Case Information
*2 Before D YK R EYNA , and S TARK , Circuit Judges . D YK , Circuit Judge .
Appellant CACI, Inc. (“CACI”) appeals the Court of Federal Claims (“Claims Court”) dismissal of its bid pro- test. The Claims Court held that CACI lacked standing but nonetheless alternatively concluded that CACI’s bid suf- fered a fatal technical deficiency. We hold that the Claims Court erred in treating the statutory standing issue as ju- risdictional. We affirm on the merits.
B ACKGROUND
I. CACI’s Proposal and the Army’s Evaluation The Army issued a solicitation for a Next Generation Load Device Medium (“NGLD-M” or “device”) to encrypt and decrypt sensitive information on the battlefield. In its solicitation, the Army stated that “[i]n order to be eligible for [the] award Offerors must . . . [r]ecieve a minimum of acceptable rating in each Technical Subfactor.” J.A. 1588. The technical subfactors were “Hardware and Application Programming Interface (API) Integration/Description Ap- proach, User Application Software (UAS) Approach/Key Management Interface (KMI) Implementation, Management, and Production.” J.A. 1588. The Army eval- uated each technical subfactor for strengths, weaknesses, significant weaknesses, and deficiencies. A deficiency “is a material failure of a proposal to meet a Government re- quirement or a combination of significant weaknesses in a proposal that increases the risk of unsuccessful contract performance to an unacceptable level.” J.A. 1594. One or more deficiencies would lead to an unacceptable rating, meaning that the “[p]roposal is unawardable.” J.A. 1594.
Five offerors submitted proposals. CACI submitted an initial proposal that was given a Technical/Risk Rating of unacceptable because it failed to provide for two-factor au- thentication for all modes of operation as required by the solicitation. Despite this deficiency, CACI’s proposal was included in the competitive range, and CACI was allowed to submit a final proposal because “only minor revisions to [CACI’s] proposal will be required to rectify this issue and a complete rewrite will not be necessary.” J.A. 5398.
Appellees Sierra Nevada Corporation (“SNC”) and General Dynamics Mission Systems (“GDMS”) were also within the competitive range. CACI, SNC, and GDMS sub- mitted final proposals. CACI for the first time included two-factor authentication in its bid for all modes of opera- tion. CACI proposed using a username and password for the first method of authentication and a dongle that could be inserted into the device’s USB port for the second method of authentication.
The Army assigned three deficiencies to CACI’s pro- posal related to its two-factor authentication proposal. First, the Army was unable to confirm that the device with the dongle inserted would meet the size requirement be- cause CACI did not provide the size measurement of the dongle used for two-factor authentication. The Army also assigned two other deficiencies because it determined that CACI’s proposal required that the two-factor authentica- tion dongle remain inserted into the device’s only USB port, meaning the USB port could not be used to distribute and receive data as required by the solicitation. The Army assigned one deficiency for failure to meet data distribution requirements and another for failing to meet the data re- ceiving requirements. Because of these three deficiencies, CACI was ineligible for the award. The Army awarded the contract to SNC and GDMS.
II. Proceedings at the Claims Court CACI filed a bid protest at the Claims Court challeng- ing the technical deficiencies assigned to its proposal. SNC and GDMS intervened as defendants. SNC and the gov- ernment moved to dismiss CACI’s complaint for lack of standing under a new theory not raised before or addressed by the contracting officer, namely that CACI had an organ- izational conflict of interest (“OCI”) that could not be waived or mitigated, which made CACI ineligible for the award even if it were to prevail on its claim regarding the technical deficiencies. Because of the OCI, SNC and the government argued that CACI was not an interested party and lacked standing, which they characterized as a juris- dictional issue.
OCIs are governed by the Federal Acquisitions Regula- tions (“FAR”), found at 48 C.F.R. Chapter 1. The FAR pre- scribes “limitations on contracting as the means of avoiding, neutralizing, or mitigating [OCIs]” with the goals of “[p]reventing the existence of conflicting roles that might bias a contractor’s judgment” and “[p]reventing unfair com- petitive advantage.” FAR § 9.505. Under the FAR, con- tracting officers are to “[i]dentify and evaluate potential [OCIs] as early in the acquisition process as possible.” FAR § 9.504(a)(1). An OCI can result from work performed un- der a prior contract. The FAR provides, in relevant part, that “[a] contractor that provides systems engineering and technical direction for a system [under a prior contract] . . . shall not . . . [b]e awarded a contract to supply the system or any of its major components.” FAR § 9.505-1. In general, an OCI can be waived by an agency head or de- signee, FAR § 9.503, an OCI can be mitigated, see FAR § 9.505, and contractual restrictions may sunset under the terms of the prior contract, FAR § 9.507-2. [1]
Here, as part of its proposal, CACI submitted an Or- ganizational and Consultant Conflict of Interest state- ment. CACI’s statement acknowledged that a former CACI employee under a prior contract worked with the Army to prepare one of the documents included in the solicitation but contended that the employee “provided only logistical and administrative support” and “did not participate in the substantive aspects of the [document] approval process.” J.A. 2318. Thus, CACI concluded it did not have an OCI with respect to the current contract. J.A. 2318. Because the employee did not provide “engineering and technical di- rection” there was no conflict. The contracting officer at the time of the proposal made no determination or sugges- tion that there was an OCI.
For the first time at the Claims Court, SNC and the government argued that the work of CACI’s former em- ployee constituted an OCI because the work was “systems engineering and technical assistance” (“SETA”) under FAR § 9.505-1. Because CACI had an OCI, it did not have a sub- stantial chance of securing the award; it was not an inter- ested party and thus lacked standing. In support of its motion, the government submitted a declaration from the contracting officer for the solicitation. The contracting of- ficer stated that, “[a]t the request of counsel for the Government,” she reviewed CACI’s OCI statement and found that “CACI would not have been eligible for [an] award due to an unmitigable OCI.” J.A. 59. The contract- ing officer declined to request a waiver from the agency head at the time she prepared her declaration because she “ha[d] no information before [her] that would lead [her] to believe that it was in the Government’s best interest to waive any provision of FAR Sub Part 9.5 in this acquisi- tion.” J.A. 60–61. The contracting officer also found that CACI had an OCI that could not be mitigated. The con- tracting officer’s declaration did not address whether the restriction resulting from the earlier contract had expired, i.e., sunsetted.
In its answering brief, CACI argued that the OCI should not be determined in a de novo review by the Claims Court because the contracting officer’s declaration failed to follow the procedure set forth by the FAR, and, in any event, that the work done by its prior employee was not SETA work, and that any potential OCI had been sunset- ted.
The Claims Court conducted its own analysis of the rec- ord evidence, finding that CACI’s OCI statement and the technical documents in the solicitation provided prima fa- cie evidence that CACI had performed SETA work. The Claims Court did not rely upon the contracting officer’s dec- laration. Because “[t]he FAR prohibits a [systems engi- neering and technical direction] contractor, as either a prime contractor or a subcontractor, from supplying any of the system’s major components,” J.A. 9 (alterations in orig- inal) (citations omitted), and because CACI’s prior work was related to the same system, CACI had an OCI. Since CACI did not provide any evidence to rebut this prima facie showing, the Claims Court concluded that CACI did not have standing because the OCI would have prevented CACI from being eligible for the award. In other words, CACI did not show that it had a “substantial chance it would have received the contract award but for the alleged error [regarding the technical deficiencies] in the procure- ment process.” J.A. 9 (internal quotation marks and em- phasis omitted) (quoting Info. Tech. & Applications Corp. v. United States , 316 F.3d 1312, 1319 (Fed. Cir. 2003)).
The Claims Court apparently held that the OCI here was not eliminated by waiver, mitigation, or sunset provi- sions, because the FAR provides that
[a] contractor that provides systems engineering and technical direction for a system but does not have overall contractual responsibility for its devel- opment, its integration, assembly, and checkout, or its production shall not – (1) be awarded a contract to supply the system or any of its major components or (2) be a subcontractor or consultant to a supplier of the system or any of its major components.
J.A. 9 (emphasis and alteration in original) (quoting FAR § 9.505-1(a)).
Alternatively, the Claims Court found that, even if CACI had standing, defendants would nevertheless be en- titled to judgment on the administrative record. In this re- spect, the Claims Court considered each of the challenged technical deficiencies and found that the Army acted rea- sonably in its assessment of CACI’s proposal.
The Claims Count dismissed CACI’s complaint for lack of jurisdiction (lack of standing). CACI appealed. We have jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).
D ISCUSSION
I. The Claims Court’s OCI Decision Under the Tucker Act, the Claims Court has jurisdic- tion over actions “by an interested party objecting to . . . the award of a contract [by a federal agency.]” 28 U.S.C. § 1491(b)(1). We have interpreted the statutory language “interested party” to be 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.” Rex Serv. Corp. v. United States , 448 F.3d 1305, 1307 (Fed. Cir. 2006) (emphasis and citation omit- ted). “To prove a direct economic interest, a party must show that it had a ‘substantial chance’ of winning the con- tract.” Digitalis Educ. Sols., Inc. v. United States , 664 F.3d 1380, 1384 (Fed. Cir. 2012) (quoting Rex Serv. , 448 F.3d at 1308).
The standing issue here presents a question of statutory standing rather than Article III standing, Acetris Health, LLC v. United States , 949 F.3d 719, 727 (Fed. Cir. 2020) (characterizing the “interested party” inquiry as “statutory standing”), there being no contention that CACI lacks Ar- ticle III standing. Although the Supreme Court had “on occasion . . . treated [statutory standing] as effectively ju- risdictional,” Lexmark Int’l, Inc. v. Static Control Compo- nents, Inc. , 572 U.S. 118, 128 n.4 (2014) (citing Steel Co. v. Citizens for a Better Env’t , 523 U.S. 83, 97 & n.2 (1998)), in Lexmark the Supreme Court held that statutory standing, occasionally referred to as the zone-of-interests require- ment, is not jurisdictional. Id . Rather, it is “an issue that requires us to determine, using traditional tools of statu- tory interpretation, whether a legislatively conferred cause of action encompasses a particular plaintiff’s claim.” Id. at 127.
Thus, as we have confirmed, “the Supreme Court has . . . clarified that so-called ‘statutory standing’ defects do not implicate a court’s subject-matter jurisdiction.” Lone Star Silicon Innovations LLC v. Nanya Tech. Corp. , 925 F.3d 1225, 1235 (Fed. Cir. 2019) (citing Lexmark , 572 U.S. at 128 n.4); see also Meenaxi Enter., Inc. v. Coca-Cola Co ., 38 F.4th 1067, 1072 n.2 (Fed. Cir. 2022). This is true even when the cause of action relies on a waiver of sovereign im- munity. See Wilkins v. United States , 143 S. Ct. 870, 879 (2023); Walby v. United States, 957 F.3d 1295, 1300 (Fed. Cir. 2020) (citing United States v. Kwai Fun Wong , 575 U.S. 402, 410 (2015)). Our prior caselaw treating the interested , party issue as a jurisdictional issue, see, e.g. , Myers Inves- tigative & Sec. Servs., Inc. v. United States 275 F.3d 1366, 1369 (Fed. Cir. 2002) (citing Steel Co , 523 U.S. at 102–04), is no longer good law in this respect. The Claims Court here erred in treating the issue of statutory standing as ju- risdictional.
We now turn to the question of whether the Claims Court properly considered statutory standing de novo where the issue had not been addressed initially by the con- tracting officer. Federal acquisitions, and the role of the contracting officer, are governed by the FAR. This regula- tion is promulgated under chapter 13 of title 41 of the U.S. Code. The statute establishes “a Federal Acquisition Reg- ulatory Council,” 41 U.S.C. § 1302, with members author- ized to issue and maintain the FAR. Id. § 1303(a)(1). Under the FAR, the contracting officer plays important roles. The contracting officer determines whether and to whom a contract should be awarded by applying the terms of the solicitation, the FAR, and other governing authority. See FAR § 15.303. In the case of a dispute between the government and the contracting party after a contract has been awarded, the contractor can submit a dispute directly to the contracting officer under the Contract Disputes Act. 41 U.S.C. § 7103(a)(1). The contracting officer’s decision is then subject to review by an agency board or the Claims Court. Id. § 7104.
In contrast, in most bid protests, the contracting officer is not charged with initially resolving a bid protest dispute. Under the statute, a protestor may file a protest at Govern- ment Accountability Office or the Claims Court. [2] See 41 U.S.C. § 3708(a)(1); 31 U.S.C. § 3552(a); 4 C.F.R. 21.1(c); 28 U.S.C. § 1491(b)(1). When such disputes are presented to the Claims Court, the plaintiff must be an “in- terested party,” 28 U.S.C. § 1491(b)(1), that is, a party with a substantial chance of securing the award. See Info. Tech. & Applications Corp. , 316 F.3d at 1319 (statutory stand- ing). The Claims Court in some instances must make the statutory standing determination, i.e . , whether the plain- tiff is an interested party. This determination by the Claims Court is required when the plaintiff is arguing that the contracting officer made an error in evaluating the bid of another contractor. Myers , 275 F.3d at 1370; CliniComp Int’l, Inc. v. United States , 904 F.3d 1353, 1359 (Fed. Cir. 2018). This is so even though statutory standing is no longer treated as a jurisdictional issue. We see nothing in Lexmark that suggests that in such cases the Claims Court may not initially determine whether a plaintiff is an “inter- ested party,” though such an initial determination is not required before addressing the merits, because statutory standing is not jurisdictional.
In such instances where the Claims Court elects to make a determination of statutory standing, the Claims Court is charged only with making a preliminary determi- nation (“substantial chance”) with respect to the plaintiff’s chances of securing the contract, rather than a final merits determination of contract entitlement. See Digitalis , 664 F.3d at 1384. Unless some exception to the Chenery doc- trine permits final decision by the Claims Court, for exam- ple, the issue to be decided is purely legal, a remand to the agency is required to make the final determination of con- tract entitlement. See Oracle Am., Inc. v. United States , 975 F.3d 1279, 1291 (Fed. Cir. 2020) (describing Chenery remand exceptions).
However, the present case is different from Myers and CliniComp in that 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 determi- nation that CACI’s own bid had disqualifying deficiencies. In this context, the statutory standing issue and the merits issue are overlapping. Every merits issue to a bidder’s qualifications is also a statutory standing issue. As the government admitted at oral argument, the technical defi- ciencies issues here could themselves be viewed as statu- tory standing issues. See Oral Arg. at 19:22–20:51; see also COMINT Sys. Corp. v. United States , 700 F.3d 1377, 1383 (Fed. Cir. 2012) (“[T]he propriety of the marginal Qual- ity/Capability rating assigned to Comint by the agency is determinative of both Comint’s standing and the merits.”).
In such a situation, allowing the Claims Court to deter- mine statutory standing de novo would be to allow the Claims Court to determine the merits de novo, when the statute and regulations clearly provide that CACI’s OCI compliance is to be determined initially by the contracting officer and reviewed by the Claims Court based on the agency record and an arbitrary and capricious standard.
Congress has primarily placed the matter of OCI deter- minations in the hands of the contracting officer. “[T]he FAR recognizes that the identification of OCIs and the evaluation of mitigation proposals are fact-specific inquir- ies that require the exercise of considerable discretion.” Axiom Res. Mgmt., Inc. v. United States , 564 F.3d 1374, 1382 (Fed. Cir. 2009) (citing FAR § 9.505). We have em- phasized the importance of the arbitrary and capricious standard for reviewing a contracting officer’s actions in bid award decisions. Id. at 1381–82.
In Axiom , Axiom, an unsuccessful bidder, challenged the award of a contract to another bidder, Lockheed, alleg- ing that Lockheed had an OCI. Id. at 1377–78. The con- tracting officer had reviewed Lockheed’s alleged OCI and concluded that the OCI was appropriately mitigated. Id. Axiom filed a complaint at the Claims Court, alleging that the government violated the FAR’s OCI provisions and seeking to supplement the record with affidavits not before the contracting officer. Id. at 1378–79. The Claims Court allowed Axiom to supplement the record and held, based on the supplemented record, that there was an OCI in vio- lation of FAR § 9.5. In doing so, the court did not apply the arbitrary and capricious standard. Id. at 1379. On appeal, we held that the Claims Court erred by essentially conduct- ing a de novo review of the OCI issue and in allowing Axiom to supplement the record before the contracting officer. Id. at 1381.
Here, too, the Claims Court erroneously conducted a de novo review of CACI’s purported OCI. Where, as here, is- sues of statutory standing and merits overlap and there is no Chenery exception, the Claims Court has no authority to conduct its own de novo determination of the issue based on a record made in the Claims Court. [3]
To be sure, when a losing bidder is challenging the con- tracting officer’s determination, the disappointed bidder must establish that it was prejudiced by the contracting of- ficer’s action. See Oracle Am., Inc. , 975 F.3d at 1290–92. The issue of prejudice is related to the issue of statutory standing. See Data Gen. Corp. v. Johnson , 78 F.3d 1556, 1562 (Fed. Cir. 1996) (describing various formulations of prejudice). Here, the government could assert that any er- ror in the technical deficiencies determination would have been harmless if CACI had a disqualifying conflict of inter- est. But as with statutory standing under Lexmark , the issue of prejudice is no longer jurisdictional unless it impli- cates Article III considerations, and our cases to the con- trary are no longer good law. The issue of prejudice can properly be resolved by the Claims Court initially only if under Chenery the issue need not be remanded to the agency, for example, if the issue is a purely legal question, Oracle Am., Inc. , 975 F.3d at 1291, which is not the case here. Typically, however, if the issue has not been ad- dressed in the first instance by the contracting officer, a remand is necessary for the contracting officer to address the issue of prejudice.
In the context of appeals from other agency decisions, the Supreme Court has held that, “[g]enerally speaking, a [reviewing court] should remand a case to an agency for decision of a matter that statutes place primarily in agency hands.” INS v. Orlando Ventura , 537 U.S. 12, 16 (2002) (per curiam). This is because “[t]he reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.” Fla. Power & Light Co. v. Lo- rion , 470 U.S. 729, 744 (1985). [4] In general, a declaration from a contracting officer as to how she would resolve the case is no substitute for a remand where the challenging party would have a full opportunity to present the case to the contracting officer. See FAR § 9.504(e) (“Before deter- mining to withhold award based on conflict of interest con- siderations, the contracting officer shall notify the contractor, provide the reasons therefor, and allow the con- tractor a reasonable opportunity to respond.”).
Given our determination as to the contracting officer’s evaluation of the technical deficiencies (discussed below), there is no need to consider a remand to the contracting officer in this case to consider the OCI allegations. [5] II. CACI’s Technical Deficiencies
We review the Claims Court’s assessment of agency ac- tions without deference, reapplying the same standard of review applicable in the Claims Court. Bannum, Inc. v. United States , 404 F.3d 1346, 1351 (Fed. Cir. 2005). We consider whether the agency’s actions were “arbitrary, ca- pricious, an abuse of discretion, or otherwise not in accord- ance with law.” 5 U.S.C. § 706(2)(A); see Bannum , 404 F.3d at 1351.
We consider only the first technical deficiency because it is determinative. There is evidence that the dongle in CACI’s proposal would protrude from the device. The Army assigned a technical deficiency to CACI’s proposal for failing to include the measurements of the proposed dongle used for two-factor authentication, making it “unclear if the proposed design meets the [device] length . . . require- ment[]” when the dongle is inserted. Appellant’s Br. at 44 (quoting J.A. 5137).
CACI argues that the Army’s determination was an abuse of discretion for two reasons.
First, CACI argues that the dongle was not “opera- tional hardware” and thus did not need to be included in for contracts in the future. Based on these concerns, CACI asks that we clearly rule there was no OCI. Oral Arg. at 0:16-0:36, 2:26-2:50. While we are not unsympathetic to CACI’s concerns, we conclude that the issue need not and should not be resolved in this appeal, just as the Claims Court could not properly resolve it de novo. We note, how- ever, that because we vacate the OCI finding (and the con- tracting officer’s declaration) without remanding for a final determination on the issue, the Claims Court’s OCI find- ings have no preclusive effect.
the device measurements. CACI points to the size require- ment, which states:
The NGLD-M operational hardware used to per- form NGLD-M functions shall not exceed the length of 7.75”, width of 4.5”, and depth of 2.5”. The NGLD-M operational hardware used to perform NGLD-M functions shall not exceed 8 pounds. (In- cluding batteries as well as system components and accessories). The operational hardware may con- tain primary device, batteries and accessories re- quired to operate the NGLD-M. Battery installation is included for [size] requirements. Standalone cables that provide a means of interfac- ing with systems, devices or power sources that are outside of the NGLD-M system context are exempt from the [size] requirements. Contractors shall not use proprietary standalone cables.
J.A. 1334 (emphasis added). CACI argues that the lan- guage “[t]he operational hardware may contain,” id. (em- phasis added), suggests that the Army considered some accessories not to be “operational hardware.” CACI further points to the language, “Standalone cables that provide a means of interfacing with systems, devices or power sources that are outside of the NGLD-M system context are exempt from the [size] requirements,” id. , as evidence that not all accessories are operational hardware. Accordingly, CACI argues that there is a latent ambiguity in the pro- posal that should be construed against the government. However, there is no ambiguity as to whether CACI’s proposed dongle is operational hardware as that term is used in the proposal. As set forth in the block quote above, the requirement is clear that “operational hardware” is “used to perform NGLD-M functions” and “required to op- erate the NGLD-M.” J.A. 1334. As the contracting officer determined, CACI’s dongle is required to operate the device because without it, a user could not initiate a session. Thus, the contracting officer was correct to find the dongle to be operational hardware.
Second, CACI argues that the Army treated offerors differently with regard to the size requirement because one of the other offerors was not assigned a deficiency for fail- ing to include its authentication device in its measure- ments. Disparate evaluation claims are analyzed under a “substantively indistinguishable” standard. Off. Design Grp. v. United States , 951 F.3d 1366, 1373 (Fed. Cir. 2020). Under this standard, the protestor must show that the de- ficiencies assigned to its proposal were “substantively in- distinguishable” from those contained in other proposals. Id. at 1372–73. CACI did not do so here.
It is true that the other offeror did not provide the measurements of its proposed authentication device. How- ever, the other offeror proposed a different solution from CACI’s to meet the two-factor authentication require- ments. This solution involved a small cartridge that is in- serted into a housing unit already built into the device. Accordingly, it is possible that inserting the cartridge would not affect the size of the device. In contrast, CACI proposed an external dongle that had to be inserted into a USB-C port, a solution that the Army reasonably deter- mined could impact the dimensions of the device when the dongle was inserted. CACI had the burden of showing that the two solutions are “substantively indistinguishable,” a burden CACI failed to meet.
Therefore, the Army reasonably assigned a technical deficiency under the size requirement. A single deficiency renders the proposal “unawardable.” J.A. 1594. The Claims Court did not err in sustaining the contracting of- ficer’s finding of a technical deficiency.
C ONCLUSION
For the foregoing reasons, we conclude that the Claims Court’s statutory standing determination was erroneous because the Claims Court improperly addressed the non- jurisdictional question of statutory standing de novo de- spite the absence of any Chenery exception, but we none- theless affirm the ultimate determination.
AFFIRMED-IN-PART AND VACATED-IN-PART
C OSTS
No costs.
[1] CACI asks us to interpret FAR § 9.507-2 and hold that once a sunset provision contained in a prior contract in accordance with that regulation becomes operable then a bidder no longer has a disqualifying OCI stemming from that contract, notwithstanding the arguable applicability of FAR § 9.505-1. Consistent with the analysis below, we decline to decide this issue.
[2] A protestor may also file a protest directly with the contracting officer, as established by Executive Order No. 12,979, 60 Fed. Reg. 55171 (Oct. 25, 1995). See FAR § 33.103.
[3] This conclusion is not intended to suggest that the Claims Court cannot make jurisdictional determinations in the first instance.
[4] See also , e.g. , Turner Const. Co. v. United States , 645 F.3d 1377, 1386–87 (Fed. Cir. 2011) (finding no error in the Claims Court’s deferential consideration of a con- tracting officer’s post-award OCI investigation and analy- sis).
[5] CACI raises concerns about the effect of the Claims Court’s OCI decision on its eligibility and competitiveness