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Protests are considered informally within the agencies, and normally no hearings are held. The regulations do not provide for appeal of a protest decision within the agency to a judicialized forum such as a board of contract appeals.

Under certain conditions, the regulations also permit a contracting officer, subject to higher approval, to award a contract despite an active protest involving that contract. The procurement regulations generally leave it to agency discretion whether to halt performance of a contract if a protest is lodged after award.

formally by an assigned attorney within the Office of General Counsel, and decisions are based on relevant documents submitted by the parties. Each decision is submitted to high-level review within GAO before it is issued as an opinion of the Comptroller General.

GAO has no power, when adjudicating a protest, to prevent the award of a contract or to have the contracting agency comply with the time requirements it has established for the processing of protests. GAO has never recommended money damages for a successful protestor, but it has recommended that the agency resolicit the procurement or terminate a previously awarded contract for the convenience of the Government.

GENERAL ACCOUNTING OFFICE

FEDERAL COURTS

Any party who has an interest in a Government contract may lodge a protest against the award of that contract with GAO, provided that the accounts of the agency that solicited the protested procurement are subject to settlement by GAO. Protests are considered in

It is only since 1970 that the Federal courts have been available as a forum for resolving award protests. The Supreme Court of the United States ruled in 1940 that protestors have no right (standing) to have their protests heard in a court of law, because the Federal procurement statutes confer no judicially enforceable rights on offerors for Government contracts. Later Supreme Court opinions broadening the concept of standing to sue the Government in other areas not related to Government contracts have led certain Federal courts to conclude that protestors also should have the opportunity to be heard.

In contrast to the procedure normally required under the disputes clause, no administrative remedy need be exhausted before a protest can be lodged in a court of law. The court may conduct a fresh trial of the evidence even if the protest has been previously considered by administrative forums. The Federal district courts can enjoin agency action, including stopping the award or performance of a contract, or direct the award of a contract to a particular party. The Court of Claims does not possess injunctive powers, but it may award damages to a successful protestor.

the procedures that have been established in the statutes and regulations governing the procurement process. It also serves to protect the contractor's right to be bargained with fairly and, in turn, to be provided a remedy when its rights are infringed. A system that will not assure a damaged protestor an adequate remedy unnecessarily creates a lack of confidence in the integrity of the methods by which Government contracts are awarded.

We have found that the system sometimes operates in that undesirable manner. Procedures that adequately inform the contractor how, when, and where to lodge protests have not been established in all cases. The best means are not always used to assure objective consideration of the merits of a protest. At times the protestor is not provided with a compensating remedy although he deserves one.

Public interests require the efficient, economical, and timely acquisition of goods and services. This strong public interest, it is contended, often overrides the personal interests of the protestor when to dispense a remedy would unduly delay or increase the cost of a procurement. Overlooked, however, is the greater overall benefit that can be gained by dealing fairly with contractors and encouraging them to deal with the Government in the future.

Summary of Findings

UNDUE DELAY IN PROCESSING PROTESTS

The award protest system, a necessary and beneficial aspect of the procurement process, needs improvement in the interest of greater fairness and effectiveness. The major problems confronting the system are (1) an absence of procedures and remedies that will assure fairness in the treatment of protestors; (2) delay in processing protests through the administrative forums; and (3) the lack of an effective plan for reducing the number of protests. At the heart of these problems lies the absence of a comprehensive, coordinated, and integrated regulatory scheme for administrative resolution and avoidance of protests.

The award protest, while serving several valuable functions in Government procurement, can also disrupt the normal flow of events. For example, in order not to prejudice the position of a protestor before the dispute is resolved, the award process or the performance of a contract should be halted when a protest is lodged. Yet, lengthy delay in the adjudication of a protest while the procurement is suspended can seriously impair Government programs and economically damage contractors as well.

Although GAO has taken significant steps that have achieved some reduction in the time needed to adjudicate protests, it is obvious that the problem cannot be solved by one agency alone. At present no Government-wide coordi

FAIRNESS TO PROTESTORS

The value of the award protest system is that it provides a means of subjecting administrative decisionmaking to review and thereby acts to assure that Government officers follow

nated attack on the problem is being undertaken.

EQUITABLE AND SPECIAL MANAGEMENT POWERS UNDER PUBLIC LAW 85–804

The Present Act

AVOIDANCE OF PROTESTS

The number of protests continues to rise each year. In fiscal 1972 over 1,200 protests were lodged with GAO alone. This represents a 16 percent increase over the number filed the previous year. The annual increase in the number of protests threatens to destroy the value of the award protest system by turning it into a device that potentially could impede the overall efficient functioning of the procurement process.

A reasonably effective scheme for reducing the number of protests does not exist. Better communication between contracting agencies and offerors is needed in order to eliminate protests that occur because of misinformation about contract award decisions. More comprehensive review of solicitation or award controversies by higher-level management officials is required in order to prevent protests based on improper management practices. Finally, there is a need for closer coordination of agency award protest procedures and practices.

Public Law 85–804 empowers the President to permit agencies that exercise functions in connection with the national defense to enter into, amend, or modify contracts without regard to other provisions of law pertaining to the making, performance, amendment, or modification of contracts. By Executive order the President has authorized the Department of Defense and ten other agencies to exercise the authority conferred by the act. Relief under the act must be accompanied by a determination that the exercise of its authority will facilitate the national defense, and the powers conferred by the act only may be used during periods of national emergency.

The primary purpose of the act is to provide authority for prompt administrative resolution of problems occurring in defense contracts that otherwise would not be solvable under the normal statutory, regulatory, and common-law principles governing the procurement process. Although not so classified under the act or implementing regulations, the powers of the act may be categorized broadly as those permitting certain management determinations and those allowing the correction of certain inequitable situations.

The management powers have been used to provide additional funds to a contractor whose performance is essential to a Government program but whose productive ability will be impaired by a threatened loss; to require special terms and conditions in Government contracts; and to dispose of Government property. The equitable remedial authority of the act has been used to settle breach of contract claims administratively, correct or mitigate the effect of mistakes, and formalize informal commitments.

Summary of Recommendations

The overall thrust of our recommendations is to revise, expand, and integrate the varying regulations governing the administrative resolution and avoidance of protests by promulgating adequate procedures for informing protestors of the steps that can be taken in order to resolve their complaints; establishing mandatory time requirements for processing protests; and providing more protection for protestors. We also recommend improving contracting agency debriefing procedures and urge periodic review by GAO of agency award protest procedures and practices.

These recommendations are discussed in detail in Chapter 3.

Summary of Findings

Restricting Public Law 85–804 to contractual actions that facilitate the national defense pre

obligate the Government in an amount exceeding one million dollars.

These recommendations are discussed in detail in Chapter 4.

DEBARMENT AND SUSPENSION The Present Setting

vents its use for other equally important national objectives.

Thirty years of experience with the act and its antecedent legislation have shown that the authority to enter into or modify contracts

"without regard to other provisions of law” • has been used prudently to compensate for

gaps in the procurement statutes. The act has

been used mainly to include indemnification - clauses in contracts, correct mistakes, and formalize informal commitments. We have no evidence of improper or excessive use of this authority.

While recognizing the limited purposes of the act, we believe that it should be removed 2 from an emergency context and exclusive naitional defense orientation. The procurement i process, in civilian as well as in defense ageni cies, in war as well as in peace, requires con

tractual adjustments of the kind authorized by Public Law 85–804. Without this author

procurement process will be impaired or [ needed adjustments will be sought under Estrained interpretations of other statutes. 5 The equitable remedial powers contained

in the act are designed to provide fair treat• ment of contractors. However, the primary

regulations implementing the act do not provide adequate procedures for handling fairness cases.

Debarment and suspension are actions taken by the Government against contractors or prospective contractors that either terminate or prevent a business relationship with the Government.” Debarment of a contractor is authorized by certain Federal statutes, Executive orders, and regulations such as the Federal Procurement Regulations (FPR) and the Armed Services Procurement Regulation (ASPR). Suspension is provided for only in the regulations.

Most of the Federal statutes serving as a basis for debarment actions concern wage and labor standards and are administered by the Department of Labor. Final debarment determination for violation of the Davis-Bacon Act is made by the Comptroller General. Debarment determinations for violation of other wage and labor statutes administered by the Department of Labor, including Davis-Bacon's related statutes, are made by the Secretary of Labor or by an agency head subject to Department of Labor approval. Under the Buy American Act, debarment determinations are made by the contracting agencies.

The procurement regulations generally authorize debarment for conviction of certain offenses, including those involving business honesty; for clear and convincing violation of contract provisions; and for other causes "of such serious and compelling nature, affecting responsibility as a Government contractor ..."

Suspension of a contractor, which has the same effect as a debarment, is authorized by the procurement regulations rather than spe.cifically by statute. A contractor may be sus

1 Summary of Recommendations

We recommend that the contractual authority provided for in Public Law 85–804 be made permanent and not conditional upon the existence of a declared national emergency. We favor elimination of the restriction on exercise of the authority to actions that facilitate the national defense, and propose that the President be empowered to authorize the use of the act by all executive agencies subject to (a) the statutory controls now contained in the act and (b) the controls and criteria specified in regulations established by the President. We also recommend that the existing reporting requirements in the act be changed to provide for notification of Congress prior to any exercise of the special management powers that would

? Another term, "ineligibility," is used interchangeably with debarment in some regulations. The result sought to be achieved is the same. The term is also applied to lack of qualification to participate in the procurement process because of failure to meet certain statutory criteria. See, for example, the "manufacturer" or "regular dealer" definitions of the Walsh-Healey Act.

pended for mere suspicion of an action, that if proved could result in debarment. Debarment may be imposed for a maximum of three years; suspension is authorized for a maximum period of 18 months, unless the Department of Justice has begun prosecutive action for the alleged violation 3

cedures for challenging a proposed debarment or suspension action. In some cases, the contractor is afforded the type of due process protections normally associated with an adversary proceeding, including the right to an open hearing, confrontation and cross-examination of witnesses, and the right to appeal an adverse decision. In other cases, some of these protections are not available.

Although debarment and suspension actions are judicially reviewable, the courts have not indicated in detail the rules of practice and procedure necessary to assure a fair hearing to a contractor in contesting a debarment or suspension action. The lack of uniformity of the regulations and the need to provide a fair hearing indicate that a review should be made of debarment and suspension procedures.

Findings and Conclusions

The statutes and regulations on debarment and suspension vary in the treatment of pro

• However, a recent court of appeals opinion states that a contractor normally must be offered an opportunity for a hearing within one month after its suspension.

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