GAO: Agency Properly Upped Contractor’s Proposed Labor Rates

Here’s hoping that you had a wonderful Thanksgiving, full of relaxation, family time, football and lots of food.

For one Arizona contractor, the holiday was a little less festive this year, after the contractor lost out on a Navy cost-reimbursement contract–in part because the Navy unilaterally upped some of the contractor’s proposed labor rates.  The GAO found nothing wrong with the agency’s decision, holding that the Navy reasonably determined that the contractor’s proposed labor rates were unrealistically low.

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Price Realism and Fixed-Price Contracts: The Solicitation Controls

If price realism is evaluated by a procuring agency under a solicitation for a fixed-price contract, the solicitation must inform offerors that price realism will be considered, says the GAO in a recent bid protest decision.

In GAO Protest of Emergint Technologies, Inc., B-407006 (Oct. 18, 2012), the GAO sustained a bid protest because the procuring agency in question failed to inform offerors that price realism would be evaluated–and seemed to fundamentally misunderstand the concept of a price realism evaluation.

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GAO: Agency Improperly Adjusted Contractor’s Proposed Level of Effort

In today’s tight budgetary climate, performance-based acquisitions and similar techniques to maximize efficiency seem to be on the rise.  Performance-based acquisitions can offer unique opportunities for contractors to develop innovative approaches to meet an agency’s needs while minimizing costs.

In a recent GAO bid protest decision, one offeror proposed fewer labor hours–and a different labor mix–than the awardee, resulting in a lower overall price.  Nevertheless, without explanation, the procuring agency in question unilaterally raised the offeror’s labor hours to match the hours proposed by the awardee, resulting in a corresponding increase in evaluated price.  The GAO was none too pleased with the agency’s action, sustaining the offeror’s bid protest.

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Contractor Corrects “Weakness”, Loses Contact As A Result

When, in discussions, a procuring agency tells a contractor that an aspect of the contractor’s proposal is a weakness, the natural response is to correct the problem.  In one recent GAO bid protest decision, however, correcting a weakness may have cost a contractor a $30 million award.

In GAO Protest of EMR, Inc., B-406625 (July 17, 2012), the procuring agency informed the contractor that certain labor rates appeared low in comparison to other offerors’ rates, and labeled the low rates a weakness.  In response, the contractor raised the rates in question, thereby increasing its overall price–then narrowly lost out on a low-price, technically acceptable contract.

The GAO’s verdict?  The agency did nothing wrong.

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