by Robert Nichols, Michael Bhargava, Sam Van Kopp

For years, government agencies have sought early dismissal of bid protests at the Court of Federal Claims on jurisdictional grounds, arguing that the protestor was ineligible for award and therefore lacked standing.  But the Federal Circuit Court of Appeals just made that more difficult for the government by holding that these arguments are not jurisdictional and must be heard at the merits stage.  This holding may draw out bid protests even when protestors appear ineligible for award.  But there may also be another way for the government to get such protests dismissed on standing grounds early in the protest process.

The case at issue, CACI, Inc.-Federal v. United States, involved a procurement for a device to encrypt battlefield information.  During the proposal stage, CACI disclosed to the Army the existence of a potential organizational conflict of interest (“OCI”) because one of its former employees prepared a document used in the solicitation.  The Army did not consider this to be an OCI, but nevertheless rejected CACI’s proposal on technical grounds, and CACI protested at the Court of Federal Claims.  In response to the protest, the Army changed its tune and asserted that CACI, in fact, did have a conflict of interest, and it moved to dismiss the protest because CACI was not an “interested party” that would have been eligible for the award.  The court refused to consider the Army’s convenient argument, but after conducting its own assessment de novo, it agreed to dismiss the complaint for lack of subject matter jurisdiction based on the lack of standing.

The Federal Circuit reversed the trial court’s decision—and decades of precedent along with it.  The appeals court first noted that the relevant standing criteria were established in the Tucker Act, 28 U.S.C. § 1491(b)(1), rather in the “cases and controversies” provision in Article III of the Constitution.  The court then looked to the Supreme Court’s decision in Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118 (2014), which held that so-called “statutory standing” (as opposed to “constitutional standing”) is not a jurisdictional issue, but a merits issue that requires courts to determine whether a cause of action encompasses a particular claim.  This holding overturns decades of Federal Circuit precedent holding that standing in bid protests was a jurisdictional issue.

The upshot of this decision is that the issue of prejudice––including whether the protestor may have a conflict of interest that makes it ineligible for award––is no longer necessarily a ground for early dismissal in bid protests.  Instead, it may be considered alongside the merits of the appeal.  CACI may give protestors that might otherwise face an early dismissal an opportunity to develop their claims for consideration on the merits.  And if the issue of prejudice is a factual question (such as OCI) that “has not been addressed in the first instance by the contracting officer, a remand is necessary for the contracting officer to address the issue of prejudice.”  Id. at *6.

While some commentators view this as the end of early-stage dismissals, we believe there is another possibility:  the government may make the same standing argument by filing early summary judgment motions under Rule 56.  The court may agree to prioritize this issue and avoid the need for the government to produce agency reports or adjudicate the remaining merits through a motion for judgment on the administrative record under Rule 52.1.  To win on Rule 56 summary judgment, the government would have a higher burden of proof, needing to show that there is no genuine dispute of facts as to whether the protestor is eligible for award.  But where the facts are not in dispute and the Government can meet this burden, early dismissal may be possible and appropriate, notwithstanding the CACI decision.