Bid protests reach 10-year high

Federal contractors filed more bid protests at the Government Accountability Office during fiscal 2008 than they did any other year in more than a decade, but many of those cases were mediated by the agencies, making it unnecessary for GAO to issue a decision.

In fiscal 2008, contractors filed 1,652 protests with GAO, up 17 percent from fiscal 2007, when they filed 1,411, according to statistics released by the agency in late December.

Last year's figures were the highest since fiscal 1997, when firms lodged 1,707 protests, according to Michael Golden, managing associate general counsel of GAO's procurement law division.

The high number reflects several governmentwide and private sector trends, said Tom Papson, a partner in the government contracting division of the law firm McKenna Long & Aldridge.

Contract spending, particularly for defense projects, has continued to increase while the economy as a whole has weakened significantly. A successful protest, Papson said, can therefore have both short- and long-term consequences.

"Many companies are looking down the road and seeing tough times ahead," he said.

While displeased contractors are challenging agency decisions more often, their complaints are increasingly falling on deaf ears.

Of the 291 cases upon which GAO ruled during fiscal 2008, only 60, or 20.6 percent, were sustained. The agency heeded GAO's recommendation in all those cases. In fiscal 2007, GAO issued 335 decisions, sustaining 91 protests, or 27.2 percent.

Despite the low chance of success through a GAO protest, companies probably are not engaging in "go-fish exploratory protests," Papson said.

"Larger companies, at least, are concerned about their customer relations," he said. "They do not want to get a reputation for protesting every award."

Most bid protests, however, never make it to a GAO decision. Some are rejected outright based on procedural rules, such as the protest being filed too late. And, in 78 of the 1,652 protests in fiscal 2008, a contractor chose alternative dispute resolution to settle the gripe.

A number of cases were settled through nonlegal methods. For example, contractors, feeling that their protests have a low chance of success, often will cut their losses -- and their potential legal expenses -- and drop their protest.

Another common scenario, based upon the statistics, is for agencies to eliminate the middleman and renegotiate directly with the contractor after a case has been filed with GAO. While the 2008 sustainment rate for companies was 21 percent, the effectiveness rate -- based on a contractor receiving "some form of relief from the agency," frequently the reopening of the contract -- was double that, at 42 percent.

"It's very much part of the system now for agencies to take voluntary corrective action," Papson said. "And, that's good for the system because it gets taken care of quickly."

The 2008 protest numbers can be deceiving for other reasons.

Regulations increasing the types of contract awards that can be protested went into effect for at least part of that year, skewering the figures higher.

Since late May, vendors have been able to challenge individual task orders on existing multifirm contracts. Protests can be filed on any grounds if the task order is worth at least $10 million.

Contractors took advantage of this rule 49 times through the remainder of fiscal 2008 -- which ended on Sept. 30 -- but only a handful of cases resulted in GAO sustaining the protest. Exact figures on the success rate of task order protests were not available, Golden said.

Thirty other filings involved public-private sector job competitions. Contractors have long had the ability to file such protests, but beginning in January 2008, government employees for the first time were allowed to fight an outsourcing decision before GAO. The agency did not have statistics on how many of those protests were successful.

In eight other cases, the protests involved Transportation Security Administration contracts. Until June 2008, TSA had been exempt from the Federal Acquisition Regulation, including GAO protest rules.