Request for Proposal Bid Protests: Maryland State Board of Contract Appeals Now Requires Plaintiff to Establish “reasonable possibility of winning”
by Kelly Raynaud,[1] MSBA-UB Business Law Clerkship Fellow 2016
Under the auspices of Joseph J. Dyer, Seyfarth Shaw LLP
I. INTRODUCTION
In Maryland, any interested party[2] may protest a procurement award granted through the Competitive Sealed Proposals process.[3] When challenging an award, an unsuccessful bidder usually claims either that they were wrongfully rejected or that the winning bidder should have been disqualified.[4] Now, the Maryland State Board of Contract Appeals (“MSBCA”) has declared that parties protesting a particular bid award must demonstrate a reasonable possibility of a substantial chance of receiving the award if the protest is successful.[5] This standing requirement not only establishes a new precedent in Maryland but also closely aligns Maryland’s procurement protest standards with that of the federal government’s.[6]
II. COMPETITIVE SEALED PROPOSALS
A State agency uses Competitive Sealed Proposals when factors in addition to price are necessary to select a bidder or a decision based solely on price is not advantageous to the agency.[7] The Competitive Sealed Proposals process begins with a Request for Proposal (“RFP”)[8] and then the agency evaluates the RFP responses considering both price and non-price factors.[9] On that basis, the agency determines which proposal is the most advantageous or represents the best value based on price and how well a bidder satisfies a set of non-price factors. When the agency has technical requirements, they are evaluated separately from price.[10]
III. GROUNDS FOR UNSUCCESSFUL BIDDERS’ RIGHT TO PROTEST
With Competitive Sealed Proposals, an unsuccessful bidder has the right to protest an award to another bidder if the protestor qualifies as an interested party.[11] That is, a bidder has standing if they demonstrate they have been “aggrieved by the solicitation or award of a contract.”[12] Such harm may be shown, for example, if the unsuccessful bidder establishes that the winner should be disqualified and the protestor is next in line or there is a problem with the solicitation or evaluation process or the protestor’s bid was wrongfully rejected.[13]
1. Determination of “Next-In-Line” Bidders
When an agency issues an RFP involving technical specifications, bidders are evaluated on technical factors as well as price.[14] Each bidder is ranked twice: once according to its price and once according to how well its proposal satisfies the agency’s technical requirements.[15] Then an overall ranking is derived from the two (2) separate rankings to identify a winner.[16] The winning bidder is the bidder who is viewed as offering the best value to the agency, which may not necessarily be the bidder who offered the lowest price or the bidder who best satisfied the technical factors.
The bidder placing second (2nd) in the overall ranking is the next-in-line bidder. That is, if the winning bidder is disqualified as the winner, the next-in-line bidder receives the award instead. The next-in-line bidder qualifies as an interested party because this bidder is aggrieved if the award was granted to a bidder who should have been disqualified as the winner. This gives the next-in-line bidder standing to protest the award.[17]
An unsuccessful bidder ranked lower than second (2nd) overall may also have standing as a next-in-line bidder if it demonstrates that all bidders ranked above it are disqualified.
2. Alleging an Unfair Solicitation or Evaluation Process
Alleging an unfair solicitation or evaluation process permits unsuccessful bidders, particularly those ranked below second (2nd) place, to qualify as interested parties in RFP bid protests.[18] The MSBCA determined that a third (3rd) ranked bidder has standing if it succeeds in proving an unfair solicitation process.[19] In addition, the MSBCA also concluded that a fourth (4th) ranked bidder has standing if it demonstrates that the agency’s evaluation process itself was unfair to all bidders.[20] In both cases, an unfair solicitation process or an unfair evaluation process, the unsuccessful bidders, if their allegations are proven true, could have been the award winners. Thus, these bidders could have been prejudiced, making them interested parties and affording them the right to protest.[21]
3. Wrongfully Rejected Bidders
Unsuccessful bidders may also attempt to acquire standing by alleging that they were wrongfully rejected. In Maryland, mere allegation without more is insufficient to gain the right to protest,[22] which is in accord with federal case authority.[23] The Government Accounting Office (“GAO”) addressed this more than twenty (20) years ago in Litton Systems, Inc.[24] and more recently in BNL, Inc.[25] Furthermore, the MSBCA decided that an unsuccessful bidder alleging wrongful rejection must demonstrate a reasonable possibility that the bidder has a substantial chance of winning the award if its protest is successful.[26] With this determination, the MSBCA created precedent[27] as well as aligned Maryland law with federal law.[28] Indeed, “reasonable possibility” and “substantial chance” is the exact language used in Calnet, Inc.,[29] and Innovative Solutions & Support, Inc.[30] Without such a showing, bidders cannot assert that they have been aggrieved, which means that they are not an interested party and lack standing to protest the award.[31]
IV. REASONABLE POSSIBILITY AND SUBSTANTIAL CHANCE STANDARD
To illustrate Maryland’s new standard, consider the following example. Imagine that six (6) bidders respond to an RFP, which included technical requirements. The results are depicted in this table:
Bidder | Technical Rank | Price Rank | Overall Rank |
A | 1 | 3 ($20 million) | 1 |
B | 3 | 4 ($21 million) | 2 |
C | 4 | 2 ($18 million) | 3 |
D | 2 | 5 ($25 million) | 4 |
E | 5 | 1 ($17 million) | 5 |
F | 6 | 6 ($26 million) | 6 |
Recall that with an RFP, the agency grants the award to the proposal that is the most advantageous or offers the best value.[32] Although A’s price is $3,000,000 more than the lowest priced bidder, E, the agency decides that the top technical solution warrants the additional money. Notice that the bidder with the second (2nd) ranking technical proposal, D, is not ranked second (2nd) overall. Instead, the bidder with the third (3rd) ranking technical proposal, B, is ranked second (2nd) overall. Thus, the agency considers B’s proposal more valuable than D’s. That is, if A is disqualified, the agency does not consider the extra value of D’s technical proposal to be worth an added $4,000,000 but it does consider that B’s technical proposal merits the additional $1,000,000.
Suppose that F disagrees with the agency’s technical evaluation of its proposal, asserting that it should have been ranked first (1st). Furthermore, assume that F’s protest is successful, catapulting it to the top technical rank and pushing A into second (2nd) place. F’s price remains in sixth (6th) place and would cost the agency $6,000,000 more than A’s (now) second (2nd) ranked technical proposal. If the agency was unwilling to place D’s overall ranking above B’s due to the additional $4,000,000 cost, then it is very unlikely that the agency would give F an overall first (1st) place ranking, even with a top technical proposal, because of the additional $6,000,000. In short, there is no reasonable possibility that F has a substantial chance of receiving the award even if its protest is successful. Therefore, F is not an interested party and as such, does not have standing to protest the award.[33]
V. CONCLUSION
Only interested parties may protest a procurement award granted to another through the Competitive Sealed Proposals process. When an unsuccessful bidder protests an RFP bid, it must offer more than allegations to qualify as an interested party,[34] which is in conformity with the approach of the GAO.[35] The unsuccessful bidder must also demonstrate that there is a reasonable possibility it has a substantial chance of winning the award if its protest is successful.[36] The reasonable possibility and substantial chance standard is new in Maryland and is exactly aligned with that of the GAO: “we will not sustain a protest unless the protester demonstrates a reasonable possibility that it was prejudiced by the agency’s action; in effect, a protester must show that . . . it would have had a substantial chance of receiving the award.”[37]
FOOTNOTES:
[1] Ms. Raynaud ’17 is currently a law clerk for the Howard County Circuit Court. The opinions, positions, statements, and/or views expressed in this article are solely those of the author, and do not reflect those of the Maryland Judiciary. Her authorship occurred when Ms. Raynaud was a Clerkship Fellow.
[2] An interested party is defined as “an actual or prospective bidder, offeror, or contractor that may be aggrieved by the solicitation or award of a contract, or by the protest.” Md. Code Regs. 21.10.02.01B(1).
[3] Md. Code Regs. 21.10.02.02A.
[4] Philip M. Andrews & John F. Dougherty, Brief Guide to Maryland Procurement Law, The Maryland Litigator (MSBA Litigation Section), Feb. 2012, at 17, http://www.kramonandgraham.com/siteFiles/News/MSBALitigationJan2012.pdf.
[5] See Appeal of Active Network, LLC, Md. B.C.A. 2920 (2015), http://msbca.maryland.gov/wp-content/uploads/sites/30/2016/08/active_network2920.pdf (holding that a protest cannot be sustained unless the protester shows there is a reasonable possibility that it would have a substantial chance of receiving the award had its protest been successful), aff’d No. 24-C-15-003630 (Md. Cir. Ct. Balt. City Dec. 7, 2015).
[6] Id. at 8.
[7] Md. Code Regs. 21.05.03.01B.
[8] Md. Code Regs. 21.05.03.02.
[9] Md. Code Regs. 21.05.03.03.
[10] Md. Code Regs. 21.05.03.03(2).
[11] Md. Code Regs. 21.10.02.01B(1).
[12] Id.
[13] Id.; see supra note 3 and accompanying text.
[14] Md. Code Regs. 21.05.03.03(2).
[15] Id.
[16] Md. Code Regs. 21.05.03.03(1).
[17] Md. Code Regs. 21.05.02.01B(1).
[18] See Appeal of Mid-Atlantic Vision Svc Plan, Inc., Md. B.C.A. (1988) (concluding that a third (3rd) ranked bidder had standing if it demonstrated that the solicitation process was unfair to all bidders); Appeal of Balt. Motor Coach Co., Md. B.C.A. 1216 (1985) (concluding that a fourth (4th) ranked bidder had standing if it demonstrated that the evaluation process was unfair to all bidders).
[19] See Appeal of Mid-Atlantic Vision Svc Plan, Inc., Md. B.C.A.
[20] See Appeal of Balt. Motor Coach Co., Md. B.C.A. 1216.
[21] Md. Code Regs. 21.05.02.01B(1).
[22] Appeal of Active Network, LLC, Md. B.C.A. 2920 at 5–6.
[23] See e.g., BNL, Inc., B-409450 at 5, 2014 CDP P 138, 2014 WL 1818046 (“We will not sustain a protest where the agency’s evaluation is reasonable, and the protester’s challenge amounts to nothing more than disagreement with the agency’s . . . judgment[].”). See also Litton Sys., Inc., Data Services Div., B-262099 at 4, 95-2 CPD 261, 1995 WL 717637 (“Litton’s disagreement with the Army’s judgment provides . . . no basis to find that judgment unreasonable”).
[24] Litton Sys., Inc., Data Services Div., B-262099 at 4.
[25] BNL, Inc., B-409450 at 5.
[26] Appeal of Active Network, LLC, Md. B.C.A. 2920 at 5–6.
[27] Id. at 8–9.
[28] Calnet Inc., B-42558.2 at 2, 2010 CPD P 130, 2010 WL 2561519 (indicating that a protest cannot be sustained unless the protester shows there is a reasonable possibility that it would have a substantial chance of receiving the award had its protest been successful); Innovative Solutions & Support, Inc., B-405658 at 7, 2011 CPD P 274, 2011 WL 6431207 (indicating that a protest cannot be sustained unless the protester shows there is a reasonable possibility that it would have a substantial chance of receiving the award had its protest been successful).
[29] Calnet, Inc., B-42558.2 at 2.
[30] Innovative Solutions & Support, Inc., B-405658 at 7.
[31] Md. Code Regs. 21.05.02.01B(1).
[32] See supra Part II.
[33] Md. Code Regs. 21.05.02.01B(1).
[34] See Active Network, LLC, Md. B.C.A. 2920, at 9.
[35] See e.g., BNL, Inc., B-409450 at 5. See also Litton Sys., Inc., Data Services Div., B-262099 at 4.
[36] See Active Network, LLC, Md. B.C.A. 2920, at 9.
[37] Calent, Inc., B-42558.2, 2010 CPD 130B, at 2; See also Innovative Solutions & Support, Inc., B-405658, 2011 CPD P 274, at 7.