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Court of Federal Claims' OCI Ruling Reversed

The Court of Appeals for the Federal Circuit reversed a Court of Federal Claims decision setting aside an award (51 CCF 78,829), because the CFC erred in allowing supplementation of the administrative record, reviewing the contracting officer's mitigation of the awardee's organizational conflict of interest without sufficient deference to the government's discretion, and setting aside the award. The Federal Circuit first clarified the circumstances in which parties may supplement the administrative record in protests before the CFC. Citing Esch v. Yeutter, 876 F2d 976 (CA-DC 1989), the CFC had encouraged the parties to supplement the record with "whatever they want" and relied on two expert witness declarations the protester added to the record to evaluate the awardee's OCI mitigation plan. However, the Supreme Court has stated "[t]he task of the reviewing court is to apply the appropriate [Administrative Procedure Act] standard of review ... to the agency decision based on the record the agency presents to the reviewing court" (Florida Power & Light v. Lorion (470 US 729)). Review is limited to the agency record to guard against courts using new evidence to, in effect, convert the APA's "arbitrary and capricious standard" to de novo review. To the extent Esch held otherwise, it was not the law of the Federal Circuit. Thus, the CFC erred when it admitted the protester's extra-record evidence without first determining whether the evidence was necessary for effective judicial review.
 
Arbitrary and Capricious Standard

The CFC also erred in reviewing the CO's mitigation of the awardee's OCI de novo rather than under the APA's "arbitrary and capricious" standard (5 USC 706(2)(A)). Believing the CO had violated FAR 9.504, the CFC viewed its task as determining whether there had been a violation of law and, if so, whether the mitigation proposal was an actual remedy. However, FAR 9.505 recognizes identifying OCIs and evaluating mitigation proposals are fact-specific inquiries that require considerable discretion. The CFC's conclusion the CO "violated" FAR 9.504 in a way that triggered de novo review therefore was inconsistent with the discretion accorded the government by FAR 9.505 and the APA's underlying principles.
 
No Grounds for Judicial Interference

Finally, the Federal Circuit determined the award was not arbitrary or capricious and enforceability of the mitigation plan provided no basis for setting aside the contract. The government's conclusion the plan was sufficient was reasonable, and the awardee was barred from bidding on future requirements in a different category of services. It also was reasonable for the CO to defer evaluating potential unequal access to information conflicts until the awardee bid on future contracts for which it had obtained nonpublic information by performing the contract at issue. As for the enforceability of the mitigation plan, the parties agreed the government had legal recourse to enforce the plan. The CFC's conclusion continuing court oversight was required, based on its belief the CO could not be trusted with enforcement, was not appropriate, because the CO did not act arbitrarily or capriciously in evaluating the mitigation efforts. (Axiom Resource Management, Inc. v. U.S., et al., CA-FC, 53 CCF 79,108)
 

 

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )

     
  
 

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