Subcontractor Price Proposals: A Cautionary Tale

Subcontractors sometimes prefer to submit their cost or price proposals directly to the government, instead of submitting their cost or pricing information through the prime contractor.  In cases where a procuring agency allows it, such independent submissions can ease a subcontractor’s concerns about disclosing sensitive information to the prime contractor.

But when a subcontractor circumvents the prime contractor and independently submits its pricing, the prime contractor is unable to review the subcontractor’s proposal to ensure that it complies with the terms of the solicitation.  As demonstrated in a recent GAO bid protest decision, if the subcontractor’s proposal is non-compliant, the entire team may pay the price.

The GAO’s decision in URS Federal Services, Inc., B-411024.4 (Apr. 30, 2015) involved an Army solicitation for logistics support services.  The solicitation called for the evaluation of three factors: technical merit, past performance, and cost/price.

The solicitation specified that subcontractors could independently submit cost/price proposals.  The solicitation advised subcontractors independently submitting cost/price proposals that they were required to include “Attachment 16,” which contained information such as the subcontractor’s name and CAGE code, the prime contractor with whom the company was teaming, and so on.  The solicitation stated that failure to comply with the requirement to submit Attachment 16 would result in the proposal’s elimination from the competition.

The solicitation required offerors to submit their proposals through the Army Single Face to Industry Bid Response System.  Any subcontractors submitting proposals were also required to use the ASFI BRS.

However, Because offerors began experiencing difficulties submitting their proposals through the ASFI BRS, the Army changed the method of submission.  It notified offerors that they could submit their proposal documents by email, rather than through the ASFI BRS.

URS Federal Services, Inc. submitted a proposal as a prospective prime contractor.  URS used email to submit its proposal.  One of URS’s proposed subcontractors, DA Defense Logistics HQ, submitted an independent cost/price proposal, also by email.

The Army conducted an initial evaluation of proposals, and discovered that DADL had not submitted the required Attachment 16.  As a result, the Army concluded that URS’s proposal was deficient, and excluded URS from the competitive range.

URS filed a GAO bid protest challenging its exclusion.  URS conceded that DADL had not submitted Attachment 16, but argued that the requirement to include Attachment 16 applied only to submissions through the ASFI BRS.  URS contended, in part, that since DADL submitted its proposal through email, Attachment 16 was not required.

The GAO disagreed.  It wrote that “the solicitation’s requirement to include Attachment 16 with all independently-submitted cost proposals . . . was clear and unambiguous.”  The GAO pointed out that “URS’ other teammates and subcontractors submitting independent cost proposals did include Attachment 16 with their proposals, notwithstanding the change to e-email submission.”  In fact, “DADL itself included Attachment 16 with its independent cost proposal for another prime offeror.”  The GAO denied URS’ protest.

As the URS Federal Services case demonstrates, a prime contractor may run a risk by allowing independent subcontractor submissions.  In this case, had URS been able to review DADL’s submission, URS may well have noticed that Attachment 16 was missing.  By allowing DADL to directly submit its proposal, URS trusted DADL to get it right.  When DADL didn’t, the entire team paid the price.

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