Coming to a contract protest near you, loser pays legal fees
The DoD and GAO are being called on to develop a plan to have companies that lose bid protests to repay DoD for legal costs.
A clause in the Defense Authorization law for 2025 has procurement attorneys sitting up in their chairs. It calls on the Defense Department and the Government Accountability Office to develop a plan to test a novel idea: having companies that lose bid protests to repay DoD for legal costs. Venable procurement attorney Chris Griesedieck the Federal Drive with Tom Temin joined me to discuss what this could all mean.
Interview transcript:
Tom Temin: This is an old idea that bounces around. Is this the first time it’s actually made it into law, even in pilot project form?
Chris Griesedieck: No, it’s not. Actually, there was a clause in the fiscal year 2018 National Defense Authorization Act, or NDAA, where Congress passed a very similar but more limited pilot program to have contractors who lost a bid protest pay the Department of Defense for its costs of litigating the protest. But it only would have applied to contractors who were receiving over $250 million in revenue and it was scrapped a couple of years later.
Tom Temin: OK, so what is the gambit now? Why revive it at this point? What are the differences in the conditions under which the government could recover?
Chris Griesedieck: Well, there are a few differences from before. No. 1, the payments would not just be to DoD. It would also be to the GAO would be the idea for its costs as well. No. 2 is that there’s actually a third party you’d be paying now, which would be the awardee, because when you protest at the GAO, it freezes the procurement in place and the new awardee can’t perform for 100 days while the protest is pending. And so they have lost profit. And the idea is that they would be entitled to receive that lost profit from the protester if the protester loses.
Tom Temin: Wow. So they took a iffy idea and expanded it greatly into see if it goes over any better this time?
Chris Griesedieck: Yeah, I mean I’m not really on the policy side of things, but I certainly have different ideas for what I think is potentially ailing the system a little bit. One interesting thing to look at is that back in the FY16 NDAA, Congress created that blue ribbon Section 809 Panel that came out with all the recommendations for procurement reform. And they actually thought through and came up with four recommendations related to bid protest. And none of those are the ones that we’re seeing in this NDAA.
Tom Temin: Right. That 809 Panel kind of toiled in great honor, but not a lot of effect from what it is of the hundreds of things that came up with.
Chris Griesedieck: A cry in the wilderness a little bit. Yeah.
Tom Temin: Well, let’s get back to this now. One of the things that you’ve pointed out in analysis is that one of the characteristics of this pilot program that GAO and DoD are supposed to devise is an enhanced pleading standard for protesters to meet before they may obtain DoD’s administrative procurement records in GAO protests of DoD contracts. Put that in English for us.
Chris Griesedieck: Yeah. So this is basically an effort to make it harder to win the protest or to make the protest go the full 100 days, because the way it works is that you’ll get a debriefing if you lose the procurement and the government will give you some information about what happened. And to its credit, the DoD oftentimes provides more than other agencies will give you a redacted source selection decision document, maybe portions of the technical evaluation, so you have some idea of what happened. But other agencies don’t always do that. And so oftentimes people will protest to try to figure out what happened because they just have a sense that something’s wrong here. The protests really can’t continue if you don’t get those documents to see what the agency actually did. So this enhanced pleading standard would basically require you to have even more facts going into the protests than you do, which can oftentimes be not very many at all. So the long and short of it is that the protest is much less likely to proceed and succeed ultimately if you can’t get those documents.
Tom Temin: Right. So it sounds like they’re really trying just to tamp down on the number of protests, period.
Chris Griesedieck: Yeah, I agree with that. I mean, if you look at the materials that the House Armed Services Committee released, they are touting this as an effort to tame and avoid frivolous protests by contractors. But again, if you look at what the Section 809 panel did, they considered claims over the years from the Senate as well that there were allegedly a lot of meritless protests out there. And they looked at it and they said, ‘Well, hold on, if you look at the data, the amount of times where you either have the government voluntarily taking corrective action because they recognized there was a problem or where the GAO sustains the protest, that rate has stayed the same,’ which suggests that even as the number of protests has ticked up a little bit over the last few years, it’s not because there are meritless protests. It’s because protesters are actually finding the same number of problems as they always did. It’s just that it’s infecting more procurements.
Tom Temin: We’re speaking with Chris Griesedieck. He’s a procurement attorney with Venable. Really, the number of protests is relatively flat. If you look at the 20-year chart that GAO puts out every year, it goes up a little bit, down a little bit. It’s always around 2,000 or so out of the how many hundreds of thousands or millions of contract actions the government takes in a given year. So I guess they just don’t like the annoyance of the ones they do get.
Chris Griesedieck: Yeah. Another little factoid there is that in the FY17 NDAA, Congress commissioned a report amid protests from the DoD and it was ultimately performed by the RAND Corporation and they issued the report. It’s public and you can look at it and they noted that at that time when the report came out, I think it was back in 2018, the overall percentage of DoD contracts protested was really very small. It was less than point 3%. So, yes, I think it’s fair to say that a very large procurement high dollar value is more likely to be protested. But at the same time, if you look at the system as a whole, most things don’t get protested and they fly through.
Tom Temin: And the really big programs like for ships or tanks, this type of thing that the government or maybe a giant to cloud contract, the Jedi thing that never went through, those are protested as a matter of course by everyone That doesn’t win. I think they prepare their protest strategies at the same time as their bid strategies. But those are relatively rare in terms of how many of those have come out from DoD in a given year.
Chris Griesedieck: Right. And if you think about the bid protest system as for what it is, which is it’s really the primary accountability measure that we have to ensure that procurement statute and regulation get followed during the acquisition process. If you think about it from that framework, those are the exact procurements that you would want protested to make sure that the rules are actually being followed. If we started seeing those never being protested, it would sort of suggest, ‘Hold on, who who’s actually watching things here,’ because we actually probably don’t have enough offices of inspector general staff who can really do all that work on their own. And so Congress, in its wisdom, has sort of privatized that function, that accountability function to interested parties in the contractor community to police it.
Tom Temin: If you actually read the analysis, say that like Nash used to publish and so forth of protest cases, they’re highly arcane in some cases and it’s doubtful anyone in the IG office, for example, might even know the issues the way procurement attorneys do.
Chris Griesedieck: Yeah, I think that’s a fair point. And it sort of raises the other issue here, which is that when there is a problem that’s found in the procurement, it’s very rare that it’s an issue of bad faith by anyone in the government. It’s just that there are a lot of really complicated regulations and rules to be followed. And everybody’s got a procurement timeline that they’re trying to hit to make sure that their mission is successful. And it’s just easy for things to get missed there. Arguably a better solution to the overall problem of procurement timelines being slowed down in some cases by their protest is maybe other things like the Section 809 Panel said make protesters choose between going to the GAO and the Court of Federal Claims rather than being able to do sequential protests. I think that’s worth considering and looking at another possible angle is, OK, if the issue is that a lot of these rules that we want procurement officials to follow, it’s really not worth the cost of the protest process to make sure that they’re followed, include more waiver authority, give contracting officers the authority to waive those things that they’re truly unimportant but documented so that we know what rules are not being followed. There other things that potentially are better than this blunt sort of stuff, saying let’s just make it harder to protest regardless of whether or not the protesters. Right.
Tom Temin: Yeah, it’s sort of like the British tort system or something that they’re emulating here.
Chris Griesedieck: Right.
Tom Temin: And as a procurement attorney, I mean, if you count up all of the protests in a year and multiply by the hours that they take, divide by the number of procurement attorneys operating in this market, protest is not really a huge part of a given lawyer’s yearly time anyway, is it?
Chris Griesedieck: Yeah, I mean, it’s definitely an ebb and flow, I would say. But I don’t know any government contracting attorney whose entire practice has been protest. I do them and they’re not an insignificant part of my practice, but we all do a lot of other things, too.
Tom Temin: All right. So this provision in the NDAA, it gives the two parties, GAO, DoD 180 days from passage. Then sometime in the middle of calendar 2025, we’ll be able to see what this program looks like in detail.
Chris Griesedieck: Yeah, that’s right. GAO is going to have to huddle up with DoD and come up with some benchmarks. I think if I’m reading the tea leaves of what Congress has put together correctly, I don’t think they want to have a very detailed accounting in every one of these cases where you have to tick and tie every single nickel and dime of costs incurred by the DoD and the GAO in resolving a big protest. I think they’re trying to come up with a framework with benchmarks saying on average, it costs DoD this much to litigate a protest. And so if you lose, they’re going to pay something around that average. And perhaps they’ll have like a tiered system where it’s like this kind of protest that goes this way. Maybe it’s pre award versus post award, extra costs, less costs, something like that. I mean, that’s all something to be hashed out. But it’s a pretty it’s a pretty broad mandate that’s been given out here. And it’ll be interesting to see what they come up with. My hope is that they confer with the private bar and other interested parties before they publish rules or give them to the Congress to make a final system, because I do think there are a lot of people who are going to have helpful things to say.
Tom Temin: Right. It could be so bad we’ll all repair to a private bar.
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Tom Temin
Tom Temin is host of the Federal Drive and has been providing insight on federal technology and management issues for more than 30 years.
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