Government Contract Bid Protests: Analysis of Legal Processes and Recent Developments
Released: 2018-11-28T00:00:00

Introduction

In FY2017, the federal government obligated approximately $500 billion to procure goods and services. Federal procurement statutes and regulations—notably the Competition in Contracting Act of 1984 (CICA) and the Federal Acquisition Regulation (FAR), the government-wide regulation that generally applies to acquisitions by executive branch agencies—establish largely uniform policies and procedur es for how federal executive agencies acquire goods and services. The purpose of these standards is to guide the acquisition system "to deliver on a timely basis the best value product or service to the [government], while maintaining the public's trust and fulfilling public policy objectives," such as the promotion of competition. In an effort to advance the transparency, fairness, and integrity of the procurement system, federal law provides mechanisms for contractors to "protest" (i.e., object to) contract awards and solicitations for failing to comply with federal law. However, empowering contractors to protest procurement decisions has the potential to delay agency acquisitions of goods and services. In recent years, Congress has paid increasing attention to achieving and maintaining the appropriate balance between these competing interests, particularly regarding defense acquisition. For example, the FY2017 National Defense Authorization Act (NDAA) required the Department of Defense (DOD) to contract for a comprehensive study on the impact of bid protests on acquisitions, which was released in December 2017.

Congress authorizes bid protests in three separate forums: (1) the procuring agency, (2) the Government Accountability Office (GAO), or (3) the U.S. Court of Federal Claims (COFC). This report briefly analyzes the varying legal procedures applicable to bid protests under each forum, which may be relevant to Congress as it assesses potential reforms to the bid protest process. First, the report provides an overview of bid protests generally and the legal procedures applicable to bid protests made in each forum. Next, the report analyzes the legal distinctions among these forums. Finally, the report discusses recent legislative developments affecting bid protest procedures and potential considerations for Congress.

Background

Generally, a bid protest is a written objection to the conduct of a government agency in acquiring supplies and services for its direct use or benefit. Among other things, this conduct can include violations of law or regulation in the way in which an agency solicits offers for a contract, cancels such a solicitation, awards a contract, or cancels a contract.

As previously mentioned, bid protests can be filed with the procuring agency, GAO, or the COFC. The three forums share some common features. For example, they each utilize the same definition of "interested party" to govern who may file a valid protest. However, as discussed in more detail below, the applicable legal procedures and available remedies vary considerably under each forum. Parties generally consider these distinctions when choosing the forum or forums in which to file a protest, and as a result, often begin a protest in one of the nonjudicial forums. In addition, contractors may request, and for certain procurements procuring agencies must provide, pre-award and post-award "debriefings" through which the contractor may acquire certain information about how the agency decided to make an award or to eliminate the contractor from competition for a contract prior to the award decision. Debriefings can help inform an interested party's decision on whether to initiate a protest and through which forum or forums to raise claims.

Although there are scant reliable data on the number of protests filed with procuring agencies, public data demonstrate that substantially more protests are filed with GAO on average each year than with the COFC. Parties that disagree with the outcome of a bid protest before a procuring agency or GAO often can still bring claims before the COFC, but the reverse route (filing a protest with a procuring agency or GAO after an adverse COFC decision) is generally not permitted . For example, GAO generally dismisses protests that are currently pending before or have been previously resolved by the COFC.

Protests Before the Procuring Agency

Provisions of the FAR, which were implemented pursuant to a 1995 Executive Order and several broad procurement-related statutory authorities, require executive branch procuring agencies to "provide for inexpensive, informal, procedurally simple, and expeditious resolution of protests." There are no comprehensive publicly available data on protests before procuring agencies; agency protest decisions are not published; and the relevant FAR provisions, which stress speed and simplicity, provide limited guidance for how agencies are expected to implement these "informal" protest procedures. Given the dearth of publicly available data, it is difficult to draw firm conclusions regarding the consistencies and differences of procuring agency protest processes across the government.

The relevant FAR provisions provide some standard procedures applicable to agencies hearing a bid protest. For example, only an "interested party" may file a valid protest with a procuring agency. The term "interested party" is defined as an "actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract." Interested parties that file a protest with a procuring agency generally do not have a legal right to compel discovery from the procuring agency, although agencies could voluntarily share certain information. In addition, agencies are expected to resolve a protest within 35 days of its receipt.

When a procuring agency receives a protest from an interested party, the agency must halt (i.e., "stay") the award or implementation of the relevant contract until the protest is resolved, unless the agency concludes that there are "urgent and compelling reasons" or where moving forward with the contract is "in the best interest of the Government." The purpose of this "automatic stay" is to ensure that agencies have sufficient opportunity to remedy legal violations before the contract moves forward.

Procuring agencies are expected to provide parties a "well-reasoned" explanation of the agency's protest decision. Procuring agencies may provide the same relief that GAO is authorized by law to recommend, which, as discussed below, includes canceling or reissuing a contract or solicitation. The primary recourse for parties that are unsatisfied with how the procuring agency resolved the protest generally is to file a protest with either GAO or the COFC.

Under certain limited circumstances, protests also can be filed with specialized agencies. For example, small business size certification determinations can be protested with the Small Business Administration.

Protests Before GAO

GAO has been a forum for resolving protests for nearly a century and is the only agency with the authority to hear protests from across the federal government. Federal law, primarily through CICA, authorizes "interested parties" to file a protest with GAO regarding a federal agency's procurement contract solicitation or award. More specifically, federal law provides that these parties can argue that a federal agency violated a statute or regulation in the way in which the agency defined who may be eligible for a contract in the solicitation, canceled a contract solicitation, or determined who is awarded a contract.

The term "interested party" has the same meaning for the purposes of a GAO bid protest as it does for a protest before the procuring agency, i.e., the contractor must be "an actual or prospective bidder" with "a direct economic interest" in the challenged procurement action. Thus, contractors who simply desire to bid for a contract can qualify as an "interested party" when they challenge a pre-award solicitation. However, GAO often will limit post-award protests to parties that both bid on the contract and were next in line to win the contract, unless the challenging party raises a claim that, if ultimately successful, would allow it to jump ahead of multiple parties. Additionally, potential subcontractors generally do not qualify as interested parties because they are not "actual or prospective bidder[s] or offeror[s]."

Federal law generally requires protests before GAO to be "inexpensive and expeditious" and establishes time limits for filings by the parties and for rulings by GAO that are shorter than those that are applicable to a typical judicial process, but longer than those applicable to protests before a procuring agency. GAO protests normally must be filed within 10 days of the time in which the violation "is known or should have been known." Absent extenuating circumstances, GAO dismisses untimely protests. GAO also must inform the relevant agency of a protest within one day of the protest being filed. This notice typically triggers a 30-day window for the procuring agency to respond, unless GAO provides an extension. The procuring agency generally must provide GAO and the protestor all documents "relevant" to the protest for GAO's consideration. GAO generally has 100 days from the day on which the protest was originally filed to issue a recommendation in a matter, although GAO may also consider protests pursuant to an "express" proceeding for cases that GAO determines may be feasibly resolved within 65 days.

Upon receiving notice from GAO, the procuring agency typically must implement an automatic stay , thus halting the award or performance of a contract until GAO issues a recommendation on the protest. By statute, the procuring agency generally may only lift, or "override," the automatic stay prior to GAO's recommendation for a limited number of reasons, such as if "performance of the contract is in the best interests of the United States" or there are "urgent and compelling circumstances which significantly affect interests of the United States [that] will not permit waiting for the decision of [GAO]." Agencies that override an automatic stay must justify the decision in writing and provide notice to GAO. GAO does not have legal authority to reverse an automatic stay override or to review the decision. However, the COFC, upon a motion from an interested party, can review an agency's decision to override the stay. The COFC may reverse the agency's decision to override the stay through the issuance of a temporary restraining order or preliminary injunction that requires an agency to halt performance of the contract.

After considering the legal basis for the protest, GAO may issue a decision either denying the protest and recommending that the agency move forward with the award or performance of the contract, or sustaining the protest and recommending further action by the procuring agency. In the latter scenario, GAO may recommend that agencies reissue a solicitation, rebid a contract, cancel a contract, or take certain other steps outlined in Section 3554(b) of Title 31. If GAO concludes that an agency failed to comply with a procurement law or regulation, GAO may recommend that the agency pay the challenging party's attorneys' fees and certain other costs associated with filing the protest.

Although GAO recommendations are explicitly established by statute as nonlegally binding on the procuring agency, GAO must "promptly" inform Congress of any instance in which a federal agency does not comply with a GAO bid protest recommendation. GAO must further advise Congress whether it believes the noncompliance warrants a congressional investigation or some other legislative response "in order to correct an inequity or to preserve the integrity of the procurement process." In practice, executive agencies almost always implement GAO recommendations, and the COFC, while not bound by GAO interpretations of law, "gives due weight and deference to GAO recommendations" when assessing challenges from parties unhappy with the outcome of a GAO bid protest.

Protests Before the COFC

The COFC is the only judicial forum authorized by Congress to hear bid protests. Parties to protests filed with the COFC must comply with the court's rules of practice (Rules of the Court of Federal Claims (RCFC)), which are modeled after the Federal Rules of Civil Procedure. Additionally, the challenging party must demonstrate that it qualifies as an "interested party." The COFC and its appellate court, the U.S. Court of Appeals for the Federal Circuit (Federal Circuit), have interpreted the term "interested party" consistent with the CICA definition of the term discussed above.

The COFC reviews final agency procurement actions in accordance with the Administrative Procedure Act (APA) and will only set aside an agency's action if it is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." The COFC generally requires the procuring agency to provide the full administrative record associated with the protested procurement, including all of the agency's correspondence with the protestor and the contractor that won the procurement contract as well as internal evaluations of contract offers. The COFC "may award any relief that the court considers proper, including declaratory and injunctive relief except that any monetary relief shall be limited to bid preparation and proposal costs." COFC-issued remedies are legally binding and may be enforced through contempt of court, among other legal powers.

Parties may file bid protest lawsuits with the COFC before or after filing protests with the procuring agency or GAO. In contrast to the processes applicable to the two nonjudicial forums, parties that initiate a bid protest through the COFC do not gain the benefit of an automatic stay. Instead, parties may request that the procuring agency voluntarily impose a stay, or they may petition the court to issue a preliminary injunction or temporary restraining order. These "extraordinary remed[ies]" generally enjoin or restrain a party from taking certain actions, and, thus, can provide similar protections as an automatic stay. Nevertheless, the COFC will only issue these remedies "in extremely limited circumstances" where a petitioner is able to meet exacting standards, including demonstrating that the petitioner will likely suffer irreparable harm in the absence of such relief and succeed on the merits of its claims.

Subsequent to a 2007 opinion of the Federal Circuit Court of Appeals, the COFC generally reviews protests based on solicitations in the same time frame as that applicable to GAO. However, in contrast to the 10-day filing deadlines applicable to GAO post-award protests discussed above, post-award protests at the COFC generally are not subject to specific initial filing deadlines other than potentially the general six-year statute of limitations applicable to claims against the federal government. In practice, however, procurement decisions typically are made well before the end of this six-year period, and the COFC can bar claims on equitable grounds (e.g., laches, equitable estoppel) when, for instance, a "protester's delay in filing was unreasonable and prejudicial to the agency or other parties." COFC bid protest opinions also do not have to be issued within a specific time frame like those before the procuring agency and GAO. Consequently, the COFC often takes longer to issue a ruling on the merits of a protest than the procuring agency and GAO. COFC rulings, like TROs and similar remedies discussed above, are legally enforceable, and they may be appealed to the Federal Circuit.

Analysis of the Legal Distinctions Among the Forums

As the foregoing indicates, although the three bid protest forums share some common features, the legal processes applicable to and remedies available under the forums vary considerably. These distinctions arguably seek to further Congress's desire to maintain balance between an efficient and timely, yet fair and transparent, procurement system. Congress may consider the unique aspects of each forum and how each contributes to that balance when evaluating potential reforms to the bid protest process.

Generally, protests before the procuring agency and GAO tend to be resolved faster and less expensively than challenges before the COFC because they are subject to specific resolution timetables and less formal procedures. Additionally, parties that file a protest with either the procuring agency or GAO generally gain the benefit of an automatic stay that bars an agency from awarding or implementing a contract while a protest is pending. In contrast, while filing a protest with the COFC is frequently more time-consuming and expensive and does not trigger an automatic stay, protests before the COFC have the potential to result in legally binding and conclusive judicial decisions and orders. Procuring agency decisions and GAO bid protest recommendations, on the other hand, are not legally binding. Furthermore, interested parties that disagree with GAO or procuring agency decisions generally can still bring claims before the COFC, whereas the reverse route is generally not permitted.

Another important distinction among the forums is that the scope of discovery is potentially broader in a protest before the COFC because the court generally reviews the entire administrative record of a procurement. In contrast, procuring agencies generally are not compelled to produce documents, and GAO typically reviews only those documents that are relevant to the particular protest. Furthermore, while GAO and the procuring agency are limited to a finite list of statutorily authorized remedies, the COFC may "award any relief that the court considers proper" with the exception of certain monetary relief.

Considerations for Congress and Recent Legislation

Congress likely intended to further a number of objectives by statutorily authorizing contractors to challenge federal procurement solicitations and awards through the bid protest process described above. Allowing protests can help ensure that procuring agencies comply with federal law and, consequently, advance congressional prerogatives. The bid protest system also can help promote fairness and transparency in the procurement process, which arguably encourages participation and increases competition for federal procurement awards. This, in turn, has the potential to improve the quality and reduce the costs of goods and services purchased by the government. Similarly, the absence of a protest system might undermine public confidence that contract award decisions are based on merit and in compliance with the law, which could discourage participation by qualified and reputable parties and result in wasteful government spending.

Although few are likely to argue with these general benefits, protests arguably may impede the timely acquisition of goods and services, at least in certain circumstances. In particular, some commentators have expressed concern that contractors are filing protests that are highly unlikely to be successful, if not entirely baseless, as a way to harm competitors or extend the performance of existing contracts. Even if these protests ultimately prove to be unsuccessful, they often force procuring agencies to expend time and money defending their actions and can hold up the agency's ability to acquire goods and services needed to implement their congressionally mandated operations. Furthermore, the expectation of protests might drive up the administrative costs of soliciting and awarding contracts as agencies defensively go beyond their legal requirements to ensure that their procurement decisions are sufficiently documented and justified.

According to a congressionally mandated report, some stakeholders believe that, while the potential for a bid protest generally does not have a significant effect on an agency's overall operations, it could cause an agency to fail to meet programmatic deadlines, which might lead to a loss of appropriations. Some have also noted that the fear of a potential protest can impact an agency's procurement contract decision making by, for instance, causing acquisition personnel to prioritize price over quality.

In light of the competing interests discussed above, some in Congress have expressed a need for procurement reform, generally, and bid protest procedural reform, specifically. In recent years, Congress has passed several provisions intended to address concerns with the bid protest process, which largely have been focused on increasing Congress's understanding of how legislative amendments to bid protest procedures could enhance the efficiency of the procurement process, discourage unwarranted protests, and generally improve procurement outcomes for the federal government.

Most of these recently enacted procurement protest reform provisions have been related specifically to defense acquisition enacted through annual NDAAs. For example, Section 822 of the FY2019 NDAA requires DOD to study and report on (1) the establishment of "an expedited bid protest process" for defense procurement contracts valued under $100,000; and (2) "the frequency and effects of bid protests involving the same contract award or proposed award that have been filed at both [GAO and COFC]." The FY2018 NDAA established a three-year pilot program, to begin in December 2019, to assess and issue a report on "the effectiveness of requiring [certain] contractors to reimburse the Department of Defense for costs incurred in processing covered protests" that are denied by GAO. Additionally, Section 818 of FY2018 NDAA enhanced debriefing rights for prospective DOD contractors by allowing them to submit debriefing questions and receive written responses to those questions from the procuring agency. Section 818 also authorizes prospective DOD contractors to file bid protests with GAO up to five days after they receive DOD's written responses to submitted debriefing questions.

Of relevance to the procurement system, generally, a provision of the FY2013 NDAA requires GAO to include in its annual report to Congress a summary of the most common grounds for sustaining protests during the year. GAO has included this information in each annual report it has submitted to Congress beginning in FY2013.

Congress might utilize the information gained from these studies, reports, and pilot programs to inform its consideration of substantive legislative reforms to the bid protest system. For instance, reforms could include implementation of certain recommendations in the RAND report or making permanent, expanding, or eliminating the pilot program that requires certain contractors to reimburse the government for the costs associated with adjudicating unsuccessful protests.