Federal Circuit Weighs in on Prejudice in Bid Protests

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Federal Circuit Weighs in on Prejudice in Bid ProtestsRinging out 2021, the U.S. Court of Appeals for the Federal Circuit, in Systems Studies & Simulation, Inc. v. United States, recently held that there generally is no presumption that a protester has suffered competitive prejudice, even where the protester has successfully demonstrated that an agency’s evaluation was irrational. This article provides a brief overview of this noteworthy case, as well as key takeaways.

The Facts

System Studies & Simulation, Inc. (S3), an unsuccessful bidder for a government contract, filed a bid protest in the U.S. Court of Federal Claims (COFC). The COFC found that the government had acted irrationally in one respect during its evaluation of S3’s proposal, but nevertheless denied S3 relief on the ground that S3 did not suffer competitive prejudice as a result of this irrational evaluation.

On appeal to the Federal Circuit, S3 argued that there is, as a matter of law, a presumption of prejudice to the protester whenever the COFC determines that the procuring agency acted irrationally in evaluating proposals or making an award decision. Specifically, relying on the Federal Circuit’s decision in Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 (Fed. Cir. 2001), S3 argued that there exists an implicit presumption of prejudice where agency irrationality has been established.

The Federal Circuit, however, rejected S3’s argument and held that “there is no presumption of prejudice when a protestor demonstrates irrationality in an agency decision.” Instead, “[t]he protestor must show prejudice under the usual standard.” The Federal Circuit also rejected the protester’s challenge to the COFC’s “particular finding of no demonstrated prejudice in this case,” concluding that there was no clear error in the COFC’s decision.

The Takeaway

Coming on the last federal workday of 2021, the Federal Circuit’s decision affirms the principle that competitive prejudice is an essential element of a viable bid protest. That principle now, without doubt, applies both when a disappointed offeror challenges a contract award before the COFC based on a lack of rationality and when the award violates statutes or regulations. Thus, the Federal Circuit’s decision removes some confusion that had existed in prior COFC cases and provides clarity on bid protest pleading standards to the government contracting bar.

If you have any questions about this noteworthy case or bid protests in general, please do not hesitate to contact Aron Beezley or Patrick Quigley.