Relief Requested: What the Federal Circuit’s CACI-Federal Decision Means for Your Bid Protest beyond Standing

Stephanie M. Harden ●

The primary holding of the Federal Circuit’s May 2023 decision in CACI, Inc.-Federal v. United States (Case No. 2022-1488), is that “statutory standing” is no longer a jurisdictional issue. This means that when considering whether a protester is an “interested party” under the Tucker Act, the Court of Federal Claims (“COFC”) is not required to address statutory standing before the merits.

Although much has been written about this holding, our view is that there will be little or no impact on most bid protests stemming from this particular aspect of the decision, other than perhaps an uptick in denying protests on the merits without first addressing statutory standing.

We think the more interesting part of the decision is its reaffirmance of the Chenery doctrine, and specifically, the Federal Circuit’s direction about which issues must be remanded back to the agency, rather than decided by the COFC in the first instance. Although the Chenery doctrine is not new, the Federal Circuit has now made it clear that the doctrine greatly limits the COFC’s ability to order specific relief where an issue was not previously considered by the agency. On this issue, our takeaway is that CACI-Federal will actually lead to a reduction in the COFC weighing in on certain merits-based issues.

Confused about how Chenery relates to statutory standing? Read on for our analysis.

What is statutory standing?

Statutory standing differs from Article III standing: Article III requires that there be an active “case or controversy” before the court, whereas statutory standing requirements are (not surprisingly) any additional standing requirements created by statute. In the context of bid protests before the COFC, the Tucker Act’s “interested party” requirements are statutory standing requirements.

Will more bid protests be resolved on the merits following CACI-Federal?

Maybe. It is true that judges may now choose to deal with statutory standing at the end of the opinion (in the same way prejudice is typically handled). Thus, there will likely be instances in which the COFC opines upon a protest ground but then goes on to conclude that the protester lacks statutory standing . . . or perhaps more likely, instances in which the COFC denies a protest on the merits before reaching the issue of statutory standing.

However, given that the government or intervenor can still seek dismissal of the protest for lack of statutory standing (under Rule 12(b)(6) now, instead of Rule 12(b)(1)), we are dubious that there will be a significant increase in resolving protests on the merits that otherwise would have been dismissed for lack of standing.

What is the relevance of the Chenery doctrine (and what is the Chenery doctrine anyway)?

An interesting wrinkle in CACI-Federal is that the Federal Circuit found that the issue of statutory standing overlapped with the merits of the protest. This is because, as summarized by the Federal Circuit, “CACI is not challenging an award to a third party based on some defect in the solicitation process, but is rather challenging the contracting officer’s determination that CACI’s own bid had disqualifying deficiencies.” Decision at *5. In such circumstances, “[e]very merits issue to a bidder’s qualification is also a statutory standing issue” because it goes to whether CACI had a substantial chance of receiving the award. Id.

Why does this matter? Pursuant to the Chenery doctrine, courts are limited to reviewing the grounds an agency actually invoked when it took an action. Consistent with this principle, the COFC reviews agency procurement decisions under the deferential arbitrary and capricious standard rather than substituting its judgment for that of the agency.

In CACI-Federal, this meant that the COFC could not make a de novo determination regarding CACI’s statutory standing because this would amount to a de novo determination of a matter that only the contracting officer can decide in the first instance: CACI’s organizational conflict of interest (“OCI”) compliance—which had been challenged by the government and intervenor during the protest, but had never been decided by the contracting officer. Thus, the COFC was not permitted to decide this issue in the first instance.

Wait…the COFC cannot decide an issue raised in a protest because it overlaps with the merits?

The COFC cannot properly decide an issue that the agency is supposed to decide in the first instance if the agency itself has not done so, unless an exception applies.

This means, for example, that if new errors are raised during the protest that the agency did not yet examine, the COFC should remand to the agency to consider the issue(s), rather than resolve them in the first instance. A common scenario, as in CACI-Federal, would be arguments that the protester lacks standing or cannot establish prejudice due to defects in its own proposal that the agency failed to consider altogether. While the Court can certainly opine on any legal parameters that may limit the agency’s discretion in considering the issue, it ultimately must permit the agency to decide the/ issue in the first instance . . . even if that means that matter ends up back before the COFC after the agency’s determination.

The lessons of Chenery also extend to the appropriate remedy where the COFC finds an error in the agency’s analysis. In such circumstances, the COFC may hold that a particular course of action was arbitrary and capricious, but then should remand the matter to the agency for further action consistent with the Court’s ruling without otherwise limiting the agency’s discretion regarding how to implement the Court’s ruling. This is because, after declaring the agency’s original decision invalid, the Court must permit the agency to make a new decision itself, rather than making that decision for the agency. A noteworthy exception arises where the issue in question is purely legal; such matters may be resolved by the Court without remanding to the agency for further review.

What does this mean for my next bid protest?

Our key takeaways are:

        1. Chenery has broad applicability to protest issues, including merits issues, and requires that agencies make most determinations in the first instance.
        2. We can expect more remands as the COFC navigates the overlap between issues of standing, prejudice, and the merits.
        3. Practitioners can and should advocate for remands in which the agency retains discretion to resolve any errors identified by the COFC in the first instance.

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