Recently, the U.S. Court of Federal Claims held in favor of a construction contractor in a bid protest action that was brought against the U.S. Postal Service ("USPS") in connection with the award of a firm, fixed-price contract for replacement of the heating, ventilation, and air conditioning system in the principal post office in Portland, Maine. The Court’s decision in J.C.N. Construction, Inc. v. United States reaffirms that the Court has jurisdiction over claims for breach of the government’s implied duty to fairly and honestly consider offerors’ proposals and highlights little-known risks that exist when contracting with the USPS.
In J.C.N. Construction, Inc., the contractor argued that the USPS improperly evaluated offerors’ proposals and acted arbitrarily and capriciously throughout the procurement. Specifically, after the contractor had successfully protested under the USPS’s bid protest process, the contractor contended that the USPS treated it unfairly by allowing the awardee to have inside information about the true scope of work and relaxed scheduling requirements. Indeed, when the awardee’s prior contract was not terminated for convenience after the contractor’s initial success at the agency-level protest, the awardee was able to significantly reduce its price under the revised solicitation because its bid and insurance costs had already been purchased under the original contract award and because the public statement of work overstated the work, as the awardee knew privately. In short, the USPS’s mishandling of the procurement provided an improper advantage to the awardee and constituted a breach of the government’s implied duty to consider proposals fairly and honestly in the earlier solicitation for the same work.
In response to these claims, the USPS argued that the contractor waived its claim associated with inaccuracies in the second solicitation issued by the USPS by failing to raise these inaccuracies with the USPS before the close of bidding. In addition, the USPS argued that the Court did not have jurisdiction over the contractor’s claim that the government breached its implied duty to fairly and honestly consider the contractor’s proposal. The Court rejected these arguments, finding that the inaccuracies in the second solicitation were latent and, as a result, the contractor was not required to raise this issue before the close of bidding under the second solicitation. In addition, the Court held that it had jurisdiction over the contractor’s claims for breach of the implied covenant of fair and honest consideration.
Despite the Court’s finding in favor of the contractor on the merits of its claims, the Court declined to grant the contractor’s request that the Court terminate performance of the awarded contract because the majority of the work required by the contract had already been performed by the time the Court issued its decision. The reason that the contract had neared completion was because the contractor was required by regulation to exhaust the USPS’s unique protest process before filing suit in the U.S. Court of Federal Claims and the USPS’s protest process, unlike some other US agencies, does not provide for an automatic stay of contract performance. However, the Court did order the USPS to pay the contractor’s bid preparation and proposal costs, and there is still the possibility that the contractor will recover a portion of its attorneys’ fees under the Equal Access to Justice Act.
This case is significant because it reaffirms that the U.S. Court of Federal Claims has jurisdiction over contractors’ claims for breach of the implied duty to fairly and honestly consider offerors’ proposals and highlights little known risks of contracting with the USPS.