We often see price realism in protests when the protester is making the claim that the awardee’s price, which was lower than the protester’s price, is low enough that the awardee would not be able to perform the work as solicited. Most often, GAO will determine that the agency’s price realism analysis was acceptable. However, in Criterion Corporation, B-422309 (Apr 16, 2024), the agency determined that the lowest priced offeror’s price was too low, and that the company could not possibly perform at the price offered. This led to the next lowest priced offeror receiving the award, and the lowest priced offeror protesting that decision, ultimately winning its argument.
Continue readingTag Archives: cost realism
Unreasonable Cost Adjustment Leads to Sustained Protest
Of late the pages of this blog have been entirely coronavirus and COVID-19 obsessed—and for good reason. But that does not stop the Government Accountability Office from deciding bid protests.
With all that’s been going on, writing about a GAO decision regarding run-of-the-mill unreasonable cost realism evaluation is downright refreshing.
Continue readingReasonable Cost is not Always Realistic Cost
GAO sustained a protest recently where the agency seemed to think that a reasonable cost was also a realistic cost.
That is not necessarily so.
Continue readingGAO: Agencies Must Explain Cost Realism Evaluation Determinations
GAO recently held in ATA Aerospace, LLC, B-417427 (July 2, 2019) that agencies are required to explain how offerors’ proposed labor hours and prices are, or are not, in line with historical data from predecessor contracts when conducting cost realism evaluations.
Continue readingHiring Incumbent Employees At Low Labor Rates–What Could Go Wrong?
A company bidding to replace an incumbent service contractor cannot presume incumbent workers will take major pay cuts without setting itself up for a potentially successful protest.
FAR 22.12 generally requires successor service contractors to give a right of first refusal to qualified employees under the previous contract. And even when these nondisplacement rules don’t apply, many offerors’ proposals tout their efforts to retain incumbent employees. But asking incumbent employees to take significant pay cuts–and expecting them to accept–is unreasonable and can torpedo a proposal. Case in point: GAO sustained a protest recently against an awardee who had proposed high retention rate of incumbent workers, but lower pay for those positions.
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.
Cost Realism: Using Offeror’s Actual Rates Was Unobjectionable
In conducting a cost realism evaluation, an agency was entitled to use an offeror’s historic approved indirect rates and current incumbent direct labor rates to upwardly adjust the offeror’s evaluated cost, in a case where the offeror’s proposed rates were significantly lower.
The GAO recently held that an agency did not err by adjusting a protester’s rates to better align with the protester’s historic indirect rates and current direct rates, where the agency was unable to determine that the protester’s significantly lower proposed rates were realistic.