Concerned about major acquisition programs being routinely stalled by protests by losing companies of the contract award, the Senate Armed Services Committee (SASC) wants to up the ante on filing a complaint with the Government Accountability Office (GAO).
Few weapon acquisition programs escape a protest to the GAO by the losing contractor. In the past year, a sample of marquee programs put on hold for a portion of the 100-day protest period includes the Joint Light Tactical Vehicle (JLTV), the Army’s Common Infrared Countermeasures (CIRCM) helicopter protection system, the Marine Corps Amphibious Combat Vehicle (ACV) and the Air Force B-21 long-range bomber.
A provision in the SASC markup of the fiscal year 2017 National Defense Authorization Act would force large prime contractors who filed a protest and lose to shoulder the cost of processing the protest. A protesting company with revenue in the previous year of at least $1 billion would be liable if all elements of its complaint are denied by GAO.
The GAO considers a protest for 100 days before issuing a decision either upholding or denying the protest. It can then either reverse the original contract award or reopen the competition. Either way, production of the equipment or system is halted by law for the 100 days. In the case of JLTV, Lockheed Martin [LMT] took its complaint to the Court of Federal Claims, drawing out the process another few months, before voluntarily conceding the contract to Oshkosh [OSK].
Though Oshkosh was able to begin production of the truck once the complaint was moved to federal court, the delay caused by the GAO protest period pushed back government testing of the vehicle in a domino effect that will ultimately postpone its fielding by a year.
Lockheed Martin petitioned the court to halt JLTV production while the case was litigated. The Army argued that if production were halted, Lockheed Martin should have to put up a $16 million security deposit to cover the five months of lost production expected from a preliminary injunction against Oshkosh and the protest is ultimately unsuccessful. The Army claimed halting production would cost the government approximately $3.24 million for every month of delay.
Under the SASC bill, incumbent contractors will not be paid for work on bridge contracts or temporary extensions granted to cover the production gulf cause by the protest. The payments will be paid once and if the protest is upheld in the incumbent’s favor.
If the protest is unsuccessful, the incumbent will not see withheld payments again. They will go either to the winning contractor or to GAO to help fund processing of protests involving small businesses, according the SASC bill.
“All payments above incurred costs of a protesting incumbent contractor withheld…shall be released to the protesting incumbent contractor if the solicitation that is the subject of the protest is canceled and no subsequent request for proposal is released or planned for release, or if the GAO issues an opinion that upholds any of the protest grounds filed under the protest,” the bill reads.
If the protest is denied, payments due to the incumbent contractor will go “to the contractor that was awarded the protested contract prior to the protest.” If neither contractor is awarded the disputed contract, the withheld payments will be released to GAO and deposited into an account that can be used to offset costs for bid protests in which the GAO issues an opinion in favor of a small business concern.
Congress also wants a third-party organization to crunch the numbers on the cost of protests to program cost and development schedules. The bill requires the Defense Department to begin a study on “the prevalence and impact of bid protests on…acquisition.”
The study should break out how many protests are filed by incumbent contractors and by value.