You read the agency’s solicitation and realize the specifications are written around a competitor’s product and your product does not qualify. You alert the government to the issue to no avail. Where do you turn? This can be the ideal situation to lodge a pre-award protest of the specifications.
What is a pre-award protest?
A pre-award specification protest challenges the agency’s description of the requirements contained in a solicitation or the ground rules under which the agency intends to conduct the procurement. Under the Competition in Contracting Act, a contracting agency is generally required to specify its needs and solicit offers in a manner that will achieve full and open competition, so that all responsible sources are permitted to compete. An agency generally may include restrictive provisions or conditions in its solicitations only to the extent necessary to satisfy the agency’s needs. 10 U.S.C. § 2305(a)(1)(A); 41 U.S.C. § 3306(a)(2)(B). When an agency’s solicitation contains restrictions that prevent a potential bidder from competing, potential bidders can protest that the solicitation improperly restricts competition.
Prevailing on this type of protest can be difficult because it requires the protestor to demonstrate that an agency acted unreasonably in describing its requirements, which is an area over which agencies are granted broad discretion. But the equities of such a challenge can be in the favor of the protestor because the protest seeks to expand competition, which ultimately should benefit the agency. The GAO recently sustained a pre-award protest of a Department of Veterans Affairs procurement for sterile foam dressings because the agency was unable to provide a reasonable explanation for a restrictive absorbency specification in its solicitation.
Where and when to file a pre-award specification protest?
There are three different venues available to hear a bid protest challenging the terms of a solicitation—the agency, the Government Accountability Office, and the United States Court of Federal Claims. The agency and GAO are the most popular venues for a pre-award specifications protest. The reasons for this are two-fold: agency and GAO protests are less expensive to pursue than protests at the Court of Federal Claims and both venues offer an automatic stay of the contract award. 31 U.S.C. § 3553(c); FAR 33.103(f). Although the Court of Federal Claims has jurisdiction to hear pre-award protests, the cost of litigating there is high and the availability of an injunction stopping the award of the contract is not automatic.
The agency protest process is fairly informal. The protest is commenced with a letter from the protestor to the contracting officer invoking the process and setting forth, among other things, the legal and factual grounds of protest. An agency must stay the awarding of a contract while an agency protest is pending. Typically, there is little or no interaction between the agency and the protestor during the pendency of an agency protest. An agency must use best efforts to resolve the protest within 35 days. A protestor disappointed with the agency’s decision has the ability to bring a GAO protest.
The GAO protest process also begins with a detailed letter setting forth the legal and factual grounds of protest. The agency, represented by agency counsel, is required to respond to the protest with an “agency report.” The agency report is required to include a statement of facts, a memorandum of law, and a copy of the relevant documents. The protestor and any other bidders who might intervene in the protest then have 10 days to respond to the agency report. The GAO is required to issue a decision resolving the protest within 100 days after the protest is filed. Although there is no formal appeal from a GAO decision, a protestor that is not satisfied with the GAO’s resolution can bring the claim at the Court of Federal Claims.
Must a pre-award protestor submit a bid?
Choosing a forum is not the only decision-point in a pre-award protest. A potential offeror considering a pre-award specification protest must also decide how to respond to the solicitation. One might think that as long as the offeror files a timely pre-award protest to the agency or GAO there is no need to submit a proposal in response the solicitation. After all, there is an automatic stay of the contract award while the protest is pending.
But this conclusion is too simplistic. In fact, refusing to submit a proposal may undermine the potential offeror’s standing as an “interested party.” While an automatic stay resulting from a pre-award protest prevents the agency from awarding a contract, it does not stay the deadline for submission of bids or proposals and does not bar the agency from evaluating them. If the time for submission of proposals passes while the protest is pending, a protestor that has not submitted a proposal likely cannot submit one later if the protest is denied. At that point, the protestor’s options are to bring the protest at the next available forum or simply to abandon the contract and move on to the next opportunity.
The Federal Circuit’s decision in CGI Federal, Inc. v. United States, No. 2014-5143 (Fed. Cir. 2015) [pdf] demonstrates the difficult choices a contractor faces when a pre-award protest is denied. The underlying solicitations were for assistance in identifying overpayments of Medicare claims. Under its Recovery Audit Program, the Department Health and Human Service’s Centers for Medicare and Medicaid Services engages Recovery Audit Contractors to determine if Medicare claims are properly paid. When a RAC finds an apparent overpayment, CMS sends a demand letter to the provider and the RAC is paid a contingency fee. CMS issued the solicitations under GSA’s Federal Supply Schedule, which limited the competition to contractors holding recovery audit schedule contracts. CGI filed a GAO protest complaining that the payment terms in the solicitations were inconsistent with customary commercial practice, contrary to FAR Part 12 and the Federal Acquisition Streamlining Act. CGI did not submit proposals in response to the solicitations, and the deadline for submission of proposals passed while CGI’s protest was pending at GAO.
The GAO denied CGI’s protest, concluding that CMS was permitted to use terms inconsistent with customary commercial practices because the solicitations were issued under FAR Part 8 and not FAR Part 12.
Within three days of receiving the GAO’s decision, CGI brought its case to the Court of Federal Claims. The government sought to have the protest dismissed, arguing that CGI’s failure to submit a proposal in response to the solicitation destroyed its status as interested party. In the government’s view, CGI could not protest because it was not an actual or a prospective bidder. The Court of Federal Claims rejected this argument, finding that CGI preserved its status by moving quickly with further proceedings after the dismissal at GAO. But CGI lost on the merits. As GAO had done, the Court of Federal Claims concluded that Supply Schedule purchases under FAR Part 8 are not subject to the FAR Part 12 bar on the use of non-customary commercial terms.
CGI’s appeal to the Federal Circuit met with better results. As to the question of standing, the court held that CGI achieved prospective bidder status with its timely pre-award GAO protest and that it maintained that status by filing at the Court of Federal Claims within three business days of the GAO’s decision. The court distinguished CGI’s diligence in pursuing its protest from the protestor in Rex Service Corp. v. United States., 448 F.3d 1305 (Fed. Cir. 2006), which lost its prospective bidder status by waiting almost three months after the denial of its pre-award agency protest before going to the Court of Federal Claims. The Federal Circuit also accepted CGI’s argument on the merits. The solicitation was unduly restrictive because it included contract terms that are inconsistent with customary commercial practice.
Choosing a pre-award protest strategy
CGI Federal demonstrates that protesters are not required to submit a proposal while their pre-award protest is pending in order to retain their status as an interested party. But there may be times when submitting a proposal while a protest is pending will yield the best result. A protestor may choose to submit a proposal based on the assumption that the agency makes the requested change in the solicitation. While the agency might reject it as non-responsive, the proposal could serve as a complement to the protest and induce the agency to take corrective action. A protestor may also choose to submit a fully-compliant bid or proposal while its pre-award protest is pending. The advantage to this approach is that the protestor maintains its stake in the competition without having to continue its protest if the first protest does not succeed. The disadvantage is that submitting a proposal that meets a set of improper specifications would tend to undermine the merits of the protest, particularly if the protestor contends that a solicitation provision is unduly restrictive of competition. There is no one-size-fits-all approach to pre-award protests.