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Federal Contract Winners, Protesters, and Real Losers

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federal contract, protest, procurement, loser, unfair, Washington Techology

I recently surveyed 113 federal contractors about their success in federal contracting. 49% said their win rate is less than 10%. That didn’t surprise me. In 2010, when I was researching my book, I interviewed a business owner who was all excited about winning her first federal contract.

“Tell me something,” I asked. “How many bids did it take you to win that first one?”

“39,” she said triumphantly.

I didn’t have the heart to point out to her that the cost of winning one included the cost of losing the other 38: a 2.5% win rate. I hope things have improved for her since then. If not, she’s got plenty of company.

I would love to know the total cost, for a whole year, of all the failed federal bids -- and especially the total outlay by small businesses that won no contracts at all despite those efforts. It’s got to be in the billions. The shame is how much of that wasted effort could be avoided by getting better competitive intelligence to support better bidding decisions

Worse yet, each year, hundreds of losing contractors pile pain on top of pain. They protest those losses with high expectations of losing good will and low chances of future success.

Nearly three-quarters of federal contractors recently surveyed were willing to file a bid protest that they expected would damage a client relationship to get information on a losing bid.

Why did they gamble that the sum of what they might find out, and what they will spend, in the protest effort would be worth more than the risk and cost of long-term damage of their relationship with the buyer?

Maybe they didn’t have faith in two more effective, less costly ways to get on the fast track for their next win: Debriefings, and, long before that, competitive intelligence.

Debriefs are supposed to be helpful, and often they’re not. FARS subpart 15.5 describes what the debriefing should cover, which is another way of saying that you, as a contractor need to show up knowing what information the contracting officer should cover, at the very least. That being said, Federal contractors receive plenty of scanty debriefs (too bad that’s less fun than it sounds), and sometimes none at all.

More importantly, I want to ask every losing offeror: how well did you know the buyer before you decided to bid? If you didn’t know the buyer, the contracting officer, the budget, the FARS covering the competition, the evaluation criteria, the incumbent, or the project history…you should have. If you had, maybe you’d have decided not to bid.

Contractors keep bidding, despite miserable win rates and costly efforts, because the occasional random win gives them hope that their luck is about to change. The difference between a random contract win and a winning lottery ticket is that if you turn in kickass performance on that contract, you actually could increase your odds of positioning for more success the next time.

That hope drives thousands of companies to continue to bid projects on which they have no hope of winning, including because they don’t understand the customer, the selection process, or the qualifications required.

Highlights from a May 2016 survey by Washington Technology left me feeling uneasy.

Washington Technology, federal contract, protest statistics

What were these protesters thinking?

I wanted to know more. As it turns out, there are a couple of things going on. Some of them make good sense.

For a start, there’s less contract spending, so we are willing to fight harder for the win. According to a 2015 report by the Congressional Research Service (CRS), 2,561 federal contract protests were filed related to 2,135 procurements in 2014, numbers that have stayed fairly consistent since 2011. This CRS report also notes that leaner federal contract spending has corresponded with an increase in protests, reporting that, “From FY2008-FY2014, total government spending, adjusted for inflation, decreased 25% while total protests increased 45%.”

Of the many reasons why a contractor might protest, I understand those who do so to redress substantive procedural concerns or issues with fairness. I sympathize with losing incumbents who protest out of pure economic sense: they fully expect their protest won’t succeed but have more to gain in revenue from the consequent short-term contract extension than they lose in cash and goodwill to pay for the protest.

That being said, I conclude that hundreds of those 2,561 contractors protested a losing bid to gain competitive intelligence they feel they couldn’t get either before the competition, or from a post-award debriefing.  

What else may be driving protests? The Washington Technology survey focused on the role that poor quality debriefings have in driving protests.  The CRS report pointed to that cause as well, but also cited other analysts’ criticisms of “poorly written or vague contract requirements, failure to follow the process or criteria laid out in the request for proposals, and failure to adequately document government findings,” as well as poor communication between government and industry.

“In contracts that are complex, have elaborate requests for proposals, or have poorly written requirements, contractors may not always understand the basis upon which awards were made.  Not understanding the award criteria can lead contractors to think they were treated unfairly or that an error was made in the award process.”

The odds are good (increasingly so) that the government’s contract actions will be upheld.  In 2015, the Congressional Research Service reported that, from FY2001-FY2008, GAO sustained protests in just 22% of their opinions. From FY2009-FY2014, that number dropped to 17%.

Furthermore, if the incumbent loses a re-competition, even in the unlikely event that they win the protest, odds are low that the losing company will successfully defend its incumbency on the re-competition.

On many contracts, especially for services, the incumbent protester’s additional revenue from a contract extended during a protest can outweigh the financial cost of the protest itself.  Even if your odds of winning are small, the protest buys you time to figure out how to replace the revenue and find new jobs for your people.

That’s a straight-up business decision. If the federal agency doesn’t want you, then they don’t want you. Even if there’s no love lost between you, there’s an economic case to be made for banking another few hundred thousand or million on your way out the door.

You might think that contracting officers don’t want a protest. On the face of it, why would they? Protests eat up personnel and program resources. New contracts get slowed down. Current programs can run up unbudgeted costs when an old contract is unexpectedly extended. Other activities that depended on the new contract getting launched on time will get delayed. Wouldn’t you think that makes the contracting officer look bad?

It’s worth remembering that while not every contracting officer is as expert as she’d like to be, most contracting officers really know their rules and laws. Many have graduate degrees and advanced education in acquisition management. They know that if they screw up badly enough, they face penalties or, worse, prison. Every one of them is following the FARs, plus their own agency’s acquisition supplement. There are around 88,000 federal contracting officers I leave it to you to speculate how many interpretations of the FARs there are.

No doubt about it: no contracting officer wants a protest. But if it’s going to happen, chances are that the contracting officer is thinking, “Yeah? Bring it. My file is solid. Good luck trying to overturn this decision.” She sighs, gets out the paperwork, and hunkers down for the fight.

Don’t get me wrong: protests have a place. In my view, the protest system is a small advantage that federal contractors experience by comparison to their competitors in the corporate market – where buying decisions are much less transparent and opportunities for recourse are considerably smaller. We have this giant set of Federal Acquisition Regulations. We should reasonably expect those rules to support fair and open competition, and give all contractors the assurance that contracting officers are following the rules of the game.

If it’s a game that’s worth playing in the first place.

 

 

 


Wed, 05/25/2016 - 7:33pm

Comments

Submitted by Peter W. Woodma... on
Hi Judy: Great article as always. You touched on the key issues, especially those we use, pre-bid intelligence gathering, using a checklist of your strengths and weakness, and a go-no-go decision tree. During my days at Dynamac International in the 80s-90s, our win rate was 66%. It was always important to find out if the Federal Contracting Agency was pleased with the incumbent's performance or were looking for a change. That's the time to learn about the key players and decision makers on the RFP and their "pet peeves." Regards, Peter W. Woodman, Ph.D.

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