Bid protests: good for business or relationship killers?
How many bid protests is too many? That was the title of my award-winning article, which covered the unprecedented “ban” by the Government Accountability Office (GAO) of an extremely enthusiastic contractor who volley-fired more than two-thousand bid protests (yes, you read that correctly).
GAO lost patience and decided to “ban” the contractor, twice! My full-length article covers all the gory details, including why GAO likely doesn’t have the authority to “ban” anyone, and you can email me for a free copy. But read ahead for the bottom line, up-front (BLUF) on bid protests. Are bid protests good for business, or are they relationship killers?
By Christoph Mlinarchik, JD, CFCM, PMP | Owner, www.ChristophLLC.com
Did you just lose a contract? Are you thinking about a bid protest over government contracts? Save your money and consider your options with an expert in government contracts. Email Christoph@ChristophLLC.com
What’s a bid protest?
Generally, a GAO bid protest contests the evaluation and award of a federal contract, or terms of the solicitation, RFP, or RFQ. Your proposal was rejected, you lost the contract, and you think you got a raw deal because the government didn’t follow the rules. A successful GAO protest can give you a second chance at winning the contract.
Does it cost money to protest a solicitation or contract award?
Until the GAO introduced filing fees starting May 1, 2018, it was completely free to file. Now it costs $350 to file using the GAO’s new Electronic Protest Docketing System (EPDS).
Although $350 seems like a bargain, here’s the catch. Your bills can run into six figures to pay consultants and attorneys. That’s one reason clients hire me for an expedited expert opinion, to evaluate your situation, before a fast-talking attorney convinces you to go “all in” and spend the big bucks.
You can protest on your own, without an attorney, which is called pro se, but “you get what you pay for.”
Does it make business sense to protest a contract award?
That’s right; you guessed it! The answer is “it depends.”
Let’s say the total cost of the bid protest is $100,000 and you’re the incumbent contractor that just lost the follow-on services contract to a competitor.
Suddenly the numbers make sense, because if your protest is not immediately dismissed, you’re looking at a four to six-month contract extension. Assuming your contract is for more than a few employees, $100,000 is a reasonable expense to keep a half-year’s revenue flowing.
What about the client relationship? Will the client view me as a trouble-maker?
Bid protests are a double-edged sword because they can swing your company’s fortune in either direction. You might secure a lucrative contract, or you might ruin your relationship with the government client. The official line is protests are a valid process of accountability, but your clients are subject to emotions, bias, and grudges.
Controversial strategy: using a bid protest to secure an extension of the contract
Here’s a hard-nosed and highly controversial business strategy. Let’s say your competitor beat you in the follow-on service contract. Instead of packing your bags and vacating, you can file a bid protest to freeze the follow-on award.
If you file a GAO bid protest within a certain timeline, you can trigger the “automatic stay” or “freeze” under the Competition in Contracting Act. This “freeze” prevents the government from moving forward with the award to your competitor until the GAO bid protest is resolved.
Well, if the government can’t award to someone else, guess who usually gets a contract extension? Yes, you! Federal Acquisition Regulation (FAR) 52.217-8, Option to Extend Services allows for emergency extensions up to six months, like the emergency you just created with your GAO bid protest!
Life’s not fair, and protesting to get six months of more business seems harsh to the government and your competitor. To be clear, the government client might be very angry. But run the numbers and consider both your cash flow and potential damage to the client relationship.
Is another six months of revenue what you need to keep the lights on and your employees paid? Is it worth the potential damage to the client relationship, especially if you ultimately lose the bid protest and the follow-on contract?
Look before you leap
Many companies immediately consider bid protests when they lose a contract competition. That’s a rookie mistake.
Less than five percent of GAO bid protests are successful. They’re expensive and can ruin relationships.
You need to conduct a strategic analysis of your relationships, BD pipelines, existing contracts, and other factors to determine the best path forward. Sometimes it’s better to spend “exploratory” money to get independent, candid, expert advice…before you file a formal protest.
Beware the bid protest mongers
One thing I always warn clients about is the trigger-happy bid protest attorneys who always recommend a protest. They have a big financial incentive to recommend that course of action, but that’s not always in your best interests. A few hours of analysis and advice can save you $100,000 down the road.
Keep your eyes on future bid protest reform
Legislative bid protest reform is always on the menu. For instance, Congress created a pilot program for the largest defense contractors to reimburse costs to the government of failed bid protests. Congress is also considering a separate venue for protests of small-dollar contracts. Finally, the GAO recently reasserted its authority over protests that Other Transaction Authority (OTA) was improperly used instead of a traditional government contract. For more information on bid protests, please contact me at Christoph@ChristophLLC.com.
Christoph Mlinarchik, JD, CFCM, PMP is the owner of www.ChristophLLC.com, providing expert advice in government contracts: consulting, professional instruction, and expert witness services. Contact Christoph at Christoph@ChristophLLC.com.