Monday, August 16, 2010

Are Bid Protests Good or Bad for the Public's Interests?

In these tight economic times, many public agencies are seeing an increase in the number of bid protests, as contractors compete for work, eager to keep their skilled and loyal workers employed.

Federal Bid Protests Increasing:  At the federal level, the number of bid protests increased considered by the U.S. Government Accountability Office (GAO) has been increasing as noted below:

The Question:  Are bid protests good or bad for the public's interests?

Bid Protests Are Important:  Daniel Gordon, Director of the Office of Federal Procurement Policy, thinks bid protests are important, writing that:
"Bid protests play a central fundamental role in protecting the integrity of the procurement system.  Neglecting, or crippling, an effective protest system will lead to a loss of transparency, and the shared experience of many procurement systems is that when transparency is decreased, corruption and related problems increase."
Bid Protests Should Be Discouraged:  On the other hand, Jacques Gansler, former Deputy Undersecretary of Defense for Acquisition, Technology, and Logistics, notes his concerns for delays as a result of bid protests:
"In the NFL, you get penalized if you protest arbitrarily and capriciously.  No one in the defense world loses anything for protesting.  You can hold up the program for several years, try to get on as a subcontractor, negotiate around it.  We need to think of some disincentives for protesting rather than incentives."
Finding the Balance:  Clearly, both have valid positions that reflect the classical tension in public agencies: the importance of the integrity of the procurement process versus expediency in completing the work.  Both are important values.  

The challenge for those in public procurement and contracting is to balance the business needs of the agency with the requirements for running a procurement system that complies with regulations, protects the public's interests, and inspires confidence in the integrity of the system, while at the same time achieving wise financial and business results for the agency and the taxpayers.

Charging for Bid Protests?  I was recently asked whether a public agency could charge contractors a fee for filing a protest - an effort to discourage protests and ensure no project delays.  While it may be possible to do so, I would discourage implementing such a fee as it undermines what should be an open and transparent process.  

Clarity in Bidding Documents:  Bid protests will occur, especially in tough economic times.  Public agencies can take steps to mitigate against protests by ensuring that the bidding documents and solicitation process are clear and free of ambiguity.  Bidding documents should be developed and reviewed with a mindset that asks the question of how might the documents be the subject of a protest, and whether the documents give one party an advantage over others.

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