Lately, we’ve seen a boom in protests being brought to the United States Court of Federal Claims (COFC) in lieu of protests brought at the Government Accountability Office (GAO). And it appears that the recent decision in Percipient.AI, Inc. v. United States, 2023-1970 (June 7, 2024) may have just set the course for even more. But the case here didn’t start with an offeror under a solicitation. Instead, it was brought by a commercial software company, Percipient.AI, Inc. (Percipient), who challenged the government’s acquisition of custom software at the Court of Federal Claims and then landed right in the lap of United States Court of Appeals for the Federal Circuit (Federal Circuit).
10 U.S.C. § 3453 establishes a preference commercial services. Specifically, it states:
“The head of an agency shall ensure that procurement officials in that agency, to the maximum extent practicable … acquire commercial services, commercial products, or nondevelopmental items other than commercial products to meet the needs of the agency.”
Here, the agency set out to procure custom software instead of commercial products as required per 10 U.C.S. § 3453. Accordingly, Percipient challenged the procurement. COFC didn’t agree with Percipient that it had standing under 28 U.S.C. § 1491(b)(1), so Percipient took its case to the Federal Circuit, which agreed with Percipient.
A plaintiff must be an “interested party” per 28 U.S.C. § 1491(b)(1) to have standing at the Federal Circuit. An “interested party” can challenge:
- a solicitation by a federal agency;
- a proposed award or the award of a contract; or
- any alleged violation of statute or regulation in connection with a procurement or proposed procurement.
COFC has held time and time again that a party is an “interested party” when the alleged harm-causing government action is a solicitation, an award, or a proposed award under prongs one or two of 28 U.S.C. § 1491(b)(1).
However, a challenge under the third prong, when the challenged harm-causing action is not the solicitation, award, or proposed award of a contract, is far less common–and that is exactly what this decision discussed. Unfortunately, the Competition in Contracting Act (CICA), which is often referred to in this situation, does not address the third prong of 28 U.S.C. § 1491(b)(1). The plain language of 28 U.S.C. §1491(b)(1) does not resolve the interpretation issue either.
This leads us to the big question, which has never been contemplated by the Federal Circuit: whether a prospective offeror may file an action raising procurement related illegalities under 10 U.C.S. § 3453 “where the asserted illegalities do not challenge the contract between the government and its contractor (either the award or proposed award of or a solicitation for such a contract.”
The Federal Circuit determined that the third prong in 28 U.S.C. § 1491(b)(1) was meant to be interpreted more broadly based on its language covering “any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.” Prongs one and two specifically discuss a “solicitation” and a “proposed award or the award of a contract.” Had the drafters’ intent been to give standing only the situations discussed in prongs one and two, there would have been no need for the third prong. After all, statutes and regulations are meant to be interpreted so as to give every word meaning.
Thus,
for this case involving only the third prong of § 1491(b)(1) and allegations of violations of 10 U.S.C. § 3453 that do not challenge the solicitation or contract, we hold that Percipient is an interested party because it offered a commercial product that had a substantial chance of being acquired to meet the needs of the agency had the violations not occurred.
It was important in this case that the federal regulations required an agency to ensure that “offerors of commercial services, commercial products, and nondevelopmental items other than commercial products are provided an opportunity to compete in any procurement to fill such requirements” of the agency with respect to procurement of supplies or services “to the maximum extent practicable.” 10 U.S.C. § 3453(a)(1), (3). Therefore, the protester could raise an argument based on this provision even in the absence of a solicitation and would have no opportunity otherwise to challenge an agency’s violation of this requirement.
Therefore, for this case and others that involve only the third prong of 28 U.S.C. § 1491(b)(1) without a challenge of a solicitation or contract, the Federal Circuit held that a protester can be an interested party. If a protest does involve a solicitation or contract, then the third prong of § 1491(b)(1) does not seem to apply.
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