United States: The RAND Bid Protest Study Performed Pursuant To The 2017 NDAA Fails To Support The Pentagon's Desired Restrictions On Contractors' Ability To Challenge Agency Procurement Decisions

Keywords: RAND, Government, NDAA, Procurement

The long-awaited study by the RAND Corporation (RAND) that was performed pursuant to Section 885 of the 2017 National Defense Authorization Act (NDAA) was delivered to Congress on December 21, 2017 and released to the public last week. Not only does RAND clearly explain with data the reasons for the Government's long-standing decision to have a robust bid protest system to review of agencies' procurement decisions, but RAND's data, analyses, and recommendations also undercut most of the incessant (and growing) calls for restrictions on bid protests. Among other things, the RAND report demonstrates that there is no basis for the "pilot program" of restrictions imposed by Section 827 of the 2018 NDAA—which requires payment of agencies' "costs incurred in processing" bid protests by large Government contractors in the event a challenge is not successful.

As RAND explained, the Government, "is a powerful entity in the economy," and has a "moral duty to maintain fairness in how it awards large contracts." The Government also needs to "deter and punish ineptitude, sloth, or corruption of public purchasing officials" (among other reasons for the bid protest system). For years, there have been complaints about the purported abuse of the bid protest process by contractors and unnecessary delays resulting from excessive bid protests. Although the officials calling for restrictions on bid protests were presumably able to present their best evidence and arguments to RAND's independent analysts, the empirical data simply does not support the restrictions sought. The annual complaints about bid protests in the run-up to each year's NDAA should cease—and Section 827 of the 2018 NDAA should be repealed.

RAND's report begins with a long explanation of the reasons for its study, the specific issues to be addressed, and the history of federal bid protest actions. It also provides a good explanation of why Congress has long believed bid protests are a necessary part of the federal procurement system.

Like many decisions made by executive branch officials that affect citizens' rights, people (and companies) whose interests are negatively affected by Government procurement actions (solicitations, awards) can challenge those decisions and have their rationality and legality reviewed under the standards set forth in the Administrative Procedure Act (APA). Not only is there no reason why federal procurement officials' actions should be immune from the APA review to which other federal officials' decisions are subjected, but RAND quoted GWU's Professor Kovacic to explain that bid protests are necessary to "accomplish nonefficiency goals that ordinarily are of little concern to private firms." Among other things:

Taxpayers typically want their government to deal fairly when it distributes money, judgments, and other "services" paid for by taxpayer money. Bid protests aim to ensure that government purchasing agents deal "fairly" with prospective suppliers.

To the extent possible, bid protests also provide assurance that Government funds are being distributed transparently and equitably—and that offerors are being given "an 'equivalent' chance" at winning contracts. In other words, bid protests help assure that contract awards are not tailored to a particular outcome and that taxpayers can be assured that their money is being spent transparently and efficiently. In this regard, protests provide oversight of purchasing agents who, unlike personnel in private companies, are not subject to compensation systems that provide strong incentives for improved performance. In addition, the bid protest system is supposed to "act as a signaling mechanism to potential private partners," which often must invest substantial sums to compete for Government work, that "if a decision is perceived to be unfair," the offeror can obtain review of the decision by "another party."

RAND's report is detailed and long, and describing all of its findings would be the subject of an article, not a blog post. We explain five important takeaways relevant to the arguments for restricting bid protests that have been made during the past several years.

1. Empirical data fails to support the FY 2018 NDAA's "pilot program" imposing costs on large contractors that lose bid protests. After considering other means to curtail contractors' ability to obtain meaningful (and timely) review of procurement decisions, Section 827 of the 2108 NDAA mandates that DoD "carry out a pilot project to determine the effectiveness of requiring contractors to reimburse [DoD] for costs incurred in processing covered protests." Section 827's pilot program will apply to large contractors, i.e., those "with revenues in excess of $250 [million]," when such firms' protests are "denied in an opinion issued by [GAO]." This provision does not take effect until October 1, 2019 (though GAO will have to determine many details before then)—which is ample time to repeal the provision that RAND's report demonstrates is completely unjustified.

DoD's desire, and Congress' decision, to focus initially on large contracts for this "losing-claimant pays" provision only makes sense if one believes that large firms are one of the primary problems in the bid protest system—and the problem that most urgently needs to be addressed. But RAND's data directly contradicts the notion that protests by large contractors are a problem.

Large contractors are not clogging up the Government's procurement system by filing a disproportionately large (or growing) numbers of bid protests. To the contrary, RAND's data shows that the protest activity of "the largest 11 [Government contracting] firms has remained relatively constant and may be slightly declining." What is more, "[t]he top 11 firms have higher effectiveness and sustained rates than the rest of the sample [though these rates are declining over time]—suggesting that they are possibly more selective in the protests they file and spend more resources developing their cases." In other words, higher percentages of the protests pursued by larger contractors have been found to be meritorious or have triggered corrective action by DoD agencies.

Although a loser-pays provision also is not appropriate with respect to small businesses, RAND's analysis of those companies' bid protests highlights the absurdity of Section 827's focus on larger contractors. One of RAND's "most striking" findings "is the fact that protests from small businesses account for more than half of all the protest actions." The ratio of small businesses' bid protests relative to the total number of protests is comparable to the percentage of DoD contracts going to small businesses, but the ratio of small business protests to total protests is "much higher than the fraction of DoD contract dollars going to small businesses." Given this, it is irrational to initiate a test program focusing on large contractors. The "loser pays" provision is unwarranted by any measure.

2. There is no support for claims of a problematic increase of "frivolous" protests. Advocates for restrictions on bid protests have voiced the a perception that the number of frivolous or extremely weak protests is growing. But the protesters' success rates flatly contradict this notion. RAND found that protesters' sustain rate (in which they prevailed after completion of the protest process and issuance of a decision) and the effectiveness rate (which refers to a protester receiving some relief, e.g., the agency takes corrective action prior to a GAO decision) has been stable over time. Indeed, "from FY 2008 to FY 2016, the effectiveness and sustain "rates have been steady and may be slightly increasing with time." "[T]he stability (or slight increase) in the effectiveness rate while the number of protests is increasing refutes the claim that meritless protests (some use the term frivolous) account for th[e] increase[ing]" number of protests.

During their history of reviewing these cases, GAO and the CFC have dismissed bid protests as "frivolous" only a small handful of times. To the extent agencies believe a bid protest fails to satisfy the requirements for an action, they can seek dismissal of purportedly frivolous filings. Absent evidence that frivolous bid protests are a problem facing the procurement system (and there is none), no modifications to GAO's jurisdiction or rules should be considered to address this non-issue.

3. Complaints about the recent increase in bid protest activity must be viewed in context. The RAND study recognizes that the bid protest "activity for both DoD and non-DoD agencies has approximately doubled" during the period "between FY 2008 and FY 2016." Notably, this increase in activity occurred after GAO was given jurisdiction to consider task order protests, though RAND asserted that "even excluding [such protests] the upward trend is still statistically significant."

But RAND correctly points out that the recent increase in protest activity should be considered in context in two respects. First, when the researchers "go back further in time" and analyze a data set that GAO provided, the picture looks very different:

As RAND's chart makes clear, "the time trend clearly shows that protest activity was much higher in the late 1980s and early 1990s than it is today." Second, RAND explains the importance of understanding "that the overall percentage of contracts protested is very small, less than 0.3 percent," and that this "small value implies that bid protests are exceedingly uncommon for DoD procurements."

4. There is no basis for reducing the time GAO has to consider a bid protest. Bid protests at GAO are (by statute) supposed to be—and almost always are—resolved within 100 days. Last year, legislative proposals were considered to reduce to 65 days the amount of time GAO has to resolve bid protests. The RAND report pointed out serious problems with this proposal, explaining that although "a large number of the protest actions are resolved within the 65-day window, those requiring decisions by GAO are not." The cases that go to decision "are typically more complex and as such are not simply resolved." RAND correctly explained that "shortening the window for GAO to close protests could result in an inadequate amount of time to develop the[ record in] these more complex" cases.

The RAND report points out another problem with the proposed shortening of GAO's time to consider bid protests. As a result of agencies' annual procurement cycle—and agencies making large numbers of important award decisions near the end of the fiscal year—GAO bid protest "filings peak around the end of the fiscal year then drop sharply in November, December, and January." The 100-day decision window "allow[s] GAO to smooth the workload between the peak and minimum filing periods (which are adjacent)." Reducing the time to consider protests "would provide less flexibility to GAO in managing its protest workload and may require additional staff to meet peak filing demand." These timing issues would have to be considered carefully to the extent reducing GAO's decision timeline is ever seriously explored. (Note: Although addressed by RAND, it is odd that some agencies complain about the 100 days given the schedule under which protests proceed. Protests are filed without access to the record (unlike other APA review proceedings), and agencies are given 30 days to produce the record, after which a supplemental protest based on the actual record must be filed within 10 days. One obvious solution to reducing the amount of time a protester has to prosecute its challenge or that GAO has to resolve the protest is to require agencies to produce the record earlier in the proceeding.)

5. There is no good reason to reduce contractors' ability to protest task orders awards. As noted above, GAO was given jurisdiction to consider protests of agency awards of task orders above certain financial thresholds. GAO's jurisdiction was expanded to include task orders in FY 2008, when Congress recognized that an increasing volume of contracting dollars was being spent under these procurement vehicles. Although there have subsequently been attempts to limit GAO's ability to consider challenges to task order awards, the RAND analysis explains that "task-order protests have slightly higher effectiveness and sustained rates compared with the rest of protests." The report reasonably concludes that "[t]his positive, though small, correlation suggests that restricting protests on task orders is not supported by the outcomes." Indeed, there is no good reason to restrict challenges to awards using this procurement vehicle as the volume of task order awards continues to increase.

Conclusion

In sum, the RAND report confirms that the current protest process strikes a reasonable balance between the Government's need to get it contracts awarded and protection of the public interest in the integrity and transparency of the acquisition process. Longstanding principles of review of agency decisions underlie the GAO protest process, and the advocates for deterring companies that use the process misapprehend the critical role of review of agency decisions in a democracy.

(The RAND study also produced a list of six recommendations for improving the bid protest process; those issues will be addressed in a later blog post.)

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2018. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions