By: Joseph A. Hackenbracht

From August 2, 2002 until July 14, 2004, Todd Construction, a general contractor located in Oklahoma, was awarded five indefinite delivery/indefinite quantity (ID/IQ) contracts by the Savannah District of the Corps of Engineers for design and construction of projects in Georgia, North Carolina, and South Carolina. Each contract was for a period of up to three years and together the task orders issued under the contracts could have added up to $65,000,000. On two of the task orders, each of which was for less than $500,000, Todd received unsatisfactory performance evaluations; it challenged those ratings.

Back in 2008, we reported (see our earlier blog article) about a decision by the U.S. Court of Federal Claims, Todd Construction, L.P. v. U.S., 85 Fed.Cl. 34, 2008, where the Court held that it had jurisdiction to hear a challenge to a performance rating. In that case, Todd submitted a CDA claim asserting that it received an erroneous performance evaluation. The Court concluded that the challenge constituted a “claim” within the meaning of the Contract Disputes Act, thereby giving the Court jurisdiction of what amounted to a non-monetary dispute.

In the years that followed, Todd proceeded on a legal odyssey in what came to be known as Todd I, Todd II, and Todd III. Todd’s counsel battled with government attorneys in written brief and after written brief over nuances regarding one’s ability to challenge a performance evaluation. In 2009, the Court issued Todd II, finding that plaintiff’s must “do more than recite the elements of a cause of action; they must make sufficient factual allegations to ‘raise a right to relief above the speculative level.’” Todd v. U.S., 88 Fed.Cl. 235 (2009). The Court then granted Todd the opportunity to amend its pleadings. In Todd III, decided in 2010, the Court of Federal Claims concluded that, even after revising its complaint, Todd failed to state a claim upon which relief could be granted, and dismissed Todd’s challenge of its rating. The Court also found that Todd lacked standing to bring the action because there was no discernable injury from the alleged errors in the evaluation. Todd v. U.S., 94 Fed.Cl. 100 (2010).

Once Todd’s journey in the Court of Federal Claims came to an end, Todd had two choices: abandon pursuit of its claim or appeal the decision to the United States Court of Appeals for the Federal Circuit. Todd chose to appeal. On August 29, 2011, the Circuit Court issued its decision. The Circuit Court agreed with the lower court’s finding that, in the absence of a showing of prejudice or injury in fact, Todd lacked standing to challenge the alleged procedural violations in the agency’s evaluation. Furthermore, the Court of Appeals agreed with the lower court’s dismissal of the case for failure to state a claim. Todd Const. L.P. v. U.S., 656 F.3d 1306, C.A.Fed. 2011. The Court noted that the complaint did not “state a claim to relief that is plausible on its face,” and that Todd failed to “plead factual content that allows a court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” The Court of Appeals did confirm the jurisdiction of the Court of Federal Claims to hear challenges of performance ratings since, it concluded, the ratings are “related to” the contract and the challenge is a claim under the Contract Disputes Act.

So, on a contract that was performed between 2003 and 2005, concerning a performance evaluation issued on July 23, 2006, that was challenged in a claim submitted in August, 2006, which was denied in a Contracting Officer’s decision dated April 25, 2007, that was the subject matter of the Complaint filed on May 25, 2007, Todd learned on August 29, 2011, that the merits of the government’s evaluation of its performance would go unchallenged and unreviewed. Although Todd could appeal to the Supreme Court of the United States, there is no indication that Todd pursued the matter any further.

Decisions of the Court of Appeals for the Federal Circuit are precedent for both the Court of Federal Claims and the boards of contract appeals. Going forward, therefore, contractors can expect that both the boards and the Court will hear challenges of adverse performance ratings. However, in order to avoid the negative result suffered by Todd, contractors must plead the facts specifically and in detail, and identify individually which ratings are arbitrary and capricious and why they are erroneous. Contractors must also allege what the ratings should have been and that the outcome would have been different if the errors had not been made. In order to avoid dismissal based on standing, contractors must be ready to provide evidence that the negative rating has caused injury, or has prejudiced the contractor.

Based upon the above, contractors should consult with a professional to the extent that they wish to challenge a performance rating to assure themselves that the prerequisites of Todd I, II and III have been met.

Joseph A. Hackenbracht is a Partner in the firm and a member of the Federal Contracting Practice Group.