The Department of the Treasury (“Treasury”) recently announced procedures for selection of private entities to assist the Treasury in implementing the Troubled Asset Relief Program (“TARP”) authorized by the Emergency Economic Stabilization Act of 2008 (the “Act”). See “Emergency Economic Stabilization Act Offers Opportunities for Sellers, Contractors, and Purchasers,” October 6, 2008. Companies interested in competing for such contracting opportunities should be aware that there is a well-worn path in US government contracting where disappointed bidders may protest procurement procedures and decisions at either the US Government Accountability Office (“GAO”) or the US Court of Federal Claims (“COFC”).

Protests to the GAO – GAO has jurisdiction under the Competition in Contracting Act (“CICA”) to resolve protests by interested parties concerning any alleged violation of a procurement statute or regulation. Recent decisions by the GAO have held that the GAO will not review an agency’s decision to use other statutory authorities to procure goods and services in lieu of a procurement contract when the non-procurement authority was used to support a public purpose authorized by law. However, the GAO will review a timely protest alleging that an agency is improperly using a non-procurement authority to acquire goods or services where a procurement instrument is required, to ensure an agency is not attempting to avoid the requirements of the Federal Acquisition Regulation or other procurement statutes and regulations. Any protest at the GAO based on alleged improprieties which are apparent on the face of a solicitation must be filed prior to the deadline set for receipt of proposals, but GAO may consider an untimely protest that raises issues significant to the procurement system. GAO’s regulations also make clear that the GAO will only hear protests that are filed by so-called “interested parties,” defined as an actual or prospective offeror whose direct economic interest would be affected by the award of, or failure to award, a contract. Finally, GAO regulations permit the awardee or offerors who appear to have a substantial chance of receiving an award to intervene in a protest to assist the agency in defending its solicitation procedures or award decision.

Protest Actions at the COFC -- The COFC has jurisdiction under the Administrative Disputes Resolution Act (“ADRA”) to hear both pre- and post-award protests objecting to a Federal agency’s solicitation for bids or proposals, to a proposed award or award of a contract, or any alleged violation of a statute or regulation in connection with a procurement or a proposed procurement. The US Court of Appeals for the Federal Circuit has broadly interpreted the COFC’s bid protest jurisdiction to include alleged violations of any statute or regulation that has a connection to a procurement. In addition, the Federal Circuit recently clarified the definition of “procurement” with respect to the COFC’s jurisdiction under ADRA in connection with proposed procurements and relied upon the Office of Federal Procurement Policy’s definition of procurement, which defines the term broadly as “all stages of the process of acquiring property or services.”

Under this precedent, a timely protest of Treasury’s acquisition of services to implement the TARP, whether accomplished by a financial agent agreement or accelerated procurement procedures, arguably falls within the jurisdiction of the COFC. Such a protest would also need to meet the COFC’s timeliness requirements, which provide that a party that has the opportunity to object to the terms of a Government solicitation but fails to file an action prior to the close of the bidding process waives its ability to raise the same objection in a protest at the COFC. Potential offerors might argue, however, that they were not given adequate opportunity to challenge Treasury’s acquisition procedures before the close of the bidding process for either procurement contracts or financial agent agreements. In addition, similar to the procedure for intervention in a GAO protest, the rules of the COFC permit a contract awardee or any other entity with a direct and substantial economic interest in the action to intervene in the protest in order to protect that interest.

Challenges to Treasury’s TARP Procedures -- Treasury’s authority under Section 101(c)(3) of the Act to designate “financial institutions as financial agents of the Federal Government … [to] perform all such reasonable duties related to this Act” begs the question of what services Treasury may acquire using financial agent procedures. Can Treasury designate a financial institution to provide any service related to the implementation of the TARP?

The US Court of Appeals for the District of Columbia Circuit’s 1996 decision in Transactive Corporation v. United States suggests that there are limits on the types of services that may qualify as financial agent functions. Specifically, the DC Circuit rejected the Treasury’s argument that its decision to designate a financial agent (rather than conduct a full and open competitive procurement under CICA) for electronic benefits transfer (“EBT”) administration services was necessary because only a financial agent of the United States could provide the required services. The DC Circuit held that the proper use of Treasury’s power to appoint financial agents necessarily involved the Treasury acting as a principal to the financial agent, and, in its sovereign capacity, delegating to the financial agent inherently governmental functions that Treasury would otherwise perform. The court concluded that EBT administration services did not constitute the sovereign functions of collecting or disbursing funds on behalf of the Treasury, and therefore the EBT administrator did not have to be a financial agent. Thus, depending upon the type of services that Treasury elects to solicit pursuant to financial agent procedures in lieu of a full and open competitive procurement, its use of these procedures may be subject to protest at the GAO or the COFC.