Today, I submitted the following letter to the Office of the Solicitor General regarding Percipient.ai v. United States.
-----
SCOTUS Case No. 25-428
The 12-judge en banc Federal Circuit on a 7–4 split just decided its first government contracts case in over 40 years—and it is grievously wrong on the law and on the merits. The outcome of Percipient.ai conflicts with the plain text of a statute that passed unanimously in Congress; President Trump’s Executive Orders; and SECWAR Hegseth’s defense reform agenda.
Almost 20 amici urged the Supreme Court to grant cert due to the critical national security interests at stake—including 4 Republican Members of Congress, 9 companies (including Snowflake and Palantir), 2 venture capital firms, the Alliance for Commercial Technology in Government, and the Foundation for American Innovation. The Office of the Solicitor General’s (“OSG”) opposition is due on December 8.
We urge OSG to immediately request an extension, and ultimately to not oppose cert.
The case: “This is a straightforward statutory-interpretation case with significant impacts on the government contracting community.” (Dissent at 9.) Amici described its “existential consequences” for the dynamism of the defense industry, and how the “Federal Circuit’s exclusive jurisdiction prevents percolation; in the absence of review, it is the last word.” (FAI Br. at 4.) The majority failed to seriously engage with the law itself, failing even to mention the text of the statute—28 U.S.C. § 1491(b)(1)—until page 15 of its opinion.
There, it held that subcontractors suing to enforce the Federal Acquisition Streamlining Act, 10 U.S.C. § 3453(b)(2) and (c)(5) (“FASA”), were not “interested parties” with standing to sue. In doing so, the majority failed to give effect to the plain meaning of “interested party” under § 1491(b)(1); prioritized unrelated legislative history over straightforward statutory interpretation; and disregarded the purpose and history of the statute. (Palantir Br. at 4–5.) Subcontractors seeking to enforce the law against prime contractors who disregard statutory mandates are apparently not “interested parties” in a case.
Those legal errors will kill the dynamism of the American defense industry and stymie this Administration’s goals. As the certiorari petition explained, the majority hands government contractors “a roadmap for circumventing the law.” (Pet. Br. at 23.) So FASA, the “most ambitious procurement reform in modern history,” has just lost “the last available brake on nonenforcement.” (FAI Br. at 5, 18.)
FASA tasks the government with purchasing commercial items to the “maximum extent practicable.” 10 U.S.C. § 3453. These purchases “can eliminate the need for research and development, minimize acquisition lead time, and reduce the need for detailed design specifications or expensive product testing.” Palantir USG, Inc. v. United States, 904 F.3d 980, 983 (Fed. Cir. 2018). That gives warfighters the best tech cheaply and quickly, an urgent need in a time of intense geopolitical competition.
FASA “recognized a specific market failure: prime contractors managing large integrated procurements lack incentive to seek commercial components that would displace their own profitable development work.” (FAI Br. at 6.) In response, FASA mandates that primes research and use commercial alternatives even after contract award. (Id. at 7.) But without subcontractor standing to enforce those post-award obligations—which target “the precise moment when agency oversight weakens and contractor self-interest peaks”—there is no one to enforce the laws requiring commercial acquisitions, a nonsensical result. (Id.)
Ignoring FASA has well-documented impacts. “Skipping market research adds years of delay and billions in cost.” (Id. at 12.) Drones that take one year for commercial companies can spend over 15 years in DOW custom development. (Id. at 13.) “The method of failure is simple. [DOW] grants a large contract to a prime, who—safe in the knowledge that standing doctrine protects them from relevant complaints—prioritizes internal development while blowing past the original deadline and racking up billions in extra costs.” (Id. at 14.)
You need not take our word for it. President Trump has made enforcing FASA a priority:
- POTUS, April 16, Executive Order 14271: “It is the policy of my Administration that agencies shall procure commercially available products and services … to the maximum extent practicable, including pursuant to the Federal Acquisition Streamlining Act.”
- SECWAR, March 6: DOW must “maximize the use of its existing authorities” to “shift to a construct designed to keep pace with commercial technology advancements” and “leverage the entire commercial defense ecosystem.”
- SECWAR, November 7: Defense reform is “literally life or death”; “This is the beginning of an unrelenting onslaught to change the way we do business and change the way the bureaucracy responds.”
But if prime contractors can issue subcontracts to themselves instead of following the law by buying from commercial companies—and nobody can sue to stop it—the onslaught is over before it even begins.
The United States’s litigating position in Percipient.ai is directly contrary to POTUS and SECWAR’s goals. OSG is on course to defend an atextual result that makes serious errors of statutory interpretation. We urge the Administration to take action, align its priorities, and not oppose certiorari in Percipient.ai v. United States, Case No. 25-428. Until then, OSG should promptly request an extension to give the Administration time to deliberate.
Thank you for your attention to this matter. Our nation’s security depends on it.
Tim Hwang
General Counsel
Foundation for American Innovation
2443 Fillmore St
PMB 380-3386
San Francisco, CA 94115-1814
