Government Contracts Monitor

Court Sanctions Agency for Falsifying Documents, but Allows It to Cancel Procurement Without Explanation

September 30, 2014

The Court of Federal Claims (COFC) recently issued two decisions on the same day in Coastal Environmental Group, Inc. v. United States, COFC No. 13-71C, which graphically demonstrate the heavy burdens a bid protestor has in making its case and overcoming (i) the discretion afforded the Government in procurement matters, and (ii) the presumption that Government officials act in good faith and in the public interest.

In the first decision the Court found that the EPA “acted in bad faith by manufacturing an inaccurate, backdated document; including such document in the supplemental administrative record [AR]; and certifying that the supplemental administrative record constituted an accurate record of the relevant EPA actions.” In a rare step, the Court imposed monetary sanctions against EPA under COFC Rule 11, consisting of (i) the protestor’s reasonable attorneys and costs in addressing the bad faith conduct, and (ii) a $1,000 penalty. However, in addressing the merits of the protest in the second decision, the Court found that the challenged agency cancellation of the procurement was a permissive act, within the agency’s discretion, that the agency was not required to explain this action, and that the protestor had failed to overcome the presumption that EPA’s cancellation was in good faith.

The case arose out of an 8(a) small business set-aside procurement, and has a tortuous history extending almost two and one-half years. Initially Coastal Environmental Group (CEG) was the second lowest of eight bidders. EPA found the lowest bidder non-responsive. However, EPA’s Administrative Contracting Officer treated this as a responsibility finding, and referred the matter to the Small Business Administration (SBA) for Certificate of Competency (COC) consideration. SBA, without addressing the bid responsiveness issues, issued a COC, and directed EPA to award to the low bidder, which EPA did. CEG protested to the GAO, which denied the protest. CEG then filed at the COFC, where EPA agreed to stay performance pending the Court’s ruling. When the awardee told EPA the delay was imposing a financial burden, EPA agreed to a no-cost termination for convenience and then moved to dismiss CEG’s complaint as moot.

At this point EPA could have gone back to the original procurement and awarded to CEG as the next-in-line bidder. But EPA did not do this. Rather, EPA reassessed its needs, considered other options, and ultimately awarded a more-limited scope contract to a different 8(a) on a sole-source basis. CEG challenged EPA’s follow-on actions, alleging “Bad Faith Cancellation of the Procurement.”

During the course of initial briefing certain inconsistences arose in the Government’s case, causing the Court to issue a Show Cause Order. The Government then discovered and disclosed to the Court that a document in the supplemental AR had been created after-the-fact and backdated. The Court concluded that the EPA officials had acted in bad faith and were “intentionally trying to deceive counsel and the court” as to the authenticity of the document. The Court concluded that the identified actions were “sanctionable under both [the Court’s Rule] 11 and the court’s inherent powers,” and had caused all parties to question the integrity of the AR and incur additional costs and efforts. The Court assessed monetary sanctions against EPA under Rule 11, and admonished the Government, in future bid protests, to “take due care to ensure that the factual representations it makes to the court have evidentiary support in the administrative record.” While no doubt edifying, this relief, in the end, did little to help the protestor, other than offset some legal costs.

Turning to the merits, the Court held that EPA’s decision to issue a new solicitation, rather than seek to revive bids under the existing IFB, constituted a permissible “constructive termination” of the initial procurement. While acknowledging that EPA’s cancellation decision was not documented or explained, even post hoc, the Court concluded that “EPA is not required to provide an explanation for its decision.” The Court cited the presumption of good faith Government actions, and noted that there was no evidence of improper motives here. The Court further stated that while EPA could have sought to revive the initial bids, it was not required to do so.

Thus, after years of fighting, and some success, in the end CEG was not able to overcome the discretion afforded the Government in procurement matters, or the presumption that Government officials act in good faith.