Defense Contractors Could Face Pay-Back Clause for Losing Bid Protests


Incumbent contractors that lose a bid protest may end up footing the bill for the government's costs.

Congress could make it more difficult for companies to protest contract awards, particularly those made by defense and military agencies.

Language within the Senate’s National Defense Authorization Act would reform the way the Government Accountability Office addresses bid protests, which have increased with frequency in recent years.

The NDAA language would “require contractors who file bid protests with the Government Accountability Office on a contract with the Department of Defense to pay to the Department of Defense costs incurred for processing a protest at the Government Accountability Office and the Department of Defense when such a protest is filed by a party with revenues in excess of $100 million during the previous year where all of the elements of such protest are denied” by GAO.

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The provision would also require incumbent contractors that protest a follow-on contract award “to have all payments above incurred costs withheld on any bridge contracts or temporary contract extensions awarded to the contractor as a result of a delay in award resulting from the filing of such protest.” The protesting companies are spared paying fees only if GAO “upholds any of the protest grounds” or if the contract in question is scrapped.

Kevin Plexico, vice president of information solutions for Deltek, said the bill seemed aimed at incumbent contractors, likely driven in part because more than 90 percent of the fiscal year’s total contracting value will be represented by recompeted, extended or follow-on contracts.

“It does seem to be a way [Congress] might discourage companies from protesting,” Plexico said, speaking Tuesday at Deltek’s FedFocus 2018 conference. “When you have big multibillion-dollar contracts, the stakes are so high we’re usually finding companies are usually willing to take the risk of protest to see if they can be successful.”

According to GAO data, bid protests have increased significantly across government over the past decade. In fiscal 2008, bidders filed 1,652 protests; in fiscal 2016, they filed 2,789. While the NDAA is headed to conference, one of the most important voices weighed in on proposed bid protest tweaks last month.

In a Sept. 7 letter addressed to Sens. John McCain, R-Arizona, and Jack Reed, D-Rhode Island, U.S. Comptroller General Gene Dodaro asked the Senate Armed Services Committee chair and ranking member to delete the provision.

Dodaro said GAO “expresses no view on the policy of imposing protest processing costs on certain contractors whose protests are denied,” but rather took issue with the provision because it would require GAO to implement new procedures and collect data it currently doesn’t need nor have. Further, Dodaro also expressed concern “that assessing costs associated with processing covered defense protests could involve GAO in federal court litigation concerning both the application of the requirement to pay costs” and the amount of costs to be paid.