Palladian Partners, Inc. v. United States
2015 U.S. App. LEXIS 6654
| Fed. Cir. | 2015Background
- NIDA issued an RFP for a Coordination Center for NIH Pain Consortium Centers of Excellence in Pain Education as a small-business set-aside under NAICS 541712 (R&D; 500-employee size standard).
- Information Ventures timely appealed the 541712 designation to SBA OHA; OHA concluded the solicitation did not call for R&D and ordered the contracting officer to change the NAICS code to 541611 (administrative/management consulting; $14M receipts size standard).
- OHA’s decision issued before proposals were due; the contracting officer amended the RFP to 541611 and extended the due date.
- Palladian, which would be ineligible under 541611 but might qualify under a different code (519130, Internet publishing; 500-employee standard), received notice of the Information Ventures OHA appeal but did not intervene or participate.
- Palladian later filed its own OHA appeal (arguing for 519130) which OHA dismissed as precluded by the earlier Information Ventures decision; Palladian also filed a pre-award bid protest in the Court of Federal Claims while its OHA appeal was pending.
- The Court of Federal Claims set aside the agency’s change to 541611 as arbitrary and capricious and enjoined acceptance of offers under 541611; the government appealed, arguing, inter alia, that Palladian failed to exhaust administrative remedies.
Issues
| Issue | Palladian's Argument | United States' Argument | Held |
|---|---|---|---|
| Whether Court of Federal Claims has jurisdiction to review OHA and contracting-officer NAICS actions | Court may review contracting-officer amendment and could review OHA decision as "in connection with" a procurement | Tucker Act covers actions in connection with a procurement; court has jurisdiction | Court of Appeals: jurisdiction under 28 U.S.C. § 1491(b)(1) extends to both OHA NAICS decisions and contracting-officer amendments |
| Whether Palladian was required to exhaust SBA OHA remedies before suing | Not required to intervene in another party’s OHA appeal to preserve judicial review; exhaustion would unfairly burden potential bidders | Regulations require interested parties to participate in pending OHA appeals or be precluded; exhaustion protects agency expertise and efficiency | Held: Palladian was required to participate in the pending OHA appeal and failed to exhaust administrative remedies; dismissal required |
| Whether exhaustion can be excused (futility or other exception) | McKart and other authority permit exceptions where agency expertise is unnecessary or exhaustion is futile | Exhaustion required here because NAICS selection is fact-specific and implicates agency expertise; McKart is distinguishable | Held: No excuse; McKart inapplicable; exhaustion not excused because OHA expertise and factfinding could have addressed Palladian’s alternative code theory |
| Whether the contracting officer acted arbitrarily in adopting OHA’s code (merits) | The contracting officer improperly adopted OHA’s 541611; Task 3 (web/case development) indicates 519130 may better describe the acquisition | OHA’s determination controls; contracting officer properly implemented OHA; merits should be addressed administratively first | Court of Appeals did not reach merits—reversed Court of Federal Claims’ relief and remanded with instructions to dismiss for failure to exhaust administrative remedies |
Key Cases Cited
- McKart v. United States, 395 U.S. 185 (U.S. 1969) (explains exceptions to exhaustion in criminal-administrative contexts)
- Woodford v. Ngo, 548 U.S. 81 (U.S. 2006) (describes purposes of exhaustion doctrine: agency authority and judicial efficiency)
- Sandvik Steel Co. v. United States, 164 F.3d 596 (Fed. Cir. 1998) (failure to exhaust agency remedies bars judicial review)
- Weinberger v. Salfi, 422 U.S. 749 (U.S. 1975) (distinguishes statutory exhaustion from judicially created exhaustion doctrine)
- McGee v. United States, 402 U.S. 479 (U.S. 1971) (failure to present fact-based claims to agency bars later judicial challenge)
- RAMCOR Servs. Group, Inc. v. United States, 185 F.3d 1286 (Fed. Cir. 1999) (construes "in connection with" language of Tucker Act broadly)
- Sys. Application & Techs., Inc. v. United States, 691 F.3d 1374 (Fed. Cir. 2012) (Tucker Act provides broad bid-protest jurisdiction)
- Deseado Int'l, Ltd. v. United States, 600 F.3d 1377 (Fed. Cir. 2010) (affirming dismissal for failure to participate in pending administrative proceeding)