Diebold v. U.S., 90-5373
| Decision Date | 30 January 1992 |
| Docket Number | No. 90-5373,90-5373 |
| Citation | 947 F.2d 787 |
| Parties | , 37 Cont.Cas.Fed. (CCH) P 76,208 Daryl A. DIEBOLD; Daton L. Plumblee, Plaintiffs-Appellants, v. UNITED STATES of America; Attorney General of the United States; General Thomas C. Foley; Mike Stone, Secretary; Colbar, Inc., Defendants-Appellees. |
| Court | U.S. Court of Appeals — Sixth Circuit |
Ralph M. Mobley (argued and briefed), Elizabethtown, Ky., for plaintiffs-appellants.
Joseph M. Whittle, U.S. Atty., James H. Barr, Asst. U.S. Atty., Louisville, Ky., Timothy Goblirsch, Ft. Knox, Ky., Miguel A. Escalera, Jr. (briefed), Dept. of Army, Office of the Judge Advocate General, Washington, D.C., Christopher J. O'Brien (argued and briefed), DAJA-LTC, Dept. of Army, Litigation Div., Arlington, Va., Lawrence L. Pedley (briefed), Pedley, Ross, Zielke, Gordinier & Porter, Louisville, Ky., Joel R. Feidelman (briefed), Alan M. Grayson (argued), Richard D. Leiberman, Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C., for defendants-appellees.
Before MERRITT, Chief Judge, JONES, Circuit Judge, and WELLFORD *, Senior Circuit Judge.
This case presents the jurisdictional question whether, under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701(a)(2), 1 a decision by the army to "privatize" or to "contract-out" the operations of its dining halls at Fort Knox is a decision "committed to agency discretion by law." The complaint in this "wrongful privatization" case alleges that the Army miscalculated the comparative costs of in-house versus outside operation of its dining halls and therefore violated statutes and regulations governing the agency's decision to contract with a private company.
The District Court held that it had no jurisdiction because the contracting-out decision at issue was "committed to agency discretion." The Court then dismissed the plaintiffs' case. For the reasons set out below, we reverse the judgment of the District Court on the issue of jurisdiction.
The parties also raised but the District Court did not reach the question whether displaced federal employees have standing to bring a complaint challenging the contracting-out decision. Therefore we do not reach the standing issue or any issue on the merits. We remand to the District Court for further proceedings, including development of the facts and law governing standing for the plaintiffs.
Because of the volume and complexity of statutes, regulations, policies, administrative decisions, and cases discussed below we summarize our conclusions at the outset.
To decide whether this dispute may be heard in federal district court, we begin with the presumption that this privatization decision, an agency action within the meaning of the APA, is reviewable under the Administrative Procedure Act unless we find that the action is "committed to agency discretion by law." 5 U.S.C. § 701(a)(2). Agency action generally is considered committed to agency discretion when there is "no law to apply," S.Doc. No. 248, 79th Cong., 2d Sess. 212 (1946) (hereinafter S.Doc. No. 248), when there are no "standards, definitions, or other grants of power [that] deny or require action ... or confine an agency within limits as required by the Constitution." Id. at 275.
A complex scheme of statutes and regulations governs federal procurement decisions. Underlying all these statutes and regulations is a requirement that agencies acquire goods and services at the lowest possible cost to the taxpayer. For example, Congress has set out the specific policy directive that federal agencies pursue economy and efficiency in making procurement decisions. See Office of Federal Procurement Policy Act, as amended, 41 U.S.C. § 401 et seq. See also the Budget and Accounting Act of 1921, as amended, 31 U.S.C. § 101 et seq. Further, Congress has directed the Department of Defense ("DoD") to contract with the private sector for commercial supplies and services if the private sector can provide the supplies and services at a lower cost than the government can provide the same supplies or services. See 10 U.S.C. § 2462.
Office of Management and Budget ("OMB") Circular A-76 and its accompanying Supplement set out an elaborate, mandatory process for comparing the costs of in-house and private production. It requires an administrative appeals process to adjudicate the claims of aggrieved citizens, a process not unlike the social security appeals process. The Defense Department must follow Circular A-76 in its comparison of costs. See 32 C.F.R. §§ 169 & 169a. See also 48 C.F.R. § 7.3. In its decision whether to provide its own commercial supplies and services or whether to contract with the private sector, the Army must compare costs and choose the least costly alternative. In this regime as a whole, with its directives to procure commercial supplies and services economically and save money for the taxpayer, we find law to apply, standards which confine an agency's action in making the contracting-out decision. Wrongful privatization cases are in principle cases requiring an accounting, and courts have long dealt with disputes that required an accounting of one party or another.
Our view that these statutes and regulations provide law to apply and enable courts to review agency procurement decisions is reinforced by a number of legal developments by courts, Congress, and the Executive agencies that have developed the procurement regulations. After the enactment of the APA, courts found law to apply in procurement cases involving disappointed bidder protests. See, e.g. Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C.Cir.1970). The law to apply in the disappointed bidder cases is precisely the same set of laws and regulations as in disappointed in-house employee cases like this one. The Government Accounting Office ("GAO") review of procurement decisions, including bid protests founded on lack of compliance with Circular A-76, illustrates that the procurement statutes and regulations create law to apply. See, e.g., Matter of: EPD Enterprises, Inc., 69 Comp.Gen. 46 (Oct. 30, 1989). Congress expressly has approved the disappointed bidder cases. See S.Rep. No. 275, 97th Cong., 2d Sess. 22-23, reprinted in 1982 U.S.Code Cong. & Admin.News 11, 32-33. Further, Congress has increased the remedial power of the Claims Court. See 28 U.S.C. § 1491(a)(3). In addition, Congress has reinforced the bid protest function of the GAO while making clear that the GAO's jurisdiction is not to be exclusive of the jurisdiction of federal district courts and the Claims Court. 31 U.S.C. §§ 3551-3556. And Congress increasingly has provided other systems that allow review of the procurement process. See, e.g., 40 U.S.C. § 759(f) (General Services Administration Board of Contract Appeals). Finally, the OMB and the Department of Defense consider the cost comparison process as set out in Circular A-76 to be mandatory and have established an administrative process for the adjudication of contracting-out decisions. All directly affected parties, including federal employees, may bring an appeal under the administrative appeals procedure. See Circular Supplement, Part I, Chapter 2, p I; 32 C.F.R. § 169a.18.
Courts of appeals cases that have held that the contracting-out process is not reviewable are not directly on point. See, e.g., Local 2855, Am. Fed'n of Gov't Employees v. United States, 602 F.2d 574 (3d Cir.1979). These cases dealt with early, less formal, and highly discretionary versions of Circular A-76, prior to the Circular's setting out mandatory criteria and prior to the Circular's promulgation under 41 U.S.C. § 401 et seq. and 31 U.S.C. § 101 et seq. The Supreme Court has not dealt with APA review of a wrongful privatization case. Thus there is no Supreme Court case on point to guide our decision. The Court has, however, narrowly defined the exception, "committed to agency discretion," to include cases involving prosecutorial discretion, Heckler v. Chaney, 470 U.S. 821, 105 S.Ct. 1649, 84 L.Ed.2d 714 (1985), and cases which implicate national security, Webster v. Doe, 486 U.S. 592, 108 S.Ct. 2047, 100 L.Ed.2d 632 (1988). Our case falls outside the parameters of such definitions of nonreviewability.
We conclude that there are standards guiding this agency action and our review of the action. Furthermore, nothing suggests that Congress does not intend judicial review of the Executive branch's exercise of the spending power. Instead, the APA provides a compelling policy decision in favor of judicial review of agency action.
This dispute centers on the question whether the Army will save the money it says it will save by contracting-out the dining hall operation at Fort Knox rather than continuing to operate the dining halls with civilian employees. The plaintiffs are two federal civilian employees formerly employed by the Army as food service workers at Fort Knox. They brought suit against the Army and Colbar, Inc. ("Colbar"), the private contractor awarded the contract, alleging that the Army did not include certain costs it should have included in its calculations of the cost of contracting-out the food service activity, and that if it had included these costs, the cost comparison would have failed to show the ten percent savings required as a justification for the conversion to private contract.
OMB Circular A-76 sets out a mandatory process for Executive agencies to follow when they contract-out commercial activities. Each Executive department periodically reviews its commercial activities to determine whether its own operation is the most economical provider of commercial services and supplies or whether a private contractor could provide those services and supplies more economically. Circular A-76, p 5. An agency conducting such a review develops a...
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