Worth Fighting For
With lucrative deals on the line, companies more often are protesting contract awards and winning.
An increasing number of companies have turned to the Government Accountability Office for a second opinion on contract awards. And while the bulk of these protests are dismissed for procedural reasons, companies are experiencing a fairly high degree of success. In fact, although the number of protests decided by GAO fluctuates from year to year, the proportion of successful ones has risen steadily in each of the past five years, from 16 percent in fiscal 2002 to 29 percent in 2006.
Attorneys who represent contractors before GAO attribute their success to a number of factors, including an inexperienced procurement workforce, increasingly complex procedures and mounting pressure among companies to secure lucrative, and often elusive, contracts. "There are a lot of contracts out there and not as many experienced contracting officers," says John J. Pavlick Jr., a partner in the Washington law firm, Venable LLP. "That's a bad combination."
Pavlick has been trying cases before GAO since 1990, winning roughly one out of every five decisions. In January, for example, Venable won a protest by establishing that the winning bidder for an unmanned robotic water vehicle did not qualify for a small business set-aside. He suggests that the recent retirement of many senior contracting officers has left a void of experience that could be fueling procurement errors. And, while the burden of proof in bid protests still favors the agency-most agree that a tie goes to the government-savvy contractors are finding creative new ways to earn a second shot.
Last year, contractors filed 1,327 protests with GAO. More than 80 percent were pulled back by the protester or dismissed, either because they were filed late or involved an agency that GAO does not have jurisdiction over. Of the 249 cases in which GAO reached a decision, 72 went in favor of the protester. Companies also filed 64 cases with the Court of Federal Claims, an alternate route for settling disputed procurement decisions.
GAO's Michael Golden, who heads the General Counsel's Procurement Law Office, says many protests focus on conflicts of interest-a firm helping to draft an agency's request for proposals and then winning the deal, for example. Others contend an agency failed to impartially follow its own rules for evaluating bids. In some cases, companies claim their discussions with agencies were misleading or that the government's cost evaluations were flawed. "There is a wide range of issues," Golden says. "Companies protest when there is a reason to protest and when it's a good business decision."
Some protests seem ill-fated from the start. Stewart Distributors of Pennsylvania recently argued that the Veterans Affairs Department improperly rejected its bid for bulk laundry and linen service at the VA Medical Center in Pittsburgh because the agency misinterpreted language in its proposal. VA's solicitation required that the winning contractor provide clean, dry and stain-free laundry that was not physically damaged due to improper processing or carelessness. Stewart's proposal suggested that it would guarantee "not more than one hole, no longer than a dime" in pads and briefs, while other items, such as patient gowns, bibs and bath mats would have no "more than one slight stain, no larger than a quarter." Stewart argued that the aforementioned language referred only to a small percentage of the items in the solicitation. GAO denied the protest.
In other instances, companies bring relatively strong cases, but still don't necessarily prevail. Last year, for instance, the State Department's Overseas Building Operations awarded a $75 million contract to American International Contractors Inc. (Special Projects) of Arlington, Va., to design and build a new embassy in Djibouti, Africa. Caddell Construction of Montgomery, Ala., protested, alleging that AICI-SP did not qualify because it was not a "U.S. person" or an American-owned company. The 1986 Omnibus Diplomatic Security and Anti-Terrorism Act restricts diplomatic building projects to U.S. firms or joint ventures that include an American company.
Caddell's attorney, James F. Archibald III, with the Alabama firm of Bradley Arant Rose & White, told GAO that AICI-SP was established in November 2005, shortly before the bid was awarded. It is a subsidiary of American International Contractors Inc., which is owned by the Archirodon Group, a Dutch-based international construction company. In January, GAO upheld Caddell's complaint, recommending that the State Department further review AICI-SP's "U.S. person" status.
Despite the verdict, it appears that Caddell's protest might have been for naught. AICI-SP recently supplied the State Department with additional information that the agency said validates its status to build the North African embassy, says Gina Pinzino, external affairs manager for the State Department's Overseas Building Operations. Archibald plans to file another protest.
His situation is not unique. Pavlick estimates that in 90 percent of successful protests, the original winning company still ends up keeping the contract. If a protest is sustained, GAO often recommends that the contract go out for bid again or that the agency reanalyze the criteria for selecting the winner. Rarely will GAO recommend that the protester be awarded the contract outright. Without any assurance that their company will be awarded the deal, some contractors find protesting a time-consuming and expensive waste of time. What's more, some are convinced that filing a protest will anger the affected agency and could lead to being locked out of future contracts.
There is little evidence to sustain that fear, according to Jonathan S. Aronie, a partner and expert in government contracting at the Washington law firm Sheppard, Mullin, Richter & Hampton LLP. For example, Lockheed Martin Corp., the country's largest federal contractor, recently protested, and won, a decision by the Air Force to award a helicopter project to Boeing Co. Northrop Grumman Corp. and other firms that do big business with the government commonly file bid protests. "When agencies don't treat them fairly, companies don't have to sit idly by," Aronie says.
While correcting a perceived wrong might drive many companies to appeal, others are driven by far more urgent circumstances. "There are only a limited number of these opportunities, so companies feel the need to react," says Venable's Pavlick. "In many cases, it's their livelihood."