The government contracting process includes opportunities for rejected bidders to protest contracting agency decisions triggering a review and administrative hearing by the U.S. Government Accountability Office (GAO). The basis for the protest must be that the contracting agency did not follow the process it established for itself. Protests involve a small percentage of all source selections but when sustained, their impact can be significant. Reductions in U.S. spending are likely to trigger more of them.
A study supported by the Research Acquisition Program at the Naval Postgraduate School identifies challenges associated with the bid protest process, including GAO’s role. The study analyzed GAO decisions issued in calendar years 2001 through 2009 for bid protests of Department of Defense source selections. It included information from databases such as Fedmine and interviews with over fifty members of the acquisition community. (Study: Understanding and Mitigating Protests of Department of Defense Acquisition Contracts)
The costs of protests include the resources expended in responding by the contracting agency and GAO and delays in awarding and executing contracts. Delays can impact defense policy and national security. Business and government organizations have human and financial capital in limbo pending resolution of the protest.
The benefits of protests include more competitive and accountable procurements. Avoiding protests incentivizes contracting agencies to design and operate source selection processes that 1) are fair and transparent, and 2) minimize the error of selecting an inappropriate vendor. By allowing bid protests, the government also incentivizes interested third parties, those who do not win contracts for which they competed, to monitor the source selection process.
Conundrum one: incentivizing third-parties admits opportunism. Rejected offerors can lodge protests for reasons other than obtaining corrective actions, benefiting the protestor at the government’s expense. Contractor executives and bid protest attorneys report that they will protest to:
- Win and thereby be competitive in a new selection or to recover costs;
- Send the agency a message, be heard, or seek justice, even against advice of counsel that the protest is unlikely to be sustained and, if it is sustained, the protestor is unlikely to become the eventual winner;
- Obtain information to help them improve their future bids;
- Obtain competitive intelligence;
- Hurt the winner by delaying the award;
- Retain a revenue stream for the duration of the protest at GAO (in the case of an incumbent who loses);
- Demonstrate resolve to board members or senior executives that everything that can be done to pursue a contract is being done;
- Be granted work under the contract, either by the agency or by the awardee; and
- Improve the protestor’s chances of getting future contracts.
Only the first three of these serve a public purpose. The others result from competitive pressures in the marketplace. As a result, filing and defending against bid protests have become routine features of doing business with the government.
Conundrum two: speed, which makes the bid protest process productive, induces unproductive behavior. Time pressure associated with GAO’s mandated deadline for filing protests induces rejected offerors to use a shotgun approach in making claims. As a bid protest attorney said.
You have five days to file. You haven’t seen the record. You have to raise an issue to preserve it. If you don’t raise it during that 5-day period, you can’t file it. You’re doing it blindly. Your strategy is to say: “Here are the things that could be issues. But we don’t want to waive any issues, which you do, in effect, if you don’t raise it initially.” The ability to file an amended protest helps a bit. But you risk getting caught in a procedural argument: We told you about this in the debrief and you should have known about it from that or other sources but didn’t file the claim initially, so you cannot raise it later. Why take on the procedural argument?
Naturally, GAO attorneys prefer that frustrated offerors not employ the shotgun approach.
Conundrum three: perceptions beyond the control of GAO influence decisions by members of the acquisition community. GAO maintains that it operates on professional principles, immune from political influence by members of Congress. People in the business world do not believe GAO can be immune. A legal practitioner at a prime contractor said, “GAO tries to keep the politics out of it. I don’t know how they do it when their bosses in Congress are calling them in to testify at hearings.”
Businesses seek congressional assistance in securing a contract or in protesting failure to win. GAO believes members of Congress like being able to direct their constituents to GAO for a neutral hearing, rather than having to do battle over the matter with another member. Nonetheless, as elected officials are wont to do, they will take credit for GAO decisions that favor their constituents. They may not assert that they exerted influence successfully at GAO. They only need say that they “worked to support their constituent,” which might have meant writing a letter asking for GAO’s prompt attention. The damage to perceptions of GAO’s professionalism is done.
Conundrum four: the bid protest process exists to police and to educate the acquisition community, purposes that can conflict. GAO attorneys discriminate cases without merit from legitimate protests—those that point out an error in a contracting agency’s processes. They also differentiate among legitimate claims those that are material—meaning the outcome of the source selection might have been different but for the agency’s error—from those that are immaterial. In that sense, GAO, in effect, applies a standard of reasonableness in its bid protest decisions and works diligently to maintain that standard.
However, members of the acquisitions community on both the government and the business side believe GAO’s standards of reasonableness and materiality have eroded, encouraging more protestors to file protests and more protests to involve immaterial claims. For example, a senior agency official said,
Sometimes, we weren’t smart enough to put a value on something in our initial RFP, engineers catch it, and we amend the RFP, although most amendments fix things that aren’t profound. Still, this exposes us to a bid protest. We could cancel the RFP and start over, but that also exposes us to a protest.
The agency wants GAO to defer to it in this situation. GAO disagrees that its standard of reasonableness has declined. An independent legal analysis might confirm that it has not. What matters, however, is the perception that it has.
Similarly, some agencies and some legal practitioners believe GAO exercises discretion in the areas where it chooses to rule and on the direction of its rulings by, as a bid protest attorney put it, ignoring facts in one case that are the same as in another case and should be determinative in both. When a new area of dispute arises, such as evaluating organizational conflicts of interest in the early 2000’s, GAO will find merit in many claims and begin sustaining quite a few until, like judicial precedent, the legal community obtains more certainty about the likelihood of certain claims prevailing. Then the number of those claims trails off. ’
For good or ill, GAO’s pursuit of its educational role can confound its pursuit of its policing role, reinforcing a perception of inconsistency. Here is an example from a bid protest attorney of strategic behavior that results:
GAO depends on what businesses bring to it in terms of what it can educate the acquisitions workforce about. I may have a past performance argument that’s great, but GAO has sustained three of 150 past performance claims, so it won’t target this. If I bring something new to GAO, a little gem of an issue [a claim based upon a detail in the execution of a discussion], that might get their attention as something attractive that allows them to educate the acquisition workforce. GAO doesn’t care about the protestor in this case; it cares more about announcing law to the acquisitions community. GAO would not agree with me. GAO will say: absence of adequate documentation, lack of meaningful discussion or unequal discussion, organizational conflicts of interest: in these hot button issues, if you come to the door with that issue, you’ll win. So my argument doesn’t apply over all issues.
Conundrum five: protestors expect GAO to operate like a U.S. Constitution Article 3 court but GAO’s bid protest process is an alternative dispute resolution mechanism (ADR). “Alternative dispute resolution works,” said one bid-protest attorney. It provides a valuable, inexpensive way of resolving disputes, especially compared to the judicial process. Another said, “It limits the time you are spending a client’s money. GAO helps the sanity of the acquisitions community.”
The process at GAO looks like nonbinding arbitration, although it does not fit neatly into any traditional model of ADR. Arbitration, chosen primarily for its finality and efficiency, is more about consistency—within limits. Something akin to a precedent can emerge but not as rigorous a body of precedent and law governing discovery and evidence as an Article 3 court. Not surprisingly, some members of the acquisition community expect GAO to follow precedent but perceive that it does not.
To obtain consistency, a GAO assistant director reviews the work of the drafting attorney. The associate general counsel signs every decision. Of thirty GAO attorneys, half have been at GAO for over twenty years, affording them considerable experience. They reviewed five years of data and found no significant change in their standard of reasonableness. A GAO executive believes the 100-day statutory requirement for issuing decisions forces GAO to be highly systematic.
Formality at GAO has increased. Prior to 1984 when GAO received statutory authority for deciding bid protests under the Competition in Contracting Act, GAO did not hold hearings as a process for fact-finding under oath. It held conferences where parties presented arguments. GAO now holds hearings—not under oath, so no one can be held liable for perjury, but under the False Statement Statutes, which can lead to one year in jail and a fine. A process designed to resolve conflicts in a quasi-adversarial setting has some of the trappings of ADR and some of common law courts. The more GAO acts like an Article 3 court, the more it risks being distrusted by those who hold it to the standards they apply to a court.
Conundrum six: an agency taking corrective action in response to GAO’s sustained protest can undermine relationships with vendors. Unlike GAO’s 100-day deadline to make bid protest decisions, agencies have no deadline for implementing corrective actions. The agency retakes control and might not resolicit for a year. Meantime, the awardee, who cannot recover the costs of preparing its proposal, has either distributed the members of its bidding team to other jobs, or it is expending resources on keeping the team together, just as it must keep its subcontractors together. If the protestor is an incumbent and the agency resolicits, the protestor can get more than 100 days of continuing work and revenue.
What’s to be done? For some of these conundrums, GAO can only soldier on and manage through them. For example, there’s no way to communicate to business executives that GAO decision-makers have a sufficient degree of independence from Congress, just as there’s no way to stop people elected to Congress from taking credit for decisions taken on their watch for which they are not responsible. Of course, best practice in dispute resolution would be to resolve the dispute before it gets to GAO because parties at the lowest level will have the best information, be able to respond most quickly, and be more likely to focus on underlying interests. That would be an agency review.
Procurement agencies have not been aggressive in implementing alternative dispute resolution systems. The Defense Logistics Agency has a well-developed process for agency level reviews: from 2004-2009, DLA had a lower rate of protests at GAO than the army, navy, air force, or DOD. Whether this will work with selections more complex than those typical at DLA is unclear. In any case, to make agency level reviews more credible, agencies should use staff trained in negotiation and mediation, preferably using parties different from those engaged in the initial decisions.
Charging a fee for protesting at GAO might mitigate third-party opportunism, but it also could discourage access and the incentives for third-party’s to monitor the contracting process. GAO could track in the government’s past performance records protests found to be without merit for agency’s to consider. This makes transparent something that vendor’s believe already occurs.
Another procedural device is to record debriefings. Recording debriefings supports GAO’s job as third party intervener. A contracting official can say the same thing in debriefings to two different protestors. Depending on the attitudes and interests of the protestors, one will find the contracting official unresponsive and the other will not. GAO can judge.
GAO should monitor and be transparent about its standards of materiality and reasonableness and the processes by which they are assured. A higher standard might be appropriate for incumbents, either in terms of agencies providing a rationale for changing suppliers or in terms of GAO’s standard of the reasonableness of an incumbent’s claim. If an agency has had experience with an incumbent and still believes a new contractor is preferable, GAO could afford greater deference to the agency.
A more aggressive recommendation is to require agencies who re-compete a contract—as a result of taking corrective action or as a result of a GAO recommendation to amend or reissue the request for proposal—to do so within a specified timeframe, to publish why the timeframe can not be met, or to request an exemption from the limit. This assumes that Congress or Pentagon decision-makers are in the best position to judge the amount of time required to re-assemble the selection team, whose members typically will have taken up other tasks once an award has been announced and GAO processes a protest. Monitoring the amount of time required with guidelines issued by the Office of the Secretary of Defense might be sufficient to secure agency attention to crafting the most efficient responses to sustained protests.