This month the Federal Circuit, in Dell Federal Sys., L.P et al. v. United States (Dell),[1] granted the government's appeal of a Court of Federal Claims' (COFC) decision enjoining the Army from taking its planned corrective action. In reversing the COFC, the Circuit unequivocally rejected the heightened standard applied in several COFC cases that required an agency's planned corrective action to be "narrowly targeted" to the identified procurement defects and instead held that such actions must be reviewed under the "highly deferential" rational basis standard.

Background

In the underlying solicitation in Dell, the Army sought to procure commercial off-the-shelf computer hardware through indefinite-delivery indefinite quantity contracts. The total estimated value of the contracts was $5 billion. The solicitation provided that offerors would be evaluated under three factors – Technical Approach, Past Performance and Price, and that contracts would be awarded to the lowest price technically acceptable offerors. The Technical Approach Factor was divided into two subfactors under which offerors were required to submit an "Equipment Submission Form" and a "Business Process Form."

Fifty-eight offerors submitted proposals, but the Army found only nine of those proposals technically acceptable. The Army declined to hold discussions, and awarded contracts to the nine technically acceptable offerors.

Several offerors filed protests at the Government Accountability Office (GAO) alleging that "clerical errors and other misunderstandings concerning the Equipment Submission Form spreadsheet had led them to submit technically unacceptable proposals."[2] Other protesters alleged that the Army should have engaged in discussions to resolve the "spreadsheet related" misunderstandings. In response to the protest, the Army opted to take corrective action.

The Army's Planned Corrective Action

The Army conducted an internal review of the procurement following the GAO protests and concluded that it was appropriate to take corrective action to resolve all of the protests. The Army identified two defects in the procurement. First, the Army concluded that because the procurement was valued in excess of $100 million, it was likely required to conduct discussions under DFARS 215.306(c)(1)[3], which it failed to do. Second, the Army concluded that the solicitation instructions regarding the Equipment Submission and Business Process Form spreadsheets contained ambiguities which "'could have been easily and quickly been resolved' before award" and addressed in discussions. As a result, the Army advised GAO that its corrective action would consist of: (1) opening discussions with all of the remaining offerors, including those who filed protests, (2) requesting final revised proposals, and (3) issuing a new award decision.

COFC Decision

Several initial awardees protested both the Army's decision to take corrective as well as the scope of its proposed corrective action at the COFC. Recognizing an agency’s broad discretion to take corrective action, the court concluded that the Army had rationally identified defects in the procurement and was reasonable in deciding to take corrective action. However, the court enjoined the Army from taking its planned corrective action, holding that "the Army's contemplated corrective action is not narrowly targeted to address the procurement defects the Army has identified."[4] The court reasoned that because "many offerors made minor errors filling out the Army-provided spreadsheets and submitted technically unacceptable proposals as a result, . . . clarifications and reevaluation would suffice to remedy" those errors.[5] The court went on to state that "discussions paired with re-solicitation would represent a blunderbuss approach to corrective action that neither the record nor the law supports," and was "akin to killing an ant with a sledgehammer when a rolled-up newspaper would have sufficed."[6]

Circuit Decision

The government and two of the unsuccessful offerors appealed the COFC decision at the Federal Circuit, contending that the COFC had applied the wrong standard of review in assessing whether the Army's proposed corrective action was 'narrowly targeted' to remedy the procurement defects.[7] The circuit agreed and explained that the COFC, in this instance (and in other corrective action decisions), had improperly relied on a heightened standard in reviewing an agency's corrective action. It went on to state that it had "never adopted this heightened 'narrowly targeted' standard" but had "consistently reviewed agencies' corrective action under the APA's 'highly differential' 'rational basis' standard,"[8] and made clear that an agency's corrective action must be reviewed under that APA standard. Accordingly, the circuit went on to state that the appropriate inquiry is not "whether a selected remedy is as narrowly targeted as possible to an identified error in the bidding process," but rather "whether the contracting agency provided a coherent and reasonable explanation of its exercise of discretion."[9]

Applying the "rational basis" standard, the circuit determined that the Army’s corrective action "to reopen the procurement and allow proposals to be revised [was] rationally related to the procurement's defects, i.e., the failure to conduct discussions and spreadsheet ambiguities."[10] As a result, the circuit reversed the COFC's grant of an injunction and reinstated the Army's proposed corrective action.

What The Decision Means For Protesters

The circuit's decision clarifies the appropriate standard of review in deciding challenges to agency corrective action. Prior to Dell, there existed a split among COFC judges as to the appropriate standard of review, with some judges adopting the "narrowly tailored" standard set forth in Amazon Web Services,[11] and others rejecting that standard as contrary to the court’s mandate to review procurement actions under a deferential reasonableness standard.[12]

Although the circuit's decision should lead to more consistency in the outcome of corrective action protests, the impact on the viability of these protests could be significant. Although the circuit's decision suggests that previous decisions like Amazon Web Services,[13] would have had the same result under the "rational basis" standard,[14] this standard is highly deferential to agencies. The COFC has been seen as the more favorable forum for challenging corrective action, as GAO largely dismisses such protests so long as the proposed corrective action is appropriate to remedy the concern that caused the agency to take corrective action.[15]

The COFC has already had occasion to rely on the circuit’s decision in Dell in one issued decision. In Ideal Industries Inc. v. United States, the COFC rejected a protester’s argument that the agency's decision to take corrective action by terminating the awardee's contract for convenience, amending the solicitation, and resoliciting proposals was unreasonable. In denying the protest, the COFC applied the "rational basis" test and reasoned that the original solicitation had arguably violated the Federal Acquisition Regulation (FAR) in requiring bidders to submit pricing information beyond that required by the FAR, and that corrective action "is rational –and sometimes even required—when necessary to ensure that a procurement be conducted in compliance with 'applicable procurement statutes and regulations.'"[16]

While it remains too early to tell, the circuit's decision in Dell, will likely make it more difficult for protesters to successfully challenge an agency's decision to take corrective action at the COFC.