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United States Government Accountability Office:
Washington, DC 20548:
B-401197:
April 9, 2009:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Minority Member:
Committee on Armed Services:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable John M. McHugh:
Ranking Minority Member:
Committee on Armed Services:
House of Representatives:
Subject: Report to Congress on Bid Protests Involving Defense
Procurements:
This report responds to the direction from the Committee on Armed
Services, House of Representatives, contained in the report on the
Duncan Hunter National Defense Authorization Act for Fiscal Year 2009,
Pub. L. No. 110-417 (2008) (H.R. Rep. No. 110652, at 394-95, May 16,
2008). The committee directed the Comptroller General of the United
States to review bid protests filed with the Government Accountability
Office (GAO) during the last 5 years associated with procurement
actions by the Department of Defense (DOD). The committee requested
that we assess the extent to which bid protests may be increasing, the
extent to which frivolous and improper protests may be increasing, and
the causes of any identified increases. The committee further directed
the Comptroller General to provide recommendations regarding actions
that Congress, or the executive branch, could take to disincentivize
frivolous and improper bid protests on the part of industry.
Executive Summary:
This report reaches the following conclusions about the GAO bid
protest process in general, and about the committee's mandate to
assess the increase in protests and the extent to which frivolous
protests may be increasing:
* Twenty-five years ago, the Competition in Contracting Act of 1984
(CICA), Pub. L. No. 98-369, 98 Stat. 1175 (1984), codified and
significantly enhanced GAO's bid protest forum. The existing process
provides a balanced approach to adjudicate and resolve challenges to
U.S. government procurements.
* Despite an increase in bid protest filings in fiscal year (FY) 2008-—
driven in part by statutory expansions of GAO's bid protest
jurisdiction—-the number of protests challenging DOD contract awards
in the last 5 years is relatively low when viewed historically.
* The GAO bid protest process significantly reduces potential
disruptions to DOD procurements as a result of three factors:
— GAO consistently closes more than 50 percent of all protests
involving DOD procurements within 30 days of filing;
— The remaining DOD protests must be, and are, resolved within 100
days of filing; and;
— CICA permits agencies to proceed with contract performance even
before a protest is resolved when the goods or services are urgently
needed, or when proceeding is in the best interests of the United
States.
* GAO's regulations and procedures currently provide GAO the ability
to promptly close protests that do not merit further development. GAO
does not need to determine that a protest is "frivolous" to promptly
close it, and, in our view, malting such a determination could add
substantial costs to the protest process and have the unintended
consequence of discouraging participation in federal contracting and,
in turn, limiting competition.
Background:
On occasion, bidders or others interested in government procurements
may believe that a contract has been, or is about to be, awarded
improperly or illegally, or that they have been unfairly denied a
contract or an opportunity to compete for a contract. These objections
to procurement actions or decisions are referred to as bid protests.
Twenty-five years ago, Congress enacted CICA. In addition to
significantly reforming the federal procurement system, CICA provided
a statutory basis for the bid protest forum within the Office of
General Counsel in GAO.
Last year, a single protested procurement—the Boeing Company's
challenge of the award of a contract by the Air Force to Northrop
Grumman for a new fleet of tanker planes—generated unprecedented
interest in, and questions about, GAO's role in deciding these
disputes. While we welcome this interest, many of the questions we
received, as well as the media accounts of the dispute, reflected a
limited understanding of the protest process.
CICA's 1984 changes to GAO's bid protest forum confirmed and
strengthened GAO's long-standing role as a quasi-judicial forum for
objective, independent, and impartial resolution of disputes
concerning the award of federal contracts. At the heart of the law's
bid protest provisions is a balancing act that attempts to ensure that
procurements can proceed without undue disruption, while also
providing a mechanism for holding agencies accountable, and protecting
the rights of aggrieved offerors to fair treatment by the government.
A discussion of the current bid protest process should begin with the
concerns expressed by Congress at the time of CICA's enactment.
Specifically, the report of the House Committee on Government
Operations complained that the GAO bid protest process prior to 1984
was too weak to be effective; was principally advisory in nature; and
depended too heavily on voluntary agency compliance—in responding to
protests, in producing applicable documents, and in implementing
recommended remedies.[Footnote 1] In fact, the report set forth a
detailed example of a protest filed by Amdahl Corporation challenging
the award of an Army contract to the IBM Corporation on the basis that
the equipment being offered did not comply with the solicitation's
requirements, and was out of date and not in current production.
[Footnote 2] Although GAO ultimately sustained the protest,[Footnote
3] because there was no provision for a stay of performance, the
decision was issued after the equipment had been installed, and hence
no meaningful relief was available.[Footnote 4] The window into the
procurement process provided by the Amdahl protest was the subject of
hearings in the House,[Footnote 5] and led to the above-referenced
discussion of the case in the committee report.
To address concerns about the strength of the GAO bid protest forum
and the voluntary nature of agency responses to protest allegations,
CICA provided a statutory basis for the protest process and set
statutory timelines for agency responses. To strike a balance between
the need for agencies to proceed with their procurements and the need
to allow complaints to be addressed, CICA imposed a deadline on GAO
for issuing its decisions. As amended, CICA requires that GAO resolve
all bid protests within 100 calendar days; GAO has never failed to
meet its statutory deadline for issuing decisions.
Perhaps most significantly, to address concerns about providing
meaningful relief when a protest is upheld, CICA included an automatic
stay of contract performance until a decision on the protest is
issued. CICA's balancing of the competing interests of the
government's procurement system is clearly reflected in two provisions
addressing this issue of providing meaningful relief. First, the law
allows agencies to "override" the automatic stay of performance with a
written agency finding that the goods or services are urgently needed,
or that proceeding with performance in the face of a protest is in the
best interests of the United States. Second, the law requires agencies
to advise GAO if the agency decides not to follow the recommendation
of a bid protest decision; GAO is then required to report these
instances of noncompliance to four congressional committees.[Footnote
6]
In implementing the bid protest provisions of CICA, GAO has maintained
the balance between allowing agency procurements to proceed and
providing meaningful relief to protesters. Before a protest will be
considered on the merits, GAO applies a series of tests that, as
explained below, screen out a large number of cases. These tests are
embodied in GAO's regulations implementing the bid protest provisions
of CICA. For example, GAO applies a strict timeliness rule, set out in
4 C.F.R. Part 21, that leads to the prompt dismissal of many protests.
In addition, GAO applies a standing rule, based on CICA's definition
of an "interested party" with standing to protest. Again, this rule
leads to the dismissal of a number of protests. If the protest meets
GAO's timeliness and standing rules, GAO reviews it for legal
sufficiency. In this regard, our regulations provide other grounds for
dismissing protests. When a protest does not state a valid legal basis
or raises issues outside GAO's jurisdiction (such as disputes during
contract administration and challenges to a firm's size status for
purposes of a small-business set-aside), GAO promptly dismisses it.
As discussed in greater detail below, GAO's application of these rules
means that a significant percentage of GAO protests are dismissed
within a short time after filing, in which case the contracting agency
is free to proceed with the procurement (that is, CICA's automatic
stay is lifted).
For those cases that GAO does not dismiss, GAO will issue a decision
on the merits, always within CICA's 100-day deadline, and typically
well before it. In those cases, GAO decides whether the contracting
agency complied with the statutes and regulations controlling
government procurements. If GAO fmds that the agency did not violate
procurement law, or that any violation that may have occurred did not
prejudice the protester's chances of winning the contract, GAO will
deny the protest. If GAO determines that the agency did violate
procurement law and the violation prejudiced the protester's chances
of winning the contract, GAO will sustain the protest.
GAO's role in resolving a bid protest is an adjudicative process that
differs significantly from the audits and evaluations conducted by
GAO's audit teams. Protests are handled by a group of 30 attorneys
within GAO's Office of General Counsel, who serve as hearing officers.
Unlike GAO audit reports, bid protest decisions do not address broad
programmatic issues, such as whether a weapons program is being
managed effectively and within costs. Nor do our decisions evaluate
which company's proposal is better. Rather, the decision produced in
response to a protest addresses the specific allegations raised by the
parties about whether a particular government action was contrary to
procurement law or regulations, or contrary to the evaluation scheme
the procuring agency established in the solicitation. Only when GAO
fmds—after developing a full record—that a procuring agency has not
followed procurement rules, and that this failure has prejudiced the
protester's chances of winning a competition, do we sustain a protest.
Bid Protest Trends:
Summary of Findings:
As noted above, we were asked to review the number of GAO protests
filed challenging procurement actions by DOD during the last 5 years
(FY 2004 to FY 2008) and assess the extent to which protests may be
increasing.[Footnote 7] Based on our review, which shows a historical
variability in the number of protest filings, the 4-year period of FY
2004 to 2007 does not reflect an upward trend in DOD protest filings.
[Footnote 8] Rather, as discussed below, the number of protests filed,
relative to DOD procurement spending, actually suggests a downward
trend in the rate of DOD protest filings.
A single year in this 5-year period, however, FY 2008, did reflect a
significant increase in the number of DOD protests filed. Our review
indicates that a portion of this increase is tied to recent statutory
expansions of GAO's bid protest jurisdiction, and we expect that our
expanded jurisdiction will continue to result in an increased level of
DOD (and non-DOD) protest filings. One important aspect of our
process, however, remained constant—the rate at which DOD protests are
closed early in the protest process.
We were also asked to consider the extent to which frivolous protests
may be increasing. We limited our inquiry to ascertaining any trends
regarding DOD protest filings as a whole, however, because, as
discussed more fully in the next section of this report, while our
Office tracks dismissals and grounds for dismissing protests, we do
not label protest filings as frivolous, and accordingly, do not
collect data on such filings.
DOD Protests: A Historical Perspective:
In order to fully understand and consider the extent to which DOD bid
protests may be increasing, we decided to consider the number of
protests filed during this period in historical context. Thus, we
reviewed not only the number of DOD protests filed during the last 5
years, but also the number of DOD protests, and non-DOD protests,
filed over the past 20 years. As can be seen from Figures 1 and 2
below, while the number of DOD protests filed with GAO has fluctuated
significantly over the past 20 years (FY 1989 to FY 2008), the last 5
years reflect relatively low numbers of DOD protests filed, in terms
of the historical trends.
Figure 1. Number of Protests Filed FY 1989 - FY 2008:
[Refer to PDF for image: stacked vertical bar graph]
Fiscal year: 1989;
DOD Protests: 1,490;
Non-DOD Protests: 750;
Total: 2,240.
Fiscal year: 1990;
DOD Protests: 1,326;
Non-DOD Protests: 705;
Total: 2,031.
Fiscal year: 1991;
DOD Protests: 1,482;
Non-DOD Protests: 770;
Total: 2,452.
Fiscal year: 1992;
DOD Protests: 1,403;
Non-DOD Protests: 852;
Total: 2,255.
Fiscal year: 1993;
DOD Protests: 1,492;
Non-DOD Protests: 844;
Total: 2,336.
Fiscal year: 1994;
DOD Protests: 1,104;
Non-DOD Protests: 772;
Total: 1,876.
Fiscal year: 1995;
DOD Protests: 1,110;
Non-DOD Protests: 617;
Total: 1,727.
Fiscal year: 1996;
DOD Protests: 917;
Non-DOD Protests: 632;
Total: 1,549.
Fiscal year: 1997;
DOD Protests: 799;
Non-DOD Protests: 483;
Total: 1,282.
Fiscal year: 1998;
DOD Protests: 591;
Non-DOD Protests: 415;
Total: 1,006.
Fiscal year: 1999;
DOD Protests: 572;
Non-DOD Protests: 301;
Total: 873.
Fiscal year: 2000;
DOD Protests: 467;
Non-DOD Protests: 313;
Total: 780.
Fiscal year: 2001;
DOD Protests: 421;
Non-DOD Protests: 279;
Total: 700.
Fiscal year: 2002;
DOD Protests: 513;
Non-DOD Protests: 294;
Total: 817.
Fiscal year: 2003;
DOD Protests: 510;
Non-DOD Protests: 344;
Total: 854.
Fiscal year: 2004;
DOD Protests: 458;
Non-DOD Protests: 419;
Total: 877.
Fiscal year: 2005;
DOD Protests: 540;
Non-DOD Protests: 331;
Total: 871.
Fiscal year: 2006;
DOD Protests: 473;
Non-DOD Protests: 318;
Total: 791.
Fiscal year: 2007;
DOD Protests: 493;
Non-DOD Protests: 372;
Total: 865.
Fiscal year: 2008;
DOD Protests: 611;
Non-DOD Protests: 416;
Total: 1,027.
[End of figure]
Figure 2. Percent Change in Number of DOD Protests Filed
Year to Year FY 1989 - FY 2008:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 1989;
Percent change in number of DOD protests filed: 11.2%.
Fiscal year: 1990;
Percent change in number of DOD protests filed: -11.0%.
Fiscal year: 1991;
Percent change in number of DOD protests filed: 11.8%.
Fiscal year: 1992;
Percent change in number of DOD protests filed: -5.3%.
Fiscal year: 1993;
Percent change in number of DOD protests filed: 6.3%.
Fiscal year: 1994;
Percent change in number of DOD protests filed: -26.0%.
Fiscal year: 1995;
Percent change in number of DOD protests filed: 0.5%.
Fiscal year: 1996;
Percent change in number of DOD protests filed: -17.4%.
Fiscal year: 1997;
Percent change in number of DOD protests filed: -12.9%.
Fiscal year: 1998;
Percent change in number of DOD protests filed: -26.0%.
Fiscal year: 1999;
Percent change in number of DOD protests filed: -3.2%.
Fiscal year: 2000;
Percent change in number of DOD protests filed: -18.4%.
Fiscal year: 2001;
Percent change in number of DOD protests filed: -9.9%.
Fiscal year: 2002;
Percent change in number of DOD protests filed: 21.9%.
Fiscal year: 2003;
Percent change in number of DOD protests filed: -0.6%.
Fiscal year: 2004;
Percent change in number of DOD protests filed: -10.2%.
Fiscal year: 2005;
Percent change in number of DOD protests filed: 17.9%.
Fiscal year: 2006;
Percent change in number of DOD protests filed: -12.4%.
Fiscal year: 2007;
Percent change in number of DOD protests filed: 4.2%.
Fiscal year: 2008;
Percent change in number of DOD protests filed: 23.9%.
[End of figure]
Examining only the past 5 years (Figures 3 and 4), the variability in
DOD protest filings, on a year-to-year basis, has swung up and down—
just as the totals of such filings have varied over the past 20 years.
Figure 3. Number of DOD Protests Filed FY 2004 - FY 2008:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2004;
Number of DOD protests filed: 458.
Fiscal year: 2005;
Number of DOD protests filed: 540.
Fiscal year: 2006;
Number of DOD protests filed: 473.
Fiscal year: 2007;
Number of DOD protests filed: 493.
Fiscal year: 2008;
Number of DOD protests filed: 611.
[End of figure]
Figure 4. Percent Change in DOD Protests FY 2004 — FY 2008:
[Refer to PDF for image: vertical bar graph]
Fiscal year: 2004;
Percent change in DOD protests filed: -10.2%.
Fiscal year: 2005;
Percent change in DOD protests filed: 17.9%.
Fiscal year: 2006;
Percent change in DOD protests filed: -12.4%.
Fiscal year: 2007;
Percent change in DOD protests filed: 4.2%.
Fiscal year: 2008;
Percent change in DOD protests filed: 23.9%.
[End of figure]
The number of filings in the 4-year period from FY 2004 to FY 2007
ranged between 458-540 per year, with an average of 491 protests
filed. In FY 2008 there was a significant increase in the number of
DOD protests filed. Specifically, FY 2008 brought an increase of 118
DOD protests over the previous year, to 611 (a 23.9 percent increase).
A portion of this increase (30 protests, or about 25 percent of the
increase in filings) was tied to recent statutory expansions of GAO's
bid protest jurisdiction. As a result of the statutory changes, GAO
now considers protests concerning task and delivery orders issued
after May 27, 2008, provided they are valued at more than $10
million.[Footnote 9] In addition, section 326 of the NDAA increased the
scope of GAO's bid protest review with respect to public-private
competitions conducted pursuant to OMB Circular No. A-76.1.[Footnote
10] After removing the portion of the increase related to statutory
changes in jurisdiction, FY 2008 saw an increase of 88 DOD protests,
to 581 (an increase of 17.8 percent over FY 2007).
The somewhat higher number of DOD procurements protested to GAO (up
17.8 percent in FY 2008 after removing protests resulting from
statutory changes) needs to be put in the context of the increase in
DOD procurement spending over the past few years. From FY 2007 to FY
2008 alone, DOD procurement spending increased 15.7 percent (Figure
5). These similar rates of increase may suggest that the increase in
protests was due in part to DOD's increase in procurement spending.
See GAO Bid Protests: Trends, Analysis, and Options for Congress,
Congressional Research Service, Feb. 11, 2009, at 7 (suggesting that
"the recent rise in protests is primarily a result of increased
government contracting activity").
Figure 5. DOD Procurement Spending, Adjusted for Inflation:
[Refer to PDF for image: vertical bar graph]
Fiscal Year: 2004;
DOD Procurement Spending: $262.30 billion.
Fiscal Year: 2005;
DOD Procurement Spending: $292.00 billion.
Fiscal Year: 2006;
DOD Procurement Spending: $310.60 billion.
Fiscal Year: 2007;
DOD Procurement Spending: $342.10 billion.
Fiscal Year: 2008;
DOD Procurement Spending: $395.80 billion.
(DOD spending data obtained from the Federal Procurement Data System)
[End of figure]
The amount of DOD procurement spending over the past several years
also can be correlated to the number of GAO protests of DOD
procurements during those years. The result can be shown as a ratio of
protests to procurement dollars. In Figure 6, we show that there have
been between 1.4 and 1.9 protests filed at GAO for every billion
dollars spent by DOD. Importantly, as shown in Figure 6, the number of
GAO protests per billion dollars of DOD procurement spending reflects
a slight downward trend during this period. In fact the recent CRS
review of the GAO bid protest process shows that the number of GAO
protests filed between FY 2001 and FY 2008, relative to federal
procurement spending, reflects a downward trend in the number of
protests filed. See GAO Bid Protests: Trends, Analysis, and Options
for Congress, Congressional Research Service, Feb. 11, 2009, at 6-7.
Figure 6. Number of DOD Protests Filed per Billion DOD Procurement
Dollars Spent:
[Refer to PDF for image: vertical bar graph]
Fiscal Year: 2004;
DOD Protests Filed per Billion DOD Procurement Dollars Spent: 1.8.
Fiscal Year: 2005;
DOD Protests Filed per Billion DOD Procurement Dollars Spent: 1.9;
Fiscal Year: 2006;
DOD Protests Filed per Billion DOD Procurement Dollars Spent: 1.5.
Fiscal Year: 2007;
DOD Protests Filed per Billion DOD Procurement Dollars Spent: 1.4.
Fiscal Year: 2008;
DOD Protests Filed per Billion DOD Procurement Dollars Spent: 1.5.
[End of figure]
Despite the variability in protest filings from one year to the next,
our Office minimizes the delay and disruption associated with protest
filings by resolving protests as expeditiously as practicable. In
fact, during the last 5 years, we have consistently closed more than
half of all DOD protests within 30 days of when they were filed
(Figure 7).
Figure 7. Percentage of DOD Protests Closed Within 30 Days:
Fiscal Year: 2004;
DOD Protests Closed Within 30 Days: 52.4%.
Fiscal Year: 2005;
DOD Protests Closed Within 30 Days: 56.7%;
Fiscal Year: 2006;
DOD Protests Closed Within 30 Days: 57.7%.
Fiscal Year: 2007;
DOD Protests Closed Within 30 Days: 59.2%.
Fiscal Year: 2008;
DOD Protests Closed Within 30 Days: 52.9%.
[End of figure]
The vast majority of cases closed within the first 30 days are
dismissed because the protest fails to meet one of the threshold tests
(such as timeliness) explained above. Another typical basis for
dismissal is where the protester withdraws its complaint, often after
the agency takes corrective action to remedy the problem protested. In
addition, many of our dismissals occur after an agency elects to take
corrective action rather than defend its procurement—and where we
agree that the corrective action renders the pending protest moot. By
resolving more than half of all DOD protests within the first 30 days,
our Office helps minimize the delay and disruption that protests can
cause to DOD procurements.
"Frivolous And Improper" Protests:
In its report, the committee directed GAO to assess the extent to
which "frivolous and improper" bid protests may be increasing. Because
the report does not specify what is meant by frivolous and improper
protests, we have looked to the federal courts for their definition of
frivolous legal actions.[Footnote 11]
The courts have identified two ways in which legal actions may be
deemed frivolous. First, a legal action is considered "frivolous as
filed" when a plaintiff or appellant grounds its case on arguments or
issues "that are beyond the reasonable contemplation of fair-minded
people, and no basis for [the party's position] in law or fact can be
or is even arguably shown." Abbs v. Principi, 237 F.3d 1342, 1345
(Fed. Cir. 2001), citing State Indus., Inc. v. Mor-P7o Indus., Inc,
948 F.2d 1573, 1578 (Fed. Cir. 1991); see also International Union of
Bricklayers Etc. v. Martin Jaska, Inc., 752 F.2d 1401, 1406 (9th Cir.
1985) ("frivolous appeal is defined as one in which the result is
obvious, or where the appellants' claims are utterly meritless").
Second, a legal action is considered "frivolous as argued" when a
plaintiff or appellant has not dealt fairly with the court, has
significantly misrepresented the law or facts, or has abused the
judicial process by repeatedly litigating the same issue in the same
court. Abbs v. Principi, 237 F.3d at 1345; Lawrence N Sparks v.
Eastman-Kodak Co., 230 F.3d 1344, 1345 (Fed. Cir. 2000); see also
Finch v. Hughes Aircraft Co., 926 F.2d 1574, 1582 (Fed. Cir. 1991).
The courts have repeatedly recognized, however, that a legal action
found to be without merit is not necessarily frivolous. See Abbs v.
Principi; 237 F.3d at 1345. A legal complaint that is poorly drafted,
or based on weak facts, is not necessarily frivolous. Ravens Group,
Inc. v. United States, 79 Fed. Cl. 100, 113 (2007). Likewise, a legal
argument that is ultimately incorrect is not necessarily frivolous.
Ravens Group, Inc. v. United States, 79 Fed. Cl. at 114; Saladino v.
United States, 63 Fed. Cl. 754, 757 (2005); see also Fed R. Civ. P. 11
(Advisory Committee Notes on 1993 Amendments).
These judicial decisions show that a frivolous legal action must be
more than simply one without merit. Rather, the court cases make it
clear that the pursuing party knew, or should have known—either at the
time of filing or subsequently—that the legal action was so utterly
without merit that it was essentially pursued in bad faith. We think
this defmition is appropriate for our protest forum as well.
Applying the standards articulated by the courts, the fact that a
protest is denied for lack of merit does not necessarily mean that it
was frivolous. Likewise, the fact that a protest is dismissed because
of a procedural deficiency does not necessarily mean that the protest
was frivolous. In our view, even when a protest is dismissed for lack
of a valid legal basis, it should not necessarily be considered
frivolous; rather, the key question is whether the protest was filed
in bad faith.[Footnote 12] A determination by GAO that a protest is
frivolous would require determining not only that the protest is
without merit or procedurally defective, but also that the protest is
so utterly without merit as to have been filed in bad faith.
GAO does not categorize protests as frivolous, and thus, has not
identified as frivolous any protests during the last 5 years involving
contract awards made by DOD.[Footnote 13] That does not mean, however,
that meritless protests, or those that a reasonable third party might
label frivolous, remain open at GAO, thus delaying DOD procurements.
As discussed above, GAO promptly dismisses protests that do not state
a valid legal basis or are otherwise procedurally defective,
consistent with our broad statutory authority. Thus, GAO dismisses
protests, where appropriate, without the need to resolve whether the
protest was frivolous.
Concerns With Measures To Disincentivize Protests:
The committee directed GAO to address whether the filing of frivolous
and improper protests might be disincentivized. We have two
interrelated observations in this regard. First, our current
procedures permit us to dismiss early in the process a significant
number of protests that, for instance, are untimely, fail for lack of
standing, or fail to assert a valid legal basis for protest. Our
current process, we believe, permits us to identify and dismiss
protests that would arguably fall under the rubric "frivolous as
filed." Similarly, protests that would arguably fall under the
"frivolous as argued" rubric, even were they not dismissed early in
the process, would be identified later in the process and dismissed or
denied as appropriate at that point. Accordingly, given our current
broad authority to expeditiously dispose of a protest that does not
merit further consideration and development, we do not believe that
GAO requires any additional authority to dismiss protests, nor are we
seeking such authority. Our second observation is that attempts to
disincentivize protests that in some sense might be considered
frivolous may have, on balance, the unintended consequence of harming
the federal procurement system by discouraging participation in
federal contracting and, in turn, limiting competition.
Imposing penalties for protesting—such as fines, a requirement to
reimburse agency litigation costs, or the inclusion of a vendor's
protest track record in past performance evaluations—as a means to
disincentivize frivolous protests could have serious negative
consequences for contractors (particularly small businesses), our
Office, and the procurement process. Importantly, any system that
imposes penalties on contractors for filing frivolous protests would
require adequate due process protections to avoid punishing a company
for filing a good-faith but unmeritorious protest.[Footnote 14]
As a general matter, a determination that a protest is frivolous would
require an additional inquiry beyond our current practice of
determining whether a protest meets the threshold requirements for
filing a protest, and then determining the merits of that protest.
Specifically, finding that a protest is frivolous would require a
determination that the protest was brought in bad faith—an assessment
of the subjective intent of the protester. Such a fact-specific
inquiry could require substantial litigation, such as declarations,
affidavits, or live testimony, to assess whether the protester
possessed the intent required for our Office to conclude that its
protest was filed in bad faith.
In our experience, there are many instances in which protesters may
file a protest in good faith that is nonetheless based on either a
misunderstanding of the facts or misapprehension of the law. This may
occur more commonly with small business protesters or protesters not
represented by counsel.[Footnote 15] We think that a careful
examination of a protester's subjective intent to distinguish between
good faith and bad faith arguments would require a significant
diversion of our Office's limited resources—resources currently used
to resolve protests as expeditiously as possible.
In addition to the resource implications for our Office, a system of
penalties for frivolous protests could impose substantial costs on
contractors and agencies. An inquiry into the subjective intent of a
protester would require the protester to mount a potentially costly
defense in order to avoid either a financial penalty, or the
potentially more damaging sanction of a negative past performance
rating in future competitions. The required defense could, again,
potentially place a disproportionately high burden on small businesses.
Attempts to disincentivize protests ignore several valuable benefits
of the current protest process. First, protesters act as "private
attorneys general" who use the protest process to identify and pursue
complaints concerning the procurement system, with a resultant benefit
to the public.[Footnote 16] In addition, protests provide a form of
indirect congressional oversight of the procurement process. Ameron,
Inc. v. U.S. Army Corps of Engineers, 809 F.2d 979, 984 (3d Cir. 1987)
("the bid protest resolution process created by CICA is also intended
to inform Congress of the operation of existing procurement laws, and
to use the pressure of publicity to enforce compliance with those laws
...[by enabling] disappointed bidders to compel the executive to
explain some of its procurement decisions to the Comptroller General").
In our view, potential penalties—along with the additional litigation
necessary to establish the sine qua non for the imposition of
penalties, namely, bad faith—risk discouraging good-faith protests. In
addition, protests bring an important element of transparency and
accountability into the federal procurement system that otherwise
might be unavailable. Protests also provide guidance to agencies in
the form of publicly-available decisions interpreting procurement laws
and regulations.
Finally, the imposition of penalties on protesters could result in a
chilling effect on the participation of contractors in both the
protest process and federal procurement as a whole. As the conference
report accompanying CICA stated, the availability of a strong bid
protest mechanism promotes competition in the procurement system by
providing contractors a measure of confidence that concerns regarding
potentially unfair treatment may be addressed in a neutral forum.
[Footnote 17] Contractors, particularly small businesses, could
conclude that the risk of being penalized for a good-faith protest—or
the potential that they may have to litigate whether their protest was
frivolous—outweighs the potential benefit in filing the protest.
Contractors might also perceive the inclusion of penalties in GAO's
statutory mandate as an indication that protests have become
disfavored as a matter of policy. To the extent contractors believe
that it is less likely that their legitimate concerns will be
addressed, the result could be an increased distrust of the U.S.
procurement system and reduced participation in the system—especially
by small businesses. Either of these outcomes could reduce competition
and impair the government's ability to obtain the best value in
procuring goods and services.
Conclusion:
GAO's existing bid protest process provides a balanced approach to
adjudicate and resolve challenges brought by protesters to federal
government procurements. Our existing regulations and procedures
permit us to promptly close protests that do not merit further
development. We do not believe that GAO requires additional authority
to dismiss protests, and we are not seeking such further authority. In
fact, attempts to disincentivize frivolous protests could introduce
significant unintended consequences into the current system, by adding
substantial costs and discouraging good-faith protests. As Congress
has recognized, a robust bid protest process brings an important
element of transparency and accountability into the federal
procurement system and ultimately promotes competition by ensuring
that concerns about unfair treatment will be addressed in a neutral
forum. As our extensive track record shows, GAO currently has, and
effectively uses, the tools necessary to continue our key role in the
bid protest process, with due consideration of both agencies' needs to
proceed with their procurements and the need to provide an avenue of
meaningful relief to protesters.
We hope you fmd this information useful. Should you have any
questions, please contact Michael R. Golden, Managing Associate
General Counsel, at 202-512-8233.
Sincerely yours,
Signed by:
Gary L. Kepplinger General Counsel:
[End of section]
[1] H.R. Rep. No. 98-1157, at 23 (1984).
[2] Id at 24.
[3] Amdahl Corp.; ViON Corp., B-212018, B-212018.2, July 1, 1983, 83-2
CPD ¶ 51.
[4] Amdahl Corp.; ViON Corp.—Recon., B-212018.3, B-212018.4, Dec. 19,
1983, 83-2 CPD ¶ 703.
[5] Competition in Contracting Act of 1984: Hearing on H.R. 5184
Before the House Committee on Government Operations, 98th Congress. 59-
60 (1984) (statement of A.G.W. Biddle, President, Computer and
Communications Industry Association).
[6] Because GAO is not a court, it cannot (unlike the Court of Federal
Claims) direct executive-branch agencies to take corrective action.
Instead, GAO makes recommendations. Except in rare instances, these
recommendations are routinely followed. See GAO Annual Reports to
Congress on Bid Protests for Fiscal Years 1986-2008. The annual
reports for FY 1995-2008 are available on GAO's website, [hyperlink,
http://www.gao.gov].
[7] Because we were asked about protests of DOD procurements, this
report generally refers only to DOD procurements. In many cases, the
analysis and our conclusions would be the same for civilian agency
procurements. In any event, no inference should be drawn that protest
processes or trends would be different for civilian agency
procurements.
[8] CICA requires GAO to report to Congress each year on the number of
protests filed. GAO's long-standing approach to this requirement has
been to report the docket numbers ("B" numbers, such as B-123456)
assigned by our Office, not the number of procurements challenged.
Thus, where a protester files a supplemental protest or multiple
parties protest the same procurement action, multiple iterations of
the same "B" number are assigned (e.g., B-123456.2, B-123456.3). These
docket numbers accurately reflect GAO's protest filings, but they
overstate the number of procurements challenged. In contrast, in
recent testimony by the Secretary of Defense, DOD characterized the
effect of the protest process in terms of the number of procurement
actions challenged. For purposes of this report, we are adopting DOD's
recent approach. Thus, for purposes of counting the number of protests
filed, we eliminated from our count multiple iterations of the same
"B" number. As a consequence, the number of protests in this report
reflects the number of procurements challenged in a given fiscal year.
[9] In this regard, section 843 of the National Defense Authorization
Act for Fiscal Year 2008 (NDAA), Pub. L. No. 110-181, 122 Stat. 3
(2008), amended 10 U.S.C. § 2304c and 41 U.S.C. § 253j to authorize
GAO to hear protests of the award or proposed award of certain task
and delivery orders under indefmite-delivery/indefmite-quantity
contracts.
[10] NDAA, Pub. L. No. 110-181, § 326, 122 Stat. 3 (2008), amending 31
U.S.C. § 3551.
[11] For purposes of this report, we regard the terms "frivolous" and
"improper" as, in essence, interchangeable.
[12] We think there is no dispute that a protest should not be viewed
as frivolous where the protest is sustained, or where the agency takes
corrective action rather than defend the procurement.
[13] Similarly, contracting agencies themselves rarely describe
protests as frivolous. For example, the last reported GAO decision in
which a contracting agency (the Air Force) characterized a protest as
frivolous occurred in 1996. See Bionetics Corp.— Costs, B-270323.3,
Aug. 16, 1996, 96-2 CPD ¶ 70. Undercutting the agency's position in
that case is the fact that, after the agency initially asked GAO to
dismiss as "frivolous" the protester's assertion that the agency had
improperly deviated from the evaluation scheme set forth in the
solicitation, the agency subsequently decided to take corrective
action after acknowledging that its evaluation scheme was, in fact,
flawed.
[14] E.g., Old Dominion Dairy Products, Inc. v. Secretary of Defense,
631 F.2d 953 (D.C. Cir. 1980).
[15] In keeping with CICA's mandate to provide "for the inexpensive
and expeditious resolution of protests," 31 U.S.C. § 3554(a)(1), our
regulations do not require protesters to be represented by counsel,
and a significant percentage of protesters appear pro se.
[16] See Scanwell Lab., Inc. v. Shaffer, 424 F.2d 859, 864 (D.C. Cir.
1970) ("Instead of designating the Attorney General, or some other
public officer, to bring such proceedings, Congress can
constitutionally enact a statute conferring on any nonofficial person,
or on a designated group of non-official persons, authority to bring a
suit to prevent action by an officer in violation of his statutory
powers; for then, in like manner, there is an actual controversy, and
there is nothing constitutionally prohibiting Congress from empowering
any person, official or not, to institute a proceeding involving such
a controversy, even if the sole purpose is to vindicate the public
interest. Such persons, so authorized, are, so to speak, private
Attorney Generals."); Department of the Navy—Modification of Remedy, B-
284080.3, May 24, 2000, 2000 CPD ¶ 99 ("In our view, [the] protest
served precisely the purpose anticipated by CICA [by] highlight[ing] a
failure by GSA to properly maintain the FSS program . . . [W]e think
CICA clearly anticipates that the government should reimburse DRS for
acting as a private attorney general in shining the light of publicity
here."); E&R, Inc.—Claim for Costs, B-255868, B-255868.2, May 30,
1996, 96-1 CPD ¶ 264 ("In essence, entitlement to bid protest costs
relieves a protester of the financial demands of acting as a private
attorney general where it brings to light an agency's failure to
conduct a procurement in accordance with law and regulation.").
[17] H.R. Conf. Rep. No. 98-861, at 1435 (1984), reprinted in 1984
U.S.S.C.C.A.N., at 2123.