Xpp-pdf support utility

Federal Contracts Report™
Reproduced with permission from Federal Contracts Report, 98 FCR 179, 08/07/2012. Copyright ஽ 2012 by TheBureau of National Affairs, Inc. (800-372-1033) http://www.bna.com To Each His Own: An Analysis of the U.S. Court of Federal Claims' Jurisdiction OverChallenges to the Federal Government's Cost Analyses and Insourcing DecisionsUnder 10 U.S.C. § 2463 With budget cuts on the rise over the last few years and in the face of President Obama'sMarch 4, 2009 memorandum regarding govern- ment contracting2, federal government insourcing hasbecome a hot topic. Contractors are starting to paycloser attention to insourcing statutes and directives be-cause of the likelihood that the level of work availablefor contractor employees will decrease.3 As a result, 2 In his Memorandum, President Obama directed the Office of Management and Budget (OMB) to develop and issue ''gov-ernmentwide guidance to assist agencies in reviewing, andcreating processes for ongoing review of, existing contracts in BY E. SANDERSON HOE AND JUSTIN M. GANDERSON order to identify contracts that are wasteful, inefficient, or nototherwise likely to meet the agency's needs, and to formulateappropriate corrective action in a timely manner. Such correc-tive action may include modifying or canceling such contracts E. Sanderson Hoe is a partner in the Washing- in a manner and to the extent consistent with applicable laws, ton, DC office of McKenna Long & Aldridge regulations, and policy.'' Mem. of Mar. 4, 2009 on Government LLP, and focuses his practice on all areas of Contracting, 74 Fed. Reg. 9755 (Mar. 6, 2009) (emphasis government contracting including privat- ization. Justin M. Ganderson is an associate in For example, Section 808(c)(4) of the National Defense the Washington, DC office of McKenna Long Authorization Act (''NDAA'') for Fiscal Year 2012 requires theSecretary of Defense to issue guidance to military departments & Aldridge LLP, and focuses his practice in and defense agencies during fiscal years 2012 and 2013 to ''re- the areas of claims/disputes, internal investi- quire the Secretaries of the military departments and the heads gations, privatization and general federal gov- of the Defense Agencies to reduce by 10 percent per fiscal year ernment contract counseling. Mr. Ganderson in each of fiscal years 2012 and 2013 the funding of the mili- was recently appointed as a co-chair of the tary department or Defense Agency concerned for- (A) staff American Bar Association Public Contract augmentation contracts; and (B) contracts for the performance Law Section Privatization, Outsourcing and of functions closely associated with inherently governmental Financing Transactions Committee for the functions.'' NDAA for FY 2012, Pub. L. No. 112-81, § 808(c)(4), 2012-2013 ABA year. Mr. Hoe was a co-chair 125 Stat. 1298, 1489 (2011) (emphasis added). See also Officeof the Under Sec'y of Def. Mem., Guidance for Limitation on of this committee from 1999 through 2012. Aggregate Annual Amount Available for Contracted Servs.
Messrs. Hoe and Ganderson are also frequent (June 3, 2012) (implementing Section 808 of the NDAA for the contributors to the Government Contracts Fiscal Year 2012); U.S. Air Force Materiel Command, Re- Advisor blog at www.governmentcontractsad- source Management Decision No. 802, insourcing Implemen- COPYRIGHT ஽ 2012 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
over the last few years contractors have begun to chal- In this article, we analyze the jurisdictional jungle lenge agency decisions to insource work that has been that has arisen from contactor challenges to agency de- performed by contractors, albeit with little success.4 cisions to insource work under 10 U.S.C. § 2463. We Much of this litigation has focused on the application conclude that, although the prospect is looking brighterthat COFC judges will recognize jurisdiction in these of 10 U.S.C. § 2463 (along with 10 U.S.C. § 129a), which matters, jurisdiction is not assured with each presiding requires the Under Secretary of Defense for Personnel and Readiness to ''devise and implement guidelines andprocedures to ensure that consideration is given to us- I. Brief Background of Insourcing Costs Analyses Under ing, on a regular basis, Department of Defense civilian 10 U.S.C. § 2463. In January 2008, Congress added Sec- employees to perform new functions and functions that tion 2463 to Title 10 of the United States Code, requir- are performed by contractors and could be performed by Department of Defense civilian employees.''5 And in [t]he Under Secretary of Defense for Personnel and Readi- most cases, the litigation has begun and ended with the ness shall devise and implement guidelines and procedures question of whether a court or the Government Ac- to ensure that consideration is given to using, on a regular countability Office (''GAO'') has jurisdiction to enter- basis, Department of Defense civilian employees to perform tain the contractor's claim or protest.
new functions and functions that are performed by contrac- Unfortunately, courts have not even been uniform in tors and could be performed by Department of Defense ci- their interpretation of this jurisdictional issue. To dem- vilian employees. The Secretary of a military departmentmay prescribe supplemental regulations, if the Secretary onstrate this point, one need look no further than four determines such regulations are necessary for implement- recent decisions by the United States Court of Federal ing such guidelines within that military department.11 Claims (the ''COFC''): Santa Barbara Applied Re-search, Inc. v. United States6; Hallmark-Phoenix 3, LLC This statute did not require a cost analysis, compar- v. United States7; Triad Logistics Services Corp. v. ing agency and contractor costs, to be performed as United States8; and Elmendorf Support Services Joint On May 28, 2009, the Office of the Under Secretary of Defense issued its guidance memorandum entitled''In-sourcing Contracted Services - Implementation Guidance.''12 Noting that ''[i]nsourcing is a high prior- resources for fiscal years 2010 through 2013 to decrease fund- ity of the Secretary of Defense,''13 this guidance docu- ing for contract support and increase funding for government ment reinforced that ''10 U.S.C. § 2463 requires the De- civilian support). Although requiring a quota in this instance partment of Defense to ensure that consideration is does not necessarily mean that there will be a 10 percent re- given to using, on a regular basis, Department of De- duction in available contractor jobs (e.g., hypothetically, all fense civilian employees to perform functions that are contractor jobs could be retained if the rates for their positionswere lowered to fit within the funding reduction), it is repre- performed by contractors but could be performed by sentative of the federal government's push to move more work Department of Defense civilian employees.''14 It also stated, in pertinent part, that certain services ''may be 4 Of the four COFC cases discussed herein, only two found in-sourced if a cost analysis shows that Department of that COFC had jurisdiction to entertain the protest and that the Defense civilian employees would perform the work contractor was an interested party. SeeSanta Barbara Applied more cost effectively than the private sector contrac- Research, Inc. v. United States, 98 Fed. Cl. 536 (2011); Elmen- tor.''15 The Office of the Secretary of Defense also pub- dorf Support Servs. Joint Venture v. United States, No. 12- lished Directive-Type Memorandum (''DTM'') 09-007 346C, 2012 WL 236075 (Fed. Cl. June 22, 2012). And in those regarding ''Estimating and Comparing the Full Costs of two decisions, the court ultimately denied the contractors' pro-tests. Santa Barbara Applied Research, 98 Fed. Cl. at 545-53 Civilian and Military Manpower and Contract Support'' (granting the government's motion for judgment on the admin- to establish the ''business rules. for use in estimating istrative record); Elmendorf Support Servs., 2012 WL 236075, and comparing the full costs of military and DOD civil- at *6-9 (denying the contractor's motion for preliminary in- ian manpower and contract support.''16 5 10 U.S.C. § 2463(a), (e) (as amended by NDAA for FY 2012, § 938, 125 Stat. at 1547). See also 10 U.S.C. § 129a(e)(1) bid protest challenging the government's transfer of services (as amended by NDAA for FY 2012, § 931(a), 125 Stat. at 1541) (''If conversion of functions to performance by. Department 10 See, e.g., Adams v. United States, 42 Fed. Cl. 463, 472-73 of Defense civilian personnel. is considered, the Under Sec- (1998) (noting that a COFC judge is not bound by decisions of retary of Defense for Personnel and Readiness shall ensure other COFC judges); Tamerlane, Ltd. v. United States, 81 Fed.
compliance with- (1) section 2463 of this title (relating to Cl. 752, 759 (2008) (''[D]ecisions of one judge. on the Court guidelines and procedures for use of civilian employees to per- of Federal Claims do not serve to bind another judge of the form Department of Defense functions'').
6 98 Fed. Cl. 536 (2011) (finding jurisdiction to hear the con- 11 NDAA for FY 2008, Pub. L. No. 110-181, § 324(a)(1), 122 tractor's bid protest challenging the government's transfer of Stat. 3, 60-61 (Jan. 28, 2008) (codified as amended at 10 U.S.C.
services in-house under 10 U.S.C. § 2463).
§ 2463(a)(1)).
7 99 Fed. Cl. 65 (2011) (determining that the court could not 12 Office of the Under Sec'y of Def. Mem.,In-sourcing Con- entertain a challenge to an insourcing decision under 10 U.S.C.
tracted Servs. - Implementation Guidance (May 28, 2009), § 2463 due to prudential standing concerns).
8 No. 11-43C, slip op. (Fed. Cl. Feb. 29, 2012) (finding that the contractor did not have standing to challenge the agency's insourcing decision under 10 U.S.C. § 2463 because the con- tractor's contract had expired prior to its filing its complaint).
14 May 28, 2009 Memorandum, Attach. 1, § 4.1.
9 No. 12-346C, 2012 WL 236075 (Fed. Cl. June 22, 2012) (agreeing with the analysis in Santa Barbara Applied Re- 16 Office of the Sec'y of Def., DTM No. 09-007, Estimating search, Inc., and finding jurisdiction to hear the contractor's & Comparing the Full Costs of Civilian & Military Manpower COPYRIGHT ஽ 2012 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
Unlike the NDAA for Fiscal Year 2008, which con- (B) take into consideration any supplemental guidance is- tained no requirement for a cost analysis under 10 sued by the Secretary of a military department for determi- U.S.C. § 2463, the NDAA for Fiscal Year 2011 included nations affecting functions of that military department; and language making the DTM 09-007 cost analysis manda- (C) ensure that the difference in the cost of performing tory in certain instances.17 Section 323(b) stated, in the function by a contractor compared to the cost of per- forming the function by Department of Defense civilian em- In deciding which functions should be converted to ployeeswould be equal to or exceed the lesser of- performance by Department of Defense civilian em- (i) 10 percent of the personnel-related costs for perfor- ployees pursuant to section 2463 of title 10, United States Code, the Secretary of Defense shall use thecosting methodology outlined in the Directive-Type Memorandum 09-007 (Estimating and Comparing the The NDAA for Fiscal Year 2012 also modified 10 Full Costs of Civilian and Military Manpower and Con- U.S.C. § 2463 to include a new reporting requirement, tractor Support) or any successor guidance for the de- requiring the secretary of defense to notify any contrac- termination of costs when costs are the sole basis for tor who performs a function that DOD plans to convert the decision. The Secretary of a military department to performance by DOD civilian employees pursuant to may issue supplemental guidance to assist in such deci- 10 U.S.C. § 2463(a), and to provide a copy of such noti- sions affecting functions of that military department.18 fications to congressional defense committees.22 Section 323(d)(2) noted, however, that the Secretary of Defense was not required to ''conduct a cost com- II. Recent COFC Decisions Regarding Challenges Under parison before making a decision to convert any acqui- 10 U.S.C. § 2463. Although all COFC judges are bound sition function or other critical function to performance by decisions of the United States Court of Appeals for by Department of Defense civilian employees, where the Federal Circuit, a COFC judge's decision is not factors other than cost serve as a basis for the Secre- binding on any other COFC judge.23 As a result, al- tary's decision.''19 Finally, this section required specific though the COFC as a court has jurisdiction over pro- reporting requirements to Congress about the ''conver- curement protests,24 each individual judge interprets sion of functions to performance by Department of De- and applies his or her own notion of COFC jurisdiction.
fense civilian employees made during fiscal year The ability to have a protest of a government insourc- ing decision heard at the COFC may well rest entirely Congress made further changes to 10 U.S.C. § 2463 in on the judge who is drawn for the protest. If the judge the NDAA for Fiscal Year 2012. In addition to the man- has decided jurisdiction before, litigants will likely datory requirement in the prior year's NDAA - that a know whether the COFC will hear the case on the mer- cost analysis under DTM 09-007 be performed before its. If the judge has not decided the issue before, the liti- work can be insourced where the costs are the sole ba- gants are in for briefing and argument of that issue, sis for the determination - Congress added a minimum differential in cost standard when analyzing contractor Four recent COFC bid protests related to agency de- cision to insource work under 10 U.S.C. § 2463 high-light the situation: Santa Barbara Applied Research, Except as provided in paragraph (2) [discussing inherently Inc.;Hallmark-Phoenix 3, LLC;Triad Logistics Services governmental functions], in determining whether a func- Corp.; and Elmendorf Support Services Joint Venture.
tion should be converted to performance by Department of All of these cases focus on the issues of subject matter Defense civilian employees, the Secretary of Defenseshall- jurisdiction to review insourcing decisions and stand-ing.25 28 U.S.C. § 1491(b)(1) provides the COFC with (A) develop methodology for determining costs based on subject matter jurisdiction to ''render judgment on an the guidance outlined in the Directive-Type Memorandum09-007 entitled 'Estimating and Comparing the Full Costs of Civilian and Military Manpower and Contractor Support' or See NDAA for FY 2012, § 938(e), 125 Stat. at 1547 (em- any successor guidance for the determination of costs when phasis added). See alsoid. at § 931(e)(1), 125 Stat. at 1542-43; costs are the sole basisfor the determination; 10 U.S.C. § 129a(e)(1) (''If conversion of functions to perfor-mance by. Department of Defense civilian personnel. isconsidered, the Under Secretary of Defense for Personnel and & Contract Support (Jan. 29, 2010), available at Readiness shall ensure compliance with- (1) section 2463 of this title (relating to guidelines and procedures for use of civil- 09-007 is effective through October 1, 2012. See Office of the ian employees to perform Department of Defense functions)'').
Sec'y of Def., DTM No. 09-007, Estimating & Comparing the 22 NDAA for FY 2012, § 938(f), 125 Stat. at 1547; 10 U.S.C.
Full Costs of Civilian & Military Manpower & Contract Sup- port, Change 3 (Sept. 2, 2011), available at 23 See, e.g., Adams, 42 Fed. Cl. at 472-73; Tamerlane, 81 17 NDAA for FY 2011, Pub. L. No. 111-383, § 323, 124 Stat.
25 E,g., Triad Logistics Services Corp., No. 11-43C, slip op.
18 Id. at § 323(b) (emphasis added). See also id. at § 323(a) at 1 (''The court, however, favors the approach adopted in (''The Secretary of Defense may not establish, apply, or en- Santa Barbara, that the court first should determine whether force any numerical goal, target, or quota for the conversion of there is subject matter jurisdiction generally, including subject Department of Defense functions to performance by Depart- matter jurisdiction to review insourcing decisions under 28 ment of Defense civilian employees, unless such goal, target, U.S.C. § 1491(b)(1) and standing as an interested party, before or quota is based on considered research and analysis, as re- addressing questions related to prudential standing.'') (citing quired by section 235, 2330a, or 2463 of title 10, United States Santa Barbara Applied Research, Inc., 98 Fed. Cl. at 542; Wendland v. Guitierrez, 580 F. Supp. 2d 151, 153 n.2 (D.D.C.
19 Id. at § 323(d)(2) (emphasis added).
2008)). But see generallyHallmark-Phoenix 3, LLC, 99 Fed. Cl.
20 Id. at § 323(c) (emphasis added).
action by an interested party objecting to a solicitation Santa Barbara Applied Research, Inc. was the first by a Federal agency for bids or proposals for a pro- published decision discussing the issue of whether the posed contract or to a proposed award or the award of COFC had jurisdiction over a contractor's bid protest a contract or any alleged violation of statute or regula- challenging the government's transfer of services in- tion in connection with a procurement or a proposed house under 10 U.S.C. § 2463, and whether the contrac- procurement.''26 In Distributed Solutions, Inc. v. United tor had standing.31 In this case, the contractor protested States, the Federal Circuit explained: the agency's determination to insource work that was the phrase, ''in connection with a procurement or currently being performed by the contractor pursuant proposed procurement,'' by definition involves a con- to an option to the underlying contract.32 The contrac- nection with any stage of the federal contracting acqui- tor claimed that the agency did not perform a proper sition process, including ''the process for determining a cost analysis under 10 U.S.C. § 2463.33 Ruling on the need for property or services.'' To establish jurisdiction government's motion to dismiss, Judge Firestone found pursuant to this definition, the contractors must demon- that the COFC had jurisdiction under 28 U.S.C.
strate that the government at least initiated a procure- § 1491(b)(1) to hear the contractor's claim and that the ment, or initiated ''the process for determining a need'' Judge Firestone determined that the court had juris- The Distributed Solutions, Inc. court also stated that, diction to entertain the contractor's challenge of the to have standing, a contractor must be an ''interested agency's insourcing decision because the agency's ''de- party'' - that ''(1) it was an actual or prospective bidder cision to in-source the work [the contractor] had been or offeror, and (2) it had a direct economic interest in performing at four Air Force bases and continues to the procurement or proposed procurement.''28 Addi- perform at five other locations. was made 'in connec- tionally, these four COFC cases discuss the issue of pru- tion with a procurement' as that term has been inter- dential standing - ''whether the constitutional or statu- preted by the Federal Circuit [in Distributed Solutions, tory provision on which the claim rests properly can beunderstood as granting persons in the plaintiff's posi- There have been two published GAO decisions related to protests about an agency's decision to insource work under 10 Although three of the four decisions demonstrate a U.S.C. § 2463 and 10 U.S.C. § 129a. In Aleut Facilities Support positive trend for contractors attempting to challenge Services, LLC, B-401925, 2009 CPD ¶ 202 (Comp. Gen. Oct. 13, agency insourcing decisions, one of the four decisions 2009), the contractor argued that the agency improperly can- provides a strong view against jurisdiction. As the Fed- celed a solicitation, in part, because it did not conduct a proper eral Circuit has not ruled on this particular issue and cost analysis under 10 U.S.C. § 2463. In dismissing the protest, Congress has not added any legislation to resolve the the GAO explained, ''Although we review agency decisions to same, a contractor's success against the government is cancel solicitations to determine whether those decisions arereasonably based, we generally do not review them when the dependent upon the judge assigned to the case. And be- work in question is to be performed in-house because such de- cause there are currently 24 judges on the COFC bench, cisions are generally a matter of executive branch policy.'' Id. there is a very good chance that a contractor will need at 3 (citation omitted). Although the GAO recognized that to persuade a judge in the first instance that jurisdiction there were limited exceptions to this rule - e.g., ''where a so- and standing exists. One thing is certain: for the fore- licitation requires a cost comparison. , where a statute or seeable future the Department of Justice will continue regulation requires a cost comparison before retaining the to press its case that there can be no jurisdiction and work in-house'' - it determined that no exceptions applied standing in COFC protests of insourcing decisions un- here, in part, because 10 U.S.C. § 2463 did ''not require. a cost comparison between the agency and outside contractors.''Id. (citations removed). In Triad Logistics Services. Corp., A. Two COFC Decisions Issued in 2011 With Similar Fact B-403726, 2010 CPD ¶ 279 at 3(Comp. Gen. Nov. 24, 2010), the Patterns Reach Completely Opposite Conclusions. precursor to Triad Logistics Services Corp. v. United States 1. Santa Barbara Applied Research, Inc. discussed herein, the GAO quickly dismissed the contractor'sargument that the GAO had jurisdiction to review the agency'scost analysis under 10 U.S.C. § 129a because this statute was 26 Although the language in the current version of 28 U.S.C.
not a procurement statute and it did ''not require a cost com- § 1491(b)(1) states that the COFC and U.S. district courts pos- parison between agency and contractor performance.'' It sess jurisdiction, the Administrative Dispute Resolution Act remains unclear, however, if GAO would find jurisdiction fol- (ADRA) included a sunset provision which removed the U.S.
lowing the amendments to 10 U.S.C. § 2463 in the NDAA for district courts' jurisdiction over bid protests as of January 2, Fiscal Years 2011 and 2012, which make the DTM 09-007 cost 2001. ADRA, Pub. L. No. 104-320, § 12(d), 110 Stat. 3870, 3875.
analysis mandatory in certain instances. There have also been 27 539 F.3d 1340, 1346 (Fed. Cir. 2008).
a few cases before U.S. district courts and the U.S. Circuit 28 Id. at 1344 (citation omitted).
Courts of Appeals challenging agency's decisions to insource 29 Warth v. Seldin, 422 U.S. 490, 500 (1975).
under these statutes. The majority of these decisions hold that 30 Interestingly, the court in Triad Logistics Services Corp. U.S. district courts do not possess jurisdiction over such a claim. E.g., Fisher-Cal Indus., Inc. v. United States, No. 11-791 The United States has taken evolving positions on jurisdic- (BAH), 2012 WL 914674 (D.D.C. Mar. 19, 2012) (finding no ju- tion and standing as related to insourcing challenges. In the risdiction); Rothe Dev., Inc. v. U.S. Dep't of Def., 666 F.3d 336, current litigation, the government states, ''in certain district 338 (5th Cir. 2011) (finding jurisdiction); Vero Tech. Support court litigation, the government previously asserted that an in- v.U.S. Dep't of Def., 437 F. App'x 766 (11th Cir. 2011) (unpub- cumbent contractor could satisfy the interested party require- lished decision) (finding no jurisdiction); K-Mar Indus., Inc. v. ment. We now believe that our prior position was incorrect, U.S. Dep't of Def., 752 F. Supp. 2d 1027 (W.D. Okla. 2010) and that the position we presented in our motion to dismiss in this case - that Triad is not an interested party - is the correct 32 Santa Barbara Applied Research, Inc., 98 Fed. Cl. at 537- one and we have taken the same position in other insourcing No. 11-43C, slip op. at 23 n.17 (citations omitted).
COPYRIGHT ஽ 2012 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
Inc.].''35 Further, Judge Firestone determined that the took issue with the majority of Judge Firestone's analy- contractor had standing because the contractor sis, and arrived at a much different conclusion.
In a spirited decision, Judge Allegra dismissed the has a government contract and claims that it would expect contractor's claim because it failed to meet prudential to compete for future government contracts but for the er- standing requirements.44 After determining that the rors made by the [agency] in its insourcing decision, which concept of prudential standing applied to bid protests prevents [the contractor] or any other contractor from per-forming the functions at issue. Where, as here, [the contrac- under 28 U.S.C. § 1491(b)(1),45 Judge Allegra indicated tor] has a track record of winning contracts for the work that ''the critical question becomes whether the statutes that the [agency] is now insourcing, the economic impact to at issue [10 U.S.C. §§ 129a and 2463] can be understood as granting a contractor standing to challenge an agen-cy's decision to fulfill its needs using its own employ- Finally, the court rejected the government's argu- ees.''46 ''[T]he injury of which plaintiff complains does ment that the court should dismiss this claim based on not arguably fall within the zone of interests sought to ''prudential standing'' grounds.37 A determination of be protected by these statutes.''47 Because sections of prudential standing is based upon ''whether the consti- these statutes required certain reporting to Congress, tutional or statutory provision on which the claim rests Judge Allegra relegated these statutes to ''internal inter- properly can be understood as granting persons in the nal agency procedures subject to legislative over- plaintiff's position a right to judicial relief,''38 e.g., sight,''48 and compared the issues now before him to ''whether the interest sought to be protected by the American Telephone & Telegraph Co. v. United complainant is arguably within the zone of interests to States.49 In doing so, he explained: be protected or regulated by the statute or constitu-tional guarantee in question.''39 Judge Firestone found What is controlling here-and what demands, in the final that the doctrine of prudential standing did not apply to analysis, that plaintiff's case be dismissed-is the language bid protests under 28 U.S.C. § 1491(b)(1), and even if it of the statutes in question. That language indicates that did, it would not relinquish the court's jurisdiction over Congress intended to reserve for itself, and not any court, this protest.40 She determined that 10 U.S.C. § 2463 the twin job of deciding whether the Defense Departmenthas properly in-sourced various tasks and of requiring the ''was enacted, at least in part, for the benefit of the con- agency to changes its policies as proved necessary. Both tracting community.''41 She arrived at this conclusion tasks were to be accomplished by application of the consid- based upon Section 323 in the NDAA for FY 2012 which erable pressures of the legislative process-what Madison, ''prevent[ed] the DOD from imposing any specific quo- in Federalist No. 48, referred to as Congress' ''complicated tas or goals on insourcing without a considered cost analysis and mandated that the DOD conduct a specificcost comparison [under 10 U.S.C. § 2463] that takes Interestingly, Judge Allegra's lengthy analysis ap- into account the 'full costs of civilian and military man- pears to boil down to policy concerns.51 Judge Allegra power' before making any insourcing decision, where was very apprehensive that a decision finding jurisdic- . cost alone is the deciding criteria,''42 although Sec- tion over the contractor's protest would ''risk[] trigger- tion 323 was enacted after the events underlying the ing a wave of cases brought by hopeful contractors each believing that they have the likely prospect of receivinga contract if a particular function is outsourced. The disruption inherent in such cases likely would hinder The next case to tackle these issues was Hallmark- the ability of the Department of Defense to establish, on Phoenix 3, LLC. Like the contractor in Santa Barbara a timely basis, its personnel needs in formulating its au- Applied Research, Inc. here the contractor protested thorization requests to Congress, thereby impeding the the agency's decision under 10 U.S.C. § 2463 to in-source work currently being performed by the contrac-tor.43 Although this case had a similar fact pattern to Santa Barbara Applied Research, Inc., Judge Allegra 45 Id. at 68-72.
46 Id. at 72.
47 Id. 35 Santa Barbara Applied Research, Inc., 98 Fed. Cl. at 542-43 (citing Distributed Solutions, Inc., 539 F.3d at 1346 49 307 F.3d 1374, 1379 (Fed. Cir. 2002) (finding that Section (''[T]he phrase, 'in connection with a procurement or proposed 8118 of the NDAA for Fiscal Year 1988 did ''not create a cause procurement,' by definition involves a connection with any of action inviting private parties to enforce the provision in stage of the federal contracting acquisition process, including 'the process for determining a need for property or ser- 50 Hallmark-Phoenix 3, LLC, 99 Fed. Cl. at 77 (citation vices.' '')). See alsoSanta Barbara Applied Research, Inc., 98 omitted). Judge Allegra even commented that the language Fed. Cl. at 543 (''The substance of the [agency's] decision has added to the NDAA for Fiscal Year 2011 regarding 10 U.S.C.
been to stop procuring services from [the contractor] and to in- § 2463 would not have changed his analysis. Id. at 74 n.15 stead use [agency] civilian employees to do the same work.
(''While the amended statute makes specific reference to the Thus, the insourcing decision in this case was made for the existing Defense Department guidelines, that feature does not, purpose of determining the need for contract services and thus in this court's view, make insourcing decisions under the was made 'in connection with a procurement decision.' '').
amended statute reviewable. This is because the amendment 36 Santa Barbara Applied Research, Inc., 98 Fed. Cl. at 543.
does not fundamentally change the nature of section 2463 as focusing on legislative oversight, rather than judicial review, as the means of enforcement. Indeed, as mentioned above, the 39 Ass'n of Data Processing Serv. Orgs., Inc. v. Camp, 397 same Congress that passed the requirements highlighted in Santa Barbara also imposed new reporting and review require- 40 Santa Barbara Applied Research, Inc., 98 Fed. Cl. at 544.
ments to bolster its legislative oversight of this issue.'').
51 That being said, Judge Allegra indicated that the ''court does not come to this decision lightly, fully recognizing the po- 43 Hallmark-Phoenix 3, LLC, 99 Fed. Cl. at 66-67.
tential impact on plaintiff.'' Id. at 80.
legislative oversight process that Congress intended to dertaking a robust critical analysis of the court's subject matter jurisdiction to review government insourcing de- Also, by agreeing with the government's prudential cisions, she found that the alleged violations under 10 standing argument, Judge Allegra did not have to de- U.S.C. §§ 129a and 2463 were generally ''within the sub- cide if the contactor possessed standing as an interested ject matter jurisdiction of this court.''59 party. However, he commented that the contractor's ar- However, persuaded by the government's arguments, gument that it was an interested party was based on a Judge Horn ultimately concluded that the contractor ''pile of assumptions.''53 Judge Allegra stated that it was did not possess standing as an interested party, mostly '' debatable whether [the contractor] qualifies as a pro- because the contractor's contract had ended and the spective bidder within the meaning of the Federal Cir- government insourced the work prior to the contractor cuit's definition of interested party.''54 filing its current complaint.60 Judge Horn also appeared B. Two COFC Decisions Issued in 2012 Favor the Analy- to be influenced by the government's argument that the sis in Santa Barbara Applied Research, Inc. court could not ''fashion[] a workable remedy'' in this After Judge Allegra issued his decision in Hallmark- specific scenario because the agency personnel were al- Phoenix 3, LLC in late 2011, two other COFC judges is- ready performing the insourced work.61 That being sued decisions on the same topic, and preferred Judge said, she offered hope for future contractor challenges Firestone's analysis in Santa Barbara Applied Re- search, Inc. over Judge Allegra's analysis in Hallmark This court concludes that Triad is not an interested party, and therefore, does not possess standing to sue. The court, however, does not conclude that an incumbent contractor In Triad Logistics Services Corp., the contractor pro- challenging an insourcing decision could never satisfy the tested the agency's decision to insource work previ- interested party requirements. In the case currently before ously performed by the contractor based, in part, upon the court, Triad's contract had been completed before the the cost analysis performed under 10 U.S.C. § 2463.55 second complaint was filed in this court. Triad was in theunfortunate position that it no longer possessed a direct, Unlike the situation in Santa Barbara Applied Re- economic interest in an Air Force contract when it filed suit.
search, Inc. and Hallmark-Phoenix 3, LLC, the contrac- Moreover, if a contractor's ongoing contract is insourced tor in Triad Logistics Services Corp., protested the after the enactment of the [NDAA for Fiscal Year 2011], agency's decision to insource the work after the con- that incumbent contractor could be in a different position tractor's contract had ended on its own terms.56 The agency also made its final determination to insource thework after the contract had ended.57 Also, because Judge Horn ultimately found that the contractor had no standing, she did not rule on the gov- As an initial matter, Judge Horn stated that she ''fa- ernment's prudential standing arguments.63 vors the approach adopted in SantaBarbara [AppliedResearch, Inc.],'' noting that ''the court first should de- 2. Elmendorf Support Services Joint Venture termine whether there is subject matter jurisdiction The most recent COFC case dealing with these juris- generally, including subject matter jurisdiction to re- dictional issues is Elmendorf Support Services Joint view insourcing decisions under 28 U.S.C. § 1491(b)(1) Venture. Like the scenarios in Santa Barbara Applied and standing as an interested party, before addressing Research, Inc. and Hallmark-Phoenix 3, LLC, here the questions related to prudential standing.''58 After un- agency decided to insource work currently being per-formed by the contractor after performing a cost analy-sis under 10 U.S.C. § 2463.64 Prior to its contract end- 52 Id. at 78. See also id. at 80 (''In the court's view, internal agency decisions of the sort at issue do not suddenly becomereviewable because they are predicated on an insourcing deci- sion. A contrary ruling would fling open the doors of this court to any contractor who can reasonably claim that an agency's 61 Id. at 26 (''The Air Force cannot easily reverse the in- insourcing decision denied it a contracting opportunity.'').
sourcing decision which, according to defendant, has resulted 53 Id. at 68 (''[T]here is no existing solicitation here. Nor is in agency personnel performing the tasks that previously had there any assurance that there ever will be one. If this court been performed by Triad, following the end of Triad's contract, were to set aside the Air Force's insourcing decision, it is con- even if the court were to order another cost study analysis and ceivable, if not likely, that the Air Force would simply make a the cost study analysis were to demonstrate that performance second 'corrected' decision to in-source, the effect of which by Air Force personnel was more costly than contractor perfor- would be to deny plaintiff a contracting opportunity. Even if mance. Defendant points out the difficulties in fashioning a this court's rejection of the Air Force's insourcing decision re- workable remedy, and, therefore of providing redress to this sulted in a new procurement, there is no assurance that plain- plaintiff, which no longer has an economic interest in the con- tiff could or would bid on that procurement. After all, the con- tract work since plaintiff's contract ended by its own terms, is tract that plaintiff previously won was a small-business set further reason why plaintiff does not have standing to chal- aside. And there is no guarantee that the Air Force would once lenge the DOD insourcing decision.'').
again reserve the requirements at issue for such a set aside, 62 Id. at 33. Judge Horn commented, ''Because this court nor any statute or regulation of which the court is aware that has concluded plaintiff is not an interested party and lacks would dictate that result.'') (citation and footnote omitted).
standing, however, it is not for this court to determine if the [NDAA for Fiscal Year 2011] was enacted for the benefit of 55 No. 11-43C, slip op. at 1-2 (Fed. Cl. Feb. 29, 2012).
contractors or provides sufficient judicially manageable guide- lines, to assist in providing standing for future plaintiffs wish- 57 Id. at 8. This situation arose because the agency per- ing to challenge future insourcing decisions by the DOD.'' Id. formed a new set of cost analyses after the contractor's initial protest at COFC was dismissed without prejudice to allow the 63 Id. at 26-33. Nonetheless Judge Horn did spend a consid- new analysis to occur. Id. at 7-8. The Contractor's first protest erable amount of time in her decision discussing Judge Fir- was filed at COFC on the date its contract ended. Id. at 7.
estone's and Judge Allegra's prudential standing analysis. Id. COPYRIGHT ஽ 2012 BY THE BUREAU OF NATIONAL AFFAIRS, INC.
ing, the contractor protested the agency's decision to in- by outside contractors, and that this makes such pro- tests very different in some regards from ones in which Issued in June 2012, Judge Bruggink's opinion ac- the concerns of the Competition in Contracting Act, 31 knowledged that ''there exists a split among the judges U.S.C. §§ 3551-56 (2006), are invoked, nevertheless, the of this court regarding whether the decision to in- procedures and standards required by these statutes source contract services is reviewable.''66 In concluding circumscribe the government's ability to bring services that the court possessed subject matter jurisdiction and in-house. At a minimum, incumbent contractors have that the contractor was an interested party, Judge Brug- an interest in ensuring that the calculus is done prop- gink considered the approaches in Santa Barbara Ap- erly. This competitive impulse creates an incentive to plied Research, Inc. and Hallmark-Phoenix 3, LLC.67 expose ways in which the government may have acted He agreed with Judge Firestone's decision in Santa improperly. Refereeing such debates is routine work for Like Judge Firestone, Judge Bruggink determined The court was also persuaded by the analysis in that the COFC had subject matter jurisdiction over the Match-E-Be-NashShe-Wish Band of Pottawatomi In- contractor's bid protest under 28 U.S.C. § 1491(b)(1) dians v. Patchak74, a Supreme Court decision issued af- ter oral arguments were held.75 Judge Bruggink noted The substance of the [the agency's] decision here was to that the Supreme Court ''made it clear that the pruden- stop procuring services from plaintiff and instead to use tial standing test 'is not meant to be especially demand- government employees. Because that decision necessarily ing.'. Moreover, the test 'forecloses suit only when a included the process for 'determining the need for. ser-vices' that plaintiff currently provides, the insourcing plaintiff's interests are so marginally related to or in- decision-making process was 'in connection with a procure- consistent with the purposes implicit in the statute that ment or proposed procurement' within the rather generous it cannot reasonably be assumed that Congress in- definition adopted by the Federal Circuit [in Distributed So- tended to permit the suit.' ''76 It is unclear whether this Supreme Court decision would have affected Judge Al-legra's analysis in Hallmark-Phoenix 3, LLC.
The court also determined that the contractor was an interested party, and was not barred by the doctrine of III. Conclusion. These decisions demonstrate how prudential standing. Finding that the Santa Barbara COFC judges can arrive at completely different conclu- Applied Research, Inc. was ''instructive,''70 Judge Brug- sions when analyzing similar fact patterns. The stark contrast between Judge Firestone's and Judge Allegra's Having concluded that there was a proposed procurement, decisions is striking, and presents a hurdle for contrac- we have no difficulty finding that plaintiff clearly has a fi- tors attempting to protest an agency's decision to in- nancial interest in maintaining its incumbency. It has dem- source under 10 U.S.C. § 2463. Jurisdiction before the onstrated its desire for the work and, but for the insourcing, COFC is not guaranteed in any way until the Federal we have every reason to assume it would still be on the job Circuit addresses the issue for all the judges of the . Here, in its most recent contractor performance assess- ment report, plaintiff was rated as excellent, and for the du-ration of the contract, there is no dispute that plaintiff has Although Judge Bruggink (and for the most part performed well. Thus, there is a substantial chance that, Judge Horn77) was persuaded by Judge Firestone's given the opportunity, plaintiff would perform the services analysis in Santa Barbara Applied Research, Inc. find- ing jurisdiction, contractors cannot assume that other The court summarily dismissed the government's ar- COFC judges will follow suit. Other judges may agree gument that the court did not have jurisdiction over this with Judge Allegra's analysis of prudential standing in bid protest due to prudential standing concerns, prefer- Hallmark-Phoenix 3, LLC or be guided by the same ring Judge Firestone's approach over Judge Allegra's policy concerns that underpinned his decision.
approach.72 Apparently disagreeing with Judge Alleg- Until the Federal Circuit rules on this issue or con- ra's concern that finding jurisdiction over these types of gress adds legislation clarifying that the COFC has ju- protest would open the floodgates of litigation, Judge risdiction over this type of protest, contractors must re- main vigilant and careful when arguing for jurisdiction.
While we recognize that Congress no doubt was mo- Due to budget constraints and general government poli- tivated by fiscal concerns in requiring periodic assess- cies, insourcing and the related cost analyses under 10 ment of the relative costs of having services performed 73 Id. at *5.
74 Nos. 11-246, 11-247, 2012 WL 2202936 (U.S. June 18, 67 Id. at *3. Judge Bruggink likely did not rely upon Triad Logistics Services Corp. because the facts before Judge Brug- 75 2012 WL 236075, at *5.
gink more closely resembled the facts in Santa Barbara Ap- 76 Id. at *5 (quoting Match-E-Be-NashShe-Wish Band of
plied Research, Inc. and Hallmark-Phoenix 3, LLC.
Pottawatomi Indians v. Patchak, Nos. 11-246, 11-247, 2012 WL 2202936, at *9 U.S., June 18, 2012)).
69 2012 WL 236075, at *3-4 (citations omitted).
77 One lesson learned from Judge Horn is that a contractor should file its protest related to an agency's decision to in- source under 10 U.S.C. § 2463 prior to the expiration of its con- 72 Id. at *4-5.

Source: http://mckenna.client.firmseek.net/media/resource/1877_GandersonBNA.pdf