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Shrinking Budgets, Acquisition Workforce Mistakes Drive Bid Protests, Experts Say

Friday, May 10, 2013

By David Hansen  

Data from the Government Accountability Office clearly show an upward trend in the number of bid protests, and procurement analysts told BNA there several explanations for the increase.

Chief among these, they said, are smaller federal budgets that allow for fewer overall contracts, along with a shrinking, less skilled acquisition workforce prone to mistakes.

Total federal spending on contracts fell to $516.8 billion in FY 2012 from $538.6 billion in FY 2011, according to USASpending.gov. Spending rose only 19.6 percent from $432.1 billion in FY 2006.

At the same time, contractors filed 2,475 protests, cost claims, and requests for reconsideration with GAO in fiscal year 2012, a five percent increase from FY 2011 and a 94 percent increase from the 1,274 protests filed in FY 2006.

To reduce the number of protests and ease its crowded docket, GAO is considering a $240 filing fee per protest or a varying charge, depending on the number of documents filed (98 FCR 594, 12/4/12).

The fee would finance an online docket system to help manage the growing case load. It also could dissuade frivolous pro se cases, analysts said.

But it would do little to stem the overall number of protests because it pales in comparison to attorney fees and the money at stake, one expert said.

There are also larger forces at work, in particular a win-at-all-costs attitude on the part of bidders vying for fewer and fewer contracts.

“I think it boils down to fighting over smaller pieces of pie,” National Contract Management Association Executive Director Michael Fischetti said. “[Filing a protest] is relatively easy--if you fail, you fail. The only reason you would not file is if you didn't want to be perceived as a protestor.”

Optimos CEO Lisa Mascoloceo agreed.

“Competition is as fierce as it's ever been,” she said. “That drives people to wonder if this is the last bus to come along.”

Protests started rising quickly in FY 2008--up 17 percent from FY 2007--with the downturn in the economy, according to GAO.

As the commercial market contracted, companies focused on their government customers. “It became more important to win each opportunity that came out,” McKenna Long & Aldridge Partner Jay Carey said.

The cost of a protest comes to mere pennies compared to the size of awards, Guerra Kiviat founder Robert Guerra pointed out. “I spent half a million on a bid. What's another $10,000?”

A protest is especially tempting if the agency is reluctant to say why a particular bidder lost.

Contracting officers are afraid that disclosing such information might be viewed as illegal or used against them in a bid protest, Seville Government Consulting President and CEO Jaime Gracia said. However, that reasoning can backfire.

“If you're not telling me what I need to know, I will probably protest to get the information,” he said.

Penny Wise, Pound Foolish?

Another factor contributing to the rise in protests is the acquisition workforce, which is becoming smaller and losing talent due to budget pressures.

A shrinking acquisition workforce dealing with more complicated contracts commits more errors, several analysts said.


 

“You are throwing [acquisition workers] to the wolves without proper training. That encourages industry to file protests. They are making mistakes, and GAO is overturning them, so what do I have to lose?”--Guerra

 

 

 


“If you talk to just industry people, they will tell you all this stuff about how the government is wrong on this, wrong on that,” Guerra said. “To be fair to the government, you are throwing these people to the wolves without proper training. That encourages industry to file protests. They are making mistakes, and GAO is overturning them, so what do I have to lose?”

Among other things, staffers writing requests for proposals need more training, ImpaQ Solutions President Mark Boster said.

“The vast majority of RFP's I've seen have fatal flaws, and the process itself is fatally flawed, making protests easy,” he said. “Why not go after it?”

In addition, policy makers completely fail to appreciate the complexity of federal procurements and the time and talent required from contracting officers, Boster said. As a result, COs do not get the support and training they need.

“They are the ones who have to say this strategy is incorrect, this isn't ready to go out,” he said. “When you try to administer 20 to 25 contracts, you can't pay attention to all of them. When you do a major procurement, you don't have time to work on other contracts.”

The situation was different 20 years ago. “There were probably fewer procurements and more experienced and better trained people,” Boster said.

Gracia agreed that many of the common problems with contract awards stem from the weak skills of the acquisition workforce.

“The requirements are bad, people don't understand what they are doing, you get a bad award and then you get protests,” he said. “It is more than numbers themselves. You must give them the skill set so that contractors have confidence that awards are done correctly.”

Skills that are lacking include “basic knowledge of how industry functions,” Gracia said. “They misunderstand what a company is looking for or what its goals are. There needs to be a lot more focus on collaboration and communication with industry and in the debriefing process.”

Increased numbers of service contracts, especially commoditized services such as software as a service and cloud computing, particularly tax the acquisition workforce, Mascoloceo said. “It's not where a lot of contracting officers and staffers have a lot of training, so the requirements are less defined,” she said.

Although it is hard to validate statistically that a poorly trained acquisition workforce has contributed to the rise in protests, Mark Colley, Arnold & Porter partner and chair of the firm's government contracts practice, said there is little doubt the workforce has been financially neglected and undertrained.

“It gets beat up,” Colley said. “It's hard to recruit and retain people when they are underpaid, abused, not given raises and promotions, and not given respect. It is becoming a thankless job.”

Protorae Law Member Devon Hewitt said the lack of workforce skills has increased the need for corrective actions in the last 18 months, especially for procurements of less than $30 million.

Agencies assign smaller procurements to less-experienced staff who make more errors such as math mistakes, undocumented discussions, or incomplete source selection documents, she said. This prompts agencies to take corrective actions to ward off protests.

Statistics showing the low success rate of bid protests are misleading because they do not account for corrective actions, she added. “The perception has been that the success rate has stayed current at 20-22 percent, but it is much higher,” Hewitt said.

If there is any good news, it is that sequestration does not seem to have increased the rate of protests thus far, GAO Managing Associate General Counsel Ralph White said.

“There is a thesis that something catastrophic is happening, but we are not seeing it,” White said. “We are running just like 2012.”

PSC Survey Faults Training

Numerous reports by both public and private entities point to deficiencies in the acquisition workforce.

For example, government procurement executives and practitioners cited inadequate training as a top concern in the Professional Services Council's biannual 2012 survey (98 FCR 651, 12/18/12). The root cause of problems in the acquisition community was the workforce downsizing conducted in the mid-1990s, they said.

Respondents classified negotiating skills as a major weakness of the workforce by a 7-1 margin over those calling it a strength. Front-end acquisition planning--e.g. defining requirements and choosing the correct contract type--also was cited as a significant area of weakness by a large margin.

Intense competition between agencies for personnel added to workforce woes, respondents to the PSC survey said. To entice offers, agencies hired GS-12 staff--viewed as working-level contracting professionals--as GS-13, 14, or 15 employees.

As a result, agencies lost institutional skills while unprepared workers filled higher-level positions.

GAO Notes DOD Workforce Issues

GAO noted that the Defense Department's acquisition workforce got a boost in 2008 when Congress created the Defense Acquisition Workforce Development Fund (DAWDF).

DOD used the money to hire thousands of new staff but failed to spend 61 percent of the funds available in FY 2011, GAO noted in a June 2012 report (97 FCR 635, 6/26/12). So much was left over that Congress actually reduced funding in FY 2012 by $200 million.


 

“Firms' natural inclination is to focus on the technical proposal and find potential flaws.”--Carey

 

 

 


DOD's total acquisition workforce grew in the early years of DAWDF but slowed considerably in FY 2011 and actually shrank in the first quarter of FY 2013.

GAO recommended that DOD revise its DAWDF guidance to clarify when and how the funds should be used. DOD agreed, but the recommendation remained open when the report was released.

Unfortunately, GAO has found that simply hiring more people will not automatically create a more capable workforce.

For example, DOD hired 5,900 acquisition staff in FY 2010 using DAWDF, GAO said in a November 2011 report. Yet the department still did not know the effectiveness of its training in improving workforce acquisition outcomes.

GAO made the same point in a 2010 report, recommending that DOD develop additional measures to determine the capability of its workforce. DOD disagreed, stating current metrics such as numbers worked.

Despite these findings, DOD has not developed ways to measure how the DAWDF improved workforce skills, GAO noted in the June 2012 report. It also has not aligned its use of the DAWDF with its acquisition workforce plans.

DOD agreed with GAO recommendations to establish key performance metrics for the DAWDF so senior leaders could assess how the fund was used to support the acquisition workforce. The department also agreed to align the fund with DOD's strategic human capital plan.

Resources, Data Found Lacking

DOD is not an isolated case. Many federal agencies lack the resources to train staff, or even data regarding which skills are needed or the number of acquisition staff on their payrolls, GAO said in a March 28 report (99 FCR 492, 4/23/13)

The report found that 20 of 23 agencies surveyed identified obtaining adequate funding as challenging. Obtaining sufficient staff to manage training was deemed challenging by 19 of 23.

Almost half the agencies said even identifying the acquisition workforce was difficult, especially because some workers are involved in procurement as a secondary rather than primary duty. Almost one-third of the agencies said they do not track the benefits of training--not even basic end-of-course evaluations.

“The shortage of trained acquisition personnel hinders agencies from managing and overseeing acquisition programs and contracts that have become more expensive and increasingly complex,” GAO said. “As a result, the federal government is at risk for significant overcharges and wasteful spending of the billions of dollars it spends for goods and services each year.”

The Federal Acquisition Institute (FAI) has raised similar concerns, noting in its FY 2011 annual report that the acquisition workforce could lose critical skills in the next decade as 66 percent of current acquisition employees will be eligible to retire in the next 10 years.

The number of retirements in key federal acquisition positions steadily increased from FY 2009 to account for 3.4 percent of the workforce in FY 2011, the survey found, compared to the governmentwide rate of 3.0 percent the same year.

“With the high levels of retirement eligibility, the community is at risk of losing competent, highly skilled and trained workforce members through attrition,” the survey said. “These workforce members may have years of experience that are not easily replaced. It is important that we focus our efforts on developing the more junior contracting professionals who will be stepping into their shoes.”

Protests are no Panacea

Regardless of whether they are motivated by the mistakes of inexperienced acquisition personnel or other factors, protests make life more difficult for everyone, Fischetti said. For example:

• source selection teams have to stay together instead of return to their full-time jobs;

• contracts do not move forward into implementation;

• relationships with vendors become strained; and

• industry wastes time in litigation and money on attorney fees.

 

“The government rarely loses, but it is a lot of agony for all involved, and it becomes all about the protest instead of the mission,” Fischetti said.

Because of the burden imposed by the large volume of protests, contractors should exhaust their administrative remedies before they are allowed to file, he added.

“It is just common sense that they be required to use alternative dispute resolution and then move on to another venue,” Fischetti said. “It might be able to resolve more issues informally before getting into the formalities.”

Another problem is firms that misuse protests as a legal procedure to gain more time to determine if they have a credible case.

To have legitimate grounds for protest, “you have to really suspect that the agency did not follow its process, that you have reason to believe information was withheld or abused, or irregularities in the process,” Fischetti said.

Protest Factors to Consider

Attorneys mentioned several factors to look for when considering a bid protest.

If an agency made an award to a firm whose bid was much higher than the others, that could be a red flag, Hewitt said.

“Agencies must justify higher-priced contractors,” she said. “They have to focus on what the advantage of that awardee's proposals are and how they are related to a price premium. [But] agencies are not going the extra mile to make that assessment.”

Teams that lose a solicitation--especially members of the bid team with a technical background--understandably want to protest, Carey said. They are vested in the procurement and sometimes do not understand how the federal government could reject their work.

“A firm's natural inclination is to focus on the technical proposal and find potential flaws,” he said.

But instead they should emphasize any procedural errors in how the agency conducted the procurement, he advised. “Those are things the proposal and the business team are attuned to.”

For example, perhaps the agency violated a statute. “If that's the case, you are not dealing with a zone of deference,” he said.

Companies also should consider the arguments and potential remedies surrounding each protest issue.

Arguing on technical grounds usually will not entitle a losing company to revise its proposal because the agency will only have to make a reevaluation of existing proposals, Carey said.

“On the other hand, if the agency failed to tell your company about a specific concern, the remedy gives you an opportunity to revise,” he said. That tactic can significantly improve the chance of winning.

In fact, the first thing Carey looks at when a company is considering a protest is whether the agency fulfilled its obligation to conduct meaningful discussions.

“Whenever an agency discusses anything with an offeror, they have to talk about it with all offerors,” he said. “It also puts an offeror on notice of any sufficient weaknesses so it can address those concerns in a revised proposal.”

More generally, a protest has a much better chance when the issues concern process rather than judgment. GAO is very deferential to the technical judgment of an agency, Carey said, which puts the protestor “in a real uphill battle.”

“You have to show an agency's evaluation got it so wrong that no reasonable person could have reached that conclusion,” he said. “It is a pretty demanding standard.”

“In the government contracting world, the government has the right to get it wrong,” he explained. “They have to go about the process of doing it the right way.”

 

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