On June 7, 2024, the U.S. Court of Appeals for the Federal Circuit issued what is likely the decision of the year for government contractors. In Percipient.ai, Inc. v. United States, CACI, Inc.-Federal, No. 2023-1970 (Fed. Cir. June 7, 2024), the court found the Federal Acquisition Streamlining Act of 1994 (FASA) task order bar did not apply to Percipient's protest of commercial services acquisition planning actions conducted on behalf of the National Geospatial-Intelligence Agency (NGA). The holding represents a seismic development in jurisprudence, adopting a narrow scope of the task order bar while, at the same time, expanding what is means to be an "interested party" under the Tucker Act. As Judge Raymond Clevenger notes in his dissent, if the majority's decision is not reconsidered en banc, "it is fair to expect that potential subcontractors will soon flood" the U.S. Court of Federal Claims (COFC) with protests challenging procurement decisions on the basis of alleged violations of 10 U.S.C. § 3453, which establishes the statutory preference for commercial products and commercial services.

Background

In January 2021, the NGA awarded the SOM AAA Framework for Integrated Reporting and Exploitation (SAFFIRE) contract to CACI, Inc. – Federal. Under the Indefinite Delivery, Indefinite Quantity (IDIQ) contract, NGA sought to sustain and improve its processes for obtaining and storing visual intelligence data and integrating those capabilities with computer vision (CV), a form of artificial intelligence. Broadly speaking, the contract had two deliverables: (1) "an enterprise repository backbone for storing, managing, and disseminating data," known as SER and (2) a user-facing CV system. CACI was also awarded Task Order 1 under the contract, requiring the development and delivery of the CV system. 

Percipient offers "Mirage," a commercial CV platform that could meet NGA's CV system requirements, but did not have the capability to provide the SER component of the SAFFIRE solicitation. Therefore, Percipient did not bid the SAFFIRE contract and did not challenge the SAFFIRE solicitation or award. However, Percipient expected NGA and CACI to comply with 10 U.S.C. § 3453, which establishes a preference for commercial services, and consider Mirage for the CV system. In other words, Percipient expected to be considered as a subcontractor for the CV portion of the SAFFIRE contract. 

With these expectations, Percipient subsequently contacted NGA and CACI, explaining that it had a commercial solution that could meet the CV system requirements and could save the government hundreds of millions of dollars. In response, CACI briefly evaluated Mirage, but later announced its intention to build its own software to meet the SAFFIRE's requirements. Likewise, NGA received a demonstration of Percipient's capabilities but evaluated Mirage as a "Machine Learning (ML) Platform" rather than an "analytical tool." Percipient believed this demonstrated that NGA failed to properly evaluate whether Mirage could meet SAFFIRE's CV system requirements.

As such, Percipient filed a bid protest at the COFC, asking the court to enjoin NGA's alleged violation of its obligations under 10 U.S.C. § 3453, which requires heads of agencies to ensure their contractors conduct market research to determine if commercial or non-developmental items are available that can meet the agency's procurement requirements.

The government and CACI (collectively, the defendants) filed motions to dismiss Percipient's complaint, arguing that (1) the COFC lacked subject matter jurisdiction based on the FASA task order bar and, separately, the Tucker Act; (2) Percipient lacked standing; and (3) Percipient's complaint was untimely. COFC eventually ruled that the FASA task order protest bar applied, which (as applicable here) divests the COFC of jurisdiction over protests "in connection with the issuance or proposed issuance of a task or delivery order expect for a protest of an order valued in excess of $25,000,000." 10 U.S.C. § 3406(f). Percipient appealed the decision to the Federal Circuit. 

Decision

On appeal, Percipient asserted its protest was not "in connection with the issuance or proposed issuance of a task or delivery order" and thus fell outside the FASA task order bar. The defendants disagreed, arguing the COFC properly determined it did not have jurisdiction. The defendants also argued that (1) the trial court lacked subject matter jurisdiction because the protest was not "in connection with a procurement or a proposed procurement," a requirement under the third prong of the Tucker Act, (2) Percipient was not an interested party and thus lacked standing, and (3) Percipient's claims challenged the terms of the SAFFIRE solicitation such that the protest was untimely. 

FASA Task Order Bar

At the outset of its analysis, the majority reviewed Percipient's four claims to determine whether they challenged the "issuance of the task order directly or…a government action (e.g., waiver of an organizational conflict of interest) whose wrongfulness would cause the task order's issuance to be improper" such that the FASA task order bar was applicable. The court focused on Count Two of Percipient's complaint as most likely implicating the "issuance or proposed issuance" of a task order. However, the court concluded Count Two was focused on "CACI's actions after issuance of Task Order 1 and its failure to evaluate Mirage for integration into the SAFFIRE's CV system." The court found the same for Percipient's three other counts, holding, "Percipient does not challenge the issuance of Task Order 1 to CACI. Moreover, no allegation asserts that the language of Task Order 1 was deficient or forced the alleged statutory violations to occur." 

The government argued the language of the task order bar, in particular "in connection with," bars all protests that relate to work performed under a task order, and that "whatever results from, i.e., follows or comes after, a task order falls under the task order bar." The majority disagreed, finding that interpretation to be "far too broad" and giving no meaning to the language "issuance or proposed issuance" found in 10 U.S.C. § 3406(f). The court also disputed the defendants' reliance on SRA International, Inc. v. United States, 766 F.3d 1409 (Fed. Cir. 2014). The defendants argued that anything "directly and causally connected to issuance of [a task order]" fell under the task order bar, citing SRA. The majority, however, found, "we understand SRA's reference to 'directly and causally connected to issuance of [a task order]' to refer to government action in the direct causal chain sustaining the issuance of a task order, not to all actions taken under or after issuance of a proper task order." And unlike in SRA, Percipient's requested relief would not alter NGA's issuance of Task Order 1 to CACI such that it was not "directly and causally connected to issuance of a task order." 

Therefore, the court concluded the FASA task order bar did not apply to Percipient's protest. 

Tucker Act Jurisdiction

Having determined the task order bar did not apply, the court was still faced with the question of jurisdiction under the Tucker Act. Percipient asserted jurisdiction under the third prong of the statute: "any alleged violation of statute or regulation in connection with a procurement or a proposed procurement." 28 U.S.C. § 1491(b)(1). 

The defendants argued Percipient's protest fell outside the prong because it is not "in connection with a procurement or a proposed procurement," claiming the company was challenging contract performance and administrative activities. However, the majority noted that "in connection with" is "very sweeping in scope" and that "procurement" encompasses "all stages of the process" including "actions after issuance of a contract award." Thus, the court held that Percipient's protest was "in connection with a procurement" because it alleged NGA violated 10 U.S.C. § 3453 and related regulations, which establish a preference for commercial services, in connection with the SAFFIRE procurement. Therefore, COFC jurisdiction was proper pursuant to the third prong of the Tucker Act. 

Standing

Under prongs one and two of the Tucker Act, it is well-established that an interested party means "an actual or prospective bidder or offeror whose direct economic interest would be affected by award of the contract or by failure to award the contract." However, Percipient's protest, a challenge solely under prong three of the Tucker Act  presented the court with a "different question of who qualified as an 'interested party.'" In this regard, Percipient admitted that it did not and could not bid on the SAFFIRE contract and therefore was not an "interested party" under prongs one or two. Nevertheless, the company argued it was an interested party with a direct economic interest affected by the government's failure to comply with 10 U.S.C. § 3453 because Percipient is a prospective offeror of a commercial product that satisfies SAFFIRE's CV system requirements and, had the government complied with the statute, Percipient would have been a subcontractor. 

The court ultimately agreed with Percipient that the traditional definition of "interested party" for the purposes of prongs one and two was not the relevant standard for a challenge under prong three. Instead, "where a plaintiff, invoking only prong three of the jurisdiction under 28 U.S.C. § 1491(b)(1), asserts a violation of 10 U.S.C. § 3453 without directly or indirectly challenging a solicitation for or actual or proposed award of a government contract, the plaintiff is an interested party if it is an offeror of a commercial product or commercial service that had a substantial chance of being acquired to meet the needs of the agency had the violation not occurred." Under this standard, Percipient was an "interested party" and had standing to challenge NGA's alleged violation of § 3453. 

Timeliness

Lastly, the court addressed the government's assertion that Percipient's complaint challenged the terms of the SAFFIRE solicitation, and under Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308 (Fed. Cir. 2007), that challenge was untimely. The court disagreed, finding Percipient's challenges focused on "post-award delegations, not defects in the solicitation," and Percipient was not required to protest before the close of the bidding process.

Accordingly, the Federal Circuit reversed the trial court's dismissal for lack of subject matter jurisdiction and remanded the case for further proceedings. 

Dissent

In a dissenting opinion, Judge Clevenger took great issue with the majority's analysis and noted the tremendous impact the decision could have on bid protests at the COFC moving forward. 

First, Judge Clevenger asserted that "both as a matter of failure to follow binding precedent and as a matter of initial statutory interpretation" the majority did not correctly apply the holding of SRA to the case at hand. In doing so, the majority improperly narrowed the existing scope of the task order bar in 10 U.S.C. § 3406(f)(1). By focusing on the "issuance or proposed issuance" language in the task order bar, the majority wrongly (according to Judge Clevenger) reinterpreted the statute to bar only protests focused on a task order, not protests more broadly made in connection with the issuance of a task order, essentially reading the "in connection with" language out of the statute. 

Second, according to the dissent, the majority improperly broadened the existing scope of "interested party" statutory standing in 28 U.S.C. § 1491(b)(1) by permitting potential subcontractors for the first time to bring suit under § 1491(b)(1), in conflict  with congressional intent evidenced by the Competition in Contracting Act (CICA), the Administrative Dispute Resolution Act of 1996, and the now-repealed Brooks Act. 

Judge Clevenger also stated that, although the "majority limit[ing] potential subcontractor standing to prong three protests involving alleged violations of § 3453" may not seem like "a big deal," that is not so, arguing that § 3453 applies to all government contracts for products and services and that the "driving rationale" for the majority's decision, "that some laws are so important that they require relaxed standing tests to promote compliance, will in time likely apply to alleged violations of other important laws." 

Takeaways

The potential repercussions of the Percipient.ai decision on COFC bid protests (and possibly Government Accountability Office (GAO) protests) going forward cannot be overstated. 

• The majority opinion adopts a narrow view of the task order bar under FASA. In so doing, the court has opened the door for any commercial product or commercial service contractor to bring a challenge to the COFC for an agency's failure to conduct adequate market research in violation of 10 U.S.C. § 3453, even when, arguably, a task or delivery order may somehow be involved. Moreover, the majority's expansion of the scope of "interested party" under prong three of 28 U.S.C. § 1491(b)(1) will, for the first time in the history of the Tucker Act, allow potential subcontractors to have standing under prong three of the statute. All told, it just became a lot easier to bring a protest at the COFC. 
• Although "interested party" status at GAO is defined as "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," the Percipient.ai decision nonetheless may serve as a basis for contractors to argue that they are an interested party when bringing protests at GAO. 
• Given the reverberations the Percipient.ai decision will have on bid protest jurisdiction and standing, it begs the question whether the government will seek an en banc decision. In his dissent, Judge Clevenger repeatedly asserts that the majority has improperly overturned binding precedent — a decision that should only "come from an en banc decision by this court." Is Judge Clevenger signaling to the government to request an en banc decision? Time will tell if the government heeds that call. 
• Intelligent pleading and favorable facts will make all the difference in pursuit of protests under prong three of the Tucker Act. 

If you have any questions about the Percipient.ai decision and protesting at the COFC or GAO, please contact one of the Miller & Chevalier attorneys listed below. 

Scott N. Flesch, sflesch@milchev.com, 202-626-1584

Jason N. Workmaster, jworkmaster@milchev.com, 202-626-5893

Alex L. Sarria, asarria@milchev.com, 202-626-5822

Ashley Powers, apowers@milchev.com, 202-626-5564

Connor W. Farrell, cfarrell@milchev.com, 202-626-5925

Alexandra S. Prime, aprime@milchev.com, 202-626-5940

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