News broke on Friday that Boeing and Lockheed Martin are contesting the decision by the U.S. Air Force to award the contract for the Long Range Strike Bomber to Northrop Grumman. The two losing companies contend that the Air Force did not properly evaluate their efforts to save the government money, tapping into the budget-fretting ethos of Congress.
Ironically, the increase in the protest of contract decisions is part of the overall dysfunction within the Department of Defense (DoD) acquisition process. Protests of contract decisions used to be quite rare, but now the government frequently has to moderate contentions by the losing companies. This not only delays the development (the process can take up to 100 days), which costs money, but can damage relationships, pitting the Pentagon against its industrial base and Congress. More importantly, however, is that the rise in bid protests is a symptom of deeper problems.
Among other issues, an article by Alden Munson for the Potomac Institute of Policy Studies highlights the interplay between bid protests and failed acquisition programs at the DoD. While not flawed in and of themselves, bid protests delay the system, reveal the lack of institutional acquisition awareness in the Pentagon, incentivize inefficient procurement vehicles, and stifle competition.
The costs associated with delays are pretty straightforward – the winner of the bid has to cease work while the process is adjudicated. This will of course increase the cost of the program, regardless of the outcome of the bid protest. But the higher frequency of bid protests has shaped cost outcomes in different ways. The Pentagon has reduced the amount of time it interfaces with potential producers during the bidding process (in an effort to reduce claims of favoritism). This tacit prohibition on communication has reduced the ability to fully brief bidders on the Department’s expectations, and has increased the risks of miscommunications. This has resulted in all relevant bidders lacking a full understanding the program, and of the cost-increases associated with post-development changes.
Given the frequently highlighted lack of a ‘professional’ track of acquisition employees within the Pentagon, this process has also increased the use of both Low Price, Technically Acceptable (LPTA) and Indefinite Delivery, Indefinite Quantity (IDIQ) procurement vehicles. The former involves selecting the bidder with the lowest price, as long as the proposal meets technical requirements. IDIQ contracts involve awarding a contract for an undefined quantity, but with a fixed timeline. These are useful for appropriate projects, but tend to contribute to increased cost growths and misinformed projects – particularly because they are overused by inexperienced acquisition officers seeking to avoid bid protests.
Combined with a focus on large, decades-long programs, bid protests have altered the competitive nature of defense bidding. When the long-term ability of a company to produce a product like bombers rests on whether it gets the one contract in years, there is likely to be an increased fight over that project. Over-optimistic bidding and bid protesting is heavily encouraged within industry, which hurts the ability of the DoD to run a useful competitive bidding process. This leads to delays and cost overruns.
This does not mean that bid protests should be prevented, or that Boeing and Lockheed Martin don’t have merit to their cause. It is, however, another sign of the deeper defense acquisition issues that need to be addressed.