FAR 33.104:  Agency Does Not Follow GAO’s recommendation

Court of Federal Claims - Key Excerpts

To be pre-qualified, offerors were required to complete “Certifications Relevant to Public Law 99-399, Statement of Qualifications for Purpose of Section 402 of [the Act]” (“Statement of Qualifications”). AR 2. The Notice of Solicitation stated:

To demonstrate performance of similar construction work for purposes [of the Act], the offeror needs to provide information demonstrating that it has successfully completed in the United States or at a U.S. diplomatic or consular mission a construction contract or subcontract involving work of the same general type and complexity as the solicited project and having a contract or subcontract value of approximately $120 million.The Act Requires DOS to Assess Total Business Volume Cumulatively Over Three Years

(Sections deleted)

Caddell argues that DOS acted arbitrarily and capriciously by pre-qualifying Pernix when Pernix did not meet the total business volume requirement. Pl.’s Mot. at 11-15. Caddell contends that DOS incorrectly interpreted a provision of the Act in assessing Pernix’s total business volume by totaling gross annual receipts over three years on a cumulative basis, instead of evaluating Pernix’s business volume per year for each of three years out of five. Id. at 12-15.

The Act imposes a business volume requirement in defining “a United States person” as an entity that:

with respect to a construction project under subsection (a)(1) [a diplomatic construction or design project valued over $10,000,000], has achieved total business volume equal to or greater than the value of the project being bid in 3 years of the 5-year period before the date specified in subparagraph (C)(i).

22 U.S.C. § 4852(c)(2)(E).

Statutory interpretation starts with the plain language of the text. Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997). If the Court finds the statutory language unambiguous, then that plain language controls the text’s meaning. See Carcieri v. Salazaar, 555 U.S. 379, 387 (2009); Shoshone Indian Tribe of the Wind River Reservation v. United States, 364 F.3d 1339, 1345 (Fed. Cir. 2004). A Court must construe the plain language of a statute “so that ‘no clause, sentence, or word shall be superfluous, void, or insignificant.’” Grunley, 78 Fed. Cl. at 40 (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)).

Here, the provision in question, Section 4852(c)(2)(E), states that a qualifying entity must have “achieved total business volume equal to or greater than the value of the project being bid in 3 years of the 5-year period before [the solicitation date].” This provision directs that the government will measure “total business volume” “value” by aggregating the business volume over a three-year period, not measuring the business volume of each individual year separately. This Court, like the Court in Grunley, deems “total” to be an essential statutory term which cannot be read out or ignored. As stated in Grunley:

The inclusion of the word ‘total’ modifies the term ‘volume’ and informs the reader that the volume in question will be, as plaintiff states, ‘a product of addition.’ Measuring the three years cumulatively gives meaning to the word ‘total’ and avoids a construction that leaves language ‘superfluous, void, or insignificant.’

Id. (footnote omitted) (citing Duncan, 533 U.S. at 174). The Grunley Court derived its definition of total as a “product of addition” from Merriam-Webster’s Collegiate Dictionary (11th ed. 2003). Id. Other dictionary definitions support interpreting total business volume on a cumulative basis. Webster’s Third New International Dictionary of the English Language provides a definition of total as “a result of addition” and lists as synonyms “aggregate,” “sum,” “column,” and “cumulative.” 2414 (2002). The American Heritage Dictionary of the English Language defines total as “[a]n amount obtained by addition; a sum.” 1892 (3d ed. 1992).

An interpretation that the requirement is cumulative squares with the plain text of the statute by avoiding either removing the word “total” from the provision or inserting the word “separate” or “individual” before “years.” Indeed, there is no countervailing language requiring the Government, in measuring the value of “total business volume,” to isolate three individual years and require that receipts from each single year meet a volume approaching the overall project value. Connecticut Nat. Bank v. Germain, 503 U.S. 249, 253-54 (1982) (“[C]ourts must presume that a legislature says in a statute what it means and means in a statute what it says there.”); SEC v. Zahareas, 272 F.3d 1102, 1106-07 (8th Cir. 2002) (“Courts are obligated to refrain from embellishing statutes by inserting language that Congress has opted to omit.”) (alteration and citations omitted).

GAO’s articulated rationale for reading the total business volume as per year rather than cumulative is predicated on a presumption that it would be wrong to permit “a very large business volume in one year and zero in the other two” and thus necessary to require a “steady volume of one-third the value of the project” per year. Caddell, B-298949.2, 2007 CPD ¶ 119 at 11. But this gloss on the statutory language injects requirements nowhere found in the statute that receipts had to be evenly divided among the three years and meet the total business volume in each of three years. In contrast, the definition of total connotes adding up the receipts over a three-year period no matter what the discrete gross receipts in those individual years might be. The language permitting totaling gross receipts in any three years of the five preceding the solicitation indicates that it matters not what three years an offeror chooses to identify. Nor does the statute address what the gross receipts in each of those three years individually had to be – so long as they “totaled” at least $160 million.

An interpretation that the total business volume requirement is cumulative is consistent with the purpose of the Act – which sets forth requirements for construction projects that span multiple years. See BASR P’ship v. United States, 795 F.3d 1338, 1343 (Fed. Cir. 2015) (“[W]e cannot determine the meaning of the statutory language without examining that language in light of its place in the statutory scheme.”). The Act addresses the building of new embassy compounds, which are “known to be multi-year projects.” Grunley, 78 Fed. Cl. at 41. Here, the project is scheduled to be completed in 33 months, just shy of three years, making the total business volume requirement, if read cumulatively, consistent with the length of the project. AR 134. In contrast, imposing a more rigorous per-year requirement for meeting business volume would force a prospective offeror to have completed triple the volume of the project’s estimated value in a three-year period in order to prequalify. This reading would impose an unduly onerous qualification requirement and yield less competition.

As the Court in Grunley observed:

The cumulative three-year requirement does not contradict the stated purpose of ensuring that an offeror has performed projects of similar magnitude, cost, and type. The projects being bid on are known to be multi-year projects. Both the DOS and the offeror knew that these projects are completed over a period of multiple years. Offerors submit proposals that assume that the total cost will be spread across several years. This fits hand in hand with the three-year cumulative business volume requirement. Congress created a system whereby offerors display their capability to perform multi-year projects by showing their total business volume over three years out of the previous five.

78 Fed. Cl. at 41.

Caddell places undue reliance on DOS’ regulations defining “total business volume” as “the U.S. dollar value of the gross income or receipts reported by the prospective bidder/offeror on its annual federal income tax returns.” Pl.’s Reply 15; 48 C.F.R. § 652.236-72 (emphasis added). Caddell seizes on the fact that DOS is looking to “annual” income tax returns as the proper reporting device to reflect gross receipts, to reach an unwarranted conclusion that individual yearly business volume must be the measure of the total business volume requirement. Pl.’s Reply at 15. This attempt to imbue the word “annual” with undue significance ignores the fact that “annual” read in the context of the regulation merely indicates the type of income tax returns to be referenced. See id. at 16. In contrast to Caddell’s strained interpretation of “annual,” the regulation’s express designation of annual tax “returns” in the plural refers to multiple years of “annual” tax receipts, not just a single year. 48 C.F.R. § 652.236-72.

Because the unambiguous meaning of the statute controls, it is not necessary to consider legislative history. Connecticut Nat’l Bank, 503 U.S. at 254. Nonetheless, the legislative history here is consistent with an interpretation that the total business volume requirement is to be measured over three years. Congress was well aware that new embassy compound construction requires multiple years to complete.8 H.R. Rep. No. 99-494, at 17 (1986); S. Rep. No. 99-304, at 15 (1986). The House Report specifies that an offeror’s prior business volume in three years had to “be at least equal to the value of the project being bid,” stating:

The firm must have achieved a total business volume in 3 of the previous 5 years at least equal to the value of the project being bid. The previous two requirements will help ensure that a firm is technically capable to carry out a given project.

Id., as reprinted in 1986 U.S.C.C.A.N. 1865, 1883 (emphasis added). Here, for purposes of assessing whether an offeror’s past total business volume is “at least equal to the value of the project being bid,” an offeror’s “total business volume” must be aggregated over three years so as to be meaningfully compared to the project’s overall value, which here spans 33 months. See id.

In sum, based upon the clear language of the Act, DOS acted reasonably when it pre-qualified Pernix by assessing Pernix’s total business volume for three years on a cumulative basis.

DOS Rationally Declined to Implement GAO’s Recommendation

Plaintiff claims DOS erred in not following GAO’s recommendation and in failing to articulate a rational basis for disregarding GAO’s recommendation. Pl.’s Mot. at 28-29. This Court recognizes the long-standing expertise of GAO in the bid protest arena and accords its decisions due regard. Integrated Bus. Sols., Inc. v. United States, 58 Fed. Cl. 420, n.7 (2003); see The Centech Grp. v. United States, 78 Fed. Cl. 496, 506-07 (2007). However, it is well established that GAO recommendations do not bind agencies. Kingdomware Techs., Inc. v. United States, 754 F.3d 923, 929 (Fed. Cir. 2014) (citing Honeywell, 870 F.2d at 647-648). The Federal Acquisition Regulation contemplates that agencies will not always follow GAO recommendations.9 See AR 387-389; see also Turner Constr. Co., Inc. v. United States, 94 Fed. Cl. 561, 571-73 (2010) (finding an agency acted irrationally in following a GAO recommendation), aff’d 645 F.3d 1377 (Fed. Cir. 2011); Sys. Application & Techs., Inc. v. United States, 100 Fed. Cl. 687, 711 (finding an agency’s decision to follow corrective action proposed by GAO in an email to be irrational) aff’d 691 F.3d 1374 (Fed. Cir. 2012).

Here, DOS had ample reason to interpret the Act in the manner it did and ample reason to opt not to follow GAO’s recommendation. DOS explained:

The Department of State has never previously declined to implement GAO’s recommendations and the Department understands that abiding by GAO bid protests with which we disagree is essential to the functioning of the bid protest system. In [Grunley], however, we attempted to follow GAO’s interpretation of the statute only to be told by the Court of Federal Claims that our long-standing administrative interpretation was correct and that GAO’s ruling was arbitrary and capricious. . . . Unless the law is changed or repealed, bid protests will likely continue until the issue is decided by the Court of Appeals for the Federal Circuit or possibly the U.S. Supreme Court.

AR 388-89. Given the conflict on the statutory interpretation issue in the two bid protest fora, the agency faced a dilemma – no matter which forum it followed, it would be departing from the other’s ruling. The rationality vel non of an agency’s decision to follow either a trial court decision or a GAO decision depends on the reasoning articulated by the tribunal. Honeywell Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir. 1989) (“[A] procurement agency’s decision to follow the Comptroller General’s recommendation, even though that recommendation differed from the contracting officer’s initial decision, was proper unless the Comptroller General’s decision was irrational.”). In departing from GAO’s ruling here, the agency relied upon a Court of Federal Claims decision on point and returned to its long-standing interpretation of the Act. AR 387-89; see Grunely, 78 Fed. Cl. at 38. In staking out its statutory interpretation, the agency reasonably construed the total business volume requirement both in the context of the statute as a whole, and in the context of the requirements for this 33-month project. As explained above, this Court finds the agency’s interpretation not only to be reasonable, but also to be legally correct. So too, DOS’ Notification to GAO set forth sufficient documentation explaining its reasoning for not adopting GAO’ recommendation based on DOS’ own interpretation of the Act as well as on its reasonable reliance on Grunley. AR 387-89.  (Caddell Construction Company v. U. S. and Pernix Group, Inc., No. 15-645C, October 2, 2015)  (pdf)

Court of Federal Claims - Listing of Decisions

For the Government For the Protester
Caddell Construction Company v. U. S. and Pernix Group, Inc., No. 15-645C, October 2, 2015  (pdf)  


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