Appeals court rules potential subcontractors can file protests too

A federal court has ruled that a commercial company can protest if its product is not part of a solution that a prime contractor proposes for a customer.

If the decision holds, it could send shockwaves through the contracting community because it would create a brand new category of protests when prime contractors decide to custom-build the solution instead of using a commercial product.

For the case at hand, the National Geospatial-Intelligence Agency awarded a $376.4 million contract called SAFFIRE in 2021 to CACI International for an intelligence analysis tool.

Percipient.ai filed a protest in January 2023 at the U.S. Court of Federal Claims, arguing that its commercial product should be part of CACI’s solution.

NGA underutilized the demos that Percipient offered, Percipient claims in its protest. CACI also evaluated Percipient’s Mirage product, which is used to analyze unstructured data.

Percipient claims that because its product is commercial, federal procurement laws require government agencies to use that offering instead of building something new from scratch.

It is a similar argument that Palantir used to fight its way onto the Army Distributed Common Ground Systems-A program for battlefield intelligence technology. But in that situation, Palantir wanted to pursue the opportunity as a prime and compete against Raytheon.

NGA argued that Percipient didn’t have standing to protest because it couldn’t be the prime contractor. Percipient also missed the window for protesting the terms of the solicitation, NGA claimed.

In May 2023, the U.S. Court of Federal Claims denied Percipient’s protest because the procurement in question was a task order and only the Government Accountability Office has authority over those.

The Court of Federal Claims did not rule on the validity of Percipient's commercial product argument and told the company it should go to GAO. But by that point, it was too late for Percipient to go GAO.

Percipient instead took its argument up to the U.S. Court of Appeals for the Federal Circuit, where two of the judges hearing the appeal reversed the lower court’s ruling in a decision handed down on Friday.

Both government agencies and prime contractors are required to conduct market research to determine if commercial products are available, according to the majority opinion.

Percipient claims that CACI did not engage in adequate market research by evaluating the commercial product after NGA awarded the SAFFIRE task order.

The majority of the appeals court judges agreed, writing that the solicitation had market requirements for commercial products that NGA and CACI did not fulfill.

Now the case goes back to the U.S. Court of Federal Claims.

Almost all of the attorneys I have asked about the matter expect NGA to ask the full nine-person appeals court for a ruling.

Judge Raymond Clevenger wrote the appeals court dissenting opinion, which warns that a flood of protests currently not allowed will happen if Percipient wins here.

“Think of all the products and services that go into government contracts for a battleship, or airplane, or new headquarters for an agency, and the vast number of potential subcontractors who can so easily allege possession of a suitable off-the-shelf product or service and inadequate agency attention to [market research] requirements,” Judge Raymond Clevenger wrote in his dissent.