Pay-Up-or-Shut-Up Fee Proposed for Federal Contracting Protests

Companies that want to fight the federal government over billions of dollars in contract awards may have to pay up or shut up.

The U.S. Government Accountability Office, which arbitrates contract disputes, is asking Congress to approve the agency’s first-ever fee to file a bid protest, said Ralph White, GAO’s managing associate general counsel for procurement law. The proposed charge might come in the form of a $240 flat fee, which would fund an online docket system designed to help the GAO cope with a rising caseload, he said.

Protests over award decisions and other contracting issues rose to 2,475 in the year that ended Sept. 30, the highest level since 1995 and a 75 percent increase since fiscal 2007, according to GAO statistics. The surge in recent years may partly reflect more competition for a smaller pool of awards as U.S. agencies begin cutting their budgets.

“We’ve got to find some way to improve and streamline how we handle protests, and this idea is meant to be one possible way,” White said in a phone interview.

The online docket would help ease the strain on GAO staff who must now manually filter through about 16,000 protest-related e-mail messages a year, White said. The current process raises the risk of mistakes and delays, he said.

Online Docket

The agency is proposing either the flat fee of $240 for each protest, or a lower initial charge with additional costs for filing supplementary documents. Both arrangements would raise about the same amount of money.

The proposed fee would cover the cost of hiring a contractor to operate the system, estimated at $450,000 a year, according to a GAO document obtained by Bloomberg. It’s necessary to fund the online docket with a fee because Congress may not be willing to approve taxpayer money for it, White said.

“If we don’t have people pay, then you’re just talking about a new expenditure on the part of the federal government,” White said. “And I’m not sure that’s an idea that will fly right now.”

The GAO’s budget declined 4.6 percent to $542 million in the fiscal year that ended Sept. 30 from $568 million the prior year. The number of employees at the agency, which also acts as Congress’s investigative arm, was poised to drop below 3,000 this year to the lowest level in 75 years, the GAO said in a report.

Prolific Protesters

The proposed fee would apply to all contractors including small businesses, White said.

“We are talking about companies that want to do business with the government, and we presume that they are sufficiently in business that they can afford a small filing fee,” White said.

Small businesses were the most frequent protesters from fiscal 2007 to fiscal 2011, according to data compiled by Bloomberg. Among the top 10 government contractors, L-3 Communications Holdings Inc. and Northrop Grumman Corp. protested the most during that period, the data show.

The fee would be in line with the amounts charged at other legal venues, White said. For example, the U.S. Court of Federal Claims, which also hears contract disputes, charges a $350 filing fee, according to the GAO.

Some members of Congress probably will support the fee as a way to deter frivolous protests, while others may oppose it because they’ll see it as a burden on small businesses, said Dan Gordon, associate dean of procurement law at George Washington Law School and a former top contracting official in the Obama administration.

Charging a protest fee probably wouldn’t greatly alter the workload at GAO, he said.

“I would be astonished if there was a significant decline in the number of protests because of that fee,” Gordon said in a phone interview.

The proposed docketing system would increase transparency in the bid protest process by allowing contractors and the public to “instantaneously access all documents filed in a particular protest through a readily accessible web-based portal,” according to the GAO document.

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