Court of Federal Claims Slams Government For Cancellation of Solicitation And Awards Attorneys Fees Under Equal Access to Justice Act

Theodore P. Watson, Esq.

Background of Relevant Facts Leading to Agency Decision for Cancellation of Solicitation.

The Court of Federal Claims entered judgment in favor of Starry on its bid protest claim, concluding that the Department of Health and Human Services acted arbitrarily and capriciously in canceling its solicitation seeking to procure certain business operations services.

In response to what it believed to be an insufficient scope of the proposed corrective action, Starry sent a letter to the Clerk for the Court of Federal Claims, stating its intent to file a bid protest. On January 9, 2015, the Contracting Officer sent a letter to Starry indicating that the agency now intended to reevaluate proposals and make a new award decision. That representation prompted Starry to withdraw its notice of intent to file a protest.

On September 15, 2015, Starry filed its third protest at the Government Accountability Office (“GAO”), challenging HHS’s decision to cancel the solicitation as a pretext so that Mr. Davis could secure future work for Intellizant.

The protestor also argued that Davis, who Starry had alleged exerted influence to guide the award to Intellizant,  decided to eliminate the requirements of the solicitation as to which Intellizant was unqualified and later to re-solicit the remaining work in order to avoid GAO’s earlier recommendation to reevaluate, which Starry believes would have resulted in it winning the original procurement.

GAO denied the protest by written decision on December 23, 2015, finding that the agency’s proffered rationale for cancellation of solicitation was reasonable.

Can You Protest Cancellation of Solicitations Based on Bias, Bad Faith or Improper Conduct?

The answer is’ it depends on the basis of your protest. If you have more than just a hunch and you believe that certain government officials are acting with bias, then the court may allow you to probe the evidence to a limited extent.

The Court of Federal Claims decided that while government contracting officials are presumed to operate in good faith, citing AmPro Protective Agency, Inc. v. United States, 281 F.3d 1234, 1239 (Fed. Cir. 2002), a protestor is entitled to investigate bias if it can make a threshold showing of “motivation for the Government employees in question to have acted in bad faith or conduct that is hard to explain absent bad faith,” and that “discovery could lead to evidence which would provide the level of proof required to overcome the presumption of regularity.” Beta Analytics, 61 Fed. Cl. at 226.

The Court of Federal Claims also awarded Starry attorney fees at the rates actually billed to Starry by its counsel, finding that the “extreme measures that [Starry] was forced to pursue to vindicate its right to a rational and lawful federal procurement process, combined with the shocking disregard of the truth by” HHS, constituted a “special factor” justifying an award of fees above the EAJA’s “default rate” of $125 per hour.

Equal Access to Justice Act Attorneys Fees Awarded

EAJA, the Equal Access to Justice Act, 28 U.S.C. 2412(d)(2)(A), provides that when a trial court finds that a “special factor” exists, in this cancelation of solicitation requirements, it is authorized to increase the statutory attorney fee rate in certain cases brought by or against the government. The Federal Circuit vacated the award, holding that the Claims Court erred as a matter of law in holding that an agency’s improper or dilatory conduct during the administrative process that gave rise to the litigation between the parties can constitute a “special factor.”

  • EAJA does not contain any reference to prelitigation activities.

After successfully challenging HHS’s cancellation of a solicitation for business-operations services, Starry filed a motion for attorney fees pursuant to the Equal Access to Justice Act (“EAJA”).  This can be risky. However, as is the case here, the contractor did recover attorneys fees.

  • Be mindful that there is a legal standard that must be met before contractors can recover attorneys fees during litigation in a government contracts case. The government’s position must be reasonably justified based on the law or the facts

The government can avoid an award of Equal Access to Justice Act  fees upon a demonstration that the positions it took were “substantially justified,” a deferential standard requiring only that such positions were reasonably based in both law and fact (though the Court noted that both DOJ’s position before the Court, as well as HHS’s position throughout the proceedings, were relevant to this inquiry). Defending its conduct in this case, the Department of Justice (“DOJ”) asserted that it reasonably relied on prior GAO decisions and agency representations regarding the case history.

The Court of Federal Claims was unconvinced, observing that the “record as further developed in this protest ought to have thoroughly disabused defense counsel of any notion of rationality” behind HHS’s decision for the cancellation of the solicitation.

 In light of a record that “contains a lengthy history of agency personnel being indifferent to the fidelity of the procurement process,” the Claims Court concluded that “[a]t no point was the government’s position reasonably justified based on the law or the facts,” such that Starry was “entitled to recover fees and costs under EAJA.”

The point here is that although the federal government has vast discretion about how to handle its government contracting matters, it is not exempt from the Court’s oversight. Many small businesses have to spend thousands of dollars in attorney fees to go to the court for relief. This is the primary reason for the Equal Access to Justice Act

Can You Get More Than the Statutory Amount under EAJA?

Because of the EAJA’s statutory cap on the amount of fees awards, Starry also requested an upward departure. The EAJA allows for awards in excess of the statutory cap if a court determines that a “special factor” justifies a higher fees award that the Equal Access to Justice Act. After rejecting DOJ’s argument that “special factor” departures were only warranted in instances where the proceedings could be handled by a very limited number of attorneys, the Claims Court described two grounds for its decision that Starry was entitled to an enhanced fee award. First, the Court highlighted HHS’s problematic conduct, noting that “what the agency did here constitutes an egregious example of intransigence and deception, not just with regard to the bidder, but to the GAO and to the court.” Second, the Claims Court cited the extensive procedural history Starry needed to navigate to obtain a favorable outcome in this case.

Court says Yes

The Court of Federal Claims  concluded that the “extreme measures that plaintiff was forced to pursue to vindicate its right to a rational and lawful federal procurement process, combined with the shocking disregard of the truth by the agency, justif[ied] an award at higher than the default rate.”

While the COFC’s ruling on the merits of the agency cancelation of solicitation of the procurement was in and of itself noteworthy, its subsequent award of enhanced Equal Access to Justice Act fees makes this case truly unique for small business seeking to recoup attorney fees in litigation.

The Claims Court acknowledged as much, noting that its holding was “not applicable across a broad spectrum of litigation,” but when an “agency’s conduct necessitates that an offeror file four protests in over two years, in two fora, winning two of them and prompting one corrective action, and when the agency’s defense of its conduct is highly irregular (misrepresentations and illusory promises), the circumstances of the case are anything but ordinary.”

Despite the ruling’s narrow scope, the case sets an important precedent reminding government agencies that the deference owed to their determinations is no substitute for compliance with the requirements of, and fidelity to, the federal procurement process.

The lesson for small business government contractors is that the Government has great latitude to cancel its solicitation to the extent that it meets the legal requirement to do so.

For additional help with federal procurement disputes, call the bid protest lawyers at Watson & Associates, LLC at 1-866-601-5518.