In Nortel Gov’t Solutions, Inc. v. U.S., 84 Fed. Cl. 243 (Oct. 20, 2008), the U.S. Court of Federal Claims held that the Drug Enforcement Agency’s (DEA) decision to override an automatic stay of a contract performance was arbitrary, capricious and contrary to law. The plaintiff in Nortel Gov’t Solutions, Inc. contested an override by the defendant, the DEA, of an automatic stay that was triggered when the plaintiff filed a bid protest in the Government Accountability Office (GAO). The plaintiff had initially been awarded a contract to provide IT services to the DEA, but after a bid protest was filed, the contract was re-awarded to another party. Thereafter, the plaintiff protested the re-award and filed a complaint with the U.S. Court of Federal Claims challenging the DEA’s decision.
In examining the DEA’s decision, the court noted that a bid protest filed at the GAO triggers an automatic stay of the protested contract. However, an agency may override an automatic stay by notifying the GAO in writing that either “urgent and compelling circumstances” exist or that “performance of the contract is in the best interests of the United States.” Here, the DEA argued that both of these reasons compelled an override of the stay.
To prove “urgent and compelling circumstances,” an agency must consider the following factors:
(1) whether significant adverse consequences will necessarily occur if the stay is not overridden;
(2) whether reasonable alternatives to the override exist; (3) how the potential cost of proceeding with the override, including the costs associated with the potential that the GAO might sustain the protest, compare to the benefits associated with the agency’s needs; and (4) the impact of the override on competition and the integrity of the procurement system . . .
The court held, “A failure by an agency to consider just one of these factors is fatal to an override decision.”
Analyzing the facts, the court found that the DEA’s allegation of staffing shortages was not significant enough to meet the first factor. Second, the court held that the DEA had not met the second factor because it had not even considered other alternatives to the override. Third, the court found that the DEA had not adequately considered the costs of the override compared to the benefits, as required by the third factor. Lastly, the court held that the DEA had failed to demonstrate that abiding by the stay would compromise the safety and welfare of the agency, as the DEA had argued under the fourth factor. Therefore, the court held that, “[i]n light of the defendant’s failure to meet any of the four [factors] of an urgent and compelling circumstances inquiry, defendant’s override on this basis is invalid.”
Thereafter, the court examined whether overriding the stay was in the best interests of the United States, as argued by the DEA. The court noted that in order for a stay override to be proper under a “best interests” justification, “[t]here must be some rationale — above and beyond the principle aim originally sought when the agency decided to engage bidders in the competitive procurement — that absolves the agency of its obligation to await the GAO’s recommendation.” The court held that the DEA had failed to establish that overriding the stay was in the best interests of the United States because the DEA had argued that the new contract was better and more cost efficient, which is “not enough to justify overriding the stay.”
Since the defendant had failed to establish that overriding the stay was necessary due to urgent and compelling circumstances or because it was in the best interests of the United States, the court held that the defendant’s override decision was arbitrary, capricious and contrary to law such that the stay was invalid.