Why Are Bid Protests Up 83% From 2006 Levels?

First utilized in the 1920s to resolve contract disputes regarding construction of the Panama Canal, government contract bid protests were designed to add accountability to the federal procurement system. The protests, which are managed by a staff of about 30 within the Government Accountability Office (GAO), function as a check-and-balance where government contractors have the opportunity to raise concerns about the fairness of contract awards and the bidding process. Unfortunately, in recent years bid protests have instead become synonymous with delays, often pushing back or halting agency projects for months or even years .

According to GAO reports , government contract bid protests have risen 83% over the past seven years, from 1,327 in fiscal year 2006 to 2,429 in FY 2013. Despite a slight dip from a 15-year record high of 2,475 in FY 2012, last year’s numbers still beg the question: why have award protests nearly doubled over the past decade?

• Changes in traditional government contracting: More agencies than ever before are opting to establish multiple-award vehicles such as Indefinite Delivery/Indefinite Quantity (IDIQ) contracts. Within these vehicles, a shortlist of approved vendors vie for business on individual task orders using a list of predetermined services. Companies may feel greater pressure to aggressively bid and fight for their spot on these high-value contracts that can essentially lock out competitors--sometimes for as long as 10 years. Moreover, encouraged by initiatives promoting shared services and interagency collaboration, agencies are increasingly utilizing Government-Wide Acquisition Contracts (GWACs) and other interagency contracts, making the loss of a single award even more significant to company revenues.
  
• GAO’s role has changed: These aforementioned shifts toward higher value IDIQ-style procurement prompted Congress in 2008 to temporarily expand GAO oversight from only contract awards to also include task orders orders valued over $10 million, increasing the number of overall protests. For instance, over 8% of all bid protests in FY2010 were on these task orders. GAO’s scope and responsibility was also amended in 2010 to include Transportation Safety Administration (TSA) acquisitions and other types of decisions. However, the lack of clarity around these recent changes in oversight jurisdiction has caused its own confusion within the government contracting realm, resulting in many situations where GAO has punted or deferred protests, citing lack of authority.
  
• Shrinking agency budgets: Sequestration and the overall decline in agency spending over the past few years has also put greater pressure on companies to perform and win contracts, especially in the defense industry. Uncertainty in the market has already prompted some experts to predict a future wave of defense mergers and acquisitions, at least within smaller to mid-sized market players, in addition to increases in political and lobbying activity.
  
• Fewer downsides to protesting: Long-time GAO leaders have stated that a major change in bid protests today when compared to previous decades is the dramatic increase in average contract value; recent bid protests often surround contracts valued at over $100 million or even $1 billion. Today’s contracting market is a higher stakes game, which can compel players to forgo concerns of ruining customer relationships in favor of fighting for contracts that now have a greater impact on their bottom line.
  

Though bid protests occur on fewer than 1% of all government contracts, some have still proven to significantly harm agency schedules and mission requirements. A recent Government Business Council survey of federal leaders revealed that while some employees concede the check-and-balance merits of bid protests, nearly 60 percent of respondents believe that protests result in “unnecessary delays in the contracting process, the costs of which outweigh the benefits of added accountability.”​

Perhaps channeling the concerns of federal employees like these, government leaders and GAO officials continue to pursue ways to improve the undoubtedly imperfect status quo. Some have floated adding a protest filing fee , which could help fund new electronic docketing systems and disincentivize companies from filing an excessive number of protests. Still others have pointed out that agencies must more clearly and carefully define contract solicitation requirements and award criteria earlier in the bidding process. All in all, while it is is undeniable that bid protests serves a crucial role in ensuring fairness and accountability to federal procurement, the system still has room for improvement.