Appealing COTS: RpK’s Avenues for Relief

November 5, 2007 at 3:02 pm | Posted in Space Law | 3 Comments

by P.J. Blount with the blog faculty
On October 18 NASA announced its intention to terminate the $175 million Commercial Orbital Transportation Services (COTS) Agreement between it and Rocketplane Kistler (RpK). NASA is granted this ability under the COTS agreement between the two parties. Under Article 17(b)(1) of the space act agreement NASA may terminate the agreement 30 days after it issues a written notice “that RPK has failed to perform under the Agreement.” Before doing so NASA must consult with RpK to determine whether further efforts are needed. NASA did issue such notice, and RpK has decided to appeal. But what options does RpK have?

Under the Agreement RpK must first make three agency appeals (Agreement, Article 19). The first step for RpK is to submit the dispute, in writing, to the RpK Adminstrative Contact and the NASA Administrative Contact. RpK submitted a letter to NASA on October 19 that requests the agency “to either reconsider the termination or to give the company $10 million for progress it has already made.” (space.com) In the letter RpK’s attorney says that NASA’s actions are “arbitrary, capricious, and an abuse of discrection that will not withstand judicial scrutiny should this matter remain unresolved after the three NASA levels of review” (space.com).

If the first level of review fails then the matter will be referred to the “JSC Commercial Crew Cargo Project Manager and the CEO of RpK for joint resolution” (Agreement, Article 19) If this fails, then the “Associate Administrator for Exploration Systems Mission Directorate, or the Deputy of the Directorate will seek to resolve the dipute” (Agreement, Article 19) If this fails then the Administrator or Deputy of the Directorate is given the power to issue a written decision “that shall be a final Agency decision for all purposes including purposes of seeking judicial review” (Agreement, Article 19) It is agreed by the parties that this process of dispute resolution “shall be the exclusive procedure followed by the Parties in resolving any dispute arising under, or based on, an express or implied provision of” the Agreement (Article 19).

If the dispute makes it this far then RpK will have the ability to seek judicial review of the administrative decision. There is no provision for venue in the Agreement, so RpK can seek relief in any “court of competent jurisdiction” according to the Administrative Procedures Act (APA) (5 USC §703). The APA entitles RpK to judicial review if it has suffered a “legal wrong because of agency action, or [has been] adversely affected or aggrieved by agency action within the meaning of a relevant statute” (5 USC §702). The court has the ability to:

(1) compel agency action unlawfully withheld or unreasonably delayed; and
(2) hold unlawful and set aside agency action, findings, and conclusions found to be—
(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;
(B) contrary to constitutional right, power, privilege, or immunity;
(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;
(D) without observance of procedure required by law;
(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or
(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. (?? USC §706)

It seems that RpK may be relying on (2)(a) of this provision due to the the language in the letter it submitted to NASA on October 19.

The Court that hears the case will apply Federal Law due to the Agreement’s choice of law clause, which states that:

U.S. Federal law governs this Agreement for all purposes, including, but not limited to,
determining the validity of this Agreement, the meaning of its provisions, and the fights,
obligations and remedies of the Parties. (Agreement, Article 24).

In the mean time, however, Melissa Mathews (a NASA spokesperson) stated that, “The Oct. 18 termination letter is a final agency decision.” NASA has begun soliciting proposals for the COTS money remaining after the Agreement was terminated. RpK is entitled to enter the competition for this money, but has not made a public statement as to whether it will or not.