Transactive Corp. v. U.S.
| Decision Date | 13 August 1996 |
| Docket Number | No. 95-5312,95-5312 |
| Citation | 91 F.3d 232 |
| Parties | TRANSACTIVE CORPORATION, Appellant, v. UNITED STATES of America and Robert E. Rubin, Secretary of Treasury, Appellees. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Kathleen L. Beggs, Washington, DC, argued the cause for appellant, with whom David Povich, Angela S. Kim and Michael R. Pompeo were on the briefs.
Darya Geetter, Assistant United States Attorney, Washington, DC, argued the cause for appellees, with whom Eric H. Holder, Jr., United States Attorney, R. Craig Lawrence and Edith S. Marshall, Assistant United States Attorneys, David A. Ingold and Ingrid D. Falanga, Counsels, United States Department of Treasury, were on the brief.
Herschel C. Minnis, Assistant General Counsel, Florida Department of Health and Rehabilitative Services, Tallahassee, FL, and Charles A. Miller and Caroline M. Brown, Washington, DC, attorneys for the Alabama Department of Human Resources, Arkansas Department of Human Services, Georgia Department of Human Resources, Kentucky Department for Social Insurance, Missouri Department of Social Services, North Carolina Department of Human Resources, and Tennessee Department of Finance and Administration, were on the brief for amicus curiae the Southern Alliance of States.
Before: SENTELLE, RANDOLPH, and ROGERS, Circuit Judges.
Opinion for the Court filed by Circuit Judge SENTELLE.
Transactive Corporation ("Transactive") appeals the District Court's grant of summary judgment against it. Transactive had sued to enjoin the decision of the Department of Treasury ("Treasury") to select the private administrator of a proposed Electronic Benefits Transfer ("EBT") system that would cover most of the southeastern United States through a process that would have inherently excluded Transactive. At issue is whether Treasury properly decided to use an Invitation for Expressions of Interest ("IEI") process instead of a more typical (and lengthy) bidding process governed by the
[319 U.S.App.D.C. 430] Competition in Contracting Act ("CICA") to choose its EBT administrator. Because we conclude that Treasury based its decision to use an IEI on its mistaken belief that only a financial agent of the federal government could legally fulfill the specifications of its EBT design, we reverse the decision of the District Court and direct it to remand this matter to Treasury for further proceedings not inconsistent with this decision.
Electronic Benefits Transfer is the latest in a series of efforts by federal and state governments to reduce administrative costs and inefficiencies associated with the redistribution of public funds to specific individuals. In general, EBT envisions at least two separate transfers. The first transfer sends benefit payments from funds held by Treasury into an account of an individual recipient via what is called the Automated Clearing House ("ACH") method. The second transfer occurs when the recipient withdraws funds from this account through use of a debit card, which is similar to an Automated Teller Machine ("ATM") card. EBT thus promises the efficiencies of a direct deposit system and the conveniences of a debit card.
In November 1993, after having performed two small-scale tests of a federal EBT system, the Office of Management and Budget established a federal task force, including representatives from the Departments of Agriculture, Health and Human Services, Education, and Treasury, to prepare a significantly larger test of EBT. Treasury already had in place significant regulations regarding Electronic Fund Transfers ("EFT") through the ACH method, see 31 C.F.R. Pt. 210, a category that includes direct deposit, which is the type of EFT geared towards individuals who already possess electronically-accessible accounts. Three months after the task force was created, Treasury added additional regulations further discussing EFT disbursement as part of a section of regulations addressing federal disbursement in general. See 31 C.F.R. Pt. 206.
On April 5, 1994, eight states (collectively, the Southern Alliance of States or "SAS") agreed to join Treasury and the federal task force in designing and implementing a joint EBT model throughout their jurisdictions. 1 This cooperative venture developed an EBT proposal that permits both federal and participating state governments to transfer electronically public-assistance payments, including those from Aid to Families with Dependent Children and food stamps, as well as various other programs, to their recipients, and then to allow these recipients to access their benefits at compatible ATMs or "point-of-sale" ("POS") readers, such as ones commonly found at grocery stores or gas stations. In order to encompass individuals who could not otherwise take advantage of direct deposit or other existing forms of EFT, the EBT proposal was limited to individuals who did not already have an electronically accessible account of their own.
The EBT program did not envision much governmental participation, by Treasury or any other federal department, in its actual operation. Instead, Treasury would limit its role largely to encouraging recipients of federal benefits in the test area to participate in the program. Treasury would also be responsible for contracting with some private party to perform the variety of tasks necessary to the federal elements of the program. Of these tasks, three are particularly relevant to this litigation. First, in part because the federal government concluded that it could not require benefit recipients to use either direct deposit (if a recipient already had an electronically-accessible account) or EBT (if he did not) without some more explicit statutory mandate, the party who won the EBT contract would bear some responsibility to market the program. Second, because the purpose of the EBT program was to extend direct-deposit type service to persons without an electronically-accessible account, the EBT contractor would have to be able to obtain or establish such accounts for these individuals. Third, because the model On March 9, 1995, Treasury published an IEI in order to solicit bids from parties wanting to manage the proposed EBT program. Used by Treasury in selecting a contractor for its two small-scale EBT tests, an IEI is a method of solicitation for banking services that emerges from the authority of Treasury to name certain financial institutions as "depositaries of public money" and "financial agents" of the federal government. See, e.g., 12 U.S.C. §§ 90, 265; see also 31 C.F.R. Pt. 202 (). No statutory provision, however, clearly establishes when Treasury may choose to use an IEI to obtain financial services instead of relying on the procurement procedures of the CICA, 41 U.S.C. § 251 et seq., further described in the Federal Acquisition Regulations ("FAR"), 48 C.F.R. § 1.000 et seq.
[319 U.S.App.D.C. 431] was intended to be an "open" system--that is, a system that would allow recipients to access their funds from most ATMs rather than from only EBT-specific ATMs--and because it involved Treasury sending payments using its established ACH method, the private party who received the EBT contract would have to arrange for the EBT accounts to be connected with the ACH network. In addition to these tasks, of course, this contractor would have to perform the many other services basic to an EBT program, including providing debit cards to EBT recipients and informing EBT recipients how those cards may be used.
The IEI procedure differs in several respects from the CICA bidding process. The most critical to this litigation is that a bid process pursuant to CICA may select any qualified vendor, but an IEI may select only a financial institution. In other words, by using the IEI procedure in this case, Treasury foreclosed any possibility that parties who were not connected to some financial institution could win the EBT contract.
Transactive, a private entity, objected to Treasury's decision to use an IEI. Transactive had already had several years of experience as an EBT provider, albeit in a "closed," or stand-alone, system, which, unlike the "open" system specified for the federal-state model, only permits EBT recipients to access their accounts at EBT-specific terminals, and thus does not require the system be linked to the ACH network or to an established financial institution. In fact, Transactive was and is not associated with any financial institution. Treasury's decision to use an IEI thus excluded Transactive from seeking the EBT contract.
On March 29, 1995, Transactive sued to enjoin use of the IEI. Transactive contended that Treasury could not procure the services necessary for its proposed EBT system through an IEI. Treasury countered that its search for a private party to perform EBT services was not a general commercial procurement, but rather an appropriate use of Treasury's power to appoint financial agents who may hold and disburse federal funds and perform other auxiliary banking services for the government. The two parties disputed whether Treasury acted contrary to various restraints on its authority to use an IEI, including segments of the National Bank Act, see, e.g., 12 U.S.C. §§ 90, 265, and the Intergovernmental Cooperation Act. 31 U.S.C. § 6505. Transactive also argued that Treasury was illegally arbitrary when it did not sufficiently distinguish its actions related to the EBT proposal from its existing, and contradictory, policies.
On September 8, 1995, the district court granted summary judgment for Treasury. It dismissed Transactive's suit on various rationales, including that Treasury's interpretation of...
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