Contractors & the Law


RAND report deals blow to Department of Defense’s efforts to limit bid protests

 

Over the past few years, there has been a major push by the Department of Defense (DOD) and certain members of the U.S. Senate Armed Services Committee for reforms aimed at limiting the number and impact of bid protests. The proposed protest reforms — such as reducing the time to decide a protest, withholding contract payments from incumbent contractors that file protests and limiting the choice of protest venue to a single forum — have been largely opposed by the private sector and trade associations. The U.S. House of Representatives has also generally opposed these reforms, and, as a result, most have failed to become law. The National Defense Authorization Act, or NDAA, for FY2017 required DOD “to carry out a comprehensive study on the prevalence and impact of bid protests on Department of Defense acquisitions, including protests filed with contracting agencies, the Government Accountability Office (GAO), and the Court of Federal Claims (COFC).”

The DOD commissioned the RAND Corporation to study the matter and prepare a report, which RAND published in January 2018. DOD likely requested this report believing that it would show contractors were abusing the protest system supporting DOD’s calls for bid protest reform. However, the findings, observations and recommendations in the RAND report did not end up supporting the department’s view that contractors were abusing the protest process or the need for reform. Instead, RAND found that only a small number of procurement actions are protested (less than 0.25 percent of all DOD contracts) and the fact that the protest effectiveness rate at GAO has consistently hovered around 40 percent over the past 10 years reflects that contractors are generally not filing meritless protests as DOD had argued. Not only did RAND recommend against the protest restrictions the department had proposed, RAND questioned whether some existing restrictions (such as limits on task order protests) were in the best interest of improving the fairness of DOD procurement.

While there is little agreement between the DOD and contractors when it comes to bid protest policy, from the RAND report, it is apparent that there is at least one clear point of agreement: that better post-award debriefings would reduce the number of bid protests filed (particularly meritless protests). RAND recommended that the department take steps to enhance the quality of post-award debriefings, beyond the minimum requirements in Federal Acquisition Regulation, or FAR, 15.506. While enhanced debriefings will be coming to select DOD procurements sometime in 2018 or 2019 as a result of the enhanced post-award debriefings provisions in Section 818 of the NDAA for FY 2018, these new enhanced debriefing rights will only apply to a select number of DOD procurements.

The findings in the RAND report are likely to stop the momentum on the department’s efforts to limit contractors’ bid protest rights.

In addition to the legislative and policy implications, the report contains fascinating quantitative insights into the bid protest process, primarily at the GAO. One of the issues that RAND’s data repeatedly points to is how the protest effectiveness and sustain rates at GAO are depressed as a result of many small businesses pursuing bid protests without experienced bid protest counsel, sometimes without any outside legal counsel at all. RAND found that protests filed by small businesses at GAO (when compared with protests filed by large businesses) were approximately 18 percent less likely to be effective, 27 percent less likely to be sustained and 50 percent more likely to be dismissed as legally insufficient.

The following data in the RAND report supports the conclusion that this disparity is largely caused by small businesses often pursuing bid protests at the GAO with poor or no legal representation:

  • While at GAO there is disparity between small vs. large business protest effectiveness and sustain rates, at COFC there was no statistical difference. This can likely be explained by the fact that at the GAO a protest can be filed without an attorney, while at COFC a contractor must be represented by legal counsel to file a protest.
  • Protective orders were only issued in 48.9 percent of GAO protests, but where a protective order was issued the protest was at least 50 percent more likely to be effective or sustained. Because the GAO will only issue a protective order if the protester is represented by outside legal counsel, this statistic shows that outside legal counsel of any kind greatly enhances a protester’s chance of success.
  • Protests were approximately 67 percent more likely to be sustained if the protester filed a supplemental protest in addition to its initial filing. This is important because supplemental protests are rarely filed without a protective order being issued, and a protective order cannot be issued unless the protester is represented by outside legal counsel. Moreover, experienced protest counsel are far more likely to locate the basis for a meritorious supplemental protest in the protected record.
  • GAO protests by the largest 11 contractors, who are generally represented by experienced protest counsel, were approximately 57 percent more likely to be effective and 227 percent more likely to be sustained.

As RAND correctly concluded, these statistics  “suggest that more protests filed by small businesses might be successful with better legal representation” and that “when small businesses are forced to use legal counsel, their protest sustained rates are similar to those of larger firms.” As a solution to this problem, RAND suggested requiring protests at the GAO to be filed through legal counsel and even went as far as to suggest that maybe the U.S. Small Business Administration should provide legal assistance to small business protesters. While neither of these solutions seems ideal on its face, the RAND report does shine the light on an important issue for small businesses.

A copy of the RAND report is available at https://www.rand.org/pubs/research_reports/RR2356.html.

 

Adam Lasky is a partner at Oles Morrison, where he focuses his legal practice on helping clients win and navigate government contracts. With extensive experience litigating bid protests, Lasky has a notable track record of success in multiple protests before the U.S. Court of Federal Claims, GAO and state/local agencies. Government contractors look to Lasky for counsel on how to enhance the chances of receiving contract awards, ensure FAR and SBA regulatory compliance, and minimize risks and resolve disputes that arise during contract performance.