The United States Court of Federal Claims (CFC or the “Court”) recently dismissed a disappointed incumbent’s (the “Plaintiff ”) post-award bid protest claim for lack of standing. More specifically, the Court held that that the Plaintiff did not have a substantial chance of award despite the Plaintiff ’s incumbent status.  The Court’s ruling underscores the importance of being able to establish substantial chance of award, particularly when a protestor’s offer/proposal is ranked third or worse.

In Hughes Group, LLC v. U. S. and Management Services Northwest, Inc., No. 14-155C, 2014 WL 1604330 (Fed. Cl. April 22, 2014), the Plaintiff sought to permanently enjoin the General Services Administration (GSA) from proceeding with an award for janitorial and landscaping services at a federal building in Seattle, Washington. The Plaintiff claimed that the award was improper because GSA impermissibly engaged in discussions with the awardee that allowed the awardee to make major beneficial changes to its proposal.

The solicitation provides that the award is to be made “on a best value basis utilizing trade off source selection.” Fur- ther, “any proposal receiving an overall ‘Marginal’ or below rating shall not be considered for Award; however, if the Government receives limited competition with an overall ‘Marginal’ rating, the Government reserves the right to con- sider a ‘Marginal’ rating.” Four companies submitted bids. The Plaintiff ’s proposal ranked third and received an overall rating of “Marginal.” The second-place proposal also received an overall rating of “Marginal.” Because the awardee’s proposal received an overall rating of “Very Good,” GSA deemed the other three proposals ineligible. For this reason, and because the Plaintiff ranked third, the government and intervening awardee moved to dismiss the Plaintiff ’s ac- tion for lack of standing pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims.

In deciding this issue, the Court initially noted that the “pivotal element” of the Court of Federal Claims’ subject-matter jurisdiction to hear bid protests is whether a protestor qualifies as an “interested party” under 28 U.S.C. § 1491(b)(1). The Court explained that an interested party under the statute is (i) an actual or prospective bidder (ii) whose direct economic interest would be affected by the award of the contract. With respect to satisfying the “direct economic interest” requirement, the Court stated that a protester “must show that it had a ‘substantial chance’ for award but for the alleged error in the procurement process.”

Despite the fact that the Plaintiff was the incumbent contractor, and despite the fact that both the Plaintiff ’s proposal and the second-ranked proposal received an overall rating of “Marginal,” the Court found that the Plaintiff did not have a substantial chance of award and therefore lacked standing. The Plaintiff ’s third-place ranking and the fact that GSA was not required to rebid the contract if the award were overturned were facts of particular significance to the Court. Distinguishing Preferred Sys. Solutions, Inc. v. United States, 110 Fed. Cl. 48 (2013), the Court notes that the Plaintiff ’s “rat- ing would still not be equal to the higher-ranking GWMC [the company ranked second],” and thus, “if GSA were to con- sider an award to a marginally rated offeror, GWMC, and not [the Plaintiff ], would have a substantial chance for award.”

The Court’s decision is an important reminder that simply having viable protest grounds is not enough. A protestor must also be able to establish a substantial chance for award. In most instances, a protestor whose offer/proposal is ranked third or worse must be able to explain how and why its offer/proposal will beat all higher-ranking proposals once the agency takes corrective action.