BID PROTESTS: THE COSTS ARE REAL, BUT THE BENEFITS OUTWEIGH THEM

Daniel I. Gordon*

[Note for student editors: Will you insert a table of contents and format the headings of the article consistent with PCLJ’s procedures?]

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TABLE OF CONTENTS

I. INTRODUCTION..............................................2

II. ADMINISTRATIVE AND JUDICIAL VENUES FOR FILING PROTESTS IN THE U.S. FEDERAL SYSTEM...................................2

III. SPREAD OF THE PROTEST PROCESS OUTSIDE THE U.S.............5

IV. CORRECTING MISPERCEPTIONS ABOUT PROTEST STATIISTICS.......7

A. Protests are rare events.............................7

B. It is rare for a protester to win a protest, and even rarer for a winning protester to go on to obtain the contract at issue in the protest....................14

V. COSTS OF THE PROTEST PROCESS.............................17

VI. Benefits of the Protest Process..........................27

VII. Conclusion: The Costs are Overstated, and the Benefits Outweigh Them............................................30

I. INTRODUCTION

This article discusses the benefits and costs of bid

protests—legal challenges by a bidder to the way the gGovernment

has conducted a procurement.1 In the U.S. federal procurement

system, bid protests have existed since the 1920s,2 and criticism

arguing that they are more trouble than they are worth has been

around for nearly that long.3 The article explains why, in the

author’s view, the benefits of the bid protest system

1 See James F. Nagle & Adam K. Lasky, A Practitioner’s Road Map to GAO Bid Protests, 30 CONSTR. LAW , no. 5, Winter 2010, at 5.2 See id.3

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substantially outweigh the burdens that it imposes on the

procurement system.

II. ADMINISTRATIVE AND JUDICIAL VENUES FOR FILING PROTESTS IN THE U.S. FEDERAL SYSTEM

It was in the U.S. that the first litigation leading to what

came to be recognized as a bid protest decision took place.4 In

1924, a company filed a complaint with the then-new General

Accounting Office (“GAO”),5, alleging that the officials of the

Panama Canal had written specifications for a truck that were

“wired” to a particular brand name and that unfairly precluded

the complaining firm from fair consideration for the contract.6

GAO, after some internal hesitation, decided to consider the

complaint as part of the office’s responsibility to ensure that

funds appropriated by Congress were lawfully spent—what is

4 See Comptroller General McCarl to the Governor, the Panama Canal, 5 Comp. Gen. 712, A-11259 (Mar. 9, 1926).5 Effective July 7, 2004, the GAO's legal name became the Government Accountability Office. See GAO Human Capital Reform Act of 2004, Pub. L. 108-271, § 8(a), 118 Stat. 811 (2004)Effective July 7, 2004, the GAO's legal name became the Government Accountability Office. Pub. L. 108-271, 118 Stat. 811 (2004).6 5 Comp. Gen. 712, 713.

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referred to as GAO’s account settlement function.7 GAO

ultimately agreed with the protesting firm.8

In the course of the ensuring decades, handling bid protests

became a routine function of GAO’s Office of General Counsel.9

Some protests involved pre-award challenges by potential offerors

to solicitation terms;10 the majority were post-award challenges

by firms that had competed for a contract, contesting the award

to another offeror.11

For many years, courts did not consider bid protests, so

that GAO (and the contracting agencies themselves) represented

the only place to file a protest.12 Then, for three decades

after the decision of the U.S. Court of Appeals for the District

of Columbia Circuit in Scanwell,13 U.S. district courts had bid

7 In the Beginning: The Earliest Bid Protests Filed with the US General Accounting Office, 13 PUBLIC PROCUREMENT L. REV. 5 (2004); Daniel I. Gordon, Annals of Accountability: The First Published Bid Protest Decision, 39 PROCUREMENT LAWYER , no. 2, Winter 2004, at 11.In the Beginning: The Earliest Bid Protests Filed with the US General Accounting Office, 13 PUBLIC PROCUREMENT L. REV. 5 (2004); Annals of Accountability: The First Published Bid Protest Decision, THE PROCUREMENT LAWYER , Vol. 39, No. 2 (Winter 2004).8 5 Comp. Gen. 712, 7135 Comp. Gen. 712, A-11259 (Mar. 9, 1926).9 See William E. Kovacic, Procurement Reform and the Choice o Forum in Bid Protest Disputes, 9 ADMIN. L. REV. AM. U. 461 , 470 (1995)10 See, e.g., New York Tel. Co. v. Sec’y of Army, 67 F. Supp. 18, 19 (D.D.C. 1986)11 12 13 Scanwell Labs., Inc. v. United States, 424 F.2d 859 (D.C. Cir. 1970).

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protest jurisdiction, until that jurisdiction “sunset” in 2001.14

From the enactment of CICA in 198415 until its jurisdiction was

ended through section 5101 of the Clinger Cohen Act of 1996,16

Pub. L. No. 104-106, there was another administrative forum with

jurisdiction over some protests, those related to information

technology, and that was the General Services Administration’s

Board of Contract Appeals, the GSBCA.17 In addition, a statutory

change in 1996 meant that the Court of Federal Claims,18 which

had only pre-award protest jurisdiction for many years, was given

post-award jurisdiction as well.19

The result is that, for more than a decade now, the only

places outside the contracting agency where disappointed bidders

have been able to protest are GAO and the Court of Federal

Claims.20 From time to time there are differences between GAO

14 The Administrative Dispute Resolution Act of 1996, Pub. L. No. 104-320, § 12, 110 Stat. at 3874, provided for the District Court jurisdiction to sunset on January 1, 2001.15 16 17 18 The Court of Federal Claims was previously called the United States Claims Court prior to Congress’s enactment of the Federal Courts Administration Act of 1992, Pub. L. No. 102-572, 106 Stat. 4506, 4516. Also, Prior to Congress’s enactment of the Federal Courts Improvement Act of 1982, Pub. L. No. 97-164, 96 Stat. 25, 42, the court generally existed as the United States Court of Claims, Trial Division. 19 Administrative Dispute Resolution Act of 1996, Pub. L. No. 104-320, section 12(d). [Note to student editors: Should we refer back to the citation in the earlier footnote?]20

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and the Court, with respect to both process and outcomes.21 The

author views occasional differences between two fora as

inevitable, and that is particularly the case here, where one

forum is administrative and the other is judicial. In any event,

having two fora hearing bid protests may be healthy for the

procurement system. While the discussion below regarding the

costs and benefits of protests to the procurement system is

focused on GAO, the analysis should apply, at least in broad

terms, to the Court of Federal Claims as well.

III. SPREAD OF THE PROTEST PROCESS OUTSIDE THE U.S.

Before turning to that analysis, it is worth looking outside

the U.S., because the protest process has been receiving

substantial attention around the world.22 More than ever in the

past, a protest system has come to be seen as a required part of

a good public procurement system.23 For example, in every free

trade agreement that the U.S. has negotiated over the past 20

years, there has been a provision requiring our trading partners

to have a protest mechanism.24 In Canada, for instance, the

Canadian International Trade Tribunal was created to satisfy the

requirement of NAFTA, the North America Free Trade Agreement,

21 22 23 It should be noted that the term “protest” (or “bid protest”) is rarely used outside the United States; instead, what we would call protests are called ”challenges,” “domestic review procedures,” “remedies,” or simply ”complaints.”24

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that each partner have a protest forum.25 Similarly, the World

Trade Organization’s Agreement on Government Procurement (GPA)

includes a provision requiring WTO members that accede to it to

have a protest forum (called a domestic review procedure).26 In

addition, there is a protest provision in Chapter VIII of the

model procurement law of the United Nations Commission on

International Trade Law (UNCITRAL).27

Perhaps most interesting is the attention that protests have

received over the past 20 years in the European Union (“E.U.”).

25 http://www.international.gc.ca/trade-agreements-accords-commerciaux/agr-acc/nafta-alena/bereczky.aspx?view=d: “Article 1017 of the NAFTA calls for the promotion of “fair, open and impartial procurement procedures,” whereby “each party shall adopt and maintain bid challenge procedures for procurement covered” in accordance with a variety of principles, including that of “establish[ing] or designat[ing] a reviewing authority with no substantial interest in the outcome of procurements to receive bid challenges and make findings and recommendations concerning them.” As a result, the Canadian government established the Canadian International Trade Tribunal (CITT). NEEDS CITE. The tribunal’s mandate is to receive complaints and to conduct the necessary investigation to see whether the procurement project challenged falls outside the respectable limits of the NAFTA procurement procedures and to provide for remedies where procedural breaches occur.” NEEDS CITE.[Note to student editors: Please double check proper use of quotes in the preceding paragraph]26 See Article XX of the existing GPA and Article XVIII of the 2011 revised version, which is to come into effect shortly. http://www.ustr.gov/sites/default/files/GPA%20113%20Decision%20on%20the%20outcomes%20of%20the%20negotiations%20under%20Article%20XXIV%207.pdf happening?].27 See Challenge Proceedings, Chapter VIII, UNCITRAL Model Law on Public Procurement (2011). http://www.uncitral.org/pdf/english/texts/procurem/ml-procurement-2011/ML_Public_Procurement_A_66_17_E.pdf.

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Not mentioned in the EU’s Public Procurement Directives,28

protests were first addressed by the European Commission in what

is known as the Remedies Directive.29 Initially issued in 1989,30

the Remedies Directive was revised in 2007.31 The Remedies

Directive has had an enormous impact, requiring all member states

to have a protest forum,32 and a good number of EU member states

have recently seen a significant increase in the number of

protests being filed (whether that is a positive or a negative

development is a separate question).33 The Court of Justice of

the European Union has issued decisions that have reshaped the

protest process in the E.U., in particular, through the Alcatel

decision34 that led to the requirement (codified in Article 2a of

the 2007 revision to the Remedies Directive) that there be a

“standstill” period (typically 10 days) between the announcement

of the apparent winner of the competition for a contract and the

28 See Preamble, Council Directive 89/665/EEC (1989).29 See id.30 [Id.insert reference]31 See Directive 2007/66/EC of the European Parliament and of the Council (2007).[insert reference]32 See id. at Article 1, Scope and Availability of Review Procedures.33 Jeremy Glover, Challenging the Tender Process- What is the Effect of Recent Case Law? 10 (2009).34 Case C-81/98, Alcatel Austria AG and Others, Siemens AG Österreich and Sag-Schrack Anlagentechnik AG v Bundesministerium für Wissenschaft und Verkehr, I-7708 (2009).

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signing of the contract, in order to allow potential protesters

to file before the contract is actually awarded.35

IV. CORRECTING MISPERCEPTIONS ABOUT PROTEST STATIISTICS

In the circle of people who are interested in federal

procurement, there are a number of misperceptions about protest

statistics that should be addressed, since they can taint

judgments about the benefits and costs of protests. In

particular, even people quite familiar with the federal

acquisition system believe that protests are more common than

they really are, and they often believe, inaccurately, that

protesters frequently use the protest process to win contracts.

A. Protests are rare events

The frequency or rarity of protests needs to be judged in

context in order for the judgment to be sensible. If a

contracting officer is asked whether, in the procurements she or

he has worked on over the prior 3 years, protests were frequent,

an affirmative answer is often provided; but if one asks how many

procurements the contracting officer has worked on during that

period, that number often dwarfs the number of protests. Put

another way, while the numerator (the absolute number of

protests) is important, the denominator (the total number of

procurements) is critical to a determination of whether protests 35 See Article 2(a), Standstill period, Directive 2007/66/EC of the European Parliament and of the Council, (2007).http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2007:335:0031:0046:EN:PDF.

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can reasonably be said to be frequent. In assessing the

frequency of bid protests in the federal procurement system,

there are difficulties with both the denominator and the

numerator – respectively, the number of federal procurements that

occur each year, and the number of protests filed each year.

Regarding the denominator, perhaps surprisingly, there are

not good statistics on the number of federal procurements that

occur each year. Any such count would need to include, not only

the number of contracts awarded, but also any task and delivery

orders awarded that can be protested. The latter includes all

orders placed under the GSA Federal Supply Schedule and orders

issued under multiple-awarded indefinite-delivery, indefinite-

quantity contracts, where the orders have a value above $10

million.36 A recent RAND Corporation study of Air Force

procurements that were protested to GAO indicated that

approximately 20,000 contracts with a value above $25,000 were

awarded by the Air Force in 2008, representing approximately $63

billion.37 Since overall procurement spending in 2008 was over

36 The Fiscal Year (FY) 2008 National Defense Authorization Act (NDAA), NEEDS CITE, amended FASA, NEEDS CITE, to grant GAO jurisdiction to hear protests concerning task or delivery orders valued at more than $10 million. See Pub. L. No. 110-181, 122 Stat. 3, 237 (2008). [Note to Student editors: Please update the citation to also include references to the FY 2011 and FY2012 NDAAs, which extended the jurisdiction past the sunset period]37 http://www.rand.org/content/dam/rand/pubs/technical_reports/2012/RAND_TR883.pdf at 12. [Note to student editors: Please reference the name of the Rand report]

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$500 billion (eight times the amount spent by the Air Force

alone),38 that would suggest that the overall number of contracts

awarded was approximately 160,000. The author suspects that the

number is low and that a better estimate, including FSS orders

and ID/IQ orders above $10 million, would probably substantially

exceed 250,000. For the purpose of the analysis in this paper,

it will be assumed that the total number of federal contracts and

protestable orders awarded in a year is 200,000.

With respect to the numerator – the number of protests filed

—there has been confusion, for reasons that can be clarified

here. One challenge has been a methodological anomaly that is

worth explaining. Since the days when protest filings were

tracked on 3” x 5” cards, GAO has used a methodology that can

cause people to believe that protest numbers are higher than they

actually are. When a company files a protest challenging the

terms of a solicitation, GAO assigns it a docket number, referred

to as a “B number,” since it begins with a “B” – for example, B-

123456.39 If the protester later learns new information that

constitutes a new ground of protest and files a supplemental

protest of that same solicitation’s terms, GAO will docket that

as B-123456.2.40 If another potential offeror also protests the

solicitation’s terms, GAO will docket its protest as B-123456.3,

38 39 40

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and if that firm supplements its protest, that will be docketed

as B-123456.4.41 However those pre-award protests are resolved,

once the agency awards a contract, a losing competitor may file a

protest, which GAO will docket as B-123456.5 and, if there is a

supplemental protest once the protester sees the agency report,

that will be docketed as B-123456.6.42 And finally, if another

losing competitor files a protest and then supplements it, they

will be docketed as B-123456.7 and B-123456.8, respectively.43

Overall, GAO’s statistics will indicate eight protests, even

though only one procurement has been protested. While eight

protests of one procurement would be unusual, having two protests

is routine, and three would not be out of the ordinary.

What that means is that, when GAO reports the number of

protests filed in a year, that number substantially overstates

the number of procurements protested. For Fiscal Year (FY) 2008,

for example, while GAO reported 1,652 cases filed,44, elsewhere

GAO reported that 1,027 procurements were protested in that

41 42 43 44 GAO’s reported number of cases filed apparently also includes requests for reconsideration of a prior GAO decision as well as requests for reimbursement of costs, since either such request would be assigned the same B number as the related protest (in the example used in the text here, a request for reconsideration of the decision on the protests of the award would be docketed as B-123456.9 and a subsequent request by the two protesters that their protest costs be reimbursed would be docketed as B-123456.10 and B-123456.11.

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period.45 In other words, GAO indicated that, on average, there

are approximately 1.6 docket numbers assigned (“cases filed”) for

each protested procurement. Assuming that this ratio is stable

over time, it would mean that the 2,353 “cases filed” in FY

201146 represented approximately 1,470 protested procurements.

While the number of federal procurements was probably not the

same in FY 2008 and FY 2011, if we assume, for the sake of

simplicity and since this is only a rough estimate, that there

were 200,000 procurements in each of those two years, that would

suggest that 0.51 percent of procurements were protested in FY

2008 and 0.7 percent were protested in FY 2011. In other words,

between 99.3 and 99.5 percent of procurements were not protested.

This calculation has been confirmed through the recent RAND

study mentioned above.47 In that study, researchers at the RAND

Corporation found that, in the Air Force, “[t]he number of [GAO]

protests as a percentage of total contract awards fell fairly

steadily from about 1.7 percent in 1995 to 0.5 percent in

2008.”48 That is to say, as of 2008, 99.5 percent of Air Force

45 Cf. B-401197 (supra note XX) at 7, fig. 1, and GAO’s GAO Bid Protest Annual Report to the Congress for Fiscal Year 2008, B-158766, Dec. 22, 2008.46 47 48 F. Camm, M.E. Chenoweth, T. Light, M.A. Lorell, J.C. Graser, P. Lewis and R. Rudavsky, Government Accountability Office Bid Protests in Air Force Source Selections, in American Bar Association Section of Public Contract Law, “The Changing Budgetary Environment: Legal and Fiscal Challenges in Federal Procurement,” from the ABA Annual Meetings in Chicago (August

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procurements went forward without being protested to GAO. Even

if GAO protests of some other agencies’ procurements were twice

as common as for the Air Force (and there is no reason to assume

that that is the case), it would still be true that 99 percent of

their procurements went forward without being protested to GAO.

While the RAND study refers to GAO protests, including the

Court of Federal Claims would not alter the picture, since the

Court receives fewer than one-tenth the number of protests each

year that GAO receives.49 And while protesters can file protests

within the Air Force and statistics on the number of those

“agency-level protests” are not available, there is no reason to

believe that they would increase the total percentage of

protested Air Force procurements much above 0.5 percent.

It is, of course, true that very high-dollar procurements

are much more likely to be protested—the higher the dollar value,

the greater the likelihood of a protest. For a company that

loses the competition for a $100 million contract, with all the

bid and proposal costs that competing entails, the additional

cost of filing a protest may seem minimal, so that filing a

protest can be very tempting. That does not change the overall

2012), at 3. [It appears that the more appropriate reference should be to the RAND study itself.]49 Thus, the Court received 79 protests in FY 2008. http://www.crowell.com/files/2011-Bid-Protests-Trends-and-Developments.pdf

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picture, however, especially since very high-dollar procurements

are themselves few in number: protests are rare.

What about the mantra we often hear about increases in

protest numbers? It is true that GAO has reported a substantial

increase in the number of cases filed over the past few years,50

but even if the numbers doubled, from 0.5 percent of procurements

to a full percent, it would still mean that something like 99

percent of procurements are not protested. In terms of absolute

numbers, GAO has reported that the number of protests rose from

1,327 in FY 2006 to 2,353 in FY 2011, an increase of more than 70

percent.51 Adjusted to eliminate the overcounting explained

above,52 that would represent an increase from approximately 830

to approximately 1,470 protested procurements (representing the

same percentage increase). During that same period, however,

federal procurement spending increased from $432 billion in FY

2006 to $537 billion in FY 2011.53 Put another way, in FY 2006,

there were approximately 1.92 protests for each billion in

federal procurement spending, while in FY 2011, there were 2.74

protests per billion. Those figures are similar to the ones that

GAO provided in a congressional report in 2009, when it stated

that the number of protested procurements per billion dollars in

50 51 52 53 Source: usaspending.gov.

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Department of Defense contract spending ranged from 1.4 to 1.9

during the period FY 2004 to FY 2008.54 While the FY 2011 figure

reflects an increase, the number of protests for each billion in

federal procurement spending is still extremely low: fewer than

three protests for each billion dollars that the government

spends on contracts.

B. It is rare for a protester to win a protest, and even rarer for a winning protester to go on to obtain the contract at issue in the protest.

Here again, GAO’s methodology risks misleading observers.

GAO reports a “sustain” rate that has ranged (that is, the rate

at which GAO rules in favor of the protester and sustains the

protest), over the past 5 years, from 16 to 27 percent.55 That

sounds like protesters do fairly well. For better or for worse,

the full picture is not so favorable to protesters. First, the

sustain rate has been dropping nearly consistently over the past

5 years, falling from 27 percent in FY 2007 to 16 percent in FY

2011.56 Second, the sustain rate is calculated only among the

cases for which GAO issues a merits decision, as GAO explains in

its annual reports.57 That means that, in FY 2010, for example,

GAO did not sustain 19 percent of 2,299 cases – it sustained 19

percent of 441 merit decisions.58 Third, that percentage is

54 55 56 57 58

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distorted by the methodology of counting multiple B numbers

separately, because protests that are sustained typically have

more B numbers than protests that are denied.59 Thus, for FY

2010, GAO reported 441 merit decisions, of which 82 were reported

as sustained protests.60 A count of the actual decisions

(counting each decision as one, even if it resolves two or more B

numbers) shows that there were actually 277 (not 441) decisions,

of which 45 (not 82) were sustained.61 That represents a 16

percent sustain rate (not 19 percent).

Thus far, this analysis means that, among the hundreds of

thousands of federal procurements that occurred in FY 2010, there

were only 45 where GAO sustained protests. The next stage,

though, offers even worse news for protesters, and it is

surprising how little is reported about it. What happened in

those 45 procurements, after GAO sustained the protests? Did the

protester that was successful in the GAO litigation succeed in

obtaining the contract? The answer: Rarely. The FY 2010

numbers have been selected here for further study, because enough

time should have passed for final action in the procurement to be

available. That said, discovering the final action can be

challenging, because information on what ultimately happened in

59 This presumably derives from protesters’ filing more supplemental protests in sustained protests, for whatever reason. 60 61

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each one of the sustained protests is not readily available, but

enough is known to give a fairly clear picture of protesters

often winning at GAO but nonetheless not receiving the contested

contracts.62 In four of the 45 cases, GAO did not recommend any

corrective action in the protested procurement, either because

the contract had already been performed or for other reasons.63

In an additional three cases, GAO did recommend corrective action

in the procurement, but the agency explicitly declined to follow

GAO’s recommendation.64 In another case, the agency cancelled

the solicitation entirely (for reasons, and with impact,

unclear).65 In 16 additional cases (more than one third of all

the protests sustained in FY 2010) , GAO recommended corrective

action, the agency followed GAO’s recommendation, but the agency

then confirmed award to the same company as before (or awarded to

a third company, neither the earlier awardee or the protester).66

62 GAO does not track information on which company ultimately receives a contract after GAO has sustained a protest. The author, working with student research assistants at the George Washington University Law School, has been endeavoring to obtain information for the post-protest outcome of each of the 45 sustained FY 2010 protests, and the results to date are set out in the text here. The effort to track down every case continues through Freedom of Information Act requests to the respective agencies.63 Note, though, that two of those four cases involved protests of public-private competitions, where the federal employees’ representative won the protest and may have been satisfied that no further competition was to be held.64 65 66

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In only four cases identified to date did the protester

ultimately obtain the contested contract.67 While the ultimate

outcome has yet been determined in the remaining 17

procurements,68 this much is clear: winning a protest is far

from ensuring that a protester will win the contract it is

seeking.

Experienced practitioners may point out that GAO reports a

high “effectiveness rate” that would suggest that the picture is

far better than this for protesters. That “effectiveness rate,”

which was reported as 42 percent for FY 2010,69 combines the

sustained protests described above as well as cases where

agencies took voluntary “corrective action,” without action by

GAO, so that GAO closed its files without a decision.70 There is

no publicly available information on that large universe of

protests where GAO was told that the protester “obtain[ed] some

form of relief,” as GAO writes in a footnote to its annual

report.71 In particular, there is no way to know whether the

protesters ultimately obtained the contracts at issue, and

discovering the outcome in each of the affected procurement would

challenge even the most diligent researchers, since GAO does not

publicly disclose any information about the cases that it closes

67 68 69 70 71

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due to agencies’ voluntary corrective action.72 There is,

however, no obvious reason that an agency is more likely to award

a contract to a protester whose case ends without a GAO decision

than the agency would after GAO rules in the protester’s favor.

V. COSTS OF THE PROTEST PROCESS

A key component of the harm of the protest process is the

delay that protests cause. Even when a protest is denied, it

holds up the acquisition.73 In particular, when a protester

files in time to trigger the automatic stay under CICA,74 the

agency will be required to hold off on awarding the contract (for

pre-award protests) or to direct the contractor to stop work (for

post-award protests).75 That automatic stay can last up to 100

days,76 which is longer than the automatic suspension of a

procurement in any other country’s protest system, at least among

the many systems that the author has reviewed.77 Even if GAO

dismisses a protest, whether because it was untimely filed or

because the protester does not qualify as an ‘interested party’

with standing to protest,78 can take several weeks, and even the

most promptly dismissed protests may trigger a CICA stay that is

72 73 74 75 31 U.S.C. § 3553(c), (d).76 77 Need to add cite to at least one foreign system and the length of its stay.78

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in place for at least a few days.79 In short, the CICA stay does

disrupt procurements.

The discussion above makes clear, however, that the CICA

stay applies to only a tiny percentage of federal procurements,

so that any harm caused by the CICA stay is also more limited

than might initially appear. In FY 2011, as noted early,

approximately 1,470 procurements were protested to GAO.80 While

specific information is not publicly available, not all of those

1,470 protested procurements would have been stayed. Only

protests filed within specified deadlines trigger a CICA stay,81

and at least some of those 1,470 protests were either untimely

filed (indeed, timeliness is one of GAO’s most common bases for

dismissing protests82) and even some of the timely-filed protests

may have been filed too late to trigger a CICA stay. For

example, a protest filed 6 to 10 days after a debriefing will

usually be timely for GAO’s filing purposes, but it will not

trigger a CICA stay, because a protest must be filed within 5

days of a debriefing to trigger a stay.83

Moreover, the fact that a protest has triggered the CICA

stay does not mean that the procurement will be on hold for 100

79 80 81 82 Dismissals of Bid Protests at the General Accounting Office, THE PROCUREMENT LAWYER, Vol. 37, No. 2 (Winter 2002) at 16.

83 31 U.S.C. § 3553(d)(4)(B).21

days. Most protests are resolved well before the 100th day, the

maximum length of CICA’s automatic stay.84 In 2009, GAO reported

to Congress that it consistently closed more than half of all

protests within 30 days.85 While that report related to protests

of DoD procurements,86 there is no reason to believe that

protests of civilian agency procurements (which are fewer in

number than DoD protests)87 take longer for GAO to close. The

stay may end because the protester has withdrawn the protest, or

because GAO has dismissed the case.88 When the agency takes

corrective action, that also ends the stay, but, of course, the

corrective action itself will generally delay progress in the

procurement.89 Even for the minority of protests that go to

published decisions – which means that they form the group of

protests for which the stay remains in place the longest time –

GAO reports that, on average, the decision is issued before the

80th day.90

Not only is the delay caused by the CICA stay shorter than

it may appear – when a delay, even a relatively short one, could

cause harm, CICA provides a mechanism for agencies to move

forward with the procurement while the protest is still

84 85 GAO April 9, 2009 report at 10.86 Needs cite.87 Needs cite.88 89 90 [Insert reference]

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pending.91 This “override” mechanism is available to agencies,

and is used, although information on the frequency of overrides

is not readily available.92

The truly long delays – disrupting the procurement for many

months – occur when GAO issues a decision sustaining a protest

and the agency then implements GAO’s recommendation, which

typically calls for the agency to re-do at least part of the

competition for the contract.93 The universe of such cases,

however, is quite small: as explained above, there are only a

few dozen sustained protests in a year (as noted above, there

were 45 procurements in which GAO sustained protests in FY

2010),94 and, of those, some did not lead to delay in the

procurement after GAO issued its decision, either because the

decision did not contain a recommendation for corrective action

or because the agency declined to follow GAO’s recommendation.95

That leaves a relatively small number of procurements – almost

certainly fewer than 40 out of the 200,000 estimate used here for

each year’s procurements – in which there is substantial delay

91 92 For FY 2002, the last year that GAO included information on overrides in its annual report on protests, GAO reported that, with respect to the 1,101 protests filed that year, there were 71 instances of agencies’ using their override authority to move forward with the procurement, notwithstanding the protest. http://gao.gov/assets/100/93966.pdf93 Needs cite.94 95

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due to a successful protest.96 In the author’s view, there is

adequate justification for a substantial delay in a procurement

where GAO has found that the agency violated procurement law and

that the violation harmed the protester. In any event, again in

the author’s view, any delay that the agency’s unlawful action

has caused cannot fairly be blamed on the protest system.

Critics of the protest system may also view as a cost of the

protest system GAO’s recommendation that protesters be reimbursed

the costs of filing and pursuing their protests, including their

attorney fees.97 That situation arises only when GAO finds that

a protest is meritorious—meaning, again, that the contracting

agency violated procurement law to the detriment of the protester

—so that (1) at issue are only a small number of protests each

year and (2) those cases are ones where the protest system has

identified unlawful action by the government.98 In the author’s

view, reimbursing protesters for their action as “private

attorneys general” is justified.99 In any event, the

reimbursable rates for attorney fees in those situations are now

capped, except for small business protesters.100

96 97 98 99 Scanwell Lab., Inc. v. Shaffer, 424 F.2d 859, 864 (D.C. Cir. 1970).100 31 U.S.C. § 3554 (c)(2).

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That said, critics point to abuse of the protest system in

particular contexts as causes for concern. Specifically, there

are persistent complaints that abuse arises in the form of

“frivolous” protests, and the author has often heard calls for

imposing sanctions on firms that file frivolous protests.101 In

the 2009 report to Congress mentioned earlier, GAO responded to

questions from the House Armed Services Committee to address

frivolous protests filed in connection with DoD procurements.102

GAO pointed out that the fact that a protest was denied or even

dismissed did not mean that it was frivolous; instead, GAO

expressed the view that only a protest filed in bad faith should

be viewed as frivolous.103 GAO reported that it did not

categorize protests as frivolous and therefore had no data on the

number of frivolous protests.104 It did point out that

contracting agencies rarely assert that protests are frivolous.105

In a footnote, GAO reported that the last reported decision

noting that an agency characterized a protest as frivolous had

been in 1996 and that, in that case, the agency subsequently

acknowledged that the evaluation scheme used in the protested

procurement was flawed.106

101 102 103 104 105 106 GAO 2009 report at 12 n. 13.

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In its 2009 report, GAO pointed to its practice of promptly

dismissing protests as indicating that there was no problem with

frivolous protests that needed to be solved.107 GAO also

expressed concern that any effort to impose sanctions on

frivolous protests (such as by imposing a fine or requiring the

protester to reimburse the government for costs incurred in

defending against the protest) would risk “the unintended

consequence of harming the federal procurement system by

discouraging participation in federal contracting and, in turn,

limiting competition.”108 GAO also pointed out that penalties

could not properly be imposed on “frivolous” protesters without

adding a new layer of litigation, in which GAO would need to

determine whether the protester had filed its protest in bad

faith.109 Besides the burden that would place on GAO, distracting

it from its focus on resolving protests as quickly as possible,

that new layer of litigation could impose additional costs on

agencies and protesters, and the burden of those additional costs

might fall disproportionately heavily on small businesses and

protesters not represented by counsel, who may have protested in

good faith, even if they acted with a misunderstanding of the

facts or the law.110

107 108 GAO 2009 report at 12.109 110 It is worth noting that protesters have only limited information about what happened during a procurement at the time

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Those who allege that some protesters abuse of the system

sometimes point to one scenario in particular: situations where

a service contractor has lost the competition for a follow-on

contract and then files a protest in order to continue working

during the period of the CICA stay.111 This concern may be

legitimate, although the extent of the problem is not clear. The

concern would be particularly great if (1) many protests were

found to have been filed by service-contract incumbents who had

lost the competitions for the follow-on contracts and (2) their

protests were completely without merit, but (3) GAO was so slow

in resolving the protests that the incumbent was able to continue

to perform well after its contract had been due to expire. The

author is not aware of data supporting those three statements.

The appropriate response, in any event, would appear to be to

press GAO to continue (or intensify) its efforts to resolve the

protests promptly – not to create a new round of litigation about

the imposition of sanctions, and certainly not to limit or

that the strict time limits require them to decide whether to file a protest. Many agencies disclose to firms that lost competitions for contract only the bare minimum required by law. See Federal Acquisition Regulation section 15.506. It is often only through the protest process that protesters (or at least their counsel) learn in detail why they lost the competition for a contract. While review of the full agency record may eventually demonstrate that some initial protests are without merit, in other cases, review of the entire file discloses that the protests are, indeed, meritorious.111

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abolish vendors’ right to have an independent body consider their

claims of unlawful action by the contracting agency.

The final category of alleged abuse of the protest system is

composed of sequential protests – that is, situations where a

protester loses a protest at GAO and then protests at the Court

of Federal Claims.112 Presumably, the situation could be made to

sound worse by imagining a case in which a firm protests first to

the contracting agency, then to GAO, then to the Court of Federal

Claims, and finally to the Federal Circuit.113 This scenario is,

however, an instance of imagining the hypothetical, with no

evidence of the nightmarish pattern ever actually occurring.114

Indeed, if it did occur, it is not clear that the procurement

would be disrupted, since there might be no CICA stay at GAO,115

and the courts would certainly have discretion not to impose a

preliminary injunction.116 While there are some protesters who

start at GAO and then go to the Court of Federal Claims,117 the

numbers are so small (certainly fewer than 50 in a year) and the

evidence that the procurements have been held up so thin (again,

there is no automatic right to a stay at the Court), that this

cannot legitimately be seen as a significant cost of the bid

protest system. In fact, the Court occasionally reaches a 112 113 114 115 116 117

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different outcome than did GAO,118 which suggests, if nothing

else, that the protest was not frivolous.

Another concern about the cost of the protest system relates

to what might be called its indirect impact. Fear of protests is

often given as the explanation for contracting officers’

preference for certain courses of action over others.119 In

particular, contracting officers are said to be acting to avoid

bid protests when they decide that a contract should be awarded

to the low-priced technically acceptable (LPTA) proposal, rather

than to allow a tradeoff.120 The author has never seen data that

would indicate how often contracting officers actually decide to

name LPTA as the award criterion in a solicitation for this

reason, nor how often source selection officials avoid making

tradeoffs in the award decision, even when permitted by the terms

of the solicitation, in order to avoid protests. If the

phenomenon is common, it is unfortunate, since discretion to make

tradeoffs is a positive option in the U.S. procurement system.

Similarly, the author has heard for many years that some

contracting officers prefer to make award based on initial

proposals, rather than to conduct discussions, because they fear

that conducting discussions with offerors will increase the

likelihood of a bid protest, and increase the protester’s chances

118 119 120

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of prevailing, if a protest is filed. Again, that would

represent a loss, since the ability to conduct discussions with

offerors is a good feature of our acquisition system, which few

systems around the world have.121 As with excessive reliance on

LPTA award criteria, we lack data about how common it is for

contracting officers to award based on initial proposals merely

to reduce the likelihood of a successful protest. In both

situations, the author is skeptical that there is any good reason

to try to “protest-proof” an acquisition in this way, especially

in light of how rare protests are, and how exceedingly rare

successful protests are. Moreover, neither using LPTA as the

basis for award, nor making award based on initial proposals,

without conduct discussions, will, in fact, ensure that no

protest will be held, as GAO and Court of Federal Claims

decisions ruling on protests of LPTA awards and initial-proposal

awards will testify.122 That said, it must be recognized that in

both areas, and potentially in others as well, it is quite

possible that the fear of protests – whether justifiable or not –

is harming the acquisition system by driving bad decisions. To

mitigate that harm, efforts need to be made to improve the

knowledge of contracting officers about the rarity of protests

and the fact that making LPTA or initial-proposals awards will

not prevent protests, as well as the benefit to the government of 121 122

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using tradeoffs and discussions as means to obtain a better deal

for the taxpayers.

VI. BENEFITS OF THE PROTEST PROCESS

As noted above, countries around the world are developing

bid protest systems, and such systems have become, or are fast

becoming, part of the norm for good government in the acquisition

arena.123 That can be attributed to several benefits associated

with protests.

First, protests introduce a relatively low-cost form of

accountability into the acquisition system by providing

disgruntled participants a forum for airing their complaints.124

Protesting firms decide which procurements are to be investigated

– if no one protests, neither GAO nor the Court of Federal Claims

will look into the procurement; if someone does protest, they

will (at least if the protest passes the procedural hurdles, such

as timeliness).125 While reliance on audits by government

officials would also provide accountability into the workings of

the procurement system, it may be more efficient to focus on the

procurements where a participant is dissatisfied by the

government agency’s conduct, and that is what the “private

attorney general” model of a protest provides.126 In blunt terms,

123 124 125 126

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if no one is dissatisfied with the way the government conducted a

procurement, it may not be a wise use of auditors’ time to

investigate it.

Second, by being directly responsive to participants’

complaints, protests can increase potential bidders’ confidence

in the integrity of the procurement process, and therefore lead

more players to participate, thus increasing competition.

Increasing competition, in turn, can translate into bidders

offering lower prices, higher quality, or both, to the

contracting agency.127

Third, protests can increase the public’s confidence in the

integrity of the public procurement process. While the public

only rarely focuses on public contracting, having the protest

process mentioned in the press—as happened when The Boeing

Company successfully protested the Air Force’s award of the

tanker contract to Northrop Grumman—may, it can be hoped, raise

the public’s trust in the fairness of the government’s

acquisition system and the way it spends taxpayer funds.128

Fourth, because protests are a known avenue for complaints,

their availability empowers those in contracting agencies who

face pressure to act improperly. Thus, if a contracting officer

is pressed by users within the agency to award a sole-source

127 128 The Boeing Company, B-311344 et seq., June 18, 2008.

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contract to a favored firm, the contracting officer—who may lack

the bureaucratic clout to resist the pressure—can point to the

risk of a successful protest as the reason to follow the

statutory and regulatory requirements for competition.

Fifth, protest decisions, because they are public, and have

been released publicly since GAO issued the first one in 1926,129

provide a high level of transparency into what is happening in

the federal procurement system. While, in theory, databases such

as the federal procurement data system should provide

transparency into the system,130 protests can often provide more

useful information than databases. This is particularly the case

where protests demonstrate how problematic certain issues are.

For example, when GAO sustained a significant number of protests

challenging the way agencies were conducting public/private

competitions under OMB Circular A-76 in the 1990s, that

highlighted the importance of improving the way those

competitions were conducted, ultimately leading to revisions to

the Circular as well as the creation of the congressionally-

chartered Commercial Activities Panel.131 Similarly, it was GAO’s

sustaining of a number of protests alleging organizational

129 130 131 Commercial Activities Panel, Improving the Sourcing Decisions of the Government: Final Report, April 2002. Appendix D of the report summarizes GAO bid protest decisions arising from public/private competitions under OMB Circular A-76.

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conflicts of interest that focused attention with the procurement

world on this area, and ultimately led to congressional and

regulatory action.132

Finally, the fact that protest decisions are published and

widely read by practitioners brings an additional benefit: they

provide guidance, particularly to agency counsel and attorneys

representing potential protesters, as well as, of course, to

their clients. To give just one example, which has been true for

decades: any corporate counsel who follows GAO bid protest

decisions knows how strictly GAO applies the “late is late” rule,

so that counsel will ensure that people in the company appreciate

the importance of getting bids in on time.133

VII. CONCLUSION: THE COSTS ARE OVERSTATED, AND THE BENEFITS OUTWEIGH THEM

As explained above, the costs that bid protests impose on

the acquisition system are often misunderstood and therefore

overstated, in terms of the frequency of protests, the length of

time that they last, and the risk that the agency’s choice of

contractor will be overturned in the process.134 Moreover, the

benefits of the protest system may not be fully appreciated, as

is the fact that the United States is required by its

132 See Daniel I. Gordon, Organizational Conflicts of Interest: A Growing Integrity Challenge, 35 PUB. CONT. L.J. 1 (2005), and cases cited therein.

133 134

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international trade agreements to have a protest system.135

Whatever costs protests impose on the procurement system are

outweighed, at least in the author’s view, by the benefits that

protests bring, in terms of transparency, accountability,

education, and protection of the integrity of the U.S. federal

acquisition system.

135 35