United States: Congress Authorizes GAO to Charge Bid Protest Filing Fees

Joseph P. Hornyak is a Partner in our Northern Virginia office

In the case of defense procurement, however, Congress has given losers the right not only to protest but also the right to hold up the procurement until the protest is ruled on. Thus, for the price of a stamp, anyone can initiate litigation over the award of a contract...
Jacques S. Gansler, Ph.D., Former Under Secretary of Defense for Acquisition

Most procurement officials would likely agree with Secretary Gansler's frustration at the ease with which unsuccessful bidders can initiate bid protests and thereby hold up important procurements. But his reference to "the price of a stamp" became outdated when the Government Accountability Office (GAO) amended its rules in 2002 to permit the filing of a bid protest by electronic mail to protests@gao.gov.  See 4 C.F.R. § 21.0(f) (67 Fed. Reg. No. 190 (Oct. 1, 2002)). Currently, a bid protest can be initiated without even incurring the cost of postage.  (Of course, Gansler's quote ignores the attorneys' fees and internal costs that are usually necessary to file a valid bid protest.)

This will soon change. In section 1501 of the Consolidated Appropriations Act of 2014, Congress authorized GAO to charge protesters a filing fee. Although Congress did not specify an amount, the new protest fees are to be held in a revolving fund to support the establishment and operation of an electronic filing and document dissemination system, which is also authorized by section 1501. Presumably, this system will offer greater functionality than GAO's current electronic filing system.  Ideally, it will include many of the benefits offered by the Case Management/Electronic Case Files (CM/ECF) system currently in use by the federal judiciary.

GAO has been seeking congressional authority for a filing fee to fund the new system since late 2012. At that time, GAO indicated that it was considering at least two options: a flat fee of $240 per protest or a transaction-based charge per docket filing. The Appropriations Act does not resolve this issue. Instead, it directs GAO to establish a schedule setting forth the amounts of the fees. It remains to be seen how GAO will implement its new authority, although the Act expressly permits GAO to charge the filing fee "whether or not the person uses the [electronic system] with respect to the protest." 

Even a relatively small filing fee will permit GAO to raise significant funds for the development and operation of its new system, given the number of protests filed at GAO these days. In 2013, GAO received 2,429 new cases, which actually represented a slight decrease from the previous year. 

Those of us who practice regularly at GAO are less concerned about the amount of the fee than the mechanics of transmitting payment in the rushed environment that often surrounds the filing of a bid protest. In this regard, the Appropriations Act does not address the consequences of a protester failing to timely pay the fee to GAO. Presumably, this and other issues raised by section 1501 will be addressed in a forthcoming update to GAO's regulations. The U.S. Court of Federal Claims, which also hears bid protests in federal procurements, charges an initial filing fee of $400 in bid protests and other types of cases. The Court requires this fee to be paid at the time of the initial filing unless the plaintiff demonstrates that he or she does not have the financial means to pay.

Some state bid protest forums require the protester to post a bond.  Protest bonds, however, generally serve an altogether different purpose than the filing fees authorized for protests to GAO and the Court of Federal Claims. For example, the State of Florida requires the protester to provide a bond equal to one percent of the estimated contract amount. The bond is intended to secure the protester's obligation to pay the State's costs (excluding attorneys fees) if the protester does not prevail in the underlying protest. Worse, the entire amount of the bond is forfeited if the administrative law judge determines that the protester was filed for a frivolous or improper purpose.  See Fla. Stat. § 337.11. According to a recent study by the National Association of State Procurement Officials (NASPO), protest bonds may help to discourage the filing of frivolous bid protests, but can also impose an undue financial burden on small businesses.

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