Pentagon seeks to limit bid protests in federal court

The Defense Department is proposing legislation to impose new constraints on government contractors’ ability to protest federal agencies’ award decisions, including by rolling back their rights to file bid protests in federal court.

Currently, companies who believe an agency mishandled a contract award have two independent forums to file protests: the Government Accountability Office and the U.S. Court of Federal Claims (COFC). But some firms opt to take their cases to both.

If, for example, GAO denies or dismisses their protest, they still have the right to file a new claim at the COFC.

DoD’s proposal would essentially eliminate that option by requiring contractors to bring cases to COFC within 10 days of the agency’s award decision: the same deadline used by GAO. Since GAO has up to 100 days to sustain or deny a protest, a company could not wait and use the court as a backstop if it loses its case at GAO.

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The Pentagon said the legislation is meant to reduce the number of instances in which procurements are held up by multiple protests. It argued that companies should be forced to pick either GAO or the court to handle their protest – but not both.

“The amount of time that could be consumed by protests would be reduced, scarce agency procurement resources would be conserved by ensuring that two separate trial-level forums do not adjudicate the same bid protest, and protesters would be assured of accountability and transparency no matter which forum they elected,” Defense officials wrote in their formal proposal to Congress. “This reform would largely eliminate an unintended ‘forum shopping’ practice that has arisen under the existing bid protest system, and would materially contribute to the expeditious yet fair resolution of bid protests.”

As a case study in what it believes is wrong with the current system, the department pointed to a 2006 case involving program management services for the military’s health system that was bogged down in protests for nearly three years.

A losing bidder, Axiom Resource Management, filed three successive GAO protests alleging conflicts of interest on the part of the winner, Lockheed Martin. GAO did not resolve the issue to its satisfaction, so in 2008, Axiom took the same allegations to the Court of Federal Claims, which took its side and overturned the award. But a federal appeals court overruled the COFC a year later.

“At the conclusion of the litigation, the parties found themselves in the same position they held when the GAO issued its decision on the merits of the protests; the agency’s actions were ultimately upheld,” DoD wrote. “By establishment of parallel timelines at GAO and COFC, the statutory requirement for expeditious resolution of protests is maintained, without sacrificing accountability.”

However, independent studies and GAO’s own annual data on bid protests suggest that the Axiom case is an exception, not the rule, and that as a general matter, protests are not an overwhelming burden on the Defense procurement system.

GAO’s most recent annual report showed the office received just 2,500 protests in the past year, and dismissed all but 509, about 20 percent, of those because they lacked merit.

RAND Corporation study released earlier this year found that bid protests are “exceedingly uncommon.” Only 0.6 percent of DoD’s contracts are ever protested at all, and only 0.025 percent of them ever wind up before the COFC.

However, the same report found that contractors do seem to be using the court as a place to appeal GAO decisions they disagree with. For the entire period between 2008 and 2017, the court decided only 475 cases. But in recent years, roughly 70 percent of those had already been handled by GAO.

“The recent level is similar to the anecdotal value we heard from one agency about the number of cases at COFC with a prior history at GAO,” the RAND authors wrote. “The increase with time could suggest that companies may be more willing to protest at COFC if they lose at GAO – possibly linked to declining procurement funding. It could also reflect dissatisfaction with corrective action.”