Bid protests: Useful tool or abusive practice?

Bid protests may be a necessary way for companies to stand up for their interests, but they also can be a tactic to game the system, according to some analysts.

NASA logo

The bid protest that has put a temporary halt to NASA’s plans to move from a proprietary content management system to open source architecture is just the latest example of how procurement disputes can delay agency initiatives for months.

The motives behind bid protests are not always clear, according to Jaime Gracia, president and CEO of Seville Government Consulting, who said the continued increase of bid protests in the federal space is evidence that some vendors and contractors are “abusing” the system.

Bid protest filings at GAO have increased each year since 2008, experiencing double-digit increases in fiscal 2008, 2009 and 2010, according to the agency’s annual report on bid protests.  Gracia said a big reason for incumbent companies to file protests when they lose a contract is simply extra revenue.  With a properly filed protest, an incumbent can often extend the contract at least until the protest is reviewed.

Jaime Gracia

Jaime Gracia believes some companies
use bid protests to manipulate the system.

“Protests, in general, are always business decisions,” Gracia said. “If an incumbent protests, that’s usually about three months of extra revenue. For the most part, protests are done in hopes of making an agency think twice.”

White said that many agencies faced with a bid protest will voluntarily “pull the plug and go away,” meaning they reevaluate a contract and the protestor’s argument.  It does not have to lead to a new bid solicitation, though it can, he said. 

And while “nobody talks about it,” Gracia said, bid protests also often involve backdoor deals between competing vendors.

“Nobody talks about that, nobody wants to talk about it, but through back channels, the winner will work with the loser – the protestor – to figure out an arrangement where they get a piece of the action,” Gracia said. “It’s kind of a dirty secret.”

In the NASA, case, reported earlier, eTouch Federal Systems filed a protest on Dec. 28 against NASA’s new $40 million blanket purchase agreement with Rockville, Md.-based Infozen, which was to begin Feb. 1 and would have replaced the agency’s CMS with new open source architecture to run its 140 websites and 1,600 web assets and applications.

The Government Accountability Office will review the contract, but a ruling could take until April 8, slowing NASA’s efforts to implement its open government plan. The protest means NASA can’t move ahead with its plans until GAO resolves it, according to Ralph White, head of GAO’s bid protest unit.

Optimos CEO Lisa Mascolo said frivolous bid protesting is “uncommon” and certainly not “a sound business strategy.”

“I don’t think companies protest because they think they’re going to prolong their time and revenue, I think they protest when they feel like something wasn’t right or there is something they need to better understand,” said Mascolo, whose firm is a strategy and enterprise information technology provider for the federal government.  She added that bid protest debriefs can sometimes contain valuable insight, even for a losing protestor.

“It’s not a cheap thing to protest, it doesn’t make for good relationships, it takes time and meanwhile you’re spending money on lawyers which is not a money-making venture,” Mascolo noted.

lisa mascolo

Lisa Mascolo says frivolous
protests are rare.

Contractors filed 2,475 big protests in 2012, yet only 570 of those cases were found to have merit, and only 106 of those cases were sustained, meaning the GAO ruled favorably for the bid protestor.

Mascolo said the spike in bid protests could be at least partially explained by agencies not clearly defining what they’re asking for – particularly in RFPs for involving newer technologies like cloud solutions, mobile and big data.

“Requirements were not as well defined” for such contracts, Mascolo said, “and it was easy for bidders to be confused.”

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