July 15, 2016
Government Contracts Alert
Author(s): Vincent J. NapoleonThis alert was co-authored by Sararose C. Gaines.
The Government Accountability Office (GAO) bid protest process (the “Bid Protest Process”) is a tool that serves as a critical element in ensuring fairness, transparency and integrity in government contracting. However, conflicting reports about the role of bid protests in the Department of Defense (DoD) procurement system and its efficiency seem to permeate the halls of Congress and is rationalized by some contractors for their lack of success to have contract award decisions overturned. Recently, the House Armed Services Committee (HASC) and the Senate Armed Services Committee (SASC) released plans and proposals to reform the Bid Protest Process and to provide for greater efficiencies, which they believe will better serve to more effectively resolve disputes regarding the award of government contracts. More specifically, and as part of the Fiscal Year 2017 National Defense Authorization Act (“FY17 NDAA”), the HASC and SASC are introducing and considering reforms in the Bid Protest Process as a way of addressing concerns related to frivolous protests and resultant procurement delays.
The HASC has proposed a number of reform initiatives including a review by “an independent entity with appropriate expertise to conduct a review of the Bid Protest Process related to major defense acquisition programs.” In addition, and as part of its reform, the HASC seeks to eliminate the September 30, 2016, sunset that would terminate the GAO’s authority to hear protests of task orders awarded under non-DoD agency contracts.
The independent review sought by the HASC as part of its reform “would include an assessment of the incidence and duration of bid protests, whether bid protests have delayed procurement actions, and whether bid protests are frequent by, or provide financial benefits to, incumbent contractors.” As an independent entity conducts its review as to the frequency of protests, the HASC hopes to determine if incumbent contractors filed protests with the effect of obtaining an extension to the current contract and procuring financial benefits. This concern by the HASC and other defense industry commentators is the result of incumbent contractors likely pursuing protests because of the Bid Protest Process “automatic stay rules,” which suspend procurement award actions. This procedure, which effectively compels the contracting agency to issue bridge contracts while the protest is pending, has concerned the HASC, which believes the automatic stays encourage incumbent contractors to “game the system" by filing meritless or frivolous protests.
However, the GAO’s regulations for the Bid Protest Process avoid frivolity by requiring of protestors “a detailed statement of the legal and factual grounds of protest including copies of relevant documents.”
The elimination of the sunset of the GAO’s authority to hear protests of task orders awarded under non-DoD agency contracts would expand the GAO’s jurisdiction. Federal contractors may view this reform positively, particularly in light of the fact that protests of task orders would be treated consistently across DoD and non-DoD federal organizations. Moreover, federal contractors pursuing awards with non-DoD federal organizations would benefit from this consistency as the time-frame to challenge a contracting agency’s handling of task or delivery order awards will be eliminated.
In contrast to the HASC proposal, the SASC reform initiatives seem to restrict the GAO protest authority and target protestors whose pecuniary interests are paramount. More specifically, the SASC proposes to eliminate the GAO’s jurisdiction to preside over protests involving task orders and delivery orders. Additionally, the SASC proposes to have large contractors with annual revenues of more than $100 million required to pay to GAO costs incurred for processing any protest where “all of the elements [of the protest] are denied in an opinion issued by the [GAO].” Lastly, the SASC proposes that in the case of an incumbent contractor who unsuccessfully protests their loss of a contract, the profit and fee due to the incumbent under any issued bridge contract will be released to the awardee of the protested contract.
The SASC wishes to target serial protesters who protest out of financial interest alone by putting in place disincentives and incentives to limit protests. Notable changes to the GAO’s jurisdiction to hear protests of DoD task order awards include, appointing an ombudsman, selected by the DoD, to essentially replace the GAO and eliminate its jurisdiction in these matters. The use of an ombudsman to hear complaints related to task order awards may potentially create a more streamlined approach to resolving protests. However, there is a widespread belief that the power and influence of an ombudsman to change outcomes in protests is insufficient. Additionally, some members of the government contracting committee may fear that an ombudsman may be subject to agency politics rendering their decisions to be unpredictable. With the SASC’s plan to require large revenue generating contractors and incumbent contractors to pay the GAO and the awardee of protested contracts that are denied respectively, there is the hope that profiteering by protestors will be discouraged.
The HASC and SASC interest in reforming the Bid Protest Process seems to indicate that there is something inherently broken. Some may argue that the brokenness is the result of an overwhelming floodgate of unnecessary protests. The fact of the matter is that protests are rare events. Notwithstanding the HASC’s and SASC’s desire to implement reform, there are some who argue, including former Obama Administration officials, that the Bid Protest Process is positive for the procurement system, with real advantages including:
With these advantages, there are at least two distinct benefits of the Bid Protest Process that attract practitioners and contractors. Firstly, the Bid Protest Process procedurally contains an automatic stay provision, which effectively enjoins the award of a disputed contract until the protest is adjudicated by the GAO. Secondly, the GAO process is devoid of the rigidity and formality that is inherent in other tribunals resulting in inexpensive and rapid decisions and resolutions—within 100 days of a filing. As a result, the reforms proposed by the HASC and SASC may not indeed be necessary and that the receptiveness and integrity of the process are indeed intact.
Both proposals of the HASC and SASC indicate a lack of appreciation for a process that is highly regarded and has served the federal contracting community efficiently. Indeed, the HASC and SASC proposals reflect real differences and disagreements. Their proposals however are based on common concerns—inflated concerns regarding perceived widespread frivolity of protests filed by contractors and resultant procurement delays. Notwithstanding the differences inherent in both proposals, the reality is that some version of the HASC and SASC proposals are likely to emerge from the FY17 NDAA Conference, which should be forthcoming later this year. This will be interesting given that we have a protest system that is not seemingly broken.
Contractors stay tuned.
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