Imagine a disappointed offeror’s surprise, after it survives challenges to its right to file and pursue a protest, after it has established agency action violating statute and regulation, when, notwithstanding these things, that disappointed offeror is handed a decision denying the protest. What happened? Frequently, that which has happened is that a tribunal has decided that the protester has not been prejudiced, despite the violation. This is the myth of “competitive prejudice,” and here we’ll examine the cases to see just how this cruel hoax has been applied to “wrest defeat from the jaws of victory,” so to speak.
The concept is set out in two decisions from the United States Court of Appeals for the Federal Circuit. Here is the rule:
To establish prejudice, a protester is not required to show that but for the alleged error, the protester would have been awarded the contract. See, e.g., In re Management HealthCare Prods. & Servs., B-251503.2, 93-2 Comptroller Gen.’s Procurement Decisions (Federal Publications, Inc.) ¶ 320, at 4 (Dec. 15, 1993) (“To establish prejudice, an offeror is not required to prove that it would have received the award but for the agency’s improper action. . . .”); In re Manekin Corp., B-249040, 92-2 Comptroller Gen.’s Procurement Decisions (Federal Publications, Inc.) ¶ 250, at 5 (Dec. 15, 1993) (same). Such a rule would make it virtually impossible for a protester ever to prevail, no matter how egregious the error in the procurement process. On the other hand, a showing of a mere possibility that the protester would have received the contract but for the error is inadequate to show prejudice. If that were sufficient, the requirement of prejudice would be virtually eliminated. The proper standard lies between these polarities.
There have been variations in the verbal formulation of what is necessary to show prejudice. See CACI, Inc.-Fed. v. United States, 719 F.2d 1567, 1574-75 (Fed. Cir. 1983) (finding that to satisfy the minimum requirements for standing to sue, a disappointed bidder must show that “‘there was a substantial chance that [it] would receive an award-that it was within the zone of active consideration’”) . . . .
We think that the appropriate standard is that, to establish prejudice, a protester must show that, had it not been for the alleged error in the procurement process, there was a reasonable likelihood that the protester would have been awarded the contract.
This is a refinement and clarification of the “substantial chance” language of CACI, Inc.-Fed., 719 F.2d at 1574. The standard reflects a reasonable balance between the importance of (1) averting unwarranted interruptions of and interferences with the procurement process and (2) ensuring that protesters who have been adversely affected by allegedly significant error in the procurement process have a forum available to vent their grievances.
Data General Corp. v. Johnson, 78 F.3d 1556, 1562-63 (Fed. Cir. 1996).
The Court later explained that its articulation of the “reasonable likelihood” standard was not meant to impose a more onerous standard than the “substantial chance” standard of CACI, Inc.-Fed., which it then explained with another verbal formulation:
Thus, for Statistica to prevail it must establish not only some significant error in the procurement process, but also that there was a substantial chance that it would have received the contract but for that error.
Statistica, Inc. v. Christopher, 102 F.3d 1577 (Fed. Cir. 1996).
The concept of competitive prejudice is easily articulated, but cannot be applied consistently, coherently, or fairly. The problem is that demonstrations of the existence, or lack of, a reasonable likelihood or substantial chance of contract award are based on post-protest narratives, and post-protest narratives, whatever their source, are suspect. Both of the recent Federal Circuit decisions on competitive prejudice involved post-protest narratives.
Statistica arose from a competition for support services. The agency did not clearly identify just which positions were subject to the Service Contract Act, and therefore required wages not less than those determined by the Department of Labor. Neither did the agency make it clear whether services were to be performed on-site or at the contractor’s facility. The protester incumbent contractor priced its proposal based on wage determination rates and on performance at its own facility. Award was made to an offeror that priced its proposal based on rates below those specified in the wage determination, and on performance on-site. The protester submitted the superior proposal (its technical score was 15 percent higher than the awardee’s), but its evaluated price was some $7.3 million more. Id., 102 F.3d, at 1580.
At hearing before the General Services Administration Board of Contract Appeals (GSBCA), the protester’s expert witness testified that had the agency uniformly evaluated wage rates and on-site versus off-site performance, the difference in evaluated price would have been $4 million, not $7.3 million. However, the GSBCA also received testimony from the source selection authority, and he said that he would not have selected the protester’s superior proposal, even at a price premium almost half that of the price premium he was presented for his selection decision, because the technical advantages in the protester’s proposal were only slight, and in areas that might be expected from an incumbent contractor. Statistica, Inc. v. Department of State, GSBCA No. 13426-P, Dec. 21, 1995, 96-1 BCA ¶ 28,141, at 140,487.
The GSBCA credited this testimony and denied the protest, holding that any errors were harmless, given the source selection authority’s testimony. Id., 96-1 BCA, at 140,494. On appeal, the Court sustained the GSBCA’s decision, noting that it had no grounds to question the GSBCA’s finding that the source selection authority’s post-protest testimony was “thoughtful,” “well-reasoned,” and “convincing.” 102 F.3d at 1583.
Data General concerned discussions conducted after receipt of best and final offers. Generally, when discussions with one offeror are conducted after receipt of best and final offers, an agency is required to reopen discussions with all of the offerors, and then solicit another round of best and final offers.
In Data General, an offeror had proposed conflicting discount terms, and the resolution of the conflict greatly affected that proposal’s evaluated price. The agency communicated its concerns about the conflicting discount terms, and the offeror’s response to the communication resulted in a substantially lower evaluated price than would otherwise have resulted. Award was made at the evaluated price as corrected. Data General Corporation protested the award. As it turned out, Data General had offered more capable equipment, and had received a better technical score as a result, but at a higher evaluated price.
Data General argued before the GSBCA that it would have received the award, had the offending proposal been evaluated at the price proposed before the conflicting discount terms were resolved, and, alternatively, that the agency should have reopened discussions with all offerors. If the agency had reopened discussions, Data General said that it would have “had every incentive to lower its proposal price to the maximum extent possible.” The problem was that this assertion was inspired by the litigation, and elsewhere Data General had admitted that its proposal strategy was to offer better equipment at a higher price. Data General, 78 F.3d, at 1563.
The source selection authority testified that he would not have made a different selection had he evaluated the offending proposal at the price proposed before the conflicting discount terms were resolved, and that the technical superiority of the Data General best and final offer did not offset the difference in price. The GSBCA thus denied the protest on the ground that the post best and final offer communications had not prejudiced Data General. Data General Corporation v. General Services Administration, GSBCA No. 13092-P, Feb. 6, 1995, 95-1 BCA ¶ 27,553, at 137,313.
On appeal, Data General focused on its alternate argument, that the agency should have reopened discussions with all offerors. This went nowhere:
Had GSA reopened discussions during the original procurement, Data General would not have known of IBM’s lower price and therefore would have had no reason to reduce its own price. . . . Data General presented no evidence-not even a company executive affidavit-that at any time it would have reduced its price to compete more effectively with IBM.
Data General, 78 F.3d, at 1563.
The Court thought that Data General’s case was much like an earlier GSBCA case, where the board had denied a remedy based on lack of competitive prejudice although the agency had conducted improper post best and final offer discussions, there because the protester had “made a poor business decision to offer an expensive system,” one with a price so much higher than the low offer, that the protester “could never have beaten Executone’s price.” Fortran Corporation v. Department of Transportation, GSBCA No. 12952-P, Oct. 27, 1994, 95-1 BCA ¶ 27,350, at 136,290. Ultimately, the Court sustained the GSBCA’s decision denying Data General’s protest. Data General, 78 F.3d, at 1564-65.
Data General perhaps makes better sense in that the Court here relies on an admission, rather than on a post-protest narrative, to conclude that Data General was not prejudiced. But don’t forget that the Data General court suggested that it might have accepted a post-protest narrative, a “company executive affidavit,” to conclude just the opposite. There is more. We’ve told you that the concept of competitive prejudice is not consistently, coherently, and fairly applied.
Consider next Strategic Analysis, Inc., B-270075, Feb. 5, 1996, 96-1 CPD ¶ 41, a protest denied by the United States General Accounting Office (GAO), carried to the United States District Court for the District of Columbia, and there sustained in Strategic Analysis, Inc. v. U.S. Department of the Navy, 939 F. Supp. 18 (D.D.C. 1996). The acquisition at issue concerned a proposed cost-plus-fixed-fee contract. Offerors were required to propose four categories of key personnel, and these persons were to deliver support services over a term of five years. The solicitation required that if proposed key personnel were not currently employed, the offeror was required to submit with its proposal a letter of intent showing that the person proposed would accept employment if the offeror were awarded the contract. A best value selection was to be made.
Strategic Analysis, Incorporated, was the incumbent contractor. Seven initial competitive proposals were received. Strategic Analysis’ proposed costs of $2,048,807 were fifth low. Another offeror’s, Management Resources, Incorporated’s, proposed costs of $1,679,039 were second low. Management Resources proposed a new hire for one of the key personnel categories, but did not submit with its competitive proposal the required letter of intent.
The agency asked Management Resources about this omission, and it responded with the required letter of intent, along with an explanation that the letter was “inadvertently left out of our proposal.” Strategic Analysis’ proposal was rated overall technically superior to Management Resources’ proposal. Nonetheless, the contracting officer concluded that the technical superiority of Strategic Analysis’ proposal was not worth an additional $369,768. She made award on initial proposals to Management Resources. 96-1 CPD, at 2.
Strategic Analysis protested the award at GAO, and GAO found, to no one’s surprise we’re sure, that the communications with Management Analysis about the missing letter of intent were discussions. Although Strategic Analysis had established a legal right to receive discussions and the opportunity to submit a revised proposal, GAO denied the protest because it concluded that Strategic Analysis had not established competitive prejudice. Here is the reasoning:
The only reason SAI did not receive the award is that its price was considered too high $369,768 ($74,000 per year) more than MRI’s. SAI does not argue in its protest that if it had been given the opportunity to do so during discussions it could have or would have reduced its price. Accordingly, there is no basis to conclude that SAI was prejudiced because the agency held limited discussions only with MRI.
Strategic Analysis, 96-1 CPD, at 5.
Strategic Analysis promptly sought a new review in federal district court. There the district judge credited a post-protest affidavit from Strategic Analysis’ president in which this company officer averred that if it had been given the opportunity, the company would have “lowered its price sufficiently to have been awarded the contract.” Strategic Analysis, 939 F. Supp., at 23. The district judge recognized the time-honored rule of Camp v. Pitts, 411 U.S. 139, 142-43 (1973), that the validity of agency action must stand or fall on the propriety of the contemporaneous agency record, but he looked to Data General, and on finding the Federal Circuit’s suggestion that it might have accepted a post-protest narrative, he held that “the submission of an affidavit of a company executive under circumstances such as these is a proper way to demonstrate prejudice.” Strategic Analysis, 939 F. Supp., at 23 n. 7.
The problem with the concept of competitive prejudice as it is presented in Statistica, in Data General, and in Strategic Analysis, is that in each of these cases findings of competitive prejudice (Strategic Analysis), or of no competitive prejudice (Statistica, Data General), are based on post-protest testimony or narratives, and not on the contemporaneous agency record. When an acquisition is conducted based on competitive proposals, the statutes contemplate a selection decision based on a contemporaneous written record showing that these proposals are evaluated “solely on the factors specified in the solicitation,” (10 U.S.C. § 2305(b)(1); 41 U.S.C. § 253b(a)), and that the award has been made with “reasonable promptness to the responsible source whose proposal is most advantageous to the United States, considering only cost or price and the other factors included in the solicitation,” (10 U.S.C. § 2305(b)(4)(C); 41 U.S.C. § 253b(d)(3)).
The requirement for a contemporaneous record is confirmed in Federal Acquisition Regulation (FAR) requirements that procurement file documentation “shall be sufficient to constitute a complete history of the transaction” for supporting actions taken, for providing information for reviews and investigations, and for furnishing essential facts in case of litigation or congressional inquiries, FAR 4.801(b); that technical evaluations are documented with the basis for evaluation, and an analysis of the technically acceptable proposals, including an assessment of each offeror’s ability to accomplish the technical requirements, FAR 15.608(a)(3); and that formal source selections are supported with documentation that includes “the basis and reasons for the decision,” and, as well, shows “the relative differences among proposals and their strengths, weaknesses, and risks in terms of the evaluation factors,”FAR 15.612(d)(2).
Protested selection decisions are thus properly reviewed on the contemporaneous record, and not a new record made during the protest. Florida Power & Light Co. v. Lorion, 470 U.S. 729, 743-44 (1985); Camp v. Pitts, 411 U.S. 139, 142-43 (1973) (The focal point for review “should be the administrative record already in existence, not some new record made initially by the reviewing court.”). Where a protest is disposed based on post-protest testimony or narratives, rather than on the contemporaneous agency record, this is not the selection decision contemplated by statute and regulation.
When the GAO or any other tribunal reviews a selection decision, and finds the record incomplete, or that the agency has not considered all of the relevant factors, then the protest should be granted, and the matter remanded to the agency. If, for example, it turns out that an agency should have made a cost/technical tradeoff but did not because its cost/price evaluation was improper, or if it turns out that the cost/technical tradeoff made differed significantly from the cost/technical tradeoff that should have been made, or if it turns out that an agency should have conducted discussions with all offerors, followed by the submission of revised proposals, but did not, then the protest should be granted and the matter returned to the agency.
In Statistica, under the review standard that is now in effect before the GAO, the United States Court of Federal Claims, and in the district courts, the protest should have been granted, and the matter returned to the agency for a proper cost/technical tradeoff, else another round of best and final offers. Why should a protester be saddled with a cost/technical tradeoff decision made during litigation, rather than as part of a contemporaneous selection decision?
The only explanation for the cruel hoax of “competitive prejudice” is that GSBCA review under its former Brooks Act authority, 41 U.S.C. § 759(f)(1), was de novo, and the board’s review was thus not limited to the agency record. That is, the former Brooks Act provided that GSBCA protest proceedings be “conducted under the standard applicable to review of contracting officer final decisions by agency boards of contract appeals,” and this standard, 41 U.S.C. § 605(a), specifically provides for de novo review of the underlying facts. Contrariwise, reviews of contested acquisitions before GAO, in the United States Court of Federal Claims, and in the district courts, are limited to the contemporaneous agency record.
In Strategic Analysis, why was it necessary to accept the post-protest affidavit from the company’s president, an affidavit no more believable than the post-protest testimony from the source selection authority in Data General and in Statistica? GAO should have confined its inquiry (and its rationale for disposing the case) to the contemporaneous agency record. And likely the district judge was unaware that Data General arose on appellate review from a case before a tribunal with de novo review authority. Strategic Analysis and all other cases that arise from tribunals with limited review authority should be disposed based on the contemporaneous agency record, and not on testimony or affidavits, no matter how thoughtful or believable, submitted during litigation, rather than recorded as a part of the source selection process.
It is the contemporaneous record, and only the contemporaneous record, that is the proper focus of the limited review permitted under the Administrative Procedure Act, 5 U.S.C. § 706; under the Tucker Act, 28 U.S.C. § 1491(b)(1); or under the Competition in Contracting Act of 1984, 31 U.S.C. § 3554(b)(1). Such a limited review demands that a tribunal limit its inquiry to the existing record:
If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.
Florida Power, 470 U.S., at 744.
One could suppose that the point of inquiring after “competitive prejudice” is to sort out those protests where remedying a demonstrated violation of statute or regulation would not result in a different outcome. Laudable as this goal may be, it is improper when it is achieved only through post-protest narratives or rationalizations, none of which can substitute for the contemporaneous record demanded by the statutory process mandated for selection decisions in acquisitions conducted through submission and evaluation of competitive proposals. When a tribunal supposes that it should deny a protest upon a finding of lack of competitive prejudice, it is substituting its judgment for the procuring agency, the very thing that is not to be done on a limited review-a contested source selection decision must be judged only on the record developed and considered by the agency.
— Cy Phillips
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