WT Business Beat

By Nick Wakeman

Blog archive
Nick Wakeman

Are bid protest fears overblown? Dan Gordon thinks so

Are bid protests a good thing? That’s the central question of a new paper by a George Washington University law professor and former Obama administration official.

Dan Gordon, associate dean for government procurement law studies at GW and former administrator of the Office of Federal Procurement Policy, comes to the conclusion that the costs of bid protests are overstated while the benefits are under appreciated.

Part of Gordon’s lengthy paper addresses what he calls misperceptions about bid protests statistics, particularly the view that protests are very common and have become a business tactic.

He argues that the number of protests is dwarfed by the number of contracts awarded.

Gordon takes issue with the way the Government Accountability Office counts protests. A contract can have pre-award protests and post award protests, as well as supplemental filings. Each filing is counted as a protest, even though they all involve the same contract.

He uses GAO numbers to create the ratio that there are 1.6 filings for each protested procurement, so in 2008, GAO handled 1,652 protests involving 1,027 procurements. In 2011, GAO handled 2,353 protests involving 1,470 procurements.

He also extrapolates from some Air Force contract numbers to estimate that there 200,000 contracts across the government each year.

Using that number, Gordon calculates that only 0.51 percent of contracts were protested in 2008, and 0.74 percent were protested in 2011.

Gordon uses these numbers to argue that protests are rare. He has a point, but I think that he too quickly dismisses the significance that there was a 70 percent increase in protests between 2006 and 2011.

Gordon does some further analysis where he tracks the number of protests against the value of all contracts:

In fiscal 2006, there were 1.92 protests for each billion dollars in federal contracts. By 2011, there were 2.74 protests per billion.

But instead of being alarmed at the rate of increase, Gordon argues that there are still fewer than three protests for every billion dollars in contracts.

Gordon does present some pretty compelling data from GAO that very few protests are actually sustained, and that it is rare for a protester to go on and win the contract. Using numbers from 2010, Gordon says GAO only sustained protests involving 45 procurements. Of those 45, only eight contracts went on to be won by a protester, though some award decisions are still being made.

Stats like that beg the question, why protest?

Gordon also looks at GAO’s “effectiveness rate,” which combines the number of sustained protests with the number of agencies taking a voluntary corrective action before GAO makes a decision. That effectiveness rate is 42 percent.

But the ultimate outcomes of those voluntary actions aren’t tracked by GAO, so there is no way to know if the protester ultimately won the contract.

A factor that Gordon doesn’t explore, and for which data likely doesn’t exist, is when the winning contractor and the protestor work something out, and the protesting company joins the winning company’s team.

We’ve seen this on some large contracts, such as when Science Applications International Corp. made room for Northrop Grumman on a $2.5 billion State Department contract. That was in 2011.

Anecdotally, we hear that happens with some frequency. I recall seeing some data about this at a conference sometime in the last year, but I can’t find it. If someone has that info, please share.

An interesting finding of Gordon’s analysis is that bid protests really have little impact on the government in terms of delays. Few protests take the entire 100 days that GAO has to investigate and render a decision. Most decisions are made within 30 days.

The only contracts with significant delays are ones that are sustained, and the recommendation from GAO compels the agency to reopen the bidding and award decision process. Those delays are justified, according to Gordon, because GAO has found a violation of procurement laws and regulations.

I found Gordon’s argument that the benefits of protests outweigh the negatives to be compelling. He describes protests as a low-cost form of accountability, and says that they can increase the public confidence in the procurement system.

The current system also offers transparency because GAO publishes its protest decisions, and those decisions also provide guidance to contractors and agencies, particularly their legal teams.

I agree with most of Gordon’s points except for where he too quickly dismisses the increasing number. The fact that protests are growing at a faster rate than the market overall indicates a problem to me.

But read his paper and you be the judge.

Posted by Nick Wakeman on Jun 13, 2013 at 7:24 PM


Reader Comments

Please post your comments here. Comments are moderated, so they may not appear immediately after submitting. We will not post comments that we consider abusive or off-topic.

Please type the letters/numbers you see above

What is your e-mail address?

My e-mail address is:

Do you have a password?

Forgot your password? Click here
close
SEARCH
contracts DB

Trending

  • Dive into our Contract Award database

    In an exclusive for WT Insider members, we are collecting all of the contract awards we cover into a database that you can sort by contractor, agency, value and other parameters. You can also download it into a spreadsheet. Read More

  • Is SBA MIA on contractor fraud? Nick Wakeman

    Editor Nick Wakeman explores the puzzle of why SBA has been so silent on the latest contractor fraud scandal when it has been so quick to act in other cases. Read More

Webcasts

  • How Do You Support the Project Lifecycle?

    How do best-in-class project-based companies create and actively mature successful organizations? They find the right mix of people, processes and tools that enable them to effectively manage the project lifecycle. REGISTER for this webinar to hear how properly managing the cycle of capture, bid, accounting, execution, IPM and analysis will allow you to better manage your programs to stay on scope, schedule and budget. Learn More!

  • Sequestration, LPTA and the Top 100

    Join Washington Technology’s Editor-in-Chief Nick Wakeman as he analyzes the annual Top 100 list and reveals critical insights into how market trends have impacted its composition. You'll learn what movements of individual companies means and how the market overall is being impacted by the current budget environment, how the Top 100 rankings reflect the major trends in the market today and how the biggest companies in the market are adapting to today’s competitive environment. Learn More!