Could penalties for frivolous protests protect agencies?

Companies that file protest after protest only to have them tossed out should pay for their abuse of the system, recommended a procurement expert in a new report released June 11.

Steven Maser, professor of public policy and public management at Willamette University, said Congress could authorize the Government Accountability Office to require companies that repeatedly file baseless protests to compensate the agency for the costs that go along with protesting an award. The company would have to pay after specific number of meritless protests, such as three in three years, he wrote in his report, which was released by the IBM Center for the Business of Government.

When a company protests a contract award, it can cost an agency time and money as the work is postponed. Successful protests can lead to the need for an entirely new procurement, while unsuccessful ones simply add to the time and cost.

If Congress won’t agree to the penalty system, Maser suggested that GAO begin tracking meritless protests. Agencies then could use the information as part of past performance information before they make an award.

“This merely makes transparent and systematic something contractors already believe transpires in obscurity and episodically,” he wrote.

The report looks closely at bid protests, which have increased 18 percent since fiscal 2009. Across the government, contractors filed 2,353 protests with GAO during the fiscal 2011, when federal spending on contracts peaked. He said those figures suggest that protests will become more common as the federal budget declines. More specifically, he analyzed bid protests submitted to GAO that involved the Defense Department and its agencies between 2001 and 2009.

In his report, Maser offered more suggestions to agencies on preparing to avoid protests and dealing with those that come along.

  • Appoint someone to a role that is akin to a company's chief risk officer in each source selection.
  • Share the same detailed information—the level of details where specifics about the winner must be redacted—when debriefing losing bidders.
  • Record debriefings “to mitigate the fear that company attorneys will mine disclosures for opportunities to protest.”
  • Alleviate perceptions of bias with justifiable and documented procedures.
  • Make requirements and evaluation criteria clear and simple. “If contracting officials do not understand the requirements, they can set up a protestable situation without realizing it,” he wrote.
  • Develop simulations of source selections for training and experience.
  • Make it worthwhile for an employee to work on a source selections board.
  • Taking advantage of a contracting officer’s expertise in supply chain management early in the procurement process.
  • Measure performance of a source selection board by considering whether it was on schedule, on budget and had no protests.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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Reader comments

Tue, Jun 26, 2012 Jaime Gracia Washington, DC

There is no question that protest accountability needs to be reconsidered. Certainly I think political power favors larger firms whose armies of lobbyists fill the halls of Congress and the Pentagon, but I do not think small businesses will shy way from protests if they are held accountable for the outcome. Granted the costs would be a more significant factor, but the outcomes would be more devastating for larger firms, since they have more on the line. Small firms are not competing for multi-billion contracts, with the almost perfunctory protest now. This issue is analogous to publically-traded firms who itemize legal expenses on yearly reports to pay fines and settlements, as it is cheaper than following the law. Protests are hurting the government's ability to move forward on contracts, putting taxpayers and warfighters at risk with unfulfilled requirements. Protests are a right to correct the government's wrong, and be given a fair opportunity to compete. The number of protests in the last 5 years has grown almost exponentially, with the number of upheld protests actually going down in the same period, according to recent GAO data. How can one argue that protests are not frivolous?

Wed, Jun 20, 2012

Billing contractors for protest abuse has been out there a long time. Problem. Contractors contribute to politician re-election funds and/or raise such a fuss about it that it never gets approved. But the Govt. agency that loses a protests, has to pay the contractor's attorney fees. Why can't a contractor that fails to win a protest pay the Govt.? Yes, catch22. Small businesses would not be able to protest or be afraid too. Perhaps the repeated failed protest suggestion will work better.

Wed, Jun 13, 2012 SPMayor Summit Poinit, WV

Peter - it really only takes the cost of a stamp and the time needed to prepare a letter to file a protest and bring things to a halt.The GAO Guide makes it clear a lawyer need not be involved in filing or the execution & administration of the protest with the exception for the discovery process associated with proprietary information and source selection sensitive information.The observation is not meant to encourage more protests but to clarify our understanding. Now, as to the frivalous protest issue, there likely are fewer than people imagine. As pointed out, losing protests cannot be considered frivalous because of the loss - they are frivalous if they have no merit or legitimate standing, a determination that cannot be made until the facts of the case have been reviewed.If there are repeat & serial protestors who file protests lacking substance and proveable facts then bill them the cost of both the GAO and Agency efforts [similar to FOIA charges with some 'juice' on the charges] and then when they fail to pay bar them for competing for subsequent work.

Wed, Jun 13, 2012 OccupyIT

Don't generalize. This should target repeat offenders that demonstrate they are protesting on the basis of claims that have previously been settled by precedence (yet they keep filing). Loosing doesn't mean frivolous. My experience shows that it is a few well funded LARGE businesses that use this technique as a regular part of their BD strategy. Having seen several small business shell out several hunderd thousand dollars and WIN and NOT get reimbursed or recieve an award it is ludicrous to assert this process is free or even usable to an honest small business. The USG, even when caught out, usually just shrugs and does whatever it wants some other way. How about penalizing frivolous awards? Should be about as easy to define and implement...

Wed, Jun 13, 2012

Reading the Study reveals that "GAO sustains 25% of protests but the 'effective rate' is really 45% which includes agencies taking 'corrective action' before a decision is made." This leaves out another major category that makes the contracting community look even worse. When you include the times the protesting bidder is 'bought off' by the winner with giving them a share of the work to drop the protest, the rate of success of protestors increases to ~70%. Often because a protest slows award (and the beginning of the revenue stream)by months or years if it goes into Federal Court, then there is a real incentive for especially SBs to settle among themselves. A ~70% success rate indicates a REAL problem with training KOs more than a problem with contractors -- wouldn't you agree?

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