Establishing Abuse of Discretion

1. Establishing Abuse of Discretion March 2, 2006 Presented by: Richard L. HansonMark G. Jackson

2. Introduction • Claim frequently made, infrequently won • Frequency of claim likely to increase • Court, board decisions are inconsistent and misleading

3. Why so little success?

4. Why so little success? Keco Industries, Inc. v. United States, 203 Ct. Cl. 566 (1974)

5. Keco Industries—Background • Post-award bid protest alleging arbitrary and capricious decision

6. Keco Industries—Background • Post-award bid protest alleging arbitrary and capricious decision • The “Keco factors” • Subjective bad faith depriving bidders of fair consideration • No reasonable basis for the decision • Degree of proof necessary is related to the amount of discretion available on the issue • Violation of statute or regulation may provide a basis for recovery

7. Keco Industries—The Problems • Injects “bad faith” into the discussion

8. Keco Industries—The Problems • Injects “bad faith” into the discussion“The burden of proving bad faith by the Government is a very onerous one and for an action or an inaction of the Government to constitute bad faith or abuse of discretion, some specific intent to injure the other party or actions motivated by malice alone must be proven to overcome the presumption that public officials act in good faith in the discharge of their duties.”Coates Indus. Piping, Inc., VABCA No. 5412, 99-2 B.C.A. ¶ 30, 479“Not far removed from the bad faith test is the second factor, proof that there was "no reasonable basis" for the administrative decision. Action by the Government which has no reasonable basis, the court noted, is often equated with conduct motivated by subjective bad faith.”Burroughs Corp. v. US, 617 F.2d 590 (Ct. Cl. 1980)

9. Keco Industries—The Problems • Injects “bad faith” into the discussion • Not a helpful analytical tool

10. Keco Industries—The Problems • Injects “bad faith” into the discussion • Not a helpful analytical tool“Under [the implied contract] theory, the standard of review was far narrower than district court review under the APA….”Impressa Construzioni Geom. Domenico Garufi v. US, 238 F.3d 1324 (Fed. Cir. 2001)

11. Keco Industries—The Problems • Injects “bad faith” into the discussion • Not a helpful analytical tool • Doesn’t apply

12. Keco Industries—The Problems • Injects “bad faith” into the discussion • Not a helpful analytical tool • Doesn’t apply“In any event, cases such as Keco and Trilon are based on the implied contract theory of recovery and do not govern APA review of contracting officer decisions.” Impresa Construzioni, 238 F.3d 1324 (Fed. Cir. 2001)

13. Keco Industries—The Problems • No Longer Applicable Even for CoFC Bid Protests • ADRA Change to More Liberal APA Standards Arbitrary, Capricious, Abuse of Discretion 5 U.S.C. § 706 Information Technology v. U.S., 316 F.3d 1312 AFGE v. U.S., 258 F.3d 1294

14. Keco Industries—The Problems • Injects “bad faith” into the discussion • Not a helpful analytical tool • Doesn’t apply—but see“In deciding the abuse of discretion issue, the Board properly considered (1) evidence of whether the government official acted with subjective bad faith; (2) whether the official had a reasonable, contract-related basis for his decision; (3) the amount of discretion given to the official; and (4) whether the official violated a statute or regulation.” Campbell Plastics Eng’g & Mfg., Inc. v. US, 389 F.3d 1243 (Fed. Cir. 2004)

15. Discretionary Decision Analysis • Did the CO have authority to exercise discretion? • Did the CO make a decision? • Did the CO consider the relevant factors? • Is the decision irrational or does it involve the violation of a statute or regulation?

16. Discretionary Decision Analysis—Authority • Authority to decide ≠ authority to exercise discretion • Mandatory vs. precatory vs. permissive • Cole’s Constr., Inc., ENG BCA No. 6074, 94-3 B.C.A. ¶ 26,995

17. Discretionary Decision Analysis—Decision by CO • “Government” vs. “Contracting Officer” • Abdication theory • Recently revisited by COFC • Impresa Construzioni, 52 Fed. Cl. 421 (2002) • CEMS, Inc. v. US, 65 Fed. Cl. 473 (2005) • OTI America, Inc. v. US, 68 Fed. Cl. 646 (2005)

18. Discretionary Decision Analysis—Relevant Factors • Depends on subject matter • Required by regulation, e.g. FAR 49.402-3 • Provided by decision, e.g.Balboa Ins. Co. v. US, 775 F.2d 1158 (Fed. Cir. 1985)

19. Discretionary Decision Analysis— Reasonableness • Not a “difference of opinion” • Objective analysis • The more discretion afforded, the greater the range of “reasonable” outcomes

20. Conclusion • Don’t assume discretion exists • Ensure decision is made • Be creative in the search for and identification of relevant factors • Identify limitations on range of discretion

21. Questions? Next Webcast Presentation: Beyond Mediation and Arbitration: How to Effectively Use ADR in Government Contracts Disputes Conducting ADR with the federal government presents its own unique challenges and opportunities, including the opportunity to use the full range of ADR techniques. This webcast will cover the wide variety of ADR tools available and help you select and apply the right one to resolve contract disputes with the federal government. April 5, 200612:00 p.m. - 1:30 p.m. Eastern9:00 a.m. - 10:30 a.m. Pacific Visit www.govcontractslitigation.com to register. Thank you! Please contact us anytime with additional questions. Richard Hansonrichardh@prestongates.com Mark Jacksonmjackson@prestongates.com