You have your eye on a solicitation. You know the work, you know the customer, and you are certain that you would be a front-runner for the award. Then, you learn that the agency is limiting competition for the procurement, and you can no longer compete for the contract. Immediately, you think that the agency must have made a mistake. After all, you were fully prepared to submit a proposal and perform the work. But is believing you could have competed for the contract and won the award enough to satisfy the requirements for filing a bid protest? A recent COFC decision answers this question.
In CSI Aviation, Inc. v. United States, No. 25-1338C, 2026 WL 1296071 (Fed. Cl. May 4, 2026), CSI filed a bid protest in the COFC, challenging the Department of Homeland Security’s (DHS) decision to conduct a limited competition procurement as this excluded CSI from competition for providing comprehensive support for removal operations (CSRO) services. However, the COFC ultimately found that CSI failed to prove that it was an interested party and that it had suffered prejudice due to an error made by the agency.
The COFC applied the following two-part test in determining whether CSI could challenge the terms of the solicitation: a protestor must show that (1) it is an interested party; and (2) it was prejudiced by a significant error in the procurement process. Although these are two separate requirements, the same showing may be relevant and may even satisfy both. So, how are these requirements different and what does a protestor need to show to satisfy each? And how does it differ when a contractor is challenging a sole-source award?
Interested Party Requirement
The COFC has held that an interested party is “an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract.” 31 U.S.C. 3551. This requires that the protestor show that it had a “substantial chance” of winning the contract to establish that it has a direct economic interest and is therefore an interested party. This is independent from any error that the agency may have made and focuses only on the protestor’s chances of winning. In the sole-source context, this means that the protester must allege facts and evidence to show that it can perform the contract just as well as the chosen awardee. After all, a sole-source decision means the agency determined that no other offerors can meet the requirements.
Prejudice Requirement
The protestor must also demonstrate that it was prejudiced by the agency’s significant error in the procurement process. Unlike the interested party requirement, this requirement focuses on the impact that the agency’s error had on the protestor’s chances of success. The Court of Federal Claims requires that the protester show that it would have had a substantial chance of winning the contract had the agency not made the error. Ultimately, “showing that the government erred in some procurement does not matter for an actual or prospective offeror that cannot pursue or perform the contract.” Therefore, the protestor must show that it can actually perform under the contract to demonstrate that it suffered prejudice.
COFC’s Findings
Unfortunately, CSI ran into trouble because it failed to allege any facts demonstrating its ability to perform under the contract. Although CSI asserted that it was an interested party, it did not present any facts demonstrating that it could perform the work sought by the solicitation. CSI merely restated the applicable legal standards and neglected to use any factual support for its claim that it was an interested party or that it had suffered prejudice. The court summarized it this way: “CSI’s complaint provides no factual allegations regarding CSI’s capability to perform the full scope of CSRO services. Indeed, CSI included only a single paragraph in its complaint regarding its various government contracts and the scope of its capabilities.” Plus, CSI’s briefing included “no discussion of CSI’s qualifications, its past work and experience, its ability to engage subcontractors, the willingness of potential subcontractors to perform elements of the scope of work that CSI could not perform, or anything of that sort.”
The COFC noted that “the fact that CSI could have submitted a proposal had DHS engaged in a full and open competition proves absolutely nothing.” Regrettably, CSI’s failure to plead facts alongside its legal conclusions resulted in the COFC finding that CSI had not proven that it was an interested party or that it had suffered prejudice.
Conclusion
This case illustrates what a contractor must show if it wants to challenge a limited-source procurement, under both the interested party requirement and prejudice requirement. Although closely related and often satisfied by making the same showing with the same set of facts, each requirement is separate and distinct from the other. However, the bottom line is that simply restating the legal standards and making unsupported conclusions is not enough for the COFC. The protestor must plead and prove facts demonstrating that it is an interested party and has suffered prejudice by demonstrating that the protester can perform under the contract.
You may believe that you would be a competitive bidder or could perform under the contract, but that does not automatically make you an interested party or show that you suffered prejudice. If you are interested in learning more about why you might want to consider filing a bid protest in the COFC, check out this previous article. If you decide to file a bid protest in the COFC or need assistance identifying which facts are important to show interested party status and prejudice, feel free to reach out to us.
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