Court Decision Restricts Procurement Options for Federal Agencies

RICHMOND, VA – A recent precedent-setting U.S. Court of Federal Claims decision will result in more opportunities for contractors to bid on federal government procurement projects, according to a release from the law firm LeClairRyan. Thomas Coulter, who heads the firm’s Government Contracts practice area team, represented two software companies that claimed they were unfairly denied the right to compete for a large project under federal procurement laws.

“The May 2 decision by the U.S. Court of Federal Claims broke new ground in two areas,” Coulter reported. “This is the first time that the right of contractors to challenge the federal government’s pre-procurement decisions has been recognized in a situation where the government didn’t issue a procurement vehicle. Equally important, it places a check on the government’s ability to use a private party for procurement decisions in an attempt to eliminate the protection of procurement laws and protest rights.”

The controversy began when the plaintiffs in the suit, two computer software firms, submitted bids in 2005 in connection with a Joint Acquisition and Assistance  Management System (JAAMS) program that was being developed by the United States Agency for International Development and the Department of State. The 2005 business opportunity was said to be worth about $10 million, according to court filings.

Traditionally, the federal agencies would assess contractor proposals and make a so-called direct decision about awarding the procurement contract to one or more firms, Coulter said.

“But in a stunning reversal of policy, the agencies decided to forego the direct procurement process and instead handed off the management of the procurement process to SRA International Inc., a technology and consulting company in Fairfax that also provided software contracting services for federal agencies,” Coulter said. “SRA recommended itself as the sole provider for the JAAMS software, and when the plaintiffs protested, the federal agencies claimed that the firms had no bid protest rights since a third-party, non-governmental agency had handled the procurement process. The court agreed with the core of our argument, which was that the federal agencies were remiss in changing from a direct, federal procurement to one conducted by a private party, without providing any reason for doing so.” 

The underlying project was completed long before the courts resolved the issue, but the plaintiffs were awarded the right to recover their proposal preparation costs, according to Coulter.

“Since the Federal Circuit’s ruling in this case establishing jurisdiction for pre-procurement challenges, more than 20 other contractors have filed similar pre-procurement decision appeals,” Coulter said in the release. “My clients were concerned that the government’s use of a third party for procurement would become a common practice and that they and other contractors would miss out on more opportunities issued under the protection of the federal procurement laws and regulations.”