Cancellation: A Government Agency’s “Get out of Protest Free” Card?

By David Timm of Fox Rothschild LLP

In the game Monopoly, players can end up in “jail,” where they are prevented from moving on future turns. But some players might have a “get out of jail free” card up their sleeve to avoid being stuck indefinitely. A bid protest can put a government agency into a kind of “jail,” preventing an agency from moving forward with award of a contract. But agencies can use their version of “get out of protest free” card if they take corrective action to cancel a solicitation.

Regardless of the merits of the protest, when a government agency cancels a procurement, the Government Accountability Office (GAO) will dismiss the bid protest as “academic.” In sealed bid procurements, where prices are meant to be hidden to encourage competition, bidders are likely to be frustrated if cancellation takes place after their prices are revealed. But agencies do not have unlimited power to cancel sealed bid procurements. Without a good reason, contractors can challenge the agency’s action by protesting at GAO or the Court of Federal Claims (COFC). There are two key ways (among others) contractors can push back if agencies cancel sealed bid procurements.

The Government’s power to cancel sealed bid procurements comes from Federal Acquisition Regulation (FAR) 14.404. This regulation allows cancellation but forces the agency to follow strict rules. FAR 14.404 exists because sealed bids should not be revealed “unless there is a compelling reason to reject all bids and cancel the invitation.” When bids are revealed and the same services or goods are later solicited, the procurement is compromised because all offerors know each other’s prices.

FAR 14.404 says the government can only cancel “before award but after opening [of bids]. . .” So, our first takeaway: Contractors can protest if the agency tries to cancel after it has already awarded the contract.

The FAR then goes on to discuss ten exceptions to this general rule. For each, the agency has to articulate a “compelling reason” to cancel the procurement after prices have been exposed. For example, an agency can cancel if there are no responsive bids or if there is evidence of collusion between offerors. The tenth reason listed is a “catch-all” where “cancellation is clearly in the public interest.”

If a government agency cancels a sealed bid procurement before award to avoid a bid protest it might claim that a key contract clause is missing by using this “catch-all” public interest excuse. Note that this would be a mistake that the agency itself made in drafting the solicitation. These documents are notoriously complex and lengthy and so it is easy for the agency to find an issue to use as a pretext for canceling and avoiding a bid protest.

But many of these types of errors are automatically fixed by the “Christian Doctrine,” which says that important contract clauses are still considered binding on the contractor even if left out of the solicitation.

That leads to the second takeaway: Contractors can protest if the government tries to cancel because of an omitted mandatory FAR clause.

Typically, the Christian Doctrine is a powerful tool protecting the government’s interests. In this situation, however, it would be critical in challenging cancellation. In one notable case, GAO said that an inadvertent “omission” that was “not prejudicial to bidders,” would not cause the awardee to “lose any rights” and would ultimately be “read into the contract under the [Christian] doctrine.” Linda Vista Indus., Inc., B-214447 (Oct. 2, 1984); See also Gorman-Rupp Co., B-237429 (Jan. 4, 1990).

If you find yourself at a disadvantage after the government agency cancels a sealed bid procurement, you should consider challenging the agency’s “get out of protest free” card. Remember that (1) if the agency has already formally awarded the contract it cannot cancel. Similarly, (2) if the agency claims it is cancelling because it failed to include a mandatory FAR clause, the Christian Doctrine may be the key to a successful legal challenge. There are other effective positions not discussed here if your issue falls into a different camp.

David Timm is a litigation associate in the Washington DC office of Fox Rothschild and a member of the firm’s Federal Government Contracts & Procurement Group. He can be reached at dtimm@foxrothschild.com or 202.794.1198.