The U.S. Department of Defense (“DOD”) has come under increased scrutiny in recent years regarding the time, resources, and delay in procurement that result from the bid protest process. Government contracting firms—particularly small businesses—should take note of the perception that the current bid protest system is inefficient and may be encouraging frivolous protests, as Congress is investigating methods of potentially streamlining or otherwise modifying present procedures.

As part of its investigation, Congress called for a study of the actual impact of bid protests on DOD acquisitions in the National Defense Authorization Act for Fiscal Year 2017. RAND National Defense Research Institute (“RAND”) was commissioned to conduct the study, and recently presented its findings to the public in a report titled “Assessing Bid Protests of U.S. Department of Defense Procurements: Identifying Issues, Trends, and Drivers.” The full report may be found here. This article focuses on some of the RAND study’s findings and recommendations that may interest and affect small businesses.

Small Business Related Findings

Protests by small businesses represent the majority of protests both at the Government Accountability Office (“GAO”) and the Court of Federal Claims (“COFC”).  While the percent of actions brought by small businesses is representational of the overall number of contracts awarded by DOD to small businesses (about 65 percent), small business protests are disproportionate in terms of overall DOD contracting dollars (only about 15 percent of which go to small businesses).

The above finding is likely to pique the interest of policymakers looking to reform the system, particularly given that the study also showed that approximately 3.5 percent of cases in the COFC and 8–10 percent of cases in the GAO are protesting an award value of less than $100,000. The report thus raises the policy question of whether the cost to the government to adjudicate protests exceeds the value of the procurement itself. For certain government stakeholders, the perception is certainly ‘yes’, but as of now, the government does not keep data associated with the cost to process bid protests. Nevertheless, the RAND report puts forth certain recommendations, discussed below, which are aimed at dealing with lower-value bid protests and that may hurt small businesses for which contracts valued at less than $100,000 are an important source of revenue.

The RAND study also highlighted the importance of legal counsel for small businesses. RAND found that at the GAO, small businesses are less likely to be effective than their large business counterparts, which statistic appears to be linked to the fact that protestors at the GAO are not always represented by legal counsel. In fact, small businesses are 1.5 times as likely as other businesses to have their protests dismissed for legally insufficiency. At the COFC, where all protestors are represented by counsel, the likelihood of effectiveness is the same for small businesses as it is for other businesses.

Another notable finding by RAND is that between FY 2008 and FY 2016, there was a slight increase in the overall effectiveness rate at the GAO—which data refutes the perception among many DOD personnel that meritless protests account for increases in protests over recent years. Though the RAND study looked at several other data points, it ultimately concluded there is no “formula” for predicting what will make a protest effective. Each case is different, and the details affect the outcome.

Small Business Related Recommendations

The RAND report concluded by offering the following six recommendations to policymakers:

  1. Enhance the quality of post-award debriefings.
  2. Be careful in considering any potential reductions to GAO’s decision timeline.
  3. Be careful in considering any restrictions on task-order bid protests at GAO.
  4. Consider implementing an expedited process for adjudicating bid protests of procurements valued under $0.1 million.
  5. Consider approaches to reduce and improve protests from small businesses.
  6. Consider collecting additional data and making other changes to bid protest records.

Of particular import to small businesses are recommendations four and five. With regard to the recommendation that lower-value procurement protests be streamlined, RAND recognized that cost-effectiveness is not the only—or even necessarily the most important—goal of the protest system. Government transparency is a major goal. Nevertheless, some ideas RAND put forward for these lower monetary value cases included: COFC ruling from the bench rather than generating written decisions, requiring ADR at the GAO, and possibly restricting such protests to the agency level. While it is too early to tell whether policymakers will consider adopting one of these measures, small business contractors should keep a close eye on new restrictions for small dollar amount protests. Lack of written decisions—which affects the protestor’s appeals process—and jurisdictional limitations could significantly impact fairness to small businesses.

In general, RAND’s fifth recommendation that policymakers consider small businesses in its approach to revamping protest procedures is well reasoned. However, rather than addressing the issue by imposing the burden of attorney fees on the non-prevailing party, as RAND suggests as a possibility, policymakers should focus on improved debriefing, and the GAO should consider a pilot pro-bono lawyer referral program. Armed with better knowledge and legal counsel, small businesses may be more likely to pursue more meritorious protests, and avoid protesting as a means for learning more about why their offer was denied.

Finally, another interesting idea raised informally by DOD personnel during RAND’s interviews with government stakeholders was possible creation of a statutory protective order scheme for agency-level protests whereby protestors can examine source-selection material to help resolve the protest at an early stage. RAND did not specifically investigate this idea as a recommendation, but it could be a solution beneficial to all parties involved.

In sum, small businesses, especially those that regularly contract with the government for contract values of less than $100,000, should keep an eye on possible legislation affecting protests before the GAO and COFC, as the RAND report highlights handing of small business protests as an area in possible need of change.