Source: https://law.justia.com/cases/federal/appellate-courts/F2/974/565/437515/
Timestamp: 2019-04-25 02:56:31+00:00

Document:
David P. Spence, Jeffrey A. Riggs, Provosty, Sadler & deLaunay, Alexandria, La., for St. Frances Cabrini Hosp.
Joseph S. Cage, Jr., U.S. Atty., John R. Halliburton, Asst. U.S. Atty., Shreveport, La., Jonathan R. Siegel, Anthony J. Steinmeyer, U.S. Dept. of Justice, Civil Div., Appellate Staff, Washington, D.C., for Secretary, Dept. of Veterans' Affairs.
Charles S. Weems, III, Jimmy R. Faircloth, Jr., Kenneth O. Ortego, Dir., Gold, Weems, Bruser, Sues & Rundell, Alexandria, La., for Rapides Regional Medical Center.
Before GOLDBERG, JONES, and DeMOSS, Circuit Judges.
The centerpiece of this dispute is a dual energy linear accelerator, a sophisticated radiation therapy device used on cancer patients. Two hospitals in Rapides Parish, Louisiana--one private, the other operated by the Department of Veterans Affairs (VA)--entered into a "sharing agreement" for the acquisition and joint use of such an accelerator. Under the agreement, the Alexandria Veterans Affairs Medical Center (VAMC) would procure the accelerator, with nearby St. Frances Cabrini Hospital (Cabrini) donating one-half the cost of the machine to the VAMC.1 The VAMCowned accelerator would then be housed at Cabrini and available for use by both institutions. Shortly before negotiations over the sharing agreements had been completed, neighboring Rapides Regional Medical Center (Rapides) got wind of the deal and sought to block it. Rapides, which operates two linear accelerators of its own, and which currently provides accelerator and related services to the VAMC,2 charged that the sharing agreement violated the Competition in Contracting Act of 1984 (CICA), 41 U.S.C. § 251 et seq., because it was never subjected to public bidding. After an administrative appeal dismissed as untimely by the Comptroller General,3 Rapides won a permanent injunction against the sharing agreement in district court. Rapides Regional Medical Center v. Derwinski, 783 F. Supp. 1006 (W.D. La. 1991). Both the VA and Cabrini, which had intervened in those proceedings, appealed the district court's decision, and we granted expedited review.
Before discussing the merits of this case, it may be helpful to trace its statutory contours. Rapides asserts that the Competition in Contracting Act governs this action. Appellee alleges, and the district court agreed, that the VAMC-Cabrini sharing agreement violates CICA's general requirement that federal procurement contracts be awarded competitively.4 CICA responded to Congressional findings that many federal procurement contracts were awarded on a sole-source basis, resulting in widespread inefficiencies and wasteful government spending. According to its drafters, the Act's objectives were "to establish a statutory preference for the use of competitive procedures in awarding federal contracts for property or services, to impose restrictions on the awarding of noncompetitive contracts, and to permit federal agencies to use the competitive method most conducive to the conditions of the contract." S.Rep. No. 50, 98th Cong., 2d Sess., reprinted in 1984 U.S.Code Cong. & Admin.News 697, 2174.
The purpose of this funding is to help the VA to acquire costly, advanced state-of-the-art medical equipment more easily and to provide a means of using that equipment to maximum effectiveness by encouraging long-term sharing with community institutions.... The Committee recognizes that there are limits to what medical communities and the Federal Government can individually accomplish, but believes that this proposed arrangement will provide VA beneficiaries and the VA medical centers and community medical institutions with access to prohibitively expensive major medical equipment which would otherwise not be available to either.
To summarize: Congress first adopted the VA sharing program in 1966. The program as enacted did not address competitive procurement procedures. Congress enacted CICA in 1984, creating a statutory presumption in favor of competition "except in the case of procurement procedures ... expressly authorized by statute." The following year, Congress expanded the sharing program by appropriating funds to finance the acquisition and joint use of advanced medical equipment along the lines of the VAMC-Cabrini agreement. In response, the VA in 1987 implemented regulations providing that despite CICA's enactment, the sharing program did not require full and open competition. Finally, Congress amended the sharing program in 1990 at what is now § 8153, expanding the existing program substantially but making no mention of CICA.
48 C.F.R. 806.302-5(b) ... antedates [sic] the rather precise statutory language of "otherwise expressly authorized by statute" as founded in 41 U.S.C. § 253(a). Congress said that the public bid law can be circumvented by express language contained in a statute. The regulation from the Veterans Administration is not a statute. Congress created the measuring stick and retained the power to delete public bid law requirements from contracts for goods and services. The VA is powerless to change the clear procedure set by Congress.
783 F. Supp. at 1008. The district court did not address the pre-CICA legislative history of § 8153, nor did it review the 1985 appropriations legislation expanding the existing sharing program to private hospitals.
Cabrini and the VA argue that Congress never intended the Competition in Contracting Act to apply to a sharing program that has been on the books since 1966. The program is either exempted from the Act by § 8153, they contend, or falls outside CICA because sharing agreements do not involve the "procurement" of equipment. Appellants also challenge Rapides' standing to sue. We address these arguments in reverse order.
31 U.S.C. § 3551(2) (emphasis added).
Appellants next confront CICA directly by arguing that the shared acquisition of specialized medical resources14 for mutual use under § 8153 is not a "procurement" within the meaning of CICA,15 but more closely resembles a lease or sale of government property. The VA cites several decisions of the Comptroller General to this effect.16 In particular, the VA directs this court's attention to Surface Alloys Corp., B-222703, 86-2 C.P.D. p 7 (June 25, 1986). That case involved a controversy not unlike this one. The U.S. Navy purchased a complicated piece of equipment known as an ion implanter and leased it to a private company that was performing research and development under a Navy contract. Another company protested this action, arguing that it gave the Navy's contractor an unfair competitive advantage. The Comptroller General dismissed the protest, holding that the lease was not a procurement under CICA.
While the district court in this case did not define "procurement" for purposes of CICA, its holding rests on the tacit assumption that a procurement has taken place. The question thus remains: Did the VA "procure" goods or services from Cabrini and in so doing run afoul of CICA?
For the answer, one must first examine the Memorandum of Understanding between Cabrini and the VAMC. It outlines several stages for the acquisition and mutual use of the linear accelerator: (1) the actual purchase of the accelerator by the VA from the manufacturer; (2) a financing arrangement whereby Cabrini will donate one-half of the accelerator's cost to the VA;17 and (3) the joint use of the machine by the VA and Cabrini under the terms of the sharing agreement to be negotiated at a later date.18 The VA emphasizes that the accelerator was purchased from the manufacturer using competitive procurement procedures, whereas the financing and shared use of the VA-owned accelerator is akin to a lease or sale of government property.19 For its part, Rapides argues that the transaction must be viewed as an integrated whole: the shared acquisition of property (the linear accelerator) as well as services (including Cabrini's facilities, personnel and other specialized medical services). To bolster its argument, Rapides cites Motor Coach Industries, Inc. v. Dole, 725 F.2d 958 (4th Cir. 1984) and Yosemite Park v. United States, 582 F.2d 552, 217 Ct. Cl. 360 (1978).
In Motor Coach Industries, the Fourth Circuit held that a trust formed by the Federal Aviation Administration to fund ground transportation improvements at Dulles International Airport was public in character, so that CICA applied to all such improvements financed by that trust. To fund the trust, the FAA agreed to waive air carrier fees at Dulles provided that the airlines deposited equivalent funds in the trust. After analyzing the trust's purpose, the court declared it to be a disguised "purchasing agent" created to circumvent normal appropriation channels and the federal procurement process. Id. at 968. While Rapides insists that the VA-Cabrini sharing agreement is also an "end-run" around the procurement requirements of CICA, id., Motor Coach Industries is plainly distinguishable. Unlike the FAA trust, the circumstances surrounding the sharing program do not suggest any attempt to evade statutory purchase requirements. The question here is whether the sharing agreement expressly permitted by § 8153 was for that reason not required to comply with CICA. Further, the VAMC-Cabrini agreement does not resemble the concession contract at issue in Yosemite Park. The National Park Service contracted directly for transportation equipment and services under the guise of a "concession" agreement conferring federal tax breaks on the contractor. In holding that the contractor was bound by federal procurement laws, the court rejected the NPS's efforts to evade those requirements by labeling what was in fact "the purchase of services" as a "concession." 582 F.2d at 558-59. The common thread in both cases, absent here, is an arrangement by the federal government to pay money or confer other benefits in exchange for goods and services. Under the MOU, and under § 8153, the VA received a donation of money from Cabrini in exchange for the shared use of a linear accelerator purchased and owned by the VAMC.
If anything, Congress' efforts to define "procurement" for purposes of the Office of Federal Procurement Policy Act suggest that the meaning of this term differs elsewhere in Title 41. CICA itself does not define procurement. Nor, for that matter, does the Federal Acquisition Regulations System (FAR), of which 48 C.F.R. 806.302-5(b)--the VA's rules exempting the sharing program from CICA--is a part.21 However, there can be little doubt that the word procurement is widely understood, by lawyers and laymen alike, to denote the process by which the government pays money or confers other benefits in order to obtain goods and services from the private sector. Black's Law Dictionary defines "procurement contract" as " [a] government contract with a manufacturer or supplier of goods or machinery or services under the terms of which a sale or service is made to the government." BLACK'S LAW DICTIONARY 1208 (6th ed. 1991). Rapides does not dispute that the VA procured the linear accelerator from a private manufacturer, in a procurement process that complied with CICA. What Rapides fails to explain is why an agreement over future access to government-owned property, albeit property purchased partly with a private donation from Cabrini, justifies expanding the definition of "procurement" beyond its generally understood meaning. Rapides tries to sidestep the issue by asserting that it would have given a larger donation to the VAMC to purchase the accelerator, although the district court made no findings on this point. But this does not change the fact that the VA never intended to procure the accelerator from either Cabrini or Rapides. To repeat, the classic procurement involves the government's paying money or conferring other benefits in return for the acquisition or use of private property or services. This is decidedly unlike the agreement at issue here in which the VA has received money from a private hospital and used it to purchase a linear accelerator from the manufacturer, in exchange for letting that hospital share its use.
Finally, even assuming that the VAMC-Cabrini sharing agreement is a "procurement" for purposes of CICA, we are persuaded that 38 U.S.C. § 8153, which authorizes the VA to enter into such arrangements, is a procurement procedure "expressly authorized by statute" within the meaning of CICA § 253(a) (1) and therefore is not subject to the Act's full and open competition requirements.
Moreover, the language of § 8153 is inconsistent with the district court's conclusion that the VA's sharing arrangements must be achieved competitively. For instance, § 8153(b) provides that reimbursement for the shared use of equipment must be based "on a methodology that provides appropriate flexibility to the heads of the facilities concerned," taking into account "local conditions and needs and the actual cost to the providing facility of the resource involved." This bears little resemblance to competitive bidding procedures in which the participating government agency attempts to ensure a steady supply and minimize its costs without taking into account added considerations affecting private contractors. Further, § 8153(e) directs the Secretary of Veterans Affairs to notify Congress annually "on the activities carried out under this section." The reporting requirement, which permits Congress to monitor sharing arrangements such as that between Rapides and the VAMC, would suggest that Congress sought to ensure fairness and efficiency in such unique arrangements by means other than competitive bidding.
We also disagree with the district court as to the proper role of 48 C.F.R. 806.302-5(b), which provides that " [s]haring contracts negotiated under [§ 8153] are approved for other than full and open competition." Admittedly, this regulation, which was implemented after CICA's enactment, "is not a statute." 783 F. Supp. at 1008. But while the district court correctly observed that this regulation was promulgated after the enactment of CICA, the court erred by implying that the VA was attempting to circumvent Congressional intent by exempting the sharing program from § 253(a) (1). On the contrary, the VA regulation was implementing Congress' post-CICA appropriations legislation that expanded funding for the sharing program so long as non-federal sources agreed to finance at least 50 percent of the cost of acquiring advanced medical equipment.23 We therefore can discern no valid reason why 806.302-5(b) should not be controlling.24 Rapides is certainly correct that " [t]he VA cannot unilaterally exempt itself from the Congressional mandate of the CICA," but such is not the case here. That Congress did not specifically exempt the sharing program from CICA in 1990, when it amended what was then § 5053, is not especially surprising given that Congress had created and maintained that program by means other than full and open procurement. Congress retained for itself the "measuring stick," 783 F. Supp. at 1008, by which to evaluate the success of the sharing program now recodified at § 8153: annual reports from the VA tracking activities under the program. Section 8153(e), which reflects Congress' willingness to exercise its oversight function, belies the district court's claim that the VA was attempting to circumvent Congressional priorities by promulgating 806.302-5(b).
In view of the plain language of § 8153, its pre-CICA legislative history, and the 1985 appropriations legislation expanding the existing sharing program (and which 48 C.F.R. 806.302-5(b) was intended to implement), it must be concluded that the VA's sharing program is expressly authorized by statute within the meaning of CICA § 253(a) (1) and therefore does not trigger the Act's full and open competition requirements.
For all the foregoing reasons, we REVERSE the district court's decision. The permanent injunction barring the VAMC-Cabrini Memorandum of Understanding is VACATED.
By its own terms, however, subsection (b) (1) (A) applies only to agencies that are already "using competitive procedures." The VA stipulated before the district court that it did not use competitive procedures when it entered into the sharing agreement with Cabrini. In any event, Cabrini raises this argument for the first time on appeal, and we will not consider it here.
(2) for the mutual use, of specialized medical resources in a Department health care facility, which have been justified on the basis of veterans' care, but which are not utilized to their maximum effective capacity.
(b) Arrangements entered into under this section shall provide for reciprocal reimbursement based on a methodology that provides appropriate flexibility to the heads of the facilities concerned to establish an appropriate reimbursement rate after taking into account local conditions and needs and the actual costs of the providing facility of the resource involved. Any proceeds to the Government received therefrom shall be credited to the applicable Department medical appropriation and to funds that have been allotted to the facility that furnished the resource involved.
(e) The Secretary shall submit to the Congress not more than 60 days after the end of each fiscal year a report on the activities carried out under this section.
The term "specialized medical resources" means medical resources (whether equipment, space, or personnel) which, because of cost, limited availability, or unusual nature, are either unique in the medical community or are subject to maximum utilization only through mutual use.
There is an increasing tendency on the part of United States district courts and United States Circuit Courts of Appeal to refer bid protest cases to the General Accounting Office because of that agency's "special competence and experience." This tendency is not followed in the United States Claims Court, which is the most prestigious court in the area of government contracting. It would seem that the United States Court of Appeals for the District of Columbia Circuit is of the view that a decision of the General Accounting Office may not be reversed unless it is "arbitrary and capricious," Steinthal & Co., Inc. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971). However, the majority of district courts are of the opinion that the decisions of the Comptroller General are advisory only and are not binding upon the court.
McBride & Touhey, 1A GOVERNMENT CONTRACTS at § 7.10. Appellants urge us to afford Chevron deference to Comptroller General decisions interpreting statutes entrusted to the GAO by Congress. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984). Even our pre-Chevron decisions indicate that " [w]hen actions of procurement officials have been expressly validated by considered decision of the GAO or are in compliance with a reasonably consistent pattern of GAO determinations, the court should be extremely reluctant to overturn such decisions." Kinnett Dairies, Inc. v. J.C. Farrow, 580 F.2d 1260, 1272 (5th Cir. 1978). See also J.H. Rutter Rex. Mfg. Co., Inc. v. United States, 706 F.2d 702, 711 (5th Cir.), cert. denied, 464 U.S. 1008, 104 S. Ct. 526, 78 L. Ed. 2d 709 (1983) (" [D]ecisions of the Comptroller General are entitled to special deference given the complexities and intricacies of government purchasing decisions.").

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