Determining whether to challenge the award of a contract to a competitor can be a daunting decision for a federal government contractor. This article seeks to make that decision more manageable by providing an overview of the bid protest process and by suggesting several factors a contractor should consider in determining whether to protest an award.[i]
[i] For a more detailed discussion of the GAO bid protest process, see U.S. Government Accountability Office. (2006). Bid Protests at GAO: A Descriptive Guide. (Publication No. GAO-06-797SP).
It is a beautiful Friday afternoon. As you are sitting at your desk daydreaming about your vacation plans for next week, you receive a fax from your most important federal customer. You read the subject line and learn that the fax relates to a huge proposal your company recently submitted. You are the incumbent, you know the agency, you know the work, and you offered a rock bottom price. Everyone assumed you would win the contract – but the fax says otherwise. You read on to learn that the agency awarded the contract to your competitor, who has never performed any work for the agency and who is known for having the highest prices in town. Now what?
Now you must begin the difficult process of deciding whether to sue your customer. While such an approach would be unthinkable in the private sector, the statutes and regulations that apply to most federal procurements allow you to file a bid protest challenging the award of a contract to a competitor. In addition to airing your grievances with the procuring agency, you can protest an award decision at the Government Accountability Office (GAO) or the Court of Federal Claims.
If you ultimately decide to file a protest, the GAO will be your forum of choice. The statute governing GAO protest provides for an automatic stay of performance, which prohibits the awardee from performing the contract until the GAO resolves the protest.[i] An automatic stay is not available at the Court. In addition, the GAO has more institutional experience than the Court in adjudicating contract award controversies and generally is regarded as a less expensive forum in which to litigate.
Scheduling and Preparing for the Debriefing
Before you can make an informed decision regarding the possibility of a bid protest, you need to schedule a debriefing. As tempting as it might be to leave for your beach vacation and contact the contracting officer when you return, that would be a very bad idea. When you receive a notice indicating that your company has not been selected for award, or that it has been eliminated from the competitive range, you immediately should send a written request for a debriefing to the contracting officer. If you wait more than three days to send your request, the agency will not be required to conduct a debriefing and you will not be eligible for an automatic stay.[ii] An automatic stay is particularly valuable where you are the incumbent, since it is likely that the agency will allow you to continue performing, and getting paid, until the protest is over.
Realizing this, you immediately send a written debriefing request to the contracting officer. The contracting officer emails you back within the hour, offering a debriefing on Monday or the following Tuesday. Should you opt for the later debriefing date so that it does not interfere with your vacation? Not a chance. In order to obtain an automatic stay, you must file your protest within five days of the first date offered for the debriefing.[iii] Accordingly, you should always accept the first debriefing date offered by the agency. If you wait until next Tuesday, i.e., eight days after the first date offered, you will be ineligible for a stay.
With your vacation on hold, it is time to round up the proposal team, notify your in house counsel, and prepare for the debriefing. Your goal at the debriefing will be to learn as much as possible regarding why the agency downgraded your proposal, whether it evaluated proposals in a manner consistent with the solicitation, and on what basis the agency decided to issue an award to your competitor. Prior to the debriefing, you should prepare a list of specific questions that focus on these issues. In addition, you should prepare a few general questions regarding the agency’s evaluation of your competitor. Although an agency is prohibited from providing a point-by-point comparison of proposals, most agencies will disclose the awardee’s ranking under each evaluation factor, the awardee’s total price, and the factors that led to the award decision.[iv]
Attending the Debriefing
So now you are at the debriefing, where there is neither sand nor surf, but instead uncomfortable chairs and dull power point slides. On the bright side, you will not have to spend the day with your attorney. Bringing lawyers to a debriefing, especially outside counsel, puts the agency on the defensive, limits the flow of information, and makes debriefings much less productive. For the same reason, no matter how much you think you deserved the contract, you should resist the urge to convince the agency that it made a bad decision. Nothing you say at this point will change the agency’s mind. Being confrontational will just make the agency clam up, and prevent you from getting the information you need.
At the conclusion of the debriefing, the agency agrees to “hold open” your debriefing until next week in order to allow you to submit written questions. (Actually, this is quite common.). Does his mean that you can salvage what is left of your vacation while the rest of the proposal team drafts the questions? No such luck. The five-day window for obtaining an automatic stay of performance begins on the first date offered for the debriefing – even if the agency agrees to “hold open” the debriefing for additional questions. Thus, if you want a stay – and as the incumbent you should – you have only five days to file your protest.
If you miss this five-day window, all is not lost. You can still file a protest within 10 days of the debriefing, but you will not get a stay.
Making the Big Decision
You now have five days to make and implement a very big decision, or, as they would say at the resort where you planned to be at the moment, “la decisión mas difícil.” Specifically, you need to decide whether to sue your best customer. In order to make this decision, you will need to determine whether the procurement was legally flawed, whether you were prejudiced by the errors in the agency’s evaluation, and whether there is an adequate business case for filing a protest.
Step 1: Was the Procurement Legally Flawed?
Your first step should be to analyze whether there were legal improprieties in the agency’s award decision. The fact that you disagree with the agency’s judgment is not enough. Rather, you will need to determine whether there was something objectively wrong with the agency’s evaluation. For example:
- Did the agency evaluate factors or require capabilities that were not disclosed in the solicitation?
- Did the agency downgrade your proposal based on inaccurate information or incorrect assumptions regarding what you actually proposed?
- Did the agency disclose all significant weaknesses, deficiencies, and adverse past performance information during discussions?
- Did the agency evaluate your cost/price based on the technical solution you actually proposed?
- Did the agency ignore your competitor’s failure to meet a minimum mandatory solicitation requirement?
- Did the agency fail to analyze whether your competitor may have an organizational conflict of interest (“OCI”)?
- Did the agency consider all of the disclosed evaluation factors, and only the disclosed evaluation factors, in conducting its cost/technical tradeoff?
- Did the agency fail to adequately document its award determination?
These are only a few of the many grounds on which the GAO has sustained protests.[v] Your lawyer will be able to help you analyze whether the agency may have committed these or any other errors during the course of its evaluation.
Step 2: Were You Prejudiced?
If you determine that the agency’s award decision was not legally flawed, your decision is easy. Pack your bags and enjoy what’s left of your vacation – there is no point in filing a protest. If, on the other hand, you have reason to believe that there were fundamental errors in the procurement, it’s time for step two – determining whether you were prejudiced by the flaws in the agency’s evaluation.
The requirement for prejudice is nothing more than a “no harm, no foul” rule. To win a protest, you must be able to show that the agency’s errors deprived you of the contract. This requirement is not always easy to meet. Not all procurement errors impact the outcome of a procurement. And even when the do, it is possible that the contract should have gone to another competitor, rather than your company. Accordingly, you need to look at your proposal and the errors in the agency’s evaluation, as objectively and realistically as possible, and then ask – “if the agency had not made those errors, would we have had a substantial chance for award?” If not, there is little reason to challenge the award, since your protest will be denied.[vi]
Step 3: Is There An Adequate Business Case for Filing a Protest?
Let’s assume that you have determined that the procurement was flawed, and that you can establish prejudice. Further, just to keep you honest, assume it’s hurricane season and a tropical storm is headed for that lovely resort where you booked your vacation. Your week in paradise would have been ruined anyway, so now you can focus on step three – analyzing the business case for filing a protest.
In deciding whether to file a protest, you should consider at least the following questions:
- How important is the contract to your company? Consider not only size and profitability, but less tangible factors, such as whether the contract would allow you to break into a new market, whether it is likely to lead to follow-on work, and whether it is critical to maintaining a particular line of business.
- How will a protest impact your relationship with the customer? Relevant factors include the strength of your existing customer relationship, whether the customer relies on you for products or services it cannot obtain elsewhere, the personalities of the individuals involved, and the amount of time that will pass until your next opportunity with the customer.
- What is the likelihood you will win the protest? The published sustain rate for GAO bid protests in 2007 was 27%.[vii] Of course, every protest is different. Protest challenging an agency’s technical and best value judgments rarely prevail. On the other hand, if the agency’s errors were so fundamental that you were denied a fair opportunity to complete, your probability of success will be greater.
- What is the likelihood you will win the contract? The most common bid protest remedies (in addition to reimbursement of a portion of your attorney’s fees) include the reevaluation of proposals and/or the solicitation of revised proposals. Thus, winning a protest does not guarantee that you will win the contract. It merely gives you another bight at the apple. If you believe, based on your debriefing, that your proposal is competitive or can be revised to be more advantageous to the government, then a second bight at the apple can be a very valuable opportunity. If, on the other hand, the agency seems unlikely to award your company the contract under any circumstances, then a successful protest may be a hollow victory.
- How much will the protest cost? The answer depends on a number of factors, including the size and complexity of the procurement, the volume of the evaluation record, the need for expert consultants, and how the GAO Hearing Officer manages the protest. However, you should keep in mind two points: (1) the cost of drafting the initial protest is both relatively inexpensive and relatively predictable and (2) you can always withdraw the protest later, and cut your losses, if the evaluation record produced during the protest does not support your allegations.
Filing the Protest
If you consider these and other relevant factors, and decide go ahead with a protest, the next five days will be hectic. Here are a few words of advice to help you through the turmoil:
- Immediately schedule a meeting or teleconference to allow the proposal team to get your attorney up to speed on the facts. Make sure they do not leave anything out. If they became aware of a particular basis for protest at the debriefing, it must be raised in your initial protest, or will be forever lost.
- Authorize your attorney to begin preparing the protest as soon as possible. If you allow less than two or three days for the drafting and review cycle, you may not be satisfied with the results.
- Leave time for the proposal team to review and comment on your attorney’s draft protest. They are more familiar than your attorney with your proposal and the relevant technical issues. Thus, they will be in the best position to determine whether the draft includes inaccuracies or leaves out key points.
The Protective Order
Once the protest is filed, go ahead and take that vacation, because you are about to become significantly less involved in the process. In order to obtain access to your competitor’s proposal and the evaluation record – which are essential to proving your case – your attorney will need to sign a protective order. To prevent you from obtaining an unfair competitive advantage in future procurements, the protective order precludes your attorney from sharing the substance of any this information with you.[viii]
As a result, you will be unable to review the evaluation record, the agency’s response to your protest, or even the filings submitted on your behalf. (Actually, you can ask your attorney to prepare redacted versions of these documents, which must be approved by all parties before they can be released. This is rarely worth the expense, however, because everything of interest to you will have been redacted from the documents.) Instead, you will need to rely on your attorney’s judgment regarding your probability of success. Two words of advice: (1) make sure you hire an attorney you trust and (2) lay off the lawyer jokes, at least until the protest is over.
While the protective order prevents you from seeing your competitor’s sensitive information, it also prevents your competitor from seeing your sensitive information. Under the GAO’s bid protest rules, an awardee can intervene in a protest to ensure its interests are adequately represented.[ix] The awardee’s attorney will have access to your proposal and the evaluation record. However, the protective order prohibits the awardee’s attorney from disclosing that information to your competitor or anyone else who is not admitted to the protective order. Thus, the protective order is not only your enemy, but also your friend.
The Protest Process
If the agency does not take corrective action, i.e., voluntarily fix the errors raised in your protest, then it will have 30 days to provide your attorney with an agency report, which consists of the contracting officer’s statement of facts, a legal memorandum, and the evaluation record.[x] Your attorney will then have ten days to review the agency report, respond to the agency’s position, and file supplemental protest allegations based on any new information disclosed in the evaluation record.[xi]
This is where the legal fees begin to rack up. Accordingly, once your attorney has had a few days to review the record – but before he or she puts finger to keyboard on your comments and supplemental protest allegations – you should schedule a brief call to discuss whether it makes sense to continue with the protest. Protests are won or lost on the evaluation record. Once your attorney has reviewed the record, he or she will be in a much better position to advise you regarding whether you have a reasonable chance of overturning the award and receiving the contract.
If your attorney advises you that your probability of success is low, you may want to cut your losses and withdraw from the protest. On the other hand, if the procurement is large and the stakes are high, even a relatively low probability of success may justify the continued investment, as long as your protest grounds are not so frivolous that you will lose credibility with your customer.
Assuming you decide to continue with the protest, your attorney will spend the next week drafting your comments and supplemental protest allegations. If there are supplemental protest allegations, the agency will be required to submit a supplemental agency report, and there will be another round of comments. In addition, the GAO typically provides each side an opportunity to respond to the other’s arguments, and, in some cases, requests additional briefing. You should communicate with your attorney regularly throughout this process to ensure that the facts warrant your continued investment in the protest.
Most protests (roughly 90%) are resolved on the evaluation record.[xii] However, if there are disputed issues of fact, or if the procurement is large and complex, the GAO may hold an evidentiary hearing.[xiii] At the hearing, the agency’s witnesses will explain the basis for the agency’s evaluation and award decision, and your attorney will have an opportunity to cross examine them. In addition, if you have retained technical or cost experts, they generally will have an opportunity to testify as well. Because of the protective order, however, you will not be able to attend the hearing.
Shortly after the hearing, the GAO will request post-hearing briefs from the parties. In addition, the parties typically will have an opportunity to respond to each others’ arguments. Throughout this process, you can sit back and relax as your attorney toils away.
The GAO’s Decision
By law, the GAO must decide a protest within 100 calendar days of the date on which it was filed.[xiv] The GAO never misses this deadline, so no matter how bad things may seem, there is always an end in sight.
The GAO’s decision will take the form of a recommendation, which, in practice, agencies almost always follow. If you win the protest, several forms of relief may be available.[xv] If the procurement defect was based exclusively on the evaluation of proposals, the GAO may limit its recommendation to reevaluation of the proposals already submitted. Alternatively, the GAO may recommend broader relief, such as reopening discussions, soliciting revised proposals, and making a new source selection decision on that basis. If the GAO determines that no other remedy is available, it may recommend that the agency reimburse your bid and proposal costs.
In addition to these remedies, the GAO may recommend that the agency reimburse the cost, including attorneys’ fees, of filing and pursing a successful protest.[xvi] Keep in mind, however, that so called “reasonable” attorneys’ fees will rarely cover your actual legal expenses. The reimbursement of such costs is subject to an hourly rate cap that is well below the prevailing rate for bid protest attorneys in most areas.[xvii] In addition, if you raised multiple protest allegations, the agency is likely to argue that your recovery should be reduced to reflect the effort expended pursuing the losing protest grounds.
If you lose the protest, there are three options: (1) accept defeat and move on; (2) request the GAO to reconsider its decision; and (3) begin the process anew at the Court of Federal Claims. The first option typically is the most sensible, since reconsideration is rarely granted, and the conventional wisdom is that the Court of Federal Claims is unlikely to reach a different conclusion than the GAO. On the other hand, there are a number of recent cases in which the Court of Federal claims has sustained protests that previously were denied by the GAO. [xviii] Thus, if there is enough at stake, if you are convinced that the procurement was fundamentally flawed, and if you have both the stomach and budget for another round of litigation, filing a second protest at the Court of Federal Claims may be warranted.
An edited version of this original manuscript was published in the November 2008 issue of “Contract Management,” a monthly publication of the National Contract Management Association.
[i] 35 U.S.C. § 3553(d)(3); see also FAR 33.104(c). An agency may override the automatic stay of performance if it determines that there are urgent and compelling circumstances or that doing so would be in the best interest of the government. 18 U.S.C. § 3553(d)(3)(C); FAR 33.104(c)(2). Override decisions are rare, but they occasionally do occur.
[ii] FAR 15.506(a).
[iii] FAR 33.104(c)(1).
[iv] FAR 15.506(d),(e).
[v] See generally Cibinic, John, Jr. and Ralph C. Nash, Jr., Formation of Government Contracts, Ch. 6, 3rd ed. Washington, DC: The George Washington University Press, 1998.
[vi] See, e.g., Liquidity Servs., Inc., B-294053, Sept. 18, 2004, 2004 CPD ¶ 130 (“Competitive prejudice is an essential element of every protest; where the record does not demonstrate that the protestor would have had a reasonable chance of receiving award but for the agency’s actions, we will not sustain a protest, even if deficiencies in the procurement process are found.”).
[vii] U.S. Government Accountability Office. (Dec. 2007). GAO Bid Protest Annual Report to Congress. (Publication No. GAO-08-0247R).
[viii] U.S. Government Accountability Office. (May 2006). Guide to GAO Protective Orders. (Publication No. GAO-06-716SP).
[ix] 4 C.F.R. § 21.0(b)(1).
[x] 4 C.F.R. § 21.3(c),(d).
[xi] 4 C.F.R. § 21.3(i).
[xii] U.S. Government Accountability Office. (Dec. 2007). GAO Bid Protest Annual Report to Congress. (Publication No. GAO-08-0247R).
[xiii] 4 C.F.R. § 21.7.
[xiv] 4 C.F.R. § 21.9(a).
[xv] 4 C.F.R. § 21.8.
[xvi] 4 C.F.R. § 21.8(e).
[xvii] 31 U.S.C. § 3554(c)(2).
[xviii] See, e.g., Axiom Resource Mgmt., Inc. v. United States, 78 Fed. Cl. 576 (2007).