businesses must be capable of performing the service or providing the product competitively in terms of price, quality, and delivery time.[10]
Just as it does in the country at large, in Florida, the federal government buys everything from complicated defense equipment to janitorial services. In 2018, the Florida Procurement Technical Assistance Center (PTAC), which is a partnership program with the Florida Small Business Development Center, assisted Florida businesses in securing over $520 million in federal government contract awards.[11]
But although Annie and Betty are both women-owned small businesses, their legal needs are distinct. In Annie’s case, she wants to be paid for changes in her contract. She can either file a request for equitable adjustment (REA), or file a claim against the DOT, either at the Civilian Board of Contract Appeals (CBCA) or in the Court of Federal Claims (COFC). In Betty’s case, she can file a bid protest at the Government Accountability Office (GAO) or at the COFC. After careful analysis, however, the COFC may serve both of them best.
Annie’s Contract Dispute
Annie can first file an REA, or move forward with a claim, but even if the CO denies her REA, she can still file a claim, which starts, again, with the CO.
• The REA — While Annie’s DOT contract’s “changes” clause authorizes the government to make changes to the scope of her contract, it typically also provides that if scope changes result in Annie having to spend more time and money, then the government must compensate her.
Pursuant to statute, Annie’s REA should include a detailed breakdown of direct costs, markups, and the proposed change to the time for completion specified in her contract.[12] Annie’s REA is considered part of the government’s administration of its contracts, which means that Annie may be able to bill the government for her preparation of the REA, including consultants’ and attorneys’ fees.[13] Yet, there is no deadline for the government to respond to her. If the government chooses to ignore Annie’s REA, it can.
• The Claim — Nevertheless, pressure can be brought to bear on a CO to deal with Annie’s REA by converting the REA into a claim, defined in the FAR as follows:
Claim means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. However, a written demand or written assertion by the contractor seeking the payment of money exceeding $100,000 is not a claim under 41 U.S.C. chapter 71, Contract Disputes, until certified as required by the statute. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim, by written notice to the contracting officer as provided in [§]33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.” 48 CFR §2.101 (emphasis added).
Thus, if Annie’s REA is not acted upon in a reasonable time, she can convert her REA into a claim.[14] If her claim is above $100,000, she must certify the claim using specific language required by statute.[15] Likewise, if the CO reviewed her claim but decided against an equitable adjustment, Annie can likewise proceed to file a claim. Annie’s claim, pursuant to 41 U.S.C. §7103, begins again, however, with the CO at the contracting agency.[16]
Filing a claim starts the clock on the government’s deadline for a response. After Annie’s claim is submitted, the CO must issue a decision and explain it within 60 days.[17] Specific findings of fact are not required, but if made, specific findings of fact are not binding in any subsequent proceeding.[18] Once Annie has received a final decision from her CO, she has the option, pursuant to the Contract Disputes Act of 1978 (CDA) of appealing either to the appropriate agency board of appeals or to the COFC.
• The Contract Disputes Act[19] — The CDA applies to any express or implied contract made by an executive agency for 1) the procurement of property, other than real property in being; 2) the procurement of services; 3) the procurement of construction, alteration, repair, or maintenance of real property; or 4) the disposal of personal property.[20] The CDA is a “money-mandating statute” that provides a plaintiff with the potential for a substantive right to money damages from the U.S. under the Tucker Act.[21]
The CDA provides alternative forums for challenging a CO’s final decision, allowing a contractor to file an appeal with either the appropriate board of appeals,[22] or to appeal directly to the COFC.[23] Courts consistently hold that a contractor has to choose — either the appeal is made to the appeals board or it is made to the COFC.[24] Once chosen, a contractor can no longer pursue its claim in the other forum.[25]
The CDA provides that a government contractor can appeal an adverse decision by a CO to the agency board[26] within 90 days of receipt of the decision.[27] If a contractor instead chooses to file an action directly at the COFC, that action must be filed within 12 months of receipt of the CO’s decision.[28] Accordingly, if Annie comes to see you about appealing the CO’s decision on the 91st day after she received the CO’s denial, her only option is to bring her claim to the COFC.
If Annie is unsatisfied with the COFC ruling, she can appeal to the U.S. Court of Appeals for the Federal Circuit. Likewise, if Annie proceeds to the Civilian Board of Contract Appeals (CBCA), yet is unhappy with that decision, she can appeal to the U.S. Court of Appeals within 120 days of receiving the decision.[29] In order for either the CBCA or the COFC to have jurisdiction, however, the CO must issue a final decision.[30]
Betty’s Bid Protest
The CDA does not apply to Betty’s case because Betty was never awarded a contract. She is challenging the contract award itself.[31] Like Annie, Betty has venue options to challenge the EPA’s decision in her “post-award” protest, but must carefully consider various factors such as cost, timelines, rules of evidence, and remedies. “An interested party wishing to protest [an agency’s procurement decision] is encouraged to seek resolution within the agency before filing a protest with the [Government Accountability Office], but may protest to the GAO in accordance with GAO regulations (4 CFR Part 21).”[32] Betty could bring her bid protest to the EPA, but when one considers that the very same CO who decided to award the contract to Betty’s competitor is the one who will hear her protest, it usually is not worth the time.[33] If, however, an award error is so obvious that a CO or supervisor might simply reverse course, then an agency-level protest may be worthwhile. For example, if Betty needed to submit a list of key personnel, which she did, but her bid was unsuccessful because she allegedly failed to submit a list of key personnel, then an agency-level protest may work. Most situations are not so simple. Moreover, if a bid has been awarded, performance may begin shortly. The agency may not agree to hold the commencement of the contract voluntarily while hearing Betty’s protest.
Instead, Betty can take her bid protest either to the Government Accountability Office (GAO) or to the COFC. If Betty submits a bid protest to the GAO, unlike a contract claim that requires a binding forum election, Betty can later have a second bite at the apple. This means that if Betty’s bid protest is denied or dismissed by the GAO, she can file a claim at the COFC, whose review will be of the agency’s award decision, not of the GAO’s case determination. However, Betty’s second bite will not work the other way round, i.e., if Betty first files at the COFC but is unhappy with the court’s decision, she cannot then return to the GAO. Her appeal from there is to the Federal Circuit. Even so, there may be good reasons for Betty to start at the COFC, discussed below.
• Bid Protests at the COFC — The Administrative Dispute Resolution Act (ADRA) amended the Tucker Act to create a statutory basis for all bid protest actions at the COFC.[34] Accordingly, the COFC has:
jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a [f]ederal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.[35]
Put simply, the COFC has jurisdiction to hear a bid protest whether suit was instituted before or after the contract was awarded.[36]
• Interested Party — The Tucker Act requires a bid protest to be brought by an “interested party,” but the statute does not define the term “interested party” for purposes of standing.[37] Moreover, although protests of agency procurement decisions at the COFC are reviewed under the Administrative Procedure Act (APA) standard, i.e., an agency’s decision is to be set aside only if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law,[38] the APA’s standing requirement, i.e., “a person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action,” has been found inapplicable to bid protests by the Federal Circuit.[39]
The Federal Circuit has decided instead that Congress intended to use the standing requirement of the Competition in Contracting Act (CICA) for bid protests at the COFC, the same standing requirement used for bid protest jurisdiction at the GAO.[40] An “interested party” under the CICA “with respect to a contract or a solicitation or other request for offers…means 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.”[41]
To establish that a protester’s “direct economic interest” would be affected, the protester “must show it would have been ‘a qualified bidder,’ i.e., that it had a ‘substantial chance’ of being awarded the contract.”[42] Put another way, a protester “must show that it has been prejudiced by the alleged error in the government procurement process — that ‘but for the error, it would have had a substantial chance of securing the contract.’”[43] For this reason, for purposes of standing in a bid protest, the term “interested party” excludes those who did not submit proposals, bidders who withdrew from a solicitation, and offerors who were not competitively ranked for the award because they would not have a “substantial chance” to receive the award.[44] The nature of the bid protest will dictate the necessary factors the court will consider in finding “direct economic interest.”[45] In the context of a pre-award bid protest, a plaintiff must establish that it has suffered or will suffer a “non-trivial competitive injury which can be addressed by judicial relief” to meet the economic prejudice requirement.[46]
In the next part of this article, we consider Betty’s bid protest in further detail.
[1] In fact, historically, a good number of roads did lead to Rome, but not to each other, which made it more difficult for the cities to rise up against the leadership in Rome. See Cambridge Dictionary online, All Roads Lead to Rome, https://dictionary.cambridge.org/us/dictionary/english/all-roads-lead-to-rome; see BookBrowse, All Roads Lead to Rome, https://www.bookbrowse.com/expressions/detail/index.cfm/expression_number/67/all-roads-lead-to-rome.
[2] “Nearly 2,000 customers crowded one large casino just over the Dade County line in south Hallandale seven nights a week during 1938…The casino provided bodyguards to women who won and wanted escorts home to safeguard their winnings.” See Jane’s History Nook blog, https://janeshistorynook.blogspot.com/2013/04/floridas-casino-gambling-and-bingo.html.
[3] See U.S. Government Accountablity office, Watchblog: Following the Federal Dollar blog, https://blog.gao.gov/2020/05/26/a-snapshot-of-government-wide-contracting-for-fy-2019-infographic/.
[4] Id.
[5] Id.
[6] 48 C.F.R. 1. Part 52 of the FAR contains standard solicitation provisions and contract clauses. Often, if a standard clause has been left out of the contract, the “Christian doctrine” will deem the provision included based on the concept that prospective contractors are presumed to know the law, including that government personnel cannot deviate from the law without proper authorization. See G.L. Christian and Associates v. United States, 312 F.2d 418 (Ct. Cl. 1963), cert. denied, 375 U.S. 954, 84 S. Ct. 444. While this article refers to the FAR, it will not go into detail, for both the FAR and the Christian doctrine are easily the subjects of separate articles.
[7] U.S. Small Business Administration, Contracting, https://www.sba.gov/node/1504180#:~:text=Prime%20Contract%20Goals,be%20awarded%20to%20small%20businesses.
[8] The percentages are, respectively, 5%, 5%, 3%, and 3%. See note 7.
[9] 48 U.S.C. §19.502-2. The small business set aside threshold is currently greater than $10,000 to less than or equal to $250,000. See Federal Register: The Daily Journal of the U.S. Government, Federal Acquisition Regulation Increased Micro-Purchase and Simplified Acquisition Thresholds, https://www.federalregister.gov/documents/2020/07/02/2020-12763/federal-acquisition-regulation-increased-micro-purchase-and-simplified-acquisition-thresholds.
[10] 48 U.S.C. §19.502-2(b)(1).
[11] See America’s SBDC Florida, State of Small Business Report, Small Business and its Impact on Florida 10, https://floridasbdc.org/sosb/.
[12] 48 C.F.R. §552.243-71(d); 48 C.F.R. §552.243-719(e).
[13] Tip Top Const., Inc. v. Donahoe, 695 F.3d 1276, 1284 (Fed. Cir. 2012) (quoting Bill Strong Enterprises, Inc. v. Shannon, 49 F.3d 1541 (Fed. Cir. 1995) holding that costs of consultant’s and attorney’s fees were incurred “for the genuine purpose of materially furthering the negotiation process”), overruled on other grounds in Reflectone, Inc. v. Dalton, 60 F.3d 1572 (Fed. Cir. 1995); 48 C.F.R. §31.205-33.
[14] However, if the REA is converted to a claim, the preparation costs, including consultant and attorney fees may be considered unallowable.
[15] 41 U.S.C. §7103(b); 48 C.F.R. §33.207(c).
[16] “Each claim by a contractor against the Federal Government relating to a contract shall be submitted to the contracting officer for a decision.” 41 U.S.C. §7103 (a)(1); Each claim must be in writing and each claim by a contractor relating to a contract must be submitted with in six years after the accrual of the claim. 41 U.S.C. §7103 (a)(4).
[17] For claims of $100,000 or less, 60 days after receiving a written request from the contractor that a decision be made in that time period, or if no request is made, then within a reasonable time. See 48 C.F.R. §33.211(c)(1). For claims over $100,000, 60 days after receiving a certified claim, but if a decision is not to be issued in that timeframe, than the CO must notify the contractor, within that period, of the time within which a decision will be issued. See 48 C.F.R. §33.211(c)(2). Any failure of the CO to issue a decision within the required time period is deemed a decision by the CO to deny the claim and authorizes the contractor to file an appeal or suit on the claim. 48 C.F.R. §33.211(g).
[18] 41 U.S.C. §7103 (e). Findings of law, likewise, are not binding on subsequent proceedings. An action proceeds de novo in accordance with the rules of the appropriate court. 41 U.S.C. §7104 (b) (4). See also Reflectone Inc., 60 F. 3d at 1575 (A determination of Contract Dispute Act jurisdiction and interpretation of applicable procurement regulations present questions of law which are reviewed de novo.).
[19] 41 U.S.C.A. §§7101-7109.
[20] 41 U.S.C.A. §7102.
[21] 28 U.S.C.A. §1491. The Tucker Act is beyond the scope of this article, but it provides a limited waiver of sovereign immunity that grants the COFC with jurisdiction to render judgment upon any claim against the U.S. founded upon the Constitution, any act of Congress, any regulation of an executive department, any express or implied contract with the U.S., or for liquidated or unliquidated damages in cases not sounding in tort.
[22] 41 U.S.C. §7104 (a).
[23] 41 U.S.C. §7104 (b)(1).
[24] See Bonneville Associates v. U.S., 43 F.3d 649, 652 (Fed. Cir. 1994) (citing National Neighbors, Inc. v. U.S., 839 F.2d 1539, 1542 (Fed. Cir. 1988)).
[25] Although if the first forum lacks jurisdiction, even if only because, for example, the submission of the appeal was untimely, then the contractor can, within the appropriate statutory time limits, appeal to the other forum. National Neighbors, Inc., 839 F.2d at 1542 (“Under the Election Doctrine, a contractor’s choice to pursue an appeal in a forum lacking jurisdiction is not a binding election.”).
[26] In Annie’s case, it would be the Civilian Board of Contract Appeals (CBCA), whose primary responsibility is to resolve contract disputes between government contractors and agencies under the Contract Disputes Act. The CBCA was established in 2007, pursuant to the National Defense Authorization Act for Fiscal Year 2006, and its jurisdiction extends to all agencies of the federal government except the Department of Defense, the National Aeronautics and Space Administration, the U.S. Postal Service, the Postal Regulatory Commission, and the Tennessee Valley Authority. See U.S. Civilian Board of Contract Appeals, About the Board, https://www.cbca.gov/board/index.html. It consolidates the functions of eight previous boards of contract appeals, including the Departments of Agriculture, Energy, Housing and Urban Development, Interior, Labor, Transportation, Veterans Affairs, and the General Services Administration. Administrative judges appointed by the Administrator of General Services preside over cases filed at the CBCA. Id.; 41 U.S.C. §7105. The CBCA judges must have at least five years’ experience in public contract law. 41 U.S.C. §7105. By contrast, the COFC is composed of 16 active judges who are appointed by the president, with the advice and consent of the Senate. 28 U.S.C.A. §171(a). The COFC judges serve 15-year terms. 28 U.S.C.A. §172(a).
[27] 41 U.S.C.A. §7104(a).
[28] 41 U.S.C.A. §7104(b) (1); 41 U.S.C.A. §7104(b) (3). However, an action against the Tennessee Valley Authority is excluded and must be brought in U.S. district court. 41 U.S.C.A. §7104(b) (2).
[29] 41 U.S.C.A. §7107(B).
[30] See Mills v. U.S., 69 Fed. Cl. 358 (2006).
[31] This article focuses on post-award bid protests. Bid protests can also challenge an agency’s solicitation prior to any contract being awarded. COs are required, however, to consider all protests, whether before or after the award, and whether filed directly with the agency, the GAO, or the COFC. Specific regulations apply to protests related to small business status, disadvantageous business status, HUBZone small business status and service-disabled veteran-owned small business status, status of an economically disadvantaged women-owned small business concern, or of a women-owned small business concern eligible under the Women-Owned Small Business program. 48 C.F.R. §33.102(a).
[32] 48 C.F.R. §33.102(e). An “interested party” is defined as an “actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or by the failure to award a contract.” (4 C.F.R. §21.0(a)(1)).
[33] Keep in mind that additional timeframes apply if a protester first takes a protest to an agency before filing at the GAO. If a timely agency-level protest was previously filed, any subsequent protest to GAO must be filed within 10 days of actual or constructive knowledge of initial adverse agency action, unless the agency imposes a more stringent time for filing, in which case the agency’s time for filing controls. 4 C.F.R. §21.2(a)(3).
[34] 28 U.S.C.A. §1491(b)(1)-(4).
[35] 28 U.S.C. §1491(b)(1).
[36] Id. The COFC initially only had jurisdiction to rule on pre-award protests, but after ADRA, it was able to also rule on post-award protests. 28 U.S.C. 1491(b) (1996).
[37] See Microdyne Outsourcing, Inc. v. U.S., 72 Fed. Cl. 230, 232 (2006).
[38] 28 U.S.C.A. §1491(b)(4); 5 U.S.C. §706(2)(A); Per Aarsleff A/S v. United States, 829 F.3d 1303, 1309 (Fed. Cir. 2016) (citing NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004); Res. Conservation Grp., LLC v. United States, 597 F.3d 1238, 1242 (Fed. Cir. 2010); American Federation of Government Employees, AFL-CIO v. United States, 258 F. 3d 1294, 1299 (Fed. Cir. 2001).
[39] American Federation of Government Employees, AFL-CIO v. United States, 258 F.3d at 1302.
[40] Id.
[41] 31 U.S.C. §3551(2) (A); Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009) (quoting American Federation of Government Employees, AFL-CIO v. United States, 258 F.3d at 1302).
[42] Microdyne Outsourcing, Inc. v. United States, 72 Fed. Cl. 230, 232 (2006) (quoting Myers Investigative & Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370-71 (Fed. Cir. 2002)); see also Rex Serv. Corp. v. United States, 448 F.3d 1305, 1308 (Fed. Cir. 2006); Brooks Range Contract Servs., Inc. v. United States, 101 Fed. Cl. 699, 713 (2011) (“A finding of standing in a post-award bid-protest case requires that the protestor have a ‘substantial chance’ to obtain the cont[r]act if the alleged errors are found to exist.”).
[43] Labatt Food Serv., Inc. v. United States, 577 F.3d 1375, 1378 (Fed. Cir. 2009).
[44] See Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1334 (Fed. Cir. 2001) (listing cases exemplifying each scenario).
[45] Sys. Appl. & Techs. v. United States, 691 F.3d 1374, 1382 (Fed. Cir. 2012).
[46] Weeks Marine, Inc. v. United States, 575 F.3d at 1362.
Pamela G. Levinson is an attorney at Maglio Christopher & Toale and focuses her practice on government contracts litigation, takings, construction, and Indian law. She had the honor of being a federal law clerk to Judge Adalberto Jordan, U.S. District Court for the Southern District of Florida, now serving on the 11th Circuit Court of Appeals.
This column is submitted on behalf of the Business Law Section, Kacy Donlon, chair, and Robert Charbonneau, editor.
