Eliminating Bid Protests

[Vern Edwards]

I am considering a proposal to eliminate bid protests. I am thinking of proposing that Congress eliminate GAO and COFC bid protests entirely. I am thinking of arguing that the annual cost to the taxpayers in terms of the effects on government operations is too great and that the benefits of the protest system are not worth it. I have been prompted to pursue this course by an article written by former Secretary of Defense Robert M. Gates in the November/December 2023 issue of Foreign Affairs, entitled, "The Dysfunctional Superpower," in which he wrote of the need to reform defense acquisition processes.

At present, based on 2,000 GAO decisions per fiscal year, I guesstimate that the government's annual GAO bid protest process cost is upward of $100,000,000 a year, based on an average of $50,000 per protest, including the cost of the GAO's in-house operation. Some colleagues have guesstimated much higher costs. That number does not include the costs of procurement delays and delays of government operations, which costs would be much, much higher. The benefits of the current protest system are generally intangible, unmeasurable in dollars, and unverifiable.

The objective would be to eliminate CICA stays and court orders and injunctions. In place of bid protests I'm thinking of suggesting that complaints about award decisions be handled as claims under the Contract Disputes Act, with the claimant being permitted to seek only recovery of proposal preparation costs up to a congressionally-specified limit set as a percentage of contract award value. CO decisions on such claims would be appealable to the cognizant board of contract appeals or to the COFC if the parties cannot agree to a settlement. Any costs awarded would be paid out of the agency budget.

In place of the current protest system, agency heads would be required to establish formal and formally-documented in-house pre-award quality assurance reviews of prospective source selection decisions for procurements in which the award value is in excess of $100,000,000. The reviews would be limited to the proposal evaluation and decision-making processes. The reviews would have to be independent of the contracting office that conducted the process and made the award decision and would be subject to approval by the agency head or the HCA.

Complaints about the terms of a solicitation would have to be submitted to the agency head or the HCA within 10 days after publication of the solicitation. The agency head or the HCA would have the final say and would have to publish a complaint resolution letter at SAM.

Any indication of criminal misconduct by government personnel would have to be referred to the Department of Justice.

The underlying idea is that agency heads and their subordinates should be responsible for the quality of their business operations and decisions, not the GAO and not the COFC. Given the state of the world and our government's dependence on contractors and procurements, government operations must no longer be delayed or derailed by the protests of disappointed companies.

I am interested in opinions about this idea, but I will not respond in this forum.

[Oyster]

Vern, that sounds like a fascinating paper, regardless of the inevitable pushback against it.  I've noticed that even a sensible tweak to the protest system, such as eliminating the "two bites at the apple" protests, meets furious resistance from the private sector (and private GovCon attorneys).  Since a private sector company is always on the receiving end of a serial protest, you would think that the private sector would be more moderate in its stance in that regard.  I believe the private sector GovCon attorneys (who have a vested interest in the status quo) lead the charge against any change to the system.  

 

It is interesting to note that our protest system shields certain actions from protests, but not others.  The main example of course being task/delivery orders that fall under the FASA thresholds of $10M/$25M.  It seems sort of odd to say that a $24M task order off a DOD IDIQ contract can be shielded from protests (except scope/period/max value), but a $2K procurement off a federal supply schedule can be protested at GAO or the COFC (or both, if the protester starts at GAO and then later files again at the COFC).   In other words, we *have* done what you are proposing to do on a smaller scale in the IDIQ context.  Has that resulted in some sort of crisis/lack of competition in the IDIQ realm?  No.  I think that fact strengthens your point.  

 

I'm not sure if I would peg the average cost of a protest to GAO's inflated B-numbers.  Frankly, I wish their annual report to Congress was more transparent for the uninitiated.  Only those who understand their B-Number methodology know that their annual report is inflated.  For example, I can only find 289 published protest decisions from GAO for FY23.  I can find about 100 COFC protest decisions for that same FY, and 3 from the CAFC. 

 

That said, I think it is an excellent (and timely) topic, and I really look forward to reading it.   

[Oyster]

One additional point on protest costs.  It would be helpful to know how much NIH ultimately paid out to protesters under the two CIO-SP4 protest decisions that were sustained in FY23: Systems Plus and Phoenix Data.  Phoenix Data involved 27 protesters (not represented by counsel) and 28 B-numbers, whereas Systems Plus involved 64 protesters (represented by counsel) and 98 B-numbers.  Both decisions "recommended" that NIH pay reasonable costs including attorneys' fees.  I'd be curious to know if a FOIA requestor could get at least the total bill that was paid (with taxpayer dollars) in those two sustained protests (of the same procurement).  I note that a lot of the protesters in System Plus were represented by some of the largest law firms out there.  It would be helpful to know how much of the protest costs were actually borne by the Government, and how much was not reimbursed.  The data from that one case could be illuminating.

[dsmith101abn]

I think it’s a great idea but would be super hard to implement. Maybe scale it down as a phased approach. By that I mean start with a no GAO protests against things the Government isn’t great at, like IT procurements first and then move on from there. I don’t have a roadmap but that would be the idea. Final phase would be eliminate GAO protests.

Also, since GAO recommends the Government cover the protesters costs if the Government loses a protest, maybe GAO also recommends the denied protester covers the Governments cost, inclusive of delay costs, etc. maybe that’s already a thing or just makes further litigation costs I dono just typing outload loud if you will as an alternative.

[Retreadfed]

Vern, some matters for consideration:

How would your proposed process address those rare situations such as those presented by the Darlene Druyun and Boeing scandal where it took years for contractors hurt by her to find out the truth?

If you convert protests to claims, would you exempt such claims from the Equal Access to Justice Act?

If the object of the changes is to make agencies responsible for their procurements, would you eliminate DoJ from the process before the COFC?

For consistency, would you make the standard of review the same for claim appeals submitted to the cognizant appeals board and COFC?  If so, what would that standard be?

Would an appeal to the CAFC be permitted under this process?  If so, would you eliminate DoJ from that process?

As an ancillary matter, how would your system deal with size and status protests to the SBA, and possibly the COFC?

If you make protests subject to the CDA, would you make the CDA time lines applicable to such claims and would you establish a time within which a decision has to be made by the appeals board or COFC?  

[formerfed]

Vern, I really like it.  My only suggestion is adding some timeframe for the HCA to respond to solicitation terms complaints.  It certainly would be awkward to acknowledge merits of a complaint after the solicitation closes as well.

[C Culham]

Thoughts in no particular order.... 

 

First the subject.  As I read the subject line and the  original post the idea is not to eliminate the ability to protest but to change how to and the venue(s) to do so.  A protest renamed?

 

Unfunded or funded mandate?  Agency funding would need to be increased to handle the administrative efforts under the change and establish the recovery fund.  Would the change establish additional funds or keep agency funding the same?

 

Quality assurance reviews.  Would there be a set time limit for these reviews?  Large procurements have a lenghty PALT as it is.

 

Benefits -The benefits seem one sided advantage government. Yet an element of private industry no doubt thinks there is benefit to have the ability to protest. It is they that will be the hurdle to clear for a change to occur unless they are convinced something is in it for them.  Agencies do screw up sometimes.

 

Currently protests can be made to the agency.  The private sector may view the change as just another effort to allow agencies to kick them aside.  Examples are the current ability to protest to agency and fair opportunity ombudsman, two approaches that agency's have little policy and procedure regarding.

 

Somewhere hidden in the idea is the gem, a carrot/stick, which I like.   If I am reading right complaint to agency, they solve the suggested inconsistency at some level during solicitation process and all are happy....done.  All move on.  Complaint to agency, they don't solve and there is no allowance to delay during complaint process, like a dispute responsibility of all to just move forward.  However contractor has right to what I will call a post solicitation appeal and if successful agency pays.  Seems like an agency would take a more serious approach to solving as they should already be doing.

 

Hope the thoughts make some sense and are helpful. 

 

[Voyager]

On 11/20/2023 at 9:10 AM, Vern Edwards said:

I am thinking of arguing that the annual cost to the taxpayers in terms of the effects on government operations is too great and that the benefits of the protest system are not worth it.

Vern, you and I both know that moral hazard will doom most cost arguments in Congress.  It's how we got here.  Speak instead to mission detriment and mission failures.  Be specific.  Research - as intensively as you have ever researched - the actual occurrences, agency-by-agency, DOD component-by-component.  Report exactly what the opportunity cost was for every sustained protest in terms of decreased effectiveness or lethality.  As for the denied protests, shine a light of truth on what exactly happened in the sole-source negotiations of each POP extension required due to a protest period delay.  Based on the introduction I read to the Foreign Affairs article (below), recommend you begin with DTRA and NNSA acquisitions.  Surely a boondoggle or two will come up if you survey the right people.  Retirees of these agencies can speak to anything unclassified.

Quote

The United States now confronts graver threats to its security than it has in decades, perhaps ever. Never before has it faced four allied antagonists at the same time—Russia, China, North Korea, and Iran—whose collective nuclear arsenal could within a few years be nearly double the size of its own. Not since the Korean War has the United States had to contend with powerful military rivals in both Europe and Asia. And no one alive can remember a time when an adversary had as much economic, scientific, technological, and military power as China does today.

Congressional decisions live and die by public opinion, and it is sad but true that public opinion now operates on emotion rather than reason.  As you are an expert writer, I recommend you know your audience.  They're not frugal.

[Don Mansfield]

Here are my thoughts:

1. I am in favor of removing the GAO from the bid protest process. I've always held this opinion. The Legislative Branch has no business reviewing individual solicitations and award decisions of agencies.

2. I am in favor of a venue like an agency board of contract appeals that an interested party can appeal to after receiving a decision on a protest from the contracting officer--like the disputes process.

3. I am not in favor of eliminating the COFC's bid protest jurisdiction. From a balance of powers perspective, I think that executive branch decisions regarding how it plans to conduct an acquisition and how it chooses a contractor should be subject to judicial review. 

[bob7947]

Vern:

I have one comment.  You suggest

Quote

CO decisions on such claims would be appealable to the cognizant board of contract appeals or to the COFC. 

I suggest that the CO decision get one oversight appeal and that be limited to the appropriate board of contract appeals.  You get the COFC out of the protest process.  Don't let them back in at the end.  With the COFC you get the CAFC and SCOTUS.

[Vern Edwards]

Thanks to all for the opinions and advice.

@Voyager

22 hours ago, Voyager said:

Speak instead to mission detriment and mission failures.  Be specific. 

Right on! Thank you very much. I will.

I will publish my piece in The Nash & Cibinic Report, and with Thomson Reuter's permission I will provide it to Bob for release here.

Happy Holidays to all.

Vern

[Jamaal Valentine]

On 11/20/2023 at 6:10 AM, Vern Edwards said:

In place of the current protest system, agency heads would be required to establish formal and formally-documented in-house pre-award quality assurance reviews of prospective source selection decisions for procurements in which the award value is in excess of $100,000,000. The reviews would be limited to the proposal evaluation and decision-making processes. The reviews would have to be independent of the contracting office that conducted the process and made the award decision and would be subject to approval by the agency head or the HCA.

Rather than limiting solicitation challenges to the agency head or HCA, I would like the CO to be an option similar to your revised procedures for protests against the award decision. If the protestor and CO can’t reach an agreement then the agency head or HCA implement the revised process above.

 Happy holidays!

[Jamaal Valentine]

On 11/21/2023 at 8:49 AM, Voyager said:

Speak instead to mission detriment and mission failures.

This is great advice and should be coupled with the financial impact to the taxpayer. Considering all of the voices of key customers will lead to a more persuasive advocacy. For example, taxpayers may not see the current protest scheme as something they would be willing to pay for if they had an accurate idea of what they were getting in return.

[formerfed]

1 hour ago, Jamaal Valentine said:

Rather than limiting solicitation challenges to the agency head or HCA, I would like the CO to be an option similar to your revised procedures for protests against the award decision. If the protestor and CO can’t reach an agreement then the agency head or HCA implement the revised process above.

 Happy holidays!

This brings up the need to discuss why the current agency level protests procedures aren’t working.

[Voyager]

On 11/23/2023 at 10:01 AM, Jamaal Valentine said:

This is great advice and should be coupled with the financial impact to the taxpayer. Considering all of the voices of key customers will lead to a more persuasive advocacy.

The persuader may leverage the following information.  See pages 30-32 of the GAO Performance and Accountability Report for 2020, and pages 22-24 of the GAO Performance and Accountability Report for 2023.

• GAO’s Scorecard—How we saved the federal government $77.6 billion this year | U.S. GAO
• GAO’s Scorecard—How We Saved the Federal Government $70.4 Billion This Year | U.S. GAO

Strategic Goal 3 ("OGC") appears to be the place to look for any contributing statistics from bid protests.  Based on the examples given, GAO's self-reported savings appear to be from its functions other than protests.

[Voyager]

On 11/23/2023 at 11:11 AM, formerfed said:

This brings up the need to discuss why the current agency level protests procedures aren’t working.

See the table included in this Report to Congress: B-158766, GAO Bid Protest Annual Report to Congress for Fiscal Year 2022.  I wonder if GAO's successful ADR people could be provided for agency use IAW FAR 33.103(c)?

[formerfed]

2 hours ago, Voyager said:

I wonder if GAO's successful ADR people could be provided for agency use IAW FAR 33.103(c)?

It might but I doubt it would be as successful.  Both agencies and contractors respect GAO for many reasons - chief being knowledge, impartiality, and position of authority.  Whether the assessment is fair or not, industry doesn’t see that as much with agencies.   So I think that’s why industry is not utilizing the agency process so much

[Retreadfed]

On 11/23/2023 at 10:01 AM, Jamaal Valentine said:

This is great advice and should be coupled with the financial impact to the taxpayer

I don't know if this mindset still exists in congress, but some time ago a very powerful congressman (whose name I have forgotten) was quoted as saying "one protester is worth a thousand auditors."

[joel hoffman]

Probably William Proxmire.

[Me_BOX_Me]

Joining this parade a bit late. Whatever happened to the NDAA proposal that would force large unsuccessful protesters to compensate agencies for time spent defending source selection decisions? That seems like a logical first step and it vanished into the ether almost as soon as it was proposed. 

When we can't even agree to hold large unsuccessful offerors financially accountable for their frivilous bid protests, how can we expect to revamp the entire system? 

I agree with other posters that COFC should remain, as well as emphasizing ADR in some cases. 

I will say that my current agency has a robust quality assurance process in place for source selections and it has dramatically improved our documentation. Despite this, the protest rate is still very high especially from unsuccessful incumbents who just want to milk a few more months' fee from their contracts. 

[Oyster]

It was Section 804 of the House version of the FY 24 NDAA, but was not adopted in the Senate version, and was dropped.  See: FY2024 NDAA: Department of Defense Acquisition Policy (congress.gov)   See the House provision here:  BILLS-118hr2670rh.pdf (congress.gov)

I don’t think it was an effective way to curb protests anyway, so I think it was wise that they dropped it.  It would have been cumbersome to implement, and I highly doubt it would have moved the needle at all in terms of filing bid protests for several reasons.  

First, as you mentioned, it was limited to large DOD contractors (with revenues above $250M).  I don’t believe that the threat of potentially having to reimburse the agency for their costs would be a significant deterrent to large companies in most cases.  Outside counsel from the large law firms representing these companies have partner fees at or exceeding $1K/hour. A GS-15 agency counsel, by contrast, is likely around $100/hour, depending on how you divide their salary into hours. I don’t see this as a meaningful deterrent, particularly when discussing high-dollar contracts. 

Second, I think this would be a mess to implement. Most agency attorneys are not trained (or required) to account for every increment of time allocated to a particular case/issue. It is one of the main benefits of being a government attorney. If this was passed, the odd result would be that agency counsel would be penalized by having to account for every increment of time they spend on bid protests. It’s not clear how they would calculate these costs.  Further, would that time tracking apply to attorneys only? Contracting officers too? Requiring activity personnel? Anyone who spent any time at all on it?  What about the costs of pulling all of this information together?  Where would the funds go? ... absent specific statutory language, it would just go to the Treasury under the Miscellaneous Receipts Statute (31 USC 3302), and the agency would never be able to use a dime of it.

Third, what if it was denied by the GAO and then re-filed in the COFC where the COFC sustains the protest ... perhaps on new evidence the Government was forced to divulge in its agency record that wasn't disclosed at the GAO?  Would they still have to pay because they lost at GAO first?  That sounds unfair. 

Fourth, what is the protester's recourse if the agency is unreasonable in the final bill (or it is based on errors)?  I could see that spurring additional litigation and just more costs and time wasted by the agency.

Finally, defense agencies prefer GAO protests over the more time-intensive and costly COFC protests.  The pilot program only applies to GAO protests, so why would DOD want to encourage protesters to file at the COFC instead of GAO? (I recognize they are not exclusive forums.) 

I think it’s a knee-jerk reaction that only makes sense on the surface.  Ultimately, I think it's just a bad idea.  

[Fara Fasat]

I am badly citing something I've read/heard before, but it says basically -- if you want to eliminate something, first you have to answer why it exists. In this case, why are bid protests allowed? They have no equivalent in the commercial world, so how do companies survive without it? As I have said in many classes - you lick your wounds, learn from your loss, and move on to the next opportunity.

Before even addressing the costs, the delays, etc, you must address why protests exist, and then explain why the harm from removing protests won't outweigh the interests that are being protected. In other discussions on this forum, some have stated that government money is taxpayer money, and that COs have a sacred duty to use that money fairly. Is that the reason?  Is that a better reason than the fiduciary duty a corporation has to its shareholders? Are there reasons other than making sure that taxpayer money is fairly handed out?

I realize I'm just throwing out some thoughts, not solutions. But you're the deep researcher, not me. 😀

[Oyster]

23 minutes ago, Fara Fasat said:

I am badly citing something I've read/heard before, but it says basically -- if you want to eliminate something, first you have to answer why it exists. In this case, why are bid protests allowed? They have no equivalent in the commercial world, so how do companies survive without it? As I have said in many classes - you lick your wounds, learn from your loss, and move on to the next opportunity.

Before even addressing the costs, the delays, etc, you must address why protests exist, and then explain why the harm from removing protests won't outweigh the interests that are being protected. In other discussions on this forum, some have stated that government money is taxpayer money, and that COs have a sacred duty to use that money fairly. Is that the reason?  Is that a better reason than the fiduciary duty a corporation has to its shareholders? Are there reasons other than making sure that taxpayer money is fairly handed out?

I realize I'm just throwing out some thoughts, not solutions. But you're the deep researcher, not me. 😀

 

Private companies are presumed to act in their best interests and focus on generating a profit and typically must report to shareholders and the BOD.  The Federal Government does not have the same natural predator to sloth, corruption, and errors.  Here's a partial list of the reasons that are often cited for having a protest system:

(1)    The protest system promotes private sector confidence in the procurement system, thereby increasing competition.

(2)   The protest system increases the public’s confidence in the integrity of the procurement system.

(3)   The protest system protects contracting officers from internal agency pressures to act improperly.

(4)   The protest system provides for transparency and protects the integrity of the U.S. federal acquisition system.

(5)   The protest system provides offerors who dedicate substantial resources to participate in a federal contract competition with an effective, relatively low cost and expeditious way to challenge violations of procurement statutes, regulations, and/or the terms of a solicitation.  

(6)   History has shown that only a fraction of a percent of federal procurements are protested, and therefore the oversight/transparency benefits outweigh the direct costs arising from actual protests. 

(7)   It serves as a model for developing nations to emulate, thereby promoting the US interests abroad in terms of anti-corruption efforts.   

[joel hoffman]

4 hours ago, Fara Fasat said:

They have no equivalent in the commercial world, so how do companies survive without it?

In the commercial world, companies are largely allowed to contract with whomever they want , based upon business decisions as well as established business relationships or to foster new business relationships.

During the era of predominantly sealed public bidding processes, the government had very little choice regarding who won the contracts and there was little incentive for most firms to even get along with their government counterparts and vice versa , let alone develop positive working relationships. We kept getting many dirtbag, low bid construction contractors, especially among the small businesses. I often dreaded attending or conducting post award meetings with unpleasant contractor reps.

I was only involved in about three construction protests, one service protest and no design-build protests in the 90 or so source selections that I either conducted, oversaw or otherwise participated in after we moved to competitively negotiated acquisitions. We managed to prevail or eventually prevail in those protests

And - virtually all the dirtbags that previously haunted us either disappeared or shaped up! 

[Mike_wolff]

I know I'm late to this party, but in case Vern, you are still developing arguments, at the very least I would hope to see that if we are stuck with the current GAO protest venue, that Congress could change the process to REQUIRE that contractors first have a debriefing, and if they still want to protest after that they have to start with an agency-level protest.  I've seen too often that a contractor protests to GAO without even getting a debriefing, when a debriefing or CO/agency protest could have likely resolved the issue much more quickly, and much more cheaply for all parties.