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What Is “Arbitrary and Capricious” Agency Action?

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There are two Grounds for challenges to Agency Action which may be asserted in a Procurement Protest: (a) Agency Action in violation of statute, regulation, or controlling Agency guidelines, 5 U.S.C. § 706(2)(A), (C) and 28 U.S.C. § 1491(b)(1), and (b) “Arbitrary and Capricious” Agency Action, 5 U.S.C. § 706(2)(A) and 28 U.S.C. § 1491(b)(4).

These are separate and distinct Procurement Protest Grounds: recent decisions of the U.S. Court of Federal Claims give us insights into the required elements of “Arbitrary and Capricious” Agency Action, the latter of these two Grounds required for Procurement Protest challenges to Agency Action.

There is a four-part test for proof of “Arbitrary and Capricious” Agency Action, and this four-part test is set out in a 1983 Decision of the United States Supreme Court:

Normally, an agency [decision] would be arbitrary and capricious if the agency has [1] relied on factors which Congress has not intended it to consider, [2] entirely failed to consider an important aspect of the problem, [3] offered an explanation for its decision that runs counter to the evidence before the agency, or [4] is so implausible that it could not be ascribed to a difference in view or the product of agency expertise.

Motor Vehicles Manufacturers Assoc. v. State Farm Mutual, 463 U.S. 29, 43 (1983).

An example of elements (1) and (2) of this four-part test for proof of “Arbitrary and Capricious” Agency Action is CRAssociates, Inc. v. United States, Fed. Cl. No. 10-339C October 20, 2010. At issue in CRAssociates was an Army Solicitation for facilities and support services as required for a successor Contract to furnish health care services to military beneficiaries out of two facilities to be located in Northern Virginia.

In fact, the Army had not explicitly conducted this required analysis, and instead the Army argued, from various snippets in the contemporaneous Administrative Record, that the substance of the required analysis had in fact been accomplished, albeit in a disparate fashion. The Court rejected this argument, concluding that the Army could not baste together from these various snippets the set of findings required to be made for a successor Contractor’s professional compensation plan.

It turned out that the CRAssociates Protester had first filed at the Government Accountability Office and that there the Army Contracting Officer had submitted, as required, a post hoc rationalization of his Actions. As required by 31 U.S.C. § 3556, this Contracting Officer Report became a part of the Administrative Record before the Court. But noting that there is nothing in this Statute which requires the Court to give any particular weight to this required post hoc Contracting Officer Report, the Court in CRAssociates held that such documents could not serve to bring about redemption for the missing consideration of the successor Contractor’s professional compensation plan—“they can neither fill in gaps in the agency’s reasoning for an award nor supply missing documentation of that reasoning.”

An example of elements (3) and (4) of the four-part test for proof of “Arbitrary and Capricious” Agency Action is EREH Phase I LLC v. United States, Fed. Cl. No. 10-560C, November 3, 2010. Here a Solicitation required that leased premises not be in a flood plain unless the Agency first determined “that there is no practicable alternative.” As it turned out, portions of the leased premises (parking spaces, vehicle security station, and portions of the access road and perimeter security fencing) along Arlington Boulevard in Northern Virginia were within a designated flood plain, and the Agency did not make the required determination.

The Agency attempted to support its failure to make this required determination by (1) documents in the Administrative Record and by a submission from a consultant to the successful Offeror, and (2) by an electronic mail exchange between the Agency and the successful Offeror, an electronic mail exchange which consisted of a one-sentence question from the Agency, and less than an hour later, a one-word response from the successful Offeror.

As to (1), the EREH Phase I Court holds that the documents in the Administrative Record do not reflect any informed Agency analysis and that the submission could not have been “rational” because the hand-drawing included with it is not to scale, cites neither authorship nor any information as to when or why it was rendered, and is circular in its conclusion.

As for (2), the EREH Phase I Court holds that this electronic mail exchange demonstrates only the Agency relied on the successful Offeror’s one-word representation and that the Agency did not make its own determination. Here the Court specifically notes that Agency Action which rationally relies only upon an Offeror’s submission is itself “Arbitrary and Capricious.”