Will protest fees have other costs?
A proposed fee for filing big protests is small, but could have unintended consequences for both small businesses and agencies.
A proposed fee for filing bid protests with the Government Accountability Office could have the biggest impact on agencies and small businesses.
Large systems integrators that are competing for multimillion- or multibillion-dollar contracts would not be put off by a flat fee of roughly $240 to file a protest with GAO against an agency's award decision. But companies at the other end of the contracting spectrum will likely face a tough question: Is it worth protesting a small contract?
"It will have a chilling effect on the little guy who is filing a protest ‘pro se' on a potential decision to go ahead with the protest," said attorney John Chierichella, a partner at Sheppard Mullin Richter and Hampton who has worked on many bid protest cases.
More than 50 percent of protests are filed by small companies, and more than 60 percent are filed against defense contracts, said Ralph White, managing associate general counsel for procurement law at GAO.
The proposed change could also increase the number of bid protests filed with individual agencies, which would not be subject to the fee, Chierichella said. However, he added that the success rate of such protests would be much less than the 18.6 percent sustain rate GAO had in fiscal 2012. Moreover, the process for getting a hearing with an agency is slow and award decisions are not stayed in the meantime, unlike when a protest is filed with GAO, he said.
Chierichella and White said the U.S. court system often levies a flat fee for filing protests. For example, the U.S. Court of Federal Claims charges a $350 case-filing fee and 50 cents a page to reproduce records. The Public Access to Court Electronic Records service has fees for subscribing to the website and downloading pages from its case files.
The idea to charge for protests comes in response to a steady upward trend in bid protest filings at GAO. In fiscal 2008, 2009 and 2010, GAO had double-digit percentage increases in filings, according to the agency's annual report on bid protests released in November. Since fiscal 2010, protests have leveled off somewhat and showed only a 5 percent increase in fiscal 2012. However, protests that merited a hearing went up from 417 in fiscal 2011 to 570 in fiscal 2012, a 37 percent increase. The sustain rate remained relatively flat at 18.6 percent.
In a recent interview, Dan Gordon, former administrator of the Office of Federal Procurement Policy, said he does not believe a fee would reduce the number of protests. Chierichella agreed.
Given the increase in bid protests, White drafted a paper on ways to improve GAO's operations, particularly in light of the current budgetary climate. GAO receives about 16,000 protest-related e-mail messages each year and has four employees who sort through them to determine whether they relate to new or existing cases.
GAO would like to use electronic docketing software to streamline the process and allow the agency to upload non-proprietary records in real time. The software would also help improve GAO's transparency regarding ongoing cases, White said. He estimates the cost of running the system at roughly $450,000 a year, which prompted GAO to consider charging users for its services.
However, GAO officials wanted an alternative to asking Congress to fund the system with taxpayer money. In these budgetary times, "we don't feel comfortable asking for money," White said. "I felt it was necessary to find another way to go forward and bring in money."
GAO's proposal would fall within the jurisdiction of about eight congressional committees, including those that cover armed services, appropriations and small business.
"The [House] Small Business Committee appreciates that the GAO is exploring ways to improve its efficiency in handling bids while not adding to taxpayer costs," said D.J. Jordan, a committee spokesman.
But Chierichella said small-business groups could rally their supporters on Capitol Hill to oppose the fee. "The small-business lobby is going to be infuriated and then infuriate their representatives," he said.
Jordan said the committee's chairman, Rep. Sam Graves (R-Mo.), had not received an official request from GAO regarding a bid protest fee "but will be ready to evaluate any effects of such a fee on small contractors."