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Posted on Friday, January 19, 2018

Key Findings in DoD’s Bid Protest Study

There has been much talk in recent years about a supposed increase in “frivolous” bid protests. In the National Defense Authorization Act for Fiscal Year 2017, Congress instructed the Department of Defense to conduct an independent study of the bid protest process in DoD procurements. The RAND Corporation recently published the results of this study, Assessing Bid Protests of U.S. Department of Defense Procurements, which suggests that frivolous protests do not account for the increase.  According to the RAND report, “the stability (or slight increase) in the effectiveness rate while the number of protests is increasing refutes the claim that meritless (some use the term frivolous) protests account for those increases. If the increases were due to such protests, the effectiveness rate should be falling, which it is not.”

Background

 The study process had two parts. First, a qualitative inquiry – a literature review that involved cataloging and identifying information related to the issues Congress wanted the study to consider and discussions with subject-matter experts from the U.S. government, industry, and the legal sector, as well as RAND experts who were knowledgeable about bid protests inside and outside of DoD.

Second, a quantitative inquiry examining DoD’s current bid protest landscape. These efforts focused on collecting bid protest data and histories from GAO and COFC, the vast majority of which were based on their case dockets.

Summary

RAND made many notable findings based in its study, and we’ve highlighted what we consider some of the key findings below.

Government and contractors disagree sharply. The qualitative analysis found substantial differences between how DoD and the private sector view the current bid protest process.

DoD personnel were generally unhappy with the current bid protest system. They believed that contractors have an unfair advantage in the contracting process in that they are able to impede timely awards with bid protests.

These personnel also stated that the protest rules encouraged this behavior by allowing protesters to make an excessive number of ‘weak’ allegations, by permitting contractors too much time to protest, and by virtue of the amount of time it takes to resolve cases. In addition, there was a commonly held belief that a contractor is more likely to file a bid protest if it is an incumbent that has lost in a follow-on competition. The military services gave a variety of reasons for an incumbent filing a bid protest—ranging from structuring an orderly transition of its workforce to obtaining a follow-on bridge contract from the government that would provide additional revenue.

In contrast, government contractors see “bid protests as a healthy component of a transparent acquisition process, because these protests hold the government accountable and provide information on how the contract award or source selection was made. If protests were not allowed or were curtailed, industry representatives argued, companies would likely make fewer bids.”

Contractors told RAND that good debriefings would reduce protests. RAND concluded that “too little information or debriefings that are evasive or adversarial may lead to a bid protest.” Contractors also felt that “the acquisition workforce was insufficiently staffed and could benefit from additional training.”

Protests have steadily increased since FY 2008. RAND’s quantitative analysis found that GAO protests steadily increased between FY 2008 and FY 2016 and in fact “approximately doubled” with DoD accounting for roughly 60 percent of protests. There was a similar trend for protests filed with Court of Federal Claims, with RAND finding that “while there was a statistically significant increase in all protests at COFC over time, the upward trend in the number of DoD protests was not statistically significant.”

Interestingly, the increase in the number of protests filed is “indifferent to changes in DoD spending and contracting.” Although the number of DoD contracts and contract spending declined from FY 2008 to FY 2016, protests increased.

It should also be noted that although the number of protests have steadily increased over the last several years, the overall percentage of contracts protested is very small. Less than 0.3 percent of all contracts are protested.

Small businesses protest more frequently. More than half of GAO and COFC protests are from small businesses. Small business make up 53% of the protests at GAO and 58% of the protests at COFC. The RAND study found that at GAO, “small-business protests are less likely to be effective and more likely to be dismissed for legal insufficiency.” The same is not true for small business protests filed at COFC, where all parties are required to be represented by legal counsel. RAND found that protests in which legal counsel was retained by the protestor have higher effectiveness and sustained rates.

Stable effectiveness rates refute claims of an increase in frivolous protests. Approximately half of all GAO protests provide “effective relief,” meaning either that GAO sustained the protest or the agency took corrective action. RAND concluded that “this rate suggests that the bid protest system provides a necessary oversight function that greatly improves the integrity and quality of procurements. It also suggests that the current acquisition system does not suffer from a flood of frivolous bid protests when compared with the vast amount of protests in which some sort of relief is granted.” RAND further noted that “the stability of the bid protest effectiveness rate over time—despite the increase in protest numbers—suggests that firms are not likely to protest without merit.”

RAND’s Recommendations. RAND made several recommendations based on its research and analysis, such as:

  • Enhance the quality of post-award debriefings.
  • Be careful in considering any potential reduction to GAO’s decision timeline.
  • Be careful in considering any restrictions on task-order bid protests at GAO.
  • Consider implementing an expedited process for adjudicating bid protests of procurement contracts with values under $0.1 million.
  • Consider approaches to reduce and improve protests from small businesses.
  • Consider collecting additional data and making other changes to bid protest records to facilitate future research and decisionmaking.

This excellent report is a must-read for procurement professionals, both government and contractor. It is available at https://www.rand.org/pubs/research_reports/RR2356.html.

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, legal updates, events, and more. This post was published in the January 2018 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.

Terry O’Connor and Stephanie Wilson co-lead Berenzweig Leonard’s Government Contracts practice. Terry can be reached at toconnor@berenzweiglaw.com. Stephanie can be reached at swilson@berenzweiglaw.com.