Bid Protests: Federal Court Dismisses Protest by "Disappointed Bidder"

The U.S. District Court for the Eastern District of Michigan recently dismissed a challenge by the low bidder on a Detroit Water and Sewerage Department (DWSD) contract and affirmed long- standing Michigan law concerning "disappointed bidders."

The Court dismissed a challenge by the low bidder for a contract that was awarded to the third bidder finding that the disappointed (low) bidder lacked the necessary legal standing. EBI-Detroit, Inc v City of Detroit, 476 F. Supp. 2d 651; 2007 U.S. Dist. LEXIS 12102 (E.D. Mich 2007).

In granting summary disposition for the City of Detroit, Judge John Feikens noted:

"The Michigan Supreme Court has long found a lack of standing to bring claims by disappointed bidders. In 1896, that court took up the question of "whether the lowest bidder, under a contract proposed to be let by a municipal corporation, whose bid has been rejected, has a right of action at law to recover profits which he might have made had his bid been accepted," and said bidders generally did not have such a right under law. Talbot Pav. Co. v. Detroit, 109 Mich. 657, 660, 67 N.W. 979 (Mich. 1896), cited for this proposition by Detroit v. Wayne Circuit Judges, 128 Mich. 438, 87 N.W. 376 (Mich. 1901). Federal courts have noted that a property interest in a publicly bid contract is demonstrated in one of two ways: either the bidder can show it was actually awarded the contract and then deprived of it, or the bidder can show that the governmental body limit the discretion to reject low bidders. E.g. Leo J. Brielmaier Co. v. Newport Hous. Auth., Case No. 98-5245, 1999 U.S. App. LEXIS 7496, 15-16 (6th Cir., 1999). The court in Brielmaier specifically noted that if a body has discretion to reject bidders by finding them non-responsible, then a finding that the bidder is not responsible will generally not be sufficient to show standing. Id. The court in Brielmaier also addressed disappointed bidder standing for defamation claims when declared not responsible, and noted a disappointed bidder had no legally-cognizable interest absent a resulting prohibition in bidding for future government contracts. Id."

"Since Plaintiff cannot establish either an award of the contract, a lack of discretion to determine responsible bidders, or even a prohibition on future contract possibilities, it fails to show standing. Thus, its claim must be dismissed in its entirety."

Note: Under federal law, bid protests against the award of public contracts is governed by statute and the Federal Acquisition Regulations.