In 1924, the first contractor complaints about federal agency procurement decisions began landing on desks at the U.S. General Accounting Office, says federal-contracts guru Daniel I. Gordon. Ninety years later, handling bid protests is a major mission for the now-renamed U.S. Government Accountability Office, as well as for arbiters at the state and municipal levels, and for complainant attorneys in a public-sector contracting arena that has become more complex, costly and highly competitive.
But while some question protestors' motives—even as disputes have added delay and cost to projects—others say they keep public procurement honest, efficient and fair.
Annual federal bid-protest tallies by the GAO offer some sense of the trends, as numbers for industry-related and other disputes, generally, have risen steadily over the past decade.
"I think the protest process has become part of the capture strategy," says Daniel R. Forman, a partner with law firm Crowell & Moring LLP. "It used to be viewed as an extreme measure, but it has since become much more palatable and a natural part of the process."
E. Sanderson Hoe, partner at McKenna Long & Aldridge LLP, agrees. "As the budget is squeezed, it's not as easy a business decision to wait for the next contract," he says. "Firms need cash flow and are more incentivized to take a hard look at whether to protest."
But in watching protest trends for more than two decades, Gordon—the associate dean of government procurement law at George Washington University who, under the Obama administration, was chief of federal procurement policy, and previously had run GAO's bid protest unit—says he is "skeptical about the correlation of spending cuts and protests."
He says that, even before recent major federal cuts, protest numbers had started to rise, particularly with a 2008 policy change that, for the first time, allowed protests of task orders under indefinite-delivery, indefinite-quantity contracts. "That led to a burst of activity," he says.
Today, another catalyst is the ease with which a protest can be filed—"an injunction for the cost of an email," says Seattle bid-protest attorney Howard W. Roth.
"About 25% of these are garbage protests, which will be thrown out right away," Gordon says, noting that anger over a contract loss "is a bad reason to file a protest," as is the desire "to teach them a lesson." Even so, protested contracts comprise less than 1% of annual federal awards, he says.
Winning a contract on protest isn't so easy. GAO's rate of sustaining protests dropped to 17% in fiscal 2013 from 27% a decade ago. "We find that, due to the integrity of federal procurement, it is very hard to sustain a federal procurement protest," says Chris Jahrling, vice president of Turner Federal Services.
Sarah Biser, construction practice lead at law firm McCarter & English, adds, "Even if the protesting party is awarded the contract, there is nothing to prevent the government from terminating the contract for convenience after a short period of time."
Observers say the rising "effectiveness rate" of cases is more telling than the sustain rate because it includes voluntary efforts by contracting agencies to "correct" procurement flaws or discrepancies. "The number of corrective actions has encouraged firms to file protests, but they have to be more selective on where to dig in," says Forman.
While Gordon plays down the number of contract wins gained by bid protest, others argue it's not always all or nothing.
In a 2013 article, Ira E. Hoffman, a Maryland attorney and a director of the Public Contracting Institute, noted that agency corrective actions let protestors obtain "at least a significant piece of the contract, whether as one of several awardees under a multiple-award RFP or as a sub, getting 40% to 45% of the award in a negotiated settlement with the awardee." He adds, "The awardee accepted because it did not want to risk losing the entire award in a protest decision." But, he admits, such outcomes are infrequent.
Hoe and Gordon point to a trend in which incumbent contractors, as a move to preserve revenue if they lose a recompete contract, file a protest to slow the transition process.
This might not be a "broad phenomenon," says Gordon, but he notes possible congressional scrutiny of the trend.
While firms may worry about protest costs and future contracting repercussions in deciding to file, "sometimes you just have to stand up for what is right, damn the cost," says one contractor executive.
Even so, a protest can leave non-involved project participants in limbo. Contrack International Inc.'s 2013 protest, which challenged the Army Corps of Engineers' decision to exclude the firm from a $40.3-million dining-hall project in Bahrain, halted project progress for the apparent contract winner, ECC Constructors.
"We were not party to the dispute, but since we were the identified winner, we had to keep our people and plans in place, waiting several months for this to get resolved," says CEO Manjiv Vohra. "This does have a negative financial effect."
GAO denied Contrack's arguments. Vohra says ECC has "a very high internal threshold before moving ahead with a protest," noting the major legal investment since in-house counsel cannot lawfully gain access to competitors' proposal information and government data. "Such legal costs are not allowable expenses and must be excluded from indirect costs," he says.
Some recent protests have generated high-profile contract reversals. Most notable was the two-year-long dispute, beginning in 2011, of the Corps' award of an original $675-million flood-control project in New Orleans that included multiple challenges, rebids and re-awards.
The award, originally won by a team led by CDM Smith, drew protests from losing teams led by Bechtel and Kiewit, including disputes over price requirements, technical design specifications and even an alleged conflict of interest.
GAO sustained the protests, forcing the CDM Smith team to seek redress in the Court of Federal Claims, which was unsuccessful, and generating two rebids by the Corps in which the Kiewit team emerged, last year, as the final winner.
The project, now under construction, is set for completion in 2017.
"We are disappointed we didn't win, but we still believe we had the best solution for the best price," says Tim Wall, CDM Smith chief operating officer. "The Corps went beyond and gave competitors a chance to improve their scores in areas that GAO didn't require."
Wall won't disclose the team's protest cost figure but says it was "significant." He adds, "In this marketplace, any large procurements that consume a lot of resources from proposing firms—you're mindful to do your homework on procedures."
Tim Black, chief of contracting for the Corps' New Orleans District, says that while the project has "a good technical solution," he believes the revised proposals "offered less technical capability than the original proposals because the price comparison was much more important during the recompete."