Jurisdiction over Challenges to “Large” Orders Under Federal Contracts
Released: 2012-01-17T00:00:00

Introduction

This report discusses recent legislation and decisions by the Government Accountability Office (GAO) and the U.S. Court of Federal Claims regarding jurisdiction over orders issued under civilian agency contracts. On December 31, 2011, President Obama signed legislation that effectively overturned two recent decisions by GAO and the Court of Federal Claims finding that they have jurisdiction over protests challenging the issuance of task and delivery orders of any size under civilian agency contracts, even if these orders do not increase the scope, period, or maximum value of the underlying contract. Prior to these decisions, executive branch agencies and many commentators had construed the Federal Acquisition Streamlining Act (FASA) of 1994, as amended by the National Defense Authorization Act (NDAA) for FY2008, as authorizing only protests concerning the issuance of orders under civilian agency contracts that (1) increased the scope, period, or maximum value of the underlying contract or (2) were valued in excess of $10 million, as well as granting GAO temporary exclusive jurisdiction over protests involving the latter. However, GAO and the court rejected this interpretation, finding that what expired on May 27, 2011, were limitations on their jurisdiction imposed by FASA, as amended by the NDAA for FY2008. Thus, they concluded that they and, potentially, procuring agencies had jurisdiction over protests of orders of any size issued under the contracts of civilian agencies, regardless of whether these orders increased the scope, period, or maximum value of the underlying contract.

Had they not been overturned by Congress, these decisions would have resulted in protests of orders under civilian agency contracts being treated differently than protests of similar orders under defense contracts, and could also have increased the number of bid protests.

FASA and Subsequent Amendments

The decisions by GAO and the Court of Federal Claims arose from questions regarding the meaning of certain provisions of FASA and amendments made to it by the NDAA for FY2008 and the Ike Skelton NDAA for FY2011. For various reasons, including agencies' use of detailed specifications to restrict competition and difficulties procuring commercial items during the Gulf War, by the early to mid-1990s, many Members of Congress and commentators had become concerned that the federal procurement process was excessively cumbersome and time-consuming for both agencies and contractors. FASA represented Congress's first attempt to respond to these concerns "by greatly streamlining and simplifying [the federal government's] buying practices." FASA did so, in part, by explicitly recognizing "task and delivery order contracts," and by limiting contractors' ability to protest alleged improprieties in agencies' issuance of orders under task and delivery order (TO/DO) contracts, among other things. TO/DO contracts are contracts for services or goods, respectively, that do not "procure or specify a firm quantity of supplies (other than a minimum or maximum quantity)," but rather "provide[] for the issuance of orders for the delivery of supplies during the period of the contract." Because the time of delivery and the quantity of goods or services to be delivered are not specified (outside of stated maximums or minimums) in TO/DO contracts, such contracts are sometimes referred to as indefinite delivery/indefinite quantity (ID/IQ) contracts. TO/DO contracts are sometimes also described as single-award or multiple-award contracts, a designation based upon the number of firms—one or more than one, respectively—able to compete for task and delivery orders under the contract. Before FASA was enacted, disappointed bidders and offerors could generally protest agency conduct in the award, or proposed award, of federal contracts that was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law" before GAO, the federal courts, or procuring agencies. GAO, in particular, had found that it had jurisdiction over protests regarding the issuance of orders under TO/DO contracts.

Use of TO/DO contracts can greatly simplify the procurement process for federal agencies because agencies can issue orders to contractors holding the underlying TO/DO contract without complying with the requirements of the Competition in Contracting Act (CICA) of 1984, among other things. This, in itself, can significantly reduce the time necessary for agencies to procure goods or services. However, FASA further simplified the procurement process for federal agencies by limiting the ability of bidders or offerors to protest alleged improprieties or illegalities in the issuance of orders under TO/DO contracts. In identical provisions codified in Titles 10 and 41 of the United States Code, FASA expressly prohibited protests challenging the issuance of orders except on certain narrow grounds:

A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued.

The provisions codified in Title 10 apply to the procurements of defense agencies, while those codified in Title 41 apply to the procurements of civilian agencies.

National Defense Authorization Act for FY2008

By 2008, congressional and public concerns regarding federal procurement had shifted, largely because of alleged waste, fraud, and abuse in contracts supporting military, diplomatic, and reconstruction efforts in Iraq and Afghanistan. Rather than viewing the federal procurement process as too burdensome and time-consuming, as they did when FASA was enacted, some Members of Congress and commentators now believed that agencies had used their authority under FASA and similar laws to evade the spirit, if not the letter, of competition and other requirements. These concerns persisted notwithstanding a series of judicial and administrative decisions finding that GAO and the federal courts could exercise jurisdiction over certain protests involving the issuance of orders that did not increase the scope, period, or maximum value of the underlying contract. In fact, the Acquisition Advisory Panel, chartered under Section 1423 of the Services Acquisition Reform Act (SARA) of 2003, explicitly recommended that contractors be able to protest the issuance of "large" orders that do not increase the scope, period, or maximum value of the underlying contract.

Congress responded, in part, to these concerns when it enacted the NDAA for FY2008. This act amended FASA to promote competition for orders under TO/DO contracts by (1) prohibiting agencies from using single-award TO/DO contracts valued in excess of $103 million (including options) unless certain conditions are met, and (2) specifying what constitutes a "fair opportunity to be considered" for orders valued in excess of $5 million. In addition, the NDAA for FY2008 also expanded protesters' ability to challenge alleged improprieties or illegalities in the issuance of orders. Specifically, the NDAA for FY2008 amended FASA to read as follows:

A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for—

(A) a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued; or

(B) a protest of an order valued in excess of $10,000,000.

The 2008 amendments further specified that GAO was to have exclusive jurisdiction over protests of orders valued in excess of $10 million that did not increase the scope, period, or maximum value of the underlying contract, and that

This subsection shall be in effect for three years, beginning on the date that is 120 days after January 28, 2008.

Many commentators interpreted the word "subsection" here to refer to the provisions regarding GAO's exclusive jurisdiction over protests of orders valued in excess of $10 million because these provisions were added, along with the sunset clause, in 2008. In addition, the legislative history of the 2008 amendments arguably indicated that Congress intended to temporarily authorize protests of "large" orders in order to gauge their effects on the procurement and protest processes before permanently authorizing such protests.

Ike Skelton National Defense Authorization Act for FY2011

Three years and 120 days after the enactment of the NDAA for FY2008 would have been May 27, 2011. However, before this date arrived, the 111 th Congress amended FASA's provisions regarding protests of orders issued under defense contracts to extend the sunset date and clarify that it applies only to GAO's exclusive jurisdiction over protests of "large" orders. Specifically, the Ike Skelton NDAA for FY2011 amended those provisions of FASA codified in Title 10 of the United States Code to read as follows:

(1) A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for –

(A) a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued; or

(B) a protest of an order valued in excess of $10,000,000.

(2) Notwithstanding section 3556 of title 31, the Comptroller General of the United States shall have exclusive jurisdiction of a protest authorized under paragraph (1)(B).

(3) Paragraph (1)(B) and paragraph (2) of this subsection shall not be in effect after September 30, 2016.

The 111 th Congress did not make similar changes to the provisions of FASA codified in Title 41 of the United States Code governing protests of orders under civilian agency contracts. Thus, the provisions in Title 41 differed slightly from those in Title 10 at the time when GAO and the Court of Federal Claims issued their decisions. When their decisions were issued, subsection (B)(3) in Title 41 stated that " This subsection shall be in effect for three years, beginning on the date that is 120 days after January 28, 2008," not " Paragraph (1)(B) and paragraph (2) of this subsection shall not be in effect after September 30, 2016."

The GAO and Court Decisions

In its June 14, 2011, decision in Technatomy Corporation , GAO found that it had jurisdiction over an order placed under a civilian agency contract that apparently did not expand the scope, period, or maximum value of the underlying contract. The Department of Defense (DOD), which had issued the challenged order under a General Services Administration (GSA) contract, argued that because Congress had not extended the sunset date as to the orders of civilian agencies, GAO's jurisdiction to hear protests concerning task and delivery orders valued in excess of $10 million issued under civilian agency contracts expired on May 27, 2011. GAO disagreed, because of the "plain meaning" of the relevant provisions of FASA. GAO found that the word "subsection" in 41 U.S.C. §4106(f)(3) "unambiguously refers" to the entirety of subsection (f), which governs protests of civilian agency orders generally, not just subsection (f)(2), which grants GAO jurisdiction over protests of "large" orders. Based upon this interpretation of "subsection," GAO found that what expired in May 2011 were the limitations on its jurisdiction under FASA, as amended by the expansion of its jurisdiction under the NDAA for FY2008. Thus, it concluded that, because of the expiration of these limitations, its jurisdiction "revert[ed] to that originally provided in CICA," and it could hear protests concerning orders of any value under civilian agency contracts, regardless of whether the order increased the scope, period, or maximum value of the underlying contract.

Subsequently, in its August 19, 2011, decision in Med Trends, Inc. v. United States , the Court of Federal Claims also found that it had jurisdiction over protests of orders of any value issued under civilian agency contracts. In so finding, the court rejected the government's argument that, "notwithstanding the clear language of the statute, the legislative history associated with the 2008 amendment makes clear that the grant of jurisdiction to GAO in 2008 was a short-term experiment." The court did so, in part, because it, like GAO, found that the word "subsection" referred to the entirety of FASA's provisions regarding protests of task and delivery orders issued under civilian agency contracts, not just those provisions regarding GAO's jurisdiction over "large" orders issued under civilian agency contracts. Because it viewed this statutory text as "unambiguous," the court accorded no weight to a 2007 conference report expressing the conferees' view that the expiration of GAO's jurisdiction over "large" orders would provide "Congress with an opportunity to review the implementation of the provision and make any necessary adjustments." It similarly declined to rely upon legislation introduced in the 112 th Congress and accompanying committee reports that purportedly evidenced Congress's intent that the sunset date apply only to GAO's exclusive jurisdiction over protests of orders valued in excess of $10 million.

Had the 112 th Congress not enacted legislation extending the sunset date, these decisions would have resulted in protests of orders issued under civilian agency contracts being treated differently than protests of similar orders under defense contracts, and could also have increased the number of bid protests. The legislation also arguably resolves certain questions that had been raised about the authority of the Federal Acquisition Regulatory Council to promulgate an interim final regulation amending the Federal Acquisition Regulation (FAR) to provide that

(i) No protest under Subpart 33.1 is authorized in connection with the issuance or proposed issuance of an order under a task-order contract or delivery-order contract, except for—

(A) A protest on the grounds that the order increases the scope, period, or maximum value of the contract; or

(B) A protest of an order valued in excess of $10 million. Protests of orders in excess of $10 million may only be filed with the Government Accountability Office, in accordance with the procedures at 33.104.

(ii) The authority to protest the placement of an order under this subpart expires on September 30, 2016, for DoD, NASA and the Coast Guard (10 U.S.C. 2304a(d) and 2304c(e)), and on May 27, 2011, for other agencies (41 U.S.C. 4103(d) and 4106(f)).

Both the meaning of this provision and the FAR Council's authority to promulgate such a regulation could have been in doubt, particularly after the decision by the Court of Federal Claims. As amended, the regulation could have been construed to mean that neither protests of orders that allegedly increased the scope, period, or maximum value of the underlying contract, nor protests of orders valued in excess of $10 million, were authorized for civilian agency contracts. However, such an interpretation could potentially have been found not to be entitled to deference under Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc . Under Chevron , courts generally defer to an agency's formal interpretation of a statute that the agency administers whenever the agency's interpretation is reasonable, and the statute has not removed the agency's discretion by compelling a particular disposition of the matter at issue. Agency interpretations are not granted such deference, though, when "Congress has directly spoken to the precise question at issue," and the agency's interpretation is at variance with the statutory language.

National Defense Authorization Act for FY2012

The NDAA for FY2012 amended Title 41 of the United States Code so that it reads like Title 10:

(1) A protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order except for –

(A) a protest on the ground that the order increases the scope, period, or maximum value of the contract under which the order is issued; or

(B) a protest of an order valued in excess of $10,000,000.

(2) Notwithstanding section 3556 of title 31, the Comptroller General of the United States shall have exclusive jurisdiction of a protest authorized under paragraph (1)(B).

(3) Paragraph (1)(B) and paragraph (2) of this subsection shall not be in effect after September 30, 2016.

Because of these amendments, and the amendments made to Title 10 in 2011, GAO and the Court of Federal Claims are unlikely to find that they have jurisdiction over orders that do not increase the scope, period, or maximum value of the underlying contracts after September 30, 2016, absent congressional action. However, because the provisions governing orders under civilian agency contracts are codified in a different section of the United States Code than those governing orders under defense agency contracts, it is possible that differences in the treatment of civilian and defense agency orders could again arise if Congress were to amend Title 10 without amending Title 41, or vice versa.