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Tuesday, July 13, 2010

The virtues of protest actions

The virtues of protest actions
I AM concerned to read the speculation that legislation is being considered which would exempt the finance portion of a finance/design/build/operate RFP or bid from any protest.

The article titled “Bond snag stalls JFK project,” published in the July 13 issue of Marianas Variety quotes an unidentified source as saying once an award is made, the winner’s “books are open,” and other bidders “can go in and inspect all the documents.” Evidently the aim is to prevent any such scrutiny by exempting any protest over the financing aspects of the award process.

Exemption is absolutely the worst way to maintain the integrity of the procurement system. And, for some reason, it seems to always be the knee- jerk first choice. But there would seem to be a better method to deal with the current perceived problem that does not undermine the integrity of the procurement process.

The protest procedure is there to scrutinize the procurement process, to make sure it functions according to law, not to hide it from view. Exemptions allow, indeed encourage, dirt to be swept under the rug.

Official commentary in ABA Model Procurement Code § 9-101 notes, “It is essential that bidders, offerors and contractors have confidence in the procedures for soliciting and awarding contracts. This can best be assured by allowing an aggrieved person to protest the solicitation, award, or related decision."

Exemptions that deny protests fail at this essential requirement.

The textbook, “Service Contracting, A Local Government Guide,” published by the International City/County Management Association, says, "Protests are the safety valve of public procurement.... Failure to address seriously every protest received can damage the integrity of the local government's bidding process.”

The Asian Development Bank, in its 2006 Guide, Curbing Corruption in Public Procurement in Asia and the Pacific, also emphasizes the critical role of an adequate review process: “Sound procedures and honest staff, while essential, are not sufficient to contain corruption in public procurement. Effective and swift review of major procurement decisions in response to complaints from aggrieved bidders is just as important in a procurement system that is well protected against corruption.”

The ADB report continues, “Complaint and review mechanisms fulfill two functions in curbing corruption. They allow involved bidders and the public to verify the conformity of individual decisions with the established rules and bolster trust in the fairness of the procedures. Sound verification procedures also have an important preventive role: the possibility that decisions can be overturned renders corrupt practices more difficult and therefore constitutes, together with credible sanctions, a strong incentive to respect the procedures.

All of these authorities are uniform in their insistence on availability of procedures to scrutinize the bid process. You do not improve the procurement system by creating exemptions to protest mechanisms.

The idea behind the apparent new legislative proposal seems to be that the only way to get an unqualified bond opinion is to make sure that there is no protest overhang when the award winner goes to market for the financing.

This can be assured, however, without throwing a cloak of secrecy over the bid process. Indeed, it would require the opposite. It would shine a light on the process before the award is made to smoke out any protestable issues before the award is finalized.

Under the RFP procurement process which was used for the JFK project, the information in a proposal cannot be disclosed until after the award is made. But everyone knows that the award is intended to be made to a particular offeror. This is where the problem lies, and this is where the solution should be sought.

I would propose that, in the RFP process, once the government has determined which offeror it intends to award, it must give notice of intent to award, but not actually award the contract until it has disclosed the full procurement record, including the terms of the intended proposal. The time for bringing a protest action based on the known procurement record would then begin to run.

If no protest or appeal is brought within the filing period, the award can then be made and the awarded contractor can then go to market for bonding without fear of protest based on the procurement record.

If, however, there is a protest, it can – and should – be dealt with. There should be no immunity for engaging in improper procurement actions.

COMMENT: Obviously, I'd have to wholly agree with this editorial letter. (See the linked site to understand why.)

2 comments:

Anonymous said...

As a practical matter, wouldn't eliminating the right to protest any particular part of the procuremnt process (i.e. finance) open up the door for mandamus or other actions in the Superior Court.

The only thing that seems to hold Superior Court actions back is the requirement that Administrative remedies must be exhausted before Judicial actions can be pursued. If the Administrative remedies are elimninated, there could still be judicial 'protests', right?

Obviously removing one avenue of redress hurts would-be protestors, but it might also make the process cheaper for them, depending on how often finance-related protests end up in the courts after the administrative remedies have been pursued.

I eagerly await any thoughts you might have on this.

John Thos. Brown said...

Thank you for your comment, though I would prefer the discussion here not be anonymous.

The door for mandamus and other such action is always open, even during or after protest and appeal. Eliminating the right to protest, however, will likely substantially limit the ability to scrutinize and have a critical analysis of the decisions and decision making processes, due to the court's limited standard of review. See the discussion of Jurisdiction in Article XVIII of the Guam Procurement Process Primer, Ver 1.9.

Further, questions of standing, form of action and other legal procedural impediments to a substantive review come into play when parties are limited to judicial action.

So, "as a practical matter", it not only makes shining a light on the review process more difficult and unlikely, and sets up more legal procedural traps for the unwary, by requiring diversion from administrative review to court review, it guarantees the process will be more expensive and time consuming.