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such statements have not appeared in recent GAO decisions, the impression persists that GAO still relies on this "presumption of correctness” when adjudicating award protests.

Another complaint relates to the evaluation of technical matters in a protest. Though GAO on certain occasions has sought independent evaluation and advice from an impartial Government agency, normally the soliciting agency's technical evaluations are substituted for GAO's own judgment. It is charged that this procedure also causes the evidence in a protest to be unfairly weighted in favor of the contracting agency.

We commend GAO for its responsiveness and recommend that it continue to improve its procedures for handling award protests. In making this observation, we recognize of course that a balance must be preserved between due process and prompt handling of disputes. There are distinctive values in the informality and flexibility of the GAO award protest procedures. To concentrate too heavily on the due process aspect would diminish these values.

We do not recommend, therefore, that GAO adopt the full battery of due process procedures used in a court of law but only those that will insure “basic fairness" or objective consideration of award protests. To do otherwise could destroy the protestor's option of obtaining a prompt and economical administrative determination of its protest. The Federal courts are a reasonable alternative forum in which to lodge a protest if the complexity or importance of the protest requires the use of more formalized factfinding procedures. It is essential, in our estimation, that GAO strive to provide swift, economical, and informal resolution of protests.

FACTFINDING PROCEDURES

A second part of the complaint about the failure to provide due process adjudication of award protests deals with the manner in which GAO gathers evidence.55 Although the present rules do provide for group conferences, ex parte communications are not expressly prohibited. The procedure of using ex parte communications has been criticized for its tendency to put evidence before GAO that is not known to the other party and, therefore, not rebuttable through other witnesses or documenation. Failure to provide open, oral hearings, with the opportunity for confrontation and cross-examination of witnesses, also enables parties, it is claimed, to give slanted versions of the facts to GAO. Finally, the inability of one party, through lack of discovery power, to obtain disclosure of facts in the exclusive possession of another often prevents that party from presenting evidence necessary for the successful demonstration of the merits of its case.

Review of Decision to Award Contract During Pending Protest

CONCLUSIONS

Recommendation 16. Establish in the executive procurement regulations, in cooperation with the General Accounting Office, a coordinated requirement for high-level management review of any decision to award a contract while a protest is pending with GAO.

In an attempt to restrain the award of a contract while a protest is pending with GAO, the new GAO award protest procedures provide:

When notice is given the agency that a protest has been filed with the General Accounting Office, award shall not be made prior to a ruling on the protest by the Comptroller General, unless there has first been furnished to the General Accounting Office a written finding by the head of the agency, his deputy, or an Assistant Secretary (or equivalent), specifying the factors which will not permit a delay in the award until

GAO has made a conscientious endeavor to respond to such criticism. It now provides for the automatic dissemination of pertinent data to interested parties, seeks to reduce ex parte communications, and no longer gives as much weight to the “presumption of correctness” in administrative reports.

5 See Statement of Theodore M. Kostos, Esq., 811 pra note 54 ; American Bar Association, Public Contract Law Section, Report of the Committee on Bids and Protests, sujira note 54.

The majority of protests are not lodged with GAO until after an award has been made.61 While GAO should have discretion in recommending that a contract be canceled or merely that corrective action be taken with respect to future procurements, it is important to provide protestors with an effective remedy when they are wrongfully denied an award.

Since our study began, GAO has recommended in several protest cases that an improperly awarded contract be terminated for the convenience of the Government and reawarded to the protestor who proved entitlement to that award.62 Such a procedure is meritorious in that it often provides an effective remedy to a protestor without unduly penalizing the contractor who erroneously has been allowed to begin performance. We recommend that this remedy continue to be used in appropriate circumstances.

issuance of a ruling by the Comptroller General,56

The basic executive procurement regulations, however, provide that:

Where a written protest against the making of an award is received, award shall not be made until the matter is resolved, unless the contracting officer determines that: (i) the items to be procured are urgently required; or (ii) delivery or performance will be unduly delayed by failure to make award promptly; or (iii) a prompt award will otherwise be ad

vantageous to the Government.57 The regulations further provide that when a protest has been lodged with GAO prior to award a contracting officer must seek approval at "an appropriate level above that of the contracting officer, in accordance with Departmental procedures,” if he decides to proceed with an award despite the pending protest.58 The “appropriate level" for approval varies with each agency. For example, one agency regulation requires the approval of a “superior officer” while a second agency regulation requires approval by the Deputy for Procurement within the office of an Assistant Secretary. The only coordination required with GAO is that the contracting agency notify GAO of the intent to make an award and inquire regarding the status of the protest.59

GAO has concluded that it has no power to compel the agencies to withhold award while a protest is pending with GA0.60 We believe that agencies should retain the authority to make an award while a protest is pending with GAO. Such decisions should be based, however, on a high-level agency finding as stated in the GAO procedures.

FEDERAL COURTS

Until 1970, Federal courts generally held that they would not, on the complaint of a private party, review the actions of administrative officials in soliciting or awarding a Government contract. The Supreme Court in 1940 reasoned in Perkins v. Lukens Steel C0.63 that protestors had no "standing" 64 to seek judicial review of contracting agency decisions because Federal procurement statutes bestowed no "litigable rights upon those desirous of selling to the Government.” 65 To have standing to sue

Effective Remedy for Protestor

Recommendation 17. GAO should continue to recommend termination for convenience of the Government of improperly awarded contracts in appropriate instances.

61 In fiscal 1972, 55 percent of all protests decided were lodged after award. In fiscal 1971, 60 percent were lodged after award. Moreover, 26 percent of the decisions involving protests lodged before award were rendered after an award in fiscal 1972. See Appendix A, p. 78.

63 See, e.g., 51 Comp. Gen. 423 (1972); 51 id. 293 (1971); 51 id. 62 (1971) ; 49 id. 809 (1970).

63 310 U.S. 113 (1940). 64 "The five major questions about judicial review of administrative action are whether, when, for whom, how', and how much judicial review should be provided. The question of who may challenge administrative action--the third of the five major questions--is customarily discussed by courts in terms of 'standing' to challenge." K. Davis, 3 Administrative Law Treatise 208 (1958).

65 310 U.S. at 127. This doctrine was first clearly pronounced in a suit against Denver city officials by a bídder on a city contract, and the case has served as precedent for subsequent cases involving the award of Federal contracts. See Colorado Par. Co. v. Murphy. 78 F. 28 (8th Cir. 1897), appeal dismissed, 166 U.S. 719 (1897). See also O'Brien v. Carney. 6 F. Supp. 761, 762 (D. Mass. 1934). In Perkins the Supreme Court stated that $ 3709 of the Revised Statutes, requiring public advertising for contracts, “was not en

56 4 CFR $ 20.4 (1972).
57 ASPR 2-407.8 (b) (3) : FPR 1-2.407-8(b) ().
65 ASPR 2-407.8(b) (2) ; accord FPR 1-2,407-8(b) (3).
59 ASPR 2-407.8(b) (2) ; FPR 1-2.407-8(b) (3).

See 36 Fed. Reg. 24791 (1971).

the Government, the protestor was required to show “injury or threat to a particular right of [its] own, as distinguished from the public's interest in the administration of the law.” 66

In 1970 the United States Court of Appeals for the District of Columbia Circuit held in Scanwell Laboratories, Inc. v. Shaffer 67 that Scanwell had standing under the Administrative Procedure Act (APA) 68 to sue the Government as a "private attorney general” seeking to protect the public interest in “having agencies follow the regulations which control government contracting.” 69 The court found that certain decisions issued by the

Supreme Court following Perkins v. Lukens Steel Co. in cases not involving Government contracting, plus the adoption of the APA in 1946, indicated that the Perkins decision was no longer viable law. Shortly thereafter, the Court of Claims, using a different standard but agreeing with the Scanwell decision, followed suit by ruling that an unsuccessful bidder who made a prima facie showing that the Government acted arbitrarily and capriciously in awarding a contract to another bidder had standing to sue for money damages.0

The factfinding procedures and types of relief available in the courts to the parties in a judicial award protest differ from those available in the administrative forums. The courts use formal trial procedures, thus allowing a party to the protest, for example, to confront and cross-examine witnesses and discover documents in the possession of another party. The district courts have the power to issue injunctions in order to halt performance or award of a contract temporarily pending a hearing on the merits of the case or to direct the award permanently to a protestor.:2 The Court of Claims has no injunctive powers 13 but may award any amount of damages. 4

The protestor also may seek the help of the courts in enjoining further agency action until GAO has decided the issue on its merits.75 If the protestor does lodge its initial protest with GAO, it may then, if dissatisfied with the GAO decision, lodge the same protest with a Federal court.76 One court has indicated that, in considering a protest which had been previously adjudicated by GAO, the action of the agency in following GAO recommendations should not be overturned where such action

70 Keco Industries, Inc. v. United States, 192 Ct. Cl. 773, 428 F.2d 1233 (1970).

acted for the protection of sellers and confers no enforceable rights
upon prospective bidders." 310 U.S. at 126 (1940). From 1940 until
1970 a majority of lower Federal courts followed the Perkins ration.
ale and ruled in subsequent award protest cases that offerors for
Government contracts have no standing to challenge administrative
actions of procurement officials in the contract award process. See
Walter P. Villere Co. v. Blinn, 156 F.2d 914, 916 (5th Cir. 1946) ;
Friend v. Lee, 221 F.2d 96, 100 (D.C. Cir. 1955); Edelman
v. Federal Housing Administration, 382 F.2d 594, 597 (2d Cir.
1967); Lind v. Staats, 289 F. Supp. 182, 184-86 (N.D. Cal.
1968); Pierson, Standing to Seek Judicial Reviero of Government
Contract Awards: Its Origins, Rationale and Effect on the Procure-
ment Process, 12 B.C. Ind. & Com. L. Rev. 1, 4-7 (1970); Comment,
The Erosion of the Standing Impediment in Challenges by Dis.
appointed Bidders of Federal Government Contract Awards, 39 Ford-
ham L. Rev. 103, 109-112 (1970). Judicial review of award protests
also has been denied on the ground that administrative procurement
decisions are unreviewable because such decisions are essentially
discretionary in nature. O'Brien v. Carney, 6 F. Supp. 761, 762–63
(D. Mass. 1934). See United States Wood Preserving Co. v. Sund-
maker, 186 F. 678, 683 (6th Cir. 1911) (municipal award protest).
See also note 86 infra.

66 310 U.S. at 125.
67 424 F.2d 859 (D.C. Cir. 1970).

** The act provides that “(a) person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof." 5 U.S.C. $ 702 (1970). Judicial review is precluded, however, if a statute precludes review or "agency action is committed to agency discretion by law." 5 U.S.C. $ 701 (1970). Under $ 706 the court has the power to “compel agency action unlawfully withheld or unreasonably delayed (and to] hold unlawful and set aside agency action, findings, and conclusions" found to be unacceptable under certain standards prescribed by the act, including agency action which is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. ..."

89 424 F.2d at 864. Although for almost 30 years Perkins v. Lukens Steel was viewed as barring suits against the Government by prospective contractors, in a few isolated cases standing was granted to disappointed or potential bidders. See Heyer Products Company v. United States, 135 Ct. CI. 63, 140 F. Supp. 409 (1956) (unsuccessful bidder is entitled to recover cost of preparing bid if bids not invited in good faith) ; Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964) (plaintiff has standing to challenge debarment process by which he was prevented from doing business with the Government) ; Superior Oil Company v. Udall, 409 F.2d 1115 (D.C. Cir. 1969), vacated sub nom., 421 F.2d 1089 (D.C. Cir. 1969) (court may issue permanent injunction directing award to bidder and barring award to another bidder for Government oil lease) ; Pierson, supra note 65, at 7–11; K. Davis, Administrative Law Treatise 781-82 (Supp. 1970) ; Johnson & Cobb, Scanwell and Its Implications on the Adjudication of Disputes Over the Award of Government Contracts, June 1971, at 3-10 (unpublished paper prepared for the Commission on Government Procurement).

11 When such temporary relief should be granted is discussed in M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971). See Wheelabrator Corp. v. Chafee, 455 F.2d 1036 (D.C. Cir. 1971).

72 Superior Oil Company v. Udall, 409 F.2d 1115 (D.C. Cir. 1969), vacated sub nom., 421 F.2d 1089 (D.C. Cir. 1969). See Simpson Electric Co. v. Seamans, 317 F. Supp. 684 (D.D.C. 1970). This remedy has been directed infrequently.

* The jurisdiction of the Court of Claims is limited to money claims against the United States. United States v. king, 395 U.S. 1 (1969).

7+ See 28 U.S.C. $ 1491 (1970).

** See M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971); Wheelabrator Corp. v. Chafee, 455 F.2d 1306 (D.C. Cir. 1971).

78 See M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971).

and the GAO opinion are neither arbitrary nor capricious.”

If the protestor proceeds first to a Federal court and obtains a judicial determination of the merits of its protest, then it may not obtain a subsequent decision from another forum. The contracting agencies and GAO are bound by the court's decision.78 The protestor's only recourse is to appeal an adverse lower court opinion to a higher court.9

Need to clarify Authority for Judicial Review of Contract Award Decisions

rights is not lightly to be inferred. . . . Indeed, judicial review of such administrative action is the rule, and nonreviewability an exception which must be demonstrated." 83

These Supreme Court cases have not settled the question of whether offerors on Government contracts may challenge administrative action in the contract award process. Certain courts have subsequently granted standing to protestors.84 Others have continued to deny standing to offerors based on Perkins v. Lukens Steel.85 The latter have reasoned, in essence, that the Supreme Court has not, unlike the Scanwell decision, ruled that any person "aggrieved in fact” by agency action may sue the Government. Rather, these courts contend, the Supreme Court opinions impose the additional requirement that a protestor must show that some Federal statute grants it a legal interest in the procurement process that is entitled to be protected and enforced in a court of law.86 The result of these differing decisions is that award protests may certainly be brought in certain judicial forums, such as the district courts within the District of Columbia Circuit and the Court of Claims, but it is an open question at best in other jurisdictions whether the offeror will be granted standing to sue the Government.

The brief history of judicial involvement in the award protest system shows the potential

Three weeks after the Scanwell decision, the Supreme Court issued two major opinions bearing on the doctrine of standing to sue, although, again, the cases did not involve offerors for Government contracts. In Association of Data Processing Service Organizations, Inc. v. Camp 80 the court stated a plaintiff has standing to challenge administrative action that “has caused him injury in fact, economic or otherwise" if the interest sought to be protected is "arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question” and judicial review has not been precluded.81 In a companion case, Barlow v. Collins,82 the court commented that “preclusion of judicial review of administrative action adjudicating private

"TA. G. Schoonmaker Co. v, Resor, 445 F.2d 726 (D.C. Cir. 1971). The court in a later decision emphasized that "[t]he GAO's decision is not necessarily dispositive, however, and we take occasion to point out that there certainly may be instances where the District Court will find procurement illegality that the GAO failed to recognize, or at any event failed to correct." M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1305 (D.C. Cir. 1971).

73 It is the policy of GAO “not to render decisions on protests where the material issues are or have been involved in litigation before a court of competent jurisdiction." Comp. Gen. Dec. B-173489, Oct. 8, 1971 (denying reconsid, of 51 Comp. Gen. 168 (1971)). See 51 Comp. Gen. 37 (1971) (reconsid. den., B-171782, Sept. 7, 1971, Unpublished) ; Comp. Gen. Dec. B-171917, May 4, 1971, Unpublished. GAO will consider a protest where protestor has obtained an injunction staying agency action until GAO has adjudicated the protest.

** Cases in the Court of Claims may be reviewed by the Supreme Court of the United States. 28 U.S.C. § 1255 (1970). The courts of appeals have jurisdiction of appeals from all final decisions of the district courts, except where a direct review may be had in the Supreme Court. 28 U.S.C. ( 1291 (1970). Cases in the courts of appeals may be reviewed by the Supreme Court. 28 U.S.C. $ 1254 (1970). HD 397 U.S. 150 (1970). 12 397 U.S. at 152–56. * 397 U.S. 159 (1970).

89 397 U.S. at 166.

* See, e.g., Ballerina Pen Company v. Kunzig. 433 F.2d 1204 (D.C. Cir. 1970); National Helium Corp. v. Morton, 466 F.2d 650 (10th Cir. 1971). See also Contractors Assn., of Eastern Pa. v. Secretary of Labor, 442 F.2d 159 (8d Cir. 1971).

$5 See Gary Aircraft Corp. v. United States, 842 F. Supp. 473, 476-78 (W.D. Tex. 1972) (motion for prelim. injunc. denied and complaint dismissed based, in part, on Perking v. Lukens Steel Co.); Rubber Fabricators, Inc. v. Laird, No. 71-1889 (4th Cir., Nov. 16, 1971) (District Court ruled bidder had no standing to sue under Perking v. Lukens Steel Co. and denied motion for prelim. injunc. ; Court of Appeals granted injunc. pending appeal ; injunc. dissolved because case rendered moot; Court of Appeals never reached standing issue). See also Alen M. Campbell Gen. Con., Inc. v. Lloyd Wood Conat, Co., 446 F.2d 261, 264 n.5 (5th Cir. 1971) (since Perking v. Lukens Steel Co. “never [has been] judicially overruled or even mentioned by the Supreme Court in recent standing decisions, we assume without deciding that the question in other contexts is an open one.")

sus See Merriam V. Kunzig, 847 F. Supp. 713, 720–24 (E.D. Pa. 1972) (complaint dismissed for lack of standing because "specific interest of the plaintiff cannot reasonably be considered to be included in the zone of interests to be protected or regulated" by statutes examined); Gary Aircraft Corp. v. United States, 842 F. Supp. 473, 476–78 (W.D. Tex. 1972). Protesto also have been dismissed on the ground that the agency's decision was committed to agency discretion and not reviewable by . court of law. See Gary Aircraft Corp., supra, 842 F. Supp. at 478; Hi-Ridge Lumber Company v. United States, 448 F.2d 462 (9th Cir. 1971); Pullman, Inc. v. Volpe, No. 71-2442 (E.D. Pa., Dec. 14, 1971).

ilar statistics cannot be ascertained regarding protests that are lodged in the agencies and never brought to GAO or the courts, but it is clear from the sampling of statistics we have received that the number of these protests also is rising each year.90 In fairness to protestors and to maintain the integrity of the procurement system, it is important to cope with this heavier workload by devising means to identify and remove the causes of these complaints.

value of judicial review of award protests. The more formalized factfinding procedures used by the courts give a protestor the option of obtaining a due process adjudication of its protest. Judicial independence from daily contact with the contract award process allows the courts to provide fresh insights into the workings of that process. The geographical dispersion of the Federal district courts provides easier access to a protest-resolving forum. Finally, the power of the courts to award damages makes the potential for granting effective relief to a protestor greater than is possible from an administrative forum and resolves the dilemma often faced by the administrative forums of terminating a contract.

In view of the present uncertainty regarding the standing of protestors to challenge contract awards in court, we believe consideration should be given to clarifying the statutory basis for court jurisdiction. We agree with the conclusion of the Court of Appeals for the District of Columbia Circuit that injunctive relief should not be granted unless the aggrieved offeror demonstrates that there was no rational basis for the agency's decision.87 We also believe that awarding proposal preparation costs as damages for the wrongful rejection of a proposal is appropriate and should be authorized by statute if necessary.88

Better Debriefing Procedures

Recommendation 18. Improve contracting agency debriefing procedures.

One agency study has indicated that a certain portion of award protests are made unnecessarily because they are based on incomplete or erroneous information concerning the rationale for making the administrative decisions on which those protests are based.91 Often, after full information is available, the protests are withdrawn. The study acknowledges that a failure to communicate adequately with sellers during debriefing has resulted in protests.92 The importance of having adequate debriefing procedures established in the basic procurement statutes is discussed in Volume I, Part A, Chapter 3.

AVOIDANCE OF PROTESTS

Pre-Award Protest Procedure

Although award protests serve a necessary and useful function in Government procurement, the annual number of protests is rising to a level that potentially could have an adverse effect on the procurement process. In fiscal 1972, the 1,227 protests disposed of by GAO represented a 16 percent increase over the number dealt with the previous year.89 Sim

Recommendation 19. Establish a pre-award protest procedure in all contracting agencies.

We also recommend that all contracting agencies establish a pre-award protest procedure aimed at bringing complaints quickly to the attention of management officials before they are channeled into the independent award protest-resolving forums.

87 M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971).

88 Several courts have indicated that the Court of Claims may award proposal preparation costs as damages. See M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971) ; Keco Indus., Inc. v. United States, 192 Ct. Cl. 773, 428 F.2d 1233 (1970); Continental Business Enterprises, Inc. v. United States, 452 F.2d 1016 (Ct. Cl. 1971). The APA does not authorize monetary relief. Hooper v. United States. 331 F. Supp. 1056 (D. Conn. 1971). See 5 U.S.C. $ 706 (1970). It is therefore questionable, if standing is based upon the APA, whether district courts may award proposal preparation costs. Statutory authorization may be required in this instance.

* GAO disposed of 1,054 cases in fiscal 1971. See Appendix A, p. 77.

so See Study Group 4, Final Report, Feb. 1972, vol. II, pp. A-35– A-37.

91 Department of the Air Force, Air Force Systems Command (AFSC), Hq. AFSC Study on Protests, Apr. 29, 1971 (unpublished). 32 Ibid.

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