BID PROTESTS: THE COSTS ARE REAL, BUT THE BENEFITS OUTWEIGH THEM
Daniel I. Gordon*
[Note for student editors: Will you insert a table of contents
and format the headings of the article consistent with PCLJ’s
procedures?]
*
1
TABLE OF CONTENTS
I.
INTRODUCTION.............................................. 2
II.
ADMINISTRATIVE AND JUDICIAL VENUES FOR FILING PROTESTS IN
THE U.S. FEDERAL SYSTEM................................... 3
III. SPREAD OF THE PROTEST PROCESS OUTSIDE THE U.S............. 6
IV.
CORRECTING MISPERCEPTIONS ABOUT PROTEST STATIISTICS....... 8
A.
Protests are rare events............................. 9
B.
It is rare for a protester to win a protest, and even
rarer for a winning protester to go on to obtain the
contract at issue in the protest.................... 16
V.
COSTS OF THE PROTEST PROCESS............................. 20
VI.
Benefits of the Protest Process.......................... 32
VII. Conclusion: The Costs are Overstated, and the Benefits
Outweigh Them............................................ 35
I.
INTRODUCTION
This article discusses the benefits and costs of bid
protests—legal challenges by a bidder to the way the Government
has conducted a procurement.1
In the U.S. federal procurement
system, bid protests have existed since the 1920s,2 and criticism
arguing that they are more trouble than they are worth has been
around for nearly that long.3
The article explains why, in the
author’s view, the benefits of the bid protest system
See James F. Nagle & Adam K. Lasky, A Practitioner’s Road Map
to GAO Bid Protests, 30 CONSTR. LAW, no. 5, Winter 2010, at 5.
2 See id.
1
3
2
substantially outweigh the burdens that it imposes on the
procurement system.
II.
ADMINISTRATIVE AND JUDICIAL VENUES FOR FILING PROTESTS IN
THE U.S. FEDERAL SYSTEM
It was in the U.S. that the first litigation leading to
what came to be recognized as a bid protest decision took place.4
In 1924, a company filed a complaint with the then-new General
Accounting Office (“GAO”),5 alleging that the officials of the
Panama Canal had written specifications for a truck that were
“wired” to a particular brand name and that unfairly precluded
the complaining firm from fair consideration for the contract.6
GAO, after some internal hesitation, decided to consider the
complaint as part of the office’s responsibility to ensure that
funds appropriated by Congress were lawfully spent—what is
referred to as GAO’s account settlement function.7
GAO
ultimately agreed with the protesting firm.8
See Comptroller General McCarl to the Governor, the Panama
Canal, 5 Comp. Gen. 712, A-11259 (Mar. 9, 1926).
5 Effective July 7, 2004, the GAO's legal name became the
Government Accountability Office. See GAO Human Capital Reform
Act of 2004, Pub. L. 108-271, § 8(a), 118 Stat. 811 (2004).
6 5 Comp. Gen. 712, 713.
7 In the Beginning: The Earliest Bid Protests Filed with the US
General Accounting Office, 13 PUBLIC PROCUREMENT L. REV. 5 (2004);
Daniel I. Gordon, Annals of Accountability: The First Published
Bid Protest Decision, 39 PROCUREMENT LAWYER, no. 2, Winter 2004, at
11..
8 5 Comp. Gen. 712, 713.
4
3
In the course of the ensuing decades, handling bid protests
became a routine function of GAO’s Office of General Counsel.9
Some protests involved pre-award challenges by potential
offerors to solicitation terms;10 the majority were post-award
challenges by firms that had competed for a contract, contesting
the award to another offeror.11
For many years, courts did not consider bid protests, so
that GAO (and the contracting agencies themselves) represented
the only place to file a protest.12
Then, for three decades
after the decision of the U.S. Court of Appeals for the District
of Columbia Circuit in Scanwell,13 U.S. district courts had bid
protest jurisdiction, until that jurisdiction “sunset” in 2001.14
From the enactment of CICA in 198415 until its jurisdiction was
ended through section 5101 of the Clinger Cohen Act of 1996,16
Pub. L. No. 104-106, there was another administrative forum with
jurisdiction over some protests, those related to information
See William E. Kovacic, Procurement Reform and the Choice o
Forum in Bid Protest Disputes, 9 ADMIN. L. REV. AM. U. 461, 470
(1995)
10 See, e.g., New York Tel. Co. v. Sec’y of Army, 67 F. Supp. 18,
19 (D.D.C. 1986)
9
11
12
Scanwell Labs., Inc. v. United States, 424 F.2d 859 (D.C. Cir.
1970).
14 The Administrative Dispute Resolution Act of 1996, Pub. L. No.
104-320, § 12, 110 Stat. at 3874, provided for the District
Court jurisdiction to sunset on January 1, 2001.
13
15
16
4
technology, and that was the General Services Administration’s
Board of Contract Appeals, the GSBCA.17
In addition, a statutory
change in 1996 meant that the Court of Federal Claims,18 which
had only pre-award protest jurisdiction for many years, was
given post-award jurisdiction as well.19
The result is that, for more than a decade now, the only
places outside the contracting agency where disappointed bidders
have been able to protest are GAO and the Court of Federal
Claims.20
From time to time there are differences between GAO
and the Court, with respect to both process and outcomes.21
The
author views occasional differences between two fora as
inevitable, and that is particularly the case here, where one
forum is administrative and the other is judicial.
In any
event, having two fora hearing bid protests may be healthy for
the procurement system.
While the discussion below regarding
the costs and benefits of protests to the procurement system is
17
The Court of Federal Claims was previously called the United
States Claims Court prior to Congress’s enactment of the Federal
Courts Administration Act of 1992, Pub. L. No. 102-572, 106
Stat. 4506, 4516. Also, Prior to Congress’s enactment of the
Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96
Stat. 25, 42, the court generally existed as the United States
Court of Claims, Trial Division.
19 Administrative Dispute Resolution Act of 1996, Pub. L. No.
104-320, section 12(d). [Note to student editors: Should we
refer back to the citation in the earlier footnote?]
18
20
21
5
focused on GAO, the analysis should apply, at least in broad
terms, to the Court of Federal Claims as well.
III. SPREAD OF THE PROTEST PROCESS OUTSIDE THE U.S.
Before turning to that analysis, it is worth looking
outside the U.S., because the protest process has been receiving
substantial attention around the world.22
More than ever in the
past, a protest system has come to be seen as a required part of
a good public procurement system.23
For example, in every free
trade agreement that the U.S. has negotiated over the past 20
years, there has been a provision requiring our trading partners
to have a protest mechanism.24
In Canada, for instance, the
Canadian International Trade Tribunal was created to satisfy the
requirement of NAFTA, the North America Free Trade Agreement,
that each partner have a protest forum.25
Similarly, the World
22
It should be noted that the term “protest” (or “bid protest”)
is rarely used outside the United States; instead, what we would
call protests are called ”challenges,” “domestic review
procedures,” “remedies,” or simply ”complaints.”
23
24
http://www.international.gc.ca/trade-agreements-accordscommerciaux/agr-acc/nafta-alena/bereczky.aspx?view=d:
“Article
1017 of the NAFTA calls for the promotion of “fair, open and
impartial procurement procedures,” whereby “each party shall
adopt and maintain bid challenge procedures for procurement
covered” in accordance with a variety of principles, including
that of “establish[ing] or designat[ing] a reviewing authority
with no substantial interest in the outcome of procurements to
receive bid challenges and make findings and recommendations
concerning them.” As a result, the Canadian government
established the Canadian International Trade Tribunal (CITT).
NEEDS CITE. The tribunal’s mandate is to receive complaints and
25
6
Trade Organization’s Agreement on Government Procurement (GPA)
includes a provision requiring WTO members that accede to it to
have a protest forum (called a domestic review procedure).26
In
addition, there is a protest provision in Chapter VIII of the
model procurement law of the United Nations Commission on
International Trade Law (UNCITRAL).27
Perhaps most interesting is the attention that protests
have received over the past 20 years in the European Union
(“E.U.”).
Not mentioned in the EU’s Public Procurement
Directives,28 protests were first addressed by the European
Commission in what is known as the Remedies Directive.29
Initially issued in 1989,30 the Remedies Directive was revised in
2007.31
The Remedies Directive has had an enormous impact,
to conduct the necessary investigation to see whether the
procurement project challenged falls outside the respectable
limits of the NAFTA procurement procedures and to provide for
remedies where procedural breaches occur.” NEEDS CITE.
26 See Article XX of the existing GPA and Article XVIII of the
2011 revised version, which is to come into effect shortly.
http://www.ustr.gov/sites/default/files/GPA%20113%20Decision%20o
n%20the%20outcomes%20of%20the%20negotiations%20under%20Article%2
0XXIV%207.pdf
27 See Challenge Proceedings, Chapter VIII, UNCITRAL Model Law on
Public Procurement (2011).
http://www.uncitral.org/pdf/english/texts/procurem/mlprocurement-2011/ML_Public_Procurement_A_66_17_E.pdf.
28 See Preamble, Council Directive 89/665/EEC (1989).
29 See Preamble, Council Directive 89/665/EEC (1989).
30 Id.
31 See Directive 2007/66/EC of the European Parliament and of the
Council (2007).
7
requiring all member states to have a protest forum,32 and a good
number of EU member states have recently seen a significant
increase in the number of protests being filed (whether that is
a positive or a negative development is a separate question).33
The Court of Justice of the European Union has issued decisions
that have reshaped the protest process in the E.U., in
particular, through the Alcatel decision34 that led to the
requirement (codified in Article 2a of the 2007 revision to the
Remedies Directive) that there be a “standstill” period
(typically 10 days) between the announcement of the apparent
winner of the competition for a contract and the signing of the
contract, in order to allow potential protesters to file before
the contract is actually awarded.35
IV.
CORRECTING MISPERCEPTIONS ABOUT PROTEST STATIISTICS
In the circle of people who are interested in federal
procurement, there are a number of misperceptions about protest
statistics that should be addressed, since they can taint
judgments about the benefits and costs of protests.
In
particular, even people quite familiar with the federal
See id. at Article 1, Scope and Availability of Review
Procedures.
33 JEREMY GLOVER, CHALLENGING THE TENDER PROCESS- WHAT IS THE EFFECT OF RECENT
CASE LAW? 10 (2009).
34 Case C-81/98, Alcatel Austria AG and Others, Siemens AG
Österreich and Sag-Schrack Anlagentechnik AG v Bundesministerium
für Wissenschaft und Verkehr, I-7708 (2009).
35 See Article 2(a), Standstill period, Directive 2007/66/EC of
the European Parliament and of the Council, (2007).
32
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acquisition system believe that protests are more common than
they really are, and they often believe, inaccurately, that
protesters frequently use the protest process to win contracts.
A.
Protests are rare events
The frequency or rarity of protests needs to be judged in
context in order for the judgment to be sensible.
If a
contracting officer is asked whether, in the procurements she or
he has worked on over the prior 3 years, protests were frequent,
an affirmative answer is often provided; but if one asks how
many procurements the contracting officer has worked on during
that period, that number often dwarfs the number of protests.
Put another way, while the numerator (the absolute number of
protests) is important, the denominator (the total number of
procurements) is critical to a determination of whether protests
can reasonably be said to be frequent.
In assessing the
frequency of bid protests in the federal procurement system,
there are difficulties with both the denominator and the
numerator – respectively, the number of federal procurements
that occur each year, and the number of protests filed each
year.
Regarding the denominator, perhaps surprisingly, there are
not good statistics on the number of federal procurements that
occur each year.
Any such count would need to include, not only
the number of contracts awarded, but also any task and delivery
9
orders awarded that can be protested.
The latter includes all
orders placed under the GSA Federal Supply Schedule and orders
issued under multiple-awarded indefinite-delivery, indefinitequantity contracts, where the orders have a value above $10
million.36
A recent RAND Corporation study of Air Force
procurements that were protested to GAO indicated that
approximately 20,000 contracts with a value above $25,000 were
awarded by the Air Force in 2008, representing approximately $63
billion.37
Since overall procurement spending in 2008 was over
$500 billion (eight times the amount spent by the Air Force
alone),38 that would suggest that the overall number of contracts
awarded was approximately 160,000.
The author suspects that the
number is low and that a better estimate, including FSS orders
and ID/IQ orders above $10 million, would probably substantially
exceed 250,000.
For the purpose of the analysis in this paper,
it will be assumed that the total number of federal contracts
and protestable orders awarded in a year is 200,000.
The Fiscal Year (FY) 2008 National Defense Authorization Act
(NDAA), NEEDS CITE, amended FASA, NEEDS CITE, to grant GAO
jurisdiction to hear protests concerning task or delivery orders
valued at more than $10 million. See Pub. L. No. 110-181, 122
Stat. 3, 237 (2008). [Note to Student editors: Please update
the citation to also include references to the FY 2011 and
FY2012 NDAAs, which extended the jurisdiction past the sunset
period]
36
37
http://www.rand.org/content/dam/rand/pubs/technical_reports/2012
/RAND_TR883.pdf at 12.
38
10
With respect to the numerator – the number of protests
filed—there has been confusion, for reasons that can be
clarified here.
One challenge has been a methodological anomaly
that is worth explaining.
Since the days when protest filings
were tracked on 3” x 5” cards, GAO has used a methodology that
can cause people to believe that protest numbers are higher than
they actually are.
When a company files a protest challenging
the terms of a solicitation, GAO assigns it a docket number,
referred to as a “B number,” since it begins with a “B” – for
example, B-123456.39
If the protester later learns new
information that constitutes a new ground of protest and files a
supplemental protest of that same solicitation’s terms, GAO will
docket that as B-123456.2.40
If another potential offeror also
protests the solicitation’s terms, GAO will docket its protest
as B-123456.3, and if that firm supplements its protest, that
will be docketed as B-123456.4.41
However those pre-award
protests are resolved, once the agency awards a contract, a
losing competitor may file a protest, which GAO will docket as
B-123456.5 and, if there is a supplemental protest once the
protester sees the agency report, that will be docketed as B123456.6.42
And finally, if another losing competitor files a
39
40
41
42
11
protest and then supplements it, they will be docketed as B123456.7 and B-123456.8, respectively.43
Overall, GAO’s
statistics will indicate eight protests, even though only one
procurement has been protested.
While eight protests of one
procurement would be unusual, having two protests is routine,
and three would not be out of the ordinary.
What that means is that, when GAO reports the number of
protests filed in a year, that number substantially overstates
the number of procurements protested.
For Fiscal Year (FY)
2008, for example, while GAO reported 1,652 cases filed,44
elsewhere GAO reported that 1,027 procurements were protested in
that period.45
In other words, GAO indicated that, on average,
there are approximately 1.6 docket numbers assigned (“cases
filed”) for each protested procurement.
Assuming that this
ratio is stable over time, it would mean that the 2,353 “cases
43
GAO’s reported number of cases filed apparently also includes
requests for reconsideration of a prior GAO decision as well as
requests for reimbursement of costs, since either such request
would be assigned the same B number as the related protest (in
the example used in the text here, a request for reconsideration
of the decision on the protests of the award would be docketed
as B-123456.9 and a subsequent request by the two protesters
that their protest costs be reimbursed would be docketed as B123456.10 and B-123456.11.
45 Cf. B-401197 (supra note XX) at 7, fig. 1, and GAO’s GAO Bid
Protest Annual Report to the Congress for Fiscal Year 2008, B158766, Dec. 22, 2008.
44
12
filed” in FY 201146 represented approximately 1,470 protested
procurements.
While the number of federal procurements was
probably not the same in FY 2008 and FY 2011, if we assume, for
the sake of simplicity and since this is only a rough estimate,
that there were 200,000 procurements in each of those two years,
that would suggest that 0.51 percent of procurements were
protested in FY 2008 and 0.7 percent were protested in FY 2011.
In other words, between 99.3 and 99.5 percent of procurements
were not protested.
This calculation has been confirmed through the recent RAND
study mentioned above.47
In that study, researchers at the RAND
Corporation found that, in the Air Force, “[t]he number of [GAO]
protests as a percentage of total contract awards fell fairly
steadily from about 1.7 percent in 1995 to 0.5 percent in
2008.”48
That is to say, as of 2008, 99.5 percent of Air Force
procurements went forward without being protested to GAO.
Even
if GAO protests of some other agencies’ procurements were twice
as common as for the Air Force (and there is no reason to assume
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-12-199SP, BID PROTEST STATISTICS
FOR FISCAL YEARS 2007-2011 4 (2011).
46
47
F. Camm, M.E. Chenoweth, T. Light, M.A. Lorell, J.C. Graser,
P. Lewis and R. Rudavsky, Government Accountability Office Bid
Protests in Air Force Source Selections, in American Bar
Association Section of Public Contract Law, “The Changing
Budgetary Environment: Legal and Fiscal Challenges in Federal
Procurement,” from the ABA Annual Meetings in Chicago (August
2012), at 3.
48
13
that that is the case), it would still be true that 99 percent
of their procurements went forward without being protested to
GAO.
While the RAND study refers to GAO protests, including the
Court of Federal Claims would not alter the picture, since the
Court receives fewer than one-tenth the number of protests each
year that GAO receives.49
And while protesters can file protests
within the Air Force and statistics on the number of those
“agency-level protests” are not available, there is no reason to
believe that they would increase the total percentage of
protested Air Force procurements much above 0.5 percent.
It is, of course, true that very high-dollar procurements
are much more likely to be protested—the higher the dollar
value, the greater the likelihood of a protest.
For a company
that loses the competition for a $100 million contract, with all
the bid and proposal costs that competing entails, the
additional cost of filing a protest may seem minimal, so that
filing a protest can be very tempting.
That does not change the
overall picture, however, especially since very high-dollar
procurements are themselves few in number:
protests are rare.
What about the mantra we often hear about increases in
protest numbers?
It is true that GAO has reported a substantial
Thus, the Court received 79 protests in FY 2008.
http://www.crowell.com/files/2011-Bid-Protests-Trends-andDevelopments.pdf
49
14
increase in the number of cases filed over the past few years,50
but even if the numbers doubled, from 0.5 percent of
procurements to a full percent, it would still mean that
something like 99 percent of procurements are not protested.
In
terms of absolute numbers, GAO has reported that the number of
protests rose from 1,327 in FY 2006 to 2,353 in FY 2011, an
increase of more than 70 percent.51
Adjusted to eliminate the
overcounting explained above,52 that would represent an increase
from approximately 830 to approximately 1,470 protested
procurements (representing the same percentage increase).
During that same period, however, federal procurement spending
increased from $432 billion in FY 2006 to $537 billion in FY
2011.53
Put another way, in FY 2006, there were approximately
1.92 protests for each billion in federal procurement spending,
while in FY 2011, there were 2.74 protests per billion.
Those
figures are similar to the ones that GAO provided in a
congressional report in 2009, when it stated that the number of
protested procurements per billion dollars in Department of
Defense contract spending ranged from 1.4 to 1.9 during the
50
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-12-199SP, BID PROTEST STATISTICS FOR FISCAL YEARS
2007-2011 4 (2011).
51
supra note 50 at 4;supra note 49, at 4.
52
53
Source:
usaspending.gov.
15
period FY 2004 to FY 2008.54 While the FY 2011 figure reflects an
increase, the number of protests for each billion in federal
procurement spending is still extremely low:
fewer than three
protests for each billion dollars that the government spends on
contracts.
B.
It is rare for a protester to win a protest, and even
rarer for a winning protester to go on to obtain the
contract at issue in the protest.
Here again, GAO’s methodology risks misleading observers.
GAO reports a “sustain” rate that has ranged (that is, the rate
at which GAO rules in favor of the protester and sustains the
protest), over the past 5 years, from 16 to 27 percent.55
sounds like protesters do fairly well.
That
For better or for worse,
the full picture is not so favorable to protesters.
First, the
sustain rate has been dropping nearly consistently over the past
5 years, falling from 27 percent in FY 2007 to 16 percent in FY
2011.56
Second, the sustain rate is calculated only among the
cases for which GAO issues a merits decision, as GAO explains in
its annual reports.57
That means that, in FY 2010, for example,
GAO did not sustain 19 percent of 2,299 cases – it sustained 19
54
U.S. GOV’T ACCOUNTABILITY OFFICE, REPORT TO CONGRESS ON BID PROTESTS INVOLVING DEFENSE
PROCUREMENTS 10 (2009).
55 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-12-520SP, GAO BID PROTEST OVERVIEW 2 (2011).
56 U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-12-199SP, BID PROTEST ANNUAL
REPORT TO THE CONGRESS FOR FISCAL YEAR 2011, at 4 (2011).
57
Id.
16
percent of 441 merit decisions.58
Third, that percentage is
distorted by the methodology of counting multiple B numbers
separately, because protests that are sustained typically have
more B numbers than protests that are denied.59
Thus, for FY
2010, GAO reported 441 merit decisions, of which 82 were
reported as sustained protests.60
A count of the actual
decisions (counting each decision as one, even if it resolves
two or more B numbers) shows that there were actually 277 (not
441) decisions, of which 45 (not 82) were sustained.61
That
represents a 16 percent sustain rate (not 19 percent).
Thus far, this analysis means that, among the hundreds of
thousands of federal procurements that occurred in FY 2010,
there were only 45 where GAO sustained protests.
The next
stage, though, offers even worse news for protesters, and it is
surprising how little is reported about it.
What happened in
those 45 procurements, after GAO sustained the protests?
Did
the protester that was successful in the GAO litigation succeed
in obtaining the contract?
The answer:
Rarely.
The FY 2010
numbers have been selected here for further study, because
enough time should have passed for final action in the
Id.
This presumably derives from protesters’ filing more
supplemental protests in sustained protests, for whatever
reason.
60 GAO-12-199SP at 4.
58
59
61
17
procurement to be available.
That said, discovering the final
action can be challenging, because information on what
ultimately happened in each one of the sustained protests is not
readily available, but enough is known to give a fairly clear
picture of protesters often winning at GAO but nonetheless not
receiving the contested contracts.62
In four of the 45 cases,
GAO did not recommend any corrective action in the protested
procurement, either because the contract had already been
performed or for other reasons.63
In an additional three cases,
GAO did recommend corrective action in the procurement, but the
agency explicitly declined to follow GAO’s recommendation.64
In
another case, the agency cancelled the solicitation entirely
(for reasons, and with impact, unclear).65
In 16 additional
cases (more than one third of all the protests sustained in FY
2010) , GAO recommended corrective action, the agency followed
GAO’s recommendation, but the agency then confirmed award to the
GAO does not track information on which company ultimately
receives a contract after GAO has sustained a protest. The
author, working with student research assistants at the George
Washington University Law School, has been endeavoring to obtain
information for the post-protest outcome of each of the 45
sustained FY 2010 protests, and the results to date are set out
in the text here. The effort to track down every case continues
through Freedom of Information Act requests to the respective
agencies.
63 Note, though, that two of those four cases involved protests
of public-private competitions, where the federal employees’
representative won the protest and may have been satisfied that
no further competition was to be held.
62
64
65
18
same company as before (or awarded to a third company, neither
the earlier awardee or the protester).66
In only four cases
identified to date did the protester ultimately obtain the
contested contract.67
While the ultimate outcome has yet been
determined in the remaining 17 procurements,68 this much is
clear:
winning a protest is far from ensuring that a protester
will win the contract it is seeking.
Experienced practitioners may point out that GAO reports a
high “effectiveness rate” that would suggest that the picture is
far better than this for protesters.
That “effectiveness rate,”
which was reported as 42 percent for FY 2010,69 combines the
sustained protests described above as well as cases where
agencies took voluntary “corrective action,” without action by
GAO, so that GAO closed its files without a decision.70
There is
no publicly available information on that large universe of
protests where GAO was told that the protester “obtain[ed] some
form of relief,” as GAO writes in a footnote to its annual
report.71
In particular, there is no way to know whether the
protesters ultimately obtained the contracts at issue, and
discovering the outcome in each of the affected procurement
66
67
68
GAO-12-199SP at 4.
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-13-162SP, BID PROTEST ANNUAL
REPORT TO THE CONGRESS FOR FISCAL YEAR 2012, at 5 (2012).
71 Id.
69
70
19
would challenge even the most diligent researchers, since GAO
does not publicly disclose any information about the cases that
it closes due to agencies’ voluntary corrective action.72
There
is, however, no obvious reason that an agency is more likely to
award a contract to a protester whose case ends without a GAO
decision than the agency would after GAO rules in the
protester’s favor.
V.
COSTS OF THE PROTEST PROCESS
A key component of the harm of the protest process is the
delay that protests cause.
Even when a protest is denied, it
holds up the acquisition.73
In particular, when a protester
files in time to trigger the automatic stay under CICA,74 the
agency will be required to hold off on awarding the contract
(for pre-award protests) or to direct the contractor to stop
work (for post-award protests).75
That automatic stay can last
up to 100 days,76 which is longer than the automatic suspension
of a procurement in any other country’s protest system, at least
among the many systems that the author has reviewed.77
Even if
GAO dismisses a protest, whether because it was untimely filed
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-13-2SP, PERFORMANCE
ACCOUNTABILITY REPORT FISCAL YEAR 2012, at 46 (2012).
73 31 U.S.C. § 3553(c)(1) (2006).
72
AND
74
75
31 U.S.C. § 3553(c), (d).
76
Need to add cite to at least one foreign system and the length
of its stay.
77
20
or because the protester does not qualify as an ‘interested
party’ with standing to protest,78 can take several weeks, and
even the most promptly dismissed protests may trigger a CICA
stay that is in place for at least a few days.79
In short, the
CICA stay does disrupt procurements.
The discussion above makes clear, however, that the CICA
stay applies to only a tiny percentage of federal procurements,
so that any harm caused by the CICA stay is also more limited
than might initially appear.
In FY 2011, as noted early,
approximately 1,470 procurements were protested to GAO.80
While
specific information is not publicly available, not all of those
1,470 protested procurements would have been stayed.
Only
protests filed within specified deadlines trigger a CICA stay,81
and at least some of those 1,470 protests were either untimely
filed (indeed, timeliness is one of GAO’s most common bases for
dismissing protests82) and even some of the timely-filed protests
may have been filed too late to trigger a CICA stay.
For
example, a protest filed 6 to 10 days after a debriefing will
usually be timely for GAO’s filing purposes, but it will not
78
79
80
U.S. GOV’T ACCOUNTABILITY OFFICE, GAO-12-199SP, BID PROTEST STATISTICS
FISCAL YEARS 2007-2011 4 (2011).
FOR
81
Dismissals of Bid Protests at the General Accounting Office,
THE PROCUREMENT LAWYER, Vol. 37, No. 2 (Winter 2002) at 16.
82
21
trigger a CICA stay, because a protest must be filed within 5
days of a debriefing to trigger a stay.83
Moreover, the fact that a protest has triggered the CICA
stay does not mean that the procurement will be on hold for 100
days.
Most protests are resolved well before the 100th day, the
maximum length of CICA’s automatic stay.84
In 2009, GAO reported
to Congress that it consistently closed more than half of all
protests within 30 days.85 While that report related to protests
of DoD procurements,86 there is no reason to believe that
protests of civilian agency procurements (which are fewer in
number than DoD protests)87 take longer for GAO to close.
The
stay may end because the protester has withdrawn the protest, or
because GAO has dismissed the case.88
When the agency takes
corrective action, that also ends the stay, but, of course, the
corrective action itself will generally delay progress in the
procurement.89
Even for the minority of protests that go to
published decisions – which means that they form the group of
protests for which the stay remains in place the longest time –
83
84
85
86
87
31 U.S.C. § 3553(d)(4)(B).
Supra note 54, at 5.
Id. at 10.
Id. at 5.
Needs cite.
88
89
22
GAO reports that, on average, the decision is issued before the
80th day.90
Not only is the delay caused by the CICA stay shorter than
it may appear – when a delay, even a relatively short one, could
cause harm, CICA provides a mechanism for agencies to move
forward with the procurement while the protest is still
pending.91
This “override” mechanism is available to agencies,
and is used, although information on the frequency of overrides
is not readily available.92
The truly long delays – disrupting the procurement for many
months – occur when GAO issues a decision sustaining a protest
and the agency then implements GAO’s recommendation, which
typically calls for the agency to re-do at least part of the
competition for the contract.93
however, is quite small:
The universe of such cases,
as explained above, there are only a
few dozen sustained protests in a year (as noted above, there
were 45 procurements in which GAO sustained protests in FY
2010),94 and, of those, some did not lead to delay in the
90
Couldn’t find this
91
For FY 2002, the last year that GAO included information on
overrides in its annual report on protests, GAO reported that,
with respect to the 1,101 protests filed that year, there were
71 instances of agencies’ using their override authority to move
forward with the procurement, notwithstanding the protest.
http://gao.gov/assets/100/93966.pdf
93
31 U.S.C. § 3554(b)(1)(B).
92
94
23
procurement after GAO issued its decision, either because the
decision did not contain a recommendation for corrective action
or because the agency declined to follow GAO’s recommendation.95
That leaves a relatively small number of procurements – almost
certainly fewer than 40 out of the 200,000 estimate used here
for each year’s procurements – in which there is substantial
delay due to a successful protest.96
In the author’s view, there
is adequate justification for a substantial delay in a
procurement where GAO has found that the agency violated
procurement law and that the violation harmed the protester.
In
any event, again in the author’s view, any delay that the
agency’s unlawful action has caused cannot fairly be blamed on
the protest system.
Critics of the protest system may also view as a cost of
the protest system GAO’s recommendation that protesters be
reimbursed the costs of filing and pursuing their protests,
including their attorney fees.97
That situation arises only when
GAO finds that a protest is meritorious—meaning, again, that the
contracting agency violated procurement law to the detriment of
the protester—so that (1) at issue are only a small number of
protests each year and (2) those cases are ones where the
95
96
31 U.S.C. § 3554(c)(1)(A)-(B); see also KATE MANUEL & MOSHE
SCHWARTZ, CONG. RESEARCH SERV., REPORT NO. R40228, GAO BID PROTESTS: AN
OVERVIEW OF TIME FRAMES AND PROCEDURES n.100 at 15 (June 30, 2011).
97
24
protest system has identified unlawful action by the
government.98
In the author’s view, reimbursing protesters for
their action as “private attorneys general” is justified.99
In
any event, the reimbursable rates for attorney fees in those
situations are now capped, except for small business
protesters.100
That said, critics point to abuse of the protest system in
particular contexts as causes for concern.
Specifically, there
are persistent complaints that abuse arises in the form of
“frivolous” protests, and the author has often heard calls for
imposing sanctions on firms that file frivolous protests.101
In
the 2009 report to Congress mentioned earlier, GAO responded to
questions from the House Armed Services Committee to address
frivolous protests filed in connection with DoD procurements.102
Compare Takota Corp.-Costs, B-299600 et al., 2007 CPD ¶ 171,
at 3 (Comp. Gen. Sept. 18, 2007)(finding no need to award
attorney fees because Coast Guard complied with regulations by
swiftly correcting solicitation) with Advanced Envtl. Solutions,
Inc.-Costs, B296136 et al., 2005 CPD ¶ 121 at 2-3 (Comp. Gen.
June 20, 2005)(finding attorney fees should be awarded because
agency unduly delayed taking corrective action on meritorious
protest).
99 Scanwell Lab., Inc. v. Shaffer, 424 F.2d 859, 864 (D.C. Cir.
1970).
100 31 U.S.C. § 3554 (c)(2).
101 Robert S. Metzger & Daniel A. Lyons, A Critical Reassessment
of the GAO Bid-Protest Mechanism, 6 WIS. L. REV. 1225, 1240
(2007); see also Jonathan R. Canton, Note, Bid Protests and
Procurement Reform: The Case for Leaving Well Enough Alone, 27
PUB. CON. L.J. 155, 172 (1997)(recounting proposed regulations
aimed at preventing frivolous protests).
102 Supra note 54, at 14.
98
25
GAO pointed out that the fact that a protest was denied or even
dismissed did not mean that it was frivolous; instead, GAO
expressed the view that only a protest filed in bad faith should
be viewed as frivolous.103
GAO reported that it did not
categorize protests as frivolous and therefore had no data on
the number of frivolous protests.104
It did point out that
contracting agencies rarely assert that protests are
frivolous.105
In a footnote, GAO reported that the last reported
decision noting that an agency characterized a protest as
frivolous had been in 1996 and that, in that case, the agency
subsequently acknowledged that the evaluation scheme used in the
protested procurement was flawed.106
In its 2009 report, GAO pointed to its practice of promptly
dismissing protests as indicating that there was no problem with
frivolous protests that needed to be solved.107
GAO also
expressed concern that any effort to impose sanctions on
frivolous protests (such as by imposing a fine or requiring the
protester to reimburse the government for costs incurred in
defending against the protest) would risk “the unintended
consequence of harming the federal procurement system by
discouraging participation in federal contracting and, in turn,
103
104
105
106
107
Id. at 13.
Id. at 12.
Id.
Id.
Id. at 2.
26
limiting competition.”108
GAO also pointed out that penalties
could not properly be imposed on “frivolous” protesters without
adding a new layer of litigation, in which GAO would need to
determine whether the protester had filed its protest in bad
faith.109
Besides the burden that would place on GAO,
distracting it from its focus on resolving protests as quickly
as possible, that new layer of litigation could impose
additional costs on agencies and protesters, and the burden of
those additional costs might fall disproportionately heavily on
small businesses and protesters not represented by counsel, who
may have protested in good faith, even if they acted with a
misunderstanding of the facts or the law.110
Those who allege that some protesters abuse of the system
sometimes point to one scenario in particular:
situations where
a service contractor has lost the competition for a follow-on
Id.
Id. at 13.
110 Id. ((U.S. GOV’T ACCOUNTABILITY OFFICE, B-401197, REPORT TO CONGRESS ON
BID PROTESTS INVOLVING DEFENSE PROCUREMENTS 13 (2009).))It is worth
noting that protesters have only limited information about what
happened during a procurement at the time that the strict time
limits require them to decide whether to file a protest. Many
agencies disclose to firms that lost competitions for contract
only the bare minimum required by law. See Federal Acquisition
Regulation section 15.506. It is often only through the protest
process that protesters (or at least their counsel) learn in
detail why they lost the competition for a contract. While
review of the full agency record may eventually demonstrate that
some initial protests are without merit, in other cases, review
of the entire file discloses that the protests are, indeed,
meritorious.
108
109
27
contract and then files a protest in order to continue working
during the period of the CICA stay.111
This concern may be
legitimate, although the extent of the problem is not clear.
The concern would be particularly great if (1) many protests
were found to have been filed by service-contract incumbents who
had lost the competitions for the follow-on contracts and (2)
their protests were completely without merit, but (3) GAO was so
slow in resolving the protests that the incumbent was able to
continue to perform well after its contract had been due to
expire.
The author is not aware of data supporting those three
statements.
The appropriate response, in any event, would
appear to be to press GAO to continue (or intensify) its efforts
to resolve the protests promptly – not to create a new round of
litigation about the imposition of sanctions, and certainly not
to limit or abolish vendors’ right to have an independent body
consider their claims of unlawful action by the contracting
agency.
The final category of alleged abuse of the protest system
is composed of sequential protests – that is, situations where a
protester loses a protest at GAO and then protests at the Court
11131
U.S.C. §3553(d)(3)(C); see also Keeton Corrections, Inc.,
v. United States, 59 Fed. Cl. 753, 754-55 (2007); Robert S.
Metzger & Daniel A. Lyons, A Critical Reassessment of the GAO
Bid-Protest Mechanism, 6 WIS. L. REV. 1225, 1239 (2007).
28
of Federal Claims.112
Presumably, the situation could be made to
sound worse by imagining a case in which a firm protests first
to the contracting agency, then to GAO, then to the Court of
Federal Claims, and finally to the Federal Circuit.113
This
scenario is, however, an instance of imagining the hypothetical,
with no evidence of the nightmarish pattern ever actually
occurring.114
Indeed, if it did occur, it is not clear that the
procurement would be disrupted, since there might be no CICA
stay at GAO,115 and the courts would certainly have discretion
not to impose a preliminary injunction.116
While there are some
protesters who start at GAO and then go to the Court of Federal
Claims,117 the numbers are so small (certainly fewer than 50 in a
year) and the evidence that the procurements have been held up
so thin (again, there is no automatic right to a stay at the
Court), that this cannot legitimately be seen as a significant
cost of the bid protest system.
In fact, the Court occasionally
11228
U.S.C. § 1491(b)(1)(granting the Court of Federal Claims
subject matter jurisdiction over bid protest claims); 5 U.S.C. §
706(2)(A)(establishing the standard of review for hearing bid
protest claims); see also Axiom Resource Management, Inc. v.
United States, 564 F.3d 1374, 1381 (Fed. Cir. 2009); Michael J.
Schaengold et al., Choice of Forum for Federal Government
Contract Bid Protests, 18 FED. CIR. B. J. 243, 318 (2009).
113
114
115
116
117
29
reaches a different outcome than did GAO,118 which suggests, if
nothing else, that the protest was not frivolous.
Another concern about the cost of the protest system
relates to what might be called its indirect impact.
Fear of
protests is often given as the explanation for contracting
officers’ preference for certain courses of action over
others.119
In particular, contracting officers are said to be
acting to avoid bid protests when they decide that a contract
should be awarded to the low-priced technically acceptable
(LPTA) proposal, rather than to allow a tradeoff.120
The author
has never seen data that would indicate how often contracting
officers actually decide to name LPTA as the award criterion in
a solicitation for this reason, nor how often source selection
officials avoid making tradeoffs in the award decision, even
when permitted by the terms of the solicitation, in order to
avoid protests.
If the phenomenon is common, it is unfortunate,
since discretion to make tradeoffs is a positive option in the
U.S. procurement system.
Similarly, the author has heard for many years that some
contracting officers prefer to make award based on initial
proposals, rather than to conduct discussions, because they fear
that conducting discussions with offerors will increase the
118
119
120
30
likelihood of a bid protest, and increase the protester’s
chances of prevailing, if a protest is filed.
Again, that would
represent a loss, since the ability to conduct discussions with
offerors is a good feature of our acquisition system, which few
systems around the world have.121
As with excessive reliance on
LPTA award criteria, we lack data about how common it is for
contracting officers to award based on initial proposals merely
to reduce the likelihood of a successful protest.
In both
situations, the author is skeptical that there is any good
reason to try to “protest-proof” an acquisition in this way,
especially in light of how rare protests are, and how
exceedingly rare successful protests are.
Moreover, neither
using LPTA as the basis for award, nor making award based on
initial proposals, without conduct discussions, will, in fact,
ensure that no protest will be held, as GAO and Court of Federal
Claims decisions ruling on protests of LPTA awards and initialproposal awards will testify.122
That said, it must be
recognized that in both areas, and potentially in others as
well, it is quite possible that the fear of protests – whether
justifiable or not – is harming the acquisition system by
driving bad decisions.
To mitigate that harm, efforts need to
be made to improve the knowledge of contracting officers about
121
122
31
the rarity of protests and the fact that making LPTA or initialproposals awards will not prevent protests, as well as the
benefit to the government of using tradeoffs and discussions as
means to obtain a better deal for the taxpayers.
VI.
BENEFITS OF THE PROTEST PROCESS
As noted above, countries around the world are developing
bid protest systems, and such systems have become, or are fast
becoming, part of the norm for good government in the
acquisition arena.123
That can be attributed to several benefits
associated with protests.
First, protests introduce a relatively low-cost form of
accountability into the acquisition system by providing
disgruntled participants a forum for airing their complaints.124
Protesting firms decide which procurements are to be
investigated – if no one protests, neither GAO nor the Court of
Federal Claims will look into the procurement; if someone does
protest, they will (at least if the protest passes the
procedural hurdles, such as timeliness).125
While reliance on
audits by government officials would also provide accountability
into the workings of the procurement system, it may be more
efficient to focus on the procurements where a participant is
dissatisfied by the government agency’s conduct, and that is
123
124
125
32
what the “private attorney general” model of a protest
provides.126
In blunt terms, if no one is dissatisfied with the
way the government conducted a procurement, it may not be a wise
use of auditors’ time to investigate it.
Second, by being directly responsive to participants’
complaints, protests can increase potential bidders’ confidence
in the integrity of the procurement process, and therefore lead
more players to participate, thus increasing competition.
Increasing competition, in turn, can translate into bidders
offering lower prices, higher quality, or both, to the
contracting agency.127
Third, protests can increase the public’s confidence in the
integrity of the public procurement process.
While the public
only rarely focuses on public contracting, having the protest
process mentioned in the press—as happened when The Boeing
Company successfully protested the Air Force’s award of the
tanker contract to Northrop Grumman—may, it can be hoped, raise
the public’s trust in the fairness of the government’s
acquisition system and the way it spends taxpayer funds.128
Fourth, because protests are a known avenue for complaints,
their availability empowers those in contracting agencies who
face pressure to act improperly.
Thus, if a contracting officer
126
127
128
The Boeing Company, B-311344 et seq., June 18, 2008.
33
is pressed by users within the agency to award a sole-source
contract to a favored firm, the contracting officer—who may lack
the bureaucratic clout to resist the pressure—can point to the
risk of a successful protest as the reason to follow the
statutory and regulatory requirements for competition.
Fifth, protest decisions, because they are public, and have
been released publicly since GAO issued the first one in 1926,129
provide a high level of transparency into what is happening in
the federal procurement system.
While, in theory, databases
such as the federal procurement data system should provide
transparency into the system,130 protests can often provide more
useful information than databases.
This is particularly the
case where protests demonstrate how problematic certain issues
are.
For example, when GAO sustained a significant number of
protests challenging the way agencies were conducting
public/private competitions under OMB Circular A-76 in the
1990s, that highlighted the importance of improving the way
those competitions were conducted, ultimately leading to
revisions to the Circular as well as the creation of the
congressionally-chartered Commercial Activities Panel.131
129
130
Commercial Activities Panel, Improving the Sourcing Decisions
of the Government: Final Report, April 2002. Appendix D of the
report summarizes GAO bid protest decisions arising from
public/private competitions under OMB Circular A-76.
131
34
Similarly, it was GAO’s sustaining of a number of protests
alleging organizational conflicts of interest that focused
attention with the procurement world on this area, and
ultimately led to congressional and regulatory action.132
Finally, the fact that protest decisions are published and
widely read by practitioners brings an additional benefit:
they
provide guidance, particularly to agency counsel and attorneys
representing potential protesters, as well as, of course, to
their clients.
for decades:
To give just one example, which has been true
any corporate counsel who follows GAO bid protest
decisions knows how strictly GAO applies the “late is late”
rule, so that counsel will ensure that people in the company
appreciate the importance of getting bids in on time.133
VII. CONCLUSION: THE COSTS ARE OVERSTATED, AND THE BENEFITS
OUTWEIGH THEM
As explained above, the costs that bid protests impose on
the acquisition system are often misunderstood and therefore
overstated, in terms of the frequency of protests, the length of
time that they last, and the risk that the agency’s choice of
contractor will be overturned in the process.134
Moreover, the
benefits of the protest system may not be fully appreciated, as
See Daniel I. Gordon, Organizational Conflicts of Interest: A
Growing Integrity Challenge, 35 PUB. CONT. L.J. 1 (2005), and
cases cited therein.
132
133
134
35
is the fact that the United States is required by its
international trade agreements to have a protest system.135
Whatever costs protests impose on the procurement system are
outweighed, at least in the author’s view, by the benefits that
protests bring, in terms of transparency, accountability,
education, and protection of the integrity of the U.S. federal
acquisition system.
135
36