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.

A cynic might wonder whether the procurement at issue in NikSoft Systems Corporation, B-406179.2 (Aug. 14, 2012) was a case in which the procuring agency intended to make award to a favored contractor, no matter what.  The case involved a Department of Justice Request for Quotations for the establishment of a Blanket Purchase Agreement, and an initial “call” under that BPA, to provide federal identity, credential and access management services.  The solicitation allowed offerors to propose individualized solutions, in terms of labor hours and labor mix, to perform the contract work.

In 2011, the DOJ awarded the contract to LS3, Inc.  A competitor, NikSoft Systems Corp., protested the award.  In February 2012, the GAO sustained the protest in a written decision, GAO Protest of NikSoft Systems Corporation, B-406179 (Feb. 29, 2012).  The GAO instructed the DOJ to correct various errors in its evaluation and, in essence, try again.

The DOJ re-evaluated proposals.  Although LS3’s labor hours were 12% lower than the hours estimated by the Independent Government Estimate, the DOJ concluded–without explanation–that LS3’s labor hours were sufficient, given its technical approach, to perform the first call.  In contrast, the DOJ determined, again without explanation, that NikSoft’s total labor hours (which were lower than LS3’s) were insufficient to perform the first call.  As a result, the DOJ increased NikSoft’s labor hours for performing the first call to the same level as LS3’s, which resulted in a large jump ion NikSoft’s evaluated price.  The DOJ then made award to LS3 a second time.

NikSoft again protested the award to the GAO, and the GAO once again ruled in NikSoft’s favor.  The GAO wrote that the DOJ”s evaluation record “provides no basis to support the agency’s determination that NikSoft’s level of effort or labor mix was insufficient to perform the first call, or its determination that NikSoft’s level of effort should be increased to the same level of effort proposed by LS3.”  The GAO continued, “apart from  the agency’s conclusion that NikSoft’s level of effort is insufficient and that LS3’s level of effort is sufficient, there is no analysis or explanation in the agency’s price evaluation and source selection decision to support these determinations.”  The GAO concluded, “in light of the significant differences between NikSoft’s and LS3’s levels of effort and labor mixes, the conclusory statements in the record simply are not adequate” to show that NikSoft’s proposed level of effort was insufficient.

The NikSoft Systems Corporation GAO bid protest illustrates an important evaluation principle when it comes to performance-based acquisitions and similar procurements: namely, the procuring agency must evaluate the individual merits of each proposal.  The agency cannot simply assert, without explanation, that an offeror’s solution is not feasible, nor should it arbitrarily equalize two proposals offering differing solutions, as was the case here.