Formal protests of U.S. government contracts rarely help companies win a reversal of those awards, according to a study by President Obama’s former procurement chief.
Fewer than 15 protests filed at the Government Accountability Office, the arbiter of contract disputes, in fiscal 2010 resulted in the objecting vendor winning the work. That’s less than 1 percent of roughly 1,600 protested awards in that period, according to Dan Gordon, the former Obama official who is now a dean at George Washington University Law School in Washington.
Since lawyer fees can exceed $100,000 in fighting a contract decision, the study’s findings should give companies pause when deciding whether to protest, said Gordon, who received help from a team of law students in compiling the first-of-its kind report.
“If I were the chief financial officer of a company, I would want to know this before I committed resources to a fight,’’ Gordon said. “It has the flavor of a Pyrrhic victory — you win the litigation but you don’t get the contract.’’
Ralph White, the GAO’s managing associate general counsel for procurement law, declined to comment about the study’s findings.
The low rate of success following a GAO filing reflects a large number of non-lawyers who file protests on their own, said Steve Ryan, head of the government contracts unit at law firm McDermott Will & Emery in Washington. “They file a protest, and it’s not very meaningful.’’
Companies typically file protests either to argue that the government improperly evaluated bids or to object to the terms of a competition before a winner is decided.
The number of GAO protests surged by 64 percent from fiscal 2007 to 1,708 in the year ended Sept. 30, 2011, according to government data.
Gordon, who was a GAO official from 1992 to 2009, said the agency’s only role is to ensure a fair competition and that its rulings don’t include a recommendation on which company should ultimately win a contract.
“They are never saying we think company A is better than company B,’’ Gordon said. They are saying: ‘Fix the process.’ ’’
Only 45 protested awards that came to a decision in fiscal 2010 ended with the GAO agreeing with the complaining vendor, Gordon’s research found. Of that group, eight vendors won the contract they protested after an agency agreed to reopen competition. Gordon said his team was unable to obtain final contract decision information on five protested awards. His study is expected to be published in April.
Those who do prevail with a protest can win big.
The Pentagon canceled a military health program contract awarded to Minnetonka, Minn.-based UnitedHealth Group under the Tricare program in 2009 after Humana protested and the GAO recommended reopening the competition.
After reviewing amended proposals from competitors, Tricare changed course and gave the $23.5 billion job to Louisville, Ky.-based Humana in 2011.
In a similar case, the Pentagon scrapped a military health contract with Aetna, based in Hartford, Conn., following a protest filed by Health Net. Defense department officials directed the $16.7 billion award to Woodland Hills, Calif.-based Health Net in May 2010.
Some firms file protests to send a message, Ryan said.
“Sometimes it’s important to make the point you’re not going to be pushed around anymore,’’ he said.
Aldevra, a two-person kitchen-supply firm based in Portage, Mich., filed more than 50 protests with the GAO during the past three years. It won about 32 of the challenges, which centered on whether a 2006 law directed the Department of Veterans Affairs to give preference to veteran-owned firms, said Maggie Bullard-Marshall, the company’s vice president. Bullard-Marshall’s husband, Rodney Marshall, the firm’s owner, is a disabled veteran.
Those victories resulting from the protests resulted in Aldevra eventually winning two or three contracts, she said.
Vendors who lose GAO protests can nonetheless benefit from the process, said Alan Chvotkin, executive vice president of the Arlington-based Professional Services Council, which represents companies such as SAIC and CACI International, two technology providers in Virginia.
“Many times challengers file protests because they have no clear idea about how or why the agency made the decision,’’ Chvotkin said. “The protest will give you some insight into that decision.’’
The data referenced in Gordon’s study doesn’t exactly match statistics in the GAO’s annual report to Congress because he removed duplicative items such as instances where one award drew multiple protests.
Nick Taborek in Washington contributed to this report.