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Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International

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Emerald Publishing Limited




Potential bidders are frequently excluded from participation in a federal procurement by the mandatory specifications or evaluation criteria in the bid solicitation. For certain procurements aggrieved bidders can protest inappropriate exclusions to a quasi-judicial board. We present a model where there are multiple potential litigants and the remedy is a public good. Equilibrium litigation can arise without decision errors by the court or information asymmetries. We show that protests can deter inappropriate exclusions but can also lead to undesirable settlement agreements. The free-rider problem created by the public good remedy can also cause voluntary revisions of an excessively restrictive bid solicitation as an equilibrium phenomenon. In our normative analysis we show that a ban of cash settlements can worsen the free-rider problem and thereby lead to diminished deterrence.

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