The Doctrine of Primary Jurisdiction and Federal Procurement Fraud: The Role of the Boards of Contract Appeals

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The Doctrine of Primary Jurisdiction and Federal Procurement Fraud: The Role of the Boards of Contract Appeals

On 15 September 1986, a federal district court judge issued rulings in a criminal fraud case brought against a major defense contractor that triggered shockwaves throughout the government contracts community. In United States u. Genernl Dynamics Corp.,' a federal judge held that the Armed Services Board of Contract Appeals (ASBCA) was a federal agency having primary jurisdiction over certain issues in a criminal contract fraud case. The criminal tlial WBS interrupted pending determination of ten questions by the board.* The decision was a potential precedent-setting victory far the defendants that derailed a highly publicized Department of Justice prosecution and disrupted other potential eases.3 This decision threatened to upset a longstanding ASBCA practice of refusing to decide cases involvmg criminal fraud.' It also appeared to expand the boards role from that

'Judge Advocste General's Corpe, United States Army Currently amgned m Trial Attorney, Contract Appeals Dwiaian, United States Amy Legal Selvices Agency Formerly asagmd as Officer in Charge, Wildfleeken Branch Office. V Corps, Federal Republic of Germany, 1984 to 1986. Trial Counsel. V Corpa, Frankfurt,

Federal Re.

public af Germany. 1963 to 1964, Platoon Leader and Executive Officer. Campany B.4th Battalion, 68th Armor. Aschaffenbug. Federal Republic OfGermany. 1976 to 1979B A lavmma cum Isudel. Univsrerty of Mmnewafa, 1975. J D , George Washington University %tmnal Law Center, 1982 Graduate. 99th Judge Advocate Officer

Basic

Course. 1962; 35th Judge Advocate Officer Graduate Course. 1987 Cosufhor of T k Prompt P q m n t Ad

Inereosrd Inlrpsl Llabtii.5 far the Go~emmnt,

The Amy Lawyer,Oel. 1982.at24.YemberofthebarsoftheCammonwealthofVagmia,theUnitedStateiCourtofAppealsfor theFourth Circuit, thsClsimaCoult,sndtheUniredSTates Army Coun of Military Review This anide was originally submdted ~n satiaiaefion of the Lheais elective of tho 36th Judge Advocate Officer Graduate ComaelUm~ed

States V. General Dynamic8 Carp, 644 F Svpp 1497 (C D Cal 1966). mb'd, 628 F.2d 1856 (9th Cir 19871

On June 19. 1987, the lstnct court judge dimmed the eiiminal fraud charge againat Generd Dynamics Corp and ssversl named defmdanta on motion of the De. partment of Justice IDOJ) Citing newly dacavered evidence. DOJ filed amendments to ita pleadings eiaentiaily sgresing with the defendant's contentions concerning the best effoone natwe of the contract. See infm notes 16.165, and 167 and accompanying text

"See 2.f.a text Bccompanylng notes 10.18'The Justice Department had indshniiely poetpaned a grand pry mveaflgatian of alleged fraud by Ford Asmspace. the other contractor awarded a Division An Defense gun (DIVAD) pmfatlpe cantract and the e~enfualw~nner of the DlVAD competition. lnards the Pentagon, Nau 26,1986. at 3 The Secretary ofDefenie caneeledihe DIVAD p'oject on 27 Augvst 1985 because of cancem% that the gun system ~ 8 8 madequate

for the Army's needs

'See infm section V D

of an adjudicatory body, deciding cases properly brought before it, to a full-fledged administrative agency issuing advisory opinions to federal courts.

Then, on Apnl2, 1987, the Ninth Circuit Court of Appeal8 reversed the district court in a split decisimj Holding that the Armed Services Board of Contract Appeals was not a regulatory body, the court re-fuused to apply the doctrine of primary jurisdiction.

This article evaluates the rationales for the district court and Ninth Circuit rulings in General Dynamics and explores the ramifications of applying the doctrine of primary jurisdiction in the area of government contract fraud Specifically. the questions presented are whether the primary jurisdiction doctrine allows referral of contract iasues in a criminal fraud case to a board of contract appeals, and if so, whether courts are required to refer those issues.

The doctrine of primaryjurisdiction is not a well-defined rule, but a discretionary tool judgea u ~ e to promote court-agency relationships To properly answer the questions presented the article 18 divided into six parts First we consider the decisions in General Dynom~cs.

Second,

a review of several Supreme Court eases traces the historical development of the primary jurisdiction doctrine. Recent lower court decisions then illustrate it8 current status. Third, the defense industry is analyzed to determine the nature afthe industry and its regulatory scheme. Next, the issues in a criminal fraud case are examined through a discussion of criminal jurisdiction, procurement fraud theones, and various courts' application of the primary jurisdiction doctrine inenminal cases. Fifth, the powers and functions of boards of contract appeals are established through a review of their historical role and the impact of the Contract Disputes Act.? Finally, after a reexamination of the Geneml Dynamics decisions, the article proposes a so. lution in the form of a balancing test to resolve the applicability of the primary junsdiction...

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