Pentagon contract protests aren't frivolous, RAND study finds
By TONY CAPACCIO | Bloomberg | Published: January 3, 2018
The Defense Department's process for buying weapons, goods and services isn't being overwhelmed or delayed by frivolous contract protests filed by major defense contractors as critics have contended, according to a study mandated by Congress.
Instead, "bid protests are exceedingly uncommon for DoD procurements," the report by the RAND Corp.'s federally funded National Defense Research Institute said.
The top 11 contractors filed relatively few protests in the years reviewed, fiscal 2008 through 2016, the research organization said. More than half of challenges were brought by small businesses, it said, and the protest process was more effective than generally realized at compelling a military service to change its initial contract solicitation terms or its decision after a protest was filed.
The data-driven assessment is significant because it's likely to be the basis of future congressional and Pentagon decisions on improving the process that lets bidders that have complaints before an award or those who lose a competition file appeals to the Government Accountability Office. The report underscores that most challenges are routine, unlike the few that end up in the spotlight.
Boeing and Lockheed Martin drew attention when they contested the Air Force's decision in October 2015 to choose Northrop Grumman over their joint bid for the B-21 bomber project that's valued at about $97 billion. The GAO rejected their challenge in February 2016.
"Policymakers should avoid drawing overall conclusions or assumptions about trends from one case when it comes to the efficacy of the bid protest system," RAND said.
The number of protests filed by the top 11 defense contractors went from 26 in 2008 to a peak of 40 in 2009 and have leveled off at about 20 a year.
The report also described "a lack of trust on each side" between the defense industry and the Pentagon's acquisition bureaucracy about the protest process. Military personnel say the rules allow "protesters to make excessive numbers of 'weak allegations,'" it said.
The total number of Pentagon contract actions protested to the GAO increased to about 1,400 in 2016 from about 900 in 2008, according to data cited by RAND. That covered protests filed over the terms of solicitations before contracts were awarded as well as post-award challenges seeking to overturn the winner.
While the increases "are statistically significant," the percentage of contracts protested is very small -- less than 0.3 percent per billion dollars of military contract spending, RAND said.
"Protest activity was much higher in the late 1980s and early 1990s than it is today," according to the report that was submitted Dec. 21 to congressional defense committees and Pentagon acquisition officials.
Congress directed the study to examine 14 areas, including how much the government spends on manpower to defend its actions. RAND said it was unable to quantify those costs for lack of data.
This lack of data could undercut a provision in this year's defense policy bill that requires the Pentagon set up a three-year pilot program in 2019 requiring losing protesters to pay the Defense Department's costs for handling GAO challenges.
The report's finding that contract challenges are relatively few bolsters the position of defense industry groups that the provision is unnecessary. The report also concluded that "firms are not likely to protest without merit," debunking the notion that losing incumbents protest a loss merely to extend their contracts for a few months while the case is open, according to Daniel Snyder, an analyst with Bloomberg Government.
While the GAO sustained 2.6 percent of defense protests filed since fiscal 2008, the study found that's not the whole measure of effectiveness.
"The majority of relief to protesters takes the form of corrective actions" by the contracting agency while a challenge is pending before the GAO or withdrawn based on the potential for solving issues short of a decision, the study said. "Roughly 40 percent of all protest actions result in some change to the initial procurement decision or terms," RAND said.
RAND concluded the steady record of effectiveness it documented "refutes the claim that meritless protests (some use the term frivolous)" account for the increased challenges.