On August 23, 2010, the United States Court of Federal Claims issued a decision interpreting Resource Conservation Group, LLC v. United States, 597 F.3d 1238 (Fed.Cir.2010), stating that the COFC did not read Resource Conservation to preclude a plaintiff from claiming a breach of the implied contract of fair dealing in a bid protest.

In L-3 Communications Integrated Systems, L.P. v. United States, 2010 WL 3296862 (Fed.Cl), bidder L-3 protested the Air Force’s award of two contracts to Lockheed Martin to modernize the C-5 Galaxy, after the former Principal Deputy Secretary of the Air Force Darleen Druyun was convicted of violating conflict of interest laws (for herself, daughter, and son-in-law negotiating for employment with Boeing Company while she was a top Air Force procurement official.)

L-3 complained that Deputy Secretary Druyun improperly assumed Source Selection Authority duties and changed evaluation ratings to justify selection of Lockheed Martin’s higher cost proposal, and the Air Force thereby compromised the integrity of the procurement process and breached its implied contract to treat proposals fairly, honestly, and in good faith.

The United States moved to dismiss Plaintiff’s claim for breach of the implied contract of fair dealing based on Resource Conservation, saying that decision stripped the COFC of jurisdiction to hear claims for breach of the implied contract of fair and honest consideration. These actions were previously brought under the Tucker Act, and the Defendant argued that the Administrative Dispute Resolution Act (ADRA), 28 U.S.C. Section 1491(b), now provides the exclusive ground for jurisdiction and relief in procurement protest cases. The COFC rejected this argument and denied Defendant’s motion to dismiss the case.

Before ADRA, the COFC jurisdiction over bid protests was predicated on the implied-in-fact contract between the Government and prospective bidders to fairly and honestly consider bids in making a selection under Section 1491(a).
Congress passed ADRA to unify bid protest law and provide a single court and a single standard of review for all bid protest court challenges.

After ADRA, the Court of Federal Claims judges differed in their opinions as to whether a protester could still allege a breach of the implied duty of fair dealing as a cause of action in a bid protest case. In L-3, the COFC rejects Defendant’s reading of the Resource Conservation case.

“The statute does not delete implied-in-fact or express procurement contracts from its reach. Section 1491(a)(1) continues to allow any plaintiff, including a disappointed bidder, to invoke this Court’s general contract jurisdiction to recover money damages, including bid preparation and proposal costs. The revision of Section 1491(b) did not terminate the implied contract of fair dealing. Nor did a cause of action for breach of the implied contract of fair dealing under Section 1491(a)(1) cease to exist simply because a breach occurred in the context of a procurement decision and could also be denominated a ‘bid protest’. On the contrary, as the Federal Circuit in Resource Conservation recognized, Congress intended ADRA ‘to give the Court of Federal Claims exclusive jurisdiction over the full range of procurement protest cases previously subject to review in the federal district courts and the Court of Federal Claims.’” L-3 Communications Integrated Systems, L.P. v. United States.

Karen S. Hindson is a government contracts attorney with offices in Atlanta and in Charleston, SC. Contact  Karen Hindson for assistance with your government contract law questions.