A recent decision by the U.S. Court of Appeals for the Federal Circuit invoked a broad definition of what constitutes a federal "procurement," potentially paving the way for more expansive bid protest jurisdiction at the COFC.
In Distributed Solutions, Inc. and STR, L.L.C. v. United States, No. 2007-5145 (Fed. Cir. Aug. 28, 2008), the Federal Circuit indicated that the COFC has jurisdiction over bid protests challenging decisions "involv[ing] a connection with any stage of the federal contracting acquisition process," specifically including decisions related to a Government Request for Information (RFI) and the decision to procure products through subcontracts to an existing task order, rather than a new competition. Although the Federal Circuit's decision may ultimately be limited to the unique facts at issue in Distributed Solutions, its rationale could open the door to protests of various pre-proposal activities and exchanges, such as industry conferences, market research and draft RFPs.
In Distributed Solutions, the U.S. Agency for International Development and Department of State sought to obtain software for a joint computer platform. The Government had previously issued a task order to SRA International, Inc. (SRA), under a GSA Millennia contract for software integration and acquisition support services. In June 2005, with SRA's assistance, the Government issued an RFI to research possible commercial off-the-shelf software solutions. The RFI stated that it was "for market research purposes only" and would "not result in a contract award," but would help the Government "to determine the next course of action" for the program.
After reviewing the RFI responses, the Government "decided to pursue alternative courses of action." Instead of procuring the software itself, the Government instructed SRA to select vendors who would provide the software as SRA subcontractors under SRA's existing task order. SRA subsequently issued its own RFI and, with approval from the Government, chose software vendor subcontractors. Distributed Solutions and STR, L.L.C., both submitted responses to the Government's initial RFI and SRA's RFI, but neither was selected for an SRA subcontract.
Distributed Solutions and SRA protested the subcontract awards before the GAO, which dismissed them for lack of jurisdiction because the procurement was "not 'by' the government" or "a contractor acting as a procurement agent for a federal agency." Similarly, the COFC dismissed a subsequent consolidated protest, concluding that the Tucker Act, 28 U.S.C. § 1491(b), was not so expansive as "to encompass the process which resulted in competition for the award of subcontracts rather than the award of federal agency contracts."
On appeal, the Federal Circuit reversed the COFC. The Federal Circuit agreed with the contractors that their protest focused not on SRA's decision to award subcontracts to other competitors, but instead the Government's "decision to task SRA with awarding subcontracts for the purchase of software instead of procuring the software itself through a direct competitive process." The Federal Circuit's decision addressed a serious jurisdictional issue: can a protester challenge a decision involving pre-proposal activity such as the RFI?
Because the RFI at issue involved neither a solicitation nor a contract award by a federal agency, the Federal Circuit addressed whether the RFI was "in connection with a procurement" within the meaning of the Tucker Act. The Federal Circuit noted that the Tucker Act does not define "procurement" or "proposed procurement," but pointed out that Congress has defined "procurement" in another statute—41 U.S.C. § 403(2)—that establishes the Office of Federal Procurement Policy and procedures. This statute states that a "'procurement' includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout." Based on this definition, the Federal Circuit concluded without further explanation that the Tucker Act established COFC jurisdiction over protests involving "a connection with any stage of the federal contracting acquisition process, including 'the process for determining a need for property or services.'"
The potential reach of the Distributed Solutions holding is broad. Any time the Government decides to task a prime contractor with awarding subcontracts for products or services rather than procuring those products or services directly, companies that do not receive such subcontracts can potentially argue at the COFC that such a decision was contrary to law. Citing Distributed Solutions, they could argue they were not challenging the award of the subcontract, and thus avoid dismissal.
Distributed Solutions also raises difficult issues with respect to pre-solicitation procurement activities. Subjecting Government conduct related to exchanges with industry to protest scrutiny may have a chilling effect on the extent to which federal agencies are willing to engage industry in efforts to define the Government's needs. This is particularly so with respect to RFIs, which the FAR suggests "may be used when the Government does not presently intend to award a contract, but wants to obtain price, delivery, other market information, or capabilities for planning purposes." FAR 15.201(e). As a result of Distributed Solutions, the simple act of "planning" a procurement and projecting agency need may subject the agency to the scrutiny of a bid protest if a prospective contractor can demonstrate adequate standing and the violation of a procurement law. Furthermore, rather than waiting for an agency to issue a final solicitation to protest perceived violations of law, prospective contractors may be emboldened to protest perceived illegalities in pre-solicitation notices or draft RFPs that are issued primarily for industry benefit. Although Distributed Solutions may ultimately be limited to its facts, its holding suggests a potentially significant broadening of bid protest jurisdiction before the COFC.