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CHAPTER 3

Disputes Related to the Award of Contracts

This chapter examines the methods by which disputes are resolved during the process that leads to the award of a Government contract. Such disputes are called “award protests,” i and, in the following analysis, the forums that hear these complaints are collectively entitled the “award protest system.”

The first section of the chapter discusses the award protest as a means for subjecting contract solicitation and award decisions to review, either internally within the procuring agency or by an independent adjudicatory body. The section considers the nature of the contract award process, the purpose of award protests, and the characteristics of the interests that are involved in the award protest system. After this introduction to a unique aspect of Government contract law, the chapter describes the forums available for the resolution of award protests and recommends changes that are needed if the award protest system is to function fairly and effectively.

interested in doing business with the Government respond with offers in the manner called for by the solicitation. The Government then considers the offers in the way prescribed for the method of competition selected, chooses the best offer, and makes an award of a contract.

The award process in Government procurement differs from that in private exchanges in one very important respect. Government contracts are formed according to an extensive and complex set of formal rules, comprised for the most part of Federal statutes, Executive orders, executive regulations, and agency internal procedures. These rules prescribe the steps the parties are to take during the award process, including the proper solicitation to be used in each circumstance, the contents of the solicitation, the correct manner of response to the solicitation, the period within which a response must be made, and how the response will be evaluated. No counterpart to this elaborate system of rules exists in private contract law.

The existence of this "code of conduct” in one marketplace but not in another has come about because of differing views about the nature of the interests involved. In the commercial marketplace it "was believed that if men were free to make their own self-interested decisions whether to buy or sell there would be produced and exchanged the greatest amount of goods and services at the least price." 4 This concept of the freedom of private businessmen to decide whether and with whom to contract also applied to how they should contract.

BACKGROUND

Government contracts are formed according to the same offer-acceptance principles used to form a contract between buyer and seller in private contract law. The Government usually begins the contract award process by issuing a solicitation, commonly in the form of an invitation for bids (IFB) or request for proposals (RFP), which is a request for offers to supply a particular Government need. Those

See, e.g., 10 U.S.C. && 2301-14 (1970) (Armed Services Procurement Act): 82 CFR Parts 1-39 (1972) (Armed Services Procurement Regulation); Exec. Order No. 10936, 3 CFR, 1959–1963 Comp., at 466, 41 U.S.C. $ 252 (1970) (reports of identical bids); and 32 CFR Parts 591-616 (Army Procurement Procedure (APP)).

1 For a definition of "award protests," see p. 5, supra.
2 The present award protest system is depicted at p. 6, supra.

* L. Jaffe, Judicial Control of Administrative Action 4 (1

5).

Government contracting, however, is undertaken for the benefit of the public. The public, through Congress, has decided that Govern ment contracting must be accomplished in a special way, primarily by fulfilling Government needs through competitive pricing methods that assure equal opportunities for businessmen to compete as well as the lowest possible cost to the Government. Rules designed to guarantee that these goals are met have existed almost from the beginning of our present form of Government. In 1809 Congress required that purchases and contracts for supplies or services for the military be made by “open purchase or by previously advertising for proposals” 5 in order to prevent favoritism and to give the Government the benefit of competition among suppliers.

If rules are to be effective, though, there must be some way of making those who are governed by them adhere to them. The question of how to enforce prescribed solicitation and award procedures also arose early in the history of Government procurement. In 1853, for example, a seller complained to the President that while the Secretary of the Interior had acted honestly in awarding a contract to another bidder, "he decided erroneously as to the questions of fact” in selecting the lowest bidder. The matter was referred to the Attorney General who advised that the Secretary of the Interior alone had the power to decide such questions of fact and that no statute provided a method by which even an erroneous decision could be revised.8

This early protest against the award of a Government contract identifies problems that have yet to be completely resolved. Two important questions are whether the decisions of a contracting official that lead to the award of a Government contract may be reviewed by any forum which is external to the contracting agency, and if so, who may initiate such review? Until 1970, Federal courts usually ruled that private complaints about the operation of the contract award process could not be heard in a court of law. The reason generally given was that the procurement regulations and statutes were promulgated solely for the benefit of 8 Act of Mar. 3, 1809, ch. 28, § 5, 2 Stat. 536. * 2 Ops. Atty. Gen. 257, 259 (1829). 76 Ops. Atty. Gen. 226 (1853). * Ibid., at 226–27.

Government officials as guidance in performing their duties and only higher executive authority or Congress could seek compliance with those rules. However, the General Accounting Office (GAO) shortly after its creation in 1921 became receptive to direct complaints from private parties about how Government officials had acted when buying goods and services. Thus, the private “award protest” was offered as an alternative method of subjecting such administrative action to review.

Today private protests against the decisions of procurement officials are a major means of initiating review of procurement actions. In fiscal 1972, GAO handled 1,227 protests and issued 758 opinions affecting the formation of Government contracts. 10 But the implementation of this alternative has led to further problems. Even if the private protestor has a legitimate grievance that the Government has not followed the rules, and an external forum is willing to review the contracting agency's action, does the protestor have any enforceable rights in the contract award process ?

The question is not easy to answer. Part of the problem is that the award protest system has grown by trial and error. No statute specifically grants the right to a seller to challenge the solicitation or award of a Government contract, nor does any statute clearly empower protest forums such as GAO or the Federal courts to review the decisions of administrative officials made during the contract award process.11 Without such clear statutory right, it is uncertain whether a remedy that personally benefits the protestor can ever be granted.

Another problem in fashioning remedies is caused by the competing private and public interests at work in the contract award process. The most obvious motivation of a private firm to bid on a Government contract is to gain profit in its business ventures through performance of that contract. But the profits of a particular contract may not be the only consideration in submitting a bid or proposal. Since many businesses make Government contracting their sole or principal source of income, the award of a particular contract may " See Perkins v. Lukens Steel Co., 310 U.S. 113 (1940). 19 See Appendix A, p. 77.

11 For a discussion of the statutory basis used by each forum to review award protests, see pp. 40–41, 45–47.

be vitally important if follow-on work is to be obtained. Similarly, a growing dependence on Government contracting for its source of income may cause a business to seek a contract in order to keep its plant facilities operating or its personnel employed. The Government contract, therefore, has for many businessmen a value that must be measured by more than the profit that flows directly to a company as the result of performing a specific contract.

In addition to serving the private interests of individual contractors, award protests may also serve the private interests of certain classes or groups within the procurement community. In this circumstance, the award protest functions as a means to prevent administrative action thought to be inimical to the long-range interests of the group lodging the protest.12

There is a public interest in ensuring that congressional policies requiring competition and equal access to the award process are implemented by competent men employing sound procedures. This is tantamount to saying that the system of proposal solicitation, evaluation, and award must have integrity to achieve basic policies. The Comptroller General often has stated that the integrity of the award process outweighs any particular pecuniary advantage to the Government that may result from an improper award.13 The public also has an interest in ensuring that procuring activities are capable of acting in an effective manner to implement programs and satisfy public needs.

At times the private and public interests in the award process appear to be consistent. Policies that promote competitive procedures administered with integrity will necessarily afford prospective contractors better protection in securing economic opportunities and give them little reason to protest the administration of the award process. Moreover, allowing protests to be brought to the attention of Government officials develops public confidence that the policies are being properly implemented and helps eliminate improper management practices.

On the other hand, at times these interests

will seem to be in competition. A procuring agency's view of its mission may often collide with private interests in obtaining the award and even the public interest in the integrity of the competitive system. This problem becomes most apparent and troublesome when a protest is lodged after a contract has been awarded. In this situation the delay inherent in adjudicating such protests may, from the agency's view, inhibit a successful completion of its mission. Yet failure to adjudicate legitimate protests may not only unjustly deprive the rightful recipients of their economic opportunities, it may lessen future business interest in bidding on Government contracts.

The purpose of this introduction to the nature and function of award protests has been to indicate that complex problems underlie any analysis of the present award protest system. The following sections describe the various forums and procedures used to resolve award protests. While we have not found that the present institutional structure of the award protest system is in need of fundamental modification, we do recommend that certain procedural changes be made in order for the system to operate with the greatest fairness and effectiveness.

THE PROCURING AGENCY

A protestor may always lodge a protest with the agency that has issued the solicitation on which the protest is based. GAO regulations, in fact, now urge that the protestor first seek resolution of its complaint with the procuring agency before it proceeds to GA0.14 Adjudication of award protests by procuring agencies is conducted in an informal manner. No hearings are held, and no right of appeal to a quasi-judicial forum such as a board of contract appeals exists.

Where there has been a written protest, the agency generally makes its decision on the written record compiled from the contract file and any documents submitted to the contracting officer by parties to the protest. The regulations state that where a protest has been 14 4 CFR $ 20.2(a) (1972).

See, e.g., Perkins v. Lukens Steel Co., 310 U.S. 113 (1910); Lodge 1858, American Federation of Gov. Emp. v. Paine, 436 F.2d 882 (D.C. Cir. 1970). See also Contractors Ass'n. of Eastern Pa. v. Secretary of Labor, 442 F.2d 159 (3d Cir. 1971).

13 43 Comp. Gen. 268, 272 (1963).

received before award the procuring agency should, when desirable, solicit the views of GAO regarding the protest before an award is made.15

Fairer Treatment and consideration of Award Protests

Recommendation 13. Promulgate award protest procedures that adequately inform protestors of the steps that can be taken to seek review of administrative decisions in the contract award process.

In 1968 the Senate Select Committee on Small Business concluded that “[p]resent procedures for handling [award] protests are entirely inadequate and unsatisfactory. A complete revision of these procedures is required.” 16 Despite the committee's recommendation that "[p]rocurement regulations should be revised so as to fully acquaint bidders with the opportunities and procedures for filing (award] protests,” 17 the present state of these regulations continues to be a source of dissatisfaction with the award protest system.

General guidance for processing award protests is contained in the Armed Services Procurement Regulation (ASPR)18 and the Federal Procurement Regulations (FPR),19 and most procuring agencies have, to some extent, supplemented these regulations with their own internal procedures.20 The primary fault of ASPR and FPR is that they do not tell the protestor how to use the procuring agency to resolve the protest. The thrust of these regulations is to inform the agency officials as to

what administrative actions must occur in the event a protest is received.

Contracting officers are required to "consider all protests or objections to the award of a contract, whether submitted before or after award,” 21 but not all contracting officers actually decide award protests. Some agencies have a policy of deciding all protests at a high management level, while other agencies resolve them at various levels throughout the organization.22 The regulations do not tell a protestor where a protest should be lodged in each case, what officials will have responsibility for deciding the protest, and whether individual or group conferences with either agency officials or all affected parties in attendance can be requested.23

ASPR and FPR provide that the contracting officer “may require that written confirmation of an oral protest be submitted” 24 but are not explicit regarding the manner in which a protest may be lodged or what the contents of the protest should be. No automatic dissemination of pertinent information is provided to all affected parties, and no provision is made for equal access by the protestor and all affected parties to the pertinent documents compiled and submitted by the Government and the parties to the protest.

In the event of a postaward protest—the type most potentially disruptive of an agency's program-ASPR and FPR offer few guidelines even for agency officials. They provide that the contractor who has been awarded the contract shall be notified of the pending protest, and the contracting officer may seek a mutual agreement with the contractor to suspend performance on a no-cost basis if the delay in receiving the supplies and services is not prejudicial to the Government's interest and it appears likely that the award may be invalidated.25 ASPR and FPR and most agency in

15 ASPR 2-407.8(b) (2) : FPR 1-2.407-8(b) (3).

16 Senate Select Committee on Small Business, Subcommittee on Government Procurement, Selected Problems of Small Business in the Area of Federal Procurement. S. lep. No. 1671, 90th Cong., 2d Sess. 2 (1968).

17 Ibid.

19 Procedures for protests against the award of advertised procurements are contained in ASPR 2-407.8. “Protests against awards of negotiated procurements shall be treated substantially in accordance with 2-407.8." ASPR 3–509.

19 Procedures for protests against the award of advertised procurements are contained in FPR 1–2.407-8. FPR contains no provision similar to ASPR 3-509 for protests against the award of negotiated procurements.

20 See, e.g., APP 592.407-8; DSPR 1202.407-9; HEWPR 3-2. 407-8; AGPR 4-2.407-8; GSPR 5–2.407-8; NASA PR 2.407-8; HUDPR 24-2.407-8; AECPR 9-2.407-8; VAPR 8–2.407-8; IPR 14–2.407-8.

21 ASPR 2-407.8(a) (1) ; accord, FPR 1-2.407-8(a) (1).

22 For example, one such regulation states “[i]t is the responsibility of the contracting officer to decide whether a protest has a valid basis and to take appropriate action when possible without referral to NASA Headquarters." NASA PR 2.407–8(a) (2). Another, however, states “[e]xcept as outlined above (when protests will be referred to agency headquarters), the Staff Officer responsible for procurement at the Major Command headquarters is authorized to render final decisions on protests before and after award which are lodged at no higher than Major Command level." AF ASPR Supp. 2–407.8(a).

23 See 4 CFR $8 20.1, 20.9 (1972).
24 ASPR 2-407.8(b); FPR 1-2.407-8(b) (1).
23 FPR 1-2,407-8(c); accord, ASPR 2-407.8(c).

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