October 1, 2015 - Protests & Litigation

Lessons Learned From a Successful Effort to Obtain Bid and Proposal Costs at the U.S. Court of Federal Claims

Litigation-3On September 29, 2015, Judge Thomas C. Wheeler of the U.S. Court of Federal Claims granted eight plaintiffs their bid and proposal costs following their successful bid protests.  CMS Contract Mgmt. Servs. v. United States, Nos. 12-852C et al., (Fed. Cl. Sept. 29, 2015) (“CMS”).[1]  The case serves as an important reminder that this potentially valuable monetary relief remains available when a successful bid protest results in agency action that renders an offeror’s proposal preparation efforts “wasted.”

The dispute in CMS first arose in 2012 when the plaintiffs, Public Housing Authorities and their non-profit subsidiaries, filed pre-award protests at GAO challenging the acquisition method employed by the U.S. Department of Housing and Urban development (HUD) to acquire support services for the management of HUD’s Project-Based Section 8 Housing Assistance Payment program.  Even though the initial protests were timely filed and the protesters requested the automatic stay required by the Competition in Contracting Act, HUD declined to suspend the process and directed the protesters to prepare and submit their proposals while the GAO protest was pending.

After a long and rather tortured procedural history that included GAO sustaining the protests, HUD ignoring GAO’s recommendation, the government prevailing at the Court of Federal Claims, the protesters prevailing at the Federal Circuit, and the U.S. Supreme Court denying the government’s cert petition, the protesters found themselves before Judge Wheeler requesting bid and proposal costs for their seemingly stale and useless 2012 proposals.

The court explained that a disappointed bidder may recover bid and proposal costs if three conditions are met: “(1) the agency committed a prejudicial error in conducting a procurement; (2) the error caused the protester to incur unnecessary bid preparation and proposal costs; and (3) the protester shows that the costs it seeks to recover were reasonable and allocable.”  The court found that the first element was satisfied after the plaintiffs successfully demonstrated prejudicial error on the merits and the Federal Circuit held that the underlying contracts at issue were procurement contracts and not cooperative agreements.

Turning to the second element, the court rejected the government’s position that the plaintiffs’ proposal preparation costs were not wasted because the plaintiffs could “presumably” resubmit prior proposals in response to a new procurement.  The government’s speculation regarding a future similar procurement was undercut by its concession that correcting the identified legal errors would require “significant” changes in both the procurement and the “entire administration of the program.”  Additional uncertainty was created by the government’s admission that it had not yet even begun to correct the identified errors and that it planned to continue existing contracts for the “foreseeable future” until it could restructure the program.  Based on these admissions, the court unsurprisingly found that “[r]ealistically, it may be years before HUD issues any new procurement.”  As the existing proposals were already three years old and any future procurement would include significant changes and would not occur for years, if ever, the court agreed with the plaintiffs that their bid and proposal costs had been “wasted.”

Finally, addressing the third element, the court deferred ruling on quantum until each plaintiff could submit its cost claim to the government and the parties had an opportunity to resolve the individual claims voluntarily.

Key Takeaway

Where a successful bid protest results in agency action that renders an offeror’s prior proposal preparation efforts wasted, the offeror should consider seeking its proposal preparation costs.  In order to preserve its right to seek such relief, a plaintiff at the court should include in its complaint a request for “such other and further relief the court determines just and appropriate.”

[1] A copy of the Opinion is available here.