CRS-3 than parties may be adversely affected by such postponement and H. Rept. No. 1980, 79th Cong., 2d Sess. (1946), reprinted in Administrative Procedure Act; Legislative History, 79th Congress, 1944-46 (GPO 1946), at 277-78. See also Sen. Rept. No. 752 at 187 ("This section permits either agencies or courts, if the proper showing is made, to maintain the status quo. While it would not permit a court to grant an initial license, it provides intermediate judicial relief for every other situation in order to make judicial review effective. The authority granted is equitable and should be used by both agencies and courts to prevent irreparable injury or to afford parties an adequate judicial remedy."). In elaborating on the grounds that a court will consider before a stay of agency action will be granted under Section 705, the courts have established a four-part test. In one of the most influential cases, the District of Columbia Circuit Court of Appeal in Virginia Petroleum Jobbers Assoc. v. Federal Power Commission, 259 F. 2d 921, 925 (D.C. Cir. 1958), stated that the petitioner must answer four questions: (1) Has the petitioner made a strong showing that it is likely to prevail on the merits of its appeal? (2) Has the petitioner shown that without such relief, it will be irreparably harmed? (3) Would the issuance of a stay substantially harm other parties? (4) Where does the public interest lie? In 1988, in Washington Metropolitan Area Transit Commission v. Holiday Tours, 559 F. 2d 841 (D.C. Cir. 1988), a D.C. Circuit panel reiterated the applicability of the Virginia Petroleum Jobbers to agency grams of stays, but with one modification. The Holiday Tours court modified that part of Virginia Petroleum Jobbers that requires an agency to demonstrate a challenger's “likelihood of prevailing on the merits." The panel deemed it inappropriate to require an agency to apply this part of the test to applications for administrative stays of its own actions because this would enable an agency to grant a stay only by predicting it had rendered an erroneous decision. Instead, Holiday Tours requires an agency to determine that “an admittedly difficult legal question” is at issue. 559 F. 2d at 844-45. Reported cases involving applications for stays of agency actions have applied Virginia Petroleum Jobbers as modified by Holiday Tours, rejecting petitions that have not met the four-part test or have failed to even address any of the four factors. See, e.g., Special Counsel v. Campbell, 58 MSPR 455 (1993); Jeffrey v. Office of Personnel Management, 28 MSPR 434 (1985); Special Counsel v. Starrett, 28 MSPR 372 (1985); Social Security Administration v. Brennan, 27 MPSR 439 (1985); Berard v. Office of Personnel Management, 24 MSPR 347 (1984). As has been previously detailed, the January 31, 2001, CAAC memorandum did not address any of the four factors requisite to demonstrate the appropriateness of a grant of an administrative stay. The suspension, therefore, would likely be held by a reviewing court to be legally deficient on its face. A further question might be raised whether Section 705 is even available to an agency to suspend an already effective rule. The legislative history is silent in this regard and we have found no reported cases involving a Section 705 stay by an agency of a promulgated rule. All have involved stays of adjudicative actions. On the other hand, Section 705 speaks of "agency action," a term that could easily encompass a completed rulemaking proceeding (of course there appears to be no question that a reviewing court could stay the effectiveness of a final rule on a proper showing). The doubt that is here raised stems from an understanding of the nature of the rulemaking process as it existed in 1946 and as it has evolved since the late 1960's. Briefly, most substantive agency rulemaking prior to the late 1960's was accomplished through adjudicatory 75-850 D-19 CRS-4 proceedings. The FTC, for example, would develop the law of deceptive practices though case by case adjudications, a long, arduous process. It was not until the early 1970's that the FTC first attempted to utilize the APA's notice and comment rulemaking process and received judicial approval of its action. See National Petroleum Refiner's Assoc. v. FTC, 482 F. 2d 672 (D.C. Cr. 1973). The notion of pre-enforcement review of agency rules was not recognized as a valid review mechanism until 1967. See Abbott Laboratories v. Gardner, 387 Ŭ.S. 136 (1967). Indeed, until the 1970's, notice and comment played a subsidiary role in agency decisionmaking and the courts regarded public input to a rulemaking proceeding as "instruments for the education" of the agency officials but not binding or necessary to support an agency's final decision. But since 1970, the Supreme Court and federal courts of appeal have virtually singlehandedly reshaped the structure of informal rulemaking in a series of decisions expanding the obligations of agencies and the role of reviewing courts. The result has been a transformation, without benefit of legislative amendment, of notice and comment rulemaking into a new, on-the-record proceeding that has fostered widespread public participation in the process. These developments are comprehensively treated in legal commentaries. See, e.g., Stewart, "The Reformation of American Administrative Law," 88 Harv. L. Rev. 1669 (1975), Verkuil, "The Emerging Concept of Administrative Procedure," 78 Colum. L. Rev. 258 (1978); De Long, "Informal Rulemaking and the Interpretation of Law and Policy," 65 Va. L. Rev. 257 (1979). The relatively recent emergence of notice and comment rulemaking as the dominant agency policymaking vehicle arguably casts doubt on whether agency suspensions of final rules could have been contemplated to be encompassed by the first sentence of Section 705. In any event, since the early 1980's, APA case law has established that unilateral, indefinite agency suspensions of rules, whether those rules have become effective or not, are deemed to be rescissions of rules that require notice and comment rulemaking in order to be deemed to be valid. See, e.g., Natural Resources Defense Council v. APA, 383 F. 2₫ 752 (3d Cir. 1982); Environmental Defense Fund, Inc. v. Gorsuch, 713 F 2d 802 (D.C. Cir. 1983); Environmental Defense Fund Inc. 716 F. 2d 915 (D.C. Cir. 1983) (per curiam); Natural Resources Defense Council v. EPA, 725 F. 2d 761 (D.C. Cir. 1984). In NRDC v. EPA, the court reasoned that because a rule is defined as an agency statement "of future effect," the effective date is an integral substantive part of the rule, and its suspension is a modification of the rule. 683 F.2d at 761-62. The court also relied on the substantial impact of the suspension on the public. Id. at 764. In 1983, the Supreme Court ruled that rescissions or modifications of substantive rules must be accomplished by a new rulemaking proceeding. Motor Vehicle Mfrs. Ass 'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983)(State Farm). Thus, it is arguable that the change in the nature of informal rulemaking, and the close scrutiny that reviewing courts now give to agency actions that depart from the curent rulemaking norms, lend support to the notion that the FAR rule in question cannot be simply suspended, even for a definite period, under the authority of Section 705. Indeed, there is some evidence that a court might so hold. In an unpublished opinion in Safety-Kleen Corp. v. EPA, 1996 U.S. App Lexis 2324 (D.C. Cir., filed January 19, 1996), a panel of the court in a per curiam order rejected EPA's reliance on Section 705 to stay an effective rule and vacated the administrative stay, stating: "Respondent improperly justified the stay based on 5 U.S.C. § 705 (1994). That statute permits an agency to postpone the effective date of a not yet effective rule, pending judicial review. It does not permit the agency to suspend without notice and comment a promulgated rule, as respondent has attempted to do here. If the agency determines the rule is invalid, it may be able to take advantage of the good cause exception, 5 U.S.C. § 553(b)." This unpublished ruling, of course, may not be binding precedent. But it is suggestive and appears supportive of the proposition that Section 705 stays by agencies of their own administrative actions do not reach rules that have become effective. CRS-5 Under this line of reasoning, such rules must be suspended, modified or rescinded by the same process by which they were promulgated. It is possible that an argument might be made that since matters relating to contracts are exempt from the APA's notice and comment requirements, the CAAC is under no obligation to provide public notice or opportunity for public participation for a suspension action such as that taken in the instant situation. This argument may well be rejected by a reviewing court. While there is little doubt that the "contracts" provision in 5 U.S.C. 553 (a)(2) exempts procurement regulation from the notice and comment requirements of Section 553, see Humana of South Carolina v. Califano, 590 F. 2d 1070, 1082 (D.C. Cir. 1978); Essex Electro Engeneers, Inc. v. United States, 960 F. 2d 1576 (Fed. Cir.), cert. denied, 506 U.S. 953 (1992)(holding Federal Acquisition Regulations interpreting the Contracts Dispute Act were exempt from Section 553); Munitions Carrier Conference, Inc. v. United States, 932 F. Supp. 334, 336-37 (D.D.C. 1996) rev'd on other grounds, 147 F. 3d 1027 (D.C. Cir. 1998), it does not exempt procurement regulations from procedural requirements imposed on such rules by Congress outside of Section 553. Congress did just that in 1984 when it amended the Office of Federal Procurement Policy Act to provide specific requirements for the promulgation of procurement rules that have a "significant" effect or impact on contractors or offerors. See Pub. Law 98-577, title III, sec. 302 (a), codified at 41 U.S.C. 418 b (1994). Section 418 b (a) requires that No procurement policy, regulation, procedure, or form (including The provision also requires that the comment period last for at least 60 days and that the published notice include "a request for interested parties to submit comments on the proposal." Sections 418 b (b), (c). Under its own implementing rules, the CAAC must consider all comments received in response to a notice of proposed revision; arrange for public meetings; prepare any final revision in the appropriate FAR format and language; and must submit any final revision to the FAR Secretarial for publication in the Federal Register and printing for distribution. See 48 CFR 1,201-1 (e)(2000). See also 48 CFR 1.501 which defines “significant revisions" to include "that alter the substantive meaning of any coverage in the FAR systern having significant cost or administrative impact on contractors or offerors, or significant effect beyond the internal operating procedures of the issuing agencies," and details the nature of the notice for opportunity for public comments. The legislative history of the provision underlines the congressional concern that contractors and other interested parties were not being afforded the opportunity to present input with respect to rules that would have imposed substantive impact despite the 1972 recommendation of the Commission on Government Procurement that "criteria and procedures should be established for an effective method of soliciting the viewpoints of interested parties in the development of procurement regulations," and the directive of the Office of Federal Procurement Policy (OFPP) in May 1983 requiring all agencies to publish in the Federal Register notice of significant proposed procurement policies, regulations procedures, and forms and to allow 30 to 60 days in which to submit comments on the proposal. During floor debate on the provision, Senator Coben observed that "[c]ompliance with OFPP's policy directive, however, has been a problem" and stated that the legislation was designed to "codify OFPP's policy for the expressed purpose of enhancing compliance." In a colloquy with the bill's floor manager and principal sponsor, CRS-6 procurement rules that have a substantive impact on the regulated public and to cover "not only ..proposed changes or additions to the Government-wide Federal acquisition regulation, but also to agency supplements to the FAR as well as subagency supplements on down to the lowest level." See 130 Cong. Rec. 29974-76 (1984) (statement of Senator Cohen). In the only judicial ruling construing Section 418 b, the district court in Munitions Carriers Conference, Inc. v. United States, supra, upheld a challenge to a proposed change by the Military Traffic Management Command (MTMC) to the process of bidding for foreign military sales (FMS) shipments. MTMC bad published a notice in the Federal Register stating that, in the future, carriers submitting bids for general traffic (GT) or voluntary under work would have to include FMS shipments in their bid, all at one rate. The notice effectively established a new condition precedent for carriers who would seek the government's GT and voluntary tender business: they had to agree to accept FMS work at the same rate. The plaintiff carriers challenged the notice on the ground that it did not set forth any procedure or establish a time period for public comment prior to its effective date. The court found that while the agency did not have to comply with the Section 553 notice and comment procedures because of the contract exemption, it was bound to follow the rule promulgation requirements of Section 418 b and that plaintiffs had standing to enforce compliance. 934 F. Supp. at 337-338. It rejected the agency's claim the plaintiffs had "constructive notice" of its proposal, holding that the failure to provide for a comment period as required by the statute indicated "that MTMC would abide by the terms of the Notice in spite of any comments received." Id. at 339. The court invoked APA principles to the effect that notice is meaningless if it is clear that an agency has no intent of considering comments. Id. The Court concluded that the agency's notice was inoperative for failure to provide adequate notice and comment for two reasons: “First, Section 418 b itself requires that 'no procurement regulation... may take effect' without proper procedures having been followed. Second, this court may set aside agency actions found to be “without observance of procedure required by law."" Id. at 340. In its State Farm decision, the Supreme Court observed that heightened scrutiny is required in situations where an agency has abruptly changed a settled course of agency action: "A settled course of behavior embodies the agency's informed judgment that, by pursuing that course, it will carry out the policies committed to it by Congress. There is, then, at least a presumption that those policies will be carried out best if the settled rule is adhered to... Accordingly, an agency changing its course by rescinding a rule is obligated to supply a reasoned analysis for the change beyond which may be required when an agency does not act in the first instance.” 463 U.S. 29, 41-42 (1983). The court acknowledged that rules need not last forever. It noted, however, that the forces of change do not always or necessarily point in the direction of CRS-7 in which an agency chooses to move does not alter the standard of judicial 463 U.S. at 42. In the instant circumstances, a reviewing court is likely to take a "hard look" at the validity of CAAC's six month suspension of the just effective contractor responsibility rule. In particular, substantial legal doubts may be raised with respect to whether CAAC made the proper showing of cause required to support an administrative stay under Section 705; whether Section 705 may be properly invoked to administratively stay agency rulemaking at all; and whether CAAC has adhered to the notice and comment requirements of Section 418 b in effecting the six month suspension of the subject rule. While the matter is not free from doubt, it is likely that a reviewing court could find the suspension legally deficient for any or all these reasons. |