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Wednesday, February 18, 2015

Standing at the end of the line is without prejudice

Well it's all right, even if they say you're wrong
Well it's all right, sometimes you gotta be strong
Well it's all right, As long as you got somewhere to lay
Well it's all right, everyday is Judgment Day

Well it's all right, riding around in the breeze
Well it's all right, if you live the life you please
Well it's all right, even if the sun don't shine
Well it's all right, we're going to the end of the line

In this federal US Claims Court case, the protestor thought it was all right being at the end of the line. It wasn't. It was not in sufficient competitive position to win, so was not "interested" in the solicitation.

There are a lot of instructive statements in this case covering a variety of subjects, and I've mentioned many of them, but without much context or elaboration. Read the whole case at the link, for context, accuracy and completeness; and to see where I'm paraphrasing and if correctly.

UNIVERSAL MARINE CO., K.S.C., v U.S., United States Court of Federal Claims No. 14-1115 C, February 10, 2015.
In March 2009, the United States Army (“the Army”) awarded Contract W52P1J-09-D-0025 to Universal Marine Co., K.S.C. (“Universal Marine”) for the operation of a container yard in Kuwait that repairs and refurbishes commercial shipping containers. On April 24, 2014, the Army solicited Request for Proposals No. W52P1J-14-R-0062 (the “RFP”) for the same services as the March 2009 Contract. The incumbent did not get up.

To select an awardee, the Army used a lowest price technically acceptable (“LPTA”) source selection process that evaluated three factors: Technical; Past Performance; and Price. The technical factors were rated on an "pass/fail" or "acceptable/non-acceptable" basis. In the event an Offeror had no recent, relevant past performance, a rating of Acceptable was assigned. Thus, an offeror must clear three successive hurdles to be awarded the contract: First, an offeror must obtain an “Acceptable” rating in Technical Capability and an “Acceptable” rating in Past Performance, and then must propose the lowest price.

In footnote 4, the Court explained that the LPTA procurement method was one form of "best value", but that price/value “[t]radeoffs are not permitted”, thus an LPTA proposal is per se the best value if it meets the selection criteria and proposes the lowest price.

In incumbent, Universal Marine, had the highest price amongst 4 final bidders, all of whom were evaluated to be "acceptable" on technical and past performance factors.

The Government argued that Universal Marine lacks standing, because it finished fourth and has not challenged the offerors who finished second and third. Thus, even if the low bidder's (KGL’s) award were disqualified, Universal Marine still “cannot show that it had a substantial chance of being awarded the contract when it proposed the highest price.” Universal Marine has alleged no error that would disqualify the second or third highest proposals, and therefore lacks standing, because it “has no substantial chance of being awarded the contract.”

Moreover, Universal Marine “cannot show that it was prejudiced by a significant error in the procurement process.” To show prejudice, a protestor must establish “that there was a substantial chance it would have received the contract award but for th[e] error.” Universal Marine cannot show a substantial chance of receiving the award and consequently cannot demonstrate prejudice.

Universal Marine contends that “the issue is not whether an [o]fferor is ‘next in line,’ but whether the [o]fferor has a reasonable expectation to receive an award.” It claims, being “in line” for an award means “being able to meet the requirements such that the Plaintiff is an eligible bidder and potential awardee on the contract.”

Finally, Universal Marine argues that the Army and KGL “would like to make the calculus of standing and interest party overly simplified.” Determining standing, it claims, requires examining the merits of the protest, not just a “blind reliance on the stacking and arraying of the ‘acceptable’ proposals.” Universal Marine claims it is not required to “dissect each proposal in the array that is above it, especially if it demonstrates a systemic flaw in the evaluation process[.]”

As a threshold matter, a plaintiff contesting the award of a federal contract must establish that it is an “interested party” to have standing.

A two-part test is applied to determine whether a protestor is an “interested party.” The protestor must show that: “(1) it was an actual or prospective bidder or offeror, and (2) it had a direct economic interest in the procurement or proposed procurement.” A third test has added that a protestor must show the alleged errors in the procurement were prejudicial. (“It is basic that because the question of prejudice goes directly to the question of standing, the prejudice issue must be reached before addressing the merits.”)

A party demonstrates prejudice when “it can show that but for the error, it would have had a substantial chance of securing the contract.” Importantly, a proper standing inquiry must not conflate the requirement of “direct economic interest” with prejudicial error. ([E]xamining economic interest but excluding prejudicial error from the standing inquiry “would create a rule that, to an unsuccessful but economically interested offeror in a bid protest, any error is harmful”).

In this case, Universal Marine submitted a proposal in response to the RFP, and, as an actual bidder, it satisfies the first element of the “interested party” test. But, Universal Marine did not satisfy the second element, i.e., that it “had a direct economic interest in the procurement.” Universal Marine’s proposed price was the highest of the four proposals. Thus, to have standing, it would have to challenge the bona fides of each of the other three offeror’s eligibility or the solicitation as a whole. But it did not. Universal Marine’s challenges concern only the awardee -- KGL. Based on the four challenges, even if the court were to set aside the award to KGL, the award would go to the second-place offeror. Without any challenge to the intervening offerors, Universal Marine cannot prevail.

As for Universal Marine’s reliance on Hyperion, Inc. v. United States, 115 Fed. Cl. 541 (2014), it is misplaced, even though some facts are similar to this case. Hyperion filed a post-award protest as the highest-priced of four “Acceptable” offerors in an LPTA solicitation. However, Hyperion “contend[ed] that all three [other] offerors failed to meet [certain provisions] and failed to include required [provisions].” Hyperion went on to allege particular defects in each of the other three proposals. “In Hyperion’s view, it was the only technically acceptable offeror and should have received the award.” This case, however, is distinguishable. Here, four out of Universal Marine’s five arguments are specific to KGL, and the problem identified with the solicitation was waived as untimely. Thus, even though “proving prejudice for purposes of standing merely requires ‘allegational prejudice,’” Universal Marine has not alleged facts that, if true, would create a “substantial chance” that it would be awarded the contract.

For these reasons, the court has determined that Universal Marine lacks standing to seek an adjudication of this bid protest.

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