Opinion ID: 774858
Heading Depth: 2
Heading Rank: 2

Heading: Standard of Reviewing the USPS's Actions and Inactions

Text: 48 This case presents two novel questions regarding standard of review. First, we must determine whether to apply APA review to government procurement protests involving the USPS. Second, if we apply APA review, we must determine whether APA review of a sole-source award is identical to APA review of a bid protest action.
49 Section 410(a) of title 39 of the United States Code provides that except as explicitly provided for or insofar as federal laws remain in force as USPS rules or regulations, no federal law, including chapters 5 and 7 of title 5 of the United States Code, applies to the USPS. Judicial review under the APA is specifically described in chapter 7 of title 5. 5 U.S.C. 702-706. Therefore, 39 U.S.C. 410(a) indicates that APA review does not apply to the USPS. 50 Conversely, the ADRA explicitly imports APA standards of review into the Court of Federal Claims's review of government contract procurement protests. 28 U.S.C.A. 1491(b)(4) (Supp. V 1999) (In any action under this subsection, the courts shall review the agency's decision pursuant to the standards set forth in section 706 of title 5.). The legislative history of the ADRA makes clear that the Court of Federal Claims applies the Administrative Procedure Act standard of review previously applied by the district courts (5 U.S.C. 706) to all procurement protest cases. . . . Impresa, 238 F.3d at 1332 (emphasis added) (quoting H.R. Conf. Rep. No. 104-841, at 10 (1996)). 51 There is a conflict in the law. The trial court in this case failed to address this issue, as did the litigants-all assumed that if the Court of Federal Claims had jurisdiction, APA review applies. 52 In 1991, the Supreme Court had the opportunity to address whether Congress precluded APA review of USPS action by its enactment of 39 U.S.C. 410(a). Air Courier Conference of Am. v. Am. Postal Workers Union, AFL-CIO, 498 U.S. 517, 522-23 (1991). The Supreme Court, however, declined to decide this issue because the USPS raised it for the first time in its brief in opposition to the petition for writ of certiorari and it was not argued to or considered by either the federal district court or District of Columbia Circuit below. Id. at 522. In a footnote, the majority noted that this issue could be waived by the parties because it is not jurisdictional. Id. at 523 n.3. The Air Courier Court then proceeded to decide the case based on standing to sue under the APA. 53 Similar to the Supreme Court in Air Courier, we decline to address the breadth of 410(a). Each party before the trial court, in its briefs to this court, and at oral argument contended that if we found jurisdiction under the Tucker Act, APA review applies. Because the judicial review provisions of the APA are not jurisdictional, Califano v. Sanders, 430 U.S. 99, 107 (1977), and because the Court of Federal Claims possessed Tucker Act jurisdiction over this suit, both parties waived any arguments concerning the effect of 410(a) on APA review. Consequently, we will apply the APA's review strictures in this case. 13
54 The APA provides that a reviewing court must set aside agency actions that are arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. 706(2)(A) (Supp. V 1999). Under this standard, the agency's action is entitled to a presumption of regularity, Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415 (1971), and the agency's action must be upheld as long as a rational basis is articulated and relevant factors are considered, Motor Vehicle Manufacturers Ass'n of the United States v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983); Bowman Transportation, Inc. v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285-86 (1974). 55 Pursuant to these general precepts, the Impresa court clearly delineated the proper standard of review under the APA in a bid protest context. It stated that a bid award may be set aside if either: (1) the procurement official's decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure. Impresa, 238 F.3d at 1332. When a challenge is brought on the first ground . . . the test for reviewing courts is to determine whether the contracting agency provided a coherent and reasonable explanation of its exercise of discretion and the disappointed bidder bears a heavy burden of showing that the award decision had no rational basis. Id. at 1332-33 (citations omitted). When a challenge is brought on the second ground, the disappointed bidder must show a clear and prejudicial violation of applicable statutes or regulations. Id. at 1333. To establish prejudice in an action involving an alleged statutory or regulatory violation, a protester must show that absent the error, there was a substantial chance it would have received the contract award. Alfa Laval Separation, Inc. v. United States, 175 F.3d 1365, 1367 (Fed. Cir. 1999); Statistica, Inc. v. Christopher, 102 F.3d 1577, 1582 (Fed. Cir. 1996). 56 Identical review standards apply under the APA in the context of a sole-source award. See Myers Investigative and Sec. Servs., Inc. v. United States, 47 Fed. Cl. 605 (2000) (using bid protest jurisprudence under the APA in a sole-source award context); Varicon Int'l v. Office of Pers. Mgmt., 934 F. Supp. 440, 444 (D.D.C. 1996) (indicating that a party that did not receive a sole-source contract is analogous to . . . a disappointed bidder that under the APA, must demonstrate that the agency's sole-source award had no rational basis or involved a clear and prejudicial violation of applicable statutes or regulations). That is, a sole-source award may be set aside if either: (1) the sole-source award lacked a rational basis; or (2) the sole-source procurement procedure involved a violation of a statute, regulation, or procedure. See Impresa, 238 F.3d at 1332. Under the first ground, the party challenging the sole-source award bears a heavy burden of showing that the award decision had no rational basis, see Bowman, 419 U.S. at 285; Impresa, 238 F.3d at 1332; 5 U.S.C. 706(2). To meet this burden, a disappointed party can show: (1) the agency's decision to conduct a sole-source procurement process lacked a rational basis; (2) the agency's sole-source requirements lacked a rational basis; or (3) based on the sole-source requirements, the selection of the sole-source awardee lacked a rational basis. The test for reviewing courts is to determine whether the contracting agency provided a coherent and reasonable explanation of its exercise of discretion. See Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962) (indicating that an agency must articulate a rational connection between the facts found and the choice made); Impresa, 238 F.3d at 1332. 57 When a party contends that the procurement procedure in a sole-source case involved a violation of a statute, regulation, or procedure, it must establish prejudice by showing that it would have had a substantial chance of receiving the award, see Statistica, 102 F.3d at 1582. A disappointed party can establish prejudice either by showing: (1) proceeding without the violation would have made the procurement official's decision to make a sole-source award rather than to conduct a competitive bidding process irrational, see 5 U.S.C. 706; Bowman, 419 U.S. at 281, and in a competitive bidding process, the complaining party would have a substantial chance of receiving the award, see Alfa-Laval, 175 F.3d at 1367; or (2) proceeding without the violation, the complaining party would have a substantial chance of receiving the sole-source award, see id. 58
59 The USPS's decision to contract out its Priority, Express, and First Class mail on a sole-source basis was rational. The Justification demonstrates that the USPS considered conducting a competitive bidding process for the contract at issue. The USPS rationally recognized, based on its previous experience, that a competitive bidding process would take much longer to perform than negotiating a sole-source award and would require the USPS to expend a great amount of resources to design appropriate potential networks with each viable competitor. 60 The Justification also provides insight into the rationality of the requirements the USPS sought in choosing a sole-source contractor. Prior to awarding FedEx the contract at issue, the USPS contracted primarily with multiple dedicated air transport carriers for delivery of Priority, Express, and First Class mail. The USPS recognized that this piecemeal system suffered from a myriad of deficiencies, including cost inefficiencies relating to operating procedures and overhead. It also realized that dedicated carriers tend to be less financially stable and more reliant on the USPS for financial viability than carriers capable of providing shared-lift. Further, the USPS recognized that the commercial airlines that currently transport some First Class mail are unreliable in achieving on-time performance. Appreciating these difficulties, the USPS set forth a number of characteristics that it sought in a carrier for the sole-source award. The primary characteristic the USPS desired was a single carrier that could provide shared-lift. The USPS rationally determined that unlike a primarily-dedicated system, in a shared-lift system, the USPS could purchase incremental space on carriers based on its needs. Such a shared system allows the USPS to reduce significantly operating and overhead costs arising from economies of scale and provides the USPS the ability to piggy-back on a plane already scheduled to travel a particular route. As a necessary component of a shared lift system, the USPS also sought a carrier that was not overly dependant on the USPS for its financial livelihood. These requirements under which the USPS conducted its sole-source award decision were rational. 61 Finally, the USPS's decision to select FedEx as the sole-source awardee was rational as was its decision to exclude Emery from consideration for the contract. While the trial court determined that the USPS had the objective of awarding FedEx the contract and hired PwC to justify that decision, PwC's Analysis and the USPS's decision were nonetheless rational. Both the Justification and the PwC Analysis indicate that it was unlikely that Emery could meet the USPS's national network requirements at a cost effective price without relying on postal payments for a significant portion of its overall revenue. This adverse factor indicates that Emery could not provide a shared-lift system that would benefit the USPS. As support for eliminating Emery from consideration, the trial court pointed out that the publicly available information cited in the PwC Analysis showed that Emery does not maintain a substantial business carrying parcels other than postal mail. Based on Emery's small market share of non-postal parcel transport service, it was rational for the USPS to determine that Emery could not provide a substantial non-postal delivery system on which the USPS could largely piggy-back. Further, the PwC Analysis and Justification provide ample support, including recitation of market share of non-postal shipments, for the USPS's decision to select FedEx over Emery and companies that PwC considered more viable than Emery for this contract, such as Airborne Express and United Parcel Service. 62 None of the countless other arguments made by Emery attacking the rationality of the USPS's decision garner any weight. 63
64 Emery contends that the USPS violated 39 U.S.C. 5005(b)(3) and provisions in the USPS Purchasing Manual by failing to post adequately the contract and a synopsis of the contract, respectively. Even assuming arguendo that the USPS violated these requirements, Emery cannot establish prejudice. 14 Neither publication of the contract for public inspection nor a publication synopsizing the USPS's non-competitive purchase prior to the effective date of the contract would have affected the rationality of the USPS's decision to conduct a sole-source process or would have given Emery a substantial chance of procuring the contract, because the USPS rationally determined Emery could not meet its rational requirements.
Section 101(f) of title 39 provides: 65 In selecting modes of transportation, the Postal Service shall give highest consideration to the prompt and economical delivery of mail and shall make a fair and equitable distribution of mail business to carriers providing similar modes of transportation services to the Postal Service. 66 Emery argues that this statutory provision prohibits the USPS from awarding a contract for transportation of Express, Priority, and First Class mail to a single provider of transportation services. Alternatively, Emery contends that 101(f) requires competition for the contract at issue. 67 By enacting the Postal Reorganization Act, Congress sought to untie the USPS's hands from the political strings that bound the old Post Office Department. H.R. Rep. No. 91-1104, at 13 (1970) (There is widespread agreement that vestiges of 19th century political patronage practices have persisted in the Post Office Department too long and that one of the cardinal needs of postal reform is to seal the Postal Service from partisan political influence.); Sen. Rep. No. 91-912, at 8 (1970) (The committee simply, and hopefully, recommends that politics in the Post Office be abolished and authorizes the postal service to insure the fulfillment of that policy.). In doing so, Congress endeavored to provide the USPS freedom to act in a business-like manner. H.R. Rep. No. 91-1104, at 5 (1970) (Top management must be given authority . . . to provide an efficient and economical postal system. Postal management has been severely and unjustly hampered in its efforts to administer the Department in a businesslike way.); id. (Ultimately, the mails are completely dependant upon transportation. Yet, the Post Office Department today labors under restrictions on its ability to procure transportation services that are often rigidly confining and in some instances inexcusably archaic.). 68 To effectively and efficiently provide mail service in a business-like manner, the Postal Reauthorization Act provides the USPS with extensive flexibility in its transportation decisions. Sen. Rep. No. 91-912, at 19 (1970) (The committee's primary motive is to improve postal service within the present regulatory framework, while at the same time affording the Postal Service more flexibility and economy in the transportation of mail by air.); id. at 17 (In fashioning its recommendations on mail transportation, the committee balanced the undoubted need of the postal service for additional flexibility and greater economy against the need for improved mail service for all classes of mail.). Section 101(f) does not hinder this flexibility. Rather, 101(f) simply requires that in selecting modes of transportation, procurement contract decisions be fair and equitable. Fair and equitable distribution is not tantamount to equal distribution or distribution to multiple providers. Fairness and equity can be met by an award to a single entity. 69 Further, fair and equitable distribution does not necessitate a competitive bidding procurement process; this statutory provision can be met by a non-competitive, sole-source contract that is based on rational requirements in light of relevant data from several potential carriers. The USPS Purchasing Manual 3.5.5.b also contemplates noncompetitive purchases under certain conditions, as does 39 U.S.C. 5402, which provides: The Postal Service may . . . contract with any air carrier for the transportation of mail by aircraft in interstate air transportation either through negotiations or competitive bidding. Further yet, even if 39 U.S.C. 101(f) required a competitive bidding procedure, Emery would not have had a substantial chance of winning the award because the USPS rationally determined it could not meet the USPS's shared lift requirement based on Emery's significant financial dependence on the USPS.