Petition for Writ of Certiorari — National Federation of Federal Employees v. Cheney

Supreme Court brief1990

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In The

Supreme Court of the United States

October Term, 1989

NATIONAL FEDERATION OF

FEDERAL EMPLOYEES, et al.,

Petitioners,

RICHARD B. CHENEY,

SECRETARY OF DEFENSE, et al.,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

H. STEPHAN GorRDON*

General Counsel

Auice L. BoDLEy

Deputy General Counsel

JosHuA F. Bowers

Staff Attorney

NATIONAL FEDERATION OF

FEDERAL EMPLOYEES

1016 16th Street, N.W

Washington, D.C. 20036

(202) 862-4454

Attorneys for Petitioners

“Counsel of Record

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether Federal employees have standing to enforce a

statute and regulations governing a cost comparison of

in-house government costs and contractor bids that deter-

mines whether Federal employees or contractors will per-

form commercial activities for the government.

PARTIES TO THE PROCEEDINGS

The National Federation of Federal Employees

(“NFFE”) is a labor organization which represents ap-

proximately 150,000 federal employees. The National

Federation of Federal Employees, Local 273 (“NFFE, Lo-

cal 273”) is a chartered local of NFFE which represents a

unit of 2,500 employees at Ft. Sill, Oklahoma, including

the 462 former employees of the Ft. Sill Directorate of

Logistics whose removal is the subject of this litigation.

NFFE and NFFE Local 273 were the plaintiffs-appellants

in the U.S. Court of Appeals for the District of Columbia

Circuit and are petitioners here.

The defendants-appellees below were Secretary of

Defense Richard B. Cheney (substituted for Frank C. Car-

lucci) and then-Secretary of the Army John O. Marsh, Jr.,

both of whom were named in their official capacities.

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TABLE OF CONTENTS

Page

eo ag a sexy yk nd ave 6 esd 5s 1

EST eee eee 2

STATUTES AND REGULATIONS INVOLVED ...... 2

i Ge ays |S a 3

eo 3

1. Commercial Activity Program - Purpose... 3

2. Commercial Activity Program — History.. 4

3. Commercial Activity Program: The Gov-

ernment Versus Contractor Cost Competi-

eae aie Le aii eH 6 6 6 ad NN ses oo es 7

B. FEDERAL ROLE IN THE COMMERCIAL AC-

PE REPO os snc x sev cescesesscecss 9

1. Preparation of Performance Work State-

NS en ee 10

2. Preparation of Most Efficient Organization 10

3. Administrative Appeal Procedure......... 11

a ee 6. Se en 12

Ee 12

B. U.S. District Court for the District of Columbia 13

C. U.S. Court of Appeals for the District of Co-

lumbia Circuit Panel Decision ............... 13

D. Order and Statement Denying Rehearing or

a eis ease en ness career vers 15

REASONS FOR GRANTING THE PETITION....... 16

QO @ >

TABLE OF CONTENTS - Continued

Page

NNR os 6:53 24054 KER CSE ends See EE ees 16

Pn 44d bia ede eRe 17

Prudential Standing: Zone-of-Interest ........ 19

Pee MA EIS S550 e oe sense ae esesaues 20

Ae EE tia LNs evans aavakoehweas eaneneees 25

TABLE OF AUTHORITIES

Page

CasES

Allen v. Wright, 468 U.S. 737 (1984) ................. 18

Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970)........ 24

Association of Data Processing Service Organizations,

Inc. v. Camp, 339 U.S. 150 (1970)....15, 18, 19, 21, 24

C.C. Distributors v. U.S., 883 F.2d 146 (D.C. Cir.

We ae ae kee Oe eT Ee rs os 15, 17

Clarke v. Securities Industry Association, 479 US.

Oy Se apa re Pee 19, 2, 21, 26, 25, 26

Department of the Treasury, I.R.S. v. FLRA, 862 F.2d

880 (D.C. Cir. 1988), cert. granted, 58 U.S.L.W.

date (US. Ost. 2 1989) (No. GE-Z1ZB)... «060s es 12

Headquarters, 97th Combat Support Group (SAC),

Blytheville Air Force Base, Arkansas v. American

Federation of Government Employees, Local 2840,

Se UT Ge SEE on. 56 o-dchoe CoA N eNOS EERE RES 12

Investment Company Institute v. Camp, 401 U.S. 617

COUT WN 044 v.50 cae ohh an ae eee Eee nea 14, 24

Valley Forge Christian College v. American United for

Separation of Church and State, Inc., 454 U.S. 464

GEST S06 CONST ae's So eae Chak rk oe e a eran meee 18

STATUTES

Administrative Procedure Act, 5 U.S.C. Section

FOR CRN os ans eeeh net vib eea bene eR eae ea ee a 2, 19

Back Pay Act, 5 U.S.C. Section 5596 (1987).......... 19

Budget and Accounting Act of 1921, as amended,

31 U.S.C. Section 1

TABLE OF AUTHORITIES — Continued

| Page

Contracting for Certain Supplies and Services Re-

quired When Cost Is Lower, 10 U.S.C. Section

EE ae Ant ee iene ee it ee 7

Cost Comparisons: Requirements with Respect to

Retirement Costs and Consultation with Em-

ployees, 10 U.S.C. Section 2467 (1988)... 9, 10, 20, 21

National Defense Authorization Act of 1987, Pub.

L. 99-661, Sec. 1223(b), 100 Stat. 3972......... passim

National Defense Authorization Act of 1989 Pub.

ee er eo ccc westéwasoswucesen 20

Office of Federal Procurement Policy Act of 1974,

ee aan PO SU, FUE. go vccescuceecewssus 2,5

Office of Federal Procurement Policy Act Amend-

ments of 1979 Pub. L. 96-83, 93 Stat 648 (cod-

ified at 41 U.S.C. Section 401 et seq.).......... passim

REGULATIONS

oe ee en rrr 2, 6

eee GRUMON FUE CUI)... evr ecnereesseres 8, 9

Cr SUN Fume CODD... 0 o.oo re ccwesceesens 9, 12

ee feo sss ce ay exe ne Nee . passim

OOD oo, oi baw a ve u¥eetsseenenerns 2

OO ss rales eee sanyo secs wrens 5

ADMINISTRATIVE AND EXECUTIVE MATERIALS

Executive Order No. 12615................. a oy 40 oe

Bureau of the Budget Bulletin 55-4................... °

vil

TABLE OF AUTHORITIES - Continued

Page

MISCELLANEOUS

1979 U.S. Code Cong. & Ad News at 1499-1501...... 5

134 Cong. Rec. H 2714, April 29, 1988 ... 10, 11, 21, 22

Government Accounting Office: Federal Produc-

tivity: DOD’s Experience Contracting Out Com-

mercially Available Activities, B-223693 (Nov.

PE ee ae Rte eres cep ee ede a enerees passim

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7. Ca ey ns

—

7 a Pes cae

No. 89-__

In The

Supreme Court of the United States

October Term, 1989

NATIONAL FEDERATION OF

FEDERAL EMPLOYEES,

Petitioner,

RICHARD B. CHENEY,

SECRETARY OF DEFENSE, et al.,

Respondents.

—

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS FOR THE

DISTRICT OF COLUMBIA CIRCUIT

Petitioner National Federation of Federal Employees

petitions for a writ of certiorari to review the decision of

the United States Court of Appeals for the District of

Columbia Circuit in this case.

OPINIONS BELOW

The opinion of the circuit court is reprinted in the

Appendix at pages 1-61. The decision of the district court,

National Federation of Federal Employees v. Carlucct, No.

88-834 (D.D.C. Aug. 11, 1988) (order granting motion to

dismiss) and the decision of the D.C. Circuit, National

Federation of Federal Employees v. Cheney, 892 F.2d 98 (D.C.

Cir. 1989) (order denying motion for rehearing and sug-

gestion for rehearing en banc), are reprinted in the Appen-

dix at pages 71-74 and 62-70, respectively.

JURISDICTION

The decision of the United States Court of Appeals

for the District of Columbia Circuit was entered on Au-

gust 25, 1989. The order denying appellant’s Motion for a

Rehearing and Suggestion for Rehearing En Banc was

entered December 22, 1989. This Court has jurisdiction to

review the judgment of the court below under 28 U.S.C.

Sec. 1254(1).

STATUTES AND REGULATIONS INVOLVED

This case involves the Office of Federal Procurement

Policy Act Amendments of 1979, Pub. L. 96-83, 93 Stat.

648; The National Defense Authorization Act of 1987,

Pub. L. 99-661, Sec. 1223(b), 100 Stat. 3972 (codified at 10

U.S.C. Sec. 2304 note (Supp. V 1987)), repealed and re-

codified Pub. L. 100-370, Sec. 2(a) (1), July 19, 1988, 102

Stat. 851; (codified at 10 U.S.C. 2462(b) (1988)) and the

Administrative Procedure Act, 5 U.S.C. Sec. 702 (1982).

This case also involves Executive Order No. 12615, 52

Fed. Reg. 44853 (1987), reprinted in 31 U.S.C. Sec. 501

(Supp. 1989); The Federal Acquisition Regulation, 48 CFR

Sec. 7.3 (1988); Office of Management and Budget

Circular A-76. All statutes and regulations are set forth in

the appendix with the exception of OMB Circular A-76

which has been lodged with the Clerk of the Court.

STATEMENT OF THE CASE

A detailed description of the purpose and history of

the government commercial activity program is set forth

to properly frame the case for Court review. This descrip-

tion is necessary because the union contends that the D.C.

Circuit’s decision is based on outdated principles enunci-

ated in statutes and regulations of the 1950s and 1960s

while failing to consider the statutory and regulatory

framework of the present day commercial activity pro-

gram.

A. BACKGROUND

1. Commercial Activity Program — Purpose

The federal government’s commercial activity pro-

gram is intended to reduce the cost of government by

seeking the least expensive source of commercial ser-

vices. Examples of government commercial activities are

vehicle maintenance, food services and laundry services.

The commercial activity program is set forth in the

Office of Management and Budget (“OMB”) Circular A-76

(1983 ed.).1 These procedures determine the least

' OMB Circular A-76 was originally issued in 1966 and

subsequently was revised in 1967, 1979 and 1983. See OMB

Circular A-76 (Revised) para. 4.b. (August 4, 1983). The Circu-

lar summarized a policy of the Bureau of the Budget developed

in Bureau Bulletins issued in 1955, 1957, and 1960. Id. The 1983

Circular revision is the focus of this appeal.

expensive source of services by comparing in-house gov-

ernment costs and private contractor bids. Ideally, ihis

cost comparison results in the selection of the least ex-

pensive source of service.

Commercial activities presently performed by federal

employees must be retained in-house unless a cost com-

parison indicates a private contractor can accomplish the

same quality job at lower cost. For newly proposed com-

mercial activities, an agency must conduct a cost compar-

ison unless in-house performance is not feasible.

The commercial activity program excludes some gov-

ernment functions from performance by the private sec-

tor. This exclusion applies to functions so closely related

to the public interest that they must continue to be per-

formed by federal employees. Functions excluded from

competition with the private sector are referred to as

“inherently governmental”, e.g., criminal investigation

prosecutions, conduct of foreign relations, and direction

of intelligence services.

2. Commercial Activity Program —- History

When first established in the 1950s, the commercial

activity program presumed that private contractors were

less expensive than federal employees. This policy has

gradually been rescinded, and the modern program

makes no presumption of which source is cost effective.

Today, the commercial activity program relies on a cost

competition between in-house government costs and pri-

vate contractor bids to determine the cost effective source

of commercial services.

The first commercial activity directive, the 1955 Bu-

reau of the Budget Bulletin 55-4, instructed agencies to

rely solely on private contractors for commercial ser-

vices.2 The 1955 Bulletin permitted exceptions to relying

on private contractors only in cases where use of private

contractors would not be in the public interest. See Gov-

ernment Accounting Office, Federal Productivity: DOD’s

Experience in Contracting-Out Commercially Available

Activities, B-223693 at 10 (Nov. 1988) (hereafter cited as

“GAO Report”).

In 1967, the commercial activity program introduced

competition between in-house government costs and the

private contractor bids. Unfortunately, the 1967 commer-

cial activity program lacked guidance on how to conduct

a cost comparison. This resulted in each agency or instal-

lation applying different cost comparison formulas with

mixed results.

In 1974, Congress created the Office of Federal Pro-

curement Policy (“OFPP”) within OMB and gave it au-

thority to draft government-wide procurement

regulations. Pub. L. 93-400, 88 Stat. 976. In response, the

Office of Federal Procurement Policy expanded OMB Cir-

cular A-76 and included a uniform cost comparison for-

mula agencies must apply when comparing in-house

costs and contractor bids. 44 Fed. Reg. 20559 (1979).

In 1979, Congress amended the OFPPA with instruc-

tions to expand the procurement regulations. 1979 U.S.

* Bureau of the Budget Bulletin 55-4 was promulgated

pursuant to the Budget and Accounting Act of 1921, as

amended 31 U.S.C. Sec. 1 et seq.

Code Cong. & Ad. News at 1499-1501; 93 Stat. 648. In

response, OFPP incorporated OMB Circular A-76 into the

Federal Acquisition Regulations governing government

versus contractor performance. 48 CFR Section 7.3 (1988);

App. 80.

The current OMB Circular A-76, (1983 ed.), issued

pursuant to the OFPPA, substantially improved the com-

petitive position of the in-house government operation

when pitted against contractor bids in the cost compari-

son. The Circular requires agencies to conduct an efficien-

cy study that determines the most efficient in-house

organization. Only after maximizing in-house efficiency

may an agency calculate the in-house cost placed in com-

petition with the contractor bid. GAO Report at 13.

In 1987, Congress reviewed the effectiveness of OMB

Circular A-76. In a note provision of tne 1987 National

Defense Authorization Act, Congress instructed the Sec-

retary of Defense to ensure cost comparisons were “real-

istic and fair”. Pub. L. 99-661, Sec. 1223, 100 Stat. 3972. To

accomplish this objective, the Act elevated the following

Circular A-76 costs comparison factors to law: “the costs

of quality assurance, technical monitoring of the perform-

ance of such function, liability insurance, employee re-

tirement and disability benefits and all other overhead

costs.” Id. Each of these factors was previously included

in the cost comparison formula, and the 1987 Defense Act

did not alter the existing cost comparison in OMB Circu-

lar A-76 (1983 ed.).3

3 In 1988, Congress reorganized numerous commercial

activity note provisions of the Department of Defense

(Continued on following page)

eile

In 1987, President Reagan signed Executive Order

12615 (Nov. 1987), which set forth the scope o the current

commercial activity program. App. 83. This Executive

Order requires ail agencies to schedule commercial activ-

ity competitions for each of the government commercial

activities presently performed by 750,000 federal employ-

ees. See GAO Report at 28. Agencies must subject no less

than 3% of the federal employee positions to the cost

competition each year until such time as all federal em-

ployee costs have been pitted against contractor perfor-

mance through the OMB Circular A-76 cost comparison

procedure. App. 83.

In November 1988, the Government Accounting Of-

fice reported that between 1980 and 1987, the Department

of Defense had conducted 78% of all federal government

commercial activity studies. GAO Report at 8. In approx-

imately half of the Department of Defense Commercial

Activity studies, the cost comparison resulted in a deci-

sion to retain federal employee in-house performance.

GAO Report at 15

3. Commercial Activity Program: The Government Ver-

sus Contractor Cost Competition.

The cost competition of the commercial activity pro-

gram is a multi-step process resulting in a strictly

(Continued from previous page)

Authorization Acts. The cost comparison provision of the 1987

Act was recodified as “Contracting For Certain Supplies And

Services Required When Cost Is Lower”, 10 U.S.C. Section 2462

(1988).

regimented cost comparison of in-house cost and contrac-

tor bids. The first step of a commercial activity review is

to define the performance standards (quality, timeliness,

quantity) of the work the commercial activity expects to

perform in the future. These standards are incorporated

in a written document called the Performance Work State-

ment (“PWS”). Developing an accurate PWS is critical to

the cost study process because it is the basis for determin-

ing the in-house cost estimate and contractor bids. GAO

Report at 13.

The second step is a government study to determine

the most efficient in-house organization (“MEO”). The

government next determines the cost to operate the MEO.

The Government Accounting Office recently described

the MEO performance cost as the “government bid” to

perform the commercial activity. GAO Report at 13.

The government solicits bids from the private sector

based on the work standards in the PWS. 48 CFR Section

7.302(a)(1)(1988); App. 81. All contractor bids are re-

viewed and only one is selected as best qualified. This

single remaining contractor bid remains in competition

for the contract. Finally, in accordance with the strict

requirements of OMB Circular A-76, Part IV, a cost com-

parison is conducted between the remaining contractor

bid and the cost of in-house performance. Id. at 7.302(a)

(2) (1988) App. 81. A tentative award to either in-house or

contractor performance is determined by the outcome of

the cost comparison formula. Id.

Affected parties, including the contractor and federal

employees, may file an administrative appeal based

solely on compliance with the cost comparison pro-

cedures. Id. at Section 7.302(c)(1988); App. 81; OMB Cir-

cular A-76, Part I(1)(7) at I-15. The administrative appeal

board is appointed by the agency conducting the com-

mercial activity study and must issue its decision within

30 days of receipt of an appeal.

Final award of the commercial activity is made with

the comple.ion of the appeal process. If the competition

results in an in-house award, the agency must implement

the MEO within six months. OMB Circular A-76, Part I(E)

(5) at I-12.

B. FEDERAL EMPLOYEE ROLE IN THE COMMER-

CIAL ACTIVITY PROGRAM

Federal employees play an integral role in prepara-

tion of a commercial activity study and the related ad-

ministrative appeal procedure. The National Defense

Authorization Act of 1989 contained a note provision

requiring agencies to consult federal employees on a

regular basis during preparation of two crucial docu-

ments that control the eventual cost of in-house opera-

tion. Pub. L. 100-998, Sec. 33, repealed and recodified

Pub. L. 100-456, Sec. 331(a), 102 Stat. 1957 (codified at 10

U.S.C. Section 2467(a) 1988) (hereafter “Cost Comparison

Act”). Additionally, if a cost comparison results in a

contractor award, federal employees have standing to

challenge the award in the administrative appeal pro-

cedure. 48 CFR Section 7.307 (1988); OMB Circular A-76,

Part I, 1(7).

1. Preparation of Performance Work Statement

The Cost Comparison Act requires agencies to con-

sult regularly with federal employees during preparation

of the Performance Work Statement (“PWS”). 10 U.S.C.

Section 2467(b) (1) (A). The PWS establishes the stan-

dards of work on which contractors base their bids. The

legislative history indicates Congress added this require-

ment due to frequent omissions in the PWS of the work to

be performed. 134 Cong. Rec. H2714-15, April 29, 1988

(Statement of Rep. Skelton). Congress concluded that the

omissions resulted in under-bids by contractors and mul-

ti-million dollar cost overruns when contractors were

required to perform the work omitted from the PWS. Id.

Regular consultation with federai employees is designed

to ensure that all work being studied is reflected in the

PWS. Id. In urging passage of the Cost Comparison Act,

Rep. Skelton stated that federal employees would be mo-

tivated to ensure that the PWS is complete because it

would guarantee that contractor and in-house costs

would be based on the same work standards. Id. at

H2715.

2. Preparation of Most Efficient Organization

The Cost Comparison Act also requires that agencies

regularly consult federal employees during preparation

of the Most Efficient Organization. 10 U.S.C. Section

2467(b) (1) (A). The MEO is the end result of the in-house

cost efficiency study conducted during a commercial ac-

tivity study. OMB Circular A-76, Part I(E) (1) at I-12. The

cost of performing the MEO is the “government’s bid”

compared against the contractor bid in the cost compari-

son process. GAO Report at 13. The commercial activity

regulations require the MEO to remain confidential dur-

ing its preparation to prevent disclosure to competing

contractors. Nevertheless, an agency must solicit efficien-

cy suggestions from the federal employees. OMB Circular

A-76, Part I(E) (2) at I-12. Federal employees performing

an activity are ideally situated to recommend and imple-

ment efficiency improvements. When urging passage of

the Cost Comparison Act, Rep. Skelton recognized that

Federal employees would be motivated to make efficien-

cy recommendations because, without a competitive

MEO, a private contractor will replace the federal em-

ployees. 134 Cong. Rec. H2714-15, April 29, 1988.

3. Administrative Appeal Procedure

OMB Circular A-76 (1983 ed.) was promulgated pur-

suant to the Office of Federal Procurement Policy Act,

1979 Amendment, which required the Office of Federal

Procurement Policy to promulgate efficiency regulations

and to “promote fair dealings and equitable relationships

among the parties in Government contracting.” Pub. L.

96-83, Sec. 2(12); 93 Stat. 648. In response, OMB Circular

A-76 was amended to include the designation of federal!

employees as “affected parties”, with standing to appeai

violations of the cost comparison through the administra-

tive appeals procedure. OMB Circular A-76, Para. 6(g)

(affected parties); OMB Circular A-76, Part I, I(7) at I-14

(administrative appeal procedure). The Appeals Board

jurisdiction is limited to reviewing compliance with the

cost comparison formula and the Board must issue deci-

sions within 30 days of receipt of an appeal. 48 CFR

Section 7.307 (1988). An administrative appeal outside the

agency conducting the commercial activity study is pro-

hibited. OMB Circular A-76, Part I, 1(2) & (3) at I-15.4 The

federal employees in the instant case completed the ad-

ministrative appeal procedure prior to seeking judicial

relief.

PROCEEDINGS BELOW

A. Facts

In 1980, the U.S. Army Training and Doctrine Com-

mand (“TRADOC”) directed the Army Fort Sill Director-

ate of Resource Management to conduct a commercial

activity review of the Fort Sill Directorate of Logistics

(“DOL”). The Directorate of Logistics provides support,

maintenance, transportation and supply functions for

Fort Sill, Oklahoma and surrounding installations. In

May 1987, after a seven year commercial activity study, a

cost comparison resulted in a tentative award of the DOL

function to a private contractor. The union appealed mul-

tiple violations of the cost comparison through the ad-

ministrative appeals procedure. Among the violations

raised in the appeal were inflation of the in-house cost,

4 However, the Federal Labor relations Authority has held

that the cost-comparison and other mandatory aspects of the

commercial activity program are subject to grievance/arbitra-

tion. Headquarters, 97th Combat Support Group (SAC), Blytheville

Air Force Base, Arkansas v. American Federation of Government

Employees, Local 2840, 22 FLRA 656 (1986); See also Department

of the Treasury. I.R.S. v. FLRA, 862 F.2d 880 (D.C. Cir. 1988), cert.

granted, 58 U.S.L.W. 3212 (U.S. Gct. 2, 1989) (No. 88-2123).

ee |

tare ee i

artificialiy high overhead and support costs, and an im-

proper calculation of private contractor conversion costs

and profit provisions. The Army administrative appeal

board granted portions of the union appeal but conclud-

ed that the changes in the cost comparison were insuffi-

cient to overturn the award to the private contractor.

B. U.S. District Court for the District of Columbia

On March 29, 1988, the union sought injunctive and

declaratory relief in the United States District Court for

the District of Columbia to halt the Army’s planned con-

version to contractor performance on October 1, 1988.

The union case relied on the many Army violations of

both OMB Circular A-76 and the cost comparison provi-

sions of the 1987 Defense Authorization Act. In dismiss-

ing the case, the U.S. District Court held that federal

employees lacked standing to enforce either OMB Circu-

lar A-76 or the cost comparison provisions of the Defense

Act.

C. U.S. Court of Appeals for the District of Columbia

Circuit Panel Decision

A panel of the U.S. Court of Appeals for the District

of Columbia Circuit upheld the District Court, finding

that federal empioyees were not within the zone of inter-

est of the statutes relied upon. The court reviewed the

legislative history of the Office of Federal Procurement

Policy Act of 1979 and the Budget and Accounting Act of

1921, as amended, and concluded it was Congress’ intent

to promote federal government efficiency. Additionally,

the Court concluded that the Office of Federal Procure-

ment Policy Act, 1979 Amendment, and the 1987 National

a |

Defense Authorization Act required agencies to rely on

the private sector for commercial services. App. 28 & 31.

Thus, in the court’s view, Congress had not contem-

plated reliance on federal employees to challenge agency

violations of these efficiency related statutes. App. 28 &

31. Furthermore, the court found that the interest of

federal employees in continued employment is in conflict

with an efficient government. App. 28 & 31. Therefore,

federal employees could not be within the zone of inter-

est of statutes which relied on private contractors for the |

services presently performed by federal employees. App.

28 & 31. The majority concluded that the interest of

federal employees in seeing that agencies comply with

the procurement regulations was no different than that of

the general public. App. 33.

In a vigorous and lengthy dissent, Judge Mikva crit-

icized the majority for disregarding the Supreme Court’s

zone of interest test and for misreading the legislative

history. App. 53-56. Judge Mikva concluded that the plain

language of the statutes and regulations demonstrated

Congress’ intent that the comparison of in-house govern-

ment and contractor costs result in the selection of the

least expensive source of commercial government ser-

vices. App. 57-58. This bottom line approach favors the |

source that is least expensive. As Judge Mikva pointed |

out, the only way a federal employee performing a com- |

mercial activity will retain employment is by assisting the :

agency to reach cost efficiency. App. 49-50. Judge Mikva |

identified decisions of the Supreme Court holding that

business interests in profits bring a party within the zone

of interest of a statute when pursuit of profits result in

furtherance of the congressional purpose. See Investment

Company Institute v. Camp, 401 U.S. 617 (1971); Arnold

Tours, Inc. v. Camp, 400 U.S. 45 (1970); Association of Data

Processing Service Organizations, Inc. v. Camp, 397 U.S. 150

(1970); App. 43. Judge Mikva found no difference be-

tween a federal employee's interest in wages and a com-

pany’s interest in profits. App. 43-44.

D. Order and Statement Denying Rehearing or Review

En Banc

Three days prior to issuance of the panel’s decision

in the instant case, the D.C. Circuit issued C.C. Distribu-

tors v. U.S., 883 F.2d 146 (D.C. Cir. 1989) in which the

court held private contractors have standing under the

1987 Defense Authorization Act to enforce an OMB Circu-

lar A-76 cost comparison. On the basis of the conflict

between these decisions, the union filed a Motion for

Rehearing or Suggestion for Review En Banc. The court

denied the union motion and reiterated that the interest

of federal employees in continued government employ-

ment conflicts with the efficiency goals of Congress. App.

66. The court also stated that federal employee interest in

a fair procurement procedure was no different than the

interest of the general public. App. 65.

Judge Mikva dissented and, in a statement joined by

Chief Judge Wald and Judge Edwards, criticized the

court’s decision as a “perverse use of the standing doc-

trine.” App. 70. The dissent observed that the legislative

goals of efficiency and economy would be promoted only

when the least expensive source of services was obtained.

App. 67. The dissent reiterated that the plain language of

the statute indicated neutrality between federal employee

and contractor performance. App. 67. The dissent also

accused the majority of manufacturing a preference for

private contractors through a selective reading of the

legislative history. App. 69.

REASONS FOR GRANTING THE PETITION

A. Introduction

The federal government commercial activity program

is a multi-billion dollar activity. Taken together, the stat-

utes governing the commercial activity program constitu-

te an unequivocal order to reduce costs by achieving

commercial activity cost efficiency. Congress’ instruc-

tions, in the Budget & Accounting Act of 1921, as

amended, 31 U.S.C. Section 1 et seq., and in the Office of

Federal Procurement Policy Act, as amended, 41 U.S.C.

Section 401 et seq., constitute a general command to im-

prove efficiency. These statutes delegated authority, first

to the Bureau of the Budget, and later to its successor, the

Office of Management and Budget, to create a regulatory

scheme that promotes procurement efficiency. Pub. L.

96-83, Sec. 649, 93 Stat. 649 App. 75-77. More recently,

Congress endorsed the efficiency mechanism created by

the Office of Management and Budget when it incorpo-

rated portions of the OMB Circular A76 cost comparison

in a note provision of the 1987 National Defense Authori-

zation Act. Pub. L. 99-661 Section 1223(b), 100 Stat. 3977

(codified at 10 U.S.C. Section 2304 note (Supp. V 1987));

repealed by Pub. L. 100-370, Section 2(a)(1), (recodified at

10 U.S.C. Section 2462(b) (1988)).

The Circuit Court’s decision in the instant case, and

in the related decision, C.C. Distributors v. U.S., 883 F.2d

146 (D.C. Cir. 1989), created case law that frustrates rath-

er than furthers the efficiency purposes of the OFPPA, the

Budget and Accounting Act, and the 1987 Defense Autho-

rization Act. The defeat of the Office of Management and

Budget commercial activity efficiency procedures will be-

come apparent over the next several years as the execu-

tive branch implements Executive Order 12615 (Nov.

1987). Pursuant to this Executive Order, agencies will

conduct cost studies of the commercial activities present-

ly performed by 750,000 federal employees. In studies

where an agency underestimates in-house costs, the con-

tractors will have standing to file an administrative ap-

peal and if the error is not corrected, the contractors may

seek judicial relief. However, in commercial activity stud-

ies that underestimate contractor performance, federal

employees will have standing only in an administrative

appeal forum within the very agency that has violated the

commercial activity regulations. In effect, contractors

have access to the power of the courts to correct agency

violations of law, but federal employees are left without a

neutral forum even when facing the elimination of their

jobs. This is clearly not what Congress intended when it

passed legislation requiring that federal employees be

regularly consulted throughout each step of the commer-

cial activity study to ensure agency compliance with com-

mercial activity regulations.

B. Analysis

The D.C. Circuit has disregarded this Court’s prece-

dent by denying the union standing under the Office of

Federal Procurement Policy Act of 1979 and the 1987

National Defense Authorization Act to enforce the cost

comparison provisions of OMB Circular A-76.°

The law of standing is based on a set of constitutional

and prudential requirements. To establish standing under

Article III of the Constitution, a litigant must plead an

injury in fact fairly traceable to the conduct complained

of and likely to be redressed by the relief request. Allen v.

Wright, 468 U.S. 737, 751 (1984). Prudential standing re-

quires that the “plaintiff's complaint fall within ‘the zone

of interests to be protected or regulated by the statute or

constitutional guarantee in question.’ ” Valley Forge Chris-

tian College v. Americans United for Separation of Church and

State, Inc., 454 U.S. 464, 474-75 (1982) (quoting Association

of Data Processing Serv. Orgs., Inc. v. Camp, 397 U.S. 150,

153 (1970) (footnote omitted)). The District Court con

cluded that the union satisfied the constitutional require-

ment for standing on the basis that private contractor

performance of the Army Fort Sill Directorate of Logistics

resulted in terminations, demotions, transfers and forced

early retirement for the existing federal employee work-

force. Injury to the employees would have been

> The union asserted standing under the OFPPA and the

1987 Defense Authorization Act throughout this litigation but

did not assert standing under the Budget & Accounting Act of

1921. The D.C. Circuit sua sponte reached the issue of union

standing under the Budget and Accounting Act of 1921. Nev-

ertheless, the OFPPA, 1987 Defense Act and the Budget and

Accounting Act of 1921, as amended, all mandate procurement

efficiency and the arguments presented herein on the OFFPA

and 1987 Defense Act apply with equal force to the Budget and

Accounting Act.

prevented by the granting of declaratory and injunctive

relief. Partial relief remains available though reinstate-

ment and backpay pursuant to the Backpay Act, 5 U.S.C.

Section 5596.

C. Prudential Standing: Zone-of-Interest

The union asserted standing pursuant to Section 702

of the APA, which grants standing to a person “aggrieved

by agency action within the meaning of a relevant stat-

y as 4

ute.” 5 U.S.C. Section 702 (1982)

1 "7 * . . ~] . ] = +h r+ 1h , ) +_ainmt ~

1987), the Court acknowledged that the zone-of-interest

+ + . vo - 7(\9 t +h 4 p ana wi

test 1s a gloss on section 702 of the APA and provides

< I

, 1 : + , Y

- _ P ~ . —_

Some limits On access to tne COurts ilu at SYO mowever

+} ' > } } + | 1] > >

ho 7: mrnh 17D nr y h> tih,. +

the Court emphasized in ( Ke tnat “[tjne test is 1

TY) ant to ho Special] iemandineg a nart ular +h ro

ALLO aii \ UC CS} ecCldily MCimidialiy ail MWailiLt Uldl LilcCit

P I

need be no indication ofa congressional] Purpose to Dene-

5 t t

1 1 a4 ry T . + Tl

fit the would-be plaintiff 4/9 U.S. at 399-400. The

Courts test for ZOne-Of-interest is satisfied by a mere

‘5 ‘ } tar rT) th ry ¢ ) t rerg -

plausible relationship” between the interests pri

5 va | hh th ~] Yr ++ vo +h ry ] na roira >

y , . ; oy ' ; ino

4 naead Dy tne fT laintift ana tne VOLICIES undergiraing

. ; "7 ~ - P ~ ’ _ .

rH + yy + , , , 7 + ’ L } f 7 thy

ne Statutory framework. /d. at 396. 399 tUD. IN Clarke, tne

( + af 7. | tho vk + > ; +> ; Ticial

\ourt reaffirmed the presumption in favor of judicial

I i

r Vip ry ~ly 71 +}, > ' saa) 7 } . ] try rr h +71 » | ho

AC VICW COMNCIUQAING (Nal WOUIG-DE PDialntii{s 2h£tUUIG VC

4 s

4 + ] +} + h]

1 iT) : ce } 1O } rn weE)N ri) ry

WeEU LTitO court uniess tney aTe MmOt even aQrs UuaDI\

5 j

1 thin th, > 7 Try wil -~1T) rr + } 5 roc dq ‘ ] r rq

wWithni mime Zone-of-interests to be protected or reguilatec

1 rJ sO" 4 ry

ry rnp } | , + {oO 4 Yor90te , + hota

DY (Ne Statute ia at 35Y Quoting 4ISSVUCIUTION O L/uULM

s ’ ra | , , 3907 ~ =

, + - ‘ ‘

In cases where the would-be plaintiff is not the ex-

pressed subject of the contested statute, the zone-of-inter-

est test denies standing only if “the plaintiff interests are

sO marginally related to or inconsistent with the purposes

implicit in the statute that it cannot reasonably be as-

sumed that Congress intended to permit suit.” Clarke, 479

U.S. at 399.

D. D.C. Circuit Decision

The D.C. Circuit ignored the relaxed requirement for

standing expressed by this Court in Clarke by denying

union standing under the Office of Federal Procurement

Policy Act of 1979 (“OFPPA”) and the 1987 National

Defense Authorization Act (“Defense Act”). The D.C. Cir-

cuit’s decision is based on an erroneous interpretation of

the federal employees’ role in the commercial activity

program and a misapplication of this Court’s instructions

on the zone-of-interest test.

1) Contrary to the D.C. Circuit finding, the statutory

and regulatory schemes are replete with evidence that

Congress considered federal employees a critical compo-

nent of the commercial activity program. Significantly,

agencies are required by statute to consult with federal

employees at each of the critical steps in a commercial

activity program. 10 U.S.C. Section 2467(b) (1988).®

100-989, Sec. 331, contained the provision integrating federal

employees into the OMB Circular A-76 procedures. This statu-

tory provision was repealed during the next sesion of Congress

during a reorganization of the commercial activity statutory

(Continued on following page)

—

Federal employees must be regularly consulted during

preparation of the work standards on which all in-house

bids and contractor bids are based. Id. Again, federal

employees must be consulted during construction of the

efficiency study that constitutes the government bid for

the commercial activity. Id. The legislative history is as

brief as it is clear. See 134 Cong. Rec. H2714, April 29,

1988 (Statement of Rep. Skelton). Congress determined

that federal employees were highly motivated to police

agency compliance with the commercial activity regula-

tions and brought them into the process accordingly. /d. If

Congress had concluded that federal employees’ interests

were in conflict with government efficiency, Congress

would have deleted federal employees from the adminis-

trative appeal procedures of OMB Circular A-76. See J.

Mikva’s dissent, App. 54. Instead, Congress enacted legis-

lation integrating federal employees into each critical

step of the commercial activity procedures.

Additionally, Congress amended the OMB Circular

A-76 cost comparison components with the Cost Compar-

ison Act to include the retirement costs of both contrac-

tors and federal employees. 10 U.S.C. Sec. 2467(a) (1988)

(Continued from previous page)

provisions and recodified as “Cost Comparisons: requirement

with respect to retirement costs and consuitation with employ-

ees.” Pub. L. 100-456, Sec. 331(a), 102 Stat. 1957 (codified at 10

U.S.C. Sec. 2467 (1988)). The Court may consider the 1989

National Defense Authorization Act cost comparison provision

when determining whether federal employees are within the

zone-of-interest of the Office of Federal Procurement Policy

Act and the 1987 National Defense Authorization Act. See

Association of Data Processing, Inc. v. Camp, 397 U.S. 150, 155-56

(1970); Clarke v. Securities Industry Association, 479 U.S. 388,

396-97 (1987)

The legislative history indicates that Congress found the

absence of retirement costs in the OMB Circular A-76

procedure resulted in “faulty” cost comparisons which

sometimes resulted in erroneous awards to contractors.

134 Cong. Rec. H2714, April 29, 1988 (Statement of Rep.

Skelton). In fact, the cost study at Fort Sill was cited by

Rep. Skelton as an example of a faulty cost comparison.

Id. In dismissing the union’s case, the D.C. Circuit ig-

nored Congressional action expressly passed to improve

the position of federal employees in the OMB Circular

A-76 cost comparison.

2) The D.C. Circuit interpreted federal employee in-

terest in continued employment as conflicting with gov-

ernment efficiency. App. 28 & 31. To the contrary, the

administrative scheme makes the federal employee inter-

est in continued employment inseparable from efficiency

in government. Executive Order No. 12615 requires agen-

cies to schedule each federal employee position for a cost

competition. Id. Section I(d), App. 84. Federal employees

intent on maintaining employment in a commercial activ-

ity will be highly motivated to ensure an accurate PWS

and an ideal MEO. Only with accurate and efficient in-

house operations will a commercial activity be retained

in-house. Employee failure to ensure in-house efficiency

will result in a loss of employment to a contractor

through the OMB Circular A-76 cost comparison. This

administrative scheme ensures that all federal employees

interested in continued employment, by necessity, have

an interest in government efficiency.

Moreover, federal employees are the only available

plaintiff to correct an agency underestimate of contractor

costs. If an agency accepts an underestimate of the cost of

contractor performance, the contractor will not protest

and the agency will not sue itself to correct the error.

There are no advocates in the process other than the

federal employees who have an interest in ensuring com-

pliance with the regulatory procedures that prohibit an

underestimate of contractor costs. See J. Mikva’s dissent,

App. 50.

3) The D.C. Circuit’s conclusion that the 1987 Defense

Act favored contractor performance is based on a selec-

tive reading of the legislative history and conflicts with

the plain language of the Act. While the legislative histo-

ry suggests that some members of Congress favored pri-

vate contractors, the actual language of the relevant

Statutes favors neither contractors nor federal employces.

The 1987 Defense Authorization Act requires agencies to

conduct “realistic and fair” cost comparisons. 10 U.S.C.

Section 2304 note, App. 75. This straightforward language

certainly does not suggest a bias toward contractors.

Nothing in this brief statutory provision suggests federal

employees should be cast aside regardless of in-house or

contractor costs. The OFPPA is equally neutral. This Act

declares that it is the policy of Congress to promote

efficiency and does not designate a priority other than

cost effectiveness. Pub. L. 96-83, Sec. 12, App. 78.

In dissent, Judge Mikva responds to the panel’s stat-

utory analysis by stating:

If Congress wanted to establish a presumption

that the private sector is always more economi-

cal than the government, why did it continue to

permit time consuming, lengthy cost compari-

sons before each and every contracting deci-

sion? If Congress favored the private sector,

why did it not require the government to use

ee a aaa .S...2.242Q0; SS

private enterprise for every function which is

not “inherently governmental in nature”? The

reason Congress acquiesced in OMB’s provider-

neutral decision-making strategy is that its in-

terest was, first and last, in saving money - an

interest which [the union’s] suit is not only con-

sistent with but promotes.

NFFE v. Cheney, No. 88-834 (D.C. Cir. Aug. 25, 1989)

(Mikva, J., dissenting). App. 54.

4) Finally, the D.C. Circuit charged that a federal

employee’s interest in continued employment is neither

marginally related to nor consistent with the goals of

Congress. This conclusion is wholly at odds with the

Supreme Court’s decisions in Administrative Procedure

Act zone-of-interest cases.

In Association of Data Processing Service Organizations.

Inc. v. Camp, 397 U.S. 150, 156-58 (1970), the first zone-of-

interest case, the Court held that the plaintiffs’ interest in

profits was more than marginally related to the Congres-

sional purposes for enacting a statute restricting banking

activities. The Court concluded that the business interest

in profits provided sufficient motivation to place the data

processing companies within the zone-of-interest neces-

sary to enforce the bank laws. Id. Similarly, in Arnold

Tours, Inc. v. Camp, 400 U.S. 45 (1970), this Court held that

travel agents in competition with banks offering non-

traditional bank services satisfied the zone-of-interest test

for standing to enforce restrictive regulatory bank laws.

In Investment Company Institute v. Camp, 401 U.S. 617

(1971) (“ICI”), the Court held that an interest in profits

was sufficient to confer standing on a securities industry

group seeking to challenge regulations permitting banks

to enter the securities field. Subsequently in Clarke, the

icant eine

Court made clear that the zone-of-interest test was not

meant to be especially difficult. 479 U.S. at 399. In Clarke,

the Court held that a discount broker’s interest in profits

was sufficient for standing to assert the public interest in

restricting bank activities. Id. at 403.7

This Court has consistently held a corporation’s in-

terest in profits may be sufficient to bring a plaintiff

within the zone-of-interest of a regulatory statute. Cer-

tainly there is no difference between a corporation’s in-

terest in profits and an employees interest in a job. Both

are necessary for continued economic existence.

CONCLUSION

The D.C. Circuit did not address statutes and legisla-

tive history indicating the critical role played by valuable

federal employees in achieving compliance with the com-

mercial activity regulations. Instead, the D.C. Circuit has

7 In Clarke, this Court also emphasized the importance of

whether the plaintiff would constitute a reliable attorney gen-

eral for litigating the issues of the public interest. Clarke, 479

U.S. at 397 n.12. Here, federal employees are highly motivated

to perform the function of a private attorney general when an

agency underestimates contractor performance. Enforcement

of the regulations requiring an accurate cost comparison fur-

thers the federal employees economic interest in continued

employment at the same time advances the congressional goal

of procurement efficiency. The decision below has the unfortu-

nate effect of denying the public any advocate to fulfill the

private attorney general’s role when an agency underestimates

contractor performance. The Circuit Court’s decision is incon-

sistent with Supreme Court precedent and defeats the Congres-

sional goal of procurement efficiency.

essentially looked past the federal employees’ role in the

process and considered only the employees subjective

interest in continued employment. In effect, the D.C

Circuit test for the zone-of-interest requires an a@ priori

showing of no possible conflicts with the statute a plain-

tiff relies upon. The Circuit Court’s application of th:

zone-of-interest test ignores this Court’s instruction that

the test “is not meant to be especially demanding.” More g

over, the decision reconstitutes the D.C. Circuit’s restric-

tive zone-of-interest test overturned in Clarke v. Securities

Industry Assn., 479 U.S. 388, 400 n. 15 (1987)

For these reasons, the petition for a writ of certiorari

should be granted.

Respectfully submitted

YY. STEPHAN GORDON*

General Counsel

Atice L. BoDLey

Deputy General Counsel

JosHUA F. Bowers

Staff Attorney

NATIONAL FEDERATION O}

FEDERAL EMPLOYEES

1016 16th Street, N.W

Washington, D.C. 20036

(202) 862-4454

Attorneys for Petitioners

*Counsel of Record

ae nmaliiieel

ABLE

7 2 aes

aderal Employees

D.C

APPENDIX

OF CONTENTS

Page

v. Cheney, No.

Cir. Aug. 25, 1989) ... App. 1

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4 ait i tVUWYCES ¢

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App. 1

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 2, 1989 Decided August 25, 1989

No. 88-5271

NATIONAL FEDERATION OF FEDERAL

EMPLOYEES, et al.,

APPELLANTS

Vv.

RICHARD B. CHENEY, Secretary of Defense, et al.

Appeal from the United States District Court

for the District of Columbia

(Civil Action No. 88-00834)

Joshua F. Bowers, with whom H. Stephan Gordon

was on the brief, for appellants.

Nathan Dodell, Assistant United States Attorney,

with whom Jay B. Stephens, United States Attorney, John

D. Bates, and R. Craig Lawrence, Assistant United States

Attorney, were on the brief, for appellees.

Before MIKVA, SILBERMAN and SENTELLE, Circuit

Judges.

Opinion for the Court filed by Circuit Judge SEN-

TELLE.

Dissenting opinion filed by Circuit Judge MIKVA.

SENTELLE, Circuit Judge: Appellants, the National

Federation of Federal Employees and Local 273 of the

National Federation of Federal Employees (collectively

“appellants” or “NFFE”), contest a United States Army

decision to “contract out” to private contractors the ser-

vices formerly provided by government employees of the

Directorate of Logistics, Fort Sill, Oklahoma. The District

Court held from the bench: (1) that NFFE, pursuant to

App. 2

section 702 of the Administrative Procedure Act (“APA”),

5 U.S.C. Section 702 (1982), lacked standing to sue under

either Office of Management and Budget (“OMB”) Circu-

lar A-76 (Revised) or section 1223(b) of the National

Defense Authorization Act of 1987 (“1987 DoD Authori-

zation Act”)!; and (2) that administrative decisions to

contract out are not subject to judicial review under the

APA, 5 U.S.C. Section 701(a). We affirm the District

Court’s holding that NFFE lacks standing to bring this

action and therefore find it unnecessary to address the

reviewability of contracting out decisions.

I. BACKGROUND

Under OMB guidelines, government agencies must

determine “whether commercial activities should be per-

formed under contract with commercial sources or in-

house using Government facilities and personnel.” OMB

Circular A-76 (Revised) para. 1 (August 4, 1983) (“OMB

Circular A-76”).2 In 1980, the U.S. Army Training and

Doctrine Command (“TRADOC”), pursuant to the Circu-

lar, directed the Fort Sill Directorate of Resources Man-

agement (“Fort Sill”) to conduct a commercial activity

review of the Fort Sill Directorate of Logistics. The

' Pub. L. No. 99-661, Section 1223(b), 100 Stat. 3972 (cod-

ified at 10 U.S.C. Section 2304 note (Supp. V 1987)).

2 OMB Circular A-76 was Originally issued in 1966 and

subsequently was revised in 1967, 1979, and 1983. See OMB

Circular A-76 (Revised) para. 4.b. (August 4, 1983). The Circu-

lar summarized a policy of the Bureau of the Budget developed

in Bureau Bulletins issued in 1955, 1957, and 1960. Id. The 1983

Circular revision is the focus of this appeal.

App. 3

Directorate of Logistics provides support, maintenance,

transportation, and supply functions for Fort Sill and

surrounding installations. It also operates and maintains

a fleet of 500 government vehicles.

Over the next four years, Fort Sill conducted an

extensive examination of the responsibilities of the Direc-

torate of Logistics, separating “commercial” and “govern-

mental” activities and formulating all the commercial

activities into a Performance Work Standard (“PWS”) for

a projected five-year contract term. Fort Sill then deter-

mined the in-house Most Efficient Organization (“MEO”)

costs based upon the PWS. With this estimate as a base-

line, and with other appropriate adjustments,? in Novem-

ber 1984, Fort Sill issued a solicitation for bids, referred to

as a Request for Proposals (“RFP”), from private contrac-

tors to provide the services at that time provided by the

Directorate of Logistics based on the same PWS used for

the in-house estimate.

In response to the RFP, in May 1986, Fort Sill received

eight contractor proposals, all of which were evaluated

by an Army Source Selection Evaluation Board (“Evalua-

tion Board”). As is typical in government contracting, the

Evaluation Board met with officials from the eight con-

tractors for “discussions” regarding improvements on

their proposals. After these discussions, Fort Sill re-

solicited bids seeking the contractors’ best and final of-

fers (“bafos”). The bafo proposals were received in July

19Ro

Most significantly, OMB Circular A-76 requires a ten

percent conversion differential be added to contracting costs.

App. 4

In August, the OMB revised its policy regarding cal

culation of retirement costs for in-house estimates. Like-

wise in February 1987, the method of determining costs

of a contractors’ social security and thrift plan contribu

tions was revised. Based on these changes, TRADOC

solicited a second round of bafo bids. All second round

bafo proposals were audited by the Defense Contract

Audit Agency

In May of 1987, the Evaluation Board selected the

proposal submitted by Northrup Worldwide Aircraft Ser-

vices, Inc. (“Northrup”). In June, Fort Sill compared the

selected Northrup proposal, estimated at $53.2 million

over the five-year term, with the in-house MEO estimate

of $61.4 million over the same period. After TRADOC

approval of the selection, Fort Sill announced tentatively

an award of the contract to Northrup, which necessarily

would result in termination of in-house services.

Pursuant to federal and Army acquisition regulations

and OMB Circular A-76, an administrative appeal period

ran from June 10 to July 22. During the period NFFE

directly and through its members appealed the award,

alleging several violations of the OMB Circular A-76 Cost

Comparison Handbook, including, inter alia, inflated in

house employee performance costs, artificially high over-

head and support costs,4 and improperly calculated pri

vate contractor conversion costs and profit

* TRADOC received, inter alia, 330 letters of concern from

the NFFE and Directorate of Logistics employees and another

1,131 letters of concern from non-Directorate employees. Joint

Appendix (“1.A.”) at 338-39

eee nina ieee nl

Board \

eleven appeals and in a fifty-four page decision letter

two

soard concluded that the

¢ ugh to alter the announc

son or to reverse the initial

para. 4.b. (J.A. at 39

ine Government A

Suant tO a ¢ nyressliona a:

Sill contracting out decisior

that review, on December 4

Army directed TRADOC t

others.

App

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with Northrup to correct a

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\ppellants then filed

ort Sill, in its contractin

Local 273 of t N FFI

yrievance with Fort Sill. S

before this Court, appellant

been withdrawn. Additio1

ees filed a bid protest wit

under the ( ompetitior

8 Stat. 1175 (codified 1

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1987) (J

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App. 6

comparison procedures set forth in OMB Circular A-76

and the requirements of section 1223(b) of the 1987 DoD

Authorization Act.6 Appellants sought injunctive and

other relief as necessary and proper.”

Appellees moved to dismiss. The District Court

granted appellees’ motion from the bench, holding that

(1) under section 702 of the APA and the “zone of interest

test” appellants lacked standing to sue; and (2) under 5

U.S.C. Section 701(a) the contracting out decision was not

subject to judicial review under either the Circular or the

1987 DoD Authorization Act, as the former commits the

decision to nonreviewable agency discretion and the

6 Section 1223(b) provides:

For the purpose of determining whether to contract

with a source in the private sector for the perform-

ance of any Department of Defense function on the

basis of a comparison of the costs of procuring sup-

plies or services from such a source with the costs of

providing the same supplies or service by the De-

partment of Defense, the Secretary of Defense shall

ensure that all costs considered, including the costs

of quality assurance, technical monitoring of the per-

formance of such function, liability insurance, em-

ployee retirement and disability benefits, and all

other overhead costs, are realistic and fair.

10 U.S.C. Section 2304 note.

? Appellants also argued that a Northrup employee’s con-

flict of interest arising from his prior employment with the

Army, where he allegedly had some involvement in this con-

tracting out decision, should void the award. Because appel-

lants failed to raise this allegation in their complaint before the

District Court, the issue was not before that Court and there-

fore is not properly before us.

App. 7

latter fails to provide any law or ascertainable standards

to apply. Transcript of Hearing, National Federation of

Federal Employees v. Carlucci at 2-3 (D.D.C. Aug. 10, 1988),

J.A. at 8-9. On Appeal, appellants seek reversal of the

District Court’s decision on standing and remand for

adjudication on the merits.

II. ANALYSIS

A. APA Standing: The Zone of Interest of the Relevant

Statutes.

A party must have standing to bring suit in federal

court. A court may “refuse to determine the merits of a

legal claim, on the ground that even though the claim

may be correct the litigant advancing it is not properly

situated to be entitled to its judicial determination.” 13 C.

WRIGHT, A. MILLER & E. COOPER, FEDERAL PRAC-

TICE AND PROCEDURE Section 3531, at 338-39 (1984)

Standing focuses on the party and not on the issues

sought to be adjudicated. See Flast v. Cohen, 392 U.S. 83,

99 (1968). The requirements of standing are generally

separated into two categories: the constitutional require-

ments of Article III® anc the prudential requirements

* Article Ill requires an actual “Case[]” or “Controvers|y]”

tor standing. U.S. CONST. art. III, section 2 cl. 1. In Valley Forge

Christian College v. Americans United for Separation of Church and

State, Inc., 454 U.S. 464 (1982), the Supreme Court wrote that

‘at an irreducible minimum” this equates to an “ ‘[1] actual or

threatened injury as a result of the putatively illegal conduct of

the defendant’... ‘[2] fairly ... trace[able] to the challenged

action’ and... ‘[3] likely .. . redress[{able] by a favorable

decision.” Id. at 472 (citations omitted). Thus injury without

(Continued on following page)

App. 8

crafted by the Judiciary. See generaliy, Center for Auto

Safety v. National Highway Traffic Safety Administration, 793

F.2d 1322, 1328-38 (D.C. Cir. 1986). Prudential standing

requires that the “plaintiff's complaint fall within ‘the

zone of interests to be protected or regulated by the

Statute or constitutional guarantee in question.’ ” Valley

Forge Christian College v. Americans United for Separation of

Church and State, Inc., 454 U.S. 464, 474-75 (1982) (quoting

Association of Data Processing Service Organizations v.

Camp, 397 U.S. 150, 153 (1970) (footnote omitted).

In the instant case, appellants assert standing under

section 702 of the APA. That section provides standing to

“[a] person suffering legal wrong because of agency ac-

tion, or adversely affected or aggrieved by agency action

within the meaning of a relevant statute.” 5 U.S.C. Section

702 (emphasis added). Section 702 and the prudential

zone of interest test are intimately related -— the former

provides a statutory grant from Congress to an aggrieved

party to contest agency action and the latter provides a

judicial limitation necessary to ensure that the proper

party is asserting the claim against the agency. As the

(Continued from previous page)

traceability and redressability does not satisfy Article III. See

National Maritime Union of America v. Commander, Military Sea-

lift Command, 824 F.2d 1228, 1235 (D.C. Cir. 1987) (government

contractor’s employees’ “loss of present or future jobs” as a

result of contract award to other contractor constituted eco-

nomic injury but was “neither fairly traceable to the putatively

illegal omission of a wage determination [under the Contract

Services Act] . . . nor fairly redressable by the remedy

[sought]”). Because we hold that appellants lacks standing on

zone of interest grounds, we find it unnecessary to determine if

appellants in fact suffered a traceable and redressable injury.

AS SP ee.

App. 9

Supreme Court has stated, the zone of interest test is

“most usefully understood as a gloss on the meaning of

[section] 702,” particularly since the ‘principal cases in

which the. . . test has been applied are those involving

claims under the APA.” Clarke v. Securities Industry Asso-

ciation, 479 U.S. 388, 400 n.16 (1987).

Thus, we are required to determine whether appel-

lants’ interests bring them within “that class of ‘ag-

grieved’ persons .. . entitled to judicial review of ‘agency

action.” “ Association of Data Processing, 397 U.S. at 157, by

the “relevant statute[s],” 5 U.S.C. Section 702, under

which the agency acted, thereby conferring upon appel-

lants standing to sue. The statutes under which appel-

lants assert standing are (1) the two statutes under which

OMB Circular A-76 is purported to be authorized, the

Budget and Accounting Act of 1921, as amended, ? and

the Office of Federal Procurement Policy Act Amend-

ments of 1979,19 see OMB Circular A-76 para. 3 (J.A. at

12); and (2) section 1223(b) of the 1987 DoD Authoriza-

ticn Act, 10 U.S.C. Section 2304 note, requiring a “realistic

and fair” cost comparison in a decision to contract out.’

In Clarke, the most recent and leading Supreme

Court statement on the zone of interest test, Justice

White, writing for the Court, explained that

[t]he zone of interest test is a guide for deciding

whether, in view of Congress’ evident intent to

* Act of June 10, 1921, ch. 18. 42 Stat. 20 | 1921) (codified at

31 U.S.C. Section l et seq.)

Pub. L. No. 96-83, 93 Stat. 648 (1979) (codified at 4]

U.S.C. Section 401 et seq.)

S€e@ Supra note 6

App. 10

make agency decision presumptively review-

able, a particular plaintiff should be heard to

complain of a particular agency action. In cases

where the plaintiff is not itself the subject of the

contested . . . action, the test denies a right of

review if the plaintiff’s interests are so mar-

ginally related to or inconsistent with the purposes

implicit in the [relevant] statute that it cannot

reasonably be assumed that Congress intended

to permit the suit.

479 U.S. at 399 (emphasis added). Clarke held that the

interest of the Securities Industry Association, a trade

Association representing securities dealers, was “plaus-

ibl{y] relat{ed] to the policies underlying . . . the National

Bank Act,” and therefore the Association had standing

under that Act to contest an action of the Comptroller of

the Currency. Id. at 403.

The Court noted that the “test is not meant to be

especially demanding; in particular, there need be no

indication of congressional purpose to benefit the would-

be plaintiff.” Id. at 399-400 (footnote and citation omit-

ted). The Clarke Court expressly rejected earlier lower

court suggestions that the zone of interest test requires

“indication of congressional purpose to benefit the

would-be plaintiff.” Id. at 400 n.15 (citing Control Data

Corp. v. Baldrige, 655 F.2d 283, 293-94 (D.C. Cir.), cert.

denied, 454 U.S. 881 (1981)). Instead, the Clarke formula-

tion of the zone of interest test requires that we deny

standing only if appellants’ interest is no more than mar-

ginally related to or in fact inconsistent with the implicit

purposes of the relevant statute. If, after reviewing the

relevant statute and its legislative history, we conclude

that appellants’ interests are consistent with and more

than marginally related to the purposes of the relevant

App. 11

statute, appellants have standing to contest an agency

action under section 702.

Before undertaking our zone of interest inquiry, we

must address the parties’ fundamental misunderstanding

of the relevant question. The issue is not whether appel-

lants’ interests are within the zone of interest of OMB

Circular A-76; section 702 clearly requires that the party

seeking relief be “legal[ly] wrong[ed] .. . , or adversely

affected or aggrieved . . . within the meaning of a relevant

statute.” 5 U.S.C. Section 702 (emphasis added). The Cir-

cular is not a statute, see, e.g., Ketler, Federal Employee

Challenges to Contracting Out: Is There a Viable Forum?, 111

MILITARY L. REV. 103, 110 (1986) (“Circular A-76 pro-

mulgates executive branch managerial! policy”), and, al-

though promulgated pursuant to congressional authority,

the Circular itself cannot grant standing. In Sierra Club v.

Morton, 405 U.S. 727 (1972), the Supreme Court stated

that where a dispute is otherwise justifiable by an Article

III] federal court!? under section 702 of the APA, “the

12 We emphasize that we are here concerned with Article

Ill standing, not standing before an Article I administrative

tribunal, see, e.g., American Trucking Association v. ICC, 673 F.2d

82, 85 n.4. (5th Cir.), cert. denied, 460 U.S. 1022 (1982); Ecee, Inc.

v. FERC, 645 F.2d 339, 349-50 (5th Cir. 1981); Kontag, Inc., Village

of Uyak v. Andrus, 580 F.2d 601, 605-08 (D.C. Cir.), cert. denied,

439 U.S. 1052 (1978), or with a situation in which an agency has

granted administrative standing and failed to adhere to that

grant. See Gardner v. FCC, 530 F.2d 1086, 1090-91 (D.C. Cir.

1976). In fact, NFFE and 1,500 of its members asserted adminis-

trative standing and appealed the contracting out decision to

the Army Review Board. See J.A. at 338-39. The Review Board

apparently granted standing, as it concluded on the merits that

some improprieties required minor changes. Administrative

App. Rev. Bd., supra, at para. 4.b. J.A. at 391.

App. 12

question whether the litigant is a ‘proper party to request

an adjudication of a particular issue’ .. . is one within the

power of Congress to determine.” /d. at 732 & n.3 (quot-

ing Flast v. Cohen, 392 U.S. at 100, other citations omitted).

See also Association of Data Processing Service Organizations

v. Camp, 397 U.S. at 154 (“Congress can, of course, resolve

the question [of standing] one way or another, save as the

requirements of Article II! dictate otherwise.”) (citation

omitted); State of Alaska v. Department of Transportation,

868 F.2d 441, 444 (D.C. Cir. 1989); Center for Auto Safety

793 F.2d at 1335 (Congress may, by legislation, expand

standing to the full extent permitted by Article III, thus

permitting litigation by one who otherwise would be

barred by prudential standing rule, 4 K. DAVIS, ADMIN-

ISTRATIVE LAW TREATISE, Section 24:5, at 226 (2d ed.

1983).13 It is clear then that appellants must be within the

zone of interest of the statutes authorizing OMB Circular

A-76, not OMB Circular A-76, itself.

13 Professor Davis explains:

On the question whether Congress may deter-

mine who has standing, the relevant provision could

be Article |, which confers upon Congress the power

to create legal rights. If Congress may confer rights

upon a class of persons, Congress may also confer rights

to be plaintiffs.

4 K. DAVIS, supra, Section 24:5, at 226 (emphasis in original).

We are not faced with a congressional delegation to the

Executive to promulgate regulations on standing. Thus we do

not address whether Congress may delegate such authority to

the Executive

App. 13

1. Budget and Accounting Act of 1921, as amended.

The first of the two statutes under which the OMB

promulgated the Circular is the Budget and Accounting

Act of 1921, as amended, 31 U.S.C. Section 101 et seq.

("1921 Act”). We have found nothing in the 1921 Act or

its legislative history indicating that Congress contem-

plated in-house federal employees or federal employee

“ ‘fa particular] class [of plaintiff] to be

labor unions as

relied upon to challenge agency disregard of the law.’

Clarke, 479 U.S. at 399 (quoting Block v. Community Nutri-

tion Institution, 467 U.S. 340, 347 (1984), other citation

omitted, brackets in Clarke).’4 Moreover, we have found

'* Congress has amended the Act thirteen times since its

original enactment:

- Budget and Accounting Procedures Act of 1950,

Pub. L. No. 784, ch. 946, title I, pt. I, Sections 101,

102, 64 Stat. 832 (1950). See H.R. REP. NO. 2556, 81st

Cong., 2d Sess. 1, reprinted in 1950 U.S. CODE

CONG. & ADMIN. NEWS 3707, 3707 (an Act “to

modernize and simplify governmental accounting

and auditing methods and procedures”);

- Act of July 28, 1953, Pub. L. No. 161, ch. 256, 67

Stat. 229 (1953) (to provide for a retirement annuity

for the Comptroller General);

- Act of August 1, 1956, Pub. L. No. 863, ch. 8/4,

Section 1, 70 Stat. 782 (1956) (“to improve govern-

mental budgeting and accounting methods and pro-

cedures, and for other purposes”). See also S. REP

NO. 2265, 84th Cong., 2d Sess., 1956 U.S. CODE

CONG. & ADMIN. NEWS 3794, 3794);

Act of August 25, 1958, Pub. L. No. 85-759, Section

1, 70 Stat. 782 (1958) (an Act “to provide tor

(Continued on following page)

App. 14

sufficient support in the legislative history to conclude

that the interests of in-house federal employees are in fact

(Continued from previous page)

improved methods of stating budget estimates and

estimates for deficiency and supplemental appro-

priations”). S. REP. NO. 1866, 85th Cong., 2d Sess. 1,

reprinted in, 1958 U.S. CODE CONG. & ADMIN.

NEWS 3917, 3917);

~ Act of July 13, 1959, Pub. L. No. 86-87, 73 Stat. 197

(1959) (an Act providing for annuities to widows and

children of Comptrollers General);

- Act of July 26, 1966, Pub. L. No. 89-520, Sections 1,

2, 80 Stat. 329 (1966) (an Act providing for retirement

for Comptroller Generals);

~- Legislative Reorganization Act of 1970, Pub. L. No.

91-510, title II, Section 221, 84 Stat. 1169 (1970). See

H.R. REP. NO. 1215, 91st Cong., 2d Sess. 1, reprinted

in 1970 U.S. CODE CONG. & ADMIN. NEWS 4417,

4417-18, 4433-34 (an Act providing, inter alia, for

improved rules and open proceedings of the Con-

gress and granting the Comptroller General the au-

thority “to review and analyze the results of

Government programs and activities”);

~ Act of March 2, 1974, Pub. L. No. 93-250, Section 1,

88 Stat. 323, 324 (1974). See H.R. REP. NO. 697, 93d

Cong., 2d Sess., reprinted in 1974 U.S. CODE CONG.

& ADMIN. NEWS 2778, 2779 (to provide for the

Director and Deputy Director of the Office of Man-

agement and Budget to be appointed by the Presi-

dent with the advice and consent of the Senate);

~ Congressional Budget and Impoundment Control

Act of 1974, Pub. L. No. 93-344, title VI, Sections

601-604, 88 Stat. 323, 324 (1974). See S. CONF. REP.

NO. 924, 93d Cong., 2d Sess. 1, reprinted in 1974 U.S.

(Continued on following page)

App. 15

inconsistent with the animating purpose of the 1921 Act

and, thererore, they are outside the Act’s zone of interest.

Cf. id.

(Continued from previous page)

CODE CONG. & ADMIN. NEWS 3591, 3591 (an Act

to assure congressional budget control, provide for

the congressional determination of the appropriate

level of federal revenues and expenditures, provide

a system of impoundment control, establish national

budget priorities, and provide for the furnishing of

information to Congress by the Executive branch);

- Railroad Revitalization and Regulatory Reform Act

of 1976, Pub. L. Rev. No. 94-210, title III, Section 311,

90 Siat. 60 (1976). See S. REP. NO. 499, 94th Cong., 2d

Sess. 1, reprinted in 1976 U.S. CODE CONG. & AD-

MIN. NEWS 14, 15 (an Act to promote revitalization

of the railroad industry in the United States);

- Comptroller General Annuity Adjustment Act of

1978, Pub. L. No. 95-512, Sections 2-4, 92 Stat. 1799,

1800 (1978);

- General Accounting Office Act, Pub. L. No. 96-226,

title I, Sections 102-104(b) (1), 94 Stat. 312-315 (1980).

See S. REP. NO. 570, 96th Cong., 2d Sess. 1, reprinted

in 1980 U.S. CODE CONG. & ADMIN. NEWS 732,

732-33 (an Act to strengthen the GAO as the investi-

gative and auditing arm of Congress and to improve

budget management and expenditure control rclat-

ing to the Comptroller General and the Inspector

Generals of the Departments of Energy and Health

and Human Services). The Act specifically amends

the Budget and Accounting Act of 1921 to provide

the GAO with sufficiently broad and comprehensive

authority to investigate “all matters relating to the

receipt and disbursement and application of public

funds,” id. at 2, U.S. CODE CONG. at 733; and,

(Continved on following page)

App. 16

Generally, in the 1921 Act Congress sought to coordi-

nate budgeting procedures and to increase efficiency in

5overnment operations after vast governmental growth

during World War I. After the close of the War, the

departments and agencies failed to relinquish authority

which had enured to them during the War. Congress

found departments and agencies duplicating services and

decided to centralize the budgeting system under a single

office in each of the two political branches.

Before enactment of the 1921 Act, each department or

agency developed its own budget and submitted it to

Congress, through the Secretary of the Treasury.'> The

President was never directly linked to this process.'© The

congressional committee Overseeing that department or

agency would authorize and appropriate that budget re-

quest. The total United States budget was never forecast:

(Continued from previous page)

Federal Managers’ Financial Integrity Act of 1982,

Pub. L. No. 97-255, Section 4, 96 Stat. 815 (1982). See

H.R. REP. NO. 38, 97th Cong., Ist Sess. 1, reprinted in

1982 U.S. CODE CONG. & ADMIN. NEWS 1885,

1885-86 (an Act to Improve government internal con-

trols of each executive agency and to require ongo-

ing evaluations and reports under OMB guidelines).

Nothing in these amendments or in their legislative history

suggests that the interests of federal employees and federal

labor unions are more than marginally related to the congres

sional purposes behind the 1921 Act. Cf Clarke, 479 U.S. at 399

> See 59 CONG. REC. 8626 (1920) (statement of Sen

>moot) (debate on 1920 version of Act vetoed on other grounds

by President Wilson: subject matter of 1921 Act substantially

unchanged)

16 Id

App. 17

thus it was easy for expenditures to exceed revenues

because no single office was monitoring total expendi-

tures. Additionally, each department and agency audited

itself with no confirmation by outside auditors.

The 1921 Act established a two-pronged approach to

this budgeting (or lack-of-budgeting) crisis. First, Con-

8ress created a Bureau of the Budget, the predecessor to

the OMB, within, but quasi-independent of, the Depart-

ment of the Treasury. The Bureau was to consolidate all

independent budgets of departments and agencies of the

United States government, eliminate duplication of ser-

vices, and cut funding where services were no longer

needed. The national budget of the Bureau, including an

estimate of revenues for the next fiscal year, would then

become the President's budget which the President sub-

mitted as one document to Congress for revision and

approval.!7

The second prong of the 1921 Act was the establish-

ment of the General Accounting Office (“GAO”) to repre-

sent the legislative interest in the budgeting process. The

GAO was to be directed by a Comptroller General and

Assistant Comptroller General effectively replacing the

Comptroller of the Treasury. The Treasury Comptroller

had been seriously hampered in effectively controlling

Executive branch spending since he served at the plea-

sure of the President. The 1921 Act also transferred al} the

auditors from the various departments and agencies to

GAO so that auditors would not be employed by the

department they were auditing

A pp 18

Congress considered these two separate offices, the

Bureau and the GAO, one within each political branch, as

a functional and valid constitutional “check and balance”

over the expenditure of funds. Representative James W.

Good of lowa, the chief sponsor of the 1921 Act, and

Chairman of both the House Committee on the Budget

and the House Committee on Appropriations, stated:

We provided for [a] system of checks and balances

which ought to exist in every well-regulated

budget plan. The President originates the bud-

get and he transmits it to Congress. It is up to

Congress to determine whether it will accept the

estimates, whether it will modify them, reduce

them, or enlarge them. Congress must then as-

sume full responsibility for its acts, just as the

President assumes responsibility for his when

he makes the budget. After the bill has passed,

then, under the execution of the law, we provide

for that independent establishment in the gener

al accounting office, an office that will be to the

appropriations made by Congress what the Supreme

Court is to construction of laws that are enacted by

Congress.

We create this independent establishment

[the GAO], answerable to Congress, an estab-

lishment that has clerks and accountants, who

will go through every department of the Gov-

ernment. When they find waste and inefficiency,

when they find duplication in the service, they

will come to the committee of Congress that has

jurisdiction of appropriations and report that

fact. That fact will also be communicated to the

President of the United States. With that system

of checks and balances it is believed this great

overlapping of activities, this duplication that

exists in every department of the Government

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App. 20

Nothing in the legislative history of the 1921 Act

suggests that Congress contemplated the protection of

employment of federal employees. Indeed, Representa-

tive Good’s presentation of the 1921 Act to the 67th

Congress suggests a congressional purpose inconsistent

with those interests. That is, the Act would require that

some federal employees be terminated under the new

budgeting process

The director of the [Bureau of the Budget] must per-

form his work without fear or favor. He must do it with a

realization that practically every Senator... will at some

time or another be opposed to what he is doing. He must

do it with a realization that at some time or another

practically every Member of the House will oppose

him. .. . Many [federal employee] offices must be abol-

ished. Some of the men who are here performing a public

service must go heme, and they will have to be sent home; and

when such an officeholder comes from your [congression-

al] district you will go down and see the [employee's

superior] officer in [sic] behalf of the man from your

district whom he is discharging, and Senators will go

down, and they will make strong pleas showing how this

man or that man who is slated to go has been a faithful

public servant and why he should be permitted to re-

main.

When it comes to discharging these men who must be

discharged, | say to you it is going to test the backbone ina

man who has to do this work; it will try the fiber of the

best man that the President can secure. ... We ought not

to throw upon the Secretary of the Treasury this duty. . .

[because this]

App. 21

would simply create disturbance with the other

members of the Cabinet whose organizations by

such act he was attempting to regulate and con-

tro].20

While representative Good made this Statement dur-

ing debate on whether the Bureau of the Budget should

be under the Department of the Treasury or directly

under the Executive Office of the President,?' his state-

ments illustrate that Congress was aware that some feder-

al employees would lose their jobs after the 1921 Act took

effect. He does not hint of any remedy for the severed

employees, or Suggest that the employees may assert

standing upon an act with which their interests are log-

ically inconsistent. Good’s statements support the infer-

ence to be drawn from the text of the Act. That is,

although Congress was well aware that the reformation

of the federal budgeting process would result in a loss of

federal jobs, it afforded the discharged employees neither

protection nor remedy. Thus, the 1921 Act is fundamen-

tally inconsistent with the interests asserted by appel-

lants, who, quite understandably complain that the

2° 61 CONG. REC. 981-82 (1921) (statement of Rep. Good)

(debate on 1921 Act).

*! The House desired an independent Bureau of the Bud-

get whose director reported directly to the President, lest the

director be unable to cut the budget of his superior agency, the

Department of the Treasury. The Senate, fearing that the Secre-

tary of Treasury would lose contro] Over a substantial area of

his responsibility, preterred the Bureau to be an office within

the Treasury. A modest compromise was arranged where the

Secretary of Treasury was a figurehead superior over the direc-

tor of the Bureau.

App. 22

challenged governmental conduct will cause an adverse

impact to in-house employees.

Appellants may have many “interests,” but for zone

of interest purposes we must look to their particular

interests, not to the interests amounting to generalized

grievances of all citizens. See ASARCO, Inc. v. Kadish, ___

U.S. _, 109 S. Ct. 2037 (1989); City of Los Angeles v. Lyons,

461 U.S. 95, 111-12 (1983). The dissent contends that we

proceed from an erroneous “fundamental premise that

the employees cannot assert an interest in having the

government conform to the law in making a contracting

out decision.” Dissent at 5. However, as we have previ-

ously held, “ .. . to satisfy the zone of interests require-

ment, appellants must establish that their particular

interest alleged to have been injured by the [alleged

failure of the government to conform to a law] fali within

the respective zones of interests intended to be protected

or regulated by [that law].” Haitian Refugee Center

Gracey, 809 F.2d 794, 812 (D.C. Cir. 1987) (emphasis add-

ed).

As we noted in Haitian Refugee Center,

[i]f any person or organization interested in pro-

moting ... protection of the rights created by a

statute . . . has an interest that falls within the

zone protected or regulated by the statute

then the zone-of-interest test is not a test be-

cause it excludes nothing. Indeed, such a read-

ing would mean that this court ignores the

Supreme Court’s decisions that persons who

have only a “generalized grievance” about the

way in which government operates do not have

standing.

App. 23

Id. at 813 (citing Schlesinger v. Reservist Comm. to Stop the

War, 418 U.S. 208 (1974); United States v. Richardson, 418

U.S. 166 (1974)).

Concededly, in Haitian Refugee Center, we conducted

our zone of interest analysis without the benefit of the

Clarke decision, but nothing in Clarke changes that analy-

Sis as it applied in Haitian Refugee Center or in the present

case. Indeed, in our recent post-Clarke zone of interest

decision, Hazardous Waste Treatment Council v. EPA, 861

F.2d 277 (D.C. Cir. 1988) (per curiam) (“HWTC”), we

expressly reapproved our prior understanding of the gen-

eralized grievance concept as taught in Schlesinger and

Haitian Refugee Center. In HWTC, we expressly reiterated

that neither individuals “with only a ‘generalized griev-

ance[]’ ” (citing Schlesinger) nor “an Organization” formed

“to advance [a generalized] grievance” (citing Haitian

Refugee Center) has a sufficient interest to support stand-

ing. HWTC, 861 F.2d at 287. Thus, in HWTC, although we

found that a trade association had standing as an organi-

zational representative of the consumer environmental

interest of a member company, we rejected standing to

assert claims based solely on the status as representative

of competitors of entities allegedly advantaged by the

Environmental Protection Agency’s failure adequately to

perform a statutory duty. We did so, analyzing the stand

Ing question in light of Clarke, and expressly revivified

Haitian Refugee Center stating “a rule that gave any such

plaintiff standing merely because it happened to be dis-

advantaged by a particular agency decision would de-

Stroy the requirement of prad®n{ial Standing; any party

with constitutional Standing could sue.” Id. at 283. See also

- ’

Cargill, Inc. v. Monfort of Colorado, Inc., 479 US. 104

App. 24

114-17 (1986) (holding that threatened loss from increased

competition did not alore confer standing on a competi-

tor to bring action under the Clayton Act to enjoin a

proposed merger).

In HWTC, we recognized that the Clarke analysis of

the zone of interest test “ ‘denies a right of review if the

plaintiff’s interests are so marginally related to or incon-

sistent with purposes implicit in the statute that it cannot

reasonably be assumed that Congress intended to permit

the suit.’ ” 861 F.2d at 283 (quoting Clarke, 107 S. Ct. at

757.) We thus found that the test now requires “less than

a showing of congressional intent to benefit but more

than a ‘marginal[] rela[tionship]’ to the statutory pur-

poses.” Id. (brackets in original).??

In the present case, the legislative history of the

Budget and Accounting Act of 1921, as amended, leads us

to conclude that Congress did not contemplate in-house

federal employees and federal employee labor unions as

plaintiffs. Congress carefully crafted a two-pronged

checks and balances budgeting process to coordinate the

United States budgeting process, eliminate duplication of

services, and promote efficiency. Congress knew that

some federal employees would be adversely affected and,

22 To be sure, as the dissent points out, we also held in

HWTC that “[i]n the absence of apparent congressional intent

to benefit, however, there may still be standing if some factor -

some indicator that plaintiff is a peculiarly suitable challenger

of administrative neglect —- supports an inference that Congress

would have intended eligibility.” 861 F.2d at 283. We find no

such factor in this case. We will discuss this question further in

relation to alleged standing under the National Defense Autho-

rization Act of 1987, infra II1A3.

App. 25

instead of giving these employees some recourse, inten-

tionally removed the director of the Bureau of the Budget

from as much external pressure as possible so that he

could make the “hard” decision to reduce the employee

force where necessary. At most, federal employees’ inter-

ests are marginally related to this centralized annual bud-

geting process balanced between the Executive and

Legislative branches. Cf. Clarke, 479 U.S. at 399. It is moree

logical te conclude that federal employees’ interests are

“inconsistent.” Id. Appellants alleged particular interest

in the instant case is protection of the federal jobs of their

members, not governmental efficiency as asserted by

them. See infra.

If governmental efficiency was appellants’ interest

then they would have no greater Article III injury in fact?

than any taxpayer opposing a government appropriation

See Flast v. Cohen, 392 U.S. 82 (1968) (for a taxpayer to

assert standing, the taxpayer must show that the chal-

lenged conduct violates a specific constitutional limita-

tion imposed on the taxing and spending clause and does

not merely exceed the general delegation of powers to

Congress); see also Bowen v. Kendrick, 108 S. Ct. 2562, 2579

(1988) (referring to “Flast and the narrcw exception it

created to the general rule against taxpayer standing”)

Ketler, supra, at 115-16 (“[Flederal employees have ni

greater legal interest in or standing to assert allegations

of government mismanagement [in the contracting out

process] than do ordinary taxpayers.”); see generally, Dis-

trict of Columbia Common Cause v. District of Columbia, 858

F.2d 1, 3-4 (D.C. Cir. 1988).

23 See supra note &.

App. 26

2. The Office of Federal Procurement Policy Act

Amendments of 1979.

In addition to the 1921 Act, OMB Circular A-76 cites

as authority the Office of Federal Procurement Policy Act

Amendments of 1979 (“OFPPAA”), as amended, 41 U.S.C.

Sections 401-420. See OMB Circular A-76 para. 3, J.A. at

12. In 1974, Congress created the Office of Federal Pro-

curement Policy?4 to implement recommendations of the

Commission on Government Procurement to establish a

central body “to provide overall direction of procurement

policy for Federal executive agencies.” H.R. REP. NO.

178, 96th Cong., Ist Sess. 1, reprinted in 1979 U.S. CODE

CONG. & ADMIN. NEWS 1492, 1492. In OFPPAA, Con-

gress amended and extended the life of this Office.

After a thorough review of the OFPPAA and its legis-

lative history, we have found nothing to suggest a con.

gressional purpose more than marginally related to the

interests cf federal employees vis-a-vis procurement poli-

cy. Throughout the legislative history of OFPPAA and its

amendments, Congress emphasized economy and effi-

ciency in government operations. Specifically regarding

“contracting out,” the Senate Committee on Govern-

mental Affairs recognized that there had been a long-

standing “executive branch policy of reliance on the pri-

vate sector” to improve governmental efficiency as ex-

pressed in earlier versions of OMB Circular A-76. S. REP.

24 Office of Federal Procurement Policy Act, Pub. L. No

93-400, 88 Stat. 796 (1974).

App. 27

NO. 144, 96th Cong., Ist Sess. 4 (1979). Congress specifi-

cally validated this Executive branch policy favoring the

private sector in its enactment of the OFPPAA:

The new [contracting out] policy is built on

three principles:

1. Rely on the private sector. The Govern-

ment’s business is not to be in business. If

private sources are available, they should be

looked to first to provide the commercial or

industrial services needed by the Govern-

ment.

2. Retain certain governmental functions

inhouse. Certain functions are inherently gov-

ernmental in nature being so closely related to

the public interest as to demand performance

by Federal employees.

3. Aim for economy. Use cost comparison.

When private performance is feasible and no

overriding factors require in-house perform-

ance, the taxpayer deserves and expects the

most economical performance and therefore

rigorous comparison of contract cost versus

inhouse cost shouid be used when appropri-

ate to decide how the work will be done.

Id. See also H.R. REP. NO. 146, 98th Cong., 1st Sess. 8-9

(1983) (quoting the above “government[] policy on con-

tracting out” and stating that “[t]hese are wise principles,

and in their applicability to all agencies they are entirely

consistent with the goal that the Federal procurement

system be standardized.”). The policy endorsed in the

report does not merely favor the private sector; it en-

dorses “reliance” on the private sector. The obvious pre-

sumption is that private sector performance is more

economical and efficient. Only if the goods or services

App. 28

required are “inherently governmental,”25 as none of the

services in question are, should the procuring agency

look away from the private sector. The third principle’s

call for “rigorous comparison of contract cost versus in-

house cost,” read in the context of the whole policy,

illustrates that Congress wanted in-house costs estimates

to be strictly reviewed, so as not to frustrate the first

principle’s emphasis on the private sector.

Since the legislative history of the OFPPAA endorses

the Executive branch policy of reliance on the private

sector and the Circular finds authority in the OFPPAA, it

is difficult to conclude anything but that the interests ot

federal employees are inconsistent with the purposes of

OFPPAA. As previously discussed, appellants’ real inter-

est in this case is the protection of the federal jobs of its

members, not efficiency in governmental operations. If

appellants’ real interest in this case was governmental

efficiency, they might very well be within the zone of

interest of the purposes of the OFPPAA. But again in the

assertion of that interest of efficiency, they have no great-

er claim to standing than any taxpayers. See pp. 18-20

supra. Their real interest of job protection flies in the face

of a policy that federal departments and agencies,

25 “A Governmental function is a function which is so

intimately related to the public interest as to mandate perform-

ance by Government employees.” OMB Circular A-76 para.

6.e., |.A. at 13. These include, inter alia, criminal investigations;

the management of government programs; activities related to

combat and combat support; the conduct of foreign relations;

the regulations of natural resources; the direction cf intel-

ligence operations; and the regulation of industry and com-

merce. Id. para. 6.e.1.

App. 29

through OMB Circular A-76, should rely on the private

sector. Thus appellants’ interests are inconsistent with the

purposes of the OFPPAA and not within the zone of

interest of that Act. Cf. Clarke, 479 U.S. at 399.

Because we hold that appellants’ interests are not

within the zone of interest of the Budget and Accounting

Act of 1921 or the OFPPAA, the statutory authority for

OMB Circular A-76, appellants may not assert standing

based on those statutes.

3. National Defense Authorization Act of 1987.

Appellants also assert standing under section 1223(b)

of the 1987 DoD Authorization Act, 10 U.S.C. Section

2304 note. That section requires the Secretary of Defense

to “ensure that all costs considered [in a contracting out

decision] . . . are realistic and fair.” See supra note 6.

Appellants contend that the legislative history of the Act,

which prohibits contracting out of federal firefighter and

DoD security guard positions, evidences congressional!

intent to provide employee standing because at least

some government jobs are protected. Additionally they

point out that advocates for federal employees defeated

attempts by private contractors to eliminate built-in

“bias” in the contracting out process favoring federal

emplovees, such as the addition of a ten percent conver-

sion differential which must be added to each contrac-

tor’s bid. We find appellants’ arguments unconvincing

and, after reviewing the legislative history of section

1223(b), conclude that appellants’ interest is inconsistent

with the statutory requirement of a “realistic and fair”

cost comparison.

App. 30

From our review of the legislative history, the phrase

“realistic and fair” was added to the Authorization Act to

protect the private government contractor in the contract-

ing out process against undue built-in “bias” favoring in-

house performance of services. In fact, the phrase was

added at the behest of government contractors in protest

against the ten percent conversion differential. Appellees

point to, and we find convincing, the following explana-

tion of the “realistic and fair” language found in the

Senate Report on the Authorization Act.

Realistic and Fair Cost Comparisons

DOD handicaps contractors’ bidding on sér-

vices and supplies during cost comparisons

against retaining these functions in-house. In

addition to the existing 10% [conversion] bias

used to date, other handicaps are:

Contract Administration Cost - The cost

for the government to administer the contract if

awarded to a private concern is added to the

vendor's bid.

Quality and Technical Assurance Cost -

Quality and technical supervision and assurance

are costs added to the vendor’s bid when con-

tracting out work.

Excessive liability coverage required and

unrealistically low costs for government agen-

cies.

Overhead costs computed for the govern-

ment bid.

Agency cost comparison must be made more

equal for determination of contracting out.

Some DOD organizations have used these hand-

icaps to their advantage in determining the cost

App. 31

comparison outcome. In addition to opening the

door for more competition, the competitions

must be conducced on an “apples to apples”

basis.

S. REP. NO. 331, 99th Cong., 2d Sess. 278, reprinted in 1986

U.S. CODE CONG. & ADMIN. NEWS 6413, 6472. Thus

the legislative history shows that the provision for a

“realistic and fair” cost comparison was designed to pro-

tect the integrity of the contracting out process by resolv-

ing “handicaps” against government contractors — the

apparent intended beneficiaries of section 1223(b).

Obedient to the teachings of Clarke, we must deter-

mine whether the interests of the in-house employees are

only marginally related to or inconsistent with the pur-

pose of the statute. See Clarke, 479 U.S. at 399. As dis-

cussed above, appellants’ real interest in a decision to

contract out is the protection of the jobs of their members.

Private contractors competing to perform the same ser-

vices that appellants’ members now perform are the cen-

tral threat to these government union members’ jobs. The

interests of the in-house federal employees are therefore

“antithetical” to the interests of the private contractors

because “federal employees present an ‘either-or’ situa-

tion in relation to private” contractors. American Federa-

tion of Government Employees, Local 1668 v. Dunn, 561 F.2d

1310, 1313 (9th Cir. 1977) (federal employees lack stand-

ing to contest a contracting out of an Air Force food

service facility). Thus appellants’ interest is inconsistent

with the purpose of the section 1223(b) which provides

for contracting out where that is the most cost-efficient

alternative. It follows that appellants’ interests are not

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App. 34

Congress has indicated no intention to rely on the bu-

reaucracy as a plaintiff class, and, indeed, all evidence Is

to the contrary. The bureaucratic interest functions inter-

nally, as it did in this case in the extensive review con-

ducted by the Evaluation Board, the Administrative

Appeals Review Board, and the General Accounting Of-

fice. See supra, pp. 3-5.

In this connection, we note that the dissent turns the

“intent to rely” analysis on its head, stating that “the

federal employees, and therefore the Union plaintiff here,

do have standing unless the statutes or their legislative

histories reveal a congressional intent to preclude re-

liance on this particular class of plaintiffs.” Dissent at 10

But Supreme Court precedent requires an affirmative not

a negative test: “the essential inquiry is whether Congress

‘intended for [a particular] class [of plaintiffs] to be relied

upon to challenge agency disregard of the law.’ “ Clarke,

479 U.S. at 399 (quoting Block, 467 U.S. at 347) (other

citation omitted). Nothing in Clarke or any other authori-

ty cited by the dissent or the parties suggests that the

assumed unavailability of other plaintiffs is any more

relevant to the intent of Congress in the present context

than it was to the determination of the lack of “citizen

standing” in Schlesinger.

B. Disappointed Bidder Standing.

Lastly, appellants assert standing equivalent to that

of a “disappointed bidder” in a government contract

(Continued from previous page)

disadvantage by reason of departmental contracting out would

have standing to sue.

solicitation and award. Since Scanwell Laboratories, Inc. v.

Shaffer, 424 F.2d 859 (D.C. Cir. 1970), this Circuit has

recognized that a disappointed bidder in a government

contract award has standing under section 702 of the

APA, 5 U.S.C. Section 702, to act as a “ ‘private attorney

general,’ ” in order to “prevent[] the granting of [a] con-

tract[] through arbitrary or capricious action” amounting

to “illegal [agency] activity.” 424 F.2d at 864. See also

National Maritime Union of America, 824 F.2d at 1236-38;

Orange Park Florida T.V., Inc. v. FCC, 811 F.2d 664, 671-72

(D.C. Cir. 1987); Delta Data Systems Corp. v. Webster, 744

F.2d 197 (D.C. Cir. 1954). The disappointed bidder doc-

trine has since been recognized by most circuits?? and

Congress affirmatively recognized the doctrine in the

29 See Choctaw Mfg. v. United States, 761 F.2d 609 (11th Cir

1985): In re Smith & Wesson, 757 F.2d 431 (1st Cir. 1985); CACI,

Inc.-Federal v. United States, 719 F.2d 1567, 1573-75 (Fed. Cir.

1983): B.K. Instrument, Inc. v. United States, 715 F.2d 713 (2d Cir.

1983); Airco, Inc. v. Energy Research & Development Administra

tion, 528 F.2d 1294, 1296 (7th Cir. 1975) (per curiam); Armstrong

and Armstrong, Inc. v. United States, 514 F.2d 402 (9th Cir. 1975);

Haves International Corp. v. McLucas, 509 F.2d 247 (Sth Cir.), cert

denied, 423 U.S. 864 (1975); Merriam v. Kunzig, 476 F.2d 1223,

1241-43 (3d Cir.), cert. denied, 414 U.S. 911 (1973); Keco Indus

Inc. v. United States, 428 F.2d 1233, 1236-38 (Ct. Cl. 1970); but see

People’s Gas, Light & Coke Co. v. United States Postal Service, 658

F.2d 1182, 1193 n.7 (7th Cir. 1981) (questioning disappointed

bidder standing in light of the zone of interest test), Cincinnati

Elec. Corp. v. Kleppe, 509 F.2d 1080, 1086 (6th Cir. 1975) (con-

tending that the Clarke-rejected requirement of congressional

intent to benefit, see Clarke, 479 U.S. at 399-400 & n.15, is

necessary for a party to assert APA standing in the “relevant

statute”

App. 36

legislative history of the Federal courts Improvement Act

of 1982.30

We note that courts have applied disappointed bid-

der status to meet both Article III injury requirements?!

*9 Pub. L. No. 97-164, 96 Stat. 25 (1982) (“FCIA”). FCIA

established the Claims Court which assumed the jurisdiction of

the Court of Claims. Congress indicated an intent to retain the

disappointed bidder or Scanwell doctrine. The Report of the

House Committee on the Judiciary states

It is not the intent of the Committee to change exist-

ing caselaw as to the ability of parties to proceed in

the district court pursuant to the Provisions of the

Admiuistrative Procedure Act in instances of illegal

agency action. See, e.g., Scanwell Laboratories, Inc

Shaffer... . Therefore, the Committee is satisfied

by clothing the Claims Court with enlarged equitable

powers not to the exclusion of the district courts

H.R. REP. NO. 312, 97th Cong., Ist Sess. 43 (1981). The Report

of the Senate Committee on the Judiciary agreed

By conferring jurisdiction upon the Claims Court to

award injunctive relief in the pre-award stage of the

procurement process, the Committee does not intend

to alter the current state of the substantive law in

this area. Specifically the Scanwell doctrine as enun-

ciated by the D.C. Circuit Court of appeals in 1970 is

left in tact [sic]

S. REP. NO. 275, 97th Cong., 2d Sess. 2

U.S. CODE CONG. & ADMIN. NEWS 33

3] a » J

see, e.g., National Maritime, 824 F.2d at 1237 (“Most of

the cases . . . invoke [the disappointed bidder’s] right as a

means to resolve the zone-of-interest question . . . [b]ut we

believe that [it] . . . is essential to article III standing in a

procurement challenge.”)

App. 37

and zone of interest requirements.32 This Circuit has con-

sidered “disappointed bidder” status as establishing the

bidder’s right to step into the shoes of the public and

assert the public interest. In Scanwell Laboratories, Judge

Tamm wrote for the Court:

[T]here is no right in [the disappointed bidder]

to have the contract awarded to it in the event

the district court finds illegality in the award of

the contract. ... Thus the essential thrust of {the

disappointed bidder’s] claim on the merits is to

Satisfy the public interest in having agencies

follow the regulations which contro} govern-

ment contracting. The public interest in prevent-

ing the granting of contracts through arbitrary

Or Capricious action can properly be vindicated

through a suit brought by one who suffers inju-

ry as a result of the illegal activity, but the suit

itself is brought in the public interest by one

acting essentially as a “private attorney gener-

al.”

Scanwell Laboratories, 424 F.2d at 864. More recently, now -

Justice Scalia, while a member of our Court, restated this

emphasis on the public interest: the “main Objective” of

the disappointed bidder doctrine is “to assure that the

government obtains the most advantageou. contract] by

complying with the procedures which Congress and ap-

plicable regulations have provided.” Delta Data Systems,

744 F.2d at 206. See also Orange Park Florida T.V., 811 F.2d

at 672 (“[A] wrongful award of a government contract

constitutes a discrete economic injury to unsuccessful

bidders, who [then] have an incentive to vindicate the

“ See, e.g., B.K. Instrument, 715 F.2d at 719-20; Control Data,

655 F.2d at 293.

App. 38

public interest as well as their own by insisting on the

integrity of the procurement process.”) (citations omit-

ted).

While Judge Tamm’s original language in Scanwell

Laboratories is broadly phrased, apparently to include as a

disappointed bidder anyone “who suffers injury as a

result of the illegal activity,” 424 F2d at 864, a decade

later he made it clear that disappointed bidder status is

unavailable to those who “cannot claim the special rela-

tionship found . . . to exist between a bidder and the

government; unlike the bidder in the context of a solicita-

tion, they have not ‘placed in the hands of the representa-

tives of the government the power to bind [it] to a

contract.’ ” Control Data Corp. v. Baldrige, 655 F.2d at 293

(quoting Merriam v. Kunzig, 476 F.2d at 1242 n.7. The

government is obligated to provide the bidder under this

special relationship with a “legally valid” and “fair pro-

curement,” National Maritime, 694 F.2d at 1237-38, which

presumably fosters competition amongst contractors

thereby benefiting the public interest. See Gull Airborne

Instruments, Inc. v. Weinberger, 694 F.2d 838, 842 (D.C. Cir.

1982). Not every bidder in a solicitation may assert disap-

pointed bidder standing, otherwise nuisance suits could

handicap the procurement system. Rather, standing is

conferred only to those bidders who are “ ‘within the

zone of active consideration’ for the bid’s award.” Nation-

al Maritime, 824 F.2d at 1237-38 n.12 (quoting CACI, Inc.-

Federal v. United States, 719 F.2d at 1574-75, other citation

omitted). See also Morgan Business Assocs., Inc. v. United

States, 619 F.2d 892, 896 (Ct. Cl. 1980). Moreover, the

special relationship ends once the solicitation and award

App. 39

process is complete and the bidder has received his law-

ful and fair procurement. See Gull Airborne Instruments,

694 F.2d at 842-43 (disappointed bidder standing does not

provide right to challenge contract administration).

Neither appellants nor their members bid on a con-

tract and, thus, have never placed themselves in the spe-

cial relationship by which the government can bind them

to the bid. Moreover, with no bid on a solicitation, it is

impossible for them to be within the zone of active con-

sideration. Thus, we hold that appellants do not have

disappointed bidder standing to contest the contracting

vut decision made by Fort Sill. As we stated in National

Maritime, regarding an assertion of disappointed bidder

standing by a union representing employees of an unsuc-

cessful bidder, “the right is [the contractor’s], not [the

union’s].” 824 F.2d at 1238.

II. CONCLUSION

For the above stated reasons, we find that appellants

lacked standing to contest the Army’s contracting out

decision. We therefore find it unnecessary to determine

whether administrative decisions to contract out are sub-

ject to judicial review.

Affirmed

MIKVA, Circuit Judge, dissenting: Today this court

finds that government employees who stand to lose their

jobs as a result of what we must assume - at this stage -

to be illegal contracting out decisions are not entitled to

g 4

App. 40

raise their claim in court. This is not the first time that

our circuit has attempted to restrict the standing of those

who may sue under section 702 of the Administrative

Procedure Act (“APA”). In a series of cases a few vears

ago, including Control Data Corp. v. Baldrige, 655 F.2d 283

(D.C. Cir.), cert. denied, 454 U.S. 881 (1981) and Copper &

Brass Fabricators Council, Inc. v. Department of the Treasury,

679 F.2d 951 (D.C. Cir. 1982), this circuit created a

demanding test for standing under section 702 using the

same zone of interest rubric the majority employs again

here. The test was far more difficult to meet than any

promulgated by the Supreme Court itself and, not sur-

prisingly, the Court specifically disapproved it two terms

ago in Clarke v. Securities Industry Association, 479 U.S.

388, 400 n.15 (1987). This lesson is lost on the majority

today, who pursue the same goal by only slightly differ-

ent means, despite the Supreme Court’s clear signals that

the goal itself is inappropriate.

Originally, the zone of interest test for section 702

claims was adopted, in Association of Data Processing Ser

vice Organizations, Inc. v. Camp, 397 U.S. 150, 153-54

(1970), to enlarge, not restrict, the class entitled to protest

administrative action. See American Friends Service Com

mittee v. Webster, 720 F.2d 29, 49 (D.C. Cir. 1983). The

Supreme Court has repeated loudly and clearly that

courts are to welcome those pursuing grievances under

the APA. In Abbott Laboratories v. Gardner, 387 U.S. 136,

140-41 (1967), the Court said that “the Administrative

Procedure Act’s generous review provisions must be giv-

en a hospitable interpretation” and that “only upon a

showing of clear and convincing evidence of a contrary

App. 41

legislative intent should the courts restrict access to judi-

cial review” (internal quotations deleted). In Barlow v.

Collins, 397 U.S. 159, 166-67 (1970), the companion case to

Data Processing, the Court cautioned that “preclusion of

judicial review of administrative action adjudicating pri-

vate rights is not lightly to be inferred” and that “judicial

review * * * will not be cut off unless there is persuasive

reason to believe that such was the purpose of Congress.”

In its most recent opinion on the subject, the Court reiter-

ated that while the zone of interest test is a gloss on

section 702 and provides some limit to access, it “is not

meant to be especially demanding,” and there need only

be “a plausible relationship” between the interest plain-

tiff asserts and the policies underlying the relevant statu-

tory framework. Clarke, 479 U.S. at 396, 399, 403.

In the 19 years since the Court announced the zone of

interest test for section 702 claims, it has yet to find any

party before it outside that zone. It has only once found

that plaintiffs, though within the zone of interests, were

statutorily precluded from bringing suit, in Block v. Com-

munity Nutrition Institute, 467 U.S. 340, 348 (1984). See also

Clarke, 479 U.S. at 400 (interpreting Block as finding pre-

clusion). In Block, the Court found that granting standing

for the plaintiffs would have permitted an end run

around a carefully constructed administrative review pro-

cedure, enacted by Congress to resolve the same kind of

complaint as plaintiffs brought, with only limited resort

to the court system.

Nonetheless, the majority today has found a way to

deny standing under section 702 to the plaintiff here.

(hat the National Federation of Federal Employees

(“NFFE”) satisfies Article III’s standing requirements is

App. 42

scarcely in doubt. Its members have suffered substantial

injury in fact. The Fort Sill contracting out decision led to

the abolition of 401 positions. More than 200 employees

were scheduled for discharge, 125 other for demotion.

Nor is there a difficult question as to causality or re-

dressability. Plaintiff’s claim is that the Army artificially

inflated the cost of the most efficient in-house perform-

ance of the Fort Sill functions and artificially deflated the

cost of converting to using a private contractor, with the

result that letting the contract to Northrup only appeared

to be the least expensive means of getting the job done

when actually in-house services were least expensive. If

plaintiff is correct, the distortions certainly are causally

related to the Army’s decision to hire Northrup. If plain-

tiff could pursue this matter and prove all its claims, the

Army decision sub judice would have to be vacated and

the Army would be required to choose again the least

expensive option, which would be shown to be the in

house Services

[he majority neither acknowledges nor refutes this

Instead, it holds that the union and its members are not

within the zone of interests of the Budget and Accounting

Act of 1921 (“1921 Budget Act”), the Office of Federal

Procurement Policy Act Amendments of 1979 (“OFP

PAA”), or the 1987 Department of Defense Authorization

\ct (“1987 Authorization Act”). Its reasoning is as fol

lows: (1) the federal employees’ real interest is in keeping

their jobs; (2) the statutes at issue do not indicate any

congressional interest in maintaining or enlarging federal

employment — they, in fact, show an interest in reducing

employment when it can save money without sacrificing

governmental needs; (3) the only way the empioyees can

App. 43

assert an interest in enforcing the rules aimed at increas-

ing government economy and efficiency is as taxpayers,

and under Flast v. Cohen, 392 U.S. 82 (1968), no taxpayer

standing is available to challenge these government ac-

tions.

The majority’s claim — that NFFE’s members are real-

ly only interested in keeping their jobs and that this

interest is either marginally related to or inconsistent

with Congress’ purposes and that the members cannot

assert an interest in enforcing the rules applying to con-

tracting out decisions except as taxpayers — is wholly at

odds with the Supreme Court’s reasoning and decisions

in its APA zone of interest cases

The data processing companies, in the Court’s first

zone of interest case, were really only interested in keep-

ing their profits, an interest certainly marginally related

to Congress’ purposes in enacting the banking laws, but

the Court held that they had standing to enforce the

banking laws’ rules restricting bank activities. Data Pro-

cessing, 397 U.S. at 156-58. Likewise, the travel agents in

Arnold Tours, Inc. v. Camp, 400 U.S. 45 (1970); the invest-

ment companies in Investment Company inenlinite v. Camp,

401 U.S. 617 (1971) (“ICI”); and the discount brokers in

Clarke, all interested solely in their bottom lire, were

permitted to assert the public interest in restricting bank

activities

In each of these cases, the Court understood plain

tiffs’ interest as a desire to hold on to their profits See

Data Processing, 397 U.S. at 152; Arnold Tours, 400 U.S. at

ICI, 401 U.S. at-620; Clarke, 479 U.S. at 403. In each of

these cases, the Court neither found nor suggested that

App. 44

such an intercst was to be found among Congress’ pur-

poses in enacting the statute that the plaintiffs sued un-

der. In Data Processing, the Court specifically distin-

guished Flast as irrelevant. Flast, it said, was a taxpayer

suit, whereas this was a competitor’s suit and the two

“do not necessarily track one another.” Data Processing,

397 U.S. at 152. Thus, the Court has repeatedly granted

standing to plaintiffs whose actual motivation is mar-

ginally related to Congress’ purposes, but whose asserted

interest is consistent with them. See Data Processing, 397

U.S. at 156-58; Arnold Tours, 400 U.S. at 46-47; ICI, 401

U.S. at 620-21; Clarke, 479 U.S. at 403.

In the Supreme Court’s most recent zone of interest

case, Clarke, the Court made explicit what had been im-

plicit in both Data Processing and ICI. “The Court’s con-

cern,” it said of the Data Processing decision, “was to

ensure that the data processors’ association would be a

reliable private attorney general to litigate the issues of

the public interest * * *. [Although expressed in relation to

Article Ill requirements,] the concern that the plaintiff be

‘reliable’ carries over the ‘zone of interest’ inquiry, which

seeks to exclude those plaintiffs whose suits are more

likely to frustrate than to further statutory objectives.”

Clarke, 479 U.S. at 397 n.12 (some internal quotations

deleted). Clarke explains that the Court in JCI did not take

issue with the dissent’s assertion that “there was no

evidence that Congress had intended to benefit the plain-

tiff’s class when it limited the activities permitted nation-

al banks.” Clarke, 479 U.S. at 398. The Court explained

that “it was enough to provide standing that Congress,

App. 45

for its own reasons, primarily its concern for the sound-

ness of the banking system, had forbidden banks to com-

pete with plaintiffs by entering the investment company

business.” Id.

The majority’s argument is essentially that the court

should look behind the plaintiff's asserted interest and

consider its subjective interest. Under the majority’s log-

ic, a criminal defendant, in whose house or on whose

person contraband is found, would not have standing to

assert a fourth amendment claim because his “real” inter-

est is in being free of all searches and seizures, not just

unreasonable ones. That is not the law of standing and

never has been.

Not surprisingly, the majority cites very little author-

ity to support its fundamental premise that the employ-

ees Cannot assert an interest in having the government

conform to the law in making a contracting out decision

That which it does cite is either inapposite or without

legal force. The two cases cited for the proposition that

“for zone of interest purposes we must look to [plain-

tiffs’] personal interests, not to the interests a mounting to

generalized grievances of all citizens,” see Majority Opin-

ion (“Maj. Op.”) at 20 n.22, are not even zone of interest

cases. Nor are they opinions in which the court muses on

the subject of how to approach zone of interest questions.

They do not, in short, support in any way the proposition

for which they are cited.

The first case, ASARCO, Inc. v. Kadish. __ Us.

_109 S. Ct. 2037 (1989), does contain a standing question

whether the state taxpayers or the teachers’ association

App. 46

who brought the suit meet Article III’s standing require-

ments. But Article III standing is not the subject at issue

in the majority’s opinion. The majority expressly decline

to address it. Maj. Op. at 6 n.8. Similarly, City of Los

Angeles v. Lyons, 461 U.S. 95 (1983), does not involve zone

of interest questions, only an Article III one. The major-

ity’s further attempts to support its flawed premise in-

lude only a law review, and a handful of cases or parts

f cases involving defects in Article III standing that do

not address the question here: whether those claiming to

be aggrieved under the APA are permitted to vindicate

public interest as private attorneys general. Haitian

‘enter v. Gracey, 809 F.2d 794 (D.C. Cir. 1987),

olves an Article III question, causality, and a pruden-

tial third-party standing question. United States v. Rich-

irdson, 418 U.S. 166 (1974), is a taxpayer standing case

Schlesinger v. Reservist Committee to Stop the War, 418 U.S

208 (1974), includes both citizen and taxpayer standing

sone involve a zone of interest analysis. The majority

asserts without explanation that assessing zone of interest

ows “logically the same analysis” as deter

—r Sal . Io yaa g.

nining Article II] standing. See Maj. Op. at 28

Th 741 ; _ hh . 3

) ) ) ’ ; ; r

ine questions, nowever, are altogether aifferent

.AatreS ‘ 4, 1 Io iclo ITl ; c +r , ]

ive standing under Article Ill means to have “a personal

- ts k IT) rhe 117 ,TY) Ses R nara Rai 418 l it 179

: t hk WA tt VWPUALRUELTES iN\i se AO i, A Ww c L

y yr that thy p rmliair ana inm?t r + Trviict ho nad ry tly

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ncrete that he will be a determined, practical advocate

Thus, the Court bars a person with only a “generalized

ryrievance, such as the plaintiff claiming citizen standing

in Schlesinger or general taxpayer standing in Richardson

Ray Lo : . . } ss 1 =

gut, the RE NENG RS here-have as persona!

‘ B ‘

ind concrete a stake as the framers of Article III could

App. 47

have had in mind; they have lost their jobs. To be argua-

bly within the zone of interests of a statute, on the other

hand, means that Congress plausibly expected someone

such as the plaintiffs to enforce its expressed statutory

intentions — a wholly separate inquiry. When the Supreme

Court in Richardson and Schlesinger says that it is irrele-

vant in determining standing that no one else would have

standing either to bring the claim, it is saying that if

unlawful behavior does not actually cause anyone any

tangible harm, then Congress will have to be the overseer.

See Richardson, 418 U.S. at 179. When the majority says

that it is irrelevant to the zone of interest inquiry that no

one else could have standing to bring a claim either, it is

saying that Congress must be understood to be indif-

ferent to whether its statutes are being complied with

The zone of interest inquiry is at base an inquiry into

Congress’ intent. See Block, 467 U.S. at 347. Standing is

permitted, as the majority explains at xx, to those whom

Congress intended to be relied on to challenge agency

disregard of the la\» Clarke, 479 U.S. at 399. But how that

intent is to be determined is explained by the Supreme

Court in the same paragraph: there is a presumption of

judicial review of agency action which is overcome when

there is a fairly discernible congressional intent to pre

clude it. Id. Thus, it is the majority who have stood the

“Intent to rely” test on its head. See Maj. Op. at 29

—

This circuit has recently had occasion to consider the

precise question of how the Supreme Court’s zone of

interest decisions are to be parsed as they apply to plain-

tiffs whom Congress was not affirmatively trying to pro-

tect. In Hazardous Waste Treatment Council v. EPA, 861 F.2d

> toe deed

277 (D.C. Cir. 1988) (per curiam), cert. denied US

App. 48

(1989) (“HWTC”), an association of hazardous waste con-

trol companies challenged the agency’s rules as too lax.

The companies’ competitive injuries were that lax rules

meant lower profits for them, as there would be fewer

occasions when other companies would be required to

hire their services. There was no claim that Congress

enacted the environmental law to increase the companies’

profits.

This court analyzed the Supreme Court’s zone of

interest decisions and concluded that: “In the absence of

apparent congressional intent to benefit, however, there

may still be standing if some factor - some indicator that

the plaintiff is a peculiarly suitable challenger of adminis-

trative neglect — supports an inference that Congress

would have intended eligibility.” Jd. at 283. This court

read Clarke, ICI, and Data Processing as examples of this

latter standing. Id. at 284. It explained:

The [Supreme] Court may have inferred con-

gressional approval of such challengers on the

view that those whom Congress explicitly

sought to benefit would make relatively unsui-

table plaintiffs. For example, it is hard to picture

a person or firm that could assert injury in the

form of “the dangers of possible loss of public

confidence in banks and the danger to the econ-

omy as a whole of speculation fueled by bank

loans for investment purposes|[.]”

HWTC, 861 F.2d at 284 (quoting Clarke, 479 US. at 398

n.13). In contrast, competitors suffer “sharp, clear losses”

when banks invade forbidden territory. Id. at 284. This

court then applied this analysis to HWTC. Because it

specifically found that there were other identifiable po-

tential plaintiffs, intended to be protected by Congress,

who were “highly suitable champions of enforcement,”

App. 49

this court concluded that there was no evidence of con-

gressional intent to rely on HWTC and its members. /d.

HWTC’s reading of the Supreme Court’s zone of

interest pronouncements is not only sensible and sup-

portable, it is this circuit’s own recent precedent. As such,

it should be the approach applied to the case at bar by the

majority. It would, however, yield the opposite result.

There is no evidence that Congress intended to benefit

federal employees when it passed at least two of the three

Statutes at issue, and ambiguous evidence as to the third.

Thus the question, according to HWTC, is whether there

is some factor — such as that federal employees are pecu-

liarly suitable challengers of administrative misfeasance -

that would support an inference that Congress would

have intended that they have standing. That factor is

present here.

The federal employees suffer “sharp, clear losses”

whenever over-estimates of the cost of in-house perfor-

mance of a government function or under-estimates of

the cost of converting to private contractors results in

selection of a more expensive choice to do the work than

is available in-house. Though Congress has, in each of the

statutes under which plaintiff claims standing, expressed

a clear purpose favoring economy in the conduct of gov-

ernmental affairs, no other parties are motivated to en-

force any rules preventing this particular type of waste.

The winning bidder can hardly be expected to challenge

cost calculations when it has won. The losing bidders

might sue if the winning bidder was given some advan-

tage over them. They might also sue if the government

under-estimated the cost of in-house performance or

over-estimated the cost of converting to private contrac-

tors, but they have nothing to gain from errors in the

Opposite direction.

App. 50

The only people who suffer loss if the government

commits the type of errors alleged in this case, besides

the employees, are taxpayers. Notwithstanding the ma-

jority’s caution, it is not difficult to come to this conclu-

sion. The only people affected when contracting out

decisions are made are the federal employees, the agency,

the winning bidder, private companies who either lost or

would have competed but for some failure, and the peo-

ple who foot the bill — the taxpayers. The agency cannot

sue itself. All of the private companies - whether the

winning bidder, the losing bidders, or potential competi-

tors — are placed in an advantageous position when the

government overestimates the in-house costs and there-

fore would not be able to allege the harm necessary to

meet Article III standing requirements. Lastly, no tax-

payer, as the majority has persuasively explained, would

meet the personal stake requirement of Article III in order

to sue on such a claim. The displaced federal employees,

on the other hand, have been harmed, and, unlike HWTC,

there is no one else eligible and motivated to enforce

Congress’ purpose.

Therefore, applying the law of standing consistently

with Supreme Court and our own precedent, the federal

employees, and therefore the union plaintiff here, d:

have standing unless the statutes or their legislative his

tories reveal a congressional intent to preclude reliance

on this particular class of plaintiffs. See Clarke, 479 U.S. at

399. As HWTC indicates, the availability of another po-

tential plaintiff whom Congress affirmatively sought to

protect may defeat standing. In the only Supreme Court

case - as well as in every post-Clarke D.C. Circuit case

rejecting APA standing, another potential plaintiff was

App. 51

found to be available. In Block, consumers challenged

orders setting milk market orders (minimum prices paid

to producers) on the ground that the prices were too

high. The Court found that milk handlers were equally

motivated to challenge high prices, and that Congress

had contemplated that they would do so. Block, 467 USS.

at 346. In HWTC, this court found that the consumers of

environmental purity were “highly suitable champions of

enforcement.” HWTC, 861 F.2d at 284. In Water Transport

Association v. ICC, 819 F.2d 1189 (D.C. Cir. 1987), this

court, in denying standing to water carriers, found that

shippers and ports had standing to bring the same claim

and were contemplated by Congress as the parties to be

relied on in enforcing the provisions of the statute. Id. at

1190 n.6, 1192, 1195 n.48, 1197.

While the existence of an alternative plaintiff, affirm-

atively contemplated by Congress, may not always be

sufficient ground to deny Standing, see International

Ladies’ Garment Union v. Donovan, 722 F.2d 795 (D.C. Cir.

1983), neither the Supreme Court nor this court (since

Clarke) has denied APA standing when, as here, no alter-

native plaintiff can be found. In Block, the Supreme Court

also emphasized another factor. It found that Congress

had provided that the handlers were to first subject a

price challenge to administrative review before suing in

court and had prohibited injunctions in such suits. Block,

467 US. at 347-48. The Court explained that permitting

consumers to sue directly would permit handlers, either

as consumers or by joining forces, to manage an end run

around both restrictions and that this showed that Con-

gress did not intend consumers to have standing. Id. at

348. NFFE’s standing in the case sub judice would not

implicate this concern either; none of the three statutes

App 52

under which plaintiff claims standing include any limita-

tions on judicial review that plaintiff's standing would

circumvent

The 1921 Budget Act was enacted to centralize the

sudget process and make it more economical. This is

emphasized repeatedly in its legislative history. For ex

ample, its chief sponsor, Rep. James W. Good, said

describing the evil the law was intended to remedy: “We

have been talking about economy in Government affairs

and at the same time have been practicing extrava-

gance * It will be necessary to adopt a system of

economy and efficiency in every department, establish-

ment, and bureau in order that the Government of the

United States may obtain what it has never obtained

before in all its history, and that is a dollar’s worth of

service, if possible, for every dollar expended.” 61 Cong

Rec. 980 (1921). Thus, an action rought by NFFE t

assure that the Army chooses to obtain needed services

by the least expensive means is wholly consistent wit

Congress purposes

[he majority contends that there is no evidence

Congress actually contemplated the “protection of em

ployment of federal employees.” Maj Op. at 16. This

however, has no bearing on the question, as the Suprem«

Court has specifically noted that such affirmative evi

dence is unnecessary for a plaintiff to come within th

zone of interests of a statute. Clarke, 479 U.S. at 399-400

[he majority next points to two statements in the legisla-

tive history showing that Congress contemp lated that

some federal workers would be discharged as a result of

eftorts to eliminate duplication and waste, and that Con-

gress would actively seek to eliminate “excess” employ-

ees when service would not be injured thereby. Maj. Op

at 16 n.19, 17-18. Again, this has no bearing on the

App. 53

question of standing. Congress’ interest in streamlining

government and firing unneeded workers, is scarcely in-

consistent with NFFE’s suing to force the Army to choose

the most cost-effective method of securing needed ser-

vices. Anc there is no evidence in the legislative history

of hostility to federal employees per se or to continued

federal employment - as long as it is economical.

OFPPAA, like the 1921 Budget Act, was aimed at

increasing the economy and efficiency of the federal gov-

ernment. The majority denies standing on the ground that

the statute and its legislative history do not contain evi-

dence that NFFE’s interest is more than marginally re-

lated to Congress’ purposes - again, implicitly applying

the test disapproved in Clarke. Maj. Op. at 22. What

makes NFFE’s interest more than marginally related to

Congress’ purposes in enacting OFPPAA is not any ex-

plicit language in the statute or legislative history about

federal employees; rather it is NFFE’s unique ability to

enforce Congress’ clearly expressed interest in the gov-

ernment obtaining services at the lowest cost. See HWTC,

861 F.2d at 283

[he majority also denies standing under OFPPAA on

the basis of a Senate Report which it says shows that

Congress favored the private sector over federal employ-

ees, presumed “that private sector performance is more

economical and efficient” and called for strict review of

in-house costs. Maj. Op. at 23. The majority, however, is

reading more into the report than is there. That report

does indeed say that the OMB’s contracting out policy is

based on three principles: reliance on the private sector

retention of functions in-house which are “inherently

App. 54

governmental in nature,” and choosing the most econom-

ical approach after rigorous cost comparisons of contract

versus in-house costs. S. Rep. No. 144, 96th Cong., Ist

Sess. 4 (1979).

Nothing in the report, nor in the amendment Congress

passed, however, evinces any interest in changing the con-

tracting out system from one of absolute neutrality between

federal employees and private contractors where the lowest

bid wins, see OMB Circular A-76, to one which “favors” the

private sector or presumes that the private sector is more

economical and efficient. If Congress wanted to establish a

presumption that the private sector is always more economi-

cal thar. government, why did it continue to permit time-

consuming, lengthy cost comparisons before each and every

contracting out decision? If Congress favored the private

sector, why did it not require the government to use private

enterprise for every function which is not “inherently gov-

ernmental in nature”? The reason Congress acquiesced in

OMB’s provider-neutral decision-making strategy is that its

interest was, first and last, in saving money - an interest

which NFFE’s suit is not only consistent with but promotes

Finally, neither the Senate report nor OFPPAA say anything

at all about review of estimated costs, in-house or otherwise

The 1987 Department of Defense Authorization Act

was, like most authorization statutes, aimed at many

things. Two sections are pertinent to this inquiry, section

1223 and section 1224. The majority’s sole focus is on

Section 1223(b), the 1987 Authorization Act provision

under which NFFE is suing. This is inconsistent with

Supreme Court precedent and results in a distorted view

of Congress’ intention toward contracting out. In Data

Processing, the Court looked not only to the provision

under which plaintiffs sued but also to a related although

App. 55

wholly different act, passed decades later, to find that

plaintiffs satisfied the zone of interest test. See Data Pro-

cessing, 397 U.S. at 155-56. The Court again confirmed the

appropriateness of interpreting the phrase “a relevant

statute” in Section 702 broadly, for the purposes of the

zone of interest test, in its most recent decision on the

issue. See Clarke, 479 U.S. at 396-97.

Looking no further than the 1987 Authorization Act

itself, but at the immediately surrounding provisions as

well as the one plamtiff sues under, it is clear that Con-

gress’ stance throughout was neither consistently pro-

federal employee nor pro-private contractor. The contrac-

ting out provisions were enacted under a section entitled

“Economy and Efficiency.” Pub. L. 99-661, 100 Stat. 3976.

Congress’ interest was in an economically run defense

program and its statutory choices manifest a deliberate

attempt to construct a purposeful balance among the

interests involved. Cf. Wilderness Society v. Griles, 824 F.2d

4,18 n.11 (D.C. Cir. 1987) (finding plaintiff within zone of

interests of federal statutes because they were attempting

to enforce the “purposeful balance” Congress had

struck) .

The legislative history cited by the majority is the

Senate Report explaining the Senate’s version of Section

1223(b). Maj. Op. at 25. The Senate committee, as the

majority explains, called for “realistic and fair” cost com-

parisons because it believed that the Department of De-

fense (“DOD”) was putting its thumb on the scale to

maintain defense functions in-house. The Senate’s ver

sion also made no mention of the ten percent differential

that, under OMB rules, was added to any private contrac

tor’s bid to cover various hidden costs. In addition, the

App. 56

Senate’s version prohibited conversion of any commercial

or industrial activity performed by a private contractor to

performance in-house, excepting emergency conditions,

unless the Secretary of Defense informed Congress first

and provided it with a detailed five-year cost projection

of the two alternatives.

Thus, the majority’s detection of a pro-private contractor

bias in the Senate committee’s report is not without founda-

tion, although even the Senate committee continued to call

for DOD to choose the lowest cost alternative rather than

insisting On private contractors wherever national security

permitted. See S. Rep. 331, 99th Cong., 2d Sess. 277, reprinted

in 1986 U.S. Code Cong. & Admin. News 6413, 6472. How

ever, the bill described by that Senate report did not pass in

its entirety, and several of the changes worked in conference

are instructive.

For example, section 1223(a), as enacted, requires the

Secretary of Defense to procure supplies and services

from the private sector “if such a source can provide such

supply or service to the Department at a cost that is lowe?

(after including any cost differential required by law, executit

order, or regulation) than the cost at which the Department ca)

provide the same supply or service.” 1987 Authorization Act

Pub. L. 99-661, 100 Stat. 3977 (emphasis added). This

language, in particular the insistence that prescribed cost

differentials be added to private contractor bids before

comparing them with in-house cost estimates, was added

In conference. See. H.R. Conf. Rep. 1001, 99th Cong., 2d

Sess. 526, reprinted in 1986 U.S. Code Cong. & Admin

News 6413, 6585. It replaced section 1233 of the 1986 law

that simply required the Secretary to ensure that private

contractors are used when they would be cost effectiv:

and in the best interests of national security. Cee id. Pub

L. 99-145, 99 Stat. 734. It may be debatable whether this

App 57

change manifests an intention to protect federal employ-

ees, as appellant argues, but it certainly shows that Con-

gress had no preference for private contractors Over

federal employees, if the employees were the cl capest

alternative. And it shows that Congress wanted to make

sure that the scales could be tipped toward employees if

this would better reflect real costs (or a policy decision)

The Senate’s tough reconversion was also changed in

conference. Instead ef being prohibited from converting

functions back in-house unless he submitted a five-year

projected comparative cost study, the Secretary was left

free to return functions from private contractor to gov

ernment. Congress decided to require the Secretary only

to maintain data comparing the projected cost of continu

ing the contract to the actual cost of in house perfor

mance and to submit such data to Congress after the first

and second six months after the change. See H.R. Cont

Rep. 1001, 99th Cong., 2d Sess. 527, reprinted in 1986 U.S

Code Cong. & Admin. News 6413, 6586; Pub. L. 99 661

Section 1224, 100 Stat. 3977-78. Again, while the initial

Senate bill might have been interpreted as demonstrating

a pro-private contractor bias, the statute as enacted

shows that any such bias was eliminated before passagt

An earlier statute, in effect when the Fort Sill a

sion was made, sheds further light on Congress purty

with regard to contracting out. it provided

(a) No commercial or industria

T Ty tk. +

of the Department of Wefense nat ()

’ ) — } .

1980, is being performed ’

, Yr) " sy r) ,

C S C1Villa t t

App. 58

(1) to circumvent any civilian personnel

ceiling; or

(2) unless the Secretary of Defense pro-

vides to the Congress in a timely manner -

(A) notification of any decision to

study such commercial or industrial type func-

tion for possible performance by a private con-

tractor;

(B) a detailed summary of a compari-

son of the cost of performance of such function by the

Department of Defense civilian employees and by

private contractor which demonstrates that the per-

formance of such function by a private contractor

will result in a cost savings to the Government over

the life of the contract and a certification that the

entire cost comparison is available;

calculation for the cost of performance of such function

by Department of Defense civilian employees is based on

an estimate of the most efficient and cost effective orga-

nization for performance of such function by Depart-

ment of Defense civilian employees; and

(D) a report, to be submitted with the

certification required by subparagraph (C),

showing -

(i) the potential economic effect

on employees affected, and the potential eco-

nomic effect on the local community and Feder-

al Government if more than 50 employees are

involved, of contracting for performance of such

function; * * *

Pub. L. 96-342, tit. V, Section 502, 94 Stat. 1086 (1980), as

amended by Pub. L. 97-252, tit. XI, Section 1112(a) (1982),

96 Stat. 747, reprinted at 10 U.S.C. Section 2304 note (em-

phasis added).

Understood in context, Congress’ passage of Section

1223(b) indicates that the words “realistic and fair” were

App. 59

meant literally. The Senate report makes it clear that the

committee was concerned with abuses that favored in-

house performance. But not only is there no indication

that the Senate would have been indifferent to DOD

abuses that favored private contractors, there is every

indication — in both the 1987 Authorization Act as well as

the 1980 one - that Congress as a whole intended to

disfavor any abuse which rendered cost comparisons un-

reliable. Thus, NFFE’s suit, which challenges such an

allegedly unreliable cost comparison, promotes Congress’

interest in choosing the most cost-effective supplier of

DOD needs and is well within the zone of interests of the

relevant statutory framework.

Only one circuit has addressed the question of

whether federal employees have standing to challenge

cost comparisons in contracting out decisions. See Ameri-

can Federation of Government Employees’ Local 1668 v. Dunn,

561 F.2d 1310 (9th Cir. 1977) (involving the contracting

out of an air force cafeteria). In Dunn, the Ninth Circuit

decided that the union did not have standing to assert

such a claim, but it decided this without examining the

1921 Budget Act or OFPPAA or any DOD Authorization

Acts. The opinion summarily dismissed plaintiff’s stand-

ing to challenge cost comparisons, “for the reasons set

forth earlier in this opinion.” Dunn, 561 F.2d at 1315. The

only standing discussion earlier in the opinion was

whether plaintiff had standing to bring a different claim

under the Service Contract Act. The court found that

plaintiff was not within the zone of interests of that act.

Id. at 1313. But since NFFE is not suing under the Service

Contract Act, and since the Ninth Circuit does not appear

to have considered whether federal employees are within

the zone of interests of the three statutes at issue here, !

App. 60

fail to see what force the Ninth Circuit’s decision can

have on our analysis of the case before us.

Congress passed a law aimed at saving money. It

established a procedure and standards for the Army to

follow in seeking such savings. This court frustrates that

laudable purpose by putting the procedures and stan-

dards beyond any judicial review. Because NFFE is the

only party available to enforce an affirmative requirement

that Congress has enacted and because nothing in any of

the three statutes or their legislative histories indicates a

Congressional intent to preclude NFFE’s standing, |

would find that NFFE satisfies the prudential require-

ments for standing to bring this suit, as well as the

constitutional requirements. I would also find that the

Army’s decision to contract out the logistics work at Fort

Sill is reviewable. The reviewability of OMB Circular

A-76 is governed by our previous decisions. See Equal

Employment Opportunity Commission v. FLRA, 744 F.2d 842

(D.C. Cir. 1984) (deciding that OMB Circular A-76 was an

“applicable law” within the meaning of 5 U.S.C. Section

7106(a)(2) and a “law, rule, or regulation” within the

meaning of 5 U.S.C. Section 7103(a)(9)(C)(ii)), cert. dis-

missed, 476 U.S. 19 (1986); Department of the Treasury v.

FLRA, 862 F.2d 880 (D.C. Cir. 1988) (same). Section

1223(b) of the 1987 Authorization Act should also be held

to be reviewable, as its limitation, requiring cost compari-

sons to be “realistic and fair” —- meaning accurate —- is no

less specific than the limitation found reviewable by the

Supreme Court in Citizens to Preserve Overton Park v.

Volpe, 401 U.S. 402, 411-13 (1971) (that statute prohibited

use Of parkland unless there was no “feasible and pru-

dent alternative”). I would therefore reverse the decision

below and remand for further proceedings.

App. 61

Today’s decision is a direct rebuff to the Supreme

Court’s Section 702 jurisprudence. Not content to have

tried and failed, this circuit again attempts to prune the

APA’s broad grant of standing, with little regard for

Congress’ will and with insufficient attention to the Su-

preme Court’s or its own precedent. The decision results

in a no man’s land with no review by anybody for impor-

tant parts of two statutes and a regulation adopted pur-

suant to two others. Congress never signalled that it

intended or desired such a bizarre outcome. I| respectfully

dissent.

App. 62

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Issued December 22, 1989

No. 88-5271

NATIONAL FEDERATION OF FEDERAL

EMPLOYEES, et al.,

APPELLANTS

RICHARD B. CHENEY, SECRETARY OF

DEFENSE, et al.

Appeal from the United States District Court

for the District of Columbia

(Civil Action No. 88-00834)

On Appellants’ Suggestion for Rehearing En Banc

Before: WALD, Chief Judge, MIKVA, EDWARDS,

RUTH B. GINSBURG, SILBERMAN, BUCKLEY, WIL-

LIAMS, D. H. GINSBURG and SENTELLE, Circuit

Judges.

ORDER

Appellants’ Suggestion for Rehearing En Banc has

been circulated to the full court. The taking of a vote was

requested. Thereafter, a majority of the judges of the

court in regular, active service did not vote in favor of the

suggestion. Upon consideration of the foregoing it is

| a ss pate te a haa

a ted rR AS at

fata add sine. 4 “>

App. 63

ORDERED, by the Court en banc, that the suggestion

is denied.

Per Curiam

FOR THE COURT:

CONSTANCE L. DUPRE, CLERK

BY:

ROBERT A. BONNER

Deputy Clerk

Chief Judge WALD and Circuit Judges MIKVA and

EDWARDS would grant the suggestion.

A statement of Circuit Judge D. H. GINSBURG, con-

curring in the denial of rehearing en banc, joined in by

Circuit Judges SILBERMAN, WILLIAMS, and SENTELLE

is attached.

A statement of Circuit Judge MIKVA, dissenting from

the denial of rehearing en banc, joined in by Chief Judge

WALD and Circuit Judge EDWARDS, is attached.

D. H. GINSBURG, Circuit Judge, concurring in the

denial of rehearing en banc, with whom SILBERMAN,

WILLIAMS, and SENTELLE, Circuit Judges, concur: Con-

trary to the claim made by petitioner Nationai Federation

of Federal Employees in urging the court to rehear this

case en banc, there is no conflict between the decisions

here and in C C Distributors, Inc, v. United States, 883 F.2d

146 (D.C. Cir. 1989), decided three days earlier. In Nation-

al Federation of Federal Employees v. Cheney, 883 F.2d 1038

(D.C. Cir. 1989) (NFFE), we held that federal employees

lack standing to challenge a decision to contract out

government work because their interest is “inconsistent”

with Congress’s purpose, in Section 1223 of the 1987

App. 64

National Defense Authorization Act, of removing unwar-

ranted “” ‘handicaps’ against government contractors,” id.

at 1050-51; in C C Distributors we held that private con-

tractors have such standing because their interest in com-

peting for government contracts is “closely related to”

Congress’s goal of improving efficiency through contract-

ing out; as the legislative history showed, “DOD had

previously handicapped private contractors” in ways that

the Act was intended to preclude, 883 F.2d at 153. In

applying the test for prudential standing, therefore, these

decisions merely conclude that private contractors fall

within, and federal employees without, “the zone of in-

terests . . . protected or regulated by the statute .. . in

question,” Association of Data Processing Service Orgs., Inc.

v. Camp, 397 U.S. 150, 153 (1970) (footnote omitted), i-e.,

Section 1223 of the 1987 Authorization Act.

As we discussed in C C Distributors, the Senate Re-

port referred to that statute as a “mandatory contracting

out provision” and stated that it would newly “enable

private industry to compete with the government sector

whenever possible. . . .” S. Rep. No. 331, 99th Cong. 277

(1986), reprinted in 1986 U.S. Code Cong. & Admin. News

6413, 6472. See C C Distributors, 883 F.2d at 152. On this

basis, we found it reasonable to infer that Congress in-

tended to permit the plaintiff contractors to bring a suit

challenging the decision of the Air Force, without com-

paring the relative costs, to displace private contractors

with in-house employees in order to perform certain pro-

curement functions. Id. at 148-49. Although we did not

expressly hold that private contractors were “intended

beneficiaries” of the Act, see Hazardous Waste Treatment

Council v. Thomas, 885 F.2d 918, 923 (D.C. Cir. 1989)

nition

tt ene

App. 65

(HWTC IV), as they may well be, it was at least apparent

that their interests systematically coincide with Con-

gress’s interest in encouraging contracting out. See C C

Distributors, 883 F.2d at 153.

Congress mandated contracting out not as an end in

itself, of course, but in order to promote economy and

efficiency in government. See id. at 152-53. Economy and

efficiency are promoted not through indiscriminate use of

private contractors, but by contracting out only where

that is less expensive than using in-house employees,

such as are represented by NFFE. Thus, petitioners argue,

the real interest of government employees in challenging

contracting out decisions is consistent with Congress’s

intent, because the employees will prevail in getting the

work only when they can make it cheaper for the Govern-

ment to have them do the work.

The prudential standing test focuses not upon wheth-

er the outcome of a particular case might be consistent

with the public interest, but upon whether furtherance of

the challenger’s interest is likely consistent with Con-

gress’s intent. See HWTC IV, 885 F.2d at 925-26. Adopting

the level of generality suggested by petitioners would

eviscerate the prudential standing test: challengers to

agency actions might as reasonably assert that because

Congress’s interest in adopting any statute is to promote

the public welfare, they have standing because they will

not prevail unless their position is found to be consistent

with the public welfare.

The prudential standing test is not so porous a filter.

It screens out challenges by persons whom the court

cannot rationally infer that “Congress ‘intended . . . be

App. 66

relied upon to challenge agency disregard of the law.’ ”

Clarke v. Securities Industry Association, 479 U.S. 388, 399

(1987) (quoting Block v. Community Nutrition Institute, 467

U.S. 340, 347 (1984)).

Here, we deal with a statute by which Congress

expressed its intention to improve the relative position of

private contractors, who had previously been hand-

icapped by employees on the inside track. See C C Distrib-

utors, 883 F.2d at 152. Government employees were

clearly not the intended beneficiaries of a statute de-

signed to promote contracting out, nor are their interests

systematically coincident with — on the contrary, they are

systematically incongruent with —- the objective of the

statute. See HWTC IV, 885 F.2d at 924. Their suits there-

fore “are more likely to frustrate than to further,” Clarke,

479 U.S. at 397 n.12, Congress’s attempt to overcome the

innate bias of government agencies against contracting

out.

MIKVA, Circuit Judge, joined WALD, Chief Judge,

and EDWARDS, Circuit Judge, dissenting from the denial

of rehearing en banc: As I stated in my dissent in this case,

I think the court has chosen to contravene the Supreme

Court’s clear teachings on prudential standing. As dis-

turbing, it has twisted a congressional mandate to suit a

purpose Congress never expressed.

I am genuinely perplexed by the majority’s conclu-

sion that the petitioners in this case lack prudential

NE eS a ae ae

App. 67

standing. The Supreme Court has stated on several occa-

sions that the zone-of-interest test denies standing to a

prospective plaintiff only if that party’s “interests are so

marginally related to or inconsistent with the purposes

implicit in the statute that it cannot reasonably be as-

sumed that Congress intended to permit the suit.” Clarke

v. Securities Industry Association, 479 U.S. 388, 399 (1987).

The majority does not deny that this indisputably gener-

ous approach to prudential standing controls our deci-

sion. Yet, the court has turned a presumption in favor of

judicial review into an almost irrebuttable presumption

against such review.

The court acknowledges, as it must, that Congress’

obvious intent to promote efficiency and economy is fur-

thered only by

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