The opinion of the court was delivered by: Colleen Kollar-kotelly United States District Judge
Plaintiff New Life Evangelistic Center, Inc. ("New Life") commenced this action on July 13, 2009, naming as defendants Kathleen Sebelius, in her official capacity as Secretary of the U.S. Department of Health and Human Services ("HHS"), and Martha N. Johnson, in her official capacity as Administrator of the U.S. General Services Administration ("GSA") (collectively, "Defendants").*fn1 In the first instance, New Life challenged HHS' denial of New Life's application, made pursuant to Title V of the McKinney-Vento Homeless Assistance Act, 42 U.S.C. §§ 11301 et seq. (the "McKinney Act" or the "Act"), to use a particular piece of federal property in Cape Girardeau, Missouri for establishing a homeless assistance program. On December 8, 2009, after conducting a searching review of the administrative record and the parties' respective submissions, this Court vacated the denial and remanded the action for further proceedings below. On remand, HHS again denied New Life's application and issued a second denial letter. Presently before the Court is New Life's  Second Motion for Vacatur and Remand, through which New Life challenges both the substantive bases for the second denial letter and the procedural underpinnings of the proceedings conducted on remand. After reviewing the parties' submissions, including the attachments thereto, the administrative record, the relevant authorities, and the record of the case as a whole, the Court shall DENY New Life's Second Motion for Vacatur and Remand and DISMISS this action in its entirety, for the reasons set forth below.
The Court assumes familiarity with its prior opinion in this action, which sets forth in detail the factual and procedural background of this case, see New Life Evangelistic Ctr., Inc. v. Sebelius, 672 F. Supp. 2d 61 (D.D.C. 2009), and shall therefore only address the factual and procedural background necessary to address the issues currently before the Court.
A. The McKinney Act and the Accompanying Regulatory Framework Congress passed the McKinney Act in 1987, recognizing that "the federal government 'has a clear responsibility and an existing capacity' to help meet an immediate and unprecedented crisis due to the lack of shelter for a growing number of individuals and families." Nat'l Law Ctr. on Homelessness & Poverty v. U.S. Veterans Admin., 98 F. Supp. 2d 25, 27 (D.D.C. 2000) (quoting 42 U.S.C. § 11301(a)). In particular, Title V of the Act, 42 U.S.C. §§ 11411-11412, and its implementing regulations, 45 C.F.R. §§ 12a.1 et seq., provide a comprehensive legal framework for making "unutilized, underutilized, excess or surplus" federal real property available for use by representatives of the homeless. Id. § 12a.2(a). In the process, the Act appropriates and modifies, in part, the administrative procedures established by the Federal Property and Administrative Services Act of 1949, 40 U.S.C. §§ 541 et seq., which authorizes HHS to dispose of surplus property "as needed for use in the protection of public health," id. § 550(d)(1), a congressional mandate interpreted to include use by organizations that provide "services (including shelter) to homeless individuals," 45 C.F.R. § 12.3(e).
Under the McKinney Act, HHS is charged with soliciting and evaluating applications by representatives of the homeless for the use of properties designated as suitable "surplus" federal property. 42 U.S.C. § 11411(e). The process starts, however, with the Secretary of Housing and Urban Development ("HUD"), which is responsible for canvassing landholding agencies to collect data on properties that are designated as unutilized, underutilized, excess, or surplus. 45 C.F.R. § 12a.3. HUD is required to publish in the Federal Register a description of any available property that has been identified as suitable for use as a facility to assist the homeless. 42 U.S.C. § 11411(c); 45 C.F.R. § 12a.8(a). Thereafter, any representative of the homeless that may be interested in such property must send HHS a written "expression of interest" within sixty days.
45 C.F.R. § 12a.9(a). Upon receipt of a written expression of interest, the property may not be made available for any other purpose until the application has been resolved. Id. § 12a.9(a)(2).
Once HHS has received an expression of interest, it sends the interested party an application packet, which requires the applicant to provide certain information, including, among other things, (i) a description of the applicant organization, (ii) a description of the property desired, (iii) a description of the proposed program, (iv) a description of the applicant organization's ability to finance and operate the proposed program, and (v) a certification of compliance with non-discrimination requirements. Id. § 12a.9(b); see also Appl. Instruction Booklet at AR686-715.*fn2
Applications must be received by HHS within ninety days after receipt of an expression of interest. 42 U.S.C. § 11411(e)(2); 45 C.F.R. § 12a.9(d). Upon receipt, HHS "review[s] [the application] for completeness and, if incomplete, may return it or ask the applicant to furnish any missing or additional required information prior to final evaluation of the application." 45 C.F.R. § 12a.9(e)(1). However, "[d]ue to the short time frame imposed for evaluating applications, HHS' evaluation will, generally, be limited to the information contained in the application." Id. § 12a.9(c). Indeed, the Application Instruction Booklet advises:
[Incomplete applications] will either result in disapproval of the application or a request for additional information. It is to the applicant's benefit to err on the side of providing too much information as opposed to omitting information or not providing enough detail. It is the applicant's responsibility to ensure their [sic] application presents all the information requested in a detailed and complete manner.
Appl. Instruction Booklet at AR691.
HHS must "evaluate each completed application within 25 days of receipt and . . . promptly advise the applicant of its decision." 45 C.F.R. § 12a.9(e)(2); see also 42 U.S.C. § 11411(e)(3). By regulation, all applications must be evaluated on the basis of the following five, non-exhaustive criteria (which are listed in descending order of priority, except for the final two factors, which are of equal importance):
(i) Services offered. The extent and range of proposed services, such as meals, shelter, job training, and counseling.
(ii) Need. The demand for the program and the degree to which the available property will be fully utilized.
(iii) Implementation Time. The amount of time necessary for the proposed program to become operational.
(iv) Experience. Demonstrated prior success in operating similar programs and recommendations attesting to that fact by Federal, State, and local authorities.
(v) Financial Ability. The adequacy of funding that will likely be available to run the program fully and properly and to operate the facility.
45 C.F.R. § 12a.9(e)(2) (emphasis added). In addition, the regulations provide that, when "construction or major renovation is not required or proposed, the property must be placed into use within twelve (12) months from the date of transfer." Id. § 12.3(c). When major construction or renovation is required or proposed, the property must be placed into use within thirty-six months from the date of transfer. Id. Finally, the regulations reserve to HHS the right to add "[a]additional evaluation factors . . . as deemed necessary," provided the application packet is revised accordingly. Id. § 12a.9(e)(3).
B. Factual and Procedural Background
1. The Initial Denial of New Life's Application
New Life is a self-described 501(c)(3) organization that provides services to homeless men, women, and children throughout Missouri, Illinois, Kansas, and Arkansas. Compl., Docket No. , ¶ 1; see also Appl. for Surplus Fed. Property ("Appl.") at AR717. On December 19, 2008, HUD published an availability announcement for the federal building and courthouse located at 339 Broadway Street in Cape Girardeau, Missouri (the "Broadway Street Property"), which had been identified as no longer serving a federal need. See Fed. Property Suitable as Facilities to Assist the Homeless, 73 Fed. Reg. 77821-01 (Dec. 19, 2008).
On January 26, 2009, New Life filed its expression of interest requesting an application for use of the property, see Jan. 26, 2009 Ltr. from B. Calkins to H. Ransom at AR681, and filed a formal application on May 1, 2009, see Appl. at AR716-1006. In its application, New Life proposed serving "temporary and/or chronically homeless persons in Cape Girardeau, Missouri and the surrounding twenty-two rural counties." Id. at AR721. More specifically, New Life proposed providing transitional housing and related services through its "Core Program" to approximately 125 homeless individuals per year, 20 of whom would also be eligible to receive job training through New Life's Leadership Job Training Program, as well as emergency shelter and a free store to an additional 1,100 homeless individuals per year. Id. at AR721-22.
By letter to New Life President Rev. Lawrence W. Rice, Jr., dated May 28, 2009, HHS denied New Life's application for failure to meet the threshold requirements for four of the five criteria set forth in the relevant regulations -- namely, services offered, need, implementation time, and financial ability. See May 28, 2009 Ltr. from P. Bartley to L. Rice at AR1023-26.
2. The Court's Remand Order
On July 13, 2009, New Life commenced this action seeking judicial review of HHS' decision. See Compl. Shortly thereafter, on July 21, 2009, it moved for a preliminary injunction, see Pl.'s Mot. for Prelim. Inj., Docket No. , which was subsequently converted into and treated as New Life's opening brief on the merits, see Order (July 24, 2009), Docket No. , at 1-2. On October 9, 2009, Defendants filed an opposition and the administrative record. See Defs.' Mem. of P. & A. in Opp'n to Pl.'s Opening Merits Br., Docket No. ; AR1-1028, Docket Nos. , . New Life filed a reply on November 9, 2009, and Defendants filed a surreply on November 18, 2009. See Pl.'s Reply in Supp. of its Mot. for Summ. J., Docket No. ; Defs.' Surreply in Supp. of their Mem. in Opp'n to Pl.'s Opening Merits Br., Docket No. .
On December 8, 2009, after conducting a searching review of the administrative record and the parties' respective submissions, this Court vacated HHS' decision and remanded the action for further proceedings below. See New Life Evangelistic Ctr., 672 F. Supp. 2d at 61. In remanding, the Court identified three specific defects in HHS' decision. First, because New Life's underlying application did not include any proposal regarding primary health care services, HHS erred in criticizing New Life for failing to make clear how it proposed to deliver such services.*fn3 Id. at 72-73. Second, HHS erred in relying exclusively on a "point-in-time" survey conducted by the Missouri Housing Development Commission to conclude that New Life failed to demonstrate a sufficient need for a program of the size and scope proposed, as New Life had submitted other evidence and statistical data; to the extent HHS intended to rely only on the point-in-time survey, it was required to explain its decision to discount contradictory evidence. Id. at 73-74. Third, because New Life's proposal included a description of estimated costs for proposed capital projects and revenue sources for those projects, HHS erred in concluding that New Life failed to allocate funds for capital improvements in its budget. Id. at 74-75. The Court declined to address New Life's additional challenges to the decision, electing instead to remand the action for further proceedings below. Id. Although it did note that "HHS would be well served to augment the record below with such additional explanation as may be appropriate," the Court did not impose any specific conditions or limitations on the nature of the proceedings on remand. Id. at 74 n.14; see also Order (Dec. 8, 2009), Docket No. .
3. The Proceedings on Remand
Shortly after the Court's remand order, on December 11, 2009, New Life wrote to HHS concerning the nature of the proceedings on remand. See Dec. 11, 2009 Ltr. from E. Waters to D. Rybicki at AR1059-60. Specifically, New Life "propose[d] that before HHS reevaluates the application per the Court's [remand] order, New Life  supplement its application." Id. at AR1059. By letter dated December 28, 2009, HHS rejected New Life's proposal, indicating that New Life's original application was "complete" and taking the position that the relevant regulations reserve to HHS the discretion to request further information. See Dec. 28, 2009 Ltr. from D. Rybicki to E. Waters at AR1061-62.
By letter dated May 14, 2010, HHS again denied New Life's application and issued a second denial letter (the "Second Denial Letter"). See May 14, 2010 Ltr. from P. Bartley to L. Rice ("2d Denial Ltr.") at AR1215-1225. As before, albeit in considerably greater detail and based on somewhat distinct reasoning, HHS denied New Life's application for failure to meet the threshold requirements for four of the five criteria set forth in the relevant regulations -- namely, services offered, need, implementation time, and financial ability. Id. On July 19, 2010, New Life filed the present motion for vacatur and remand, challenging both the substantive bases for the Second Denial Letter and the procedural underpinnings of the proceedings conducted on remand. See Pl.'s Mem. of P. & A. in Supp. of Pl.'s Second Mot. for Vacatur & Remand ("Pl.'s Mem."), Docket No. [35-1]. Defendants filed an opposition, and supplemented the administrative record to include additional materials referenced in denying New Life's application. See Defs.' Mem. of P. & A. in Opp'n to Pl.'s Second Mot. for Vacatur & Remand ("Defs.' Opp'n"), Docket No. ; Defs.' Not. of Suppl. Filing of Admin. Record, Docket No. ; Defs.' Not. of Suppl. Filing of Admin. Record, Docket No. . On August 26, 2010, Plaintiff filed a reply. See Pl.'s Reply to Defs.' Opp'n to Pl.'s Second Mot. for Vacatur & Remand ("Pl.'s Reply"), Docket No. . The motion is now fully briefed and ripe for adjudication.
Both parties agree that HHS' decision to deny New Life's application for the Broadway Street Property is properly analyzed under the "arbitrary or capricious" standard set forth in the Administrative Procedure Act (the "APA"). See 5 U.S.C. § 706(2)(A) ("The reviewing court shall . . . hold unlawful and set aside agency action, findings, and conclusions found to be . . . arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law"). New Life, as the party challenging the agency action, bears the burden of proof. Abington Crest Nursing & Rehab. Ctr. v. Sebelius, 575 F.3d 717, 722 (D.C. Cir. 2009) (citing City of Olmsted Falls v. Fed. Aviation Admin., 292 F.3d 261, 271 (D.C. Cir. 2002)). In assessing the merits of New Life's challenge, the Court begins with the presumption that HHS' action was valid. Grid Radio v. Fed. Commc'ns Comm'n, 278 F.3d 1314, 1322 (D.C. Cir.), cert. denied, 537 U.S. 815 (2002).
Agency action must generally be affirmed on the grounds originally stated by the agency;
a reviewing court may not attempt to supply "a reasoned basis for the agency's action that the agency itself has not given." Motor Vehicle Mfrs. Ass'n of the U.S., Inc. v. State Farm Mut.
Auto. Ins. Co., 463 U.S. 29, 43 (1983). Nor may counsel's "post hoc rationalizations," offered for the first time on judicial review, substitute for an agency's obligation to articulate a valid rationale in the first instance. El Rio Santa Cruz Neighborhood Health Ctr., Inc. v. U.S. Dep't of Health & Human Servs., 396 F.3d 1265, 1276 (D.C. Cir. 2005). Consistent with these principles, judicial review is typically confined to the administrative record before the agency at the time the decision was made. Envtl. Def. Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C. Cir. 1981).
In order to avoid a finding that the challenged agency action was arbitrary or capricious, the "agency must [have] examine[d] the relevant data and articulate[d] a satisfactory explanation for its action." PPL Wallingford Energy LLC v. Fed. Energy Regulatory Comm'n, 419 F.3d 1194, 1198 (D.C. Cir. 2005) (quoting Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43) (internal quotation marks omitted). In articulating the reason for its action, the agency "must have provided a 'rational connection between the facts found and the choice made.'" Int'l Union, United Mine Workers of Am. v. Mine Safety & Health Admin., __ F.3d __, 2010 WL 4180677, at *4 (D.C. Cir. Oct. 26, 2010) (quoting Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43) (internal notations omitted). An agency's decision may be said to be arbitrary or capricious if any of the following apply: (i) its explanation runs counter to the evidence before the agency or is so implausible that it could not be ascribed to a difference of view or the product of agency expertise;
(ii) the agency entirely failed to consider an important aspect of the problem or issue; (iii) the agency relied on factors which Congress did not intend the agency to consider; or (iv) the decision otherwise constitutes a clear error of judgment. Motor Vehicle Mfrs. Ass'n, 463 U.S. at 43; accord Jicarilla Apache Nation v. U.S. Dep't of Interior, 613 F.3d 1112, 1118 (D.C. Cir. 2010).
This standard of review is highly deferential to the agency; a court need not find that the agency's decision is "the only reasonable one, or even that it is the result [the court] would have reached had the question arisen in the first instance in judicial proceedings." Am. Paper Inst., Inc. v. Am. Elec. Power Serv. Corp., 461 U.S. 402, 422 (1983). That is, it is not enough for the agency decision to be incorrect; so long as it has some rational basis, the court is bound to uphold the decision. Hosp. of Univ. of Pa. v. Sebelius, 634 F. Supp. 2d 9, 13 (D.D.C. 2009) (citing Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971)). At bottom, the reviewing court is not entitled to substitute its judgment for that of the agency. Overton Park, 401 U.S. at 416.
Finally, in evaluating agency action under the "arbitrary or capricious" standard, the reviewing court must take "due account . . . of the rule of prejudicial error." 5 U.S.C. § 706. Just as the burden of establishing that the agency action is arbitrary or capricious rests with the party challenging agency action, so too must that party establish that the errors ascribed were prejudicial. Jicarilla Apache Nation, 613 F.3d at 1121 (citing PDK Labs. Inc. v. U.S. Drug Enforcement Agency, 362 F.3d 786, 799 (D.C. Cir. 2004)). The question of whether an error was prejudicial is necessarily contextual, and courts must proceed with a case-specific application based upon an examination of the record. Jicarilla Apache Nation, 613 F.3d at 1121. However, where the party challenging agency action fails to show that the agency's error may have affected the outcome of the proceedings below, the error is not prejudicial, and it would be senseless to vacate and remand for further proceedings. Id.
With these principles in mind, the Court turns to the merits of the present motion.
New Life tenders three principal arguments in support of its claimed entitlement to a second vacatur and remand: (i) New Life first claims, in essence, that HHS acted arbitrarily or capriciously on remand by engaging in a procedurally defective decisionmaking process, see infra Part III.A; (ii) New Life next contends that, even if HHS' conduct on remand was not procedurally defective, the Second Denial is nevertheless substantively arbitrary or capricious, see infra Part III.B; and (iii) finally, New Life appears to argue that, even if HHS' decision was not otherwise arbitrary or capricious, the Court should nevertheless permit New Life to file a revised ...