The CBCA Chews Up Agency’s Erroneous Allegation that Contractor Is Getting a ‘Second Bite at the Apple’
At the intersection of bid protests and claims, in Optimum Services, Inc. v. Department of the Interior, CBCA 4968 (May 2, 2016), the Civilian Board of Contract Appeals (“CBCA” or “Board”) recently encountered the question of whether a decision by the Government Accountability Office (“GAO”) can preclude a contractor from later maintaining an appeal of a contracting officer’s final decision about a claim that arises out of the facts considered by GAO. Noting that this question did not appear to have yet been decided, the Board engaged in a fulsome comparison of the authority and available remedies at GAO and the CBCA, as it refused to accept the National Park Service’s (“NPS” or “agency”) argument that Optimum Services, Inc.’s (“OSI”) appeal should be dismissed because of the doctrine of res judicata, which generally precludes a party to a lawsuit from re-litigating aspects of a case that were decided in a prior proceeding by a tribunal of competent jurisdiction and authority to grant the relief sought in the later proceeding. This case’s reasoning and result can be reassuring to contractors who may find themselves responding to an agency’s motion to dismiss based on an erroneous assertion that another forum’s pronouncement on an issue precludes them from having their day in court.
I. Factual and Procedural Background
NPS awarded OSI a contract to perform restoration services in Everglades National Park in December 2008. Then, in January 2009, a competitor filed a bid protest in the United States Court of Federal Claims. In response to the protest, the agency agreed to terminate the contract award and issue a new solicitation. OSI then filed a protest at GAO challenging the agency’s decision to issue a new solicitation. The agency subsequently terminated for convenience the contract with OSI. A couple of months later, GAO denied OSI’s protest. See Optimum Services, Inc., B-401051 (Apr. 15, 2009). After stating that it “generally decline[s] to review the termination of contracts because such actions are matters of contract administration which are appropriate for resolution by the contracting agencies and the contract appeals boards,” GAO noted that it “will review the propriety of a termination where it flows from a defect the contracting agency perceived in the award process.” Thus, because “the agency’s termination of [OSI’s] award flowed directly from the agency’s concern that the solicitation did not accurately reflect the agency’s requirements,” GAO determined that it would review the propriety of the agency’s decision to cancel the solicitation. GAO denied the protest because it concluded that the agency acted reasonably in issuing a new solicitation.
After GAO denied OSI’s protest, OSI submitted a termination settlement proposal to the agency. Following five years of communications regarding OSI’s settlement proposal, OSI submitted to NPS in January 2015 a claim for termination costs and breach of contract. The contracting officer denied the claim, stating in the final decision that “GAO held that the [agency] acted reasonably when it terminated OSI’s contract for convenience and cancelled the underlying solicitation.” OSI appealed that decision to the CBCA. Framing OSI’s appeal as a “second bite at the appeal,” or attempt to relitigate the GAO decision at the CBCA, the agency moved to dismiss the appeal pursuant to the doctrine of res judicata. To defeat the agency’s motion, OSI contended that GAO lacked both the judicial capacity and ability to grant the relief sought at the Board because GAO’s decisions regarding protests do not bind executive branch agencies.
II. CBCA Analysis
After recognizing the following well-established rules, the Board launched into a comparative analysis of the authority of GAO and the CBCA, in terms of judicial capacity and available remedies. Quoting the United States Court of Appeals for the Federal Circuit’s (“Federal Circuit”) requirements for barring subsequent litigation on the basis of res judicata, the Board provided that “the party asserting the bar must prove that (1) the parties are identical or in privity; (2) the first suit proceeded to a final judgment on the merits; and (3) the second claim is based on the same set of transactional facts as the first.” See Ammex, Inc. v. United States, 334 F.3d 1052, 1055 (Fed. Cir. 2003). Focusing on the second element, the Board explained that a “final judgment of an administrative agency, such as a board of contract appeals, that ‘is acting in a judicial capacity and resolv[ing] disputed issues of fact properly before it which the parties have had an adequate opportunity to litigate’” could bar a litigant from later maintaining suit based on the same facts that were the subject of such a final judgment. See Phillips/May Corp. v. United States, 524 F.3d 1264, 1268 (Fed. Cir. 2008) (quoting United States v. Utah Construction & Mining Co., 384 U.S. 394, 422 (1966)). The Board added that “it is the remedies available to the plaintiff in a forum of limited jurisdiction, not the remedies sought by the plaintiff, that determine whether res judicata bars a subsequent claim in a different forum.” See Cunningham v. United States, 748 F.3d 1172, 1180 (Fed. Cir. 2014) (citing Restatement (Second) of Judgments § 26(1)(c)).
A. GAO Authority and Available Remedies
The Board’s discussion of GAO’s authority emphasized that GAO lacks the authority to render binding, enforceable judgments against executive branch agencies of the Government. The Board began by quoting GAO’s statement in K.B.J. Engineering, Inc., B-190818 (Dec. 8, 1977), that GAO does not act in a judicial capacity. Then, based on the Supreme Court’s pronouncement in Bowsher v. Synar, 478 U.S. 714, 731 (1986), that GAO is a part of the legislative branch of the Government and that “congressional control over the execution of the laws . . . is constitutionally impermissible,” the Board reiterated the oft-heard statement that the GAO’s “decisions are recommendations that . . . do not bind the executive branch of the Government.” Further emphasizing that the only available remedy at the GAO is a recommendation, the Board provided in full the list of recommendations, supplied by the Competition in Contracting Act (“CICA”), 31 U.S.C. § 3554(b)(1) and (c)(1), GAO is empowered to make based on a determination that a solicitation, proposed award, or award does not comply with statute or regulation.
B. CBCA Authority and Available Remedies
In contrast, the Board’s discussion of its province emphasized its authority to act in a judicial capacity and grant the panoply of relief available at the United States Court of Federal Claims. For its general authority to hear contractors’ appeals of contracting officers’ decisions of civilian executive branch agencies of the Government, the Board quoted the Contract Disputes Act (“CDA”), 41 U.S.C. § 7105(e)(1)(B). Then, it reiterated the long-established principle that the Board’s review of a contracting officer’s decision is de novo, meaning that it affords no deference to the contracting officer’s factual findings or legal conclusions. See, e.g., Wilner v. United States, 24 F.3d 1397, 1401 (Fed. Cir. 1994). Recognizing that it is not a court, the Board continued by noting the Federal Circuit’s long-standing pronouncement that the Board functions as a quasi-judicial body. See Boeing Petroleum Services, Inc. v. Watkins, 935 F.3d 1260, 1261 (Fed. Cir. 1991). As such, the Board reiterated the CDA’s statement that it may grant “any relief that would be available to a litigant asserting a contract claim in the United States Court of Federal Claims,” 41 U.S.C. § 7105(e)(2), which includes binding, enforceable judgments for money damages as a result of a contract termination.
III. Holding and Implications
Based on the premise that GAO’s decision in OSI’s protest would preclude OSI from litigating its appeal before the Board “only if [the agency] established that GAO acted in a judicial capacity when it decided OSI’s protest and [that] GAO had the ability to offer complete relief for OSI,” the Board afforded no deference to the contracting officer’s final decision and denied the agency’s motion to dismiss. Although the Board did not explicitly define what it means for a tribunal to act in a “judicial capacity,” by emphasizing that “GAO’s decisions under CICA are only recommendations that are not binding on the executive branch of the Government” and holding that there is, thus, “no judgment by GAO in OSI’s protest that precludes the Board from hearing [the] appeal,” the Board insinuated that a tribunal acts in a “judicial capacity” only when it has the authority to render binding, enforceable judgments. Similarly, the Board did not define “complete relief.” However, the Board implied that the determination of whether GAO could offer “complete relief” to OSI in its protest requires a determination of whether GAO could offer the relief that the Board has the authority to grant pursuant to the CDA. In comparing the remedies that it may grant to those possible at GAO, the Board stated that the appeal before it concerned “the termination of OSI’s contract and OSI’s claim for monetary damages as a result of that termination,” and proclaimed that, whereas the Board may grant monetary damages, “GAO had no authority under CICA to award damages related to either a termination for convenience or breach of contract.”
Although the Board does not go so far as to concretely state that a GAO decision touching on a contract administration issue can never preclude a contractor from maintaining an appeal before it, this decision mandates such a result. GAO, as an agency of the legislative branch of the Government, is never going to have the authority to render a judgment that is binding and enforceable against an executive branch agency. Further, although this decision does not address the preclusive effects of a Court of Federal Claims bid protest decision that comments on a contract administration issue, the non-availability of a monetary remedy in a protest at the Court of Federal Claims will almost certainly defeat any agency motion to dismiss a CDA appeal based on the doctrine of res judicata.