Federal Circuit Overrules Court of Federal Claims: Agencies Need Not Narrowly Tailor Corrective Action

FCPAIn an important new decision, the Court of Appeals for the Federal Circuit rejected a line of Court of Federal Claims case law that required agencies to “narrowly tailor” corrective action to fit the procurement errors the action is intended to resolve.

Procedural History

In Dell Federal Systems, L.P. v. United States, the Federal Circuit heard an appeal of a 2017 Court of Federal Claims decision that we previously discussed here and here.  Briefly, 21 disappointed offerors filed protests at the Government Accountability Office (GAO) challenging nine awards in a low-price technically acceptable (LPTA), multiple-award procurement, where only nine of the 58 offerors were found technically acceptable.  The agency decided to take corrective action because two protest grounds posed litigation risk:  (1) ambiguities in a Government-supplied spreadsheet apparently confused many offerors and caused their proposals to be technically unacceptable; and (2) given the value of the procurement, the agency should have conducted discussions, in accordance with DFARS 215.306(c). The agency announced that corrective action would be to open discussions with “virtually all of the offerors,” and solicit revised proposals with new pricing – nearly guaranteeing that all the offerors could make their proposals technically acceptable, thus jeopardizing the original nine LPTA awards.

Appeal

Six of the awardees then went to the Court of Federal Claims and protested the corrective action as overly broad. The court agreed.  Citing its own precedent, the court held that “[e]ven where an agency has rationally identified defects in its procurement, its corrective action must narrowly target the defects it is intended to remedy.”  The court held that opening discussions with all offerors after awards had been made and pricing disclosed was inappropriate, when a narrower solution was available:  limited clarifications with the offerors whose otherwise acceptable proposals were rejected simply because of clerical noncompliance with the ambiguous spreadsheet.

The Government and a number of the original protesters appealed. The Federal Circuit held that the Court of Federal Claims applied the wrong legal standard by analyzing whether the corrective action was “narrowly tailored” or “narrowly targeted”:

The Court of Federal Claims based its decision on an error of law because corrective action only requires a rational basis for its implementation. . . . Asking whether a selected remedy is as narrowly targeted as possible to an identified error in the bidding process requires more than a finding of rationality or reasonableness; therefore, the Court of Federal Claims improperly applied an overly stringent test for corrective action.

The Federal Circuit recognized that a number of Court of Federal Claims decisions have used the “narrowly tailored” test as an application of the rational basis analysis, but rejected that approach as inconsistent with binding precedents imposed by the Circuit itself. The appeals court was clearly annoyed at what it perceived as the Court of Federal Claims treating its own precedents as more persuasive than the binding precedents of the Federal Circuit:  “the Court of Federal Claims must follow relevant decisions of the Supreme Court and the Federal Circuit, not the other way around.” (Quoting Dellew Corp. v. United States, 855 F.3d 1375, 1382 (Fed. Cir. 2017).)

Having discarded the lower court’s legal analysis, the Federal Circuit then considered the facts of the protest under the highly deferential standard it had just announced. The court found that opening discussions and receiving proposal revisions from the offerors were “rationally related” to the ambiguous solicitation and the failure to have conducted discussions that “should” have been conducted.  On this basis, the court held that the agency’s announced corrective action was unobjectionable and did not need to be narrowly targeted.

Impact

This makes the standard at the Court of Federal Claims roughly equivalent to the standard at the GAO and eliminates a line cases that allowed offerors to challenge unnecessarily broad corrective action. Going forward, offerors aggrieved by overly broad corrective action will have no hope for relief unless they can show that the announced corrective action is not “rationally related” to the errors the agency perceives in the procurement, or that the agency has misidentified the errors in the first place.