Bid Protests for Government Property Sales? Maybe . . . Sort of

When a bidder in a government real estate property auction feels in some way the victim of unfair or improper treatment by the government is there a remedy available? And by remedy, I mean some formal process that will subject the government agency’s action to an independent review. If you ask the General Services Administration (the seller of most surplus federal property), they will say there is no remedy.   But in my view, that is not quite the case.

If you were selling to the government rather than trying to buy something from the government, you would have access to a remedy called a bid protest. A bid protest is also called a pre-award dispute. Basically, the idea is that bidders have a remedy if there has been some failure on the part of the government to follow its own rules for buying goods or services. Other than getting the agency to take another look (i.e., an agency level protest), you could go to the Government Accountability Office or the US Court of Federal Claims, either of which might provide various types of relief to ameliorate problems with the procurement. Does a frustrated purchaser of federal real estate have the same option?

This was dealt with at some length in the case of Resource Conservation Group (RCG) which involved the unlikely circumstance of the US Naval Academy dairy. In 1910, several midshipmen came down with typhoid fever which was traced to a local milk distributor. So Congress had the Naval Academy establish and operate a dairy on land the Naval Academy purchased in Gambrills, Maryland, fifteen miles from the Naval Academy. In the 1990’s, the Naval Academy determined not surprisingly that it would be less expensive to purchase milk commercially. The dairy farm remained in Navy hands since Congress required that the “rural and agricultural nature” of the land be maintained, but was leased out to a milk producer.

In 2005, the Navy solicited proposals for a new lease. The bidding process was still going on in February, 2007, when interested bidders including RCG toured the property. With the Navy’s written permission and understanding, RCG came a second time to survey and specifically to test the area for the presence of sand and gravel. From this survey and testing, RCG prepared a site analysis, designed mining plans for the property, and submitted a timely proposal to lease the property in order to mine it for sand and gravel. The Navy then rejected the proposal because the Navy concluded that mining of sand and gravel was not legally permitted.

RCG responded by filing a bid protest with the Government Accountability Office (GAO), which is authorized to decide bid protests concerning an alleged violation of a procurement statute or regulation. GAO’s statutory authority defines a “protest” to include objections to a solicitation for the “procurement of property or services.” (31 U.S.C. §§ 3551-56) GAO dismissed the protest for lack of jurisdiction since a solicitation of offers to lease of government-owned land is not a “procurement of property or services by a federal agency.”

About a year later, RCG went to the US Court of Federal Claims seeking recovery of bid preparation costs and fees in the amount of $500,000 because the Navy failed to advise RCG in a timely fashion that the Navy considered RCG’s plans for the property to be illegal. Initially, the Court of Federal Claims dismissed the suit for lack of jurisdiction. So it looked like there was no remedy for the frustrated bidder on this solicitation for lease of federal land. This all changed with an appeal to the Court of Appeals for the Federal Circuit which reversed the lower Court’s decision.

The Court of Appeals’ opinion (Resource Conservation Grp v. US, 597 F.3d 1238 (Fed. Cir. 2010)) is central to our question, but first we have to get a bit technical and historical. The federal government cannot be sued unless, by federal statute, it consents to be sued. This is sovereign immunity, part of our English common law legacy. It became obvious early on in the history of the Republic that if the government wanted willing vendors for needed goods and services, there had to be a reasonable contract dispute resolution forum. Initially, contract claims had to be submitted to Congress for resolution. When this process become burdensome, the Court of Claims was created in 1855 to adjudicate contract claims. In 1887, the Tucker Act made the Court of Claims the primary forum for money claims against the federal government. The Court of Claims, after various name changes and other modifications, became today’s Court of Federal Claims.

Included in the Tucker Act is the jurisdiction to render judgment on claims against the federal government founded “upon any express or implied contract with the United States.” (28 U.S.C. 1491) Up until 1996, this Tucker Act jurisdictional grant was read to authorize suits by disappointed bidders, i.e., bid protests, challenging contract awards based on alleged improprieties in the procurement process. The recognized basis for these bid protests was the bidder’s assertion of a breach of an implied-in-fact contract to have the involved bids fairly and honestly considered.

In 1996, passage of the Administrative Dispute Resolution Act (ADRA) consolidated bid protest jurisdiction (which the Court had previously shared with federal district courts) in the Court of Federal Claims by enacting specific language that granted the Court jurisdiction over all bid protests “in connection with a procurement or a proposed procurement.” (28 U.S.C. 1491(b)(1)) The preexisting Tucker Act language (now in section 1491(a)(1)) was unchanged. RCG argued that the Court had jurisdiction under both subsections of section 1491.

So, two questions came up in the RDG case. The first was whether the addition of the ADRA language implied a repeal of the earlier, implied-in-fact contract breach basis for bid protests from section 1491(a)(1). The second was whether the word “procurement” could include a solicitation for leasing government property. If “procurement” included solicitations for leasing government property, then the Court of Federal Claims would have jurisdiction over RDG’s case under the ADRA language in section 1491(b)(1).

The Court of Appeals agreed with the Court of Federal Claims that “procurement” would not include a solicitation for leasing federal property. The term wasn’t defined in ADRA, but was defined in related federal statutes which defined “procurement” as “the process of acquiring property or services.” (41 U.S.C. § 403(2)). References to other statutes and the general usage of the word (including a reference to Black’s Law Dictionary) convinced the Court of Appeals that “procurement” did not include leasing out federal property. Thus the ADRA language from section 1491(b)(1) did not provide a basis for a bid protest of a solicitation for leasing federal property. It seems likely that the same reasoning would be applied to a solicitation for the sale of real estate.

As for the implied-in-fact contract breach claim under section 1491(a)(1), the Court of Federal Claims had concluded that that type of bid protest jurisdiction was repealed by implication and replaced by the ADRA language. Referring to the legislative history, the Court of Appeals concluded that ADRA did not modify the implied-in-fact contract breach jurisdiction under section 1491(a)(1). The Court of Appeals noted that before ADRA, the Court of Federal Claims had exercised jurisdiction over solicitations for the sale of government property just as it did in the procurement area, and that there was nothing in ADRA or its legislative history to indicate that Congress intended to change that.

So where does that leave the bidder who finds itself the recipient of unfair treatment by the government real estate seller? The RCG case involved a lease of federal property, not a sale. Prior cases involved sale of lumber from federal lands or concessions to run businesses on federal property. At this point, I have not found reported cases that deal specifically with solicitations for the sale of federal real estate, but the logic of the the RDG case and the timber sale cases would seem to logically extend to real estate sales.

Bidders on a solicitation for sale of federal real estate cannot go either to the GAO or the Court of Federal Claims in the way available to bidders on solicitation for goods or services for use by the government. However, they could go to the Court of Federal Claims for breach of the implied-in-fact contract to have the bids fairly and honestly considered. It should be noted that the only remedy the Court can award for this law suit is money damages, e.g., bid and proposal costs similar to those RCG sought. Also, it is not a simple task to show that the government acted in bad faith or unfairly or illegally. That is a whole subject itself that I will have to address in the near future. The challenge in showing that a bid was not fairly and honestly considered may well be the reason we have not seen cases specifically challenging real estate sales. Not wanting to annoy a very powerful seller may also be a factor, as it is to some extent in procurement bid protests. That said, there is at least some place to go to argue for relief from unfair treatment in the sale of government property.

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