ICYMI: The Federal Circuit Just Issued One of the Largest Wins Ever for Commercial Companies

Source: “Percipient.ai, Inc. v. United States, CACI, Inc.-Federal: Case 23-1970,” United States Court of Appeals for the Federal Circuit, June 7^th, 2024

In June 2024 the U.S. Court of Appeals for the Federal Circuit issued a landmark decision in Percipient.ai, Inc. v. United States, CACI, Inc.-Federal. This decision carries significant implications for commercial companies who wish to create a foothold in the federal market, as well as more established government contractors who must now account for additional risks to revenue achievability, IP, and customer stickiness.

Background & Context:

This case traces its roots to 2021 when the National Geospatial-Intelligence Agency (NGA) awarded CACI with a single-award IDIQ (Indefinite Delivery, Indefinite Quantity) contract called SAFFIRE (SOM AAA Framework for Integrated Reporting and Exploitation). This contract called for two primary requirements: 1) an “enterprise repository backbone for storing, managing, and disseminating data,” known as “SER” (SOM Enterprise Repository), and 2) an AI Computer Vision (CV) system.

After careful consideration, Percipient concluded it could not fulfill both task order requirements and chose to “no-bid” the contract. However, Percipient surmised it could still meet the requirements of the individual task order calling for the development and delivery of a CV system. Considering the eventual prime contractor CACI lacked organic capabilities to address this CV task order, and given Percipient already had an existing commercial CV platform (“Mirage”) that could address NGA’s requirement, Percipient decided it would position as a prospective subcontractor for the CV task order.

Percipient attempted to reach out to both CACI and the NGA to demonstrate the viability and readiness of its commercial solution, as well as explain the cost-savings NGA could realize by fielding a mature system over a new-development. Despite Percipient’s efforts, on separate occasions, both CACI and NGA dismissed Percipient following its Mirage demonstrations, claiming the system was incapable of addressing the SAFFIRE CV requirement. As a result, NGA proceeded to have CACI develop its own CV system.

Percipient filed a protest with the U.S. Court of Federal Claims, arguing that the leadership in charge of NGA’s acquisition violated its obligations under 10 U.S.C. S 3453, which establishes a “preference for commercial products and services” and instructs heads of agencies “to procure them to the maximum extent practicable.’” The Court of Federal Claims dismissed Percipient’s protest in March 2023 for three distinct reasons:

1. the Court lacked “jurisdiction” on the basis that Percipient’s protest was not “in connection with a procurement or a proposed procurement,” a threshold that must be met as outlined by the Tucker Act,
2. Percipient was not an “interested party,” and thus lacked standing to bring a protest, and
3. Percipient’s claims challenged the terms of the SAFFIRE solicitation itself, suggesting Percipient’s protest was “untimely.”

Following the denial of this protest by the Court of Federal Claims, Percipient appealed this decision to the Federal Circuit, who just last month reversed the Court of Federal Claims’ decision and found in favor of Percipient. The Federal Circuit found that:

1. the Court of Federal Claims indeed had “jurisdiction” as the protest was in fact “in connection with a procurement,”
2. Percipient indeed had standing as an “interested party” since Percipient asserted NGA’s violation occurred “without directly or indirectly challenging a solicitation for award of a government contract, [thereby qualifying the plaintiff as  an interested party [considering it is] an offeror of a commercial product or service that had a substantial chance of being acquired to meet the needs of the agency had the violation not occurred,” and
3. Percipient’s arguments emphasized violations occurring in “post-award delegations, not defects in the solicitation.”

Implications:

The Federal Circuit’s decision expands our understanding of “interested parties” who are allowed to bring forth protests alleging government agencies and their contractors are “economically impacting” their interests. This decision expands the “interested parties” definition beyond our traditional understanding of “potential bidders” for contracts to also include companies who choose not bid for contracts, but whose economic interests are still impacted by post-award decision-making.

Ultimately, the Federal Circuit’s decision in Percipient.ai v. United States establishes a precedent for companies with commercial solutions to file protests about administrative contract activities. This decision lends great new power to commercial companies to claim themselves as “interested parties,” when an agency requirement arises that a commercial capability can address. Now, it appears interested parties need only orient their allegations on the “failure” of procurement authorities to perform adequate market research in the identification of viable commercial capabilities that could otherwise have identified these parties’ solutions as potential offerings.

This article scratches only the surface of the legal ramifications this decision will carry throughout GovCon. If nothing else, this decision significantly expands the power of commercial companies to raise alarms of insufficient market research practices performed by government agencies in their due diligence processes. This case should empower commercial firms who find themselves on the sidelines (willfully or by agency neglect) of compelling government deals. There are now new mechanisms in the market for commercial companies to latch onto existing contracts or capture new customers where particularly in scenarios where arguments of unnecessary spending on developmental solutions can be made.

What to do with this Information:

The Chertoff Group can help both commercial companies and federal contractors identify upcoming solicitations and current contracts where possible opportunities for commercial technologies may exist. Our team of Federal Strategy experts can help you navigate this landscape, pinpoint the right contracts, and implement the right tactics to position your existent capabilities in front of addressable customers seeking to identify commercially viable or readily available solutions. The Chertoff Group can also help established contractors with proper inventorying and acknowledgement of relevant commercial capabilities that can support eventual requirements or customer requests that arise in the middle of contract execution.

Cameron Fegers is a Director in The Chertoff Group’s Federal Strategy practice. Reach out to him via cameron.fegers@chertoffgroup.com