The Federal Circuit Reconsiders the Impact of Standing and Prejudice on the Court of Federal Claims’ Bid Protest Jurisdiction

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.)

CACI was eliminated from an Army procurement for a battlefield encryption device due to multiple identified technical deficiencies in its proposal.  Upon protesting at the CFC, the Government moved to dismiss CACI’s complaint for lack of jurisdiction, arguing that CACI lacked standing to protest because it had an Organizational Conflict of Interest (OCI) rendering it ineligible for award.  The Army had found no OCI associated with CACI’s proposal during its contemporaneous evaluation but, at the CFC, produced a declaration from the Contracting Officer (CO) stating CACI had an OCI that could not be mitigated.     

The CFC disregarded the CO’s declaration in favor of its own de novo review of the OCI allegations, but ultimately reached the same conclusion—CACI suffered from an OCI rendering it ineligible for award.  Accordingly, the CFC held CACI was not an interested party and dismissed the protest for lack of jurisdiction.  For good measure, the CFC also held that the Army had not erred in assigning technical deficiencies to CACI’s proposal, and thus CACI had not prevailed on the merits of its protest in any event.

On appeal, the Federal Circuit affirmed the CFC’s merits decision, holding the deficiencies the Army assigned to CACI’s proposal were neither arbitrary nor capricious.  But the Circuit devoted the bulk of its decision to explaining that the CFC had erred in dismissing CACI’s protest for lack of jurisdiction. 

The Circuit’s discussion highlighted the distinction between standing created by statute (in the context of bid protests, the Tucker Act) versus standing conferred by Article III of the U.S. Constitution (think 1L year, “cases or controversies”).  The Circuit explained that alleged “defects [in statutory standing] do not implicate a court’s subject-matter jurisdiction,” but instead are merits considerations.  This was a significant ruling upending large swaths of prior standing jurisprudence, which the Circuit acknowledged: “Our prior caselaw treating the interested party issue as a jurisdictional issue is no longer good law in this respect.”  The Circuit held the same for questions of prejudice: “[T]he issue of prejudice is no longer jurisdictional unless it implicates Article III considerations, and our cases to the contrary are no longer good law.” 

In practical effect, the Circuit explained that because the question of CACI’s standing went to the merits of its protest, the CFC was not empowered to conduct its own mid-protest, de novo review of CACI’s putative OCI.  Instead, the appropriate course of action would have been for the CFC to remand the matter to the Army to allow the Contracting Officer to conduct and document a full OCI analysis, which the CFC could have then assessed under the arbitrary and capricious standard of review. 

More broadly, the Circuit’s decision is welcome news for protesters. Arguments that they lack standing, or cannot demonstrate prejudice, can no longer form the basis for early motions to dismiss for lack of subject matter jurisdiction.  Instead, those arguments must be rolled into merits briefing based upon the administrative record, giving protesters more of an opportunity to vindicate their claims.