The volume of bid protests is drawing more attention, but will the remedies make things worse? Former PSC President Stan Soloway offers some alternatives to process that can protect bidders and improve the procurement process.
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.
WT Insider Report Debriefings and Bid Protests
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 And most are settled or withdrawn well before they reach the decision point, usually when agencies take corrective action.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.
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