IN-SOURCING CHALLENGE NEARLY SUCCEEDS

Judge Christine Miller of the Court of Federal Claims (COFC) has just issued an opinion denying injunctive relief to a contractor complaining that the Air Force's decision to in-source work the contractor had been performing violated statutory law.  The contractor contended that the Air Force violated the National Defense Authorization Act (NDAA) for fiscal year 2012 which requires the Secretary of Defense to ensure that the cost of performance by a contractor compared to the cost of performance in house would be equal to or exceed the lesser of 10% of the personnel costs of performance or $10 million.  Since the savings was 7.9% the contractor argued the in-sourcing decision violated the statute.

Judge Miller writes a veritable treatise on the key legal issues in bringing such a suit.  This is great reading for lawyers.  First, she addresses subject matter jurisdiction saying "prudential standing" must be considered after first determining jurisdiction.  The key statutory requirement on jurisdiction is whether the alleged violation occurred in connection with a procurement or a proposed procurement. After a thorough discussion, she determines the definition includes the process for determining a need for property or services.  The Air Force's decision to in-source involved such a process.

Next, Judge Miller examines whether the contractor was an interested party.  The contractor was, after all, the incumbent contractor, and after a lengthy explanation, Judge Miller finds that the contractor was an actual or prospective bidder with a direct economic interest in the procurement or proposed procurement.  Given the opportunity, the contractor would have as substantial chance of performing the services in the future.  There also was an issue of mootness in the case.  Because there was an option period remaining on the contractor's contract, Judge Miller found she could fashion a remedy and the case was not, therefore, moot.

Judge Miller than tackled the issue of prudential standing.  Prudential standing requires that a contractor's grievance must arguably fall within the zone of interests protected by the statute invoked in the suit.  Department of Defense (DOD) procedures required by the statutory provisions in the NDAA limit DOD's ability to convert from contractor to civilian performance.  Therefore, the contractor came within the zone of interests protected by the NDAA and the contractor accordingly has prudential standing.

But Judge Miller denies injunctive relief primarily because the contractor's case failed on one of the four prongs of such relief, success on the merits of the case. Based on the timing of when the in-sourcing decision actually occurred, she holds the NDAA did not apply to the case at all.  The statute was not retroactive and the Air Force was not required to adhere to the 2012 NCAA because the events complained of occurred much earlier.  Although she found lack of success on the merits, Judge Miller also examined the irreparable harm to the contractor (existing), the balancing of the hardships (favoring relief in this case) and the public interest (determined against the contractor because no statute was violated).

We now have several opinions from the COFC upon which a contractor can seek judicial relief with regard to in-sourcing decisions.  But the bottom line is that such a suit will not stand any chance of success unless the contractor can show a violation of a statute.

bill@spriggslawgroup.com           www.spriggslawgroup.com