GAO Releases Report On DOD Contract Protests

(MoneyWatch)  In a true case of lies, damn lies and statistics the Government Accountability Office (GAO) released their regular report to Congress on protests of DOD contracts. The report concludes that protests were up twenty-three percent in 2008, but historically is lower then average. As such the results of the report got described two ways in two different articles. The Dayton Business Journal stressed the increase in protests, while Federal News Radio headlined their article "DoD facing fewer bid protests".

Congress had directed the GAO to study the amount of protests and the effect on the Government's procurement process last year. There was concern that the number of protests were increasing, some were frivolous, and they were having a negative effect on timely execution of contracts. The report by the GAO says that it could not determine if a protest was frivolous or not as it has to consider them all equally.

As the number of large contracts have declined compared to the past, especially the Eighties, protests have seemed to be more common as the losing companies have nothing to lose. Most system contracts have only two or three available competitors for them and failure to win means that opportunities in the near term are very limited. That is why you saw only two bidders on the KC-X and it was expected the loser would bid. Boeing did lose to Northrop Grumman and EADS and did protest. The GAO upheld the protest and a recompete is ongoing.

The Air Force would not be buying a large aircraft again for decades. This contract is worth a great deal to the winner and there would be little hope of a similar contract being available for some time. The GAO said that compared to the 1989-1997 period the average protests per year was lower in 2003-2008. Now the Nineties saw much reduced defense spending, especially on large procurements, then the last five years and that could easily explain the number of protests. During the Eighties the Reagan administration greatly increased defense spending and also if possible focused on dual sources for most systems. This meant that there was plenty of work to go around and probably limited protests in that decade.

The GAO also concludes that they attribute the increase between 2007 and 2008 to the increase in defense spending. Personally I think that is somewhat of a cop out. The spending may have increased but it is also what it was spent on that is critical for the protest process. If in 2007-2008 several major contracts were competed that could cause the increase. CSAR-X, KC-X, some servie and intelligence contracts were awarded and protested. Some of these were once a decade type awards and even the service contracts tend to be five years long so the last award for this work would have been done before the 2002-2008 period.

If the Obama Administration does implement a program of reductions in defense spending and actually focus on operations and existing systems then the chances of protests in the future will probably go up. As companies fight over less work, especially new large programs, then there will be more impetus to protest.

The other aspect of the report that Congress wanted to know was there anything they could do legislatively to fix the protest problem. The GAO concluded that the existing laws and regulations are appropriate and giving the GAO more power or authority would not be required or helpful. The GAO report may be found in PDF format here.