The Court of Appeals for the Federal Circuit has resolved once and for all the question of who can file a bid protest before the Court of Federal Claims (COFC).

In Percipient.ai, Inc. v. United States, its Aug. 28 precedential decision, the court – sitting en banc – held that only actual or prospective offerors qualify as “interested parties” under the Tucker Act.

As we previously discussed, a panel of the Federal Circuit ruled in June 2024 that Percipient.ai Inc. had standing to pursue bid protest grounds relating to its being passed over for a subcontract to provide an artificial intelligence solution on a task order procurement awarded to CACI, Inc.- Federal. The majority panel in that opinion felt Percipient had standing as an “interested party” to bring its claims that the government had violated a statutory preference for commercial items, even though Percipient never competed for – and, in fact, admittedly could not have competed for – the underlying task order. This prompted a lengthy dissent that accused the majority of disregarding the statutory history of the Tucker Act’s “interested party” standing requirement, as well as prior Federal Circuit precedent interpreting it.

The government responded by filing a petition for a rehearing en banc, which the Federal Circuit granted in December 2024, thereby vacating the panel’s previous holding. Now, more than six months later, the court sitting en banc has answered definitively that the phrase “interested party” as used in the Tucker Act means only an actual or prospective offeror to the underlying procurement. Prospective subcontractors like Percipient, in other words, lack standing to contest alleged violations of procurement law.

The precedential decision was not unanimous, however, with four of 11 judges dissenting. Thus, while it provided much needed clarity on who can bring a bid protest before the COFC, the Federal Circuit’s en banc decision is likely to polarize members of the government contracting community for years to come. Tracing how the Court reached its ultimate conclusion is therefore necessary to understanding what contractors need to know to establish bid protest standing before the COFC going forward. 

Case Background

At the center of the case is the National Geospatial-Intelligence Agency’s (NGA) award of the SOM AAA Framework for Integrated Reporting and Exploitation (SAFFIRE) contract to CACI. The SAFFIRE contract requires CACI to provide a Structured Observation Management Enterprise Repository (SER) and Computer Vision (CV) capabilities. The contract also includes FAR 52.244-6, requiring CACI to use commercial or non-developmental items “to the maximum extent practicable” during performance. This clause implements the Federal Acquisition Streamlining Act’s (FASA) preference for commercial items.

Percipient did not bid on the SAFFIRE contract because it could not meet the SER requirement. However, Percipient alleged it could satisfy the requirement for CV capabilities, and so hoped to have the opportunity to offer its commercial CV solution to NGA and CACI during performance. After the government and CACI both passed on the idea, Percipient filed a bid protest action in the COFC, seeking to enjoin NGA’s alleged violations of FASA’s preference for commercial products and services. Following the initial dismissal of its case, Percipient appealed to the Federal Circuit.

In a 2-1 decision, the Federal Circuit reversed the dismissal. The majority held the third prong of the Tucker Act, allowing “an action by an interested party objecting to.any alleged violation of statute or regulation in connection with a procurement or a proposed procurement,” to be “very sweeping in scope” because it covers “all stages” of the acquisition process, not just the solicitation (prong one) or award (prong two) phases.

Because Percipient brought its protest grounds under this broadly worded third prong of the Tucker Act, the majority found that a definition of “interested party” to mean “an actual or prospective bidder” – which is how the Competition in Contracting Act (CICA) defines the term in the context of protests brought before the Government Accountability Office (GAO) – to be inappropriate. Instead, the majority held that, in the context of alleged violations of FASA’s commercial preference that are unaccompanied by challenges to the underlying contract, an “interested party” with standing to protest before the COFC “includes an offeror of commercial or nondevelopmental services or items whose direct economic interest would be affected by the alleged violation of the statute.”

In a lengthy dissent, Judge Raymond C. Clevenger III faulted the majority panel for departing from prior Federal Circuit precedent in American Federation of Government Employees, AFL-CIO v. United States (AFGE), which had adopted the CICA definition of “interested party” for purposes of standing under the Tucker Act. Clevenger also faulted the majority panel for disregarding Congress’ intent in enacting the Administrative Disputes Resolution Act of 1996 (ADRA). The ADRA limited the COFC’s bid protest jurisdiction to actions brought by an “interested party” – a term of art, Clevenger noted, Congress would have known to apply only to actual or prospective bidders given the CICA definition and Congress’ decision not to extend standing to prospective subcontractors under the now repealed Brooks Act. 

After granting the government’s petition for rehearing en banc and vacating the panel’s decision, a majority of the Federal Circuit sitting en banc affirmed the lower court’s dismissal of Percipient’s case for lack of “interested party” standing.

Majority Decision

In last month’s decision authored by Judge Todd M. Hughes, in which six other judges joined, the Federal Circuit held that “an interested party is an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract, regardless of the type of challenge brought” under the Tucker Act.

The majority began its analysis with a detailed history of the COFC’s bid protest jurisdiction and the phrase “interested party” in Section 1491(b)(1) of the Tucker Act. The court noted that “[m]uch of the language within § 1491(b) tracked the language in CICA, specifically allowing an ‘interested party’ to challenge ‘a solicitation’ or ‘a proposed award or the award of’ a contract.” The court also noted that, at the time of the ADRA’s enactment, “the Brooks Act included language giving the [General Services Board of Contract Appeals (GSBCA)] the authority to review ‘any decision by a contracting officer that is alleged to violate a statute, a regulation, or the conditions of a delegation of procurement authority,’ which is similarly reflected in the language of § 1491(b).”

Turning next to the question of standing presented by Percipient’s case, the majority emphasized its prior precedent in AFGE by recognizing that the Federal Circuit has “long held that the term ‘interested party’ for bid protests should be limited to actual or prospective bidders or offerors whose direct economic interest would be affected by the award.” Thus, the Court disagreed with Percipient that the term “interested party” should be interpreted differently based upon which of the three prongs of the Tucker Act a bid protest action is brought.

In this regard, the majority held that the Tucker Act provided “no indication that the statute is separable in this manner – especially since § 1491(b)(1) is not so divided.” Because Congress “used a single, unbroken, and undivided sentence” in describing what types of actions an “interested party” may bring under the Tucker Act, the court held that “[d]ividing this single sentence and imparting different definitions for a single term within each artificial division contravenes the plain text of the statute.”

The majority also found that “Percipient’s proposed interpretation is not supported by the statutory history” either. To this end, the court noted that Congress previously used the term “interested party” in both CICA and the Brooks Act, both of which were in effect when Section 1491(b) was being drafted. Applying the principle of statutory construction that, “[w]here Congress employs a term of art obviously transplanted from another legal source, it brings the old soil with it,” the majority en banc held that the usage of the CICA definition of “interested party” in the Brooks Act demonstrates that “Congress understood and intentionally brought that specific definition into the Court of Federal Claims’ jurisdiction” when enacting the ADRA, especially given that the Brooks Act’s authorization for the GSBCA to review alleged violations of statute or regulation in connection with a procurement “mirrors the language Congress used in the third part of § 1491(b)(1).”

Finally, the majority held that “the statutory history indicates that Congress considered and rejected including subcontractors as interested parties in both CICA and the Brooks Act,” which reinforced that Congress did not intend that term to extend to prospective subcontractors like Percipient under the Tucker Act. While Percipient argued that district courts previously recognized subcontractor standing in bid protest actions under the Administrative Procedure Act (APA) before the Tucker Act’s sunset provision consolidated bid protest jurisdiction before the COFC, the majority found that line of cases only recognized standing when “there was an agency-like relationship between the contractor and the government or more direct government involvement” in subcontractor selection, both of which were missing in Percipient’s case. In any event, even if subcontractor standing did exist under the APA, the Court stated that “that would at most suggest that subcontractors could have an APA claim in district court” to enforce FASA’s commercial preference, “not an action in the [COFC] under § 1491.”

The Dissent

Judge Kara F. Stoll penned an eight-page dissent, in which she was joined by three other judges, including Chief Judge Kimberly A. Moore. The dissent took issue with the majority’s failure to consider the context of the different types of objections covered by Section 1491(b)(1) of the Tucker Act in interpreting who an “interested party” is. According to the dissent, because they cover different types of objections, “an interested party under one prong of § 1491(b)(1) might not quality as an interested party under another prong.”

Because the first two prongs (that is, objections to a solicitation or to an award or proposed award of a contract, respectively) are “transplants from CICA,” the dissent conceded that CICA’s definition of an “interested party” makes sense for challenges brought under those two prongs. In contrast, “CICA did not, and it still does not, contain an actual-or-prospective-bidder definition for all agency actions that violate a statute or regulation in connection with a procurement or proposed procurement,” making the application of CICA’s “interested party” definition inappropriate to challenges brought under prong three of the Tucker Act. The dissent considered the majority’s failure to consider this distinction “critically important,” because it “effectively eliminated judicial review of alleged violations of the statutory provisions invoked by Percipient here, enacted by Congress just two years before [the] ADRA.”

The dissent also disagreed with the majority’s reliance upon legislative history to support use of the CICA definition of “interested party” for prong three challenges. To this end, the dissent noted that Congress would have been aware that district courts interpreted their jurisdiction over bid protest actions under the APA broadly when enacting the ADRA. Yet, “Congress chose not to adopt the limited definition of ‘interested party’ from CICA when it enacted § 1491(b)(1), even though it knew how to do so.”

Congress’ choice not to incorporate the CICA definition, the dissent added, “leaves interpretation of ‘interested party’ in prong three (3) situations, which are not covered by CICA, to include parties who have a direct economic interest that would be affected by the alleged ‘violation of statute or regulation in connection with a procurement or a proposed procurement.’” Because Percipient’s challenges fell under this category of “interested party” standing, the dissent believed the en banc majority erred in holding otherwise in what the dissent characterized as “a straight-forward statutory interpretation case with significant impact on the government contracting community.”  

Takeaways

So, will the en banc decision in Percipient.ai have a “significant impact on the government contracting community,” as the dissent foretells? It probably depends on how one looks at the decision.

On the one hand, the original panel decision in Percipient.ai represented more of a sea change to government contracts law than the en banc decision. As we have discussed, the panel majority’s decision reflected the first time the Federal Circuit had interpreted the Tucker Act as conferring standing upon a party that had neither bid on, nor could have bid on, the underlying procurement. By reverting back to the CICA definition of “interested party,” the en banc majority’s decision reaffirmed what the Federal Circuit had already held for years under AFGE and its progeny.

On the other hand, the en banc majority decision’s is notable in that it seemingly does away with there being “three prongs” to the Tucker Act’s grant of bid protest jurisdiction. The panel majority’s decision was not the first time Section 1491(b)(1) has been divided into different prongs based on the type of challenge being brought. Instead, members of the government contracting bar have conceptualized Section 1491(b)(1) in that manner for decades now, debating whether subcontractors could have standing under prong three’s broadly worded language. The en banc majority’s decision ended that debate, however, and in doing so, rejected the notion that the statute could be compartmentalized into “artificial divisions.”

But what is perhaps the most startling takeaway from the en banc decision and its dissent is their treatment of “interested party” standing as a simple matter of statutory interpretation. As we noted in an the Procurement Lawyer, Section 1491(b)(1) of the Tucker Act is extraordinary because it waives the doctrine of sovereign immunity for bid protest actions. That alone could have cautioned against a broad interpretation of the Tucker Act as conferring standing upon prospective subcontractors. But other than Clevenger’s dissent, none of the decisions in the Percipient.ai saga even makes mention of the doctrine of sovereign immunity. Has the right to protest become so ingrained that “interested party” standing has become simply a question of statutory interpretation? Or has the long-held principle of sovereign immunity been eroded by other principles of construction?

Rhetorical questions aside, one thing at least is now clear: If a contractor wants to bring a bid protest before the COFC, it must demonstrate that it is an actual or prospective bidder for the procurement at issue. Otherwise, they can expect their bid protest action to be dismissed.

Miles & Stockbridge’s government contracts lawyers are available to discuss what the Percipient.ai en banc decision means for individual government contractors.

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