Quit complaining. That's the message from the Pentagon and Congress to defense companies that cry foul when they don't win contracts. Resolving the protests costs...
WASHINGTON — Quit complaining.
That’s the message from the Pentagon and Congress to defense companies that cry foul when they don’t win contracts.
Resolving the protests costs the government time and money. That means it can take longer to build needed combat gear or buy critical supplies, making U.S. troops and American taxpayers the real losers.
More often than not, the complainers don’t win anyway, according to statistics from the Government Accountability Office.
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Military spending has increased dramatically since 2001, and so have the challenges to procurement decisions made by the Defense Department.
It’s become a big enough problem that the House Armed Services Committee has raised the possibility of fining companies that submit “frivolous or improper” protests to the GAO. Complaining has become too reflexive, the committee says in a May 16 report, and it wants to discourage contractors from lodging protests as a “stalling or punitive tactic.”
At the same time, John Young, the Pentagon’s acquisition chief, has urged the military branches to be more up front with their contractors so there are fewer surprises when work is awarded. If a company knows its proposal doesn’t measure up, Young said, it will be less likely to gripe afterward.
“Protests are extremely detrimental to the warfighter and the taxpayer,” Young wrote in a memo to military branches. The memo did not state the financial impact of the problem, however.
The GAO, the investigative arm of Congress, is seeking a nearly $40 million increase to its budget from last year’s level of $507 million. Comptroller General Gene Dodaro, the office’s top administrator, told a Senate subcommittee late last month the boost is needed to deal with a steadily growing workload that includes a greater number of contract protests.
Determining a frivolous or vindictive protest from a legitimate one is tricky business, though. In February, the Air Force selected a European-U.S. consortium for a $40 billion contract to build aerial refuelers. Lawmakers who backed the competing bid by Boeing cheered the company’s move to challenge the choice.
Boeing has argued the Air Force changed its method for evaluating the tanker it wanted after asking for proposals. That allowed a larger tanker offered by European Aeronautic Defence & Space and its U.S. partner, Northrop Grumman, to beat Boeing’s offer, the company said.
For the Air Force, which must await GAO’s call before moving ahead with the contract, Boeing’s complaint delays the replacement of KC-135 tankers that have been in the fleet for more than four decades and cost about $15,000 an hour to fly.
A ruling from the GAO on Boeing’s protest is expected next month. The odds are not in Boeing’s favor.
In 2007, the GAO received 1,318 protests, 48 more than in 2006 and 234 more than in 2001. The bulk of the cases were related to defense contracts. About one quarter of the 2007 total got as far as an official decision. In more than 70 percent of those cases, the office sided with the government and denied the complaint.
The hundreds of other complaints were dismissed for technical reasons, withdrawn by the protester or resolved by the parties before a formal GAO ruling was made.
Although the chances of winning are relatively small, companies had even slimmer hopes five years ago when the accountability office backed the government 80 percent of the time.
In its recently released report on the defense budget for 2009, the House Armed Services Committee directs GAO to review all the protests it has received over the past five years stemming from defense contracts. Then it wants the office to suggest ways to curb overly combative companies.
“If you’re too aggressive, you fundamentally become untouchable,” said Jim McAleese of McAleese & Associates, a law firm that specializes in government contracts.
Allan Burman, a former chief of the Office of Federal Procurement Policy, says the committee’s effort is worthwhile. But he cautioned against any new rules that make companies worried they’ll be blacklisted if they file a challenge.
“Nobody likes things slowed down when there’s no grounds for a case,” Burman said. “But protests, when done correctly, are a tool for industry to make sure the process worked fairly and effectively.”
Huge money at stake
Government contracts attorney James McCullough said protests haven’t increased significantly. The attention, he said, is due more to the enormous amounts of money at stake. For example, the tanker contract could grow if the Air Force orders more refueling jets beyond the 179 it initially plans to buy.
“For the winner, it’s going to be worth billions of dollars over the next 20 years. For the loser, they go home,” said McCullough, who runs the government contracts group at Fried Frank, a law firm.
The GAO is the arbiter that companies most often look to if they think there have been any irregularities in how a federal agency went about awarding a contract. While the GAO lacks the clout of the judicial branch, it’s required to resolve cases within 100 days.
The U.S. Court of Federal Claims, an optional forum can take much longer to settle and generate heavier legal fees.