Federal Circuit Weighs In on Bid Protest Standing

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The United States Court of Appeals for the Federal Circuit May 10 issued a decision regarding bid protest standing in CACI, Inc.-Federal v. United States et al. In that decision, the court declared previous decisions to no longer be good law and held that the United States Court of Federal Claims erred in finding the protester to lack standing.

The impact of the decision remains to be seen, but the decision merits careful consideration by the defense industry and legal practitioners alike.

An agency’s actions during a federal government contract procurement may be challenged in a bid protest. For example, an offeror who is not awarded a contract may file a “post-award protest” challenging the award decision. To take another example, an offeror who intends to submit a proposal — but is concerned about the terms of the solicitation — can file a “pre-award protest” challenging those terms.

With some exceptions, protests involving federal government contract procurements are typically filed at the Court of Federal Claims, the Government Accountability Office or directly with the procuring agency. To file a protest at the Court of Federal Claims, a contractor must show that it has standing, also known as “interested party” status. In the context of post-award protests, this generally means that the contractor must show it would have a “substantial chance” of receiving the award but for the alleged error in the procurement process.

Contractors must be vigilant about demonstrating standing, as an adverse ruling on standing can prevent a protest from reaching the merits.

The protester in CACI faced such an adverse ruling. The CACI decision involved the Army’s procurement for a Next Generation Load Device Medium that would be used for encryption and decryption on the battlefield. During the procurement, the contracting officer found the protester’s proposal to be technically unacceptable and thus ineligible for award.

The protester challenged the Army’s finding at the Court of Federal Claims.

However, the court determined that the protester was ineligible for a separate reason. According to the court, the protester had an unmitigable organizational conflict of interest. Based on that determination, the court dismissed the protest for lack of standing. The protester then appealed the decision to the Federal Circuit.

The Federal Circuit disagreed with the court’s conclusion. We highlight below three of the Federal Circuit’s findings: interested party status is not jurisdictional; the court’s ability to make de novo findings about interested party status is limited; and the same is true for prejudice.

First, the Federal Circuit stated that the issue of whether a protester is an interested party is a “question of statutory standing rather than Article III standing,” and the court’s “prior caselaw treating the interested party issue as a jurisdictional issue . . . is no longer good law in this respect.” Because statutory standing is not jurisdictional, an “initial determination” that the protester is an interested party “is not required before addressing the merits.”

Second, the Federal Circuit stated that the ability of the Court of Federal Claims to make de novo findings regarding interested party status — that is, “new” findings that the agency itself did not make during the procurement — is limited. Because judicial review of agency action is generally limited to the grounds the agency invoked when it took the action, a court is generally unable to make de novo findings regarding a protester’s interested party status.

The Federal Circuit observed that there are exceptions to this general rule — for example, where the question is purely a legal one. But under the particular facts of this case, the Federal Circuit determined that the Court of Federal Claims was not in a position to make a de novo determination concerning whether the protester had an organizational conflict of interest and thus was not an interested party, because “the statutory standing issue and the merits issue are overlapping.”

Third, the Federal Circuit observed that its findings regarding standing also apply to prejudice. When resolving a bid protest, the Court of Federal Claims generally requires that a protester demonstrate not just that the agency made an error, but that the agency’s error prejudiced the protester. This inquiry is similar to the standing inquiry but occurs after the record has closed and an error has been found.

In CACI, the Federal Circuit explained that, like interested party status, “the issue of prejudice is no longer jurisdictional unless it implicates Article III considerations,” and the court’s “cases to the contrary are no longer good law.”

Despite finding that the Court of Federal Claims erred on the standing question, the Federal Circuit ultimately affirmed on the merits and upheld the contracting officer’s finding of the protester’s technical unacceptability. The impact of the Federal Circuit’s findings on standing, however, will be important to watch. 

Andrew Guy is an associate and Kayleigh Scalzo is a partner in the government contracts practice of Covington & Burling LLP.

Topics: Defense Contracting