Acquisition Reform: Potential Bid Protest Impacts from the Section 809 Panel’s Final Report and Recommendations

In Section 809 of the National Defense Authorization Act for Fiscal Year 2016, Congress directed the Department of Defense (DoD) to establish an advisory panel on streamlining acquisition regulations applicable to DoD. The resulting “Section 809 Panel” (Panel) developed a series of recommendations and issued three reports over the past two years. In its third and final report issued January 16, the Panel made a series of recommendations, which would reform the bid protest system in several ways. These reforms would immediately impact defense contractors. Importantly, since DoD acquisition reform frequently leads the way for changes across all federal agencies, these recommendations also have the potential to impact all government contractors in the future. What follows are the paraphrased recommendations with brief explanations of their potential bid protest impacts.

Recommendation 35: Replace commercial buying and simplified acquisition procedures with “simplified readily available procedures.”

Currently, contractors may protest DoD commercial item procurements both pre- and post-award at the procuring agency, Government Accountability Office (GAO) and/or Court of Federal Claims (COFC). The Panel’s recommendation dramatically changes those options for DoD acquisitions of products and services falling under a new category deemed “readily available” in the marketplace. The Panel defines “readily available” products and services as those that require no vendor customization and that customers can put on order.

The Panel’s recommended changes would apply to all readily available product and service acquisitions of $15 million or less (and over $15 million with higher authority approval). The changes include not requiring public advertising for these acquisitions, utilizing market research and market-based competition, eliminating mandatory small business set-asides, providing small businesses a five percent price preference and permitting “limited protests” to be filed with the agency. The only permitted protests would be situations where (1) the product or service procured was not actually “readily available” or (2) the contracting officer did not conduct proper market research.

The result of these changes would be no ability to protest these acquisitions at GAO or COFC, and very limited ability to protest to the agency. Contractors would lose the ability to hold the government accountable to following the procurement rules, and taxpayers would have less transparency into how DoD spends its funds.

Recommendation 66: Establish a bid protest purpose statement to provide adjudicative bodies with guidance for consistent protest resolution and an effectiveness measurement standard.

Currently, there is no bid protest “purpose statement” to provide agencies, GAO or COFC with any guidance for resolving bid protests uniformly, nor any official method of measuring bid protest effectiveness. A primary bid protest goal frequently cited has been transparency into the procurement system to ensure agencies treat offerors fairly and spend taxpayer funds efficiently. The Panel recommends enacting the following purpose statement:

[T]o enhance confidence in the [DoD] contracting process by providing a means, based on protests or actions filed by interested parties, for violations of procurement statutes and regulations in a timely, transparent, and effective manner; and a means for timely, transparent, and effective resolution of any such violation.

While this purpose statement would provide statutory guidance on bid protest purposes by essentially codifying what is already widely believed in the acquisition community, it will likely have very little impact on the current bid protest system. Additionally, while the Panel recommends establishing a standard for measuring bid protest effectiveness, it does not provide any guidance or suggestion for what that standard should be.

Recommendation 67: Reduce bid protest timelines by 1) eliminating the opportunity to protest at COFC after protesting at GAO and 2) requiring COFC to issue a decision within 100 days of ordering a procurement be delayed.

Currently, disappointed offerors are permitted to file bid protests with the procuring agency, GAO, COFC or a combination of the three in succession. The Panel’s recommendation is to eliminate what is referred to in the acquisition community as disappointed offerors having “two bites at the apple” in the protest realm by protesting at GAO and, if unsuccessful, protesting again at COFC. GAO regulations prohibit GAO from reviewing bid protests already decided by COFC. GAO must issue its bid protest decisions within 100 days of filing. COFC, where review is more expansive and agencies typically must produce much more robust administrative records, does not have any required timeline (though according to the Panel, the average COFC bid protest has been 133 days over the last few years).

These changes, intended to expedite acquisitions and prevent longer bid protest disputes, would create significant changes to the current bid protest system.

First, forcing contractors to make this binding forum selection would likely drive up protest costs and increase burdens at COFC. By their nature, COFC bid protests are more expensive and time consuming as they typically require more time to assemble and review larger administrative records and involve more arguments of errors discovered in the records. While contractors may choose now to only pursue that option if a less expensive GAO protest fails, under the Panel’s recommendation, contractors may be forced to choose the more expensive route to ensure they get the entire administrative record and an opportunity to raise all possible protest grounds at the outset.

Second, prohibiting COFC protests after losing at GAO essentially prevents contractors from any “judicial review” of GAO. While GAO is technically a legislative forum that only makes recommendations to executive agencies, the agencies almost universally follow GAO’s recommendations. Going to COFC after a loss at GAO permits contractors to have an appointed federal judge look at the matter and render a binding opinion. GAO correctly decides the vast majority of its protests, but even GAO attorneys occasionally “get it wrong.” The recent case of Palantir USG, Inc. v. United States, 129 Fed. Cl. 218 (2016) is an instructive example where GAO initially denied the protest, but COFC issued a decision sustaining the protest. Under the Panel’s recommended changes, Palantir would have been stuck with an erroneous GAO decision denying its protest.

Third, while the “100-day rule” may be effective for narrow issues, limited jurisdiction and smaller corresponding administrative records, the same timeline at COFC would likely be untenable given the broader jurisdiction and more fulsome administrative records.

Contractors file very few GAO protests where they lose and subsequently litigate the protest again at COFC. Eliminating this potential strategy for contractors will eliminate the opportunity to correct GAO errors and likely drive up protest costs by increasing the number of COFC protests.

Recommendation 68: Limit GAO and COFC bid protest jurisdiction to procurements exceeding, or expected to exceed, $75,000.

Currently, contractors can protest procurements of any dollar value at both GAO and COFC.  The recommendation would establish a floor with no ability to protest if the procurement was under $75,000. Notably, according to a RAND study the Panel cited, a not-insignificant ten percent of GAO protests and four percent of COFC protests are for acquisitions under $100,000.  In making its recommendation, the Panel questions the “value, in terms of transparency” for smaller contract awards.

While understanding the Panel’s desire to balance the costs and efficiency losses involved in protests with the need to deliver products and services to the warfighter, this recommendation would likely have a disproportionate impact on small businesses. Additionally, this change removes any threat of oversight for procurements under $75,000, disincentivizes procurement officials from adhering to the rules and essentially eliminates transparency into these acquisitions. The “value, in terms of transparency” for a small contract award bid protest, where GAO or COFC finds the procurement official acted improperly, is the deterrent effect it has on similar conduct in future acquisitions. Eliminating these protests would essentially eliminate transparency and accountability for acquisitions involving spending up to $75,000.

Recommendation 69: In all required debriefings, provide a redacted source selection document and the debriefed offeror’s technical evaluation.

Currently, required debriefings must include items such as evaluations of significant weaknesses and deficiencies in debriefed offerors’ proposals; evaluations of cost/price and technical ratings for successful offerors and debriefed offerors; past performance information for debriefed offerors; overall rankings (when developed) of all offerors; summaries of award rationale; and reasonable responses to relevant questions about whether agencies followed applicable source selection procedures. In DoD debriefings, debriefed offerors may also ask follow-up questions that procuring officials must answer before closing the debriefings. Finally, for high-dollar acquisitions, DoD must provide redacted source selection documents.

The Panel’s recommended debriefing changes essentially extend the requirement for redacted source selection documents to all acquisitions requiring a debriefing and provide offerors with the government’s technical evaluations of their proposals. Arguably, these changes will lessen the need for bid protests as they provide more transparency into how the government evaluates proposals and how procuring officials make award decisions. If the documents demonstrate the government followed the rules, the process should result in fewer bid protests.

Conclusion

The Panel’s overall efforts to develop recommendations for DoD acquisition reform are commendable. The Panel recognized the need for a balance between acquiring needed products and services for the warfighter more efficiently and the importance of transparency and oversight functions provided by our current bid protest system. The effects of some of the Panel’s recommendations, however, have the potential to significantly impact current bid protest processes. If you have questions about further understanding the Section 809 Panel’s recommendations and potential impacts, please contact Ice Miller’s Government Contracts Practice.

The full Section 809 Panel reports can be found at https://section809panel.org/media/updates/. 

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.