By Bijah LaFollette
I spent a week shadowing a government contracts lawyer. I learned that the U.S. Government spends $558 billion annually in contracting with private companies to provide goods and services to carry out government programs. These contractors compete by submitting proposals in response to government solicitations. When a contractor believes that the competition has not been conducted fairly—i.e., that there was a mistake in the solicitation or the proposal evaluation process—it can file a “bid protest” to seek a recompete. In a bid protest, a neutral third party, either the Government Accountability Office (GAO) or the Court of Federal Claims (COFC), determines whether the government properly conducted the competition. The protest process costs both time and money for the protester and the government, but it also ensures accountability for taxpayer dollars. This essay summarizes what I learned about government contracts and protests.
What the Government Buys
Over the past 20 years, federal government expenditures on contracts have increased significantly, from just $208 billion in FY 2000 to an estimated $558 billion in FY 2018, representing 40% of the government’s discretionary spending. The government has contracted for goods and services covering everything from F-22 jets to Medicare Part B pharmaceutical payments.
The primary driver of the U.S. government contracting budget is defense programs, which amounted to a whopping $358.3 billion in 2019. Defense contracts include the production of military equipment—e.g., tanks, missiles, aircraft, other weapons systems—and services such as cybersecurity support. These products and services are provided primarily by large defense companies like Lockhead Martin ($48.6 billion), Boeing Corporation ($28.18 billion), General Dynamics Corp ($21.0 billion), and Raytheon ($15.9 billion).
Real World Government Contracting Examples
Border Security: The U.S. Customs & Border Patrol (CBP) uses private contractors for a significant portion of its mission. For example, CBP recently awarded a 10-year, $1.43 billion contract to provide maintenance and logistics support services for the agency’s fleet of 211 fixed-wing and rotary-wing aircraft. These aircraft patrol the U.S.-Mexico border for illegal entries and drug detection.
The CBP has other border security contracts. In May of 2020, CBP awarded a contract to construct approximately 14 miles of new border wall system in Webb County, Texas. That contract has a total value of $275 million.
Additionally, in November of 2019, CACI, a professional services and information technology company, landed a $1.9 billion contract to modernize many of CBP’s back office systems. The five-year contract had a $460 million ceiling and covers design, development, testing, implementation, training, and maintenance of back office CBP IT systems, including operational offices, administrative office systems, the agency’s website, personnel and financial management systems, as well as applications that track border activity and seized property.
Afghanistan Aid: The United States Agency for International Development (USAID) is an independent agency of the federal government that is primarily responsible for administering civilian foreign aid and development assistance. As part of its mission, USAID builds schools and infrastructure and operates hospitals and clinics to basic healthcare in impoverished nations. Most of this work is done by the private sector through government contracting.
In Afghanistan, an international development contractor received a $100 million loan from USAID for an Agricultural Credit Enhancement Program I & II (ACE). This loan allowed the contractor to give Afghan farmers access to agricultural credit to pay for the tools needed for harvesting. The farmers repay their loans after the harvests.
This program had positive results. ACE I loans benefitted 31,000 small commercial farmers and 150,000 rural households. ACE II contributed to the creation of 1,877 full-time equivalent jobs. The program gave 11,026 beneficiaries access to agricultural lending products.
African Aid: USAID has other private sector partners that work in impoverished nations around the globe. USAID partners with a private equity fund based in South Africa. The firm manages the Pan African Infrastructure Development Fund (PAIDF1), a $630 million fund that invests in infrastructure across Africa. The project has provided access to clean, reliable energy in East Africa by investing roughly $70 million in equity finance into a wind farm in Kenya that is poised to provide clean power to the country’s national electricity grid. The fund has also injected over $500 million into the African power sector and increased access to electricity in several African countries while planning potential investments in others.
The federal government is required by statute to award contracts to the maximum extent practicable. Multiple companies compete for any given contract, and the government awards to the company whose proposal provides the best value. Unsuccessful companies can challenge the government’s award through the bid protest process. In a bid protest, a losing offeror asks a neutral decision maker, usually GAO, to determine whether the purchasing agency conducted the competition properly.
As discussed further below, the bid protest process has pluses and minuses. When protests are successful, GAO will recommend that the agency fix errors in the procurement, which potentially benefits taxpayers. On the other hand, protests consume resources and can slow the procurement process, preventing a contract from proceeding. As commentators have noted, “[f]ederal agencies—believing many protests to be frivolous and frustrated by the expense and delays they cause—have sought to curtail the bid protest process.”
Reasons to File a Protest
The U.S. government is legally and morally responsible for ensuring that U.S. tax dollars are spent wisely, fairly, and transparently. But when awarding contracts, the government often makes mistakes. Many protests challenge the government’s solicitation (proposal for a contract). When a solicitation is poorly written, it can affect how a contractor formulates its proposal. For example, vague solicitations can result in two companies submitting proposals on unequal footing.
An offeror may file a protest because the company awarded the contract is an “irresponsible bidder.” If the company that won the contract has a history of poor performance, is unlicensed, or has criminal convictions, they are considered an irresponsible. If an irresponsible bidder wins a contract, a competitor should file a protest.
Additionally, contractors may file a protest if the company that won the award submitted a nonresponsive bid. As construction attorney Trent Cotney advises, “[i]n order for a bid to be considered, it must be filed and filled out exactly to the specifications outlined within the bid application. If even one section of the bid is improperly done, the bid should be rejected. If this does not happen, however, and an award is given to an unresponsive bid, you have a right to file a bid protest.”
A protest is warranted when the agency’s evaluation is irrational or when its evaluation conclusions are not properly documented. Moreover, a contractor may have grounds to protest if the contracting agency disregarded procurement statutes or rules, unless the violation did not actually harm the protester.
The Bid Protest Process
Bid Protests can be filed with the agency that issued the solicitation, GAO, or the COFC. Most are filed with GAO.
In deciding a protest, GAO (or an agency or COFC) will review the bid protest arguments, consider the alleged errors, and, if necessary, recommend the agency take corrective action to fix mistakes. If a protester convinces the tribunal that (1) an agency has made an error and (2) that error requires corrective action, they have filed a successful bid protest.
In making a corrective action recommendation to the procuring agency, GAO will examine the circumstances of the procurement, including the agency’s need for the goods or services, the extent to which the contractor has completed its contractual obligations in the past, and other factors. In certain situations, GAO will suggest that the agency terminate a wrongly awarded contact, or that the agency not renew the contract.
Bid Protest Data
Bid protest data indicates that the U.S. government’s contracting process has room for improvement:
- Since 2010, Bid protests have increased by around 30%.
- Less than 25% of merit case decisions are filed because one decision can cover multiple protests. Different procuring agencies routinely take voluntary corrective action, and protest are occasionally withdrawn.
- GAO requires corrective action in an annual average of 16.8% of its merits decisions.
- But the much higher average effectiveness rate of 43.9% indicates that agencies take involuntary and voluntary corrective action much more frequently.
Are Bid Protests Good for Taxpayers?
By promoting fairness and transparency in the procurement process, the bid protest system is vital to ensuring that the government spends tax dollars wisely. Bid protests can potentially reduce the cost of goods and services purchased by the government and improve quality. If companies know that they must provide the best service possible, they are likely to make a better offer; competition is the name of the game. If the bid protest system were abolished, public confidence in the government contract sector could be lessened, which could depress participation by qualified companies and result in waste, fraud, and abuse in government spending.
But, as the Congressional Research Service (CRS) has found “protests arguably may impede the timely acquisition of goods and services, at least in certain circumstances,” and some “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 are unsuccessful, CRS opined, they force agencies to expend resources and can hold up goods and services needed for government operations. Furthermore, CRS has found “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.”
In the end, however, the numbers don’t lie. An estimation by CRS showed that GAO has saved taxpayers an estimated one trillion dollars over the last two decades. In fiscal year 2019 alone, GAO saved taxpayers a stunning $214.7 billion. It’s safe to say that despite their potential drawbacks, protests ultimately benefit U.S. taxpayers.