United States: Fed. Circ. Ruling Highlights Bid Protester Standing Issues

A protester must have a genuine stake in the government decision it hopes to challenge. Protesters do not have standing to challenge procurements they cannot hope to perform. There is friction, however, between the need for courts to consider the standing of protesters (e.g., their ability to perform a challenged contract) and the exclusive authority of the procuring agency to perform evaluations. The Federal Circuit's recent decision in CliniComp provides an illustration of this friction.

In CliniComp International Inc. v. U.S., the protester challenged a proposed sole-source award of a national electronic health records contract by the U.S. Veterans Administration to a much larger competitor. The Federal Circuit affirmed the underlying quasi-evaluation by the U.S. Court of Federal Claims decision, which compared CliniComp's current operations with the details of the proposed sole-source contract. The Federal Circuit upheld the COFC's finding that CliniComp did not have standing, as it had not shown itself to be capable of performing a national contract much larger than any of its current efforts.

While the decision is technically limited to protests challenging sole-source awards, the opinion could be read to suggest that even protesters challenging the terms of a solicitation may need to submit significant evidence at the outset of a protest to demonstrate that they could credibly propose to perform the full scope of work contemplated by the agency. Practitioners should take heed of the potentially critical importance of this threshold showing.

Procurement Background and Protest

For nearly 20 years the VA and the U.S. Department of Defense have struggled to make their electronic health records systems interoperable, resulting in significant challenges when transitioning health care for active military members from the DOD to the VA. In 2015, following a competition, the DOD awarded a contract to Leidos for delivery of a modern EHR system, consisting primarily of commercial software developed by Cerner Corporation. In 2017, the VA secretary issued a determination and findings supporting a sole-source award to Cerner to deliver an EHR that would provide the VA a "single common system" with the DOD. To support the sole-source award, the VA relied on the Competition in Contracting Act's "public interest" exception.¹

CliniComp, an incumbent provider of EHR systems to the VA, protested the VA's proposed sole-source award at the COFC, challenging, among other things, that the VA was improperly using CICA's public interest exception to make up for a lack of advance planning and to create a brand name justification.²

COFC Proceedings

COFC Judge Lydia Kay Griggsby dismissed CliniComp’s protest for lack of standing, concluding: "The evidence before the Court makes clear that CliniComp has not shown that CliniComp has the kind of experience that would enable it to compete for the work contemplated by the VA's planned contract with Cerner."³ The COFC could not refer to objective minimum requirements or eligibility criteria from a solicitation, as no solicitation existed. Rather, the COFC compared CliniComp's current operations with the description of the proposed sole-source award in the secretary's determination and findings — the same D&F that CliniComp challenged as unlawful. The COFC found that CliniComp lacked the kind of experience needed to compete against Cerner for the contract described in the secretary's D&F.⁴

The court rejected CliniComp's argument that it "has standing because CliniComp can offer an alternative solution that could meet the VA's needs," determining that "the question before the Court is not whether CliniComp could offer the VA an alternative solution," but rather "whether CliniComp could compete for the contract that the Secretary has decided to award to Cerner."⁵ The court concluded that the answer was no for several reasons.

Appeal to the Federal Circuit

In a unanimous decision authored by Chief Judge Sharon Prost and joined by Judges Evan Wallach and Richard Taranto, the Federal Circuit affirmed the COFC's decision to dismiss CliniComp's protest for lack of standing.⁶ In doing so, the Federal Circuit determined that it was applying the deferential "clear error" standard of review to the COFC's findings of fact, and concluded CliniComp could not demonstrate clear error in the COFC's conclusion that "CliniComp failed to show it possessed the kind of experience that would enable it to compete for the work contemplated by the VA's proposed contract to Cerner."⁷

The parties' briefing focused largely on whether the COFC applied the correct legal standard for standing. CliniComp urged that, while the COFC applied the standard announced in Myers for protests of sole-source awards, which requires showing that the protester "could compete for the contract if the bid process were made competitive," the COFC should have applied the standard announced in Weeks Marine for pre-award protests, which requires showing only a "non-trivial competitive injury which can be addressed by judicial relief."⁸

The Federal Circuit's decision seems to confirm that it applies the Myers standard to protests, such as CliniComp's, that challenge a sole-source award.⁹ However, the circuit also explained that CliniComp would not have satisfied its burden under the Myers or Weeks Marine standard, because both require showing that the protester is "qualified to compete for the contract it seeks."¹⁰

The Federal Circuit rejected CliniComp's arguments that the record contained insufficient evidence of the Cerner contract's requirements to determine whether CliniComp could compete, finding that the D&F provided sufficient detail regarding the Cerner contract's requirements to support the COFC's conclusion. The Federal Circuit also rejected CliniComp's argument that it derived standing from its status an incumbent VA EHR provider, again concluding that CliniComp simply had not met its burden of showing that it could compete for the Cerner contract.

The circuit also rejected CliniComp's argument that it could compete for the Cerner contract by augmenting its capabilities through subcontracting. Practitioners should note that the circuit did not exclude consideration of such information, but noted that CliniComp did not supply sufficient details to the COFC regarding how or with whom CliniComp would subcontract.¹¹

Analysis and Conclusion

We think protest counsel reading the Federal Circuit and COFC decisions in CliniComp will be surprised to see the amount of evidence that the decisions seem to suggest a protester should submit to the COFC to demonstrate that it is an interested party. If, as the Federal Circuit stated, CliniComp would have failed to meet its burden under either the Myers or Weeks Marine standards, that suggests any protest challenging a sole-source award or a solicitation term could conceivably trigger a subjective factual inquiry by the COFC as to whether the protester has provided sufficient evidence to show its ability to compete for the contract at issue, whether or not a solicitation has even been issued.

This has obvious implications for smaller or newer companies seeking to challenge contracting actions in favor of larger or more established contractors. If CliniComp (a precedential opinion) proves to be representative, parties may expect the COFC to compare the work scope and value of a protester's prior contracts to those of the procurement at issue in making its required standing determination. To the extent the protester is a new market entrant or does not have comparable experience, CliniComp does not rule out arguments that a protester could subcontract or engage in corporate transactions to make up the difference. But, CliniComp does suggest that the COFC may expect hard evidence of how and when such subcontracting and transactional activity will take place.

In the wake of CliniComp, any protester challenging (or agency/intervenor defending) a sole-source award or the terms of a solicitation should carefully consider the evidence that can be submitted to support the determination that the protester could compete for the challenged contract. While experience suggests that the "interested party" analysis rarely triggers a subjective consideration of whether the protester is qualified to compete for the contract at issue, CliniComp is a warning that such analysis is not out of the question.

Footnotes

1 See CliniComp. Int', Inc. v. United States, 134 Fed. CL. 736, 741-42 (2017); CliniComp, Int'l, Inc. v. United States, Nos. 18-1101, 18-1318 at *2-4 (Sept. 19, 2018).

2 See CliniComp, 134 Fed. CL. at 740

3 Id. at 751.

4 See id. at

5 Id. at 753.

6 CliniComp, Int'l, Inc. 18-1101, 18-1318 at *6.

7 Id. at 8.

8 Id. at 7-9.

9 See id at 7, 9.

10 See id. at 9.

11 See id. at 10-11.

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