The Federal Circuit’s decision in CGI Federal Inc. v. United States addressed the relationship between FAR Part 12—which applies to acquisitions of commercial items—and FAR Subpart 8.4, which addresses the Federal Supply Schedule (FSS) program. The case involved an RFQ issued under the FSS program by the Centers for Medicare & Medicaid Services (CMS) for recovery audit contract services.

In its decision, the Federal Circuit agreed with the Court of Federal Claims (CFC) that although the protester did not submit a proposal, it qualified as an interested party to contest the terms of an RFQ when it filed a timely protest at GAO and, after GAO denied the protest, filed an action at the CFC within three business days asserting the same grounds. The decision shows that, when bringing serial protests before GAO and the CFC, it is important to diligently pursue the case by filing promptly.

The decision arguably is more interesting in its take on the relationship between FAR Part 12 and orders under FSS contracts. FAR § 12.302(c) prohibits the tailoring of solicitations for commercial items in a manner inconsistent with customary commercial practice unless a waiver is approved. The question in CGI Federal is whether this provision governs the placement of orders under existing FSS contracts. The Federal Circuit disagreed with GAO and the CFC on that question. GAO had rejected the argument that CMS was required to follow FAR Part 12 procedures in issuing the RFQs, including those concerning the tailoring of solicitations or contracts. GAO reasoned that FAR Part 12 does not mandate its use in connection with FSS procurements under FAR Subpart 8.4. The CFC found that the services solicited in the RFQs were commercial items and that the payment terms therein were inconsistent with customary commercial practice but agreed with GAO that FAR Part 12’s proscription does not apply to orders made pursuant to existing FSS contracts. The CFC reasoned that (i) FAR Subpart 8.4 does not expressly state that FAR Part 12 applies to orders made pursuant to an existing FSS contract and (ii) FAR Part 12 does not expressly state that its provisions apply to such orders.

The Federal Circuit disagreed. The Court recognized that Subpart 8.4 does not explicitly state that FAR Part 12 applies to orders made under existing FSS contracts. The Federal Circuit reasoned, however, that FAR Part 12 applied to the solicitations at issue because FAR Part 12 provides that it “shall be used for the acquisition” of commercial items. FAR 12.102(a). The Court concluded that the effort to purchase the services at issue qualified as such an “acquisition.” The Court stated that FAR Part 12’s prohibition against “solicitations or contracts” that include terms “inconsistent with customary commercial practice” applied to the RFQ at issue because it was a “solicitation” and the resulting order would be a “contract” as defined in the FAR. Finally, the appeals court reasoned that if there was any conflict among FAR Part 12 and Subpart 8.4, FAR 12.102(c) provides that Part 12 takes precedence over any aspect of the FAR that is inconsistent.

CGI Federal thus recognizes that the terms in RFQs issued under the FSS program must be consistent with FAR Part 12, which also takes precedence over Subpart 8.4 with regard to RFQs and FSS orders. It remains to be seen how the GSA, which administers the FSS program, and other agencies will react to the ruling. Following the decision, the establishment of FSS contracts and the issuance of orders thereunder must be consistent with FAR Part 12’s mandates regarding the treatment of commercial items. Although CGI Federal involved payment terms under an RFQ, the decision might be applied to a number of other terms that appear in FSS solicitations and RFQs, such as requirements to provide pricing data. CGI Federal invites greater scrutiny over the extent to which the placement of FSS orders—and the FSS program as a whole—truly is “commercial” as defined in the FAR.