Representing Firth Construction Company before the U.S. Court of Federal Claims, the Firm recently obtained an injunction preventing the award of a contract to Firth’s competitor, M.R. Dillard Construction Company. Firth Construction Company, Inc. v. United States, No. 96-393C, Fed. Cl., July 22, 1996. As a result, Firth received a $13 million contract to lay railroad track at Fort Campbell, Kentucky.
The issuance of such an injunction is rare-the court historically grants relief in only about ten percent of the protest cases it decides-but this case is especially noteworthy for two reasons. First, the court, which has jurisdiction only in preaward situations, clarified that it does not lose its preaward jurisdiction where, as here, the agency initially awards a contract but then cancels it due to deficiencies in the awardee’s bid. Second, to grant the injunction, the court had to find that a GAO decision recommending that the agency award the contract to Dillard was irrational. Although courts generally give deference to GAO decisions, the court here decided the GAO decision was irrational. This is the first instance of which we are aware in which a federal court has refused to give any weight to a GAO decision in the same case.
The procedural history of this case is tortuous. It arose out of a sealed bid competition conducted by the U.S. Army Corps of Engineers, in which Dillard was the apparent low bidder, and Firth was the second low bidder. When bids were opened, Corps personnel noted that Dillard had neglected to provide the required two-sided SF 1442 bid form. Although Dillard contended it had included a copy of the front page of the SF 1442 with its original bid, it was undisputed that the back page of the form was not submitted. The back page of the SF 1442 shows the offered amount and acceptance period; provides blocks for acknowledgment of receipt of solicitation amendments; states the offeror’s agreement to submit any required performance and payment bonds; and calls for the name, title and signature of the person authorized to bind the company to the offer.
Dillard had submitted a price on a continuation sheet, Optional Form 336, and its bid package contained signatures in several places. The Optional Form 336 bore a stamped signature of M.R. Dillard; the first page of an SF 30 solicitation amendment form acknowledging amendment of the bid opening date also included a stamped signature of M.R. Dillard; and the Certificate of Procurement Integrity was signed by “Harry Horner,” whose title or office was not identified. However, nothing in the bid indicated Dillard’s agreement to the minimum bid acceptance period or an agreement to provide performance and payment bonds.
The Corps told Dillard that it had failed to submit a completed SF 1442, and six days after bid opening, Dillard faxed a completed, signed SF 1442 to the Corps. The Corps then awarded the contract to Dillard, apparently believing that the omission of the back page of the SF 1442 had been a minor informality that it was allowed to waive.
Firth, however, protested the award. While this protest was pending, the Corps’ lawyers advised the contracting officer that Dillard’s bid was nonresponsive due to a lack of an original signature on the SF 1442. Based on this advice, the contracting officer canceled the award to Dillard as “invalid,” and Firth withdrew its protest. The Corps then prepared to award the contract to Firth.
The Corps’ cancellation of the award led Dillard to lodge a GAO protest, asserting that the Corps had abused its discretion in rescinding the contract. Dillard submitted evidence that Mr. Horner had authority to bind the company and claimed that the absence of a signature on the SF 1442 was a minor informality.
GAO granted Dillard’s protest, concluding that Mr. Horner’s original signature on the Certificate of Procurement Integrity was sufficient to show Dillard’s intention to be bound by the bid. Although the issue of the bid’s completeness had not been raised before it, GAO, citing Weber Construction, B-233848, Mar. 27, 1989, 89-1 CPD ¶ 309, also held that Dillard’s bid was complete despite the missing back page of the SF 1442. Accordingly, GAO recommended that the Corps decide the rescission to be a nullity and proceed with the contract with Dillard. M.R. Dillard Construction, B-271518.2, June 28, 1996.
The Corps announced its intention to follow GAO’s recommendation, and it was at this point that Firth engaged the Firm to seek an injunction from the Court of Federal Claims. We immediately filed a complaint and obtained the Corps’ agreement not to award any contract pending resolution of a motion for an injunction. We argued that regardless of the validity of any signature, Dillard’s bid was incomplete and therefore nonresponsive because it omitted the material terms contained on the missing back side of the SF 1442. We noted that the Weber Construction case actually stands for the exact opposite of the proposition for which GAO had cited it; that is, that the omission of an SF 1442 will render a bid nonresponsive even if the bidder has acknowledged receipt of solicitation amendments. The court ultimately agreed with these arguments and granted the injunction.
In deciding the case, the court first wrestled with the issue whether it had jurisdiction. The court’s jurisdiction is limited to preaward protests, and Dillard argued that, since a contract had been awarded to it, Firth had come too late to invoke the court’s preaward jurisdiction. Dillard attempted to distinguish earlier cases in which the court retained jurisdiction after other tribunals (such as the General Services Administration Board of Contract Appeals (GSBCA)) canceled awards on the basis that it was the agency-and not a judicial tribunal-that had canceled the award here. Dillard contended that “[t]he contracting officer had no authority to cancel or rescind this contract.” In essence, Dillard was arguing that the contract was a species of vampire contract: neither alive nor dead but existing in an undead state. The court drove a stake through the heart of these contentions and found jurisdiction.
The court recognized that the original award had been rescinded. As a result, there was no contract then in existence, and the Corps would have to take some affirmative action to award a contract to Dillard pursuant to GAO’s recommendation. The court’s conclusions were on solid ground because, under applicable regulations, the contracting officer actually was required to cancel the contract once she decided Dillard’s bid was nonresponsive. Since there was still something to enjoin, the court concluded it had jurisdiction to grant the requested injunctive relief. Firth Construction, slip op. at 5.
In reaching this result, the court expanded upon and followed other cases finding preaward protest jurisdiction in ostensible post award situations. In IMS Services, Inc. v. United States, 32 Fed. Cl. 388 (1995), the court had rejected the notion that it forever loses jurisdiction once “an executed document titled award/contract” is issued, without regard to an agency’s later actions. Indeed, in the IMS Services case, the contract was never canceled, but the agency’s post award actions in reevaluating offers made it clear that the “practical reality” was that the awardee had but a “mere hope” of receiving the contract work. Id. at 398.
Similarly, in Unified Industries, Inc. v. United States, 24 Cl. Ct. 570 (1991), the court had found jurisdiction after the GSBCA had overturned an award, saying that “[i]n such a situation it would be to create a legal fiction to find a contract existing between the [original awardee] and the Navy.” Id. at 573. The court also found it irrelevant to decide whether the contract had been void from the outset or was merely voidable.
Thus Firth Construction expands the body of law finding jurisdiction in the limbo situations where an award has been made but is later rescinded. It also unequivocally finds jurisdiction based on a remedial cancellation effected solely by the agency.
Turning to the merits, the court said that it had to decide whether the Corps’ announced intent to award the contract to Dillard was arbitrary, capricious, or not in accordance with law. It further explained that such determination had to be considered in light of the GAO decision, and that the Corps’ decision to follow the GAO recommendation could not be arbitrary or capricious if the GAO decision were rational. Thus, the real inquiry in the case was whether the GAO decision, finding Dillard’s bid responsive as a matter of law, was rational. Firth Construction, slip op. at 6-7.
The court started with the bedrock principle of responsiveness; i.e., that “[b]ids that fail to conform to the essential requirements of the IFB must be rejected,” and that waivers for nonconforming bids are limited to those that do not affect price, quantity, or quality of the offered article. The court explained that there are two elements to analyze in determining whether a bid is responsive: “a clear intent to be bound and sufficient terms so that acceptance of the offer forms a contract on the basis of the agency’s IFB.” Firth Construction, slip op. at 9.
The court upheld GAO’s determination that the original signature on the Certificate of Procurement Integrity was sufficient to bind the bidder, pointing to established GAO precedents on this point. It noted, however, that in the earlier GAO cases on this issue bids were otherwise submitted in a complete form, which was not so here. Firth Construction, slip op. at 8.
The court then rejected GAO’s conclusion that Dillard’s bid contained all the terms necessary to form a binding contract. The court found there were two missing terms, the agreement to submit required performance and payment bonds and the period in which the bid was open for acceptance, both of which were substantive, material terms. The GAO had concluded these missing terms were incorporated by reference through Dillard’s submission of an SF 30 acknowledging receipt of an amended SF 1442 that changed the bid opening date, but the court was unable to follow any of GAO’s reasoning in support of this conclusion. Firth Construction, slip op. at 12.
Dillard had submitted the first page of the SF 30 only to show it had received the solicitation amendment. The amended SF 1442 itself was not attached to the first page of the SF 30 submitted with the bid. The court likened this situation to one in which a bidder responds to a solicitation simply by submitting a slip of paper stating: “I have received the IFB; $13,474,352.” Obviously, such a bid would have to be considered nonresponsive, and the same held true for Dillard’s acknowledgment of receipt of the amended SF 1442. Firth Construction, slip op. at 13.
The submission of the first page of the SF 30 merely acknowledged receipt of the amendment, and nothing on the SF 30 suggested that Dillard was agreeing to anything-there was no statement to the effect that Dillard agreed to the bond commitment or the minimum bid acceptance period. The court explained that if the Corps had sent the amendment return receipt requested, return of the receipt could not be treated as an offer or agreement to be bound by the terms of the amendment. This conclusion would not change simply because Dillard submitted the front page of the SF 30 as its receipt. Id.
The court was especially troubled by GAO’s citation of Weber Construction for the proposition that the missing terms could be supplied by the acknowledgment of the solicitation amendment. The same terms missing here were missing in Weber Construction, and the GAO in Weber Construction had rejected the argument that an acknowledgment of an amendment could serve to incorporate missing terms. Weber Construction is consistent with a clear line of other GAO cases holding that an amendment does not, by itself, constitute an agreement to the terms of the original solicitation. See Oxbow Enterprises, B-244696, Oct. 1, 1991, 91-2 CPD ¶ 275, at 2; Jones Floor Covering, Inc., B-213565, Mar. 16, 1984, 84-1 CPD ¶ 319, at 2; Union City Plumbing, B-208500, June 7, 1983, 83-1 CPD ¶ 614, at 2. Since Weber Construction provided no apparent support for GAO’s recommendations, the court opined it should have been distinguished or explained. Firth Construction, slip op. at 13-14.
All these factors persuaded the court that the GAO decision was irrational, as the court succinctly explained as follows:
Whether a bid package is responsive to the IFB should involve the application of principled inquiries which can be duplicated in other circumstances. What are the minimal elements of a bid, and what inferences can be legally drawn from them? At the critical stage in its analysis here, however, the GAO draws a legal conclusion with no principled support. Drawing from a small quantity of facts and bootstrapping one inference into another, the GAO creates a mutually interdependent chain of implied terms to the offer. In this process of creation ex nihilo, the GAO ignores its own clear lines of precedent and fails to give adequate consideration to basic questions of contract formation, as well as to the applicable procurement regulations. It would require a confidence in alchemy rather than reason to conclude, as the GAO did, that the missing terms were incorporated by reference. The decision was therefore irrational, and the agency would be arbitrary, capricious, and acting contrary to law in following it.
Firth Construction, slip op. at 14.
The court’s holding is noteworthy because, although earlier decisions have stated the theoretical possibility that a court could find a GAO decision irrational, this is the first instance in which a court actually made such a finding. Indeed, in the vast majority of cases in which courts have remarked upon a GAO decision dealing with the same case, the court has usually given deference to the GAO decision.
We believe the court reached the right result from a policy perspective. If the court had accepted Dillard’s arguments, virtually any incomplete submission could be considered responsive, and litigation would abound. The bidding process would be reduced to chaos because all bidders would have the proverbial “second bite.” They could omit material terms and then sit back to see whether they really wanted to accept the proffered contract. If a bid were too low to be profitable, bidders could argue that the bid was incomplete. On the other hand, if bidders wanted the contract, they could assert that missing terms were supplied by ambiguous references. The court’s decision prevents these unwarranted results.
— Claude Goddard
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