Protests Are Not a Potential Solution to Every Problem
July 5, 2017
Contractors sometimes fall into the trap of thinking of protests as a sort of silver bullet that can be used, at least in theory, to remedy any problem. Whether this perspective reflects the contractor’s own past protest success or its perception that the procedure has allowed others to avoid bad outcomes, it substantially overstates the availability–and hence ultimate utility--of the protest option. The recent Government Accountability Office (GAO) decision in Made in Space, Inc., B-414490 (June 22, 2017), points out one of the most significant hurdles that can prevent a contractor from using a protest to achieve its business goals. While the case involves the Small Business Innovative Research (SBIR) program, which introduces a number of context-specific issues, it provides a useful reminder of the basic rules governing who has standing to protest.
In this protest, Made in Space, Inc. (MIS) challenged a National Aeronautics and Space Administration (NASA) award of an SBIR Phase II contract to FOMS, Inc. for research and development relating to optical fiber manufacturing in space. More particularly, MIS argued that the award was improper because MIS had previously developed a similar technology--using private funding--such that FOMS’ technology is not sufficiently innovative to qualify as research and development under the SBIR program.
The GAO’s decision focused on whether MIS was an “interested party” with standing to protest the award. In this regard, the bid protest regulations under the Competition in Contracting Act of 1984 define an interested party as an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or the failure to award a contract. In general, a protester is an interested party to challenge a procurement where there is a reasonable possibility that its proposal would be in line for award if the protest were sustained. As the GAO noted here, determining whether a given party has standing to protest involves consideration of a variety of factors, including the nature of issues raised, the benefit or relief sought by the protester, and the party’s status in relation to the procurement.
The nature of the SBIR program proved to be a significant factor in the GAO’s consideration of the standing issue in this case. The program has three phases: Phase I, in which small business awardees test the scientific, technical, and commercial merit and feasibility of a certain concept; Phase II, during which the former Phase I awardee performs further research and development, often resulting in a well-defined, deliverable prototype; and Phase III, in which the small business must obtain non-SBIR private or public funding to develop the prototype into a viable commercial product for sale to government and/or private sector markets, or continue its research and development efforts.
The SBIR solicitation here listed 28 topics, including one that encompassed the development of technologies to manufacture optic fiber in orbit. FOMS submitted a proposal for and was awarded a Phase I contract in June of 2016. After completing Phase I, FOMS sought and was awarded a Phase II award in March of 2017. This protest followed.
As noted, MIS argued that because its technology already met the technical readiness level the solicitation required to be achieved by the end of Phase II, no NASA investment in similar technology was proper. In response, after reciting the fundamental rules governing standing, the GAO stated that MIMS is not an interested party to challenge the Phase II award to FOMS. It went on to explain why.
First, and most importantly, while MIS submitted four proposals for a Phase I award under the solicitation, none of those proposals involved the topic under which FOMS’ awards were made. As the GAO noted, MIS instead made the business decision to fund its development of space-based fiber optic manufacturing technology outside of the SBIR program. For this reason, MIS was not eligible for funding under Phase II under the operative solicitation topic and, therefore, MIS would not be next in line for award to further develop its technology.
The GAO also rejected the argument that its sustaining the protest would require the agency to compete the requirement outside of the SBIR program, using full and open competition. According to the GAO, that assertion reflects a misunderstanding of the SBIR program, under which the purpose of Phase II is to continue the effort undertaken in Phase I. Unlike in more traditional contracting contexts, there is no agency-developed work statement articulating specific agency requirements to which an offeror would respond. Instead, the SBIR awardee’s Phase I technical concept is what the Government considers for a Phase II award. In addition, the SBIR program does not contemplate head-to-head competition between offerors--or allowing other companies to compete for a contract to develop an awardee’s Phase I concept. Here, where NASA determined that FOMS’ technology merited further funding under Phase II, the GAO declined to allow MIS to disrupt that decision simply because it has conducted parallel development using non-SBIR funding.
Finally, the GAO noted that, since MIS would not be next in line for award even if the agency decided to use full and open competition to procure the development sought under Phase II because MIS claims to have already achieved the required technical readiness level.
The GAO’s concluding remarks underscore the limits of the protest procedure. The GAO observed that, instead of basing its bid protest on the desire to obtain a government contract to develop its similar technology, MIS’ purpose here was to preclude NASA from funding another firm’s development of a similar, nascent technology with comparable potential commercial application. “Such interest does not qualify the firm as an interested party.”
Disappointed offerors and others considering a protest as a means to remedy a problem must remember that the procedure is not a one-size-fits-all solution. While it can be a powerful tool for an interested party wanting to challenge what it considers to be problematic solicitation terms or an erroneous award decision, there are limits to the usefulness of protests. Before undertaking the effort and expense of filing a protest, unhappy companies should conduct their own analysis of standing. If they are not an interested party with respect to the problem at hand, they should look for another way to solve that problem.
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