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.
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.
In a best value tradeoff evaluation, a procuring agency must consider the benefits of a lower-cost proposal, even if that proposal’s cost is not as close to the agency’s internal cost estimate as a higher-priced proposal.
As demonstrated by a recent GAO bid protest decision, it is improper in a tradeoff analysis for an agency to refuse to consider the relative benefits of paying a lower cost for a lower-rated proposal.