Although bid protest decisions issued by the U.S. Government Accountability Office (GAO) may not be appealed, GAO decisions nonetheless may be subjected to review during subsequent protests filed with the U.S. Court of Federal Claims (COFC). The COFC traditionally treats GAO decisions with a high degree of deference; however, they are not binding on the court and, instead, are treated as “expert opinions.” Moreover, when the issue involves a question of law, such as statutory or regulatory interpretation, the COFC need accord no deference at all to the GAO. As a result, when multiple protests are filed in the same or related procurements, a procuring agency may find itself buffeted by conflicting GAO and COFC decisions. Just such a situation recently arose regarding the Department of State’s New Embassy Compounds Design-Build Construction Program (NEC Program).
In January 2007, the DOS issued a Pre-Qualification Notice for the agency’s FY 2007 NEC Program, which contemplated the award of ten contracts to construct embassies around the world. The Pre-Qualification Notice requested prospective offerors to submit certifications of their compliance with the requirements of the Omnibus Diplomatic Security and Antiterrorism Act of 1986, 22 U.S.C. Sec. 4852 (Diplomatic Security Act). Under the Diplomatic Security Act, only “United States persons” and “qualified United States joint venture persons” are eligible to compete for certain diplomatic construction projects. To qualify as a “United States person,” the Act requires, among other things, that an offeror “has achieved total business volume equal to or greater than the value of the project being bid in 3 years of the 5-year period” before the submission of proposals. After reviewing certification submissions, the DOS notified the prospective offerors who had been pre-qualified to submit proposals for FY 2007 NEC Program projects. Two of these pre-qualified prospective offerors were Grunley Walsh International, LLC (Grunley) and American International Contractors (Special Projects), Inc. (AIC-SP).
Meanwhile, in March 2007, a bid protest was filed at the GAO challenging the award of a DOS contract to AIC-SP under the FY 2006 NEC Program. The contract involved the design and construction of a new embassy compound in eastern Africa. The protester, Caddell Construction Co., Inc. (Caddell), alleged that AIC-SP was not eligible for award because, among other things, it lacked the requisite total business volume required to qualify as a “United States person” for the solicited project. The GAO agreed. Although the DOS interpreted the Diplomatic Security Act’s total business volume requirement as allowing it to aggregate three years of business volume and compare that three-year total with the project’s price estimate, the GAO stated that the “ordinary and common meaning” of the statutory language meant that offerors had to have achieved a business volume equal to or greater than the project’s value in each of three years within the five-year period. Despite this conclusion, the GAO recognized “an element of ambiguity” in the statutory language. The GAO stated, however, that the DOS’s interpretation of the Diplomatic Security Act’s business volume requirements was not entitled to deference because it arose in the normal course of a procurement and was not the result of either a rulemaking or an adjudication. Moreover, the GAO concluded that the DOS’s interpretation did not have the “persuasive weight deserving of deference.” In that regard, the GAO further stated that the DOS’s interpretation conflicted with the legislative history of the Diplomatic Security Act, which expressed concerns regarding ensuring that an offeror is technically capable of carrying out a given project and has experience that is similar in scope. The GAO therefore sustained Caddell’s protest and, because AIC-SP apparently did not meet the business volume requirement, the GAO recommended that the DOS award the contract to Caddell, the only other offeror eligible for award. Caddell Construction Co., Inc., Comp. Gen. Dec. B-298949.2, Jun. 15, 2007.
After receiving this GAO decision regarding an FY 2006 NEC Program project, the DOS decided to revisit its pre-qualification determinations for the FY 2007 NEC Program. The DOS then informed both Grunley and AIC-SP that their pre-qualifications for the FY 2007 NEC Program had been withdrawn because the agency had decided to apply to the FY 2007 NEC Program the “each of three years within five years” standard prescribed by the GAO in the Caddell protest, which both companies failed to meet. Grunley then filed a bid protest in the COFC to challenge the DOS’s actions, and AIC-SP intervened in the protest as a similarly-situated prospective offeror.
In an August 3, 2007 decision regarding Grunley’s protest, the COFC held that the DOS’s withdrawal of Grunley’s pre-qualification was improper because, contrary to the GAO’s reading, the Diplomatic Security Act’s total business volume requirement is cumulative for three years – as originally interpreted by the DOS. Grunley Walsh Int’l, LLC v. United States, No. 07-492 (Fed. Cl. Aug. 3, 2007) (filed under seal) (reissued for publication Aug. 13, 2007). While the GAO stated that the “ordinary and common meaning” of the statutory language meant that offerors had to have achieved a business volume equal to or greater than the project’s value in each of three years within the five-year period, the COFC disagreed, holding that the “plain meaning” of the statute establishes a cumulative business volume requirement. The COFC based its interpretation upon Congress’s inclusion of the word “total” before “business volume”: “If the section is read without the word ‘total,’ it is completely unclear whether the three years are to be measured individually or cumulatively. The inclusion of the word ‘total’ modifies the term ‘volume’ and informs the reader that the volume in question will be, as plaintiff states, ‘a product of addition.’ Measuring the three years cumulatively gives meaning to the word ‘total’ and avoids a construction that leaves language ‘superfluous, void, or insignificant.’”
The COFC also addressed three other considerations that supported its interpretation of the Diplomatic Security Act’s business volume requirement. First, while the Diplomatic Construction Program is subject to a small business set aside goal of 10 percent, the GAO’s interpretation of the business volume requirement would have the effect of exempting embassy construction contracts from the set aside goal. This is because set asides under the FY 2007 NEC Program are subject to a North American Industrial Classification System (NAICS) code under which an offeror’s average annual revenue cannot exceed $31 million during the three most recent years in order to qualify as a small business concern. The estimated value for each of the ten FY 2007 NEC Program projects, however, is $63 million or higher. Therefore, if the business volume requirement is read as requiring an offeror’s business volume in each of three individual years to equal the value of the project being bid, no potential offeror qualifying as a small business under the applicable NAICS code could qualify under the Diplomatic Security Act’s business volume requirement. The COFC concluded that the inclusion of the small business set aside goal is further evidence that Congress intended the business volume requirement to be cumulative.
Second, although the COFC stated that it was not necessary to consult the Diplomatic Security Act’s legislative history, since the statutory language is clear, the court noted that its interpretation of the Act to provide for a cumulative business volume requirement is not inconsistent with the legislative history. While the legislative history indicates that Congress created the business volume requirement to help ensure that an offeror is technically capable of carrying out a given project and has experience that is similar in scope, the COFC stated that NEC Program projects are known to be multi-year projects, with the total cost spread across several years. The COFC stated that this fits “hand in hand” with the three-year cumulative business volume requirement.
Third, the COFC observed that a different statute, involving embassy security contracts, contains an identical business volume requirement. The COFC further noted that the DOS’s implementing regulations for both statutes were published simultaneously and contain identical definitions of the terms “3 years of the 5-year period” and “total business volume.” Significantly, the implementing regulations for the embassy security contract program also include an additional sentence stating that an offeror will be deemed to have met the business volume requirement if the “total cumulative business volume for the three years presented exceeds the contract price at time of award.” The COFC stated that, if it were to follow the decision of the GAO, the DOS would be put in the untenable situation of treating two identical statutory provisions dissimilarly, a result which must be avoided.
Finally, the COFC flatly rejected the DOS’s argument that the agency’s adoption of the GAO’s recommendation was a new agency interpretation that should be entitled to judicial deference. The COFC stated that the GAO’s decision was irrational because it misread both the actual language of the statute and the legislative history. “Therefore, the DOS’s adoption of the GAO’s recommended interpretation is afforded no deference because it is plainly lacking a reasonable basis and is thus arbitrary and capricious.” The COFC also noted that such judicial deference would effectively strip the court of any real review in any case where the agency followed a GAO recommendation on an interpretation of a statute or regulation. The COFC therefore granted Grunley’s motion for summary judgment and ordered the DOS to reinstate Grunley’s and AIC-SP’s pre-qualifications for the FY 2007 NEC Program.
The decision in Grunley demonstrates that, although a GAO decision may not be directly appealed, it may be indirectly challenged when a procuring agency implements a GAO recommendation – or, for that matter, when an agency acts in accordance with GAO precedent. See Geo-Seis Helicopters, Inc. v. United States, No. 07-155C (Fed. Cl. Jul. 30, 2007), discussed above in Recent Decisions. Therefore, particularly when a question of statutory or regulatory interpretation is involved, a GAO decision should not necessarily be considered the final word.