CGI Fed. Inc. v. United States

• Decision Date: 10 March 2015
• Docket Number: No. 2014–5143.,2014–5143.
• Citation: 779 F.3d 1346
• Parties: CGI FEDERAL INC., Plaintiff–Appellant v. UNITED STATES, Defendant–Appellee.
• Court: U.S. Court of Appeals — Federal Circuit

779 F.3d 1346

CGI FEDERAL INC., Plaintiff–Appellant

v.UNITED STATES, Defendant–Appellee.

No. 2014–5143.

United States Court of Appeals, Federal Circuit.

March 10, 2015.

Scott M. McCaleb, Wiley Rein, LLP, Washington, DC, argued for plaintiff-appellant. Also represented by Daniel Patrick Graham, Christine Alice Reynolds, Gary Scott Ward.

William Porter Rayel, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for defendant-appellee. Also represented by Joyce R. Branda, Robert E. Kirschman, Jr., Kirk Manhardt.

Michael J. Schaengold, Greenberg Traurig LLP, Washington, DC for amicus curiae. Also represented by Melissa Paige Prusock, Aaron S. Ralph.

Before MOORE, TARANTO, and CHEN, Circuit Judges.

Opinion

MOORE, Circuit Judge.

In this pre-award bid protest appeal, CGI Federal Inc. challenges the payment terms of requests for quotes (“RFQs”) issued by the United States Department of Health and Human Service's Centers for Medicare and Medicaid Services (“CMS”). CGI argues that the payment terms violate certain statutory and regulatory provisions. The government responds, as it did below, that CGI did not have standing to bring its bid protest because it did not qualify as an “interested party” within the meaning of 28 U.S.C. § 1491(b)(1). Because the Court of Federal Claims correctly held that CGI qualified as an interested party at the time it filed its bid protest, but erred in holding that the payment terms do not violate the applicable regulations, we reverse and remand.

Background

In the contracts at issue, CMS uses contractors, such as CGI, to determine if Medicare claims were correctly paid. If the contractor identifies an overpayment, CMS sends a demand letter to the provider seeking repayment and pays the contractor a contingency fee. Pursuant to the original contracts from 2008, the contractors invoiced CMS for the contingency fee when the overpayment was collected from the provider, typically 41 days after the demand letter. In 2014, CMS issued new RFQs for these recovery services. The 2014 RFQs included additional payment terms requiring the contractors to wait to invoice CMS until a provider's challenge to the repayment request passed the second level of a five-level appeal process, which typically occurs somewhere between 120 and 420 days after the demand letter.

Five different contractors bid on the 2014 RFQs, but CGI did not. Instead, before bidding closed, CGI filed a timely pre-award protest at the Government Accountability Office (“GAO”) challenging the revised payment terms. While the GAO protest was pending, the bidding period closed. The GAO subsequently denied the protest. Three business days later, CGI filed a protest in the United States Court of Federal Claims. CGI and the government then filed cross-motions for judgment on the administrative record, and the government moved to dismiss for lack of standing. The Court of Federal Claims denied the government's motion to dismiss but granted its motion for judgment on the administrative record, holding that the modified payment terms do not violate statutory or regulatory provisions. CGI Fed. Inc. v. United States, No. 14–cv–00355–MCW, slip op. at 9–10, 18–21 (Fed.Cl. Aug. 15, 2014) (“Opinion and Order ”). It also held that the payment terms do not unduly restrict competition. Id. at 22. CGI appeals. We have jurisdiction under 28 U.S.C. § 1295(a)(3).

Discussion

I. Standing

Whether a party has standing is an issue of law that we review de novo. Am. Fed'n of Gov't Emps. v. United States, 258 F.3d 1294, 1298 (Fed.Cir.2001) (“AFGE ”). To have standing to bring a bid protest in the Court of Federal Claims, a plaintiff must be an “interested party.” 28 U.S.C. § 1491(b)(1). While § 1491(b)(1) does not define “interested party,” we have construed the term in accordance with the definition provided in the Competition in Contracting Act (“CICA”), 31 U.S.C. §§ 3551 –56, “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” AFGE, 258 F.3d at 1299 (quoting 31 U.S.C. § 3551(2) ). Thus, to demonstrate that it has standing, CGI must show that it is (1) an actual or prospective bidder, and (2) that it has a direct economic interest. Digitalis Educ. Solutions, Inc. v. United States, 664 F.3d 1380, 1384 (Fed.Cir.2012).

A. Prospective Bidder

CGI never submitted a bid in response to the 2014 RFQs and thus is not an actual bidder. CGI must therefore show that it was a prospective bidder at the time it filed its protest in the Court of Federal Claims. We hold that it has made such a showing.

The parties primarily debate the implications of four cases in which we have opined on the meaning of “prospective bidder.” A brief description of each case is helpful. In MCI Telecommunications Corp. v. United States, we considered the meaning of “prospective bidder” within the now-defunct Brooks Act, 40 U.S.C. § 759(f)(9)(B), which included a definition of “interested party” identical to the definition in CICA. 878 F.2d 362 (Fed.Cir.1989). There, we held that MCI was not a prospective bidder because it did not participate in the bidding process and did not file the protest at issue until after the contract had been awarded. Id. at 364–65. We noted that MCI could not “achieve prospective bidderhood” via its post-award protest because “the opportunity to qualify either as an actual or prospective bidder ends when the proposal period ends.” Id. at 365.

One year later in Federal Data Corp. v. United States, we held that Federal Data was not a “prospective bidder” within the meaning of the Brooks Act because it withdrew from the bidding process prior to filing a protest. 911 F.2d 699, 702–05 (Fed.Cir.1990). “Federal Data knowingly took itself out of the bidding prior to filing its amended protest,” and therefore “relinquished any chance of receiving the contract by that action.” Id. at 703–04. We noted that Federal Data “could have continued to compete for the contract award ... and could have utilized the protest procedures available to an interested party to correct any deficiencies it perceived in the procurement process,” but did not. Id. at 705. We stated that a “prospective bidder” “does not include one who only intends to bid in the event of a reprocurement.” Id. at 704.

We considered the meaning of “prospective bidder” in the context of an interested party under § 1491 in Rex Service Corp. v. United States, 448 F.3d 1305 (Fed.Cir.2006). Rex initially filed a pre-award protest with the agency. Id. at 1307. The agency denied its protest, and Rex, having not submitted a bid, did not pursue the matter further. Id. The agency subsequently awarded the contract to another party and—two months after the award and three months after the agency denied its initial protest—Rex filed a post-award protest in the Court of Federal Claims, raising issues entirely different from those raised in its agency protest.Id. We held that Rex was not a prospective bidder because it “could have bid, but chose not to.” Id. at 1308. We noted that in Rex's case, its pre-award agency protest was “not relevant” to determining its prospective bidder status. Id. We again noted that “ ‘the opportunity to qualify either as an actual or a prospective bidder ends when the proposal period ends.’ ” Id. (quoting MCI, 878 F.2d at 365 ). We held that “In the end, Rex did not submit a bid; nor did it file a timely bid protest in the Court of Federal Claims.” Id.

Finally, in Digitalis, we held that a protestor that failed to submit the required statement of capability to the agency in the allotted time period and filed its Court of Federal Claims protest more than two months after the contract was awarded was not a prospective bidder. 664 F.3d at 1383–86. Citing to both MCI and Rex, we again noted that “the opportunity to become a prospective bidder ends when the proposal period ends.” Id. at 1385.

While none of these cases is directly on point, together they are instructive. In each case, the party failed to obtain prospective bidder status because it did not diligently pursue its protest rights, e.g., by failing to file any protest until well after a contract award (MCI, Digitalis ), affirmatively abandoning any interest in the contract (Federal Data ), or delaying months after both denial of a timely protest and the award of a contract before filing the protest at issue (Rex ).

The same cannot be said of CGI, which diligently and continuously pursued its rights in the GAO and then, immediately upon dismissal by the GAO, in the Court of Federal Claims.¹ Neither party disputes that CGI qualified as a prospective bidder on the day that it filed its GAO protest. Thus, it “achieve[d] prospective bidderhood” at that time. MCI, 878 F.2d at 365. The fact that—as MCI, Federal Data , and Digitalis all make clear—CGI's opportunity to qualify as a prospective bidder ends when the solicitation period ends does not doom CGI because it had already achieved prospective bidder status with its timely GAO protest. It seems equally clear that CGI retained its prospective bidder status throughout the pendency of its GAO protest because it was continuously pursuing its challenge to the payment terms in the 2014 RFQs.² The question, then, is whether CGI lost its prospective bidder status during the three business days between the GAO denial and filing the Court of Federal Claims protest. In other words, has this brief passage of time or some affirmative act stripped CGI of its prospective bidder status? In this case, the answer is no.

While we recognize that the government has been guided in its view by language in Rex, we agree with the Court of Federal Claims, which concluded that CGI's position is readily distinguishable from the protestor in Rex. In Rex, the protestor waited nearly three months after the agency denied its initial protest before filing the protest at issue and, in the interim, the...