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Monday, August 26, 2013

GAO Bid Protests: Trends and Analysis

Moshe Schwartz
Specialist in Defense Acquisition

Kate M. Manuel
Legislative Attorney

Lucy P. Martinez
Research Associate

Bid protests on federal government contracts filed with the Government Accountability Office (GAO) have recently received increased congressional scrutiny due to protests of high-profile awards and reports that the number of protests is increasing. The delay of contract award or performance triggered by a GAO protest, coupled with the increasing number of GAO protests, has also prompted concerns about the potential impact of protests upon government agency operations, especially in the Department of Defense.

There has been a significant shift in bid protest trends over the last five years. From FY2001 to FY2008, total government procurement spending, adjusted for inflation, increased at a faster rate (over 100%) than the number of protests filed (35%). This trend reversed itself in FY2008: from FY2008-FY2012 total government spending, adjusted for inflation, decreased more than 10% while total protests increased 45%. This data indicates that, when compared to the rate of government spending, bid protests decreased from FY2001-FY2008, and increased from FY2008-FY2012.

The rate at which GAO sustains protests has also seen a significant shift in recent years. From FY2001-FY2008 GAO sustained protests in 22% of their opinions; from FY2008-FY2012 that number dropped to 18%. This data suggests that while companies are more likely to file a bid protest, they are somewhat less likely to win a bid protest. According to one recent analysis, in FY2010, there was less than a 1% chance that GAO would sustain a protest and the protesting party would go on to win the contract. However, this figure does not account for cases where the agency took corrective action prior to GAO issuing an opinion. Taking into account agency corrective action, one observer estimated a “protester has a 12% chance of ultimately winning a contract award as a result of its protest.”

In addition to GAO sustaining a protest a contracting agency voluntarily acts to correct the allegation charged in the protest. Many analysts consider the increasing willingness of agencies to voluntarily take corrective action as one of the most significant trends in bid protests. In many cases, voluntary action by an agency could indicate that the agency believes a given protest has merit. However, there may be instances when an agency takes corrective action even when it believes the procurement was done properly (e.g., meeting with the protesting party to clarify why the protester lost the competition). The percentage of protesters obtaining relief—either through a protest being sustained or through voluntary action taken by an agency—is called the effectiveness rate. Over the last 5 fiscal years the effectiveness rate has remained relatively stable, averaging 43%.

Companies file protests based on the belief that the government has made a material error in the bidding process. When agencies do not adequately debrief losing bidders, the losing companies may also file a protest to determine why they lost the competition. A number of analysts have also suggested that companies are increasingly likely to file protests when it is in their business interest to do so, even when they do not believe there was an error in the procurement process. The specter of a company filing a bid protest can influence agency behavior. Fear of protests may motivate agency officials to conduct more rigorous market research, hold a competition instead of awarding a sole-source contract, or conduct more thorough and fair competition. On the other hand, fear of a protest could also prompt officials to try to structure a contract in a manner they deem less likely to be protested, such as using lowest price technically acceptable award criteria instead of a best-value competition.

DOD contracts are less likely to be protested than those of the rest of government. From FY2008- FY2012, on average, DOD accounted for 70% of government contract obligations but only 57% of protests filed against the federal government. Protests against DOD are sustained at a lower rate than the rest of government. From FY2008-FY2012, 2.6% of protests filed against DOD were sustained by GAO, compared to 5.3% of protests filed against federal civilian agencies. Protests against civilian agencies are also growing at a faster rate than protests against DOD.

Date of Report: August 9, 2013
Number of Pages: 28
Order Number: R40227
Price: $29.95

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