Opinion ID: 528191
Heading Depth: 2
Heading Rank: 2

Heading: Department of Defense Regulations

Text: 39 Plaintiffs also claim that certain Defense Department procurement regulations provide standards suitable for judicial review. Both plaintiffs' opening brief and the Government's brief discuss a now-superceded version of the DOD regulations, however, 32 C.F.R. Part 169 (1988); as plaintiffs note in their reply brief, DOD has recently put into place a revised version of these regulations, 54 Fed.Reg. 13373 (1989), which became effective on March 10, 1989. Since plaintiffs seek only prospective relief against future COCESS conversions, we believe that only the new Part 169 regulations are relevant to the question of reviewability. 40 Contrary to the Government's assertion at oral argument, the issue of reviewability under Sec. 1223 of the 1987 Authorization Act, discussed above, does not bear upon the issue of reviewability under the Part 169 regulations. Notwithstanding the lack of judicially manageable standards in the underlying statute, regulations promulgated by an administrative agency in carrying out its statutory mandate can provide standards for judicial review of agency action. Center for Auto Safety v. Dole, 846 F.2d 1532, 1534 (D.C.Cir.1988). 41 Here, the Part 169 regulations state that it is DOD policy to: 42 (b) Achieve Economy and Quality through Competition. Encourage competition with the objective of enhancing quality, economy, and productivity. Whenever performance by a commercial source is permissible, a comparison of the cost of contracting and the cost of in-house performance shall be performed to determine who shall provide the best value for the Government.... 43 (d) Rely on the Commercial Sector. DoD Components shall rely on commercially available sources to provide commercial products and services except when required for national defense [or] when no satisfactory commercial source is available.... DoD Components shall not consider an in-house new requirement, an expansion of an in-house requirement, conversion to in-house, or otherwise carry on any [commercial activities] to provide commercial products or services if the products or services can be procured more economically from commercial sources. 44 32 C.F.R. Sec. 169.4, 54 Fed.Reg. 13375. These regulations do seem to incorporate standards susceptible to judicial review: Is a satisfactory commercial source available? Was a cost comparison done? Is the commercial source more economical than in-house provision? 45 The Government responds by confession and avoidance, noting that the Part 169 regulations by their terms do[ ] not apply to DoD governmental functions.... 32 C.F.R. 169.2(d), 54 Fed.Reg. 13374. Indeed, the section of Part 169 cited by plaintiffs and quoted above also sets forth DOD policy to: 46 (c) Retain Governmental Functions In-House. Certain functions that are inherently governmental in nature, and intimately related to the public interest, mandate performance by DoD personnel only. These functions are not in competition with commercial sources; therefore, these functions shall be performed by DoD personnel. 47 32 C.F.R. Sec. 169.4, 54 Fed.Reg. 13375. The Government therefore argues that the Part 169 regulations for reliance on the private sector are inapplicable, because the Air Force determined that making pricing decisions under the COCESS program is a governmental function. 48 The Air Force did specifically conclude that the task of determining the fairness of price and delivery terms for non-priced materials is a governmental function. Plaintiffs initially claim that this characterization contravenes the Part 169 regulations, which define the term commercial activity as one that provides a product or service obtainable (or obtained) from a commercial source and add that [a] representative list of the functions performed by such [commercial] activities is provided in enclosure 3 of DoD Instruction 4100.33. 32 C.F.R. Sec. 169.3, 54 Fed.Reg. 13374. Enclosure 3, as set out in Appendix A to 32 C.F.R. Part 169a, lists Contractor-Operated Parts Stores and Contractor-Operated Civil Engineer Supply Stores [COCESS] as commercial activities. 49 Contrary to plaintiff's suggestion, however, the categorization of COCESS as a commercial activity does not preclude its categorization as a governmental function as well. The definition of commercial activity (CA in the jargon of the regulation) specifies that: A DoD CA falls into one of two categories: 50 (a) Contract CA. A DoD CA managed by a DoD Component, but operated with contractor personnel. 51 (b) In-House CA. A DoD CA operated by a DoD Component with DoD personnel. 52 32 C.F.R. Sec. 169.3, 54 Fed.Reg. 13374. The overlap is apparently intentional, since the prior version of the regulation specifically provided that [a] DoD CA is not a Government function, 32 C.F.R. Sec. 169.3 (1988), and this statement was deleted in the new version. The upshot is that the Part 169 regulations plainly leave open the possibility that an activity may be a governmental function (such that it must be performed by government personnel) but also come within the definition of a commercial activity (depending upon the nature of the activity, not upon who does or must perform it). Hence, a commercial activity may be performed in-house if it is also a governmental function. 53 Plaintiffs advance as a second basis for reviewability the Part 169 definition of a governmental function, to wit: 54 A function that is related so intimately to the public interest as to mandate performance by DoD personnel. These functions include those that require either the exercise of discretion in applying Government authority or the use of value judgment in making the decision for the Department of Defense.... Governmental functions normally fall into two categories: 55 (a) Act of Governing. The discretionary exercise of Government authority. Examples include criminal investigations, prosecutions, and other judicial functions; management of Government programs requiring value judgments, as in direction of the national defense; management and direction of the Armed Services; activities performed exclusively by military personnel who are subject to deployment in a combat, combat support, or combat service support role; conduct of foreign relations; selection of program priorities; direction of Federal employees; regulation of the use of space, oceans, navigable rivers, and other natural resources; management of natural resources on Federal Property; direction of intelligence and counterintelligence operations; and regulation of industry and commerce, including food and drugs. 56 (b) Monetary Transactions and Entitlements. Refers to such actions as tax collection and revenue disbursements; control of treasury accounts and the money supply, and the administration of public trusts. 57 32 C.F.R. Sec. 169.3, 54 Fed.Reg. 13374. Given the extent of these examples, plaintiffs correctly observe--and Government does not directly deny--that a court would have sufficient guidance in evaluating an Air Force decision that a particular activity is a governmental function. The court would simply need to ask whether the activity in question is, in relevant respects, similar to the enumerated activities and to give appropriate deference to the agency's answer. Such review would not differ fundamentally from the reasoning by example typical of the process by which a common law court applies precedents to new situations. Cf. Edward Levi, An Introduction to Legal Reasoning 1 (1949). 58 We therefore find in the concept of a governmental function no bar to judicial review of the Air Force's decision to take procurement of non-priced materials in-house; the relevant standards for application by the reviewing court are to be found in the Part 169 regulations, 32 C.F.R. Secs. 169.3 & 169.4, 54 Fed.Reg. 13374-75. We leave their application to the district court, in the first instance, to be performed on the basis of a record supplemented by the parties with the new regulations in mind.