As Military Contracts Grow, So Do Protests

Protests have always been permitted by the federal procurement system as a way to let companies address concerns and to keep agencies in check. In times of healthy federal budgets, many contractors have been reluctant to lodge an objection for fear of alienating the agencies that write their paychecks. But perhaps in anticipation of a drop in spending and increased scrutiny of the procurement process, contracting lawyers say companies are more willing to challenge the decision-making process.

"The balance of power is shifting," said Jessica Abrahams, an attorney specializing in such challenges with McKenna Long & Aldridge. "A lot of contractors are marching into court and putting a lot more pressure on agencies."

Some departments have set aside time for likely protests. Kevin Carroll, who oversees Army contracts, in December told a group of government contractors that the increase in bid protests and the shortage of procurement officials to deal with them is doubling the time it takes to award the average contract. He said he has "started planning for protests as part of the contract time."

The contracts to embed passports and government employee identification cards with biometric information, for instance, have been stalled several times due to protests by losing vendors. Protests have also delayed an attempt by the General Services Administration to improve the government's widely used procurement Web site, FedBizOpps.gov. Two-and-a-half years later, the job remains in limbo.

One of the Army's largest contracts -- a $20 billion deal to revamp military computer networks -- was stalled nearly a year when several companies took issue with the Army's decision. Six companies that lost the competition protested in April and won the right to re-compete after nine months of negotiating.

Those that protested said they couldn't afford to stay on the sidelines.

"It's not a good practice to be in the business of suing your client," said Carleton Jones, chief executive of Herndon-based Multimax. "But it was the only way for us to have access to the Army for the next nine years."

Kim Nguyen, who's in charge of securing contracts for McLean-based Pragmatics, said the stakes were simply too large to accept defeat. "What did we have to lose?" he said.

The appeals can also complicate the business plans of companies that thought they had won work fair and square. CACI International of Arlington cited protest-induced delays as a reason for lowering its 2007 revenue and profit projections by nearly $250 million. Renato DiPentima, chief executive of Fairfax-based SRA International, included "probable increases in protests" as a reason for the revisions over the next six months.

A substantial spike in the number of protests occurred between 2002 and 2003, in the height of the post-Sept. 11, 2001, contracting boom. Since then the trend has continued even though some say victory is far from guaranteed. In most cases, winning a protest simply gives the company a second chance to compete for the contract.

"This winner-take-all marketplace has made it tough on a lot of companies," said Stan Soloway, president of the Professional Services Council, a trade group for government contractors. "There just aren't as many opportunities as there used to be."