In order to bring a bid protest in the Court of Federal Claims, you must have standing. To win the protest, you have to show prejudice. Although distinct, these two requirements are related and often confused. The Federal Circuit’s decision in American Relocation Connections, L.L.C. v. United States, No. 2019-1245 (Fed. Cir. Oct 2019), explains the difference between the “standing” needed to bring a bid protest and the “prejudice” needed to win.
Standing involves the threshold legal question of whether the protester has alleged a sufficiently direct economic interest to bring the case. It operates as a limit on the universe of plaintiffs eligible to file a protest. A protester has standing to challenge the award of a federal contract in the Court of Federal Claims only if it was an actual bidder or offeror that had a “substantial chance” of winning the contract. For pre-award protests, only a prospective offeror that would suffer a “nontrivial competitive injury” has standing to protest.
Unlike standing, “prejudice” is the ultimate factual question of whether the protester was actually harmed by a procurement error. Establishing prejudice is an element of the protester’s burden of proof. Without it, the protest will fail.
The distinction between standing and prejudice has been the source of some confusion, no doubt in part because the Federal Circuit’s own decisions conflate them. Consider these cases:
- In Myers Investigative & Security Services, Inc. v. United States, 275 F.3d 1366, 1369-70 (Fed. Cir. 2002), the Federal Circuit held that a protester lacked standing to challenge the award of a sole-source contract for guard services because it failed to show that it was a qualified to perform the work. The court stated explicitly that the protester had no “standing” without a sufficient showing of “prejudice.” In the court’s words, “prejudice (or injury) is a necessary element of standing.” To support the conclusion that Myers lacked “standing,” the court relied on Statistica, Inc. v. Christopher, 102 F.3d 1577 (Fed. Cir. 1996), which addresses the requirement for proof of prejudice in a post-award bid protest. The decision in Statistica never mentions standing.
- The decision in Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319 (Fed. Cir. 2003), treats standing and prejudice as if they are identical. “In fact, because the question of prejudice goes directly to the question of standing, the prejudice issue must be reached before addressing the merits. As we said in Myers, ‘prejudice (or injury) is a necessary element of standing.’” Info. Tech was a post-award protest, and the court held that the protester established both standing and prejudice.
- The decision in Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1360-61 (Fed. Cir. 2009), considers the scope of the economic interest required to establish standing in a pre‑award protest. Citing both Info. Tech. and Myers, the government asserted that standing and prejudice are identical, and that the standard for proving prejudice in a pre-award protest is the same as that required in a post-award protest. According to the government’s argument, a protester has no standing to protest the terms of a solicitation unless it could also show that it had a “substantial chance” to actually win the contract award. The court rejected that argument. According to the decision, Weeks had standing to pursue its pre-award protest because it suffered a “nontrivial competitive injury.” As written, the solicitation would have substantially limited Weeks’s opportunity to bid on nearly $1.4 billion in federal contracts for which it was uniquely qualified.
Which leads us to the decision in American Relocation Connections. ARC’s pre-award protest asserted that a solicitation for employee relocation services should have been set aside for small business. ARC claimed that the agency failed to meet its regulatory obligation to consult with the Small Business Administration as part of its underlying market research. The Court of Federal Claims denied ARC’s protest for lack of prejudice. Even assuming that the agency had consulted the SBA, the court held that the result would not have changed.
The question of prejudice was one of the central questions at the oral argument of ARC’s Federal Circuit appeal [mp3 file]. ARC sought to persuade the court that standing and prejudice were equivalent. In its view, a party with the requisite economic interest to file a pre-award protest need not separately demonstrate that it was prejudiced by agency action.
The Federal Circuit rejected ARC’s argument. Though the court’s opinion is designated “nonprecedential,” it seeks to clarify the distinction between standing and prejudice. The court held that ARC had standing to protest. Being required to compete on an unrestricted basis rather than on the basis of a small business set-aside was a sufficiently “non-trivial competitive injury.” But ARC failed to show prejudice. In the court’s view, ARC could not show that consulting with SBA would have resulted in a “greater-than-insignificant chance” of the solicitation being set aside for small business.
Further reading on this topic—