Standing and Prejudicial Error: The Importance of Demonstrating Multiple “Prejudices” in Bid Protests

November 6, 2019 | By Maria L. Panichelli

We all know that, in real life, prejudice is a bad thing. But in the unique world of bid protests, success can actually depend on establishing prejudice. Two different types of prejudice, believe it or not! Of course, “prejudice” means something entirely different in the world of government contracting, as a recent Federal Circuit case demonstrates.

In American Relocation Connections, LLC v. United States, the Court affirmed the Court of Federal Claims’ dismissal of American Relocation Connections, LLC’s (ARC) protest. The Court held that, while ARC had demonstrated the prejudice necessary to show standing, ARC had failed to establish prejudicial error on the merits. Because ARC had been able to prove one type of prejudice, but not the other, it lost its protest. So what does that mean as a practical matter? What is the lesson for contractors? Well, the takeaway is that contractors need to know how to establish both types of prejudice if they want to avoid dismissal of their protests. Let’s break down how to do that.

When you file a protest, you need to think about two types of prejudice.  First, you need to be able to show prejudice in the context of “standing.”  That means that, to successfully bring a protest at the COFC, you must 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.”  Satisfying that first “actual or prospective bidder or offeror” piece is often pretty straight-forward.  It is that “direct economic interest” piece that gets a little more complicated, and brings us to a prejudice discussion.  As explained in previous COFC decisions, to show a “direct economic interest,” “a protestor must demonstrate prejudice.”  Prejudice means different things depending on what type of protest is being filed.  In a post-award bid protest, a protestor must show that it would have had a “substantial chance” of receiving the contract award but for the alleged errors in the procurement process.  In a pre-award protest, a protestor can demonstrate prejudice by establishing a “non-trivial competitive injury which can be addressed by judicial relief.”  Satisfy these criteria and congrats! – You have demonstrated the type of prejudice necessary to establish standing for your protest!

Now you need to think about whether you can establish the second type of prejudice: Prejudicial error on the merits.  What is the difference?  As the American Relocation Connections court explained:

For standing, we presume the party bringing a bid protest will succeed on the merits of its claim and ask whether it has alleged an injury (or prejudice) caused by the procuring agency’s actions. But once we find that a party has standing, we must turn to the merits of the party’s claim and determine whether it can prove it was prejudiced based on the record evidence.

In other words, did the protestor actually suffer injury – most likely, the loss of a contract award it would have received – because of the procurement error(s) alleged in the protest? A protestor must show that its substantial rights were affected by the procurement error(s) in question, and, further, that the correction of those errors would have yielded a different result. This can be a tricky thing to do. Maybe you can show that the agency made several mistakes but, if the result would have been the same even if those mistakes were corrected, there is no prejudicial error.

The lack of prejudicial error is what killed ARC’s pre-award protest. The alleged procurement error at issue was the procuring agency’s failure to consult with the SBA during its market research phase. The agency had decided not to set aside the procurement at issue, based on its determination that there were not enough small businesses to compete for award. ARC challenged this decision, and argued that the agency should have consulted the SBA. The Court of Federal Claims had reasoned, and the Federal Circuit affirmed, that ARC failed to show that it was prejudiced by the agency’s failure to consult the SBA because “regardless of whether [the agency] consulted with the SBA…there appears to have been only one certified small business…and consequently there would not have been an expectation of receiving at least three offers from small businesses.” In other words, even if the agency had consulted the SBA, the decision would have been the same: the procurement would not have been set-aside. Thus, ARC could not show that correction of the alleged procurement errors would have yielded a different result, and, therefore, could not demonstrate the requisite prejudicial error.

It is critically important to think about prejudice before filing a bid protest. You might be able to show that the government messed up, and you might be hopping mad about it! But unless you can show both types of prejudice, a protest might be a waste of time and money. The key is to frame your protest in such a way as to overcome both barriers, and survive a motion to dismiss. If you have questions about a bid protest, or how to establish standing and demonstrate prejudicial error, give us a call.



About the Authors

Maria L. Panichelli


Maria is a partner and the Chair of the Government Contracting department.   She focuses her practice exclusively on federal government contracting and procurement, guiding her clients throughout the entire lifecycle of their...

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