This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
Win or lose, bid protests come at a significant cost to public institutions. Even where they are successful in defending against the challenge, government institutions are rarely compensated for their full legal costs, let alone the direct and indirect costs of allocating staff resources to defending claims instead of directing their limited resources toward their ongoing procurement priorities. This section considers the measures that can be implemented to protect government resources against abuse of process, while maintaining open avenues of challenge to protect the rights of prejudiced bidders.
Filing Deadlines
The first barrier against abuse of process is the filing deadline. While public institutions should be accountable for their procurement decisions, their contract awards should not be subject to the indefinite risk of bid protest challenges, nor should bidders be entitled to “sit on their grievances” and remain silent during the process, and then launch after-the-fact claims once they lose. Many jurisdictions have therefore instituted strict bid protest filing deadlines.
For example, in its March 2015 decision in Bannum, Inc. v. United States, the United States Federal Court of Appeals ruled that the plaintiff bidder was precluded from launching a bid challenge since the applicable rules required that the objection in question be filed prior to the submission of bids. In its decision, the Court of Appeals noted the distinction between defects in solicitation documents and defects in the bid evaluation process, explaining that:
A bidder that challenges the terms of a solicitation in the Court of Federal Claims generally must demonstrate that it objected to those terms “prior to the close of the bidding process.” Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1315 (Fed. Cir. 2007). If it cannot do so, the bidder “waives its ability to raise the same objection afterwards…”.
The Court of Appeals found that the complainant did not pursue its available remedies by formally filing a protest prior to the bid submission deadline, and instead attempted to launch its legal challenge after the contract award went to a competing bidder:
It is undisputed that the government received notice of Bannum’s dissatisfaction with the PREA-compliance requirement before awards were made. We conclude, however, that mere notice of dissatisfaction or objection is insufficient to preserve Bannum’s defective-solicitation challenge. The solicitations at issue and the governing regulations put Bannum on notice of the formal requirements for filing a “protest” that would trigger an agency obligation of response and prompt resolution. Bannum did not comply with those requirements; nor did it pursue other available means of formal protest (e.g., to the GAO or the Court of Federal Claims) until after the awards. In these circumstances, it waived its solicitation challenges.
As the Court of Appeals noted, the complainant failed to avail itself of remedies that could have resolved its objections to the terms of the solicitation document prior to bidding and that it could not challenge those terms retroactively after the contract was awarded. As the Court of Appeals concluded:
Having failed to follow any of the various protest procedures available to bidders for swiftly resolving objections to the terms of the solicitation, Bannum cannot raise the same challenge in the Court of Federal Claims now that an award has been made.” This relevant grounds of complaint were therefore dismissed by the court.
When specific complaint filing deadlines are in effect, bidders must file their complaints in accordance with those deadlines or run the risk of being legally barred from raising those complaints after the bidding process has run its course.
Protest Bonds and Filing Fees
To guard against frivolous claims, some jurisdictions require that complainants pay a fee or post a protest bond prior to initiating a legal challenge. For example, in its February 2015 decision in FirstDigital Telecom, LLC v. Procurement Policy Board and Board of Regents, the Utah Court of Appeals upheld a decision to reject a bid protest challenge after the complainant failed to properly file a required bid protest bond. The relevant statutory provisions require a complainant to file its challenge within seven days of the disputed contract award and to post a security deposit in the amount of five percent of the low bid. In dismissing the appeal, the Court of Appeals noted that the complainant had only paid a $500 deposit instead of the required $15,000, and had submitted those insufficient funds two days after the complaint filing deadline.
By way of illustration of broader global practices, in its June 2014 report entitled Bond Requirements in a Procurement Protest Procedure in Selected Countries, the United States Library of Congress surveyed the bid protest bonding requirements of 59 countries. The report noted that many of the surveyed jurisdictions required a complainant to submit a protest bond, which was sometimes referred to as a “fee” or “deposit”, as a prerequisite to filing a bid protest:
This report contains information on twenty-one countries on the question of whether a bond is required for a protest procedure in government procurement. In some countries the term “deposit” or “fee” is used instead of “bond.” The majority of countries included in this report require the payment of fees for an administrative review. These fees can be forfeited if the claim is found to be frivolous. In Israel, there were proposals to adopt a bond requirement, most recently in 2007, but they were not enacted. Thirty-seven additional jurisdictions were reviewed and not found to have provisions requiring a bond: Angola, Austria, Bahrain, Belgium, Brazil, Cameroon, Canada, Cape Verde, China, Costa Rica, Denmark, El Salvador, the European Union, Finland, France, Germany, Greece, Haiti, Honduras, Hong Kong, Iceland, Italy, Japan, Kuwait, Lebanon, Morocco, New Zealand, Nicaragua, Norway, Oman, Pakistan, Portugal, Saudi Arabia, Senegal, South Korea, Sweden, and Vietnam.
As the report summarized, those jurisdictions that, at least in some circumstances, require some form of bid protest bond or retroactively sanction frivolous claims included Argentina, Armenia, Bangladesh, Botswana, India, Kenya, Mauritius, Mexico, Mozambique, Nepal, Philippines, Singapore, Switzerland, Taiwan, Turkey, Uganda, and Ukraine.
However, the report also noted that many jurisdictions operate without any barriers to filing a bid protest, which is particularly concerning in those jurisdictions that do not require a bid protest bond while also granting automatic stays of any contract awards when a bid protest is filed. As the report explained, the United Kingdom is one of those jurisdictions:
The United Kingdom has what is known as the “Alcatel standstill period” of a minimum of ten days between the date a government contract has been awarded and the date it is signed. This time frame commences as soon as the contracting authority publishes a notice that the contract has been awarded or a framework agreement has concluded. The notice must be in writing and communicated in the most rapid form practicable. The ten-day period is to allow an unsuccessful bidder to challenge the decision. The initial challenge to the decision must be submitted at the end of day two of the standstill period and is known as requesting an additional debriefing. The debriefing contains information about the characteristics and advantages of the successful tender. All tenderers have the ability to file a court case during the standstill period if they are unsuccessful, regardless of whether or not they have requested an additional debriefing. It appears that the tenderer disputing the contract award does not have to provide a bond during the process.
This process was a result of two judgments from the European Court of Justice, jointly known as the Alcatel case. There currently appear to be no pecuniary fines specifically directed at people who bring repeated frivolous complaints; however, court rules for abuse of process will apply to these individuals. If the courts find that there has been an abuse of process, they can strike out the case, either in its entirety or in part, and can make a civil restraint order, in which any future applications to file a case would have to be first approved by the court. In some cases, a party to a case that has been brought as an abuse of process may obtain damages.
Jurisdictions that have an open-door policy to bid protests while also granting automatic stays fall at the high-risk end of the bid protest spectrum from the standpoint of exposing government operations to bid protest delays.
For example, in the federal system of Canada, the Canadian International Trade Tribunal does not require a bid protest bond or filing fee for complainants. In fact, its website includes instructions and webinars to help coach suppliers on how to file a complaint against the federal government. Further, the Tribunal historically declined to order costs against losing complainants until it was ordered to do so by the Federal Court of Appeal and, even after having been so ordered and having developed its cost awards guidelines, cost awards against losing complainants remain nominal when compared to the actual costs of defending against bid protests.
However, complaint costs can cut both ways. For example, in its May 2016 decision in Federal Builders, LLC-The James R. Belk Trust, the U.S. Government Accountability Office (GAO) awarded over $250,000 in costs against the US federal government in relation to a successful bid protest. The GAO awarded the complainant $49,000 in bid preparation costs, $183,000 in bid protest legal fees, $7,800 in staff time, and $22,000 for the costs of pursuing its reimbursement claim. In coming to its decision, the GAO noted that the “lengthy delay in the agency’s initial offer of settlement of the legal fees and the disparity between the offer and what the agency later agreed should be reimbursed” supported its decision on the costs award.
The Onus of Causal Connection
Most bid protest remedy regimes also operate on the basis that a complainant must prove a “causal connection” between the rules breach and its loss of contract. In other words, it is not enough to show a flaw in the procurement process – complainants must also show how that flaw resulted in the loss of a contract that they would have otherwise won. If a complainant is unable to show a direct causal connection between the rules breach and the outcome, the public institution can the rely on the “You Wouldn’t Have Won Anyways” defence as the ultimate shield against seeing a remedy granted to the complainant.
For example, in its September 2016 determination in Solutions Moerae Inc. o/a Msi v. Industry Canada, the Canadian International Trade Tribunal refused to grant a remedy for a complaint involving a professional services Request for Proposals (RFP). While the Tribunal found that the government’s evaluation of prior experience was flawed due to the application of hidden considerations, it ultimately refused to grant a remedy since it found no causal connection between the evaluation irregularities and the resulting contract award.
Similarly, in its December 2017 decision in European Union Intellectual Property Office v. European Dynamics Luxembourg SA, the European Court of Justice overturned a lower court ruling that found a government body liable for relying on unstated sub-criteria and weightings. The case dealt with a tendering process for IT project management services. The Court found that the unstated criteria and weightings could be defensible if they met an implied terms test. Furthermore, the Court determined that the third-ranked complainant was not entitled to a remedy since it failed to show how the alleged infractions impacted the rankings and cost it the contract award.
As these cases illustrate, striking the right balance between allowing for bid protests and avoiding abuse of process is a delicate process. Filing deadlines, protest bonds, and onus of proof standards all serve to maintain that right balance and to avoid declaring open season on government contract award decisions.
