Good news for potential protesters at the Court of Federal Claims (CFC). On May 10, 2023, in CACI, Inc.-Federal v. United States, No. 2022-1488, the United States Court of Appeals for the Federal Circuit issued a sweeping decision holding questions of protester standing and prejudice are merits issues that do not implicate the CFC’s jurisdiction. In so doing, the Federal Circuit declared decades of prior jurisprudence holding the opposite “no longer good law.” (For a more in-depth discussion of CACI, you can listen to Crowell’s latest All Things Protest podcast.)
All Things Protest: The Federal Circuit Re-Writes the Rules on Standing, Jurisdiction, and Mid-Protest OCI Considerations
Crowell & Moring’s “All Things Protest” podcast keeps you up to date on major trends in bid protest litigation, key developments in high-profile cases, and best practices in state and federal procurement.
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Court of Federal Claims Holds Non-Bidder Has Standing to Protest Two Years After Contract Award
Last week, on March 9, 2023, in Percipient.ai, Inc. v. United States, the Court of Federal Claims held that Percipient.ai, Inc. (“Percipient”) had standing to protest a National Geospatial-Intelligence Agency (“NGA”) procurement called “SAFFIRE” intended to improve the agency’s production, storage, and integration of geospatial intelligence data. Percipient’s complaint, filed in January of this year, argued that SAFFIRE violates the statutory mandate at 10 U.S.C. § 3453 to procure commercial items “to the maximum extent practicable.” The Court’s conclusion that Percipient had standing to protest is notable because (1) NGA issued the SAFFIRE solicitation in January 2020 (over three years ago); (2) NGA awarded the SAFFIRE contract to CACI, Inc. – Federal (“CACI”) in January 2021 (over two years ago); and (3) Percipient never submitted a proposal in response to the solicitation.
The Government and CACI moved to dismiss Percipient’s complaint, arguing, among other things, that Percipient lacked standing to protest because it had not submitted a proposal and therefore was not an “interested party,” and because the protest—filed two years after contract award—was in fact a challenge to NGA’s administration of the SAFFIRE contract. The Government and CACI also argued that the protest was untimely under the Federal Circuit’s decision in Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308 (Fed. Cir. 2007), which generally requires that protests challenging the terms of a solicitation be filed before the proposal due date.
President Biden Signs New Legislation to Identify and Mitigate Organizational Conflicts of Interest in Federal Acquisition
On December 27, 2022, President Biden signed into law the Preventing Organizational Conflicts of Interest in Federal Acquisition Act (S.3905) to strengthen the current rules relating to identification and mitigation of organizational conflicts of interest (OCIs) in federal acquisition. The Act focuses on updating the current FAR provision, Subpart 9.5, to provide clear definitions, examples
FY 2023 National Defense Authorization Act: Key Provisions Government Contractors Should Know
The National Defense Authorization Act (NDAA) for Fiscal Year (FY) 2023, signed into law on December 23, 2022, makes numerous changes to acquisition policy. Crowell & Moring’s Government Contracts Group discusses the most consequential changes for government contractors here. These include changes that provide new opportunities for contractors to recover inflation-related costs, authorize new programs for small businesses, impose new clauses or reporting requirements on government contractors, require government reporting to Congress on acquisition authorities and programs, and alter other processes and procedures to which government contractors are subject. The FY 2023 NDAA also includes the Advancing American AI Act, the Intelligence Authorization Act for FY 2023, and the Water Resources Development Act of 2022, all of which include provisions relevant for government contractors.
GAO’s 2022 Bid Protest Report to Congress for FY 2021 Shows Better than 50% Chance of Obtaining Relief
On November 1, 2022, the U.S. Government Accountability Office (GAO) released its Annual Report on Bid Protests for Fiscal Year 2022. While the number of protests GAO received dropped by 12% for the second year in a row, the overall protest “Effectiveness Rate”—meaning the percentage of cases in which the protester received some form of relief, such as voluntary corrective action by the agency or a GAO sustain—increased to 51%, tying Fiscal Year (FY) 2020 for the highest rate in the past five years.
GAO’s Annual Report also provides a helpful summary of the most common grounds for sustained protests in the prior year. In FY2022, those grounds were: (1) unreasonable technical evaluation; (2) flawed selection decision; and (3) flawed solicitation. The inclusion of “flawed solicitation” on the list is notable—it has only made the list of “most successful grounds” one other time since GAO began tracking successful protest grounds. This serves as a reminder that contractors should consider a pre-award protest as a potentially viable method of resolving solicitation flaws and ambiguities if other routes (such as the Q&A process) are unsuccessful or unavailable.
The chart below shows the top sustain grounds by year. As seen below, flawed technical evaluations continue to represent one of the most consistently successful grounds for sustains, meaning would-be protesters should consider whether they have a credible basis to make such arguments when weighing an award challenge.
DoD Will Consider Contract Adjustments Addressing Inflation
On Friday September 9, 2022, the Principal Director for DoD Defense Pricing and Contracting (DPC) issued a Memorandum titled “Managing the Effects of Inflation with Existing Contracts.” The Memorandum provides guidance to Contracting Officers about the range of approaches available to address the effects of inflation on the Defense Industrial Base. Of note, it highlights two paths contractors may pursue to recover for inflation under fixed-price contracts.
First, the Memorandum notes that the ability to recognize cost increases is largely dependent on contract type, asserting that “[c]ontractors performing under firm-fixed-price contracts that were priced and negotiated before the onset of the current economic conditions generally bear the risk of cost increases.” This is similar to guidance DPC issued in May encouraging Contracting Officers to consider including economic price adjustment (EPA) clauses in new contracts but expressing skepticism about contractors’ ability to recover for inflation under existing fixed-price contracts. However, the new Memorandum allows that “there may be circumstances where an accommodation [such as schedule relief or amended contract requirements] can be reached by mutual agreement of the contracting parties, perhaps to address acute impacts on small business and other suppliers.”
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Second Circuit Holds FOIA Exemption 4 Still Requires Showing of “Competitive Harm” Resulting from Disclosure, Though Not a “Substantial” One
Last month, in Seife v. U.S. Food and Drug Administration, the U.S. Court of Appeals for the Second Circuit became the first appellate court to address a significant question left unanswered by the Supreme Court’s 2019 decision in Food Marketing Institute v. Argus Leader Media: what impact, if any, did the 2016 FOIA Improvement Act (“FIA”) have on FOIA Exemption 4? The answer: a submitter of information ostensibly subject to Exemption 4 must demonstrate competitive harm—though not “substantial” harm—resulting from disclosure in order to invoke the exemption.
Argus clarified the applicability of Exemption 4, which protects from disclosure “trade secrets and commercial or financial information obtained from a person [that is] privileged or confidential.” 5 U.S.C. § 552(b)(4). The Argus Court rejected the longstanding National Parks test, which applied Exemption 4 only where the submitter of such information could demonstrate “substantial competitive harm” resulting from its disclosure. Instead, the Argus Court held Exemption 4 applied, at the very least, where the submitter of such information kept it confidential and submitted it to the government with an assurance of privacy. Given the difficulties inherent in establishing “substantial competitive harm,” Argus was welcome news for contractors seeking Exemption 4 protection. (We have previously written about Argus and the district court decisions that followed.)
In 2016, Congress enacted the FIA in response to concerns that FOIA’s exemptions were being overused. The FIA amended FOIA to allow for an exemption’s invocation only if “the agency reasonably foresees that disclosure would harm an interest protected by an exemption” or if disclosure is “prohibited by law.” 5 U.S.C. § 552(a)(8)(A). Since Argus, multiple plaintiffs have argued the FIA effectively codified the National Parks test. (Argus considered a FOIA dispute that commenced prior to the passage of the FIA; the Court there had no reason to address the question.)
Sometimes, the Court of Federal Claims Does Consider OTA Protests
Protesters looking to challenge U.S. Government awards of “Other Transaction Agreements” (“OTAs”) face forum challenges—the Government Accountability Office (“GAO”), Court of Federal Claims (“COFC”), and federal district courts have all dismissed OTA protests for lack of subject matter jurisdiction, with GAO and the COFC concluding that OTAs are not procurement contracts. But last week, in Hydraulics International, Inc. v. United States, the COFC held it could exercise jurisdiction over a challenge to an OTA award made in connection with a potential future procurement.
In Hydraulics, the Court considered a challenge to the Army’s award of an OTA for Aviation Ground Power Unit (“AGPU”) protypes used to service military helicopters. The Army invited offerors to respond to a Request for Enhanced Whitepapers (“RWP”), which contemplated awards to two companies for the “base effort” of one prototype AGPU. The RWP instructed that the base-effort award “may result in the award of a follow-on production contract for over 150 AGPUs without the use of competitive procedures.”
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COFC: Strictly Scrutinizing the Completeness of the Government’s Administrative Record
Last week, the Court of Federal Claims issued a decision highlighting – and further widening – the gap between the limited agency record typically available to protesters at the Government Accountability Office (“GAO”) and the much more fulsome record available at the Court. In Trace Systems Inc. v. U.S., the Court signaled its increasing willingness to scrutinize the adequacy of the record produced, rather than simply accept Government representations of completeness.
Trace Systems considered a challenge to the cancellation of a competitive procurement in favor of a sole-source award by the Defense Information Systems Agency (“DISA”). After the Government filed an administrative record containing nearly 23,000 pages of documents purportedly detailing the cancellation decision, the protester objected and sought the production of additional documents, claiming only six of the originally produced documents were relevant. The Court ordered DISA to complete the record, and the Government produced additional documents. DISA explained, however, that it was withholding other records that were “internal, predecisional, and deliberative agency documents.” The protester again objected and asked the Court to compel the Government to file all relevant documents. In response, the Government represented that, beyond the pre-decisional documents it had withheld, the record was now complete.