Should Contractors Cover the Cost of Protests?

Recently, the Professional Services Council (PSC) raised the alarm about two provisions that were being bandied about to include in this year’s National Defense Authorization Act (NDAA), the big defense spending bill that tows along dozens straggling amendments and legislative language in its wake every year. In April 25 letter to House Armed Services Committee (HASC) Chairman Mac Thornberry and Ranking Member Adam Smith, PSC expressed concern about two possible changes to the way protests are handled. The first would have disallowed defense contractors to seek remedy in the U.S. Court of Federal Claims if the Government Accountability Office denied a protest. The second, which would have applied to the entire federal government, would have required protestors to cover certain government costs associated with protests.

In an interview with Federal News Radio, PSC Vice President Alan Chvotkin said that neither provision made it into the chairman’s mark of the NDAA, but that Thornberry had ordered a study of the Department of Defense’s bid protest process (which the group supports). Leaving the first policy aside for the moment, the possibility of protesters incurring some costs for filing a protest—as of now, it costs nothing to file the protest with the government, though obviously companies must retain lawyers to make the case—is intriguing. PSC said doing so would “undermine the intended purpose of the protest process to hold the government accountable to follow established procurement rules when conducting its acquisitions, and could serve as a deterrent to small business federal contractors in particular.”

But some could argue that a deterrent is not necessarily the worst thing in the world. If the cost of filing a protest is nothing, but it costs the government in a number of ways—GAO staff handling the protest, halting of the program while the protest is deliberated—why should the government shoulder the entirety of that cost? We’ve heard (off the record) from a few senior procurement officials in the federal government that having a protester pay some of the legal costs of a protest if they lose may be one way to prevent a “frivolous” protest, or at least help the government control protest costs. One even suggested tracking the cost of protests as a percentage of total awards, to gain insight into whether such a policy would be worth advancing.

I’m not coming down on one side or the other. Certainly, both sides have valid points, and my gut tells me that PSC is right about small businesses perhaps being wrongfully dissuaded from filing a protest where they may have a strong case, simply because the danger of incurring prohibitive costs wouldn’t be worth the risk.

But I’m curious to hear what you think? Is there a system where some government costs could be covered, that would still be fair to small businesses? Let us know in the comments section and we’ll do a follow-up post.