This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In a 2018 study sponsored by the United States Congress entitled Assessing Bid Protests of U.S. Department of Defense Procurements, the RAND Corporation presented a series of findings in what is known as the RAND Report regarding the effectiveness of the US federal bid protest system in the area of military procurement. The report ultimately recommended against any significant changes to the bid protest system, but called for improved government debriefings.
As the RAND Report noted, the US federal bid protest system has a long and well-established history, which includes the establishment of the U.S. Government Accountability Office (GAO) and the Court of Federal Claims (COFC) as venues for suppliers to bring challenges against federal government contract award decisions:
History of Bid Protests
The Tucker Act of 1887 was one of the earliest legislative acts regarding U.S. government contracting. Through the act, the U.S. government waived its sovereign immunity in certain lawsuits. It allowed for lawsuits in cases of “express or implied” contracts in which the U.S. government was a party. Prior to the Tucker Act, the U.S. government could not be sued.
The framework for the bid protest system began to take shape when GAO was established as the U.S. General Accounting Office in the Office of the Comptroller General through the Budget and Accounting Act of 1921. Prior to this, bid protests were directed through the judicial branch, often with little success for protesters. It should be noted, however, that few if any protests were successful in this new venue before the 1950s. The reason appears to be that the government was not required or expected to meet additional requirements; rather, the government was free to act similarly to a private company in its distribution of contracts. Through the 1950s, GAO acted as the only nonjudicial venue for protests outside of the contracting agency.
The Walsh-Healey Public Contracts Act of 1936 was passed as a part of the New Deal and dealt with labor rights for workers on government contracts. Its goal was to improve general working conditions, and it applied to goods-based government contracts exceeding $10,000. The act established overtime pay, minimum wage, and safety standards and prohibited labor from convicts and persons younger than 16. It was the follow-up to Executive Order 6246, which required government agencies to work under fair competition requirements. The act was largely considered a signal of “good faith” that the government would honor and enforce its own labor laws in the award of contracts.
The Administrative Procedure Act of 1946 set a standard for judicial review. The legislation “[g]overns the process by which federal agencies develop and issue regulations.” Additionally, it “[p]rovides standards for judicial review if a person has been adversely affected or aggrieved by an agency action.” The act was especially important in that it extended the powers of judicial review beyond the assessment of financial damages or intent to commit fraud.
The Wunderlich Act of 1954 arose out of the 1951 Supreme Court case United States v. Wunderlich. This legislation provided that, should a contractor appeal an administrative decision to a court, any administrative determinations under a disputes clause “shall be final and conclusive.” A later Supreme Court ruling, United States v. Carlo Bianchi & Co., ruled that, according to the Wunderlich Act, the court could not make a determination of the facts and must confine its review to the administrative record.
Some three decades after the Wunderlich Act, Congress passed the Federal Courts Improvement Act of 1982, which established the U.S. Court of Appeals for the Federal Circuit and the U.S. Claims Court, which would later become COFC. Shortly thereafter, when Congress passed the Competition in Contracting Act of 1984, a journal article clarified the new view of the role of government in contracting:
Because many businesses make Government contracting their sole or principal source of income, the award of a contract may be vitally important if follow-on work is obtained. Similarly, a growing dependence on Government contracting for its source of income may cause a business to seek a contract in order to keep its plant facilities operating or its personnel employed. The Government contract, therefore, has for many businessmen a value that must measure by more than profit that flows directly to a company as the result of performing a specific contract.
This legislation ultimately expanded and augmented GAO’s power to resolve bid protests. It also established—for a trial period—the General Services Board of Contract Appeals for protests involving data processing equipment and telecommunications. The Paperwork Reduction Act of 1986 made the board a permanent bid protest jurisdiction.
While this system of checks-and-balances results in greater government accountability, the RAND Report noted a significant difference between how Department of Defense (DoD) personnel view the bid protest system and how the system is viewed by private sector suppliers. As the report explains, while the DoD viewed bid protests as obstructive to operational needs, suppliers view bid protest mechanisms as an essential element of a fair tendering system and felt that the government should work to enhance the transparency of its debriefing practices:
Our qualitative analysis found substantial differences between how DoD and the private sector view these issues. In our discussions, DoD personnel expressed a general dissatisfaction 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.
These DoD views were contrasted with views expressed in our discussions with representatives from private-sector companies, trade associations, and private law firms regarding the impact of bid protests on their corporate decision making. Overall, the private sector views 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. That said, a major private-sector concern was the quality of post-award debriefings.
The worst debriefings were characterized as skimpy, adversarial, evasive, or failing to provide required reasonable responses to relevant questions. It became clear over the course of our study that too little information or debriefings that are evasive or adversarial may lead to a bid protest. The private sector also observed that the acquisition workforce was insufficiently staffed and could benefit from additional training. That workforce was cut massively in the 1990s and is still in the process of rebuilding.
While the RAND Report noted a steady increase in recent years in the number of bid protests involving military procurements, it also noted that this increase was statistically insignificant when put within the context of the overall increase in military procurement over that same period:
Our quantitative analysis included a review of available data on bid protests filed with GAO and COFC.6 We found a steady increase in the number of bid protest actions at GAO between FY 2008 and FY 2016; during that period, protest activity for both DoD and non- DoD agencies approximately doubled. Protest actions associated with DoD agencies accounted for roughly 60 percent of total protest actions over this period. We found a similar trend for protests filed with COFC. 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.
The time trends are indifferent to changes in DoD spending and contracting. Overall DoD procurement data show that the number of contracts and contract spending declined from FY 2008 to FY 2016. This trend runs counter to that for DoD bid protests. In Figure S.1, we show GAO data for the percentage of contracts protested and the number of contracts protested per billion dollars of DoD contract spending. The increases are statistically significant. Still, it is important to note that the overall percentage of contracts protested is very small—less than 0.3 percent. The trends are less clear at COFC, but the rates are an order of magnitude smaller (shown in Figure S.2). These small protest rates per contract imply that bid protests are exceedingly uncommon for DoD procurements.
In fact, the RAND Report noted that “the overall percentage of DoD contracts protested was very small—less than 0.3 percent”, which implied that “bid protests are exceedingly uncommon for DoD procurements”. With respect to GAO bid protests, the RAND Report observed that the stable success rate for bid protests suggest that firms are not likely to bring unmeritorious challenges. The report also found that smaller firms enjoyed a lower success rate at the GAO, while cases brought by legal counsel enjoyed higher success rates, and larger contracts tended to attract higher rates of challenge. However, with respect to COFC proceedings, the report found a declining success rate, which suggests that firms are more willing to bring less meritorious challenges to that venue. The report further noted that the success rates between small and large suppliers did not vary in COFC proceedings and that the overall number of complaints across both forums was increasing, with most of the challenges in both forums brought by small businesses. The RAND Report recommended improvements to the quality of debriefings as a means of reducing bid protests:
Enhance the Quality of Post-Award Debriefings
A major concern from the private sector is the quality of post-award debriefings. The consensus among companies is that the quality and number of post-award debriefings vary significantly. The worst debriefings were characterized as being skimpy, adversarial, and evasive or as failing to provide required reasonable responses to relevant questions. In desperation, unsuccessful offerors may submit a bid protest to obtain government documents that delineate the rationale for the contract award. The bottom line is that, in most cases, too little information and evasive/adversarial debriefings will lead to a bid protest.
Our recommendation is to consider having DoD adopt a debriefing process similar to the U.S. Air Force’s extended briefing process. The extended briefing process provides an unsuccessful offeror the opportunity to participate in an extended or enhanced post-award debriefing as an initiative to dissuade unsuccessful offerors from filing bid protests. Extended debriefings offer a transparent means whereby the Air Force provides an unsuccessful offeror’s outside counsel with information that is not otherwise provided. By offering such documents—or even the entire agency record—before a GAO protest can be filed, an offeror’s outside counsel can determine whether a bid protest is warranted and provide an opinion to the unsuccessful offeror about the fairness and impartiality of the evaluation and whether the award decision was rational. The Federal Aviation Administration has adopted a similar process and has seen results similar to the U.S. Air Force in that extended debriefings frequently result in an unsuccessful offeror’s counsel dissuading the company from filing a bid protest or persuading it to withdraw a previously filed bid protest.
We note that the U.S. Senate and House Armed Services Committees recently addressed bid protest reform for DoD acquisitions related to post-award bid protest debriefings. This has been documented in Section 818 of the FY 2018 NDAA, “Enhanced Post-Award Debriefing Rights.” The general expectation is that these provisions should substantially improve the quality and usefulness of post-award debriefings by providing additional transparency into the underlying DoD competition process. Disappointed bidders will gain greater understanding of the evaluation and award process and can better analyze any potential protest grounds before filing a protest.
According to the RAND Report, improved communications in the form of debriefings can result in improved bidder understanding of the bidding process and fewer bid protests, results that both bidders and government departments can agree with.
