Back in January, we wrote about the dramatic spike in bid protests sustained at GAO during the first quarter of fiscal year 2016. At the time we noted that GAO was on pace to shatter the prior year’s number of bid protest sustains. Today, GAO released its Bid Protest Annual Report to Congress for Fiscal Year 2016, and that report shows that in indeed GAO did shatter last year’s sustain numbers. The “Sustain Rate” at GAO increased from a paltry 12% in FY 2015, to a robust 22.6% in FY 2016. This is the highest Sustain Rate at GAO since FY 2007, when the rate hit 27%, and the largest year-to-year percentage increase since GAO began reporting the Sustain Rate in FY 2001. Not only did the Sustain Rate go up by more than 10%, the actual number of sustains more than doubled, from 68 to 139. In fact, there was only one less protest sustained in FY 2016 than in FY 2015 and FY 2014 combined.
But the spike in the Sustain Rate is only the beginning, as this year’s statistics yield some other interesting takeaways.
Effectiveness Rate Remains Steady Despite Sustain Rate Nearly Doubling
GAO not only annually reports the percentage of protests decided on the merits which are sustained (the “Sustain Rate”), it also reports the percentage of protests that are resolved favorably for the protestor either because the protest is sustained or because the agency took voluntary corrective action in response to the protest (the “Effectiveness Rate”).
What makes this year’s statistics even more interesting is that despite the fact that the Sustain Rate nearly doubled, the “Effectiveness Rate” went up by a mere 1%! In other words, the combined number of sustains and corrective actions stayed essentially the same. This means that the percentage of cases ending in corrective action went down in FY 2016, but not by as much as one would think. The corrective action rate (the percentage of protests closed as a result of corrective action), went down by a mere 1.5% (from 42.4% to 40.9%). This is a reflection of the fact that when a protestor succeeds on a protest, it is far more likely to have done so as a result of corrective action than GAO sustaining the protest on its merits. The corrective action to sustain ratio at GAO was a record 17.5 to 1 in FY 2015. While that ratio dropped to 9 to 1 in FY 2016, the ratio still shows that far more protests are resolved favorably by corrective action than a GAO sustain. Thus, the spike in the Sustain Rate and the corresponding steadiness of the Effectiveness Rate does not mean that there was an equivalent drop in corrective actions. Instead, it is further evidence that a change in the Sustain Rate has little impact on GAO’s Effectiveness Rate. Since FY 2008, the Sustain Rate has fluctuated between 12% and 22.6%, while Effectiveness Rate has remained steady between 42% and 46%.
Over the prior three fiscal years, as the Sustain Rate had steadily declined from 18.6% to 12%, many had theorized the decline was due to an increased propensity by agencies to take corrective action in the face of a potentially meritorious bid protest. To the extent this theory was correct, it is fair to say that FY 2016 reflects a reversal of this pattern.
Expect the Effectiveness Rate to Increase in FY 2017
While the 12% Sustain Rate in FY 2015 may have given agencies a false sense of confidence when defending protests in FY 2016, the spike in the Sustain Rate will likely make agencies more cautious in FY 2017. When an agency considers whether to take corrective action in response to a protest, it will be thinking of the fact that nearly a quarter of protests decided on the merits were sustained in FY 2016. This will likely lead to an increase in corrective actions, and, since the Effectiveness Rate at GAO is almost entirely a function of the rate at which agencies take corrective action, the protest Effectiveness Rate is likely to go up in FY 2017.
Another reason the Effectiveness Rate will likely go up in FY 2017 is GAO’s one year suspension of Latvian Connection from filing bid protests at GAO. Latvian Connection, alone, filed 150 protests at GAO in FY 2016, all of which were denied or dismissed. In fact, Latvian Connection has filed approximately 446 protest at GAO in the past five years, and only 3 were sustained. In August 2016, GAO suspended Latvian Connection from filing protests at GAO for one year due to Latvian Connection’s “abusive litigation practices.” Since most of this suspension falls within FY 2017, and because Latvian Connection single handily brought GAO’s protest Effectiveness Rate down by approximately 3% in FY 2016, Latvian Connection’s suspension should, on its own, lead to an increase in the Effectiveness Rate in the coming year.
A Single Protest Decision Has the Potential to Significantly Skew GAO’s Sustain Rate
As we explained in our January post, in calculating its Sustain Rate GAO counts protest “sustains” not by the number of decisions issued sustaining protests, but rather in terms of the docket numbers (“B-numbers”) covered by those decisions. Every time a supplemental protest concerning the same procurement is filed, a new B-number is assigned. As a result, one case dealing with a single source selection decision can count as multiple “sustains” under GAO’s counting methodology. As a result, a single protest decision that involves a substantial number of supplemental protests can skew GAO’s statistics. And, in fact, such a situation occurred in FY 2016.
In July 2016, GAO issued a single sustain decision that covered 18 separate B-numbers. Even though only some of the protest arguments were sustained (many were denied or withdrawn), and the protest concerned a single procurement, for statistical purposes GAO counted this as if all 18 B-numbers encompassed by the decision were separate protests and all were sustained. This single protest decision accounts for 13% of the total protests “sustained” at GAO in FY 2016. If this protest decision had been counted as a denial instead of a sustain, the Sustain Rate would have dropped a full 3% to 19.6%. While this would still have been much higher than the rate in FY 2015, the spike in the rate would have been less dramatic, and the rate would have been more consistent with FY 2009 through FY 2013.
Frankly, there is no perfect way to count protests statistics. However, if GAO measured its Sustain Rate by decisions issued or procurements challenged, as opposed to by B-numbers covered by a decision, the potential for the statistics to be skewed by a single protest decision would likely decrease.
All GAO Recommendations were Fully Implemented
While technically GAO decisions are merely recommendations and an agency is not bound to follow the decision, in practice it is extremely rare for an agency to choose not to implement GAO’s recommendation. Still, in most years one or two agencies will choose not to fully implement GAO’s recommendation, in which case GAO is required to report the occurrence to Congress. For the first time since FY 2011, GAO reported that no agency failed to fully implement its recommendation.