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GAO Reports a Significant Increase in Bid Protests

In a recently published report, the GAO stated that there was a 20% increase in bid protests in FY 2009, as compared to FY 2008.

As protest regulations have evolved, the government has seen a steady increase in the number of protests since FY 2006, but this increase from 1,652 protests in FY 2008 to 1,989 protests in FY 2009 appears especially noteworthy. The GAO, however, stated that this increase was expected for three reasons. First, the option to protest task order opportunities was granted due to the growing use of contract vehicles such as EAGLE, NETCENTS, and SeaPort; second, federal employees were allowed to protest the decision to outsource requirements; and finally, the Transportation Security Administration (TSA) opportunities became susceptible to bid protests in FY 2009. Previously, TSA fell under the Federal Aviation Administration's (FAA) regulatory procedures. Below is a chart depicting the GAO Bid Protest statistics in recent years:

GAO Bid Protest statistics for FY 2005 through FY 2009

FY2009 FY2008 FY2007 FY2006 FY2005
Cases Filed 1,989 1,652 1,394 1,326 1,356
Cases Closed 1,920 1,582 1,411 1,275 1,341
Filed based on Merit (Sustain/Deny decisions) 315 291 335 251 306
Number of Sustains 57 60 91 72 71
Sustain Rate 18% 21% 27% 29% 23%

Source: GAO

Below is a list of current or recently determined opportunities that have been affected by the surge of bid protests. For TSA's Information Technology Infrastructure Program (ITIP) in particular, the awarded contractor has endured numerous work stoppages because of management authority disputes in protest handling between GAO and TSA. These delays can and have caused major funding issues in the form of bridge contracts and extensions until a final decision is made:

Title Agency Value ($K) Status
ITIP TSA/DHS $493,000 Protest
SBINet Program Integration and Management Support Services CBP/DHS $98,000 Protest
Field Office Support Services USCIS/DHS $120,175 Protest
Public Assistance and Technical Assistance Contracts (PA-TAC) FEMA/DHS $500,000 Protest
AFRICAP Program State $1,500,000 Protest
Material Management, Unit Readiness Mission & Distribution Management Center Army Sustainment Command $128,124 Protest
Goddard Unified Enterprise Services and Technology (GUEST) NASA $85,000 Protest

As bid protests on federal contract awards are likely to continue increasing, the need to shorten the process will also increase. Bid protests can extend the timeframe for award up to 6 months with the net results being delays in program schedule, fiscal complications, and general strain among government and private personnel. If protests are to be minimized, contracting personnel will likely have to take extra steps when sole-sourcing and/or assigning the competition type. They will also undoubtedly be stricter when evaluating proposals resulting in vendors having to be as clear, concise and accurate as possible during the bid and proposal process.

Andrew Endicott also contributed to this report.

Rapidly Responding to the R23G Surprises

Earlier this week, the U.S. Army's Communications and Electronic Command's (CECOM) much anticipated follow-on to CECOM's Rapid Response Program (CR2), Rapid Response – Third Generation (R2-3G) publicly posted award notices.

R2-3G provides a streamlined task order process that allows agencies to rapidly obtain contractor services in support of urgent requirements. A total of seven contracts have been awarded with a combined ceiling value of $16.4 billion over a five year performance period. Vendors awarded on the R2-3G program include Raytheon Company, Lockheed Martin Integrated Systems, Booz Allen Hamilton, Computer Sciences Corporation, General Dynamics Global Force, Adams Communications & Engineering Technology (an 8a veteran-owned small business) and R4 Inc (a service disabled veteran-owned small business).

The most surprising element of this awarded contractor's listing is not whose names are on it, but the CR2 incumbents whose names are not; specifically, ARINC and VSE Corporation. ARINC, a top contractor on CR2, had accumulated over $1.84 billion in tracked obligated funding to date. At this point, it is unclear as to why ARINC was not included in the follow-on vehicle. As of 2:15 PM EST this afternoon, a protest has not been filed with the GAO but perhaps one will be posted shortly. VSE's total obligated value for CR2 task orders to date stands at $1.68B, a momentum that appears to have been gained post Lockheed Martin's inability to obtain additional work (based on the reach of the program ceiling).

So what can we expect from this next generation of awardees? If the spending pattern remains the same for R23G as it was for CR2, Lockheed Martin will hit the ground running. Under CR2, it won over 90% of awarded work serving to fulfill materiel requirements at Army as well as other Defense agencies.

Since FY03, CECOM has awarded 1,636 task orders through CR2 totaling over $11 billion in obligated funding. The system includes analysis of task orders issued through the end of January 2009 and will run concurrently with the vehicle's January 2011 expiration date.

GovWin's Federal Task Order database has information on 1,636 CR2 task order awards including 1,564 statements of work along with details on over 13,000 CR2 task order modifications. According to the database, there are 344 task orders that will expire between now and January 30, 2011 including Northrop Grumman's $250 million task order for aircraft survivability equipment.

As deadlines and ceiling values approach, CECOM will need to start seeking new options for completing these tasks which opens the door for vendors to go after the recompete work. GovWin's Federal Task Order Database is designed to help companies identify possible teaming and recompete opportunities.

Top CR2 Contractors (by Obligations to date):

Another GAO Protest, More Questions for Task Order Competition and Industry

Recently, the Government Accountability Office (GAO) sustained a protest by Delex Systems, which argued that the Navy should have limited competition of a delivery order to small businesses because at least two small firms could have offered bids, according to Federal Computer News. This means that competition under Multiple Award Contracts (MACs) and Government-Wide Acquisition Contracts (GWACs) where two or more small businesses are eligible --- task orders should be set-aside. This broadens the so-called "rule of two".

Last month, GovWin's Deniece Peterson provided further insight into the Rule of Two in this posting.

Obviously there are significant FAR and competition implications associated with changes to task order competition and mentality. However, I'm interested in the article's comments regarding the relationship between contractors (both large and small) and the federal agencies. Apparently, this decision can strain the relationship between small businesses and agencies. Agencies could push back against GAO authority driving more business to full and open competition to avoid the new complications of task order competition.

FCW's Matthew Weigelt writes, "Officials and experts agree that the ruling could widen the rift between government and industry. Already, agencies and firms are slow to trust one another. Some experts speculated that agencies now might assume that contractors plan to protest losses and even factor the costs of pursuing those protests into their bids, raising the costs to government."

What could happen to government-industry relationship if the number of protests continues to rise? For example, if government doesn't trust that industry will be fair about when to protest, the following actions may result:

  • Contracting shops end up spending more time making requirements and evaluation criteria simple and straight-forward
  • Agencies must take more time for evaluation to make sure awards are "protest-proof"
  • Implementing new evaluation factors that can be used to better distinguish bidders (i.e. better differentiation of one bidder over another)

On the positive side, it may also encourage government to share more pre-RFP information with industry, incorporate industry into requirements-building (as suggested by DoD acquisition reform panels), and other collaborative activities to help mitigate protests before they happen.

Current impacts to government-industry relationships:

  • The government is contracting more work. With tight budgets and goals toward efficiency, agencies are already bringing in contractors for work (perhaps begrudgingly) previously performed by government employees.
  • Similarly, the human capital crunch continues to hit many offices. As contractors fill more and more desks, some government positions remain empty. As a result, contracting offices (specifically) are stretched beyond capacity. Considering the more efficient methods, like task order competition, are becoming more arduous, it only complicates the contracting mission.
  • Protest as competition strategy. Protests are increasing as more firms look to the Protest process to reverse losses.

This brings to mind a question. Should industry and government have a better relationship than most industries? Clearly, many federal contractors used to work in these agencies and most members of this industry also see themselves as part of the overall agency mission. I'm not saying it is supposed to be a contentious or antagonistic relationship, but it seems more personal than in many industries. Yet these rumors of distrust abound. The government has always had the position of leverage as the purveyor of massive amounts of money but even more than that as the not-for-profit, honest spender of taxpayer dollars. The business and moral high-ground, if you will.

As federal contractors become more willing to protest and information becomes increasingly public, the contracting industry is more ready than ever to challenge the government's decisions. This is also due in part to increased competition, decreasing budgets leading to fewer available contracts, and tightening regulations from Congress. This means that contractors have a greater impact on the agencies' ability to get things done. Whether or not this shift will redefine old stereotypes remains to be seen because both sides are dependent on the other. Either way, we know the business of government does not always move as quickly as the technologies that the government relies on. However, these changes coupled with the potential for the Obama administration to infuse greater transparency and reliance on technology into the industry could mark a shift in how these two parties view each other moving forward. While we hope that the aforementioned agency-industry relationship grows more positive and united, it is likely that many factors outside industry or agency control could challenge the status quo.

Army Tests New Task Order Regulations

Over the summer, many in the government contracting industry studied the new task order regulations included in the National Defense Authorization Act of 2008 but waited to see what the practical implications would be. At that time GovWin weighed in, saying it would be interesting to see if federal agencies attempted to keep their task orders below $10 million to avoid the protest potential or what unforeseen ways task order competition might be affected. More recently, we've heard from government sources expressing concern about vendors using protests as a business strategy for either getting another chance to win or extending current work until the protest is resolved. In general, protests have gone from 1411 in FY2007 to an estimated 1700 in FY2008.

As the result of a recent Army protest, the Government Accountability Office (GAO) ruled that all parts of an agency's order are open to review and protest. Although the GAO ultimately denied the protest, its decision sketched out more of its authority regarding task and delivery order protests, according to Federal Computer News. The article went on to say that the Army is concerned that this ruling will establish the Federal Acquisition Regulation (FAR) Part 15 regulations which govern competitive and noncompetitive negotiated acquisitions for task order competition. FAR Part 15 includes proposals, awards, and notifications to contractors about the acquisition.

One obvious implication of the legislation and new GAO ruling is agencies will likely spend more time/resources processing task orders as well as reporting to and working with the GAO. In addition, a process which was supposed to save time and resources by streamlining the competition process to pre-approved federal contractors is becoming more like market competition. While this impedes the overall efficiency, a process typically shielded from public information and reporting is now being opened up to scrutiny and oversight. As an industry analyst, I will probably benefit from that aspect even as I understand, but don't agree with, the agencies' (in this case, Army's) position to maintain the old system. If Congress and the GAO begin removing many of the benefits of task order competition, aren't they rendering the process useless by causing many of the same inefficiencies of full and open competition?

The larger complexity highlighted here is the struggle between a secretive (non-public) task order process where many large federal contractors win a majority of the prime contracts and an efficient process which gets solutions, capabilities, and technology in the hands of warfighters and government customers much quicker. As this process moves forward, it will be interesting to see if the task order process begins to look more like the full and open process and, if so, what that will do to the use of multiple award contracts (MACs) and GWACs.

Task Order Protests Set to Drive Significant Change in IDIQ Contracting

The drive towards transparency and small business contracting reform is heating up. This year has introduced two major initiatives that will be significant game-changers for contractors on multiple award contracts. Considering the increase in the use of these types of contracts, new task order rules impact nearly everyone.

There have been 2 major rulings that will change the landscape of task order contracting:

Task Order Protests. The FY2008 Defense Authorization Act cleared the way for protests on task order contracts over $10 million. It went into affect in May of this year under the authority of GAO, and many contractors have already tested the waters. According to GAO's Assistant General Counsel Ralph White, his office has received about 70 task order protests since the rule went into effect. At a recent event, government speakers expressed their increasing concern about protests as a business strategy for either getting another chance to win or extending current work until the protest is resolved. In general, protests have gone from 1411 in FY2007 to an estimated 1700 in FY2008.

Rule of Two. The FAR's "Rule of Two," which requires agencies to provide setaside opportunities for small businesses for acquisitions over $100,000 if there is a "reasonable" expectation that the agency would receive offers from at least two small businesses. GAO recently sustained a protest against the Navy initiated by Delex Systems, a small business providing technical training services, regarding a $75 million task order initially released as a small business setaside. To make a long but interesting story short, Delex was one of 4 small businesses on the NAVAIR TSC IDIQ contract. Following the recertification requirement by the Small Business Administration, only 2 small businesses were eligible as "small business concerns" (including Delex). The Navy decided to open the task order up to all contract holders, large and small, using a number of factors as the basis:

  • Because the field of small business offerors was limited, there was "no guarantee that proposals will be received from more than one small business concern."
  • They'd only received two proposals from small businesses on a past solicitation for similar work (back when there were 4 small business participants)
  • The scope and complexity was estimated at $75 million (GAO read this as Navy's assumption that a small business couldn't handle the work)

    The Navy's defense: the Rule of Two does not apply to task orders. GAO's response: Oh, yes it does.

    This has likely opened up a can of worms that could change task order contracting in the near future in several ways:

  • Although government sees the value in protests in helping increase transparency and improve requirements development, it slows the procurement process and generally makes contracting officers fearful of making mistakes. Acquisition managers are starting to review all of their IDIQs for issues and contracting officers are adding more review time to the process for "protest-proofing." As a result, some mission critical programs are being delayed - either because of closer review on the back end or protests on the front end.
  • GAO's decision regarding the Rule of Two could lead to revisions of the FAR to include it as a permanent rule. This could open up more opportunity to small businesses.
  • On the flip side, the Rule of Two provision could force large businesses to have to rethink their pricing strategies on task order vehicles. Because pricing is often based on the ability to compete for all task orders, this rule could force them to develop new pricing strategies in anticipation of being locked out of some task order competitions.

    Visibility into the task order environment has been a major concern for lawmakers. With the tough language about transparency and procurement reform coming from both Presidential candidates, I am expecting to see building momentum in this area as the veil is pulled back and both government and industry become more aware of the problems and limitations.

  • Task Order Protests: A Few Months In

    The Government Accountability Office (GAO) was given the authority to review task order protests since May, through a provision in the Defense Authorization Act of 2008. Now that several months have passed: What has been the overall impact of this change on the procurement process, and what does it mean for the future?

    The above question was the overall theme of an ACT-IAC sponsored panel on task order protests late last week. Overall, the picture painted by the impact of this rule on the contracting community was often bleak. According to panelists like Karen Kopf and Jim Ghiloni, whose respective offices are involved in the ongoing GSA FAME and Alliant procurements, contracting personnel are overworked, overstressed, and scared of missteps that might be cause for protest later in the process. Despite being short staffed, procurement offices are spending more time reviewing each procurement, and even building time for protests into their schedule.

    Several government representatives at the event supported the idea of oversight on task orders, recognizing that task orders look more like contracts than in years past, when they were designed to be more streamlined.

    The officials acknowledged weakness in their own internal procedures such as:

    • Poorly written requirements
    • Insufficient oversight
    • Increased workload

    The real issue from the Government perspective seems to be the perceived free reign given to contractors in submitting protests without repercussion as part of their business strategy. One official expressed concerns over incumbents who file protests when they lose the recompete of a contract – giving themselves another shot at winning but also guaranteeing a few more months on the job while the protest is being reviewed.

    Despite the fears expressed, Ralph White, an Assistant General Counsel for GAO, noted that although protests have increased, the GAO is able to dismiss most protests by the 30th day of review. The GAO maintains standards for each protest, allowing them to dismiss unsubstantiated protests early in the process. Additionally, protests often help government, industry, and procurement in general, by adding greater transparency and oversight to the task order process which will ideally lead to better procurements.

    Several officials have found that protests decrease with open and early communication with industry through draft RFPs and industry days. Senior Contracting Officer for NIH's Image World 3 procurement, Donald Wilson, said many problems can be prevented simply by ensuring that all contract holders have a fair chance to compete for each task order. The debrief process is also significant as it gives losing bidders a chance to understand how to be more successful. However, as incoming protests increase, changes in the protest process may be necessary in order to recoup the financial burden placed on government resources. With the issue of contracting coming up frequently in this year's presidential race, perhaps the new administration and Congress will address this arena.

    Air Force Tanker Deal Gets Tanked

    In a surprising move this morning, Secretary Robert Gates announced to Congress that the US Air Force acquisition of the KC-X Refueling Tanker has been cancelled. Secretary Gates, with the aid of Defense and Air Force officials, determined the re-competition of the refueling tankers would not be completed by January 2009. As a result, Secretary Gates is asking for a "cooling off" period to allow for an administration change, and the Department of Defense (DoD) will continue to maintain the current KC-135 fleet with additional funding in FY09. At this time, the DoD is planning to continue funding the KC-X program in the FY10 to FY15 budgets.

    The sordid story of this procurement underscores the problems the government faces in managing large scale acquisitions. To come this far only to end in a canceled procurement costs the U.S. taxpayer millions of wasted dollars and subjects companies to millions of dollars in lost profits. In a procurement this size, it also has a material impact on the ecconomy. The GAO indicated earlier that requirements were not clearly defined and cited flaws along the source selection process. The Air Force is now reaping what it sowed.

    But, is the Government fully to blame?

    The acquisition process may have been badly managed, but the level of scrutiny and interference by Congress and the political issues surrounding this program have surely contributed to this particular outcome.

    TSA's Second "Biggest" Protest Moving to FAA

    It's been a busy summer for TSA! As a recent GovWin blog mentioned, industry watchers are waiting for GAO decisions on the Unisys and Northrop Grumman protests of the $2 billion ITIP procurement, in particular as it's the first task order protest since the recent change in rules. While ITIP remains undecided, GAO announced its decision for another high profile TSA procurement – the Integrated Hiring Operations and Personnel Program (IHOPP).

    The controversial $1.2 billion (with $3 billion possible) human resources contract was awarded to Lockheed Martin in early July. Members of Congress, as well as industry groups like the American Federation of Government Employees and the National Treasury Employees Union have been critical of the contract, expressing concern that TSA might be outsourcing inherently governmental work in a workforce environment already plagued by problems.

    To compound matters, losing bidder Avue Technologies filed protests with both GAO and the FAA Office of Dispute Resolution for Acquisition (ODRA), arguing that TSA failed to consider that the two losing bidders on IHOPP are both private sector shared service providers under the Human Resources Line of Business (HR LoB). Lockheed Martin is not a shared service provider under the program. Yesterday, GAO released its decision to deny the protest, explaining that they do not have the jurisdictional authority to make a judgment since TSA was exempt from the FAR until June 26, 2008. Since the procurement was initiated prior to June 2008, it falls outside of the FAR, giving FAA jurisdiction over the procurement. ODRA officials confirmed the protest is pending, with an average adjudication time of 62 days.

    Northrop Grumman Follows Unisys on TSA Protest

    Northrop Grumman has joined Unisys in protesting TSA's Infrastructure Technology Program. Unisys filed in early July, followed by Northrop Grumman on July 21. Both companies were left off the list of finalists eligible to bid on the contract, worth $2 billion.

    I will be watching this protest closely for a number of reasons. It's another data point in a growing trend of protests, and I'm interested in seeing how the outcome motivates other contractors who may be considering protesting as part of a business strategy. Most importantly, this contract is going through the EAGLE contract vehicle, and will be the first task order protest under GAO jurisdiction since the change in rules allowing protests for task orders greater than $10 million. This is also the first time that GAO will hear protests of TSA procurements - TSA was made subject to the FAR starting June 23, 2008.

    TSA officials have said in the past that, although the agency's procurement was under the auspices of the FAA Acquisition Management System (AMS), acquisition officials followed many of the FAR's guidelines. However, lawmakers made a lot of noise about what they called TSA's "inconsistency in its acquisition environment," which led to DHS amending its procurement regulations to pull TSA under FAR as part of the TSA Procurement Reform Act.

    Although the details of Northrop Grumman's and Unisys' protests are not yet known (other than "possible flaws in the conduct of the procurement"), the alleged "wasteful spending, mismanagement, and confusion" that inspired Senators John Kerry (D-MA), Olympia Snowe (R-ME) and Rep. Chris Carney (D-PA) to introduce the TSA Procurement Reform Act don't bode well for TSA.

    Could this be a case of a steep learning curve causing some protestable missteps?

    Northrop/Boeing Protest PR Strategies

    Listening to WTOP during my moderately easy commute to and from Reston this week, I kept hearing a Northrop Grumman ad talking about its KC-45 tanker. I've heard radio ads from federal contractors before that provide a quick hit overview of their services for all of those federal workers suffering through their not-so-easy commutes. But as I heard the Northrop ad a few times, I realized that it was part of a "protest media campaign" to position itself against Boeing for "Take 2" of the Air Force tanker contract.

    In case tankers aren't your thing and you haven't been paying attention, GAO recently sustained a Boeing protest against the Air Force for awarding Northrop Grumman and EADS the contract to replace its air refueling tanker fleet (read GovWin's blog on this topic). As a result of the protest sustainment, the Pentagon stepped in and decided to cancel the original contract and issue a new request for proposals from the two companies. What's interesting is that both Boeing and Northrop Grumman have embarked on a public media blitz aimed at...I'm not exactly sure.

    There are Op-Ed pieces, blogs, print and radio ads, and websites (all telling the "real story") galore. Northrop has at least 2 radio ads that I've heard, one of which ends by emphasizing the fact that its tanker exists now, while the competitors' is just on paper. Boeing took out full page print ads, and there are billboards and other signage, particularly within the DC metro area and Mobile, AL which stands to gain 1,500 aerospace jobs if the Northrop/EADS team wins the contract and builds two plants there as planned. (Foosackly's Chicken Finger restaurant chain in Mobile invested in a billboard of its own that reads, "We Would Like to Offer Boeing a Finger," and there are T-shirts and bumber stickers for disgruntled aerospace workers on the go).

    While the government is not supposed to be influenced by the media, the PR has helped gain momentum among lawmakers from states that will be missing out on jobs if Boeing loses again. It highlights what some may call hypocrisy in government – we've seen lawmakers calling for unbiased and fair competition in contracting...that is until it affects their states. I imagine that the "call your elected official" movement can be expected. It's not clear, however, if those who are even aware of what's going on would want to get involved.

    Check out some of their efforts:

    BOEING

    Real Tanker ad

    KC-X Competition website

    The Tanker Decision: Why it Doesn't Add Up ad

    NORTHROP GRUMMAN

    Northrop radio ad

    KC-45 website

    America's New Tanker website

    What is very interesting is that in a March 11 motion, Northrop asked GAO to dismiss large sections of what it called Boeing's "PR-plated" protest. Now it seems that PR isn't such a bad thing.

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