Losing Vendor Litigation (Part 1): A Reversal of Fortune?

Posted on August 4, 2011

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It has been noted that fiscal law is not about getting the mission accomplished or getting a good deal for the government. Fiscal law is only about Congressional oversight of the Executive Branch. Thus, fiscal law frequently prevents government agencies from signing an agreement that a commercial entity would not hesitate to execute. Thus, fiscal law has an invisible and frequently negative impact on the ability of a federal agency to accomplish its mission, and this fact is frequently lost on the public and Congress.

from Anti-Deficiency Act (ADA) definition in Wikipedia

I have to admit that when I read the above definition in what is today’s equivalent of the Encyclopedia Britannica (or in my case Funk & Wagnalls), while not being totally surprised by the apparent contradictory nature of the Act, I was nonetheless stopped in my proverbial tracks.  Talk about conflicting interests.

On the one hand you have public sector purchasing professionals charged with getting the best value for the taxpayers hard earned contribution to the government coffers while on the other hand, you have an act that contravenes best value decision-making in favor of bureaucratic controls.  What a system!

Perhaps it would be safe to suggest that this is where the problems with the government tendering process originates?  Let’s revisit this point a little later.

What is interesting is that according to the Crowell and Moring Government Contracts Legal Forum, the steady rise in bid protests filed at GAO is the most glaring trend.

The trend to which firm partner Daniel R. Forman is referring is the increase in bid protests that starting with 2007 saw submissions rise by 17% in 2008 with an additional increase of 20% in 2009.  The irony of course is that there was not a corresponding increase in the number of merits and sustains.  Specifically, the number of merit decisions were 291 and 315 in 2008 and 2009 respectively, compared to 335 in 2007.

Sustain decisions reflected a similar trending with 60 and 57 in 2008 and 2009, as compared to 91 in 2007.

Forman offers his take on why there is a decrease in merits and sustains linking the result to two key developments within the government hearing process.

To start, Forman indicates that “GAO has managed its growing docket by increasing resort to a unique form of alternative dispute resolution (“ADR”) — outcome prediction.” Basically it’s an advance ruling mechanism that predicts the likely outcome of a protest, based on the premise that when a vendor realizes the the judgment is going to go against them they will as Forman puts it “voluntarily” do the right thing and withdraw the complaint.  Call it the GAO’s version of the plea bargaining process.

The other reason for the drop in merit and sustain decisions is the proactive response on the part of government agencies to take “corrective action before even producing the agency report.”  What this means is that rather than “digging in” and sticking to their guns through a litigation process, agencies are voluntarily pulling the plug and as Forman puts it by implementing “corrective measures when faced with potentially meritorious protests.”

Based on the above revelations, it is no surprise that the GAO effectiveness rate has skyrocketed by 45%.  This is an key indicator that the dispute process is working (at least one would be reasonable to assume that it is), in that “The “effectiveness rate” reflects cases where the protester obtained some form of relief by the agency, either by virtue of a sustain or an agency’s decision to take corrective action.”

Click to access GAO website

Once again, one might be reasonable to assume that this reflects a positive trend and corresponding improvement with the government tendering process.  However, I am more inclined to look at other important metrics as a measure of effective accessibility to government opportunities including the distribution of contracts over the entire supply base, overall vendor participation in the RFP bid process and, the two-edged sword of increased dispute resolution competency, which to me seems to indicate that there is an underlining and growing problem with the tendering process that is not being addressed at the point of origin.  Or to put it another way, if the tendering process worked well, then there would not be the need – at least to the same degree, for GAO intervention.

This of course brings us back to the question of what is wrong with the government tendering process, that has led to the steady increase in vendor complaints?

In Part 2 in the Losing Vendor Litigation series, we will look into the various remedies at the point of origin as a means of possibly reversing the upward trend relative to vendor disputes and litigation.

A Crowell and Moring Case Reference; GAO Invalidates Award for Lease of Health & Human Services’ Office Space.

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