With spring right around the corner and bid protest season about to heat up, we are back with another reminder about prejudice. The Federal Circuit recently weighed in about prejudice in System Studies & Simulation, Inc. v. United States (“S3”) holding that perennial protest problem: Prejudice. (See what we did there?!?) Followers will remember that we’ve posted about prejudice before. That’s because it’s critically important to winning a bid protest! But recently, in System Studies & Simulation, Inc. v. United States a contractor challenged a long-standing rule concerning prejudice, arguing that it doesn’t need to be proven, but rather may be presumed, when agencies make irrational procurement decisions. Ultimately, the Federal Circuit disagreed, providing a good reminder to contractors about the importance of this issue.
This case involved a Department of the Army, Mission and Installation Contracting Command (“Army” or “the Agency”) procurement for advanced helicopter flight training services. Using a best-value-trade-off analysis, the Agency awarded CAE USA Inc. (“CAE”) the contract. The Agency had assigned CAE’s proposal a “strength” in connection with one of the non-monetary evaluation factors because, the Agency reasoned, CAE’s proposed method for billing would result in significant cost savings.
After the award to CAE, protestor S3 filed a bid protest at the Court of Federal Claims (“COFC”) contending, among other things, that the Agency’s assignment of the strength was in error because it “would result in only small and unpredictable savings, if any.” In its opinion, the COFC denied the protest. The Court agreed that the Agency had indeed made an error by assigning a price-based strength to a non-price factor. But the Court found S3 was not prejudiced because, even if the improperly assigned strength was removed, due to CAE’s other superior rating, S3 would have still lost to CAE. CAE’s proposal was “clearly superior” to S3’s proposal.
S3 appealed to the Federal Circuit, arguing that S3 did not need to prove that it was prejudiced. Rather, S3 claimed, prejudice should be presumed whenever an agency makes an irrational procurement decision. The Federal Circuit disagreed, holding that “there is no presumption of prejudice when a protestor demonstrates irrationality in an agency decision” (and citing to a line of cases supporting that conclusion.) The Court explained the proper approach when dealing with questions of agency error and prejudice: First, the Court must ask “whether the agency’s actions were “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law’”; if so, we ask whether the error was “prejudicial.” In other words, these are two separate and independent determinations. The answer to the first inquiry does not negate the need for the second inquiry. If that wasn’t clear enough, the Court reiterated, “the second step is always required before setting aside a bid award, regardless of whether the error identified at the first step was an arbitrary and capricious action or, instead, a violation of law.” Meaning that, to win a protest, a protestor must not only show that the Agency erred, but that such error actually resulted in prejudice to the protestor. In short, the Court very clearly concluded that there is no implied presumption of prejudice. Thus, S3 had to have shown prejudice to prevail. However, it could not do so. S3 was not prejudiced by the Agency’s erroneous assignment of a strength to CAE’s proposal because CAE would have won even if the erroneously assigned strength was removed. Accordingly, the Federal Circuit affirmed the COFC’s finding, ruling against the protestor and denying the protest.
So, what does this mean for you, a contractor? Well, that you should recognize that prejudice is still an essential part of a winning bid protest. S3’s unsuccessful protest underscores what we have said before on this blog: An agency can bungle a procurement decision but unless a protestor can show that such bungling actually made a difference in who got the award, the protestor will almost certainly lose. Contractors should carefully consider this issue, and discuss prejudice with their attorneys, when deciding whether to file a protest.
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