Percipient.ai, Inc. v. U.S.: Government Requests Reconsideration of Federal Circuit’s Decision on Bid Protest Jurisdiction and Standing

As previously discussed on this blog, the Federal Circuit issued a major decision in June 2024 addressing bid protest jurisdiction and standing at the Court of Federal Claims ("COFC"): Percipient.ai, Inc. v. United States.

On September 5, 2024, the United States filed a petition for rehearing of that case - requesting that the Federal Circuit reconsider its decision, either through a rehearing by the same panel or by the full court in an en banc proceeding. Subsequently, on September 26, 2024, the protester (Percipient) filed an opposition to the petition. It will be worth watching whether the Federal Circuit grants the government's petition and, if so, whether any rehearing will result in a change to Percipient.ai's holdings.

Background on the Federal Circuit's Decision

Percipient.ai concerned an already-awarded task order which asked the contractor to provide, in part, an artificial intelligence computer vision ("CV") system. Percipient did not compete for the task order, but it wanted to provide the CV system as a subcontractor, and it reached out to both the agency and the prime contractor about that possibility. Ultimately, the agency and the prime contractor decided to not pursue Percipient's CV platform. Percipient then protested, alleging that the agency's actions violated 10 U.S.C. § 3453 - a statute which establishes a preference for commercial products and services.

On appeal, the Federal Circuit concluded that COFC had jurisdiction and that Percipient had standing to bring its protest. The Federal Circuit's decision addressed three primary issues.

First, the Federal Circuit held that the Federal Acquisition Streamlining Act of 1994 ("FASA") bar against task order protests did not bar Percipient's claims. The FASA task order bar provides that "[a] protest is not authorized in connection with the issuance or proposed issuance of a task or delivery order." 10 U.S.C. § 3406(f)(1) (emphasis added). The Federal Circuit reasoned that although Percipient's claims were in connection with a task order, they were not in connection with "the issuance" or "proposed issuance" of a task order.

Second, the Federal Circuit held that the Tucker Act conferred jurisdiction. The Tucker Act establishes jurisdiction over protests challenging "any alleged violation of statute or regulation in connection with a procurement or a proposed procurement." 28 U.S.C. § 1491(b)(1). The Federal Circuit explained that the definition of "procurement" "includes stages between issuance of a contract award and contract completion, i.e., actions after issuance of a contract award." Thus, Percipient's protest fit within the definition.

Third, the Federal Circuit held that Percipient had "interested party" standing under the Tucker Act to bring its bid protest, even though it did not and could not bid on the underlying solicitation. In a typical bid protest, COFC determines standing based on a test that considers whether the protester is an actual or prospective bidder for the award of a contract. However, the Federal Circuit found that that standard did not apply where "the challenged harm-causing action is not the solicitation, the award, or the proposed award of a contract." The Federal Circuit then articulated a test that was specific to "the context of this case involving alleged violations of 10 U.S.C. § 3453 without challenging the contract."

United States' Petition for Rehearing

The government's petition for rehearing asks the Federal Circuit to reconsider all three of those conclusions, addressing them in reverse order:

First, with respect to "interested party" standing under the Tucker Act, the government argues that the Federal Circuit's prior decision in American Federation of Government Employees, AFL-CIO v. United States ("AFGE") held that the definition of "interested party" is limited to "only actual or prospective bidders," and that such a limited definition is consistent with "conventional statutory interpretation tools." The government argues that AFGE's definition of "interested party" conflicts with Percipient.ai's definition of "interested party" - as the latter includes parties other than actual or prospective bidders, "depending on the facts of the case."

Second, with respect to jurisdiction under the Tucker Act, the government contends that that the Tucker Act's "in connection with a procurement" language should be interpreted to cover only matters of contract formation, and not matters of contract administration. In support of that argument, the government observes that the Tucker Act includes a "specific list of agency actions associated with and leading up to contract formation - including (1) 'a solicitation by a Federal agency for bids or proposals for a proposed contract,' (2) 'a proposed award,' or (3) 'the award of a contract.'" The government also notes that matters of "contract administration" are separately "governed by the Contract Disputes Act" ("CDA"). Based on these points, the government asserts that Percipient.ai's "interpretation of procurement . . . represents the first time this Court has interpreted § 1491(b)(1) as permitting a protest of contract administration," and "stands in tension with the historical understanding of the scope of a bid protest and creates an anomalous result vis-à-vis the CDA."

Third, with respect to the FASA task order bar, the government argues that the Federal Circuit did not follow its prior decision in SRA International, Inc. v. United States. According to the government, SRA interpreted FASA to prohibit protests that are "directly and causally connected to issuance of" a task order. The government asserts that task order performance "cannot be divorced from the issuance of the order that defines those requirements and their implementation" - and warns that the Federal Circuit's rule could create a "perverse outcome" where a "potential bidder on a task order is barred from challenging an allegedly illegal term of the task order during evaluation and award of the task order, yet it could wait until after award to claim that performance of the task order is not in accordance with law."

Percipient's Opposition to the Petition for Rehearing

Percipient has now filed a brief in opposition to the government's petition, which responds to all three of the government's arguments:

First, with respect to "interested party" standing under the Tucker Act, Percipient argues that there is no conflict between AFGE and Percipient.ai. Percipient argues that AFGE "specifically addressed protests of solicitations and awards," and did not address protests of other agency conduct. Percipient also argues that Percipient.ai's definition of "interested party" is supported by the text of the Tucker Act - which discusses challenges "in connection with a procurement" - as well as other Federal Circuit decisions that have "adjusted the requirements of the interested party standard" based upon the circumstances.

Second, with respect to jurisdiction under the Tucker Act, Percipient contends that the government has not identified any "conflict with circuit precedent." Percipient emphasizes that the Federal Circuit has "broadly interpreted the phrase 'in connection with a procurement" in cases such as Distributed Solutions, Inc. v. United States. Percipient also asserts that, despite the government's assertion, there is no tension between the CDA and the Tucker Act as interpreted by Percipient.ai: "The former addresses the requirements for claiming breach of a government contract. The latter addresses the requirements for enforcing post-award statutory provisions . . . ."

Third, with respect to the FASA task order bar, Percipient argues there is no conflict between SRA and Percipient.ai. According to Percipient, SRA involved an agency action that was necessary "in order to go forward" with a task order, and that the decision does not "foreclose[] any and all actions that relate to work performed under a task order." Percipient also rejects the government's warning of a "perverse outcome" as both "speculation" and a "policy argument about the statute Congress enacted, not a basis for en banc review."

Takeaways

We previously discussed the potential significance of Percipient.ai, and the government's petition is driven by a concern that the decision conflicts with prior law and could "allow[] for a dramatic - yet uneven - expansion of the scope of the Court of Federal Claims's bid protest jurisdiction." Time will tell whether the Federal Circuit is interested in reconsidering any aspect of its decision in Percipient.ai. We will provide further updates as the litigation develops.

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