Choose Your Battles Wisely: The Consequences of Protesting Government Procurement Contracts

Abstract

Firms that successfully protest a government agency’s conduct or terms of a procurement contract observe a reduction in future business opportunities with the government. These firms receive fewer and less valuable government contracts, face more contract cancellations, and experience significant reductions in sales growth and employee growth. Despite widespread belief, successful bid protesters do not delay government procurement due to lengthy dispute resolutions. We provide the first analysis of corporate interactions with the United States government bid-protest system. Our results demonstrate the effects of legitimate bid protests to firms.