Doth Thou Protest Too Much??
TIME FOR ACTION ON BID PROTESTS? MY LATEST COLUMN FROM WASHINGTON TECHNOLOGY
Has the use of protests on federal procurements become so egregious that it’s time for some serious action? The Senate Armed Services Committee seems to think so. The committee is proposing to make unsuccessful protestors pay all of the Government Accountability Office’s costs and, in the case of an incumbent protestor that loses, also put its profits at risk.
Many will applaud this effort to reign in what is seen as an out of control protest process. After all, the protest rate has grown some 45 percent during a period of time that total federal spending has dropped 25 percent. In 2001 there were about 700 individual protests filed with the GAO; in 2015 that number was over 2,500. Interestingly, of those protests on which GAO ultimately ruled, its “sustain rate” had dropped to 12 percent—from 18 percent just a few years earlier and 22 percent in 2001.
EDITOR's NOTE: See our WT Insider Report Debriefings and Bid Protests, where we explore many of these issues.
There is also anecdotal evidence that some incumbent contractors have at times used the protest process as a tool for extending the period of performance on contracts they have lost during a recompete, although, disruptive as such a practice is, there is no data to show it is actually all that common.
And it is also widely believed that a fear of protests is driving bad procurement strategies, particularly the over-use of low price buying, which is very difficult to appeal.
But while it is inarguable that there are real problems that merit a response, it is not at all clear that the committee’s proposal is the right, fair, or most effective way to do so.
To start, Congress needs to recognize that agencies have a legal responsibility to make procurement decisions that provide the best value service or product to the taxpayer. Protests are one tool by which that goal is supported.
Moreover, there should be a fair mechanism for bidders who have invested substantial resources to report and receive redress for procurement practices that violate the Federal Acquisition Regulation. On those counts, the proposal goes too far in disincentivizing legitimate protests.
In addition, the proposal is also underpinned by an assumption unsupported by fact: that a failed protest is equivalent to a protest without merit.
Although the protest sustain rate is indeed low, and there is certainly some abuse, the vast majority of protests are driven by real concern. And most are settled or withdrawn well before they reach the decision point, usually when agencies take corrective action.
But companies have also routinely experienced corrective action that, while minimal enough to satisfy the bases on which GAO would be likely to rule, is far from significant enough to address the often real concerns raised in the original complaint.
This is not to say nothing can be or should be done. Quite the contrary.
First, we need to re-energize the scope and quality of post-award debriefings. It is no surprise that the increase in protests has occurred during a period that the quality of post-award debriefings has dropped precipitously.
As we saw in the 1990s, when debriefings are robust and open, protests are far less likely. The Office of Management and Budget and the Defense Department have been beating the communications drum for years but resistance remains.
Congress can play a meaningful role here, much as the House Armed Services Committee is seeking to play a helpful role in placing the use of low price contracting in its proper context.
Second, there should be an explicit process by which representative samples of protests are continually analyzed so that win or lose, they can be used to inform better procurements. Such analyses could identify specific trends or problems, or even problematic buying activities, and could thus have real value as a knowledge tool.
Third, we should consider mandating some form of alternative dispute resolution prior to a protest going forward. According to GAO, ADR is used in only 4 percent of cases but has a success rate that annually averages between 70 percent and 80 percent. Doesn’t that itself suggest one part of the answer?
Fourth, it is not unreasonable to consider requiring a losing protestor to pay GAO’s costs (the protest version of court costs), but only if it can be demonstrated that the protest was, indeed, frivolous. While a tricky determination, one could review a set of objective criteria, such as whether the protest involved a matter significant enough to result in a different award decision, or whether the company has demonstrated a clear predilection to protest. But again, this is a slippery slope and defies a facile answer, although it can be navigated. In no case, however, should a company be required to place its “other than incurred costs” at risk; for one thing that is a stark and unfair over-reach since it is based on the assumption that a failed protest is an illegitimate protest. For another it is impractical (e.g., what happens with a fixed price contract?).
The Armed Services Committee has started an important discussion and offered some provocative “solutions” to a problem many are talking about. In so doing, they’ve also created a great opportunity on which we should collectively capitalize.
Let’s have that conversation. And let’s not simply bury our heads in the sand and do either the wrong thing or nothing at all. That won’t solve anything.
Bid Protestors are "Whistleblowers" and are guardians of the integrity of the Public Procurement Process. Just like any whistleblowing situation, there is opportunity for abuse. But I don't hear Congress clamoring for unsuccessful whistleblowers to pay legal expenses of defendants in unsuccessful qui tam cases. That just wouldn't be right. Perhaps there is an avenue for more self-certification like certified claims that can be strengthened. Maybe disgorgement of profits for bad faith filings, but I am not sure that a European style "loser pays" legal fees. Interesting problem and well raised Stan. Thank you.
I generally support Stan's review. Having recently retired from federal service, I totally agree that the quality of debriefings could be increased, and KOs encouraged to provide thorough oral debriefings. Too many have relied on written debriefings or standard templates. (I would point out though that KOs have been discouraged in some instances as any concessions made during the debriefing are thrown back at them in the protest in -- how could we be rated XX, when the KO complimented us on.... (which might be a minor part of a major factor).. Sometimes no way to win). One of the big concerns though is that many contracting personnel particularly in the Army are relatively inexperienced and thus somewhat reticent. Plus, there is continuous scrutiny of protests and procurements within the executive branch; viewing protests as somehow something a KO did wrong. (There are some that have voiced concerns about the increased corrective action trend). We need to eliminate this drive within the government, and actually throughout business, of "no defects", no errors. Who hasn't learned through errors and failures? The KOs I have worked with really grew and matured when they faced protests (maybe lost one or two), but learned through the process of the scrutiny that could be brought to bear on their decisions, and many lessons were learned in the process. I will not get into the increased scrutiny and the increasing number of reviews of procurements in recent years--but have they really made a difference, or just slowed down the process (or continued the impression that we must have "no defects")? In all truthfulness, after participating in procurements for over 30 years, I have never found a source selection that had "no defects." The underlying issue though is not whether there were any defects, but whether all the offerors were treated fairly, equally, and consistent with the evaluation criteria, and hopefully the record is adequately documented . I would point out that while I support paying costs for frivolous protests, I doubt if GAO will agree or find many such protests. The more creative solution might be to assess costs against incumbent contractors (who fairly routinely protest awards that they lose, but protest to keep the contract running.).
Good article Stan (as always). I would only take some small issue with your last comment. Doing nothing as opposed to doing something counterproductive is a good decision. My experience as a government contracts attorney is that the number of frivolous protests are overstated. Certainly they exist but not in numbers that move the meter. The largest driver I see for the increased number of protests is the increased number of IDIQ procurements with multi-billion dollar ceilings. These procurements are so large in scope that if a business is not successful it is at risk of not being able to sell to the customer for years. Thus, the procurement becomes a "bet the farm" proposition, and a protest is inevitable. Look at NETCENTS II and ITES 3H for example. Failure win a spot on those contracts almost guarantees no large opportunities to sell IT services and/or hardware to the Air Force or Army. That's what drove the multi-year protests by multiple protesters - (not to mention sloppy procurement processes by the agencies).
Good article. I think protests have gone awry, but having also seen contract actions that clearly violate the FAR and some that just may seem to; part of the problem is the lack of detail in debriefings. Not all agencies but some are so skimpy on details they actually invite a protest because the company has no idea why they lost. I'm all good with declaring some companies belligerent protesters however some are very well intentioned but given incomplete or misleading information that results in protest.
Protests are a necessary check and balance facilitating fair competition. Government and Industry do not always agree on the application of regulation and proposal guidelines. Adding metrics, introducing ADR and not penalizing industry for good-faith protests are welcomed!