November 3, 2015 - Federal Procurement

Raytheon Co. v. U.S. – The High Hurdle to Challenging Agency Corrective Action

federal-600On October 23, 2015, the Federal Circuit affirmed[1] a decision from Judge Sweeney of the Court of Federal Claims rejecting Raytheon Company’s challenge to the Air Force’s decision to take corrective action following outcome prediction by GAO.  The circuit’s decision serves as an important reminder of the high hurdle that an unsatisfied litigant at GAO must overcome to overturn agency corrective action.

During the subject procurement, Raytheon prevailed over two competitors, Northrop Grumman Systems Corporation and Lockheed Martin Corporation, in a competition for a $71.8 million contract to provide equipment and services for the Air Force’s new long-range radar program.  Northrop and Lockheed filed protests at GAO, which, following a hearing, conducted outcome prediction ADR.  GAO informed the parties that it was prepared to issue a decision sustaining the protest in part on the basis that the Air Force’s discussions with Northrop were misleading and unequal as compared to the discussions with Raytheon.  Specifically, GAO was prepared to find that the Air Force informed Raytheon that research and development costs were allowable as IR & D, but informed Northrop that IR & D cost reductions would not be accepted.  As a result of these disparate discussions, Raytheon offered IR & D cost reductions in its final proposal while Northrop did not offer similar reductions, thereby inflating its overall price.  GAO recommended that the Air Force reopen discussions with all three contractors to explain its current view of the allowability of IR & D costs, and solicit revised proposals.

The Air Force took corrective action consistent with GAO’s recommendation, and Raytheon filed a protest challenging the Air Force’s decision at the Court of Federal Claims.  Judge Sweeney agreed with GAO that the Air Force’s discussions with Northrop and Raytheon on the allowability of IR & D costs were unequal and favored Raytheon.  Accordingly the court held that GAO’s outcome prediction decision was rational, and that the Air Force’s decision to take corrective action was also rational.

The Circuit explained that the standard for overturning agency corrective action is whether the agency’s grounds for taking corrective action – in this case, GAO’s outcome prediction decision – “rationally justified” the decision to reopen the bidding process.  The Circuit agreed with the Court of Federal Claims and GAO that the Air Force’s unequal discussions regarding IR & D accounting, which was a prejudicial violation of FAR 15.306(e)(1), provided a rational basis for the corrective action.

Key Takeaway

A challenge to an agency’s decision to take corrective action following a GAO protest will turn on whether GAO’s decision was rational.  Where GAO rationally finds a prejudicial violation of law was conducted during the procurement, the agency may undertake the recommended corrective action and survive court review.

[1] See