Agencies' consolidation efforts face rising tide of protests

More and more vendors are coming to GAO to resolve their contracting issues, GAO lawyer Dan Gordon says.

Rick Steele

As the buys get bigger, vendors have more to lose; experts say planning should anticipate challenges

Is a protest of your buy inevitable? If it's an enterprise deal, worth big bucks and for multiple years, the chances increase precipitously.

It seems not just likely that more such deals will draw protests in the coming year, but inevitable.

Government Accountability Of-fice figures show the number of protests increasing modestly for each of the last three years. But the numbers don't tell the whole story, because agencies that have awarded high-profile, winner-take-all IT contracts are becoming the targets of far more frequent protests.

These big deals have basics in common: They are long term'often 10 years or more; they have high dollar values'regularly in the billions; and they shut out other vendors from a business line or service'say, telecommunications or Web operations across a department or several agencies.

Experts predict, too, that as the Office of Management and Budget continues to push for consolidation across IT services in the coming year, the number of protests of such buys will increase commensurately.

It's already happening. Take the General Services Administration's E-Travel Quicksilver project, for instance. EDS Corp. protested the $450 million contract, forcing GSA to reopen the procurement and eventually add the company to the contract [,].

Cross-agency initiatives aren't the only victims. The Housing and Urban Development Department's $750 million contract for agencywide IT systems support'known as HUD IT Services'is an example of a large enterprise deal at the center of a protest volley.

Lockheed Martin Corp., EDS and HUD have spent hundreds of thousands of dollars on lawyers' fees over the course of two protests'both of which GAO upheld for Lockheed Martin. HUD, which originally awarded the deal to EDS in September 2003, has delayed plans to implement new IT hardware and software pending a resolution [,].

Most recently, five companies protested the Treasury Department's $1 billion enterprise communications contract, awarded to AT&T Corp. last month [,].

'Large procurements, where there is a sense if you don't get the contract or one of multiple contracts, you will be excluded from future cash flow in an area for a number of years, are coming under protest more often,' said Dan Gordon, GAO's associate general counsel.

'But another reason for the increase in the number of protests is there is more money available at the Defense Department and at the Homeland Security Department,' he continued, 'and when you have more contracts, there are more protests.'

Plus, more vendors are taking their beefs to GAO for resolution, Gordon said. Companies filed 10 percent more protests last year than they did in 2003.

So how do you avoid the protest pitfalls?

Agency chiefs and lawyers say there are steps that can help an agency avoid protests. The focus is on expecting a protest from the get-go. With that perspective in mind, agencies should:
  • Begin documenting an ac- quisition from the initial concept phase

  • Include agency lawyers in every step

  • Be prepared to answer every question unsuccessful vendors could pose during a debriefing.

'The most important documents are from the source selection and technical support teams,' said Hugh Long, a senior lawyer in the Air Force's office of contract litigation. Why? Be- cause these can validate decisions the agency made during the buy's specification and selection phases, he said.

Approach a buy with an eye toward averting protests, added Elizabeth Grant, the Defense Logistics Agency's associate general counsel for acquisition. That means using the debriefings to convince unsuccessful vendors that the winner had the best offer and why.

If things get testy, propose using alternative dispute resolution, in which neutral third parties work out the issues. The ADR ap- proach can radically reduce the expense and time loss of a full-blown protest, Grant said.

But Steve Carrier, vice president for Northrop Grumman Corp.'s Washington IT unit, said sometimes a protest is inevitable.

'Protests have be-come more important because of consolidation,' he said. 'Vendors are applying a more critical eye toward long-lasting procurements; you don't want to be out of the game for that long.'

Even so, GAO's Gordon and other procurement experts caution that the number of overall protests compared to the number of transactions remains small.

In 2003, agencies conducted 37 million buys, including 24 million that were worth more than $25,000. To have only 1,500 protests is statistically insignificant, said David Drabkin, GSA's deputy chief acquisition officer.

But with the large contracts, Drabkin and others say many companies believe they have nothing to lose by protesting.

'When the size of the contracts goes up, the obvious benefits of bringing a protest grow,' said Chris Yukins, an associate professor of government contract law at George Washington University Law School in Washington. 'The cost of bringing a protest is so small compared to the money spent on putting together the proposal.'

Yukins, who spent 15 years in private practice, estimated a typical GAO protest costs a vendor $50,000 to $250,000.

'If the protest forces the agency to make multiple awards ... or if the winning vendor decides to subcontract part of the work to the protester, the protest becomes worthwhile,' he said.

Even then, the decision to protest is not easy, Northrop Grumman's Carrier said.

'We have to go through a quite rigorous process to convince management to protest,' he said.
'With a 10 percent chance of winning, that's quite a bit of money to spend, and you don't want to appear to agencies as a whiner.'

Although a vendor can spend a few hundred thousand dollars disputing an award, the costs can be higher for agencies. A protest can leave a project hamstrung, force employees to wait for upgrades and add work for agency's legal teams.

Variable cost

'The cost to the agency depends on how fast the protest is resolved,' DLA's Grant said. 'For a vast majority of our protests, it takes just one day worth of lawyer's work. But ... it may take up to two weeks of the lawyer's time.'

The impact on a project also varies. E-Travel officials built time into the schedule to accommodate potential protests, said Tim Burke, project manager.

'We lost 90 to 120 days on the schedule because of the protest,' he said. 'There are certain things you can't do ... until the award is final.'

GCN staff writer Mary Mosquera contributed to this story.

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