National Government Services v. United States
923 F.3d 977 (2019)
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Rule of Law:
When a government agency seeks to exclude a potential contractor from a competitive procurement to maintain market competition or ensure a continuous source of supply, it must follow the specific statutory and regulatory procedures requiring a formal, written 'determination and findings' for that particular procurement, and cannot use a blanket solicitation policy as a substitute.
Facts:
- The Centers for Medicare & Medicaid Services (CMS) is a federal agency that contracts with private companies, known as Medicare administrative contractors (MACs), to process Medicare claims.
- In 2010, CMS developed a new 'Award Limitations Policy' to be included in all future MAC contract solicitations.
- The policy stated that CMS would not award more than 26% of the national A/B Medicare workload to any single contractor and not more than 40% to a set of affiliated companies.
- CMS's stated purposes for the policy were to ensure business continuity by avoiding overreliance on a single contractor and to maintain a competitive long-term market.
- CMS incorporated this policy into its solicitation for the Jurisdiction H (JH) contract.
- National Government Services, Inc. (NGS) was an existing MAC with contracts for Jurisdictions 6 and K, which together constituted a significant share of the national workload.
- Due to its existing contracts, the Award Limitations Policy made it impossible for NGS to win the JH contract, as the additional workload would push its total share over the 26% cap.
Procedural Posture:
- National Government Services, Inc. (NGS) filed a pre-award bid protest with the Government Accountability Office (GAO) challenging the Award Limitations Policy.
- In January 2018, the GAO denied the protest.
- NGS then filed a suit in the United States Court of Federal Claims (the trial court), challenging the policy as applied in two different solicitations.
- The Court of Federal Claims denied NGS’s protest and granted judgment in favor of the United States.
- NGS, as appellant, appealed the decision to the United States Court of Appeals for the Federal Circuit.
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Issue:
Does a government agency's solicitation policy that establishes a maximum market-share cap for contractors, thereby effectively precluding certain offerors from winning an award, violate the Competition in Contracting Act's requirement for full and open competition when the agency has not followed the statutory procedures for excluding a source?
Opinions:
Majority - Chief Judge Prost
Yes, the agency's policy violates the Competition in Contracting Act (CICA). Full and open competition requires more than the mere ability to submit a futile proposal; it requires a meaningful opportunity to compete for the award. The court reasoned that CICA and the Federal Acquisition Regulation (FAR) provide a specific, congressionally designed procedure for excluding a source for the exact reasons CMS cited—maintaining competition and ensuring a reliable supply chain. This procedure, found in 41 U.S.C. § 3303(a) and FAR 6.202, requires the head of the agency to issue a formal, written 'determination and findings' (D&F) justifying the exclusion for a particular procurement. CMS failed to follow this procedure, instead creating a blanket policy applicable to a class of contracts, which is explicitly prohibited. Allowing an agency to bypass this statutory requirement by labeling the exclusion an 'evaluation factor' in a solicitation would nullify the procedural safeguards Congress established.
Analysis:
This decision reinforces that government agencies must strictly adhere to the procedural requirements of the Competition in Contracting Act and the Federal Acquisition Regulation. It clarifies that an agency's legitimate market-shaping goals, such as maintaining a competitive industrial base, do not permit it to create shortcuts that bypass explicit statutory mandates for excluding sources. The ruling prevents agencies from using broad solicitation provisions to implement class-based exclusions, forcing them instead to justify such actions on a case-by-case basis through a formal 'determination and findings' process. This enhances accountability and ensures that decisions limiting competition are deliberate, documented, and specifically tailored to individual procurements.
