Clinicomp International, Inc. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
CLINICOMP INTERNATIONAL, INC.,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
CERNER CORPORATION,
Defendant-Cross-Appellant
______________________
2018-1101, 2018-1318
______________________
Appeals from the United States Court of Federal
Claims in No. 1:17-cv-01115-LKG, Judge Lydia Kay
Griggsby.
______________________
Decided: September 19, 2018
______________________
RICHARD J.R. RALEIGH, JR., Wilmer & Lee PA, Hunts-
ville, AL, argued for plaintiff-appellant. Also represented
by JEROME S. GABIG, CHRISTOPHER LEA LOCKWOOD.
WILLIAM PORTER RAYEL, Commercial Litigation
Branch, Civil Division, United States Department of
Justice, Washington, DC, argued for defendant-appellee.
Also represented by CHAD A. READLER, ROBERT E.
KIRSCHMAN, JR., DOUGLAS K. MICKLE.
2 CLINICOMP INTERNATIONAL, INC. v. UNITED STATES
GABRIEL BELL, Latham & Watkins LLP, Washington,
DC, argued for defendant-cross-appellant. Also repre-
sented by DEAN W. BAXTRESSER, DAVID HAZELTON, KYLE
R. JEFCOAT, ANNE W. ROBINSON.
______________________
Before PROST, Chief Judge, WALLACH and TARANTO,
Circuit Judges.
PROST, Chief Judge.
CliniComp International, Inc. (“CliniComp”) appeals a
decision of the U.S. Court of Federal Claims (“Claims
Court”) dismissing CliniComp’s pre-award bid protest for
lack of standing. We affirm.
BACKGROUND
I
The Department of Veterans Affairs (“VA”) and De-
partment of Defense (“DoD”) operate two of the nation’s
largest healthcare systems and serve an overlapping
patient population. Over the past twenty years, these two
government agencies have tried to make their respective
electronic health records (“EHR”) systems interoperable.
In 2011, the VA and the DoD committed to developing
an integrated EHR system, which would replace the
agencies’ separate systems with a common system. But in
2013, the agencies abandoned that plan in favor of sepa-
rate initiatives concerning their own EHR systems.
The DoD decided to purchase a commercially availa-
ble system to replace its then-existing “AHLTA” EHR
system. In 2015, after a competition, the DoD awarded a
$4.3 billion contract for delivery of a modern, commercial
off-the-shelf EHR system. This EHR system consists
primarily of software developed by Cerner Corporation
(“Cerner”).
CLINICOMP INTERNATIONAL, INC. v. UNITED STATES 3
The VA, for its part, decided to modernize its then-
existing “VistA” EHR system. The VA issued a request
for information in April 2017 concerning the industry’s
capability of providing a commercialized version of VistA.
It also engaged a private consultant, Grant Thornton, to
assess the market’s ability to meet the VA’s needs
through four options—three involving acquiring a com-
mercial off-the-shelf EHR system, and the fourth involv-
ing modernizing VistA. Grant Thornton issued a report
on May 17, 2017, finding that the market could support
all four options. The report concluded that the VA’s best
option for improving interoperability with the DoD would
depend on the VA’s own evaluation of the benefits and
risks of acquiring a commercial off-the-shelf system
versus modernizing VistA.
The VA ultimately chose to acquire a new system ra-
ther than modernize its old one. On June 1, 2017, the VA
Secretary invoked the public-interest exception to the
Competition in Contracting Act’s requirement of full and
open competition, 41 U.S.C. §§ 3301, 3304(a)(7), and
signed a Determination and Findings (“D&F”) authorizing
the VA to negotiate a sole-source contract with Cerner
“for the acquisition of the [EHR] system being deployed by
the [DoD] and related services for deployment and transi-
tion across the VA enterprise in a manner that meets VA
needs, and which will enable seamless healthcare to
Veterans and qualified beneficiaries.” J.A. 10001. The
D&F indicates that the contract would require deploying
and maintaining an EHR system for approximately 1,600
VA care sites nationwide. J.A. 10001, 10005. It further
states:
Under the contract, at a minimum, Cerner will
provide the full scope of services, including inte-
gration, configuration, testing, deployment, host-
ing, organizational change management, training,
and sustainment, and licenses necessary to deploy
the DoD’s EHR system in a manner that meets
4 CLINICOMP INTERNATIONAL, INC. v. UNITED STATES
VA needs. The contract will also address all EHR
functions supporting clinical care including reve-
nue cycle, in-patient, ambulatory, as well as home
care, ancillaries, and specialties to include dental.
The contract will also address non-clinical core
functional requirements, which may include in-
ventory management/supply chain capabilities.
J.A. 10005.
II
CliniComp is an incumbent provider of EHR systems
to the VA. It filed this bid protest with the Claims Court,
asserting (among other things) that the VA’s sole-source
decision lacked a rational basis and violated the Competi-
tion in Contracting Act. CliniComp also moved for a
preliminary and permanent injunction preventing the VA
from awarding a sole-source contract to Cerner. Cerner
intervened. CliniComp then moved for judgment on the
administrative record, and the government and Cerner
responded with motions to dismiss and cross-motions for
judgment on the administrative record.
The Claims Court granted the motions to dismiss,
finding that CliniComp lacked standing to protest the
VA’s sole-source decision. CliniComp Int’l, Inc. v. United
States, 134 Fed. Cl. 736 (2017). The Claims Court noted
that to establish standing, CliniComp had to show that it
(1) was “an actual or prospective bidder” and (2) had a
“direct economic interest in the procurement or proposed
procurement.” Id. at 745 (internal quotation marks
omitted) (quoting Diaz v. United States, 853 F.3d 1355,
1358 (Fed. Cir. 2017)). Because the first prong of this test
was undisputed, the court focused on whether CliniComp
had a “direct economic interest” that would be affected by
the sole-source contract award to Cerner. Id. at 749.
The Claims Court found that CliniComp failed to
show that it had a “direct economic interest” because
CLINICOMP INTERNATIONAL, INC. v. UNITED STATES 5
CliniComp failed to show that it could have competed for
the contract had the procurement process been competi-
tive. Id. at 750. In particular, the court found that Clini-
Comp failed to show that it had experience providing
EHR services for the substantial number of facilities to be
covered by the proposed contract to Cerner. That contract
would cover approximately 1,600 VA healthcare sites,
while CliniComp had provided EHR services for only 44
VA healthcare facilities and 56 DoD medical treatment
facilities. Id. The court also found that CliniComp had
not demonstrated any experience providing the compre-
hensive services required under the proposed contract to
Cerner. Id. at 750–51. For example, the court noted that
the proposed contract to Cerner would require support of
in-patient and outpatient services, and CliniComp had
not demonstrated experience providing outpatient ser-
vices. Id. at 751.
Based on the evidence before it, the Claims Court con-
cluded that CliniComp lacked standing because it “has
not shown that [it] has the kind of experience that would
enable it to compete for the work contemplated by the
VA’s planned contract with Cerner.” Id. The Claims
Court therefore dismissed for lack of standing. CliniComp
appeals that dismissal.
We have jurisdiction under 28 U.S.C. § 1295(a)(3).
DISCUSSION
I
We review standing determinations de novo and any
underlying fact findings for clear error. Digitalis Educ.
Sols., Inc. v. United States, 664 F.3d 1380, 1384 (Fed. Cir.
2012) (citing Labatt Food Serv., Inc. v. United States, 577
F.3d 1375, 1379 (Fed. Cir. 2009)).
The Claims Court’s jurisdiction over bid protests is ar-
ticulated in 28 U.S.C. § 1491(b)(1), which provides for
jurisdiction over “an action by an interested party object-
6 CLINICOMP INTERNATIONAL, INC. v. UNITED STATES
ing to a solicitation by a Federal agency for bids or pro-
posals for a proposed contract or to a proposed award or
the award of a contract or any alleged violation of statute
or regulation in connection with a procurement or a
proposed procurement.” 28 U.S.C. § 1491(b)(1).
The party invoking federal jurisdiction bears the bur-
den of establishing standing. Myers Investigative & Sec.
Servs., Inc. v. United States, 275 F.3d 1366, 1369 (Fed.
Cir. 2002) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555,
561 (1992)). To satisfy § 1491(b)(1)’s standing require-
ments, a plaintiff must make two showings. Diaz, 853
F.3d at 1358. First, it must show that it is an “interested
party.” This requires the plaintiff to show that it is “an
actual or prospective bidder” and has a “direct economic
interest” in the procurement or proposed procurement.
Id. (quoting Digitalis, 664 F.3d at 1384). And “[t]o prove
a direct economic interest, a party must show that it had
a substantial chance of winning the contract.” Id. (quot-
ing Digitalis, 664 F.3d at 1384).
Second, the plaintiff must show that it was prejudiced
by a significant error in the procurement process. Id.
(citing Labatt, 577 F.3d at 1378); see Info. Tech. & Appli-
cations Corp. v. United States, 316 F.3d 1312, 1319 (Fed.
Cir. 2003). “A party has been prejudiced when it can
show that but for the error, it would have had a substan-
tial chance of securing the contract.” Labatt, 577 F.3d at
1378 (emphasis added). Although the inquiries may be
similar, prejudice must be shown either as part of, or in
addition to, showing a direct economic interest. See id. at
1379–80 (explaining that courts should not “conflat[e] the
standing requirements of prejudicial error and economic
interest,” because doing so would mean that “there would
be no such thing as an error non-prejudicial to an econom-
ically interested offeror in a bid contest”); see also Diaz,
853 F.3d at 1358–59.
CLINICOMP INTERNATIONAL, INC. v. UNITED STATES 7
II
CliniComp challenges the VA’s decision to award an
EHR-system contract to Cerner on a sole-source basis.
We have addressed what a plaintiff must show to estab-
lish prejudice in the sole-source context. In Myers, we
held that a plaintiff bears the burden of establishing that
it had a substantial chance of receiving the award. 275
F.3d at 1370. But we noted that, in the sole-source con-
text, “the plaintiff need only establish that it could com-
pete for the contract if the bid process were made
competitive.” Id. (internal quotation marks omitted).
“Although [the plaintiff] need not show that it would have
received the award in competition with other hypothetical
bidders, it must show that it would have been a qualified
bidder.” Id. at 1370–71.
The Claims Court in Myers found no prejudice be-
cause the plaintiff had “not proven it had the sources or
the man-power to supply the . . . services sought by [the
sole-source contracts]” and had “not provided the court
with any evidence demonstrating that it ha[d] been
awarded or successfully performed contracts for similar
services in the past.” Id. at 1371. We accordingly held
that the plaintiff in that case lacked standing to bring its
bid protest. Id.A similar analysis and conclusion apply here. The
Claims Court reviewed the record, including what the
proposed contract to Cerner would require and evidence
bearing on CliniComp’s capabilities. The Claims Court
noted that the contract would require comprehensive
EHR services—both in-patient and outpatient—at 1,600
VA healthcare sites. CliniComp, 134 Fed. Cl. at 750–51.
And it found that CliniComp failed to demonstrate a
capability even approaching what would be required
under a contract of this size and scope, given that Clini-
Comp only had experience providing EHR services at 100
facilities and had not demonstrated an ability to provide
8 CLINICOMP INTERNATIONAL, INC. v. UNITED STATES
outpatient services. Id. Ultimately, the Claims Court
found that the evidence before it made clear that Clini-
Comp failed to show it possessed the kind of experience
that would enable it to compete for the work contemplated
by the VA’s proposed contract to Cerner. Id. at 751. The
Claims Court accordingly found that CliniComp lacked
standing. Id.
Prejudice is a fact question. E.g., Diaz, 853 F.3d at
1359; Tinton Falls Lodging Realty, LLC v. United States,
800 F.3d 1353, 1358 (Fed. Cir. 2015). We see no clear
error in the Claims Court’s factfinding in this regard, nor
has CliniComp demonstrated any such error. We there-
fore conclude that CliniComp lacks standing in this bid
protest.
Resisting this conclusion, CliniComp argues that be-
cause this is a pre-award protest, the Claims Court should
have applied the test for prejudice articulated in Weeks
Marine, Inc. v. United States, 575 F.3d 1352 (Fed. Cir.
2009). In Weeks Marine, the Army Corps of Engineers
had previously awarded contracts for dredging work—
including some to the plaintiff—under competitive sealed
bidding procedures. Id. at 1355–56. The Corps then
decided to change its method of procurement from com-
petitive sealed bidding to a negotiated procurement
involving indefinite duration indefinite quantity multiple-
award task order contracts. Id. at 1355. Before submit-
ting a bid, and before any award was made under the new
solicitation, the plaintiff filed a bid protest challenging
the solicitation’s new method of procurement. Id. at
1354–55, 1360.
We first evaluated the plaintiff’s standing to bring its
pre-award protest to the terms of the solicitation. We
noted that, in that context of a pre-award challenge to a
competitive solicitation, “it is difficult for a prospective
bidder/offeror to make the showing of prejudice that we
have required in post-award bid protest cases.” Id. at
CLINICOMP INTERNATIONAL, INC. v. UNITED STATES 9
1361. This was because in that case “there ha[d] been
neither bids/offers, nor a contract award,” and therefore
“no factual foundation [existed] for a ‘but for’ prejudice
analysis.” Id. Acknowledging that some prejudice must
be shown, however, we required the plaintiff to demon-
strate a “non-trivial competitive injury which can be
addressed by judicial relief.” Id. at 1361–62. We found
that the plaintiff demonstrated such an injury. We ob-
served, however, that there was no dispute that the
plaintiff in that case could do the work required under the
new solicitation. Id. at 1360 (noting the government’s
concession that the plaintiff “is capable of doing the
dredging work contemplated by the contracts,” including
that it had the technical capability and the financial
wherewithal to do the work).
Here, unlike in Weeks Marine, there is a dispute as to
whether CliniComp could do the work required under the
proposed contract to Cerner. And as described above,
CliniComp failed to show that it was a qualified bidder in
this regard. Absent such a showing, CliniComp could not
satisfy the “non-trivial competitive injury” standard for
prejudice set forth in Weeks Marine. In other words, to
suffer a non-trivial competitive injury, CliniComp must at
least be qualified to compete for the contract it seeks.
Therefore, although we apply the standard for prejudice
as articulated in Myers, our conclusion would be the same
applying the “non-trivial competitive injury” standard set
forth in Weeks Marine.
CliniComp also argues that the requirements of the
proposed Cerner contract are not known, and therefore,
we cannot conclude that CliniComp is incapable of per-
forming the contract. See CliniComp’s Br. 29, 36, 39. The
Claims Court rejected this argument, finding that “[t]he
administrative record contains ample evidence regarding
the nature and scope” of the proposed contract to Cerner.
CliniComp, 134 Fed. Cl. at 751. We likewise reject this
argument. The D&F indicates, for example, that the
10 CLINICOMP INTERNATIONAL, INC. v. UNITED STATES
contract would require deploying and maintaining an
EHR system for approximately 1,600 VA care sites.
J.A. 10001, 10005. It also lists several examples of the
EHR services required, including outpatient services.
J.A. 10005. This is not a case where a plaintiff is unable
to demonstrate its ability to compete due to a lack of
information about what is required. Here, CliniComp
lacks standing because it failed to demonstrate an ability
to perform specific requirements that are set forth in the
administrative record.
CliniComp further argues that it has standing be-
cause, as an incumbent EHR systems provider to the VA,
it stands to lose work as a result of the proposed award to
Cerner. CliniComp’s Br. 34 (“CliniComp has standing to
challenge a VA procurement decision that will result in
the VA terminating CliniComp’s business and its use of
CliniComp’s products.”). But to have standing, Clini-
Comp’s prejudice must be due to some alleged error in the
procurement process. Labatt, 577 F.3d at 1380–81. Here,
CliniComp claims prejudice from the government’s al-
leged error of awarding this contract on a sole-source
basis. To establish that its prejudice is due to this alleged
error, CliniComp must show that if the error were recti-
fied—i.e., if the contracting process were made competi-
tive—CliniComp could compete for the contract.
CliniComp has not made that showing.
CliniComp finally argues that it is qualified to com-
pete because it could hire subcontractors to help do the
work required under the proposed contract to Cerner.
CliniComp’s Br. 41. The Claims Court did not address
this argument—possibly because CliniComp did not raise
it in its briefing on the motions to dismiss or motions for
judgment on the administrative record. 1 Even if not
1 At oral argument, CliniComp’s counsel confirmed
that CliniComp first raised this issue in rebuttal at the
CLINICOMP INTERNATIONAL, INC. v. UNITED STATES 11
forfeited, however, the argument is unpersuasive. Clini-
Comp has not supplied any details regarding how, or with
whom, it would subcontract to perform what is required
under the proposed contract to Cerner. 2 CliniComp’s
vague, cursory references to using subcontractors to
perform the work it is unable to do are insufficient to cure
CliniComp’s otherwise deficient showing that it is a
qualified bidder here.
CONCLUSION
We have considered CliniComp’s other arguments and
find them unpersuasive. For the foregoing reasons, we
affirm the Claims Court’s dismissal for lack of standing. 3
AFFIRMED
COSTS
The parties shall bear their own costs.
oral argument at the Claims Court. Oral Arg. at 2:08–23,
No. 2018-1101, http://www.cafc.uscourts.gov/oral-
argument-recordings.
2 After oral argument at the Claims Court, Clini-
Comp moved the Claims Court for leave to file a supple-
mental brief with an exhibit addressing CliniComp’s
ability to subcontract. The Claims Court denied Clini-
Comp’s motion, and CliniComp has not appealed that
denial. We therefore do not consider those materials.
3 Our affirmance of the Claims Court’s dismissal
moots CliniComp’s motions for injunctive relief, ECF Nos.
3 & 77.