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:
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.