Endogenous Split Awards as a Bid Protest and Procurement Management Tool

Abstract

When competitors for a federal government contract feel that the contract has been unfairly or unlawfully awarded, they can protest the contract award. A protest stops a contract award while the protest is evaluated for merit and remedy, as appropriate. While legitimate award protests improve procurement efficiency, integrity, and accountability, frivolous award protests create significant contract delays and cost growth. There is increasing interest in mechanisms that reduce frivolous contract award protests, while retaining the integrity of the process for meritorious protests. This research explores split procurement awards as a tool to rationalize the bid protest process and potentially improve the general procurement process. It discusses split procurement as an award protest and procurement management tool, and models bidding incentives and outcomes with both fixed or exogenous split awards and variable or endogenous split awards (where the split depends on the relative competitiveness of the vendors bids). Endogenous split awards can increase the competitiveness of vendor bids relative to fixed-split awards, while reducing the incentives for frivolous contract protests. Endogenously split contract awards can also improve the general acquisition process, particularly if retaining competition is important for follow-on procurement actions.