Those following this blog likely are aware of recent COFC bid protest decisions on the subject of insourcing. Most recently in September, we reported on the COFC’s Elmendorf II decision, where Judge Bruggink held that a contractor had lost its standing to protest after its contract ended and the government commenced performance of insourced work. Now, in Dellew Corp. v. United States, — Fed. Cl. –, No. 12-627C (Dec. 20, 2012), Judge Christine Miller finds that the contractor has standing to protest the agency’s insourcing decision, but ultimately holds in favor of the United States in denying the contractor’s request for injunctive relief.
Here, the agency terminated the contract during the middle of an option period because the agency decided to insource the work. One week prior to the termination becoming effective, the contractor filed a protest before the COFC. The contractor argued that the agency’s cost-comparison analysis related to the insourcing decision was flawed. (Notably, the contractor submitted a FOIA request to obtain important information about the agency’s insourcing decision, and had a separate battle regarding this issue.)
Starting with an excellent summary of the relevant statutory and regulatory history, Judge Miller found that the COFC had subject matter jurisdiction over the dispute. Citing Distributed Solutions, she determined that the “Air Force’s decision to in-source therefore involved a ‘process for determining a need for property or services’ and was made ‘in connection with a procurement or proposed procurement.’” Further, the contractor was an interested party because “[a]bsent the Air Force’s decision to in-source the Contract, [the contractor] likely would continue to provide . . . services for the Air Force in the future.” The contractor was an “’actual or prospective bidder or offeror’ with a ‘direct economic interest in the procurement or proposed procurement.’”
Unlike many of the prior COFC insourcing bid protest decisions – which ended on the question of standing – Judge Miller went on to analyze the contractor’s request for injunctive relief. Although she determined that the contractor did not demonstrate that the agency’s “decision to in-source based upon the 2010 cost comparison resulted in a clear and prejudicial violation of law or lacked a rational basis,” she noted that the contractor’s “claim for the opportunity to compete would have constituted irreparable harm.” Interestingly, she also noted that “[a]lthough the court could not order reinstatement [of the contract for the remainder the contract term], it could have enjoined the Air Force from proceeding with the in-sourcing during the balance of the option period.” Under the balancing test for injunctive relief, Judge Miller ultimately determined that injunctive relief should not be awarded under these facts.
Although Judge Miller’s opinion offers hope for other contractors faced with challenging any agency’s insourcing issue, it demonstrates the difficultly of prevailing and fashioning a remedy worth fighting for. Regardless of whether the United States falls over the fiscal cliff, all indications point to the fact that insourcing will continue to be on the rise, so we will continue to monitor these developments.