Bid Protest News You Can Use

On November 13, the Government Accountability Office made its annual report to Congress which includes the hotly anticipated bid protest statistics report. Ok, not so hotly anticipated, but it is always interesting. Also included in the annual report is a list of cases in which the agency refused to follow GAO’s recommendation for corrective action. Many people don’t understand that, unlike a court, GAO cannot force an agency to take corrective action after it sustains a protest. Why? – because GAO is an arm of Congress and other stuff I can’t remember so, therefore, it’s probably not that important. The only “leverage” GAO has is that it must report to Congress those instances in which the agency has declined to follow GAO’s recommendations. Since GAO is fairly impotent with regard to enforcement of its decisions, you would think that many agencies ignore its recommendations. Not true. It is very rare that an agency declines to follow GAO’s recommendations – presumably because they don’t want GAO to tattle to Congress. For example, in FY 2012, GAO denied 464 protests. The only agency that did not follow GAO’s recommendation for corrective action was the Department of Veterans Affairs. There were a number of cases filed in FY 2012 by Service-Disabled Veteran-Owned Small Businesses(SDVOSBs) and Veteran-Owned Small Businesses (VOSBs) challenging the VA’s decision to order off the Federal Supply Schedules before engaging in market research to determine whether a SDVOSB/VOSB set-aside was appropriate under the VA’s Veterans First Program. While these cases are fairly controversial in the Vets community – given the range of cases filed at GAO, it is significant that VA is the only agency that failed to follow GAO’s recommendation, and then in only in this narrow line of cases. By the way, the VA’s prioritizing FSS schedule buys over SDVOSB/VOSB set-asides has been challenged in the US Court of Federal Claims. Oral argument occurred last week and we are waiting for a decision.

Ok, the stats. The GAO reported there were 2,475 cases filed in FY 2012, 5% more than in FY 2011. Not that surprising, given the panic surrounding shrinking budgets and everything. While the increase may seem important, when compared to the increases in FY 2008, FY 2009 and FY 2010, 17%, 20% and 16%, respectively, it’s not really notable. GAO issued decisions in 570 protests. The protest sustain rate is still just below 20%, 18.6% for FY 2012, up from 16% in FY 2011. The GAO report contains a statistic called the “Effectiveness Rate” which is defined as the percentage of cases in which the protester received some form of relief from the agency, either as a result of voluntary corrective action or the GAO sustaining the protest. For FY 2012, the rate is 42%, the same rate as FY 2011 and FY 2010. What does this rate tell you? This statistic tells me that while GAO’s sustain rate is less than 20%, agencies, in fact, take corrective action in about 20% of the cases before a protest reaches the decision point. There is one statistic in the report that stands out: the cases in which GAO has used Alternative Dispute Resolution. ADR at the GAO is not like formal ADR with which some people may be familiar. Instead, GAO generally starts the process on its own when it sees a record that it believes likely will result in the granting of a protest. In these instances, GAO “encourages” agencies to take corrective action by noting the deficiencies in the agency record. According to GAO’s annual report, in FY 2012, GAO used ADR in only 106 cases, down from 140 in FY 2011, 159 in FY 2010, and 149 in FY 2009. Not really sure what this means. You would think that as protests increase and the resources GAO allocates to them remains the same, there would be a greater incentive to resolve protests early. If anyone has any theories out there, love to hear them.

From the perspective of this government contracts lawyer in Northern Virginia, I too have seen an up tick in protests in my practice. In almost half of those cases, the agency took corrective action. What is interesting to me, however, is that both small and large contractors are protesting smaller and smaller procurements. I recently handled a protest against a contract award valued at $6 million and there were two protests, one by a large company, and well-known lawyers represented the protesters. (Not as well-known as me, of course). The contract called for support services and we all know there is very little profit in these types of contracts.

Finally, one more piece of bid protest news: GAO has proposed charging a filing fee for protests. It is not a large fee – about $240. The GAO plans to use the fees to fund an electronic docketing system. Most courts charge a filing fee, so this proposal does not come out of the blue. And in most cases, I don’t think it will influence a protester’s decision to file at GAO. However, it might make a difference in some cases. For example, I mentioned earlier in this post that GAO reported to Congress that VA had declined to follow its recommendation in a suite of cases addressing VA’s use of FSS schedules over SDVOSB and VOSB set-asides? These cases were not filed by lawyers but rather representatives of the protesters themselves. Many of these cases were repeat cases, in which the same protester filed a protest each time the VA placed an FSS order. In these cases, $240 a pop adds up.