I. Introduction
In his 2006 ruling in Reilly’s Wholesale Produce v. United States, Judge Allegra established the factors that he determined an agency must consider when making a stay override decision based upon urgent and compelling circumstances. Since then, United States Court of Federal Claims (COFC) judges have disagreed over whether an agency “must” consider the Reilly’s Wholesale factors when deciding to override a stay implemented pursuant to the Competition in Contracting Act (CICA), 31 U.S.C. §§ 3551-57. Commentators and practitioners alike have long bemoaned this split among the COFC judges regarding application of the Reilly’s Wholesale factors to override protests.
In a recent bid protest decision, Safeguard Base Operations, LLC v. United States, the United States Court of Appeals for the Federal Circuit had the opportunity to resolve the split among the COFC judges. Unfortunately, the Federal Circuit dismissed the protest as moot. In doing so, however, the Federal Circuit provided insight into how the COFC should review override protests, potentially precluding judges from mandating consideration of the Reilly’s Wholesale factors.
This article begins with a discussion of the authority for stay overrides, the COFC’s decision in Reilly’s Wholesale, and the Federal Circuit’s decision in Safeguard. The article then details how judges have applied the Reilly’s Wholesale factors both before and after Safeguard. The article also argues that requiring agencies to consider every Reilly’s Wholesale factor, regardless of the underlying basis or facts of the override, exceeds the rational basis standard set forth in the Administrative Procedure Act (APA).
The Reilly’s Wholesale factors may nevertheless be useful in certain situations. The factors typify the considerations that would be included in a rational decision to override a stay because of urgent and compelling circumstances, and the COFC should use the factors as a non-binding guide for analyzing such overrides. The COFC should not use the Reilly’s Wholesale factors, however, in ruling on overrides premised on the best interests of the United States because the factors overstate the requirements for those overrides.
II. Override Authority Through the Safeguard Decision
Generally, when a protest is filed with the United States Government Accountability Office (GAO), a contract award or performance must be stayed while the protest is pending before the GAO. The stay may last up to 100 days after the protest is filed. There are, however, statutory exceptions that permit an agency to “override” the stay and proceed with contract award or performance while the protest is pending before the GAO.
A. Statutory Override Authority
The Competition in Contracting Act (CICA), 31 U.S.C. § 3553, requires an agency to stay contract award or contract performance pending a protest at the GAO unless certain exceptions are met to override the stay. An agency’s options for overriding a stay differ depending on whether the protest is pre-award or post-award.
An agency generally may not award a contract after the GAO has provided notice that a protest has been filed at the GAO. However, after receiving notice of the pending protest, the agency’s “head of the procuring activity responsible for award” may authorize contract award “upon a written finding that urgent and compelling circumstances which significantly affect interests of the United States will not permit waiting for the decision of the” GAO; the head of procuring activity must then advise the GAO of this determination. An agency may only override a pre-award stay justified by urgent and compelling circumstances under 31 U.S.C. § 3553(c)(2)(a) if award of the contract is likely to occur within thirty days after the determination.
If an agency receives notice of a post-award protest at the GAO, the contracting officer generally may not authorize performance of the contract to begin while the protest is pending before the GAO. If an agency has awarded the contract and the awardee has begun performance, the contracting officer, after receiving notice of the protest from the GAO, shall “immediately” notify the contractor to cease performance under the awarded contract. “Performance and related activities suspended” as a result of the stay “may not be resumed while the protest is pending.”
As with a pre-award protest, the head of the procuring agency may override a stay and authorize performance while a post-award protest is pending before the GAO. To do so, the head of the procuring agency must issue a written determination that: (I) performance of the contract is in the best interest of the United States; or (II) urgent and compelling circumstances that significantly affect interests of the United States will not permit waiting for the decision of the GAO concerning the protest.
If the head of the procuring agency determines that an override of a post-award “CICA stay” is justified because it is in the “best interests of the United States,” the GAO must make its ultimate recommendation concerning the protest “without regard to any cost or disruption from terminating, recompeting, or re-awarding the contract.”
Notably, a stay override that is justified on the basis that “performance of the contract is in the best interests of the United States” is only available when the protest at issue is a post-award protest. The COFC has commented that “one explanation for the provision of two post-award rationales, as opposed to a single pre-award rationale, is that Congress authorized agencies to rely on an additional, distinct rationale to justify certain post-award override decisions, when ‘urgent and compelling circumstances’ were not present.”
A contractor may challenge the agency’s override decision at the COFC. The COFC will then review the agency’s override decision under the standard set forth in the Administrative Procedure Act (APA), as discussed infra.
B. The Reilly’s Wholesale Factors
Judge Allegra’s opinion in Reilly’s Wholesale Produce v. United States has been described as a “watershed” opinion that “changed the landscape with respect to analyzing the reasonableness of a CICA stay override by delineating a four-factor test to assess an agency’s decision.”
In Reilly’s Wholesale, the Defense Commissary Agency awarded a contract for fresh produce to Four Seasons Produce Inc. (Four Seasons Produce). Thereafter, two unsuccessful offerors, Philadelphia Produce Market Wholesalers (Philadelphia Produce) and Reilly’s Wholesale Produce, Inc. (RWPI) filed post-award bid protests at the GAO. Performance under the Four Seasons Produce contract was stayed.
Rather than overriding the stay of the contract awarded to Four Seasons Produce, the Defense Commissary Agency awarded a 120-day, sole-source, interim contract for the procurement of fresh produce to Four Seasons Produce on the basis of “unusual and compelling urgency” under 10 U.S.C. § 2304(c)(2) and Federal Acquisition Regulation (FAR) 6.302-2. The interim contract “was timed to be coterminous with the expected pendency of the stay” of performance under the previous contract awarded to Four Seasons Produce. RWPI filed another protest at the GAO challenging the sole-source award to Four Seasons Produce. Performance under the sole-source contract was stayed pending the protest.
The Defense Commissary Agency overrode the stay of the sole-source contract on the basis of urgent and compelling circumstances. RWPI filed a complaint in the COFC challenging the Agency’s override decision and seeking injunctive and declaratory relief.
When analyzing RWPI’s protest, Judge Allegra stated that the COFC must determine whether the override decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” After noting that “override decisions are, by nature, fact specific,” Judge Allegra stated that “it is possible to distill from the relevant cases a variety of factors that an agency must consider in making an override decision based upon urgent and compelling circumstances.” Judge Allegra described the distilled factors as:
(i) whether significant adverse consequences will necessarily occur if the stay is not overridden . . . (ii) conversely, whether reasonable alternatives to the override exist that would adequately address the circumstances presented . . . (iii) how the potential cost of proceeding with the override, including the costs associated with the potential that the GAO might sustain the protest, compare to the benefits associated with the approach being considered for addressing the agency’s needs . . . and (iv) the impact of the override on competition and the integrity of the procurement system, as reflected in the Competition in Contracting Act . . . .
Judge Allegra stated in a footnote:
Admittedly, some of the cases cited for the factors that are legally relevant and irrelevant in this context are ones in which the agency override decision was based upon the “best interests” of the United States. However, in the court’s view, the rationale employed in those cases has, where indicated, application to the review of an override decision based upon urgent and compelling circumstances.
Judge Allegra ultimately found that the Defense Commissary Agency’s “override decision was arbitrary, capricious and otherwise contrary to law.” According to Judge Allegra:
Contrary to defendant’s claims, the situation encountered here appears to be markedly different from that encountered in other cases that have upheld CICA overrides relating to interim or bridge contracts (often with incumbent contractors). See, e.g., Chapman Law Firm, 67 Fed. Cl. at 192. In particular, it appears that many of the circumstances that [the Defense Commissary Agency] now faces are the result of a “lack of advance planning,” Filtration Dev. Co., 60 Fed. Cl. at 381, typified by its failure to pursue continuation of its arrangement with [Department of Defense Supply Center-Philadelphia] in the face of the latter agency’s apparent prior unwillingness to perform. Accordingly, the court concludes that plaintiff has demonstrated a likelihood of success on the merits.
C. The Federal Circuit’s Decision in Safeguard
In December 2019, the Federal Circuit first addressed the role of the Reilly’s Wholesale factors in override protests in Safeguard Base Operations v. United States. The appeal in Safeguard arose from the COFC’s denial of a motion for both a temporary restraining order and a preliminary injunction filed by Safeguard Base Operations (Safeguard). The motion sought to set aside the Department of Homeland Security’s decision to override a CICA stay implemented as a result of a protest filed by Safeguard at the GAO. At the Federal Circuit, Safeguard argued that “the Claims Court legally erred in refusing to hold that the Administrative Procedure Act requires that agencies address all four factors set forth in Reilly’s Wholesale Produce . . . to provide a rational basis justifying a CICA stay override.”
While Safeguard’s appeal was pending before the Federal Circuit, the GAO denied Safeguard’s protest. The Federal Circuit, therefore, determined that Safeguard’s appeal was moot because the CICA stay at issue in the override protest ended when the GAO issued its opinion denying Safeguard’s protest.
Since Safeguard’s protest was moot, the Federal Circuit did not extensively discuss the role of the Reilly’s Wholesale factors in an override protest. However, when rejecting Safeguard’s argument that its protest was “capable of repetition, yet evading review,” the Federal Circuit did briefly address Safeguard’s argument that the COFC erred by not holding that the Reilly’s Wholesale factors were binding. The Federal Circuit stated:
We note that the Reilly’s factors do not even bind the Claims Court, AINS, Inc. v. United States, 365 F.3d 1333, 1336 n.1 (Fed. Cir. 2004), abrogated on other grounds by Slattery v. United States, 635 F.3d 1298 (Fed. Cir. 2011), let alone comprise an indispensable aspect of agency rational basis. Cf. Dell Fed. Sys., L.P. v. United States, 906 F.3d 982, 992 (Fed. Cir. 2018) (holding that “highly deferential” rational basis test governed Claims Court review of agency action for purposes of deciding injunctive relief in protest of bid reopening).
Thus, the Federal Circuit indicated, albeit in dicta in an unpublished opinion, that the Reilly’s Wholesale factors are not mandatory considerations in an override protest.
III. The Effect of Safeguard on Override Review
Prior to the Federal Circuit’s decision in Safeguard, COFC judges held differing views on whether the Reilly’s Wholesale factors were mandatory considerations in stay override analyses. The COFC judges will likely continue to disagree as to the role of the Reilly’s Wholesale factors after Safeguard.
A. Prior to the Federal Circuit’s Decision in Safeguard, COFC Judges Were Split as to Whether the Reilly’s Wholesale Factors Were Mandatory Considerations.
Following the issuance of Judge Allegra’s 2006 decision in Reilly’s Wholesale, COFC judges began to disagree about the role of the Reilly’s Wholesale factors in override protests, with three positions emerging: (1) the Reilly’s Wholesale factors are mandatory for an agency to consider when making an override determination; (2) the Reilly’s Wholesale factors do not need to be considered when executing an override determination; and (3) the Reilly’s Wholesale factors are useful, but not mandatory, considerations for analyzing whether an agency’s override determination is rational.
1. A Majority of COFC Judges Previously Held That an Agency Must Consider the Reilly’s Wholesale Factors When Deciding Whether to Override a CICA Stay.
It is well-established that the “United States Court of Federal Claims judges are not bound by each other.” Indeed, Judge Allegra, who issued Reilly’s Wholesale, stated that “the decisions of this court are not binding precedent for judges of this court.” Yet a number of judges have followed Judge Allegra’s reasoning and found that the Reilly’s Wholesale factors must be considered when analyzing an agency’s decision to override a CICA stay.
Judge Lettow was the first COFC judge to follow the Reilly’s Wholesale factors in Superior Helicopter LLC v. United States, where he found that an agency’s override decision was arbitrary and capricious after analyzing the decision under each of the four Reilly’s Wholesale factors. Judge Lettow applied the factors again in his only other override decision following Reilly’s Wholesale. Judge Hewitt was the next judge to follow the Reilly’s Wholesale factors, analyzing an agency’s override determination under each of the Reilly’s Wholesale factors before concluding that its decision to override a stay was arbitrary and capricious. Although neither Judge Lettow nor Judge Hewitt stated that the Reilly’s Wholesale factors were mandatory, they each applied the factors in such a manner as to indicate that an agency must consider the factors to satisfy the APA standard of review. In the same month as Judge Hewitt’s decision, Judge Futey issued an opinion stating that “an agency must consider” the Reilly’s Wholesale factors “[w]hen asserting that urgent and compelling circumstances require immediate performance of a contract.” Judge Futey thus became the first judge after Judge Allegra to explicitly state that an agency “must” consider the Reilly’s Wholesale factors.
Judge Firestone thereafter stated in dicta that if, in a given case, “the plaintiff sought the benefits of an automatic stay through timely filing of a bid protest before the GAO and [were] now challenging the agency’s decision to formally override that stay,” she would “look[] to whether the agency considered” the Reilly’s Wholesale factors. Judge Braden also found that the Reilly’s Wholesale factors were binding, stating that “the United States Court of Federal Claims has determined that an agency must address” the Reilly’s Wholesale factors when analyzing “a CICA override.”
Judge Wolski was the first COFC judge after Judge Allegra to offer a detailed rationale on why the factors were mandatory for a rational override decision. Judge Wolski stated: “All told, it is hardly exceptional to require agencies to consider the first four Reilly’s Wholesale factors, or to disregard consideration of the other two.” He asserted that, when applying the Reilly’s Wholesale factors, “our court is not substituting its judgment for that of an agency concerning aspects that are important for a particular procurement, but is rather identifying factors that would logically be necessary or irrelevant to override decisions in general.” According to Judge Wolski:
[I]t is hard to see how an override decision could fail to consider “the impact of the override on competition and the integrity of the procurement system,” Reilly’s Wholesale, 73 Fed. Cl. at 711, and still be rational. . . . Thus, if an agency’s belief that the awardee’s proposal offered the best value—in response to a solicitation that was an advancement over prior procurements—were sufficient to override the stay, “as a practical matter, the automatic stay would be meaningless in virtually every single instance in which a GAO protest was filed.” University Research Co. v. United States, 65 Fed. Cl. 500, 503 (2005); see also PGBA, 57 Fed. Cl. at 662-63.
From this, it follows that rather than focusing on the benefits of the new contract (particularly since that means performance by a contractor whose award might prove to have been arbitrarily made), agencies should consider the existence of “significant adverse consequences [that] will necessarily occur if the stay is not overridden.” Reilly’s Wholesale, 73 Fed. Cl. at 711. To determine the necessity of contract performance to avoid these consequences, it could hardly be rational for an agency to ignore the existence of “reasonable alternatives to the override” that would also do the job. Id. And in all events, if the costs of an override when a protest might be sustained would outweigh the benefits received through immediate performance of a contract, the override would neither be in the best interests of the United States nor justified by the urgency of the circumstances. If no effort is made to compare these costs and benefits, an agency cannot rationally find an override of the stay to be warranted.
Since Judge Wolski’s 2013 decision in Supreme Foodservice, additional judges have issued decisions stating that an agency’s override decision should be analyzed under the Reilly’s Wholesale factors.
2. Three Judges Have Concluded That an Agency Does Not Need to Consider the Reilly’s Wholesale Factors When Deciding to Override a CICA Stay.
Judge Hodges, Judge Bruggink, and Judge Damich have found that, in at least certain situations, an agency does not need to consider the Reilly’s Wholesale factors.
In PlanetSpace Inc. v. United States, Judge Hodges addressed a protest challenging an agency’s decision to override a stay based on “urgent and compelling circumstances that significantly affect interests of the United States.” Regarding the applicability of Reilly’s Wholesale factors, Judge Hodges stated:
Plaintiff offered arguments regarding four factors courts normally consider in deciding whether to grant an injunction. It contended that [the agency] did not consider four additional “Reilly factors” in making its decision. See Reilly’s Wholesale Produce v. United States, 73 Fed. Cl. 705, 711 (2006) (listing factors “an agency must consider in making an override decision based upon urgent and compelling circumstances.”). We did not consider the Reilly factors at the hearing because Congress limited the court’s review of an agency’s decision in a CICA override action to the Administrative Procedure Act standards. See, e.g., Chapman Law Firm Co. v. United States, 65 Fed. Cl. 422, 424 (2005) (stating that “it would be contrary to the legislative scheme to impose such an additional requirement . . . in order to reinstate the statutory stay applicable during the GAO protest period.”); Advanced Sys. Dev., Inc. v. United States, 72 Fed. Cl. 25, 36-37 (2006) (holding that the factors for injunctive relief are not needed in a CICA override determination because “declaratory judgment achieves the same effect.”).
Judge Hodges’s reasoning in PlanetSpace Inc. for rejecting the Reilly’s Wholesale factors essentially states that application of the factors imposes additional requirements contrary to the legislative scheme. The two cited cases, both of which pre-date Reilly’s Wholesale, are not particularly helpful in assessing why the Reilly’s Wholesale factors are contrary to the legislative scheme for override review.
In the first cited case, Chapman Law Firm Co. v. United States, Judge Merow analyzed whether a protestor was entitled to attorney’s fees under the Equal Access to Justice Act. In doing so, Judge Merow stated that “[d]eclaratory relief is particularly appropriate in bid protest actions contesting agency stay override determinations,” and that “it would be contrary to the legislative scheme” to require a protestor to demonstrate entitlement to injunctive relief “upon finding that an agency override determination lacks validity, in order to reinstate the statutory stay applicable during the GAO protest period.” The portion of Chapman Law Firm Co. quoted in PlanetSpace Inc. does not address, or relate to, whether an override decision must be analyzed under the Reilly’s Wholesale factors.
In the second cited case, Advanced Systems Development, Inc. v. United States, Judge Baskir did not address what an agency must consider when deciding to override a stay. The cited portion of Advanced Systems Development, Inc., similar to the cited portion of Chapman Law Firm Co., addresses whether a protestor must demonstrate entitlement to injunctive relief in order to succeed in an override protest. Advanced Systems Development, Inc., therefore,does not directly support the proposition that an override decision should not be analyzed under the Reilly’s Wholesale factors.
In 2018, Judge Hodges revisited the applicability of the Reilly’s Wholesale factors to override protests in Intelligent Waves, LLC v. United States. There, Judge Hodges declined to apply the Reilly’s Wholesale factors to an override decision relying on the “‘best interest’ exception.” Judge Hodges stated that “the focus [in such a decision] is on the standard provided by the Administrative Procedures [sic] Act as this court has interpreted it in relation to the ‘best interest’ exception.” Judge Hodges has not applied the Reilly’s Wholesale factors in any decision, regardless of which basis an agency has relied upon to override a stay.
Judge Bruggink likewise concluded that the Reilly’s Wholesale factors do not apply to an override based on the “‘best interest’ justification.” Judge Bruggink stated, in Dyncorp Int’l LLC v. United States, that “[t]he test for evaluating the merits of an agency’s override decision is whether the agency’s determination was arbitrary, capricious, or otherwise not in accordance with law.” Judge Bruggink then “note[d] that the agency in Reilly’s relied on an ‘urgent and compelling’ rationale,” and stated that “[w]e decline to apply [the Reilly’s Wholesale] test. We believe it overstates what is required by the arbitrary and capricious standard particularly in the context of a ‘best interest’ justification.” According to Judge Bruggink, “the ‘best interests’ rationale is, as it sounds, less demanding.”
Subsequently, Judge Bruggink analyzed a protest involving an override based on urgent and compelling circumstances. In Fisher Sand & Gravel Co., Judge Bruggink stated that “[o]ur review, as in any bid protest, is one for rationality and illegality.” Judge Bruggink further stated that “the Reilly factors, although often relied on in the review of override decisions based on urgent and compelling circumstances, are not mandatory legal requirements in every instance.” Nevertheless, Judge Bruggink applied the Reilly’s Wholesale factors when analyzing the agency’s override decision, presumably because the agency’s regulations required the agency to consider the Reilly’s Wholesale factors when overriding a stay on the basis of urgent and compelling circumstances. This suggests that Judge Bruggink’s position on the applicability of the Reilly’s Wholesale factors to override determinations may turn on the rationale used by the agency when overriding the stay.
One other judge, Judge Damich, has analyzed an override without applying the Reilly’s Wholesale factors. Judge Damich did not address why he chose not to utilize the Reilly’s Wholesale factors when analyzing the agency’s override decision.
3. Three Judges Have Concluded That the Reilly’s Wholesale Factors Are Not Mandatory Considerations by the Agency but Provide Useful Guidance When Analyzing an Override Decision.
As discussed below, three judges have stated that, while the Reilly’s Wholesale factors represent useful considerations for analyzing an override decision, the Reilly’s Wholesale factors are not mandatory considerations by an agency.
In PMTech, Inc. v. United States, Judge Bush issued a lengthy opinion examining the role of the Reilly’s Wholesale factors in override protests. Judge Bush stated that “Reilly’s Wholesale has provided excellent guidance to this court, and to the procurement community, in identifying factors that may be relevant to most CICA stay override decisions. As to the precedential weight to be accorded the Reilly’s Wholesale factors, however, the court in this decision must express some reservations.” Judge Bush articulated that the “utility of the” Reilly’s Wholesale factors “may vary from case to case, and until the Federal Circuit provides further guidance in this area, Reilly’s Wholesale provides a standard of review for CICA stay overrides to the extent that the factors identified therein are deemed helpful in deciding the case at hand.”
According to Judge Bush, “some aspects of the Reilly’s Wholesalefactors are founded on this court’s analysis of ‘best interests’ CICA stay overrides, and theReilly’s Wholesale factors do not appear to distinguish between the separate categories of ‘best interests’ and ‘urgent and compelling’ CICA stay overrides.” Judge Bush stated:
To the extent that the Reilly’s Wholesale opinion might be interpreted to identify the relevant factors for both “best interests” as well as “urgent and compelling” CICA stay override decisions, and to disregard any distinction between these two categories of override decisions, such an application of Reilly’s Wholesale does not appear to be supported by the text of CICA.
Judge Bush stated that whether an override was justified on the basis of urgent and compelling circumstances “can be adequately tested against these simply stated but important statutory requirements by applying the four-factor test set forth in State Farm.” Judge Bush explained:
To go further, as Reilly’s Wholesale appears to counsel, and insist that the agency’s written findings answer a rigorous set of questions that spring not from the text of CICA and not from the well-established APA standard of review expressed in State Farm, but from this court’s own jurisprudence in discussing both “best interests” and “urgent and compelling” overrides and from this court’s analysis of CICA’s legislative history, is another matter. Reilly’s Wholesale states that an agency must consider four relevant factors that this court has identified, must sort through these four relevant factors and two irrelevant factors that this court has identified, and must make findings with respect to the relevant factors specified in Reilly’s Wholesale, 73 Fed. Cl. at 711. If this court over-zealously applies the Reilly’s Wholesale factors to a CICA stay override decision, such a review could exceed the narrow, highly deferential, “no rational basis” standard of review set forth in State Farm, Bowman, Alabama Aircraft, Impresa, and Advanced Data Concepts. The court’s focus should be on whether the CICA stay override decision was rational and whether the agency considered relevant factors, not on whether the agency conformed its analysis to a specific framework elaborated by this court.
Additionally, Judge Bush asserted that “[u]pon close examination of CICA’s legislative history, the court has found no mention of a specific factor or factors that should be considered to determine whether” to override a stay based on urgent and compelling circumstances. In CICA’s legislative history, Judge Bush found “mention of one factor that an agency should consider when determining the best interests of the United States,” which provided that “‘the head of the procuring activity should consider potential costs to the government from carrying out relief measures as may be recommended by’” the GAO if the protest is sustained. Thus, although Judge Bush acknowledged the utility of the Reilly’s Wholesale factors, she concluded that “a consideration of the applicable statutes, legislative history and controlling precedent . . . irrevocably directs and focuses the court’s analysis upon the factors set forth in State Farm for its decision on the CICA stay override presented in this case.”
Other judges have reached conclusions similar to Judge Bush’s PMTech conclusion. For example, Judge Smith has acknowledged on three separate occasions the utility of the Reilly’s Wholesale factors but stated that the COFC’s review is governed by the standards set forth in the APA. In each of those three cases, however, Judge Smith analyzed the agency’s override decision under the Reilly’s Wholesale factors. Similarly, Judge Horn has stated that “the undersigned is not bound by the Reilly’s Wholesale factors, but believes the factors are a useful tool to help analyze the Agency’s decision to override the automatic stay based on urgent and compelling circumstances in the context of APA review.”
In sum, prior to the Federal Circuit’s decision in Safeguard, the COFC judges disagreed as to the role of the Reilly’s Wholesale factors in override protests. Some judges found that the Reilly’s Wholesale factors were mandatory considerations while others stated that the factors were useful but not dispositive. A few judges, however, stated that the Reilly’s Wholesale factors should not be considered at all because the factors impose a higher standard of review than that required by the APA.
B. The Federal Circuit’s Decision in Safeguard Has Not Foreclosed Application of the Reilly’s Wholesale Factors to Override Protests.
In Safeguard the Federal Circuit opined, in dicta, that “the Reilly’s factors do not even bind the Claims Court,” but the Reilly’s Wholesale factors will likely continue to be applied in protests challenging override decisions. Indeed, following the Federal Circuit’s issuance of Safeguard in December 2019, two COFC judges have utilized the Reilly’s Wholesale factors in override protests. In STG LLC, Judge Horn stated that the Reilly’s Wholesale factors “are a useful tool” for analyzing an agency’s decision to override a stay, consistent with her position prior to the Federal Circuit’s decision in Safeguard. In Comprehensive Health Services, LLC v. United States, Judge Tapp stated that while the Reilly’s Wholesale factors “are not binding on this Court, the factors are a useful analytical tool in reviewing whether the override was arbitrary and capricious.” These decisions indicate that there will continue to be a split of authority, at least between judges who believe that the Reilly’s Wholesale factors are a useful analytical tool for evaluating an override determination and those who believe that the Reilly’s Wholesale factors should not be applied at all.
As of the writing of this article, no other COFC judge has addressed whether the Reilly’s Wholesale factors should be applied in light of Safeguard. Moreover, it may be a number of years until the Federal Circuit has another opportunity to address how the COFC should analyze bid protests challenging an agency’s override determination. More than twenty years passed, for example, between the Federal Circuit’s determination that the COFC has jurisdiction to adjudicate override protests and its decision in Safeguard.
Additional guidance by the Federal Circuit is unlikely to come quickly, if at all, because of the challenge in obtaining a Federal Circuit decision before the override decision becomes moot. To obtain relief before the CICA stay expires, a protestor must file and litigate an override protest before the COFC, receive an adverse judgment, file an appeal with the Federal Circuit, litigate the appeal, and receive a favorable judgment. Doing all of this within the 100-day period during which a stay remains effective is exceptionally challenging and would require that both the COFC and the Federal Circuit expeditiously resolve the issues in the protest.
Even if the issues in a given protest were to be resolved expeditiously, by the time the protestor were to receive a decision from the Federal Circuit, there likely would be few days left until the CICA stay expires, rendering the appeal moot. Thus, succeeding on an appeal of an override protest may be a pyrrhic victory for the protestor.
For example, the CICA stay at issue in Safeguard expired nearly a year before the Federal Circuit issued its opinion. The Federal Circuit rejected the protestor’s argument that its override protest was not moot because the protest did not involve “a controversy ‘capable of repetition, yet evading review.’” The Federal Circuit stated that, to invoke this exception to the mootness doctrine, the protestor would have to demonstrate a “reasonable likelihood” that it would “submit another unsuccessful bid,” “file a GAO protest,” “suffer another CICA stay override,” and show that the “CICA stay override occurred because the agency was not required to justify its decision in light of the Reilly’s factors.” Given the limited number of override protests litigated annually, it is doubtful that many contractors would be able to make such a showing.
Because it is unlikely that the Federal Circuit will have the opportunity to address the applicability of the Reilly’s Wholesale factors in the near future, parties should be prepared to litigate the applicability of the Reilly’s Wholesale factors to override protests. Given the uncertainty surrounding the role of the Reilly’s Wholesale factors, parties should be familiar with the assigned judge’s previous override decisions, as discussed in Section III.A. These decisions may provide insight into how the judge will apply the Reilly’s Wholesale factors post-Safeguard.
The government and the intervenor likely will urge a broad reading of Safeguard, under which there is no consideration of the Reilly’s Wholesale factors. Protestors, therefore, should be prepared to argue why the override decision is invalid both under the Reilly’s Wholesale factors and the APA standard of review.
For these reasons, the application of the Reilly’s Wholesale factors will continue to be an issue in override protests and outcomes may vary across COFC judges.
IV. The COFC Should Analyze Whether an Agency had a Rational Basis for Overriding a Stay, Not Whether the Agency Considered Every Reilly’s Wholesale Factor.
As discussed below, requiring an agency to consider the Reilly’s Wholesale factors exceeds the deferential standard of review set forth in the APA. For overrides premised on urgent and compelling circumstances, the COFC should analyze whether the agency had a rational basis for concluding that urgent and compelling circumstances prevented the agency from waiting for the GAO to resolve the protest. In these protests, the COFC should use the Reilly’s Wholesale factors as a non-binding guide for a rational override determination. When analyzing an override based on the best interests of the United States, however, the COFC’s focus should be on whether the override had a rational basis, without reference to the Reilly’s Wholesale factors.
A. The Standard of Review Set Forth in the APA
Bid protests, including override protests, are reviewed under the standard set forth in the APA. “[T]he proper standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A): a reviewing court shall set aside the agency action if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.’” When applying this standard, the procurement action may be set aside if “(1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or procedure.” The Federal Circuit has stated that:
Courts have found an agency’s decision to be arbitrary and capricious when the agency “entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or [the decision] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.”
Thus, in taking a procurement action, the agency “must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’”
When reviewing agency decisions, the court may not substitute its judgment for the agency’s judgment. The COFC also may not apply a “heightened” standard of review. In Dell Federal Systems, L.P., for example, the Federal Circuit reversed a decision of the COFC because the COFC applied a more “stringent test” than the standard of review described in the APA.
B. The COFC Should No Longer Require an Agency to Consider the Reilly’s Wholesale Factors.
When analyzing whether an agency’s override decision had a rational basis under the APA, judges should no longer require that the agency’s decision address all of the Reilly’s Wholesale factors.
1. Federal Circuit Precedent Precludes Requiring Agencies to Consider the Reilly’s Wholesale Factors When Overriding Stays.
The Federal Circuit’s opinion in Safeguard appears to preclude the COFC from finding that an agency must consider the Reilly’s Wholesale factors when overriding a stay, as discussed in Section III.A.1. Before the Federal Circuit, Safeguard argued that the COFC erred as a matter of law by failing to require the agency to apply the Reilly’s Wholesale factors in connection with its override determination. The Federal Circuit rejected Safeguard’s argument, stating that “the Reilly’s factors do not even bind the Claims Court . . . let alone comprise an indispensable aspect of agency rational basis.” Additionally, in Safeguard, the Federal Circuit indicated that the validity of an agency’s override determination “turn[s] on” the agency’s “proffered rational basis for a CICA stay override.”
The cases that have held that an agency must address the Reilly’s Wholesale factors when overriding a stay run afoul both of these statements. Requiring that an agency consider the Reilly’s Wholesale factors improperly treats those factors as “an indispensable aspect” of an override decision. As Safeguard demonstrates, a Court can find an override decision rational under the APA’s “arbitrary and capricious” standard even where an agency made that decision without considering the Reilly Wholesale factors. Indeed, in Safeguard, the agency did not consider any of the Reilly’s Wholesale factors, yet the COFC found that the override was not arbitrary and capricious.
Moreover, the Federal Circuit’s statement that the Reilly’s Wholesale factors do not “bind the Claims Court” or “comprise an indispensable aspect of agency rational basis” is consistent with other Federal Circuit decisions which reject COFC-created doctrines. For example, in Dell Federal Systems, the Federal Circuit rejected the COFC’s analysis of an agency’s corrective action using a “heightened standard,” which asked whether the corrective action “narrowly targeted” a procurement defect, rather than asking whether the action had a rational basis and was “rationally related to the procurement defect.” Both Safeguard and Dell Federal Systems illustrate the Federal Circuit’s requirement that the COFC analyze agency action under the APA’s rational basis standard, not judicially created tests, when determining whether that action was arbitrary and capricious.
In light of Safeguard and Dell Federal Systems, the COFC should no longer mandate that agencies consider all of the Reilly’s Wholesale factors in any override decision, regardless of the basis on which it was premised. Instead, the COFC should analyze whether an agency had a rational basis for concluding that urgent and compelling circumstances required overriding a stay or that overriding a stay was in the best interests of the United States.
2. The Reilly’s Wholesale Factors Do Not Always Represent “Important Aspect[s] of the Problem.”
As discussed above, agency action is arbitrary and capricious when an agency fails to consider an important aspect of the problem. Some COFC judges have justified application of the Reilly’s Wholesale factors because the factors “elaborate the ‘important aspect[s] of the problem’ factor . . . [in] the CICA context.”
The COFC, however, “is not free to invent ‘important’ things out of thin air and require the agency to consider them.” The COFC has further explained:
“[A]n ‘important aspect of the problem’ is not simply whatever plaintiffs would like the [agency] to consider.” State of N.C. Bus. Enters. Program v. United States, 110 Fed. Cl. 354, 363 (2013). Instead, “[w]hether an agency has overlooked ‘an important aspect of the problem’ . . . turns on what a relevant substantive statute makes ‘important,’” because “[i]n law, unlike religion or philosophy, there is nothing which is necessarily important or relevant.” Id. (quoting Or. Nat. Res. Council v. Thomas, 92 F.3d 792, 798 (9th Cir. 1996)). Thus, in the bid protest context, “what constitutes an ‘important aspect of the problem’ depends on what the substantive law deems ‘important.’” Id. As this court observed in State of North Carolina, an “important aspect of the problem” must be an aspect deemed “important” by some applicable source of substantive law. 110 Fed. Cl. at 363.
As an initial matter, Judge Allegra did not assert that CICA or any other source of substantive law deemed the Reilly’s Wholesale factors “important.” Judge Allegra explained that the Reilly’s Wholesale factors were his attempt to “distill from the relevant cases a variety of factors that an agency must consider in making an override decision.”
Moreover, CICA contains no discussion of what an agency should or should not consider when overriding a stay. The statute simply identifies the situations in which an agency can override a stay: when there are “urgent and compelling circumstances” that “will not permit waiting for the” GAO’s decision or when “performance of the contract is in the best interests of the United States.”
Certain judges have pointed to the legislative history of CICA as providing support for their position that an agency must consider the Reilly’s Wholesale factors. In enacting CICA, the conferees stated that they believed “that a strong enforcement mechanism is necessary to insure [sic] that the mandate for competition is enforced.” Commentators have explained that “CICA was given teeth in the form of an automatic stay of contract award or automatic suspension of contract performance in the case of post-award protests.” Although the legislative history indicates that an override should only occur under exceptional circumstances, it does not indicate that Congress expected the factors identified in Reilly’s Wholesale to be mandatory considerations for all override decisions.
Regarding the “best interests” basis for overriding a stay, the legislative history explains:
Before notifying the Comptroller General that continued performance of a disputed contract is in the government’s best interest, however, the head of the procuring activity should consider potential costs to the government from carrying out relief measures as may be recommended by the Comptroller General if the protest is subsequently sustained.
The legislative history does not include any similar statement regarding what an agency should consider when overriding a stay based on urgent and compelling circumstances, identifying no “specific factor or factors” applicable to such a decision. The legislative history, therefore, does not support the proposition that an agency must consider the Reilly’s Wholesale factors when overriding a stay based on urgent and compelling circumstances.
In sum, the Reilly’s Wholesale factors are not drawn from a source of substantive law. Neither the plain text of CICA, nor its legislative history, require consideration of the Reilly’s Wholesale factors. As such, the Reilly’s Wholesale factors do not represent “important aspect[s] of the problem,” and the COFC should not require that the Reilly’s Wholesale factors be considered in all override determinations.
3. The Reilly’s Wholesale Factors Provide Guidance for Analyzing Overrides Based on Urgent and Compelling Circumstances, but Not Overrides Based on the Best Interests of the United States.
When analyzing an override based on urgent and compelling circumstances, the COFC should analyze whether the override determination had a rational basis, using the Reilly’s Wholesale factors as guidance for a rational override determination. When analyzing an override based on the best interests of the United States, the COFC need not rely on the Reilly’s Wholesale factors.
i. The Reilly’s Wholesale Factors Reflect Considerations That Typically Would Be Included in a Rational Override Decision Based on Urgent and Compelling Circumstances.
Although the COFC’s ultimate conclusion as to whether an override based on urgent and compelling circumstances was arbitrary and capricious should be based on whether the agency had a rational basis for its override decision, the Reilly’s Wholesale factors exemplify what an agency would consider in most rational override decisions based on urgent and compelling circumstances. Even judges who have found that the Reilly’s Wholesale factors are not mandatory have acknowledged that the Reilly’s Wholesale “may be relevant to most” override protests involving urgent and compelling circumstances.
A rational override decision based on urgent and compelling circumstances would typically involve consideration of whether adverse consequences will necessarily occur if the stay is not overridden. Moreover, whether reasonable alternatives exist to the override is related to whether adverse consequences will necessarily occur if the stay is not overridden. An override decision failing to consider those reasonable alternatives would typically not be upheld as rational. These two considerations specifically address whether urgent and compelling circumstances are present. Likewise, it would be unusual for a rational override decision to forgo consideration of potential costs associated with overriding the stay or the impact of the stay on the procurement system. Because the Reilly’s Wholesale factors are likely relevant to most override decisions based on urgent and compelling circumstances, it would be unreasonable to disregard the Reilly’s Wholesale factors entirely, as was done in some of the decisions discussed in Section III.A.2.
Yet, if the COFC overzealously applies the Reilly’s Wholesale factors, the COFC would exceed the APA’s narrow rational basis standard of review, which likely occurred in at least some of the decisions discussed in Section III.A.1 in which the Court stated that an agency must consider the Reilly’s Wholesale factors. While referring to the Reilly’s Wholesale “factors,” some judges treated the “factors” as required “elements” of a rational override decision, checking to see if all of the “factors” were present and finding decisions that did not include all the “factors” to be arbitrary and capricious. By treating the “factors” as required elements of an override decision, the COFC departed from the APA’s rational basis standard in favor of a test which further required consideration of judicially specified items to determine rationality.
Moreover, all override determinations “are fact specific.” Therefore, the utility of the Reilly’s Wholesale factors varies by case. Mandating detailed consideration of all the Reilly’s Wholesale factors, without regard to the facts of the override or the basis relied upon for the override, ignores the fact-specific nature of override determinations.
Finally, whether an agency should have considered all or some of the Reilly’s Wholesale factors will depend on the facts and circumstances of the override. For example, in Safeguard, the agency “did not explicitly address the impact overriding the CICA stay would have on the procurement system,” yet the COFC still found that the agency had rationally identified urgent and compelling circumstances that did not permit waiting for the GAO to resolve the protest.
Rather than invalidating override determinations where agencies have not strictly adhered to the Reilly’s Wholesale factors, the COFC should examine whether the agency’s analysis rationally explained that urgent and compelling circumstances did not “permit waiting for the decision of the” GAO. The agency’s failure to consider the impact of the override on the procurement system may render the agency’s override decision arbitrary and capricious, but such a conclusion should be based on the entirety of the agency’s proffered rational basis for the override.
The presence of all the Reilly’s Wholesale factors in an agency’s override determination should not be dispositive. The COFC should look to the factors as guidance on what typically would be included in a rational override decision premised on urgent and compelling circumstances. However, the COFC’s conclusion should be based on whether the agency’s decision, as a whole, had a rational basis. By deciding whether the override decision as a whole was rational, the COFC will not exceed the deferential standard of review set forth in the APA, as discussed in Safeguard and Dell Federal Systems.
ii. The Reilly’s Wholesale Factors Should Not Be Used When Analyzing an Override Based on the Best Interests of the United States.
The Reilly’s Wholesale factors originally applied only to “override decision[s] based upon urgent and compelling circumstances.” As application of the Reilly’s Wholesale factors became common practice among COFC judges, some judges began to apply the Reilly’s Wholesale to overrides based on the best interests of the United States as well.
As reflected in 31 U.S.C. § 3553, the “urgent and compelling circumstances” basis and the “best interests of the United States” basis are distinct and independent grounds for overriding a stay. When interpreting 31 U.S.C. § 3553, the COFC “must strive to give effect to every word in the statutory text.” These distinct bases for override decisions should not be treated as if they are the same because the plain language of 31 U.S.C. § 3553 indicates that the override grounds differ.
As certain COFC judges have remarked, “the ‘best interests’ rationale is, as it sounds, less demanding.” This logic reflects the principle that, at least in the post-award context, agencies have flexibility in electing to override a stay. Application of the Reilly’s Wholesale factors to overrides based on the best interests of the United States “overstates what is required by the arbitrary and capricious standard.”
The Reilly’s Wholesale factors specifically focus on considerations related to urgent and compelling circumstances. Whether adverse consequences necessarily will occur if the stay is not overridden and whether reasonable alternatives exist to the override logically relate to whether urgent and compelling circumstances permit overriding the stay. These considerations, however, are not necessarily relevant to overrides based on the best interests of the United States. For example, an override may be in the best interests of the United States even if reasonable alternatives exist to the override.
In short, the “best interests of the United States” basis does not require the presence of urgent and compelling circumstances. The COFC should not apply factors based on urgent and compelling circumstances to override decisions premised on the determination that the override is in the best interests of the United States. Instead, the COFC should analyze the best interests override decision under the APA standard of review without reference to the Reilly’s Wholesale factors. In other words, “[t]here must be some rationale—above and beyond the principle aim originally sought when [the agency] decided to engage bidders in the competitive procurement—that absolves the agency of its obligation to await the GAO’s recommendation.”
Although less demanding than the urgent and compelling basis, a ‘best interests’ override requires justification beyond the superiority of the awarded contract. Prompt performance of awarded contracts is generally considered to be in the United States’ best interest, otherwise it is unlikely that the contract would have been awarded in the first instance. As stated by the COFC, “justification for an automatic stay override mandated by Congress requires something more than showing that the contract’s original purpose serves the United States’ interests.”
Additionally, in light of CICA’s legislative history, the agency also “should consider potential costs to the government from carrying out relief measures as may be recommended by the Comptroller General if the protest is subsequently sustained.” For an override based on the best interests of the United States, this consideration is especially important. When such an override decision is made, the GAO is to “make recommendations . . . without regard to any cost or disruption from terminating, recompeting, or reawarding the contract.” Accordingly, it would be difficult for an agency to rationally conclude that an override is in its best interests without considering the costs that will be incurred if the GAO sustains the underlying protest and recommends corrective action.
The Reilly’s Wholesale factors should not be applied to overrides based on the best interests of the United States. Instead, the COFC should analyze whether an agency had a rational basis for determining that overriding the stay was in the best interests of the United States.
V. Conclusion
The Federal Circuit’s decision in Safeguard indicates that the COFC’s primary focus when analyzing an override determination should be on whether the agency had a rational basis for the decision. In override decisions based on urgent and compelling circumstances, the COFC should use the Reilly’s Wholesale factors as a non-binding guide to a rational override determination. When analyzing an override decision based on the best interests of the United States, the Reilly’s Wholesale factors are largely unimportant to the best interests of the United States and should not be considered.
Because there likely will continue to be a split among COFC judges over whether the Reilly’s Wholesale factors should be considered at all in override determinations, protestors, the Government, and intervenors should be prepared to discuss how the Reilly’s Wholesale factors fit into the override landscape in light of Safeguard. Override disputes will likely explore the interplay between the Reilly’s Wholesale factors and the APA’s rational basis standard of review, with an eye toward bringing more uniformity to COFC analysis of override protests.
