Cost/Price Evaluation To Be Discretionary For Some DoD IDIQs

Under the 2017 National Defense Authorization Act, the DoD has the discretion to forego a price or cost evaluation in connection with the award of certain multiple-award contracts.

The 2017 NDAA  includes some important changes that are sure to impact federal procurements. Section 825 of the NDAA, which allows DoD contracting officers to forego price or cost evaluations in certain circumstances, is one of these changes.

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Cost Realism: Agency Must Evaluate Employee Compensation Rates

When an agency performs a cost realism evaluation under a solicitation involving significant labor costs, the agency must evaluate offerors’ proposed rates of employee compensation, not just offerors’ fully burdened labor rates.

In a recent bid protest decision, the GAO held that an agency erred by basing its realism evaluation on offerors’ fully burdened labor rates, without considering whether the direct rates of compensation were sufficient to recruit and retain qualified personnel.

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GAO: Agency Need Not Raise High Costs In Discussions

In discussions, a procuring agency is not required to inform a prospective contractor that its costs are higher than those of its competitors, unless those costs are so high as to be unreasonable.

This important potential limitation on the scope of discussions was at issue in a recent GAO bid protest decision, in which the GAO held that an agency had not erred by failing to inform an offeror that its proposed costs were approximately $3 million higher than the awardee’s.

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