Recent data indicates that protests have increased overall by approximately 17 percent since 2012, exceeded only by the decrease in government contract spending over that same time. The resulting increase in pre-award costs derived from protests for all parties concerned requires a step back to analyze what is driving this not-so-encouraging trend, and what, if anything, should be done about it.
Most involved in government contracting today understand the recent trends of a declining overall market. Topping out at almost $600 billion a few years ago, the current federal budget has been squeezed by such things as the Budget Control Act of 2011, automatic budget sequestration, mandatory cuts, spending caps, and overall drawdown of U.S. military operations worldwide. Contractors are now competing for ever fewer dollars, as the government’s “mandatory” spending — in areas such as healthcare and retirement — continues to shrink the “discretionary” dollars available for everything else. This has resulted in many contractors leaving the federal market, either through mergers or simply going out of business, or diversifying into other business lines.
From the contractor perspective, the reduced success rate of incumbent contractor wins for a re-competed contract and the rationale for protesting to the government when losing a competition offers several potential benefits and not as many downsides as in the past. Thus, protesting a lost award to a competitor might be worth it. Given this lower rate of incumbent wins than has historically been the case, the need to stay on the “good side” of a government customer doesn’t appear as important as it used to be. While the stated reasons for protesting may involve traditional rationales (such as the government not following its stated evaluation criteria or statutory or regulatory requirements), a good, yet unstated reason may be simply to hang on to business via contract extensions (or “bridge contracts”) while the protest’s merits are addressed in various forums, which can often take months.
The costs to the contractor of an unsuccessful protest rarely exceed its potential benefits in such a scenario, but the costs to the government can be quite high. Both the federal staff time spent addressing the elements of a protest and the lengthened acquisition cycle that results are not favorable.
Further, recent data indicates that sustainment of protests have slightly increased. This could be a result of the increased complexity in government requirements or lack of adequate and knowledgeable staff on the part of the government — particularly with regard to those defining the requirements and performing the technical evaluations. Ultimately, however, the exact causes of the rise in protests and the slight increase in sustainment of protests — and whether this is all a long-term trend — are not clear.
A wise contracting leader once said there are three things that differentiate government from commercial contracting. Thus, when considering “acquisition reform” (and regardless of how often Congress, the executive branch, or any outside parties, including many in industry, lament the current state of government acquisition), unless we are willing to forgo one of these three principles, significant progress will be marginal at best:
- Government contracting, as opposed to commercial contracting, requires competition on everything it buys, with some very few, but notable exceptions.
- Government contracting, as opposed to commercial procurement, requires full transparency in what and how it acquires. For example, what specific technical, management, and cost factors will be used to evaluate who it will buy from and even how they may be weighted. In other words, the requirement to tell everyone exactly how you will compete and then perform exactly how you say you will.
- Government contracting, as opposed to commercial buying, requires the government to provide offerors (i.e., those competing for contracts) with the right to protest.
How to require government contracting managers to compete — and inform all in how it intends to do so — without a backup enforcement mechanism (in the form of a timely protest mechanism) is difficult to imagine. Thus, while many argue the pros and cons of today’s protest environment, which has become somewhat of an “automatic” ritual of any significant government acquisition today, few if any meaningful alternatives have been developed.
For those who would argue that government contracting must behave in a more commercial fashion, alternative solutions to the above three principles, unique to government contracting, remain yet to be determined.
Michael P. Fischetti is the executive director of the National Contract Management Association.