Will new NDAA make protests worse, not better?

Changes to the bid protest process in the 2018 National Defense Authorization Act seem like no-brainers on the surface and especially if you believe too many companies are filing protests with the Government Accountability Office.

The protest provisions in the 2018 NDAA dictate that companies will need to reimburse the Defense Department for the costs of a protest if the company loses the bid protest. The company also needs to have more than $100 million in revenue. This is to protect small businesses who may not file a protest because they can’t afford to pay the costs if they lose.

Congress’ concern is that too many companies are filing frivolous protests. Many believe that when incumbents lose they file a protest to extend the time they can hold the contract and bill the government. Because the government can’t move forward with the new contract until the protest is resolved.

But some provisions might create new problems of their own as there is an odd caveat in the law. In order for DOD to qualify for a reimbursement, GAO must have denied all elements of the protest.

How “all elements” is defined is yet to be determined. I’ve seen many protest decisions where GAO acknowledges a point raised by a protester, but the point isn’t enough to overturn the award decision. I guess that one wouldn’t get reimbursement.

There also are circumstances where the protester might be right but they would have lost anyway because there was another bidder who would have won instead.

The provisions also might open up the gates for more litigation, said attorney Paul Khoury at law firm WileyRein.

He questions how accurately DOD will be able to document their costs.

Companies commonly are reimbursed for their costs when they successfully protest a contract award. But companies generally have outside attorneys, who submit bills to their clients. The hours are documented.

These are extra costs companies bear. They are not part of their regular spending or budgets.

“DOD is spending the same amount of money whether or not their lawyers are working on a protest,” Khoury said.

Originally there were proposals that included reimbursement of GAO’s costs, but GAO made it clear they didn’t have a process for tracking costs on a per protest basis.

“This is going to open more litigation and challenges to DOD’s costs,” he said.

Khoury predicted that after filing a protest and receiving the agency report in response, companies will ask for an outcome prediction analysis from GAO. If GAO indicates that they will rule against the company, the company likely will withdraw the protest rather than risk the extra costs of reimbursement, he said.

It is also worth noting that last year during the run-up of the 2017 NDAA, Congress also wanted to do something about bid protests but felt they didn’t have enough data. Congress instead authorized DOD to hire an independent research firm to study protests and issue a report.

Congress required a long list of elements they wanted studied, including how procurements are developed to avoid protests, quality of pre-proposal discussions and post award debriefings, and how companies decide whether or not to protest.

The Rand Corp. is preparing a study and draft reports are circulating, Khoury said.

With the 2018 NDAA they seem to have forgotten that and moved ahead before getting the report.

But for the 2018 NDAA, Congress chose to move forward without any of that information. It is as if they said, “Let’s not wait for the data,” Khoury said.

There are some positives in the 2018 NDAA, namely that Congress is putting pressure on DOD to improve the quality of debriefings.

Poor debriefings are commonly cited as reasons companies file protests. In our 2016 Insider Report on bid protests and debriefings, 53 percent of respondents said they filed a protest so they could learn more about why their bid was unsuccessful. Fifty-five percent said that debriefings were getting worse while only 1.3 percent said they were improving. The rest said the quality of debriefings was staying about the same.

The 2018 NDAA includes a section (Sec. 822) on improving post award debriefings. In fact, the law calls them “rights.”

Among the new requirements:

• DOD must provide a written source selection determination, redacted as necessary, to the losing bidder.
• Losing bidders also can request unredacted versions that will only be seen by outside counsel.
• Written and oral debriefings are required for awards worth more than $10 million.
• Losing bidders also have two days to submit follow-up questions after a debriefing.
• The five-day post-debriefing period doesn’t start until the day DOD delivers its written responses.

“This is very good,” Khoury said.

My opinion? If DOD follows through and really does improve the debriefings, it will have a bigger impact on reducing the number of bid protests than threatening companies with a reimbursement requirement when they lose.