Billions in Covid-19 Federal Contract Awards Not Facing Protests

June 22, 2020, 8:45 AM

Billions of dollars in awards for federal contracts aimed at combating Covid-19 aren’t being protested by losing bidders in court or before the agency responsible for ensuring contract integrity, despite their expedited approval.

Some questionable activity connected to the fast and massive pandemic contract spending effort, now exceeding over over $15 billion, has come to light.

FEMA, for example, awarded in April, and terminated for default in May, a $55 million contract to Panthera Worldwide LLC for its inability to deliver N-95 masks, an agency spokesperson said.

The company received the award despite having no history of performing medical supply contracts.

Washington attorneys say the lack of Covid-19-related contract protests showing up on either the dockets of the U.S. Court of Federal Claims or the Government Accountability Office can be explained by a variety of factors:

  • Desire to avoid negative publicity;
  • Companies maintaining agency relationships;
  • Agencies not focusing on longterm procurements; and
  • Difficulty at securing legal relief.

But if the pandemic continues, and contracts to fight it become both the norm and more sophisticated, an uptick in protests before both the claims court and the GAO can be expected.

Good Relations, Bad Press

Staying on the good side of the federal agencies that many contractors have long-term relationships with may explain, at least in part, a lack of challenges to awards, Kayleigh Scalzo of Covington & Burling LLP in Washington said.

“Many companies are very thoughtful and deliberative about whether to protest, and they appreciate that protests may impact their customers and the public,” Scalzo said.

“That baseline thoughtfulness likely is even further heightened when it comes to covid-19-related procurements,” she said.

But Scalzo also cautioned that the extent to which Covid-19 contract awards have been left unchallenged may not be fully known because not all protests result in published decisions. And the GAO still has time to issue decisions on protests filed over the Spring, which could reveal protests connected to the crisis, she said.

Even so, would-be protesters’ awareness of “the bad press that would come with an action seeking, in essence, to stop relief efforts” could also explain the apparent lack of challenges, Justin Chiarodo of Blank Rome LLP in Washington said.

“You want to be perceived as being part of the solution, and not seen as potentially putting lives at risk,” he said.

On the other hand, another explanation for the lack of protests is that relief spending has also created more contract opportunities, which would decrease competition for any single award, Chiarodo said.

Pandemic, Procurement Shift

But attorneys also said that Covid-19 contract protest activity may increase if the nature of the pandemic and, along with it, the agencies’ focus and goals, change.

Agencies could shift in the coming months from lowest-price, technically-acceptable, medical-supply procurements to best-value, cutting-edge medical and high-tech contracts aimed at longer-term solutions, said Daniel Ramish of Smith Pachter McWhorter PLC in Tysons Corner, Va.

“The calculus is different if the government’s failure to follow procurement rules results in the best medical or technological solutions to the pandemic being overlooked,” he said.

“Nobody wanted to risk slowing down ventilators going to hospitals in New York,” Ramish said. “But if, for example, your company’s smart thermometers are much better than your competitor’s, and they are overlooked because of a violation of procurement rules, that is different,” he said.

If Covid-19 starts becoming part of our routine life, pandemic-related contracts probably will become more routine too, Scalzo said.

“And if Covid-19-related procurements become more routine, protests of those procurements probably will start to align with general protest trends,” she said.

Health Emergency Takes Front Seat

Still another reason for the lack of protests in the claims court could be the difficulty in getting the contracts stopped.

The Competition in Contracting Act requires agencies to halt performance of protested contracts. But agencies may authorize performance anyway by issuing an override after a written finding that immediate performance either serves the best interests of the U.S., or “urgent and compelling circumstances” require it.

Those are high bars to hurdle and, even if contracts were to be challenged, protesters could safely assume that a justification for an override would invoke the health emergency, said Nathaniel Castellano of Arnold & Porter Kaye Scholer LLP in Washington.

It is an uphill fight to stop an override under normal circumstances, and persuading the court to do so in this environment would require an “extraordinarily compelling case,” he said.

The U.S. Army, for example, properly issued an override allowing the performance of a protested information technology services task order to protect national security interests in South Korea, the claims court ruled April 29.

Castellano also said that many Covid-19 awards have gone to nontraditional contractors that might not be naturally inclined to pursue multiple stages of litigation against a customer for choosing to do business with a competitor.

Additionally, some awards were issued under Other Transaction authority, which allows companies to provide certain agencies with prototypes and research services.

But the GAO has “narrow jurisdiction” over protests of those awards, he said.

To contact the reporter on this story: Daniel Seiden in Washington at dseiden@bloomberglaw.com

To contact the editors responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com; Steven Patrick at spatrick@bloomberglaw.com; Patrick L. Gregory at pgregory@bloomberglaw.com

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