Appellate Court Slams Down Army Corps of Engineers for Following a GAO Recommendation

Often in the government contract law world, following a recommendation by the United States Government Accountability Office (“GAO”) in a winning bid protest is wise and bulletproof.

However, in Turner Construction Co. v. United States, 2011 U.S. App. LEXIS 14370 (2011), the United States Court of Appeals for the Federal Circuit held that the Army’s decision to follow such a GAO recommendation was unreasonable.  The Court sustained an injunction forcing the Army to actually choose the contractor who lost the original bid protest, and who the GAO wanted excluded from even bidding, without a re-procurement.

This case is important in demonstrating the relationships between the GAO, the Court of Federal Claims, and the Federal Circuit.

The Army awarded Turner Construction with a contract to build a hospital.  The two rival bidders filed a successful bid protest to the GAO, citing Turner’s alleged organizational conflict of interest (“OCI”).  An OCI occurs when one bidder has either (1) “unequal access” to nonpublic information in performing a government contract that gives it a competitive advantage in a later competition for a government contract, or (2) there are “biased ground rules” stemming from a contractor’s participation in the process of setting of procurement rules, gleaning knowledge of the agency’s future requirements that may skew the competition in its favor.

The GAO found that Turner had both forms of OCI, sustained the bid protest of the two rival bidders, and recommended that the Army re-compete the hospital contract excluding Turner from participating.

Turner then filed a bid protest to the Court of Federal Claims arguing that the Army’s decision to follow the GAO’s recommendation was unreasonable and “irrational.”  The Court of Federal Claims agreed, sustained Turner’s bid protest, and ordered the Army to give the contract to Turner.  The Federal Circuit, on appeal, affirmed this ruling.

In a nutshell, the GAO, without any hard facts, believed that Turner had an OCI relying on vague allegations that “someone” may have had access to unidentified information or that “someone” was familiar with certain important details.  The GAO disregarded the CO’s investigation into the OCI and his determination that there was no evidence of an OCI.  Both federal courts who reviewed the GAO’s decision found this reliance by the GAO on mere suspicion and innuendo to be irrational.

The GAO is often the first place contractors go with bid protests.  For a variety of reasons, this is often a bad idea.  Among them, when the case goes to the Court of Federal Claims, the Court has to decide cases with one arm tied behind its back – the federal court cannot review the GAO’s decision “de novo” or fresh.  It is limited to determining whether the GAO’s decision was a rational one.  Thus, even if the federal court would have reached a different result, it will follow the GAO’s ruling if it was at least “rational.”  Litigants in a position to choose the GAO or the Court of Federal Claims for their disputes should carefully consider this.

In this case, the GAO’s decision was so devoid of hard facts that the federal courts had no problem not only reversing the GAO’s ruling but ordering the agency to close out the bidding and award the contract to the very company the GAO said should be disqualified from even participating in future bidding.  However, had the GAO found and relied on at least some hard facts, the federal courts might have found themselves feeling as if the right thing to do would be to give Turner the award but powerless to do anything about it.

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Dave Albo – Attorney are bid protest attorneys and government contracts lawyers.