Establishing Abuse of Discretion
March 2, 2006
Presented by:
Richard L. Hanson
Mark G. Jackson
Introduction
 Claim frequently made, infrequently won
 Frequency of claim likely to increase
 Court, board decisions are inconsistent and
misleading
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Why so little success?
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Why so little success?
Keco Industries, Inc. v. United States,
203 Ct. Cl. 566 (1974)
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Keco Industries—Background
 Post-award bid protest alleging arbitrary and
capricious decision
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Keco Industries—Background
 Post-award bid protest alleging arbitrary and
capricious decision
 The “Keco factors”
 Subjective bad faith depriving bidders of fair
consideration
 No reasonable basis for the decision
 Degree of proof necessary is related to the amount of
discretion available on the issue
 Violation of statute or regulation may provide a basis
for recovery
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
“The burden of proving bad faith by the Government is a very onerous
one and for an action or an inaction of the Government to constitute bad
faith or abuse of discretion, some specific intent to injure the other party
or actions motivated by malice alone must be proven to overcome the
presumption that public officials act in good faith in the discharge of their
duties.”
Coates Indus. Piping, Inc., VABCA No. 5412, 99-2 B.C.A. ¶ 30, 479
“Not far removed from the bad faith test is the second factor, proof that
there was "no reasonable basis" for the administrative decision. Action by
the Government which has no reasonable basis, the court noted, is often
equated with conduct motivated by subjective bad faith.”
Burroughs Corp. v. US, 617 F.2d 590 (Ct. Cl. 1980)
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
 Not a helpful analytical tool
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
 Not a helpful analytical tool
“Under [the implied contract] theory, the standard of review was far
narrower than district court review under the APA….”
Impressa Construzioni Geom. Domenico Garufi v. US, 238 F.3d
1324 (Fed. Cir. 2001)
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
 Not a helpful analytical tool
 Doesn’t apply
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
 Not a helpful analytical tool
 Doesn’t apply
“In any event, cases such as Keco and Trilon are based on the
implied contract theory of recovery and do not govern APA review of
contracting officer decisions.”
Impresa Construzioni, 238 F.3d 1324 (Fed. Cir. 2001)
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Keco Industries—The Problems
 No Longer Applicable Even for CoFC Bid
Protests
 ADRA Change to More Liberal APA Standards
Arbitrary, Capricious, Abuse of Discretion
5 U.S.C. § 706
Information Technology v. U.S., 316 F.3d 1312
AFGE v. U.S., 258 F.3d 1294
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Keco Industries—The Problems
 Injects “bad faith” into the discussion
 Not a helpful analytical tool
 Doesn’t apply—but see
“In deciding the abuse of discretion issue, the Board properly
considered
(1) evidence of whether the government official acted with subjective
bad faith;
(2) whether the official had a reasonable, contract-related basis for
his decision;
(3) the amount of discretion given to the official; and
(4) whether the official violated a statute or regulation.”
Campbell Plastics Eng’g & Mfg., Inc. v. US, 389 F.3d 1243 (Fed. Cir.
2004)
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Discretionary Decision Analysis
 Did the CO have authority to exercise
discretion?
 Did the CO make a decision?
 Did the CO consider the relevant factors?
 Is the decision irrational or does it involve the
violation of a statute or regulation?
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Discretionary Decision Analysis—Authority
 Authority to decide ≠ authority to exercise
discretion
 Mandatory vs. precatory vs. permissive
 Cole’s Constr., Inc., ENG BCA No. 6074,
94-3 B.C.A. ¶ 26,995
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Discretionary Decision Analysis—
Decision by CO
 “Government” vs. “Contracting Officer”
 Abdication theory
 Recently revisited by COFC
 Impresa Construzioni, 52 Fed. Cl. 421 (2002)
 CEMS, Inc. v. US, 65 Fed. Cl. 473 (2005)
 OTI America, Inc. v. US, 68 Fed. Cl. 646 (2005)
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Discretionary Decision Analysis—
Relevant Factors
 Depends on subject matter
 Required by regulation, e.g. FAR 49.402-3
 Provided by decision,
e.g. Balboa Ins. Co. v. US,
775 F.2d 1158 (Fed. Cir. 1985)
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Discretionary Decision Analysis—
Reasonableness
 Not a “difference of opinion”
 Objective analysis
 The more discretion afforded, the greater the
range of “reasonable” outcomes
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Conclusion
 Don’t assume discretion exists
 Ensure decision is made
 Be creative in the search for and identification of
relevant factors
 Identify limitations on range of discretion
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Questions?
Next Webcast Presentation:
Beyond Mediation and Arbitration:
How to Effectively Use ADR in Government Contracts Disputes
Thank you!
Please contact us anytime
with additional questions.
Richard Hanson
richardh@prestongates.com
Mark Jackson
mjackson@prestongates.com
Conducting ADR with the federal government presents its own unique
challenges and opportunities, including the opportunity to use the full range of
ADR techniques. This webcast will cover the wide variety of ADR tools
available and help you select and apply the right one to resolve contract
disputes with the federal government.
April 5, 2006
12:00 p.m. - 1:30 p.m. Eastern
9:00 a.m. - 10:30 a.m. Pacific
Visit www.govcontractslitigation.com to register.