The Benefits of Bid Protests

In his article “Bid Protests: The Costs are Real, But the Benefits Outweigh Them,” Daniel I. Gordon, former Administrator for Federal Procurement Policy, defends the U.S. bid protest process, the mechanism though which bidders can challenge the government’s procurement decisions. Gordon seeks to dispel what he deems “common misconceptions” about the process, which include characterizations of bid protests as frequent and costly. According to Gordon, many of the benefits of the bid protest process, including increased accountability, bidder confidence, and agency compliance with contracting laws and rules, can be enhanced through greater transparency in government acquisitions. The Project On Government Oversight agrees, and also thinks that greater openness both pre- and post- award would benefit both participants in the procurement process and U.S. taxpayers.

Gordon highlights how difficult it is to draw conclusions about the bid protest process because no data exists on the total number of U.S. procurements, and protest data provided from the Government Accountability Office (GAO) overstates the number of procurements actually challenged. Based on the available data, Gordon finds that bid protests are rare when taken in the context of the total number of government contracts in a given year. To provide an example, Gordon examines FY 2011 data and what he considers a conservative estimate of 200,000 total contracts awarded that year. He then determined that out of those 200,000 contracts, only 1,470 were actually protested (GAO reports that 2,353 cases were filed, but Gordon explains that this number includes multiple protests to procurements). Based on those numbers, Gordon concludes that in FY 2011, approximately 99.5 percent of awards were not protested, and even if protests doubled there would still be fewer than three protests per billion dollars spent on contracts annually.

Gordon explains that it is also rare for a bid protest to be sustained (decided in favor of the protestor) by the GAO. He goes on to note that even when a bid protest is sustained, protestors rarely go on to win the contract at issue. To illustrate this point, Gordon looks at FY 2010 and breaks down what happens after GAO sustains a bid protest. (He selected 2010 “because enough time should have passed for final actions in the underlying procurements to be available.”)

In GAO’s 2012 Bid Protest Report, the agency included a chart titled “Bid Protest Statistics for Fiscal Years 2008-2012,” which shows that in FY 2010, 441 out of 2,299 cases were decided on the merits. That year GAO reported a sustain rate of 19 percent. Gordon explains that the sustain rate refers to 19 percent of cases decided on the merits (441) not 19 percent of total cases (2,299). When this number is adjusted for the multiple-protest inflation described above, it turns out only 282 protests were decided on the merits. Out of these 282, only 45 were sustained, giving GAO an actual sustain rate of 16 percent, according to Gordon.

The article then breaks down the 45 sustained protests by outcome:

• 23 cases: Agency followed GAO’s recommendation, but then confirmed the contract award to same company that previously won, or took other action that did not benefit the protester.
• 8 cases: Protester obtained the contract.
• 6 cases: Outcome not yet determined.
• 4 cases: GAO recommended no action.
• 3 cases: GAO recommended corrective action, but the awarding agency declined to take such action. (Each of these disagreements arose from a difference of interpretation between the GAO and Department of Justice regarding the Historically Underutilized Business Zone statute, 15 U.S.C. § 657a, Federal Acquisition Regulation §19.1305(a)).
• 1 case: Agency agreed to re-solicit bids using the procurement code sought by the protestor.

Gordon cites the bid protest process as a low-cost way of injecting accountability into acquisitions systems (compared to regular audits of the entire system). He says bid protests can also increase the confidence of bidders and the general public in the procurement system, empower agencies to act in accordance with the laws and regulations governing acquisitions, and provide guidance to both agency counsel and attorneys representing bidders in the procurement process.

Gordon indicates that the benefits of the bid protest system may “not be fully appreciated,” and concludes that costs associated with bid protests are outweighed “by the benefits that protests bring, in terms of transparency, accountability, education and protection of the integrity of the U.S. acquisition system.” If the bid protest process is as underappreciated as Gordon indicates in his report, the next step may be to ask why, and figure out what can be done to make the protest process more valuable to those involved in federal procurement.

Outside of the bid protest process, the Office of Federal Procurement Policy (OFPP) agrees that there are benefits to transparency in the procurement process, and recently issued a memorandum that describes the availability of past performance information as “critical to informing source selection and award decisions and ensuring the government builds relationships with high-performing suppliers.” OFPP also noted that improving collection and use of performance information translates into better acquisition outcomes and increased levels of productivity. POGO supports efforts to standardize collection and evaluation of past performance data, and the release of the information to the public when doing so poses no legitimate threat to commercial interests.