Army Execution Order Not a Procurement Decision Subject to Court of Federal Claims Jurisdiction; U.S. Court of Appeals for the Federal Circuit No. 2017-1082, AgustaWestland America Inc. v. United States

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Government’s appeal of a preliminary injunction blocking the procurement of 16 helicopters via a sole-source procurement is granted, where the lower court erred in reviewing the Army Execution Order that led to the sole-source justification and approval, and where the lower court erred in determining that the justification and approval was arbitrary and capricious.

Acting under the authority of Execution Order 109-14, the Army issued a justification and approval to procure 16 UH-72A Lakota helicopters from Airbus Helicopters Inc. using a sole-source contract. AgustaWestland America Inc. challenged the procurement decision and sought preliminary injunctive relief. The Court of Federal Claims determined that the EO was a procurement decision subject to the court’s jurisdiction and found the EO to violate the Competition in Contracting Act and the Federal Acquisition Regulation.

During the proceedings, COFC supplemented the administrative record after determining it could not conduct effective judicial review on the existing record. Finally, the court determined that the J&A did not support the Army’s decision to award a sole-source contract to Airbus. The court then issued a preliminary injunction against the award.

The government appealed the decision, arguing that the EO was not a procurement decision subject to the court’s jurisdiction. Further, the government challenged the court’s supplementation of the administrative record, and the court’s finding that the J&A was arbitrary and capricious.

The Court of Appeals for the Federal Circuit first addressed whether the EO was in fact “a quintessential procurement decision” subject to the lower court’s jurisdiction. The Federal Circuit noted that to obtain jurisdiction over the EO, the court had to find that the EO initiated a procurement or initiated the process for determining a need for an acquisition.  The Federal Circuit held the EO’s objective included transitioning the entire helicopter training fleet to UH-72As; up to that point, Airbus had previously provided several hundred Lakotas to the Army, leaving a balance of only 16 needed to fulfill the transition. But the EO did not discuss or direct the procurement of the Lakotas. The Federal Circuit held that the EO was not, then, a procurement decision. As a result, the Court of Federal Claims had no jurisdiction to review whether it violated CICA and the FAR.

The Federal Circuit next considered whether the lower court properly supplemented the administrative record to determine whether the Army’s decision to acquire the Lakotas under a sole-source award to Airbus was arbitrary and capricious. The lower court provided cursory statements that it could not conduct effective judicial review without additional materials not included in the administrative record. The Federal Circuit determined, however, that the lower court was required to explain why its review was frustrated by missing evidence. The Federal Circuit determined that the unsupplemented administrative record was sufficient to allow effective judicial review and held that COFC abused its discretion in supplementing the record.

Finally, the Federal Circuit considered whether the lower court properly determined that the government’s award to Airbus was arbitrary and capricious. COFC had determined that the sole-source award to Airbus constituted a new contract rather than a follow-on contract as defined by the FAR, and thus was not subject to the exception allowing sole-source contracts for follow-on work. The Federal Circuit determined that the sole-source award was a follow-on contract because it was a continuation of the procurement of a major system, regardless of whether the contract itself was a new instrument.

COFC also found the J&A insufficient to justify the sole-source award, but the Federal Circuit held that both justifications offered were sufficient and supported by enough evidence that they were not arbitrary and capricious. The Army cited the unrecovered duplication costs that would be required to award a contract to any company other than Airbus, in part because Airbus held the intellectual property rights to Lakota production; for 16 helicopters, the Army found the costs of establishing an entirely new production line with another manufacturer to be far too expensive to justify. Further, the government cited a delay of at least three years to conduct a full and open procurement and get to first article testing, during which time its training fleet would be incomplete. The Federal Circuit determined that these justifications were well-supported and reasonable.

AugustaWestland America, Inc. is represented by Dennis J. Callahan, Neil H. O’Donnell, Jeffrey M. Chiow, and Lucas Taylor Hanback of Rogers, Joseph, O’Donnell. The government is represented by Anthony F. Schiavetti, Franklin E. White, Jr., Robert E. Kirschman, Jr., and Benjamin C. Mize of the Commercial Litigation Branch, Civil Division, United States Department of Justice.

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