An agency ordinarily enjoys very broad discretion in its procurement-related decisions. This includes whether an agency will award a contract or, instead, cancel a procurement.

Broad as this discretion is, however, an agency does not have carte blanche to cancel a procurement on a whim. As a recent Court of Federal Claims decision shows, an agency must support its decision with sufficient information, lest the cancellation decision itself be successfully protested.

The factual and procedural histories in FMS Investment Corporation v. United States, No. 18-862C et al. (Fed. Cl. Sept. 14, 2018) are tortured. But for purposes of this post, it’s sufficient to say that in 2015, the Department of Education issued a solicitation for student loan collection services. After an initial award, some twenty-two companies protested at GAO. In response, the agency decided to take a voluntary corrective action. In response, one of the protesters reasserted its protest at the Court of Federal Claims.

In response to the COFC protest, DoE again decided to take corrective action. It terminated the awarded contracts, issued a revised solicitation, and then made two new awards. In January 2018, twenty disappointed offerors again filed bid protests relating to these awards.

In March 2018, DoE again cancelled its solicitation. Doing so, it announced a new “vision” to utilize “enhanced servicers” to administer student debt. As a result of this new vision, DoE said that it no longer needed the services of private collection agencies (like the protesters). It therefore asked the Court to dismiss the bid protests filed by those agencies.

Unsurprisingly, these agencies challenged DoE’s decision to cancel the solicitation, arguing that it was arbitrary and capricious.

Reviewing the “scant” administrative record (totaling only 33 pages) provided by the agency in support of its cancellation decision, the Court agreed that DoE’s proposed cancellation was arbitrary. Doing so, it noted that the decision itself was largely unsupported by any reasoned analysis. The Court found that the record “is missing critical information about the enhanced servicer program,” including a plan or timeline for implementing that program, an overview of what its request for proposals might look like under that program, a source (or anticipated amount) of funding, or even estimates of the defaulted loan volumes and loan processing capacity.

According to the Court, DoE’s decision to cancel the solicitation and instead transition to enhanced servicers is “a significant policy change.” Its underlying documentation for that change, however, was nearly non-existent. DoE “needs to provide a ‘reasoned analysis’ for the policy change.” The record presented by DoE failed to provide this analysis, so the Court found the proposed cancellation arbitrary.

Although FMS Investment shows that an agency must support a cancellation decision with adequate justification, it might ultimately be for naught. That is, although the Court set aside the solicitation cancellation, the opinion did not permanently prohibit DoE from pressing ahead with its planned action. Quite the opposite: the Court noted that “[r]esurrecting the solicitation . . . will not prevent [the Department] from continuing to develop its enhanced servicer program.” As I read it, therefore, the Court simply found that the “scant” record did not adequately support the cancellation; it did not, however, prohibit DoE from continuing to develop the record and then pressing ahead with its planned cancellation at a later date.

In any event, FMS is important because it shows that an agency’s conduct in even the most fundamental procurement decisions isn’t necessarily free from review. In some instances, an agency’s decision to cancel a solicitation in response to a protest might be so unsupported or illogical so as to be arbitrary.

View the full article