A bid protest turns ugly and backfires

Robert J. Sherry

Bid protests are universally reviled for their costs in time and money. Recently, the Supreme Court of Virginia issued a decision proving just how expensive it can get, at least for disappointed bidders.

The case grew out of a request for proposals issued by the state's Department of Social Services. The RFP sought a contractor to run two DSS child support enforcement offices in Northern Virginia. A five-member committee that included two DSS employees evaluated the proposals. The panel's chairman was the contracting officer.

After evaluations, DSS proposed an award to one of the bidders. Another bidder protested, alleging that two of the evaluation committee members had conflicts of interest.

The company said that one of the evaluators had unsuccessfully sought employment with it less than seven months before the award announcement, and that the prospective winner had invited a second evaluator to submit a resume for possible employment. This second evaluator allegedly submitted her resume, indicating her availability for work on the very same DSS contract.

Facing such serious allegations and the bad publicity the high-visibility public protest could cause, DSS cancelled the proposed award and issued a new RFP.

But the initial proposed winner struck back. It sued the protester for conspiracy and for interfering with its prospective contract with DSS and asked for treble damages attorneys' fees and court costs.

At trial, the first evaluator testified that he had not been an active candidate for employment with the protester. He explicitly contradicted an admission made by the winning contractor that, in fact, he had been an unsuccessful candidate for a job at the other company.

The other evaluator testified that she briefly had been a consultant to the protester'not the winning vendor'and that she had sent out several resumes anticipating a family move.'On the basis of this and other evidence, the trial court awarded damages, fees and costs to the vendor that had won the contract. The case eventually found its way to the Supreme Court, which issued a ruling with the following conclusions:

First, allegations in the protest document, if false and misleading, were not privileged, because the protest proceedings were not subject to the safeguards that exist in formal judicial proceedings.

Second, allegations in affidavits, if false and misleading, can certainly serve as a basis for liability.

Third, the protest could not be considered a protected attempt to influence government policy.

The court concluded that the protester was liable to the winning vendor to the tune of $750,000 in damages.

Robert J. Sherry is a partner in the law firm of McKenna & Cuneo LLP. He heads the government contracts practice in the firm's San Francisco office, counseling information technology companies on federal, state and local issues.


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