Choose Your Battles Wisely: The Consequences of Protesting Government Procurement Contracts
50 Pages Posted: 26 Dec 2018
Date Written: December 1, 2018
Firms that successfully protest a government agency’s conduct or terms of a procurement contract lose future business opportunities with the government. Their chance of receiving procurement contracts from the contested government agencies during the following four years drops by 68%, and they experience significant reductions in sales growth and employee growth. They receive fewer contracts also from other, non-contested, government agencies. Despite widespread belief, successful bid protestors do not delay the government procurement process due to lengthy dispute resolutions. Overall, we provide the first analysis of how firms interact with the government bid-protest system in the United States. Our results demonstrate the consequences of legitimate bid protests on firms and raise questions about the efficacy of the government bid-protest system.
Keywords: Bid Protests, Government Procurement, Competition
JEL Classification: G38, H57, P16
Suggested Citation: Suggested Citation