Procurement proposal stacks deck in agencies' favor

The government may be trying to act more like a company in its procurements, but old
habits die hard. One persistent old habit is the tendency to strengthen its bargaining
power by changing the rules.

In the midst of the reinvention revolution, the Defense Department is the latest
recidivist. It is floating a legislative proposal that is a classic example of changing
the rules to get an advantage. Most of the plan's provisions give the government
additional powers and benefits at the expense of contractors--hardly a commercial

For example, the circulating plan would reverse the results of a case the government
lost at the U.S. Court of Appeals for the Federal Circuit. Under the Contract Disputes
Act, when a contractor recovers on a claim, it is entitled to interest from the date of

The case the government lost upheld the rule, and interest accrues even where the
contractor has not yet incurred the cost.

An important advantage the government has in contract administration stems from its
broad power to require a contractor to keep performing while it withholds payment.

After-the-fact interest is small recompense to a contractor that has had to wait and
perhaps litigate to get its money.

Ordinarily, the government just rewrites its regulations to eliminate court and board
rulings it doesn't like. But in this case, the problem was with a statute, so only
Congress could provide a remedy.

Rather than ask Congress to change the rule so that interest would accrue from the date
a cost was incurred, DOD wants to have it both ways. The proposed law would tie interest
to the date of claim certification or the date a cost is incurred, whichever is later.
Heads, I win; tails, you lose.

Another target of the proposed law is the already-shrinking right of contractors to an
independent review of adverse decisions. The law would prevent bidders from filing
protests in court until they had pursued an agency protest. A related provision would
apply to protests to the General Accounting Office, but only when the protester agreed.

Agency protests are mostly a waste of time. Agencies are under no obligation to provide
any information beyond debriefings, and they generally don't. Unlike in court, there is no
mechanism to permit access to proprietary and sensitive materials while safeguarding their
disclosure. And it is rare to get a truly independent review of agency action at this

One sop handed the private sector is that the restriction would apply only if an agency
agreed to withhold award or suspend performance while it considered the protest. But the
provision would likely delay the procurement process.

Ironically, the reason for the legislation is to make sure that an agency develops a
record for why it made its decision.

In the law, this is called exhaustion of administrative remedies, and that is
unfortunately the right word for it. This whole line of reasoning is flawed because the
decision being reviewed is the source selection, which has already generated a record and
therefore requires no further administrative proceeding.

There is a way for agencies to provide meaningful administrative review. They could
push for their own boards of contract appeals to consider bid protest cases. After all,
they already hear contract performance disputes.

When the idea was floated a few years ago, however, most government officials opposed

The proposal would also prevent the Court of Federal Claims from hearing a contract
appeal until after the case had been heard by a board of contract appeals.

Adding a layer to the appeals process is the opposite of streamlining. All this does is
make more work for board judges. It makes no sense.

As a last insult, the bill would shorten the date for filing a contract appeal from one
year to a scant 90 days--the same period that applies to the boards of contract appeals.
What legitimate purpose this serves is a mystery.

Only administrative bid protests have a shorter period, which is 10 days. If the
government truly wants to speed things up, it has ample opportunity to trim the delays
caused by its procrastination.

Among the many questions the draft legislation raises is why it came from Defense.
Having DOD front the proposal means it can pass through the more tractable armed services

The committees that handle procurement legislation likely would see the proposal,
accurately, as one-sided and biased.

Joseph J. Petrillo is an attorney with the Washington law firm of Petrillo &
Powell, PLLC. E-mail him at [email protected].

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