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. 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. Government agencies state that delay in performance of a contract often impedes the successful accomplishment of agency goals.1

46

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.

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).

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.

48 36 Fed. Reg. 24791 (1971). See 4 CFR Part 20 (1972).

49 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.

51 36 Fed. Reg. 24791 (1971).

Procedures for Considering Award Protests

52

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.

WEIGHTING OF EVIDENCE

When facts submitted by a protestor are disputed by the facts contained in the procuring activity's administrative report on the protest, GAO has stated in the past that "in the absence of evidence sufficiently convincing to overcome the presumption of the correctness of the administrative report, this Office will accept the administrative report as accurately reflecting the disputed facts." 53 It is charged that the use of such a presumption prevents GAO from making an independent evaluation of all the issues presented to it. Although

52 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).

such statements have not appeared in recent GAO decisions, the impression persists that GAO still relies on this "presumption of correctness" when adjudicating award protests.

Another complaint relates to the evaluation of technical matters in a protest. Though GAO on certain occasions has sought independent evaluation and advice from an impartial Government agency, normally the soliciting agency's technical evaluations are substituted for GAO's own judgment. It is charged that this procedure also causes the evidence in a protest to be unfairly weighted in favor of the contracting agency.

FACTFINDING PROCEDURES

55

A second part of the complaint about the failure to provide due process adjudication of award protests deals with the manner in which GAO gathers evidence. Although the present rules do provide for group conferences, ex parte communications are not expressly prohibited. The procedure of using ex parte communications has been criticized for its tendency to put evidence before GAO that is not known to the other party and, therefore, not rebuttable through other witnesses or documenation. Failure to provide open, oral hearings, with the opportunity for confrontation and cross-examination of witnesses, also enables parties, it is claimed, to give slanted versions of the facts to GAO. Finally, the inability of one party, through lack of discovery power, to obtain disclosure of facts in the exclusive possession of another often prevents that party from presenting evidence necessary for the successful demonstration of the merits of its case.

CONCLUSIONS

GAO has made a conscientious endeavor to respond to such criticism. It now provides for the automatic dissemination of pertinent data to interested parties, seeks to reduce ex parte communications, and no longer gives as much weight to the "presumption of correctness" in administrative reports.

55 See Statement of Theodore M. Kostos, Esq., supra note 54; American Bar Association, Public Contract Law Section, Report of the Committee on Bids and Protests, supra note 54.

We commend GAO for its responsiveness and recommend that it continue to improve its procedures for handling award protests. In making this observation, we recognize of course that a balance must be preserved between due process and prompt handling of disputes. There are distinctive values in the informality and flexibility of the GAO award protest procedures. To concentrate too heavily on the due process aspect would diminish these values.

We do not recommend, therefore, that GAO adopt the full battery of due process procedures used in a court of law but only those that will insure "basic fairness" or objective consideration of award protests. To do otherwise could destroy the protestor's option of obtaining a prompt and economical administrative determination of its protest. The Federal courts are a reasonable alternative forum in which to lodge a protest if the complexity or importance of the protest requires the use of more formalized factfinding procedures. It is essential, in our estimation, that GAO strive to provide swift, economical, and informal resolution of protests.

Review of Decision to Award Contract During Pending Protest

Recommendation 16. Establish in the executive procurement regulations, in cooperation with the General Accounting Office, a coordinated requirement for high-level management review of any decision to award a contract while a protest is pending with GAO.

In an attempt to restrain the award of a contract while a protest is pending with GAO, the new GAO award protest procedures provide:

When notice is given the agency that a protest has been filed with the General Accounting Office, award shall not be made prior to a ruling on the protest by the Comptroller General, unless there has first been furnished to the General Accounting Office a written finding by the head of the agency, his deputy, or an Assistant Secretary (or equivalent), specifying the factors which will not permit a delay in the award until

issuance of a ruling by the Comptroller General. 56

The basic executive procurement regulations, however, provide that:

Where a written protest against the making of an award is received, award shall not be made until the matter is resolved, unless the contracting officer determines that:

(i) the items to be procured are urgently required; or

(ii) delivery or performance will be unduly delayed by failure to make award promptly;

or

(iii) a prompt award will otherwise be advantageous to the Government.57

The regulations further provide that when a protest has been lodged with GAO prior to award a contracting officer must seek approval at "an appropriate level above that of the contracting officer, in accordance with Departmental procedures," if he decides to proceed with an award despite the pending protest.58 The "appropriate level" for approval varies with each agency. For example, one agency regulation requires the approval of a "superior officer" while a second agency regulation requires approval by the Deputy for Procurement within the office of an Assistant Secretary. The only coordination required with GAO is that the contracting agency notify GAO of the intent to make an award and inquire regarding the status of the protest.59

GAO has concluded that it has no power to compel the agencies to withhold award while a protest is pending with GAO.60 We believe that agencies should retain the authority to make an award while a protest is pending with GAO. Such decisions should be based, however, on a high-level agency finding as stated in the GAO procedures.

Effective Remedy for Protestor

Recommendation 17. GAO should continue to recommend termination for convenience of the Government of improperly awarded contracts in appropriate instances.

564 CFR § 20.4 (1972).

57 ASPR 2-407.8(b) (3); FPR 1-2.407-8 (b) (4).

58 ASPR 2-407.8 (b) (2) ; accord FPR 1-2.407-8 (b) (3).

59 ASPR 2-407.8(b) (2); FPR 1-2.407-8(b) (3).

60 See 36 Fed. Reg. 24791 (1971).

The majority of protests are not lodged with GAO until after an award has been made.61 While GAO should have discretion in recommending that a contract be canceled or merely that corrective action be taken with respect to future procurements, it is important to provide protestors with an effective remedy when they are wrongfully denied an award.

Since our study began, GAO has recommended in several protest cases that an improperly awarded contract be terminated for the convenience of the Government and reawarded to the protestor who proved entitlement to that award.62 Such a procedure is meritorious in that it often provides an effective remedy to a protestor without unduly penalizing the contractor who erroneously has been allowed to begin performance. We recommend that this remedy continue to be used in appropriate circumstances.

FEDERAL COURTS

Until 1970, Federal courts generally held that they would not, on the complaint of a private party, review the actions of administrative officials in soliciting or awarding a Government contract. The Supreme Court in 1940 reasoned in Perkins v. Lukens Steel Co.63 that protestors had no "standing" ” 64 to seek judicial review of contracting agency decisions because Federal procurement statutes bestowed no "litigable rights upon those desirous of selling to the Government." 65 To have standing to sue

61 In fiscal 1972, 55 percent of all protests decided were lodged after award. In fiscal 1971, 60 percent were lodged after award. Moreover, 26 percent of the decisions involving protests lodged before award were rendered after an award in fiscal 1972. See Appendix A, p. 78.

62 See, e.g., 51 Comp. Gen. 423 (1972); 51 id. 293 (1971); 51 id. 62 (1971): 49 id. 809 (1970).

63 310 U.S. 113 (1940).

"The five major questions about judicial review of administrative action are whether, when, for whom, how, and how much judicial review should be provided. The question of who may challenge administrative action-the third of the five major questions is customarily discussed by courts in terms of 'standing' to challenge." K. Davis, 3 Administrative Law Treatise 208 (1958).

65 310 U.S. at 127. This doctrine was first clearly pronounced in a suit against Denver city officials by a bidder on a city contract, and the case has served as precedent for subsequent cases involving the award of Federal contracts. See Colorado Pav. Co. v. Murphy, 78 F. 28 (8th Cir. 1897), appeal dismissed, 166 U.S. 719 (1897). See also O'Brien v. Carney, 6 F. Supp. 761, 762 (D. Mass. 1934). In Perkins the Supreme Court stated that § 3709 of the Revised Statutes, requiring public advertising for contracts, "was not en

the Government, the protestor was required to show "injury or threat to a particular right of [its] own, as distinguished from the public's interest in the administration of the law.” 66

In 1970 the United States Court of Appeals for the District of Columbia Circuit held in Scanwell Laboratories, Inc. v. Shaffer 67 that Scanwell had standing under the Administrative Procedure Act (APA) 68 to sue the Government as a "private attorney general" seeking to protect the public interest in "having agencies follow the regulations which control government contracting." 69 The court found that certain decisions issued by the

acted for the protection of sellers and confers no enforceable rights upon prospective bidders." 310 U.S. at 126 (1940). From 1940 until 1970 a majority of lower Federal courts followed the Perkins rationale and ruled in subsequent award protest cases that offerors for Government contracts have no standing to challenge administrative actions of procurement officials in the contract award process. See Walter P. Villere Co. v. Blinn, 156 F.2d 914, 916 (5th Cir. 1946); Friend v. Lee, 221 F.2d 96, 100 (D.C. Cir. 1955); Edelman v. Federal Housing Administration, 382 F.2d 594, 597 (2d Cir. 1967); Lind v. Staats, 289 F. Supp. 182, 184-86 (N.D. Cal. 1968); Pierson, Standing to Seek Judicial Review of Government Contract Awards: Its Origins, Rationale and Effect on the Procurement Process, 12 B.C. Ind. & Com. L. Rev. 1, 4-7 (1970); Comment, The Erosion of the Standing Impediment in Challenges by Disappointed Bidders of Federal Government Contract Awards, 39 Fordham L. Rev. 103, 109-112 (1970). Judicial review of award protests also has been denied on the ground that administrative procurement decisions are unreviewable because such decisions are essentially discretionary in nature. O'Brien v. Carney, 6 F. Supp. 761, 762-63 (D. Mass. 1934). See United States Wood Preserving Co. v. Sundmaker, 186 F. 678, 683 (6th Cir. 1911) (municipal award protest). See also note 86 infra.

66 310 U.S. at 125.

67 424 F.2d 859 (D.C. Cir. 1970).

"

6 The act provides that "[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof." 5 U.S.C. § 702 (1970). Judicial review is precluded, however, if a statute precludes review or "agency action is committed to agency discretion by law." 5 U.S.C. § 701 (1970). Under 706 the court has the power to "compel agency action unlawfully withheld or unreasonably delayed [and to] hold unlawful and set aside agency action, findings, and conclusions" found to be unacceptable under certain standards prescribed by the act, including agency action which is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. . . .' 69 424 F.2d at 864. Although for almost 30 years Perkins v. Lukens Steel was viewed as barring suits against the Government by prospective contractors, in a few isolated cases standing was granted to disappointed or potential bidders. See Heyer Products Company v. United States, 135 Ct. Cl. 63, 140 F. Supp. 409 (1956) (unsuccessful bidder is entitled to recover cost of preparing bid if bids not invited in good faith); Gonzalez v. Freeman, 334 F.2d 570 (D.C. Cir. 1964) (plaintiff has standing to challenge debarment process by which he was prevented from doing business with the Government); Superior Oil Company v. Udall, 409 F.2d 1115 (D.C. Cir. 1969), vacated sub nom., 421 F.2d 1089 (D.C. Cir. 1969) (court may issue permanent injunction directing award to bidder and barring award to another bidder for Government oil lease); Pierson, supra note 65, at 7-11; K. Davis, Administrative Law Treatise 781-82 (Supp. 1970); Johnson & Cobb, Scanwell and Its Implications on the Adjudication of Disputes Over the Award of Government Contracts, June 1971, at 3-10 (unpublished paper prepared for the Commission on Government Procurement).

Supreme Court following Perkins v. Lukens Steel Co. in cases not involving Government contracting, plus the adoption of the APA in 1946, indicated that the Perkins decision was no longer viable law. Shortly thereafter, the Court of Claims, using a different standard but agreeing with the Scanwell decision, followed suit by ruling that an unsuccessful bidder who made a prima facie showing that the Government acted arbitrarily and capriciously in awarding a contract to another bidder had standing to sue for money damages."0

The factfinding procedures and types of relief available in the courts to the parties in a judicial award protest differ from those available in the administrative forums. The courts use formal trial procedures, thus allowing a party to the protest, for example, to confront and cross-examine witnesses and discover documents in the possession of another party. The district courts have the power to issue injunctions in order to halt performance or award of a contract temporarily pending a hearing on the merits of the case or to direct the award permanently to a protestor. The Court of Claims has no injunctive powers but may award any amount of damages.

74

73

The protestor also may seek the help of the courts in enjoining further agency action until GAO has decided the issue on its merits.75 If the protestor does lodge its initial protest with GAO, it may then, if dissatisfied with the GAO decision, lodge the same protest with a Federal court.76 One court has indicated that, in considering a protest which had been previously adjudicated by GAO, the action of the agency in following GAO recommendations should not be overturned where such action.

70 Keco Industries, Inc. v. United States, 192 Ct. Cl. 773, 428 F.2d 1233 (1970).

"When such temporary relief should be granted is discussed in M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971). See Wheelabrator Corp. v. Chafee, 455 F.2d 1036 (D.C. Cir. 1971).

12 Superior Oil Company v. Udall, 409 F.2d 1115 (D.C. Cir. 1969), vacated sub nom., 421 F.2d 1089 (D.C. Cir. 1969). See Simpson Electric Co. v. Seamans, 317 F. Supp. 684 (D.D.C. 1970). This remedy has been directed infrequently.

73 The jurisdiction of the Court of Claims is limited to money claims against the United States. United States v. King, 395 U.S. 1 (1969).

See 28 U.S.C. § 1491 (1970).

See M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971); Wheelabrator Corp. v. Chafee, 455 F.2d 1306 (D.C. Cir. 1971). 76 See M. Steinthal & Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971).