RAND study: Bid protests are rare, aren’t frivolous

A congressionally-mandated report on bid protests in the Defense Department appears to validate a view long held by the Government Accountability Office and many government contractors: protests are not an excessive burden on the Defense procurement system, and notwithstanding some exceptions, companies are not abusing the process.

The study, conducted by the RAND Corporation, was ordered as part of the 2017 Defense authorization bill as a compromise to senators who’d introduced legislation that would have restrained companies’ ability to file protests. It found that while protests have been steadily increasing since 2008, the rate at which companies have succeeded in using them to convince the government to alter its procurement decisions or provide some other relief has stayed constant.

“If the increases were due to [frivolous] protests, the effectiveness rate should be falling, which it is not,” the authors wrote. “One possible explanation is that firms are more willing to protest procurements, where, before, they refrained from doing so due to either the costs involved or the potential for creating ill will with the customer.”

Between 2008 and 2016, bid protests of Defense contracts to GAO increased from about 900 to 1,400; the Court of Federal Claims also saw an increase during that timeframe. The percentage of contracts that were protested also grew, but overall, protests remain “exceedingly uncommon,” the study found: fewer than 0.6 percent of contracts are ever contested to GAO or to federal courts.

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And the report cautioned lawmakers against focusing any future protest reforms on large procurements and large Defense contractors. While those instances tend to garner outsized attention, the 11 largest firms, combined, filed no more than 40 protest actions in any given year.

Conversely, 53 percent of all protests are filed by small businesses, even though they take in only 15 percent of DoD’s contract dollars, and they’re more likely to be dismissed by GAO for being legally insufficient. RAND’s analysis suggests Congress take steps to improve the “quality” of protests by those firms, perhaps by offering them legal assistance through the Small Business Administration to help them determine whether they have a valid case prior to filing a claim.

And as a general matter, the authors said DoD could reduce the number of meritless claims filed against it if it provides more information to losing bidders during post-award debriefings.

“The worst debriefings were characterized as skimpy, adversarial, evasive, or failing to provide required reasonable responses to relevant questions,” they wrote. “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 in most cases.”

Congress took a step in that direction in the 2018 Defense authorization bill when it told the department to use those briefings to proactively disclose any information that might come to light during a potential GAO or court protest.

And some components of the Defense Department have already instituted such policies. The Air Force, for instance, makes all of its source selection documents available to a losing company in hopes of demonstrating to its lawyers that a protest would prove fruitless.

But overall, companies have a strong incentive to make use of the protest system when they believe the government acted improperly, mainly because data and their own experience shows those protests are successful almost half of the time.

GAO’s latest annual report on protests showed that it ruled conclusively in companies’ favor in 17 percent of cases, down from a “sustain” rate of 23 percent the year before. But in 47 percent of cases, the protests succeeded in convincing the government to take some kind of corrective action. The RAND report noted that the “effectiveness” rate, as it’s called, has held steady for more than a decade and appears to be increasing.

And the authors noted the effectiveness rate for task order protests under multiple award contracts is even higher, even though Congress has periodically tinkered with the thresholds at which companies can lodge those protests or allowed GAO’s authority to hear them to lapse altogether.

“The increased threshold is perceived as a mechanism for reducing protests and their attendant costs and delays for DoD,” they wrote. “Such a change could reduce the number of task-order bid protests (which account for approximately 10 percent of the protest actions). However… task protests are generally more likely to be sustained or have corrective action compared with other types of protests. This result suggests that task-order protests fill an important role in improving the fairness of DoD procurements. We recommend caution in considering any further restrictions on task-order bid protests.”

However, the RAND study wasn’t able answer several of the questions Congress posed, particularly some that appeared to have been teed up to provide ammunition for some reining-in of protests.

For instance, the authors said they couldn’t provide any analysis of how much time is consumed in the procurement process by government personnel attempting to prevent protests at various stages of an acquisition, citing a lack of available data. For similar reasons, the report did not analyze time consumed by agency-level protests.

Unsurprisingly, the study authors found widely-diverging attitudes in how government personnel and members of industry view the protest system and pointed to a broader “lack of trust” on each side.

On the government side, personnel told RAND that they did not believe they altered their acquisition strategies solely to ward off potential protests and that protests didn’t affect their ability to meet operational and warfighter requirements, but did say the possibility of protests brings additional scrutiny from agency lawyers. And the protest process is generally disliked within the ranks of the acquisition workforce.

“The prevailing thought is that contractors have an unfair advantage in the contracting process by impeding timely awards with bid protests,” the report said. “They stated that the federal government allows too many ‘weak’ allegations in a protest, that the contractor has too much time to protest, and that GAO takes too long to respond.”

Companies, industry associations and private-sector procurement attorneys were more likely to view the protest process as an essential feature of the acquisition system that keeps the government honest.

“[Industry] sees the bid protest system as providing transparency throughout the procurement process. Industry representatives also stated that if bid protests were not allowed or were curtailed, companies would likely make fewer bids,” the report said.