Payment of Costs for Denied Protests

Yesterday we discussed the study that Congress wants performed on the impact of bid protests to the Government procurement process and particularly, the impact on DoD. If you missed that post, be sure to read it here. There is another provision in the Senate version of the 2017 NDAA that may have a profound impact on the number of protests. It's found in Section 821 and is entitled "Government Accountability Office Bid Protest Reforms.

There are two elements to the provision, contractors who loose the bid protest and incumbent contractors who lose the bid protest.

Contractors who lose a bid protest.

A contractor who files a protest with the Government Accountability Office (GAO) on a contract with the Department of Defense shall pay to the GAO costs incurred for processing a "covered" protest. A covered protest is one where all of the elements being protested are denied in an opinion issued by the GAO and filed by a party with revenues in excess of $100 million during the previous year. Because of the $100 million in revenue threshold, most small businesses will not have to pay processing costs, even if they lose their bid protests.

The proposal does not state how "processing" costs will be determined but attorneys (including GAO attorneys) are not inexpensive.

Incumbent contractors who lose a bid protest.

There is a feeling within the Government that incumbent contractors protest awards to successor contractors simply to pro-long their revenue streams. This provision applies to incumbent contractors without regard to revenue thresholds.

Contractors who file a protest on a contract on which they are the incumbent contractor shall have all payments above incurred costs withheld on any bridge contracts or temporary contract extensions awarded to the contractor as a result of a delay in award resulting from filing a protest.

All payments shall be released to the protesting incumbent contractor if the solicitation that is the subject of the protest is cancelled and no subsequent request for proposal is released or planned for release or the GAO issues an opinion that upholds any of the protest rounds filed under the protest.

If the protest is not sustained, all payments above incurred cost shall be released to the contractor that was awarded the protested contract prior to the protest.

If no contract is awarded, the withheld payments shall be released to the GAO and deposited to an account that can be used by the Office to offset costs associated with GAO bid protests in which the GAO issues an opinion in favor of a small business concern, either as a direct or third party beneficiary.

We've read some speculation that this Senate provision will not survive to final passage of the 2017 NDAA. There would seem to be a lot of implementation issues. What happens if a GAO decision is appealed? How does one calculate "processing costs". How does one determine "profit" on a competitively awarded contract? And so on.