The Gao's Bid Protest Mechanism: Effectiveness and Fairness in Defense Acquisition?
Abstract: What are bid-protests? What functions do they perform? This article proposes that government contracting, especially the source-selection process, gives rise to a particularly intractable set of transactional hazards: governmental opportunism and third-party opportunism. It shows how the first of these hazards can be addressed by third-party intervention and how third-party intervention leads to third-party opportunism. It argues that existing arrangements governing the source-selection process, primarily the GAO’s bid-protest mechanism, effectively mitigate the consequences of governmental opportunism and, owing to this mechanism’s design, reduce the direct harm resulting from third-party opportunism as well. More formally put, it concludes that this mechanism works to minimize the maximum losses resulting from opportunistic behavior in the source-selection process and, therefore, that these governance arrangements are effective solutions to the idiosyncratic transactional hazards associated with government contracting.
