Supplier Complaints and Protests: A Guide for Public Officials and Vendors   Second Edition, 1999

Supplier Complaints and Protests:

A Guide for Public Officials and Vendors

 

Second Edition, 1999

 

 

ISBN 1-896129-10-2

 

 

Published by:

 

Michael Asner Consulting

Suite 212, 1450 Merklin Street

White Rock, BC

CANADA  V4B 4C3

Tele/Fax:  (604) 530-7881

email: michael@rfpmentor.com

 

 

Copyright © 1999 Michael Asner Holdings Ltd.

 

 

 

 

Disclaimer:  Great care has been taken to ensure that the information presented in this handbook is accurate; however, this information is still subject to errors and subject to change.  The examples have been obtained from many jurisdictions throughout the United States and may not be applicable to every jurisdiction. 

 

Do not rely on this book for legal advice.

 

All rights, including translation into other languages, are reserved by the publisher.  No part of this publication may be reproduced in any form, by microfilm, xerography, or otherwise, or incorporated in any information retrieval system without the written permission of the copyright owners.

 

 

TABLE OF CONTENTS

 

 

1. Complaints, Protests and Your Career...............................................................             1

 

2. Start with a Solid Foundation:  Promote Fair and Open Competition.................      12

 

3. Go the Extra Mile: Promote Excellence.............................................................              24

 

4. When Best Efforts Fail: Handle Protests More Effectively.................................       36

 

5. Some Examples of Policies and Practices...........................................................           49

 

6. Your Best Defense: Know the Law (Canada)....................................................           91

 

7. Your Best Defense: Know the Law (U.S.) ........................................................          121

 

 

Chapter 1

Complaints, Protests and Your Career

 

Suppliers can protest any procurement activity that they believe is not conducted properly. (However, it is not all one-sided: some unscrupulous suppliers have been known to initiate protests to delay the award of a contract, to penalize a competitor that won, or to maintain their position as the incumbent while the protest is being examined.) There are hundreds of reasons why suppliers can feel aggrieved. And, in many situations, complaints or protests do have merit. (Throughout this book, “complaint" usually designates an informal communication between a supplier and the procurement officer concerning an issue that the supplier believes is detrimental to the procurement process and to fair and open competition. A "protest" is a written objection by a supplier to some element of the procurement process. A protest is an administrative appeal, as opposed to an actual lawsuit, to contest a procurement action.)

 

Supplier complaints, protests and appeals are a fact of life. Each type of source selection has its own issues, problems and potential for creating “bad press." In fact, suppliers often complain not only about the details, but also about the source selection method that was employed. Most organizations utilize several different source selection methods:

 

· Competitive sealed bidding

· Small purchases

· Sole source

· Emergency procurements

· Competitive sealed proposals

 

Each of these commonly used source selection methods presents a wide variety of  opportunities for complaints and protests. Suppliers can insist that you justify the method of source selection that you used, and the details of what you actually did.

Competitive Sealed Bidding (the use of Request for Quotations) is the most common form of procurement and can be challenged. Often, suppliers complain that the requirements were unduly restrictive and limited competition, or that the  process was flawed. They sometimes find fault in the announcement of the bidding  opportunity (that it was not made in the newspaper as required by the regulations), - the nature of the mandatory requirements (that they are unduly severe or  unnecessary), or the time permitted for a response (that it was too short to permit a proper bid to be prepared).

 

Small Purchase is the use of a  less formal process for a procurement involving a small dollar amount, often $25,000 (but sometimes much more). These procedures are simpler and quicker than those for formal bids. Procurement officials have more discretion in these type of  purchases. In many jurisdictions, there are regulations or laws which prohibit  dividing large procurements into pieces so that each piece is a "small purchase.” In some jurisdictions, accounting is required to publish a list of "small purchases,” the suppliers, and the dollar value. Suppliers concerned about their lack of orders from a particular agency may question why other suppliers receive a seemingly regular stream of small purchases. Suppliers are keenly aware that favoured suppliers often  receive a large number of small orders. Suppliers may be concerned that they are  never called to provide a quotation — yet they are on the suppliers list. I know of one organization that invites suppliers to register for inclusion on their bidders list  but only rarely uses the list.

 
Sole Sourcing (awarding a contract without any competition) is often challenged. In many jurisdictions, this method can only be used after a senior officer has accepted a written justification describing the requirement and the search for  suppliers. The lack of competition is a red flag for suppliers who have been unable  to win in competitive situations. There are three obvious sources of protest related  to this method. First, suppliers claim that they can provide the same goods and  services as the company given the sole source award. Second, suppliers attack the written justification for sole sourcing as inadequate, claiming it failed to establish that there was only one supplier of this service. Some jurisdictions only permit sole sourcing for specific reasons and suppliers can claim that the reason for sole sourcing is not one of the reasons established in the regulations. Most organizations require a formal justification for awarding a contact without any competition. However,  suppliers are always suspicious of contracts that are given to companies without any competition. They suspect that the company has some special arrangements with the purchasing organization. Or that the company is somehow favoured.

 

Emergency procurements required to respond to an unanticipated situation can be challenged. Some of the reasons are similar to those for sole sourcing, like there was no real emergency as defined in the regulations. Or a supplier may claim that the buyer obtained much more than was required to deal with the emergency. Many organizations have very specific rules related to emergency procurements. Suppliers often review these awards and challenge their legitimacy.

 

Competitive Sealed Proposals (the use of a Request for Proposal process) is the most complex form of procurement. Organizations can spend hundreds of thousands of dollars preparing a response to a Request for Proposal (RFP). The selection process employs evaluation criteria that are based on judgments about the supplier and its proposed solution. There are always more losers than winners and some of the losers will feel aggrieved. They may believe that the requirements were too vague, that the time to complete the proposal was too short, that the selection process was arbitrary, or, even worse, that the winner was selected before the RFP was issued. They may believe that the incumbent was favoured by "insider information.” They may also believe that some of the evaluators were biased and discounted their proposal. There are documented cases of individuals inviting a supplier to prepare a proposal knowing full well that they would not, in any circumstances, award that supplier the contract. While these cases are rare, suppliers do develop suspicions about the environment within the purchasing organization and whether it truly promotes "fair and open competition.”

 

Examples of abuse by government employees or officials include:

 

· Persons external to the process attempting to influence vendor selection;

· Circumventing competitive bidding requirements;

· Splitting purchases in order to remain within small purchase limits;

· Using emergency procedures in the absence of an emergency;

· Using sole source when competition is available;

· Denying one or more vendors the opportunity to bid or propose;

· Using unnecessarily restrictive specifications;

· Prequalifying some bidders on a discriminatory basis;

· Removing companies from the bidders list without just cause;

· Requiring unnecessarily high bonding;

· Making information available to some but not all vendors; or

· Giving unfavoured vendors inaccurate or misleading information.

 

Grinding to a Halt

 

 There are serious implications of supplier protests on the organization, its political overseers, and the supplier community. In many jurisdictions in the U.S., procurement activity ceases until the protest is resolved. If a contract has not been awarded, the process is suspended. If the contract has been signed, its execution is suspended. A finding in favour of the complainant can cause the contract to be cancelled and the procurement process begun again.

 

Protests can introduce delays of not months but years in a project. These delays can derail major organizational initiatives. For example, a protest related to a strategic information technology initiative could delay reform of the tax collection or welfare systems. These delays raise questions. The procurement officer's  decision can be reviewed and then challenged by both senior management and the politicians. The process itself can be subjected to public scrutiny and found lacking. In many jurisdictions, procurement is governed by conflicting laws and regulations. Often, the competence and objectivity of the purchasing officer is questioned.

 

For an aggrieved supplier, protest procedures can be expensive, time-consuming and cause a loss of good will with the purchasing organization. For a "winning" supplier, the initiation of a protest by one of its competitors introduces another uncertainty in the running of their business and may place the "win" at risk.

 

Some suppliers protest simply to get another chance at the business. They know  that upon receipt of a protest, the state will cancel the solicitation and issue a revised RFP.

 

Adversary or Partner?

 

Supplier complaints can be dealt with in many different ways. However, prevention is a lot less expensive and more professional than having to deal with a constant stream of  complaints. (In some jurisdictions, reducing the number of complaints and protests is a formidable problem that would  require a major overhaul of the procurement laws, regulations and procedures.)

 

Occasionally, a procurement officer will commit an error or do something that compromises the process. The question is not whether these violations occur, but what is to be done when they do occur. Most states, and some provinces have laws that establish administrative procedures to redress supplier grievances. The procedures are intended to be relatively simple, straightforward, fast and inexpensive. Having  failed to win its protest, a supplier can still resort to the courts. (With procurement reform, many states are examining the vendors’ right to protest. Some states have eliminated this administrative procedure and left the suppliers with no formal recourse other than the courts.)

 

Organizations exhibit a wide variety of approaches in dealing with supplier protests in these sometimes difficult and stressful circumstances. Approaches range from a visibly hostile, adversarial approach to one based on cooperation, open communication and a desire to resolve the issue. 

 

Some organizations, often the larger local governments, state governments and agencies, recognize the right of a supplier to protest and take steps to ensure that suppliers' concerns are dealt with in a fair and open manner. Some organizations, usually smaller local governments, fail to provide suppliers with any process for  resolving concerns other than the political process. Other organizations go even  further — they seemingly appear to dare the suppliers to question their decision.

 

Imagine that you were a supplier, and you had just submitted your first proposal (which cost you $10,000 in staff time). You lost to a firm which you believed was inferior. In re-reading the RFP, you once again realized that the purchasers maintained the position that the entire evaluation process was confidential. The  RFP stated:

 

The evaluation team will utilize specific evaluation criteria to rate various requirements for evaluation purposes. Such a rating will be confidential and no totals or scores will be released to any vendor.^[2]

 

How would you feel? Would you think that the process was fair? Or would you think that the purchasing officer was hiding behind the language of the RFP? Would you, as a responsible member of the community, think that this statement was good policy? Since the RFP precluded any debriefing, your protests could only be directed to senior management, the political masters or the courts. None of these provide for quiet resolution of the issue.

 

Some senior officials and politicians do not want any formalized approach. They prefer retaining the power to deal with supplier complaints as they see fit. Often, their actions are seemingly arbitrary and possibly contrary to public policy. However, these actions can deter all but the most resolute of suppliers from getting enough good information to understand the issue, file a protest, resolve the complaint, or warrant "going public.”

 

 Putting Out the Fire ¼

 

Like all politically imposed administrative processes, source selection and the associated protest process represent an attempt to reconcile competing goals of the stakeholders. The procurement officer wants to obtain goods and services quickly and in a fair and open manner. The suppliers (except the incumbent) want to compete on an equal footing with each other. In some jurisdictions the process favours suppliers; in others, the procurement officer, the organization itself, or the project manager. In several states — those with many different laws affecting procurement, each with its own definitions and sometimes overlapping terms — the protest process (as well as the procurement process) favours no one and frustrates all the stakeholders. 

 

What are the requirements for a strategy to deal with supplier protests? Can you prevent supplier complaints? How should protests be handled? What should you instruct procurement staff to do? In considering these questions, we identified four major requirements.

 

(I) The competition must be fair and open, and therefore easily defended. Your fundamental approach must be based on accepted public policy, which has been translated into appropriate departmental policies and procedures. And your procedures must be followed by staff. 

 

(ii) Your policies and procedures should include features designed to promote excellence and thereby discourage supplier protests. 

 

(iii) There should be an effective dispute resolution mechanism, one which inspires supplier confidence and keeps these issues out of the courts. Suppliers should be encouraged to resolve the issue informally before filing a protest. 

 

(iv) Your procurement processes and practices must be up-to-date in the legal sense. They must reflect not only all the applicable federal, provincial or state laws but the current rulings of the courts. 

 

These four elements are required to keep control over the protest process and to ensure that protests are rare. Each of these elements is a critical success factor which requires time, energy and resources to be expended by the organization, not simply over the short term, but on an on-going, year-to-year basis. Here is a thumbnail sketch of each of these elements. Later in this book, each of these elements is expanded into a separate chapter.

 

1. Start with a solid foundation: Promote fair and open competition. 

 

The first requirement is to ensure that supplier protests evaporate once the facts are known. That is, your entire RFP process must be publicly defensible. If the process and your specific actions can survive close public scrutiny, then your decisions will be upheld. Your policy also must provide for a fair and open competition.

 

2. Go the extra mile: Promote excellence. 

 

The minimum requirements related to supplier protests are to ensure that the process is fair and easily defended, and to provide a dispute resolution mechanism. But can more be done? Can you, through your actions and policy, and by building-in quality, actively discourage suppliers from protesting your decisions, or taking you to court? 

 

Some organizations have taken a proactive approach to ensure that there are few protests. These organizations provide the supplier community with training and education about their policies and processes. They offer workshops on the RFP process, they publish their policies, and they develop handbooks on How To Submit a Proposal. Others hire an RFP or legal expert to ensure that high-visibility RFPs are properly executed. Some organizations provide losing suppliers with extensive debriefings. Others release their RFPs in draft form to obtain supplier acceptance of the RFP prior to the competition itself. 

 

Your policy should encourage constant review of your practices and continuous improvement. You should adopt practices designed to convince suppliers of the fairness of the process and, thereby, deter them from a public protest. 

 

3. When best efforts fail, handle protests more effectively.

 

Even when a protest has no basis in fact, it can still cause a lot of damage by delaying the procurement contract. The suppliers can aggressively challenge all aspects of a decision — the requirements, the process, the competence of the staff, the analysis performed, the criteria and the weights. It is always better that this be done through an internal process, rather than in public. Hence, the third requirement of any policy is to promote the quiet resolution of disputes before they become public issues. Is there a way in which protests can be handled without making them public events? Can you avoid the questions by the politicians and the articles in the newspapers? Can you keep the protests out of court? 

 

Your policy should provide for an effective dispute resolution mechanism. In recent years, the U.S. federal government and some of the states have initiated procurement reform which has included streamlined dispute resolution strategies and the introduction of other techniques such as third-party mediation. While these events are also occurring in Canada, their priority seems to be much lower here.

 

4. Your best defense: Know the law. 

 

All of your documents, your policies, procedures, contracts and forms must accurately reflect all the applicable laws and, more importantly, recent court cases. This may require additional training of staff, or a legal audit of your procurement practices, policies and contracts.

 

Complex RFPs, especially those involving outsourcing or information technology, usually require a lawyer as a member of the procurement team. The planning of the process and design of the RFP document can significantly effect the potential for protests. Legal advice may be needed to structure the Best and Final Offers process or to structure the process for negotiating contract terms and conditions. 

Suppliers are sophisticated and very aggressive when millions of dollars are involved.^[3] The typical supplier responding to a Request for Proposals for information technology services knows that your organization is required to conduct a fair and open competition. They supplier knows that you have in-house background papers, feasibility studies, cost estimates, etc. The supplier also knows that your evaluation process must be objective and defined prior to receiving the proposals. The supplier is also aware of the access to information laws in your jurisdiction. The supplier is also aware of its right to challenge the award with a protest if it believes that any aspect of the process was deficient, and that the procurement officer can be made to justify the award in writing. And finally, the supplier is aware that even if your agency dismisses the protest, the matter need not be dropped. The supplier can still take the matter into court (or to the agency empowered under NAFTA^[4]) and have a judge review the facts and assess the merits of the protest.   

 

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