FEDERAL CONTRACT LAW

Court defines who can and cannot protest bids

Joseph J. Petrillo

When Congress consolidated bid protest jurisdiction in the Court of Federal Claims, it specified that such a suit could be brought by any interested party. But our overworked lawmakers forgot to tell us what it takes to make a party interested.

The judges at the Court of Federal Claims split over this question. Some thought that the term interested party meant the same as standing under the Administrative Procedures Act (APA), the basis for district court jurisdiction over bid protests. Others looked to the definition of interested party in the Competition in Contracting Act, which governs bid protests at the General Accounting Office.

Both positions seemed reasonable, so it was up to the appellate court to choose between them. The Court of Appeals for the Federal Circuit made its choice in a July 23 ruling in a case brought by the American Federation of Government Employees.

The case arose from an attempt to contract out operation of the Defense Distribution Depot in Barstow, Calif., based on a government-vendor competition conducted under Office of Management and Budget Circular A-76 rules.

The private sector's bid for the Barstow depot was low enough to beat the government's. The unions representing the affected civil service workers brought, and lost, an administrative appeal. So they filed suit in the Court of Federal Claims under its bid protest jurisdiction. The judge determined that the unions were not a proper interested party and dismissed the suit.

On appeal, the Federal Circuit had to decide for the first time what Congress meant by these two words. The court looked to legislative history, that is, statements by legislators and their committees about the bill that became law.

It seemed that Congress intended to give the Court of Federal Claims the same jurisdiction that the district courts already had. It looked like the APA test, used in the district courts, would win out.

But then, the appellate court noted that waivers of sovereign immunity'which prevent the government from being sued'are to be strictly construed. So it ended up applying the narrower definition applicable to GAO bid protests.

The result: An interested party is 'an actual or prospective bidder or offerer whose direct economic interest would be affected by the award of the contract or by failure to award the contract.' That left out the unions. Their suit was dismissed without any ruling on its merits.

Federal worker unions weren't the only losers. Any party that isn't a bidder or offerer is disqualified from this type of suit at the Court of Federal Claims.

This ruling may not be the last word on the topic, however. Although the district courts lost their bid protest jurisdiction this year, they still can hear cases under the APA. Thus, plaintiffs who don't qualify as interested parties might still have their suits heard there.

Opponents of federal bid protests note that in the private sector there is no such thing. But government contracting dollars, besides just buying goods and services, also promote socioeconomic goals. Ironically, when the government acts least like the private sector, it has its most insulation from bid protests.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo & Powell. E-mail him at jp@petrillopowell.com.

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