Turner Const. Co., Inc. v. United States
645 F.3d 1377, 2011 U.S. App. LEXIS 14370, 2011 WL 2714137 (2011)
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Rule of Law:
An agency's decision to follow a Government Accountability Office (GAO) recommendation in a bid protest case is arbitrary and capricious if the GAO's recommendation itself lacks a rational basis and improperly substitutes its judgment for that of a contracting officer's (CO) thorough and fact-specific organizational conflict of interest (OCI) determination.
Facts:
- In June 2007, the United States Army Corps of Engineers (Army) contracted with HSMM/HOK (partly owned by AECOM Technology Corporation - AECOM) to prepare design requirements and assist with technical review for a government hospital at Fort Benning, Georgia.
- In May 2008, one month before the Army issued its Phase I solicitation for the hospital construction, AECOM and Ellerbe Becket (EB), which would become Turner Construction Company, Inc.'s (Turner) design subcontractor, executed a confidentiality agreement regarding AECOM’s possible acquisition of EB.
- By November 2008, AECOM’s initial negotiations to acquire EB, which included participation in a multi-party auction, had terminated without a successful agreement.
- In May 2009, after HSMM/HOK completed the Phase II solicitation materials for the Army, AECOM reopened negotiations to acquire EB.
- On July 20, 2009, an AECOM executive, realizing that EB was Turner’s subcontractor and that AECOM's negotiations with EB had resumed, informed the Army’s project manager of a potential OCI and recused himself from the technical review board.
- On September 28, 2009, the Army awarded Turner a $333,359,000 contract after determining that Turner represented the best value.
- In late October 2009, EB's merger with AECOM was publicly announced.
Procedural Posture:
- B.L. Harbert-Brasfield & Gorrie, JV (Harbert-Gorrie) and McCarthy/Hunt, JV (rival bidders) filed bid protests with the Government Accountability Office (GAO) challenging the Army's contract award to Turner Construction Company, Inc. (Turner) due to a potential organizational conflict of interest (OCI).
- On February 19, 2010, the GAO issued a decision sustaining Harbert-Gorrie’s protest and recommended that the Army re-compete the hospital contract without allowing Turner to participate.
- On March 19, 2010, the Army announced it would follow the GAO’s recommendation and notified Turner that its contract was being terminated.
- On March 31, 2010, Turner filed a bid protest in the United States Court of Federal Claims to contest the termination and re-procurement.
- The Court of Federal Claims concluded that the Army’s decision to follow the GAO’s recommendation was arbitrary and capricious, and granted Turner injunctive relief, including restoring the hospital contract to Turner (Turner Constr. Co. v. United States, 94 Fed. Cl. 561 (2010)).
- On August 5, 2010, the Army reinstated Turner’s contract in compliance with the Court of Federal Claims’ order, explicitly concluding that reinstatement was 'advantageous to the Government.'
- Harbert-Gorrie (defendant-appellant) timely appealed the Court of Federal Claims’ decision to the United States Court of Appeals for the Federal Circuit.
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Issue:
Does an agency's decision to follow a Government Accountability Office (GAO) recommendation to terminate a contract for an organizational conflict of interest (OCI) lack a rational basis when the GAO's recommendation improperly substitutes its judgment for a contracting officer's detailed, fact-specific OCI investigation?
Opinions:
Majority - Prost, Circuit Judge
Yes, the Army's decision to follow the GAO's recommendation lacked a rational basis because the GAO's recommendation was itself irrational and improperly substituted its judgment for the Contracting Officer's (CO) reasonable determination. The Federal Circuit reviews the Court of Federal Claims' ruling de novo, upholding an agency's award unless it is 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' When an agency follows a GAO recommendation, its decision lacks a rational basis if the GAO's recommendation is irrational. Contracting Officers are granted broad discretion in evaluating bids and OCIs, which are highly fact-specific inquiries. Here, the CO conducted a comprehensive post-award investigation, including gathering numerous declarations and interviews, and concluded that no OCIs existed. The CO found that any information AECOM may have had access to lacked competitive utility and was disclosed to all offerors. In contrast, the GAO's decision to sustain the bid protest and recommend re-procurement was based on 'suspicion or innuendo' and 'vague allegations' of potential access to 'unidentified information,' rather than 'hard facts.' The GAO failed to meaningfully engage with the CO's detailed findings and improperly substituted its judgment for the CO's reasoned OCI determination, which is contrary to established precedent and the Federal Acquisition Regulations (FAR).
Analysis:
This case significantly reinforces the deference owed to a contracting officer's detailed and fact-specific organizational conflict of interest (OCI) determinations. It establishes that an agency, while free to follow a GAO recommendation, must independently ensure that such recommendation has a rational basis and is not based on mere suspicion or improper substitution of judgment. The ruling provides a strong precedent for contractors to challenge GAO protest decisions that override thorough agency investigations without concrete evidence, thereby enhancing the stability of government contract awards based on rigorous agency OCI reviews. It emphasizes that a robust, documented agency investigation into potential conflicts can withstand an otherwise irrational GAO finding.
