For Subcontractors, it's the prime's way or the highway
By Bob Deller
The protest venue changed for unsatisfied bidders when the General Services
Administration Board of Contract Appeals lost its Brooks Act charter last week, but the
definition of an interested party in a contract dispute remains the same.
That definition is set forth in the Competition in Contracting Act. Companies that
traditionally bid as prime contractors have less difficulty with the concept of interested
party than subcontractors or vendors that are only wannabe primes. Subs should become more
aware of the concept of standing as interested party and of their overall vulnerabilities
in not being the prime contractor.
The most frequently voiced beef by subcontractors is a disagreement with a technology
upgrade made by their prime partners. Many primes have a reputation for abusing their
relationships with subs, especially when it comes to using technology upgrades to finesse
When the sub believes such abuse is not in the best interest of the government, what
protest rights are available to the jilted supplier to seek remedy? Unfortunately for the
sub, its lack of standing as an interested party keeps it from being able to take action
before a government protest board or an agency's alternative dispute resolution authority.
The issue between the sub and its prime is a matter of contract between them, and in
many cases, no contract actually exists. The relationship is often defined only by a
letter of interest for distributing a sub's product or a general teaming agreement giving
the prime authority to bid a sub's product.
Once the prime vendor wins the contract, it is essentially free to discover other
suppliers that can offer lower prices, as long as the new products are within the scope of
the contract. Lawyers have a field day with such situations in the civil courts.
A recent protest brought by one vendor before the General Accounting Office resulted in
a different and conservative but not rare application of interested party standing. GAO
dismissed the case under a ruling concluding that the protester was more likely to
participate in the procurement as a subcontractor than as a prime. GAO ruled that the
protester was therefore not an interested party to challenge an agency's intent to make an
award to another vendor.
In the view of the government, the protester could not have won the contract even if it
had bid it as a prime because it was not able to demonstrate that it had the capability,
the experience or the wherewithal to provide what the agency required. GAO ruled that the
only feasible role the protester could play in this solicitation was as a supplier or
So subcontractors should bone up on the issue of interested party standing. Also, maybe
it's time that they demand more legally binding relationships with primes so they can
protect themselves in government contract arrangements.