Are American Contractors Working Against National Security?

The U.S. systems and services procurement process is not perfect. In many cases, it’s quite the opposite. But the spate of contractor protests when a government program or service competition does not go the competitor’s way threatens to impact seriously critical combat and national security interests. Liberty Nation has reported extensively on the importance of space presence and exploration to the Nation’s security aspirations. Now, we find a pivotal step in America’s race to the moon is delayed. As Tara Copp reports for Defense One, “’NASA may not land astronauts on the Moon by 2024 because two spacesuits won’t be ready on time and because losing bidders have protested the lunar lander contract,’ NASA Administrator Bill Nelson said Tuesday [August 10, 2021].”

The consequences of a losing contractor protesting a government award are instant. First, all work on the contract program generally stops for up to 100 days while the protest is adjudicated by the Government Accountability Office (GAO). In the meantime, the contract award winner stops bringing on new employees, acquiring necessary tooling, putting its management team in place, etc. – but the cash outflow continues with no revenue. The government sees its program schedule delayed. For the contractor protesting, there is no penalty – especially for incumbents. What happens typically for an incumbent contractor who protests being replaced is that a bridge contract or temporary extension of the existing agreement is put in place, so the Defense Department or other government agency like NASA continues to receive products. And, of course, the protesting competitor continues to get paid. The consequence for the nation is the program is pushed back, the original schedule is lost, and the program cost increases. In the case of the NASA spacesuit and lunar lander contract, Copp writes:

“The next-generation spacesuits, known as Exploration Extravehicular Mobility Units, have been years in the making, and ‘by the time two flight-ready xEMUs are available, NASA will have spent over a billion dollars on the development and assembly,’ the IG wrote. ‘Given these anticipated delays in spacesuit development, a lunar landing in late 2024 as NASA currently plans is not feasible,’ the inspector general wrote. ‘The suits would not be ready for flight until April 2025 at the earliest.’”

The GAO released a report on December 23, 2020, titled “GAO Bid Protest Annual Report to Congress for Fiscal Year 2020.”  It explains:

“During the 2020 fiscal year, we received 2,149 cases: 2,052 protests, 56 cost claims, and 41 requests for reconsideration. We closed 2,137 cases during the fiscal year, 2,024 protests, 66 cost claims, and 47 requests for reconsideration. Of the 2,137 cases closed, 417 were attributable to GAO’s bid protest jurisdiction over task orders.”

A closer look at the statistical chart accompanying the report shows of the total 2,137 protest cases closed in 2020 by the GAO, 545 were considered to have “merit.” On the other hand, the GAO sustained only 84, or less than 4% of all closed cases. Many of the protests were dealt with between the contractors involved and the government, settled out of court if you will. Nonetheless, in some form or fashion, the government spent time and effort in administering the protests, delaying programs and costing taxpayers’ and winning contractors’ money. Again, there is little or no risk to the protester.

Congress attempted to remedy the issues with protests in the Fiscal Year 2017 National Defense Authorization Act, Section 821, “Government Accountability Office Bid Protest Reforms.” The legislation allowed that the contractor filing a protest “shall” pay the GAO costs “incurred for processing a protest.” Furthermore, incumbents will have any revenue generated during the protest period withheld “on any bridge contracts or temporary contract extensions awarded to the contractor as a result of a delay in award resulting from the filing of such protest.” That should work as a disincentive to incumbent companies knowingly filing unsustainable protests to keep the money flowing for another 100 days.

GettyImages-1231896017 contractors

(Photo by Samuel Corum/Getty Images)

Unfortunately, the legislation applied only to corporations “with revenues in excess of $100,000,000 during the previous year.” Consequently, small businesses awarded a contract are in greater jeopardy from competitors with bigger checkbooks and able to wait out the protest period. Again, what should be a chilling effect on protests with little chance of being sustained does not seem to be the case.

What does seem to prevail is an uptick in protests that are not sustained. From 2016 to 2020, though the total number of protests closed declined from 2789 to 2149, the percentage of total protests sustained decreased from about 5% to less than 4%. Fewer protests were allowed as a percentage of all the filings closed in 2020 versus 2016. The consequence was that a greater portion of total protests took administrative energy and labor costs to adjudicate with fewer actually allowed.

Returning to the spacesuit example, what resulted from Blue Origin’s and Dynetics’ protest? “The protest had halted all work on the lander until GAO threw it out on July 30.” Don’t think the fact the GAO threw out the protest means the battle is over. According to Defense One, NASA administrator Nelson lamented:

“We are waiting as we speak to find out if there is going to be a further appeal to the Federal Court of Claims, which is like a federal district court, and then, of course, you can take appeals from there on to the United States Court of Appeals. So, there are a lot of blockades that have been put in front of us.”

All the while, SpaceX, the winner of the competition, cannot move forward without financial risk, and the Nation’s Moon mission is on hold. What, then, is the remedy? At a minimum, any company that believes an acquisition decision has legitimately wronged it should be able to take exception. However, that protest should not be without risk to the company. If that company has its filing dismissed, it should be liable for all the costs to the government. Additionally, the withholding of revenue for incumbents taking exception to a losing bid should be enforced regardless of annual income until the award protest is resolved. Simply put, the government and the award winner should not bear all the financial and schedule risks.

The views expressed are those of the author and not of any other affiliation.

The post Are American Contractors Working Against National Security? was first published by Liberty Nation, and is republished here with permission. Please support their efforts.

Related Articles

Back to top button