Will GAO’s decision to charge $350 per filing stop frivolous protests?

Subscribe to Federal Drive’s daily audio interviews on iTunes or PodcastOne

Call it the “Latvian Connection effect” or blame it on Congress, but either way filing a bid protest with the Government Accountability Office is no longer going to be free starting in 2018.

And if Senate lawmakers get their way, the cost of filing a complaint with GAO could cost some large companies tens of thousands of dollars or more.

Ralph White, the managing associate general counsel for procurement law for GAO, said the agency is developing a new electronic protest docket system and will move forward with its plan to charge $350 for each filing to help offset the cost of development, operations and maintenance of the system.

Advertisement

“GAO has completed development of the EPDS application, however, we are in the final stages of completing security enhancements to the system,” White said in an email to Federal News Radio. “Once the enhancements have been implemented, and GAO issues an authority to operate the system, the production environment will be established. GAO will implement the system in two phases. The first phase will be a pilot program. In the pilot phase, GAO will migrate several existing protests to the system and require the parties in those cases to use the system; since the pilot program will be limited to protests already filed, we will maintain redundancy with the existing methods of processing a protest. The pilot program will allow GAO to ensure that the system is functional and properly calibrated, as well as provide GAO and external users the opportunity to become familiar with the system prior to deploying the system in all cases.”

White said GAO will begin collecting the filing fee when the docket system moves into phase two in the March timeframe.

“After successful completion of the pilot program, in the second phase, GAO will fully implement and go live with the system for all new cases,” he said. “At that time, protesters will be required to file all new protests in the system and they will be required to pay the filing fee.”

White said GAO is developing the system and collecting fees to support it after Congress mandated it in the Consolidated Appropriations Act of 2014. GAO first proposed charging $350 per protest in 2016 and asked for comments from industry and other stakeholders.

“GAO received several comments regarding the proposed filing fee. Several commentators expressed support for a filing fee, including suggesting a higher filing fee to discourage or reduce the number of protests,” White said. “On the other hand, several commentators were concerned that the imposition of a filing fee or the amount of the proposed filing fee would discourage small businesses from filing protests. GAO does not intend for the fee to discourage or reduce the number of protests. Rather, the sole purpose of the proposed filing fee will be to cover the costs of establishing and operating EPDS. GAO determined that a uniform fee for all protests that was limited to offsetting the costs of the system was appropriate.”

But some procurement lawyers say the filing fee to pay for the cost of the docket system is a way to hide the real reason — to deter frivolous protests, hence the “Latvian Connection effect.”

If you remember, GAO suspended the company from filing new protests for a year in August 2016. Latvian Connection had filed more than 500 bid protests over the last few years, claiming agencies are routinely and knowingly violating the Small Business Act and other small business provisions. In 2016 alone, the company filed 150 bid protests.

Since GAO lifted the suspension in August 2017, Latvian Connection has filed five bid protests, according to the agency’s docket.

“GAO can’t admit their ulterior motive, and here’s why. In 2009, GAO sent a report to Congress saying that imposing penalties on frivolous protesters is a bad idea, which could harm the federal contracting process by causing a chilling effect, and that GAO doesn’t have the capabilities to determine frivolity,” said Christoph Mlinarchik, the owner of Christoph LLC, federal contracting consultancy. “In 2016, GAO made the unprecedented move of ‘banning’ a serial protester for one year. GAO never used the word ‘frivolous’ to describe the banned protester, instead opting for the nearly synonymous ‘vexatious,’ likely because they tied their own hands from the 2009 report. Similarly, GAO won’t admit this filing fee is to deter frivolous protests and serial protesters because that would contradict their own recommendations from the 2009 report. The dollar amount of the filing fee might be another hint that it’s designed to deter frivolous protests and serial protesters. Heavy hitters like Boeing or Booz Allen Hamilton won’t blink at a $350 fee, nor will the occasional protester. For a small business with a strong case, $350 is a reasonable expenditure. But for a serial protester filing hundreds of protests per year, a $350 fee is a strong deterrent, and that’s the point.”

Steven Schooner, a Nash & Cibinic professor of government procurement law at the George Washington University in Washington, D.C., and an expert witness for federal procurement cases, said GAO’s decision is harmful to more than just those who file what some say are frivolous protests.

Schooner said the decision to charge a fee will resonate around the world.

“This will have no impact whatsoever on major defense contractors or, for that matter, most firms that compete for government work. But the symbolism is striking, particularly given how hard the government works to create meaningful opportunities for small business participation,” Schooner said in an email to Federal News Radio. “The government is becoming less open, less welcoming of protests — a form of third-party oversight. In other words, the government is disincentivizing, making it more expensive for disappointed offerors to point out to the government when it has made mistakes or mistreated treated firms. For more than a generation, the GAO bid protest process —warts and all — has been considered a model that developed and developing states around the world have sought to emulate. We’re sacrificing the moral high ground for an insignificant handful of cash.”

The $350 filing fee will generate less than $1 million based on GAO’s bid protest data. In 2016, GAO received 2,789 protests, which would have brought in more than $976,000.

Other procurement experts say the filing fee is minimal and the benefits of the electronic docket system will outweigh the costs by far.

David Yang, a partner with Blank Rome in Washington, D.C., said contractors already spend a lot of time paying attorneys and paralegals to file documents and find information connected to a bid protest, so having all the information related to a complaint in one place would be valuable.

White said the docketing system will “modernize the intake of protests, improve and streamline notification of agencies when a protest is filed, and modernize GAO’s ability to meet records retention requirements.”

Yang added the $350 fee is $100 less than what it costs to file with the Court of Federal Claims.

All of this comes as the Senate included two provisions in the 2018 defense authorization bill to exact more money from contractors filing protests.

The first provision would require unsuccessful bidders who protested to pay the costs for denied protests to the Defense Department. This provision would apply to companies with revenues in excess of $100 million and only when all elements of the protest are denied in an opinion issued by GAO.

A second provision would withhold payments above the incurred costs of incumbents that file protests. This generally provides that an incumbent contractor filing a DoD protest would have “all payments above incurred costs withheld on any bridge contracts or temporary contract extensions” awarded to the contractor, as a result of a delay resulting from the protest.

The House and Senate started the conference to settle the differences in the two versions of the NDAA last week, so it’s unclear whether lawmakers will support these two provisions. But the Senate has been trying for years to address what some say are too many protests.

So no matter what Congress decides, the cost to file a bid protest with GAO is going up.