Section 809 Panel Recommends Sweeping Changes to Bid Protests

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On January 15, 2019, the Section 809 Panel released the third and final volume of its report to Congress recommending changes to the defense procurement system. The latest volume makes the Panel’s most sweeping recommendations, including recommendations on reforming the bid protest process for defense procurements. This Alert describes the changes to bid protests envisioned by the Panel’s report, their potential impact, and prospects for adoption.

What is the Section 809 Panel?

The Section 809 Panel is named for the section of the National Defense Authorization Act (NDAA) for 2016 that created the Panel. The Panel is comprised of 16 commissioners, including current and former military service members, civilian defense acquisition professionals, and industry representatives. One purpose of the Panel is to review the acquisition regulations applicable to the Department of Defense (DoD) with a view towards streamlining and improving their efficacy and efficiency. A significant focus of the Panel from its inception has been the bid protest process, but Volume III is the first document from the Panel that discusses protests in detail.

What is the new “Framework” the Panel is recommending that could impact bid protests?

The Panel’s most significant recommendation is a system called the “Dynamic Marketplace Framework,” [1] which involves the categorization of all defense procurements into three groups or tiers. Understanding this new three-tiered framework is important because the changes the Panel recommends to the bid protest process are largely governed by the tier covering the good(s) or service(s) being procured.

  • Readily available. A good or service would be considered “readily available” if it “requires no customization by the vendor and can be ordered directly by customers, to include products and services that only governments buy.” [2] This is similar to the current “Commercial off the shelf” or COTS FAR definition, but with much simpler language. [3] The report recommends a ceiling of $15 million for this tier, but the contracting officer could easily request authority to use these procedures in more expensive procurements. [4]
  • Readily available with customization. This tier “[i]ncludes the products and services that are sold in the private sector, including to other public-sector customers, for which customization or manufacturing that is consistent with existing private-sector practices is necessary for DoD’s needs.” [5] This is similar to several elements of the “commercial item” definition in FAR 2.101, but again with streamlined language that should be easier to administer. [6]
  • Defense-Unique Development: The Panel’s report defines this as “DoD-financed development, either to repurpose a readily available product or solution or to develop a new product or solution, to provide a defense-unique capability.” [7]

What are some of the specific changes to bid protests recommended by the Panel?

  • Agency-only protests for readily available goods and services. The Panel’s flagship recommendation regarding bid protests relates to procurements under the “readily available” tier of the Dynamic Marketplace Framework. Because there would be no requirement for solicitations for readily available procurements, there would be no opportunity for pre-award protests. Further, a post-award protest could only be brought to the agency, and would be limited to whether the good or service was properly classified as readily available. [8] No protest could be filed at the Government Accountability Office (GAO) or the U.S. Court of Federal Claims, the tribunals currently available for protests of most federal procurements. To ensure accountability and transparency, the Panel recommends that the contract file for readily available procurements be available for public inspection on a website. [9] Public complaints would replace bid protests by disappointed bidders as the primary mechanism for enforcing procurement statutes and regulations for this tier.
  • Readily available with customization protests depend on solicitation method. For goods and services procured through a traditional solicitation (RFP or RFQ), pre-award and post-award protests could be filed at GAO or the Court of Federal Claims. [10] For goods and services procured through market research only, the agency-only protest process described above would be the only protest available. The commissioners expect that “nearly all of the services DoD procures should meet the definition of readily available with customization.” [11]
  • No protests outside the agency for procurements below $75,000. For procurements otherwise authorized for filing at GAO or the Court of Federal Claims, no such protest could be filed if the value of the procurement is $75,000 or less. [12] Currently, a protest may be filed at GAO or the Court for a procurement of any value, unless the procurement is a task order awarded under an Indefinite Delivery-Indefinite Quantity contract. [13]
  • No more serial protests. For protests otherwise authorized for filing at GAO or the Court of Federal Claims, a protester would have to choose to file either at GAO or the Court of Federal Claims, and could not file first at GAO and subsequently at the Court. [14] Currently, a protester may receive a decision at GAO and, if dissatisfied, file a subsequent protest at the Court. [15] This has been a reform frequently proposed in committee in Congress, but never enacted.
  • Time limit on Court protests. The Panel recommends that the Court of Federal Claims be required to render a decision within 100 days. [16] Currently, only GAO must render a decision within 100 days, [17] although the Court strives to fast track bid protests and often renders a decision on a timeline similar to GAO.

What are some significant impacts of the Panel’s recommended changes to bid protests?

The most significant potential impact of the Panel’s recommendations would be to greatly curtail the number of defense procurements that are subject to scrutiny by GAO and the Court of Federal Claims. This is particularly troubling in light of the effectiveness rate of protests at the GAO and the Court of Federal Claims. [18] For example, at GAO, the effectiveness rate year in and year out hovers around 40%. [19] Given that protests result in some relief to the protester in roughly 2 out of 5 protests, eliminating protests at GAO or the Court of Federal Claims for readily available goods and services could shield many troubled procurements from effective accountability. While they would be able for public viewing on a website after the fact, these procurements might not receive any fix in real time to prevent fraud, waste, or abuse.

Another impact would be to significantly curtail the Court of Federal Claims’ role in bid protests. By forcing protesters to choose between the often less expensive and streamlined GAO procedure and the often more expensive but detailed Court procedure, one might expect the already low number of Court protests to drop even further. In addition, limiting protests to 100 days at the Court, regardless of the complexity of the procurement or the issues involved, will force the Court to streamline or even eliminate some aspects of due process, potentially making the Court a less attractive forum for bid protests.

What is the outlook for adoption of the Panel’s recommended changes to bid protests?

One potential obstacle to large scale adoption of the Panel’s recommendations—including but not limited to the bid protest recommendations—is the sheer number and breadth of recommended changes. The Panel has made 98 recommendations, many with multiple subparts, that sprawl over three volumes and thousands of pages. The Panel has acknowledged this in recent presentations with industry groups, and has suggested that it may take 10 years or more for Congress to adopt many of the Panel’s reforms.

Another potential roadblock to adoption is the perceived need in Congress for bid protest reform. In 2016, when the Panel was formed, Congress (led mainly by the House and Senate Armed Services Committees) proposed many bid protest reform measures in successive NDAA bills. Most, but not all, were defeated in conference. One important adoption was the commissioning of the “RAND Report.” The December 21, 2017, RAND Report made several significant findings rebutting many common myths about bid protests through the analysis of objective data. For example, the RAND Report could not find any objective evidence supporting the widely held myths that contractors regularly abuse the bid protest system to file frivolous protests and preserve short term revenue, nor could the RAND Report establish through objective evidence that bid protests are a significant contributor to defense procurement delays. [20] Instead, the RAND Report found that bid protests are exceedingly rare, that protests are often effective, and that task order protests are even more likely to be effective. [21] Groups like the American Bar Association’s Section of Public Contract Law submitted written comments to the Section 809 Panel citing the RAND Report as evidence that data does not support wide-ranging reform and arguing that the Panel should take caution and seek further data before making any changes. [22]

In addition, the passing of Senate Armed Services Committee Chairman John McCain and the demotion of Representative Mac Thornberry to Ranking Member of the HASC create the possibility that new leadership of these committees will not consider bid protest reform as high a priority as their predecessors.

Despite these obstacles, the Panel’s latest report is the most comprehensive report authored to date providing a case in favor of significantly curtailing bid protest jurisdiction at GAO and the U.S. Court of Federal Claims for defense procurements. Those companies and industry groups concerned about the prospects and impact of such curtailment should consider engaging with Congress on the Panel’s Report as part of their ongoing government relations strategy.

[1] David A. Drabkin, Esq., et al., Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations (hereafter “Panel”), Vol. III, at 9, Fig. 1-1 (Jan. 2019).

[2] Id. at 8.

[3] See FAR 2.101.

[4] See Report of the Panel, Vol. III, at 23.

[5] Id. at 8.

[6] See FAR 2.101.

[7] Report of the Panel, Vol. III, at 8.

[8] See id. at 24.

[9] See id. at 35.

[10] See id. at 46.

[11] See id. at 37.

[12] See id. at EX-7.

[13] See 10 U.S.C. § 2304c(e)(1)(B).

[14] See Report of the Panel, Vol. III, at EX-7.

[15] See 28 U.S.C. § 1491(b)(1).

[16] See Report of the Panel, Vol. III, at EX-7.

[17] See 31 U.S.C. § 3554(a)(1).

[18] The effectiveness rate means that either GAO ruled that the protest had merit or that the agency voluntarily carried out corrective action to fix a perceived error or violation of law.

[19] See Mark V. Arena et al., RAND Report, at xv, Table S.1 (Dec. 21, 2017).

[20] See id. at 21, 27, Fig. 4.3, and 45, Fig. 5.3 (Between FY 2008 and FY 2016, less than .3% of DoD procurements were subject to a GAO protest, and between FY 2009 and FY 2016, less than .025% of DoD procurements were subject to a COFC protest). Additionally, “50 percent of the [GAO] protest actions are resolved in 30 days[,]” see id. at 39, and “70 percent of cases at GAO are resolved in less than 60 days[,]” see id. at xvii.

[21] See id. at 60, Tables 6.3 and 6.4.

[22] See Aaron P. Silberman et al., ABA Public Contract Law Section, Comments to Section 809 Panel; Proposed Changes to Procurement System and Bid Protests; Overall Comments (May 11, 2018).

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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