Developments continue surrounding the issue of in-sourcing. Turning first to the developments at the Court of Federal Claims, Judge Horn, recently dismissed an in-sourcing claim after finding that Plaintiff was not an interested party. Triad Logistics Servs. Corp. v. United States, No. 11-43C (Crt. Fed. Cl. Apr. 16, 2011). The Court held that while it has subject matter jurisdiction over in-sourcing claims generally, with regards to the particular in-sourcing claim at issue, the Plaintiff was not an interested party because the contract had already been completed. Accordingly, the Court found that Plaintiff lacked standing and dismissed the case.
To understand the scope of the Triad decision, a brief analysis of the procedural posture presented in the case is required. Plaintiff, Triad Logistics Service Corporation provided vehicle operations and maintenance services to the Air Force. During performance under the third option year, the Air Force informed Triad that it would be in-sourcing the services provided under the contract, and therefore not exercising a fourth option year. Instead, the Air Force modified the contract to extend performance for a brief period, at which time the contract ended by its own terms. Triad initially protested at the Government Accountability Office, which was dismissed on November 24, 2010 for failure to set forth a valid basis of protest.
Triad then filed it’s first protest at the Court of Federal Claims on November 29, 2010, the same day its extended contract ended. At the initial hearing on Triad’s first protest, the Air Force admitted there were errors in the cost calculation comparing the cost of contracting for the services versus performing the services internally. The Court therefore dismissed that complaint to allow the Air Force to perform a recalculation and make a final in-sourcing decision. On December 16, 2010, the Air Force again concluded that it would be less expensive to in-source the services.
Triad filed its second protest at the Court, the one at issue here, on January 14, 2011. The Court dismissed the case, holding that Triad was not an interested party because its contract had ended and government employees had begun performing the contract functions prior to when the second complaint was filed. Therefore, the Court found that Triad no longer possessed the required direct economic interest in a contract to qualify as an interested party. The Court seems to suggest that Triad’s claim may be more akin to an out-sourcing claim, which the Appropriations Acts strongly discourage.
As I discussed in my blog post about the D.C. District Court’s decision in Fisher-Cal Industries, Inc., various courts have been attempting to interpret the Tucker Act to determine whether that Act provides standing for contractors to pursue in-sourcing claims and which court would have jurisdiction. Although it may be tempting to conclude based on the decision in Triad that contractors should not bring their in-sourcing claims to the Court of Federal Claims, the holding in Triad cautions against such a conclusion. The Court stated that although Triad is not an interested party, “[t]he court, however, does not conclude that an incumbent contractor challenging an in-sourcing decision could never satisfy the interested party requirements.” The Court continues by noting that because Triad’s contract had been completed before the second complaint was filed “Triad was in the unfortunate position that it no longer possessed a direct, economic interest in an Air Force contract when it filed suit.” Thus, although the Court found that this Plaintiff lacked standing, the language used in the opinion suggests that a different outcome may have been reached if the procedural posture of the case before the Court had been different.
While the Triad decision adds to the growing consensus that the Court of Federal Claims is the court with subject matter jurisdiction over in-sourcing claims, the decision ultimately leaves us with more questions than answers, such as what exactly is an interested party and what would happen if a contract ends by its own terms during the litigation. Does Triad really limit standing to only contractors with currently ongoing contracts? More case law will be required to flesh out these issues.
The other update I want to alert you to is the 2013 National Defense Authorization Act, which requires Agencies, other than the Department of Defense, to make “publicly available the procedures and methodologies of the agency with respect to decisions to convert a function being performed by a small business concern to performance by a Federal employee, including procedures and methodologies for determining which contracts will be studied for potential conversion; procedures and methodologies by which a contract is evaluated as inherently governmental or as a critical agency function; and procedures and methodologies for estimating and comparing costs.” The NDAA passed in the House of Representatives on May 18, 2012. If this language remains in the NDAA as it moves through Congress, it will be interesting to see what effect, if any, the language has on the jurisdictional arguments at the Court of Federal Claims, perhaps boosting the arguments in favor of standing at the Court. As always, we will continue to monitor this issue as more developments unfold.