ternal regulations do not provide for the occasion when a contractor refuses to stop work on a no-cost basis.26

The primary focus of award protest resolution and avoidance must be in the procuring agencies. Although it appears to have been the intent of the basic procurement regulations to leave much of the procedural development of award protest regulations to the individual agencies, this has not occurred. Accordingly, the use of a contracting agency to resolve award protests should be promoted by including award protest procedures in the basic procurement regulations that adequately inform protestors of the steps that can be taken to seek review of administrative decisions.

If the utility of an award protest system is acknowledged by agency officials and the use of such a system is encouraged, the result should be beneficial both to prospective contractors and to contracting agencies. Agency officials have asserted that the current rise in protests is attributable to shrinking procurement expenditures and the consequent necessity for sellers to fight for every contract solicited. The point often missed is that previous failures to protest during more expansive periods may have sanctioned bad management practices for which the agencies only now are being held accountable. If no stigma is attached to an award protest, prospective contractors will feel freer to seek immediate correction of unfair treatment, and the contract award process eventually may be improved thereby to the extent that protests will be greatly minimized.

It is not the purpose of this recommendation to hamstring procurement actions through prolonged disputes with contractors. The procuring agency award protest procedures should provide a means for contractors to receive fair consideration for the award. However, the agency review should be conducted in an informal manner by higher management authority rather than through an adversary-type proceeding.

20 Several agencies, however, have attempted to establish procedures for contracting officers to follow in the event a contractor refuses to enter into a mutual agreement to stop work on a no-cost basis. See HUDPR 24-2.407-8 (b); DSPR 1202.407-9 (c) (2); APP 592.407-8 (j) (3).

GENERAL ACCOUNTING OFFICE

A protestor may lodge an award protest with GAO in accordance with procedures published in the Code of Federal Regulations.2 Those procedures allow an "interested party" to protest the award (or proposed award) of a contract by or for a Government agency whose accounts are subject to settlement by GAO.28 An interested party is one whose economic interest may be involved in the procurement and includes offerors for Government contracts, potential contractors, subcontractors, labor unions, and other associations.29

The number of award protest cases received by GAO has steadily increased over the past few years. As shown in table 4, GAO rendered 715 protest decisions involving 34 different agencies in fiscal 1971. That same year it handled 1,054 award protest cases, including 339 cases that were withdrawn by protestors or closed for various reasons, including agency cancellation of the procurement or positive agency action in response to the protest.30

28 4 CFR § 20.1(a) (1972). Not all agency procurement decisions are reviewed by GAO. For example, the Comptroller General has declined to adjudicate award protests involving TVA except upon the request of TVA. Comp. Gen. Dec. B-174523, Nov. 23, 1971, Unpublished. See 16 U.S.C. § 831h (1970). Protests involving Postal Service contracts also are not adjudicated by GAO. See 39 U.S.C. § 2008 (c) (1970); Postal Service Protest P 71-11.

29 Shnitzer, Handling Bid Protests Before GAO, Briefing Papers, No. 70-3, June 1970, at 2. Address by Paul G. Dembling, General Counsel, U.S. General Accounting Office, before a National Contract Management Association, Washington, D.C., Chapter Meeting, Sept. 15, 1971.

30 See Appendix A, p. 77.

Despite the evident popularity of GAO as a forum for deciding award protests, its authority to consider award protests and issue decisions that are binding on procuring agency officials or on any other officials of the executive branch has been questioned by the Attorney General of the United States and by members of the procurement community. This concern is based on interpretations of the Constitution and of the statutes that give GAO the authority to settle public accounts. To understand the nature of these objections, it is first necessary to understand the rationale used by GAO for intervention in the contract award process.

GAO issued its first award protest decision

*See dissenting position, infra.

in 1924, three years after it had been created by the Budget and Accounting Act of 1921. The Budget and Accounting Act grants GAO authority to settle and adjust "[a]ll claims and demands whatever by the Government of the United States or against it, and all accounts whatever in which the Government of the United States is concerned, either as debtor or creditor. . "32 In settlement of public accounts, "[b]alances certified by the General Accounting Office . . . shall be final and conclusive upon the Executive Branch of the Government. The Comptroller General also may render a decision, upon the application of the head of an executive department (or other establishment not under any of the executive departments) or a disbursing officer, "upon any question involving a payment to be made by them or under them, which decision, when rendered, shall govern the General Accounting Office in passing upon the account containing said disbursement." 34

" 33

While the foregoing statutes contain no express authority for GAO to adjudicate award protests, GAO has interpreted its duty to audit and settle public accounts as containing an obligation to determine the legality of contract expenditures and assure compliance with the laws and regulations relating to expenditure of public funds. GAO has concluded that by deciding award protests it is preventing unauthorized payments by determining in advance the validity of a contract that obligates public funds.35 The fact that, until 1970, no other forum independent of the procuring agency existed to insure that the contract award process operated with integrity is also cited as a reason for GAO's actions in this area. 36

The Attorney General, in a 1971 letter to

1 Comp. Gen. Dec. A-4471, Sept. 20, 1924, Unpublished (postaward protest). In 1925 the Comptroller General rendered the first GAO decision on a protest made before the award of a contract. Comp. Gen. Dec. A-10024, Aug. 19, 1925, Unpublished.

32 31 U.S.C. § 71 (1970).

33 31 U.S.C. § 74 (1970).

34 Ibid. See 31 U.S.C. § 82d (1970) for similar provision relating to certifying officers.

35 See address by Robert F. Keller, Assistant Comptroller General of the United States, before a Joint Program of the Government Contracts Committees of the District of Columbia, Federal, and American Bar Associations, Washington, D.C., Mar. 24, 1971: address by Paul G. Dembling, General Counsel, U.S. General Accounting Office, before a National Contract Management Association San Francisco Area Chapter Meeting, Oct. 6, 1970. See also 17 Comp. Gen. 554, 557 (1938).

36 See Keller address, supra note 35.

the Comptroller General commenting on GAO's proposed new award protest procedures, expressed the view that the awarding of Government contracts is purely an executive function, because "the authority to withhold awards and reject bids is reposed by statute only in the heads of Executive departments or agencies and certain specified offices of the military departments." Neither the Federal courts nor Congress has asserted this view. Over a period of years the courts have given tacit approval to adjudication of award protests by GAO.38 One court recently recognized GAO as having special competence in dealing with award protests and characterized the use of the court's injunctive powers to prevent contract action while the matter is decided by GAO as a "felicitous blending of remedies and mutual reinforcement of forums. . . ." 39 Moreover, the absence of congressional intervention, in the face of committee investigations into the operations of the award protest system " and annual reports to Congress from GAO about its activities, indicates that GAO also exercises jurisdiction over award protests with the acquiescence of Congress.

41

40

Adjudication of award protests by GAO serves several important functions in the procurement process. GAO's separation from the contracting agencies assures contractors that their complaints are considered free from any bias toward individual agency policies and thus promotes the confidence of both private enterprise and the general public that Government business is conducted with integrity. Such separation from the daily concerns of the contracting agencies also allows GAO to frame and solve problems in terms of the over

Letter from John Mitchell, Attorney General of the United States, to Hon. Elmer B. Staats, Comptroller General of the United States, June 14, 1971.

* See John Reiner & Co. v. United States, 163 Ct. Cl. 381, 325 F.2d 438 (1963); A.G. Schoonmaker Co. v. Resor, 445 F.2d 726 (D.C. Cir. 1971); M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971).

Wheelabrator Corp. v. Chafee, 455 F.2d 1306, 1316 (D.C. Cir.

1971).

See Selected Problems of Small Business in the Area of Federal Procurement, S. Rep. No. 1671, supra note 16; House Committee on Government Operations, Eighteenth Report, GAO Bid Protest Procedures, H.R. Rep. No. 1134, 90th Cong., 2d Sess. (1968).

41 U.S. General Accounting Office, Annual Report of the Comptroller General of the United States, 1970, H.R. Doc. No. 92-14, 92d Cong., 1st Sess. 110-12 (1971); U.S. General Accounting Office, Annual Report of the Comptroller General of the United States, 1971 131-33 (1972).

all best interests of the Government. The award protest decisions issued by the Comptroller General within the past five decades form a cogent body of Government contract law that is useful for guidance in solving individual problems occurring in the contract award process and provide a basis for development of more generally applicable procurement regulations. GAO's establishment as an administrative forum potentially allows it to afford a speedier solution of disputes than would be possible if Federal courts were the only arbiter.

We recommend that GAO continue to adjudicate award protests. We do not attempt here to offer legal argument that will lay at rest the issue of the constitutionality of this function. Such an issue only can be resolved by the Supreme Court of the United States.

DISSENTING POSITION

One Commissioner believes that the constitutionality question discussed above could be satisfactorily resolved administratively through the simple act of shifting the entire protest-resolving apparatus (people, records, and all) from its current residence in the GAO to the Department of Justice. Such action. would preserve the body of case decisions developed over the years by the GAO, would retain the personal expertise developed by GAO personnel in resolving disputes, and would not disrupt the processing of protests under consideration, were the physical move accomplished in a well-executed fashion. Conceivably, the shift could be accomplished without even the necessity for much physical relocation of records and personnel if administrative jurisdiction and control over the protest-resolving function were simply shifted from the GAO to the Department of Justice while the bulk of the personnel involved remained in their present location.

He believes that administrative attempts at resolution of the constitutionality question should be pursued between the Comptroller General and the Attorney General, short of initiating any action to seek resolution by the Supreme Court.

Expedition in Processing Protests

Recommendation 15. Establish, through executive branch and GAO cooperation, more expeditious and mandatory time requirements for processing protests through GAO.

The first step in GAO adjudication of award protests requires the procuring agency to submit an administrative report. Agency regulations provide that the report shall include copies of the protest, the solicitation, and the relevant bids or proposals, plus other pertinent documents and a statement by the contracting officer setting forth his findings, actions, and recommendations in the matter.42 The average time required by agencies to prepare these administrative reports and forward them to GAO was approximately 48 days during 19681972.43

After the administrative report is received, GAO begins consideration of the protest. The protestor is normally permitted to review, copy, and comment on the contracting agency's administrative report.11 The contracting agency, in turn, is permitted to review and comment on any material submitted by the protestor. Likewise, the rules now provide that GAO will make available to any interested party relevant information that has been submitted by other interested parties or agencies.45

After all documents have been submitted, and requested conferences held, an assigned attorney within the Office of General Counsel writes an opinion. The opinion is then reviewed through successive levels of the organization

42 ASPR 2-407.8(a) (2) ; FPR 1-2.407-8(a)(2).

43 See table 5 infra.

44 See 4 CFR § 20.6 (1972).

45 4 CFR § 20.7 (1972). See also 4 CFR §§ 20.3, 20.6 (1972).

and subsequently issued as a Comptroller General decision. The average time required for GAO to decide an award protest after receiving the administrative report has increased each year. In calendar 1968 the average time needed to process an award protest was 34 days. In fiscal 1972 GAO needed 61 days.

Table 5 indicates the average total time that elapsed before a case was decided by GAO during 1968-1972. This average processing time, which includes the time needed by the agency to prepare and forward the administrative report and the period needed by GAO to adjudicate the protest, increased from 88 days in calendar 1968 to 116 days in fiscal 1972.

Both contractors and contracting agencies have been critical of the upward spiral of time needed for GAO adjudication of award protests. Contractors complain that not only must production capability be maintained during the protest period, with no practical possibility for recompense of costs incurred during delay, but other business opportunities also may have to be bypassed by companies or their employees.46 Government agencies state that delay in performance of a contract often impedes the successful accomplishment of agency

goals."

On December 23, 1971, GAO published new

46 See Statement of Daniel Ross, Esq., before the Commission on Government Procurement's Remedies Study Group, Washington, D.C., Feb. 17, 1971; Statement of Michael Rukin, President, Analytical Systems Corporation, Burlington, Massachusetts, before the Commission on Government Procurement's Remedies Study Group, Boston, Massachusetts, Mar. 24, 1971.

47 See Letter from Major General Edmund F. O'Connor, DCS/ Procurement and Production, Dept. of the Air Force, Hq. Air Force Systems Command to Vice Admiral Joseph M. Lyle, USN Retired, National Security Industrial Association, Sept. 16, 1971; Bid Protests: DOD Surveys Indicate More Bid Protests Filed, Higher Percentage of Bid Protests Denied, 418 FCR, Feb. 28, 1972, A-1 at A-2; Markey, GAO Protests-A Mounting Problem, Hdqtrs. Naval Material Command Procurement Newsletter, Quarterly Review (July-Sept. 1971).

48

protest procedures. Unlike its previous procedures, the new procedures provide time constraints on the various steps of award protest adjudication. For example, the new procedures attempt to cut the average 48-day period used by contracting agencies to submit an administrative report to "20 [working] days after receipt by the agency of the complete statement of protest. . . ." Recent statistics have shown an average reduction of approximately 25 working days in the time needed to resolve protests received after the new procedures were implemented.""

GAO's attempt, through its new procedures, to reverse the annual increase in award protest processing time has not been fully implemented by the executive branch.50 GAO itself has concluded that it "has no authority. . . to impose time limits on contracting agencies for reports on protests. . . ." 51 The freedom of individual agencies to submit administrative reports according to their own schedule has led to frequent complaints that executive agencies have prejudiced a protestor's position by waiting until a contract has been partially performed before such documents are submitted to GAO, knowing that GAO often has been reluctant to overturn an award in such circumstances.

The complete solution to this problem cannot be achieved by one agency alone. It is evident that the impetus for expediting the process must come from all the Government agencies involved in the resolution of protests. If the agencies are confused about their authority and relationship to each other, and if this confusion causes resistance and lack of cooperation in expediting decisions, then achievement of the goal surely must fail. For the system to operate with fairness the agencies must act together to provide a comprehensive, coordinated regulatory system for resolution of disputes pertaining to the award of Government contracts.

** 36 Fed. Reg. 24791 (1971). See 4 CFR Part 20 (1972).

40 Figure is based on statistics furnished by Office of General Counsel, U.S. General Accounting Office.

50 See Letter from George P. Shultz, Director, Office of Management and Budget, Executive Office of the President, to Hon. Elmer B. Staats, Comptroller General of the United States, June 8, 1971; Letter from John Mitchell, Attorney General of the United States, to Hon. Elmer B. Staats, Comptroller General of the United States, June 14, 1971.

$1 36 Fed. Reg. 24791 (1971).

Procedures for Considering Award Protests

32

In the past the GAO protest procedure was normally ex parte. An opportunity was afforded the protestor to have an informal meeting with the GAO attorney assigned to the protest or other GAO officials. Only in rare instances were joint conferences held with all interested parties in attendance. The new GAO procedures now provide that all interested parties will be given an opportunity to attend. a conference requested by any of the other parties to the protest.

GAO prepares no transcript of any type of informal conference, and no provision is made for the taking of sworn testimony or the crossexamination of witnesses. The GAO decision on the protest is based entirely on the record in its file, compiled from the agency report and other documents submittted by interested parties.

The complaint has been made that GAO has failed to adopt appropriate procedural safeguards that ensure impartiality in adjudication of award protests. There are two parts to this source of dissatisfaction.

32 No formal hearing was held on the merits of the protest. Communications about the protest were ex parte in the sense that they usually were limited to an exchange of views between a GAO official and one party to the protest. Other parties to the protest were normally not made privy to these communications. See Shnitzer, supra note 29, at 4-5.

53 41 Comp. Gen. 47, 54 (1961); accord, 46 Comp. Gen. 631, 646 (1967). See also 37 Comp. Gen. 568, 570 (1958); 16 id. 1105, 1106 (1937) 3 id. 51, 54 (1923).

54 See Statement of Theodore M. Kostos, Esq., before the Commission on Government Procurement's Remedies Study Group, Washington, D.C., Feb. 17, 1971; Statement of W. Stanfield Johnson, Esq.. id.; American Bar Association, Public Contract Law Section, Report of the Committee on Bids and Protests, June 1971 (unpublished).