Each year around this time, the General Counsel of the U.S. Government Accountability Office (GAO) puts together a package and delivers it to Congress. As they say about other packages that are exchanged by people every December, sometimes “good things come in small packages.” GAO’s Bid Protest Annual Report to Congress for Fiscal Year 2015 came in a small package this year—it’s a nine-page report. It’s loaded with good things, too—lots of useful information for anyone who deals with the U.S. Government.

Statistics

The Report contains all the usual suspects in terms of statistics. Bid protest filings increased 3% this year; the Sustain Rate was 12%; etc. The Effectiveness Rate was up slightly to 45%. That means protesters “obtained some form of relief from the agency” in 45% of all protests closed. That includes both “voluntary agency corrective action” plus GAO decisions sustaining protests. One key point is that protesters “won” at GAO 45% of the time.  That’s good news for protesters. But the real value from this December’s package comes in the final paragraph of the Report where GAO identifies winning protest grounds.

Most Prevalent Grounds for Sustaining Protests

In the Report, and as required by law, GAO lists the five most prevalent grounds for winning protests and gives examples of each. Contractors and their proposal teams should consider these carefully because they show some of the pitfalls other contractors have encountered and may suggest ways to avoid similar problems. Contractors and their lawyers also should look carefully because they may see a roadmap for a successful protest.

Unreasonable Cost or Price Evaluation

The first successful ground identified by GAO is “unreasonable cost or price evaluation.” As an example, GAO cites to Computer Sciences Corp.; HP Enterprise Servs., LLC; Harris IT Servs. Corp.; Booz Allen Hamilton, Inc., B-408694.7 et al., Nov. 3, 2014, 2014 CPD ¶ 331. Here’s how GAO describes the holding in that case: “finding that the agency’s cost realism analysis was unreasonable where the record failed to show the agency conducted an independent assessment of whether proposed labor hours, skill mix, and labor mix were sufficient to successfully perform the requirement.”

Computer Sciences Corp. concerned the Air Force’s NETCENTS-2 acquisition for network operations, services and solutions. The request for proposals (RFP) was a hybrid that included cost reimbursement, fixed-price and labor hour elements. The Air Force was to evaluate the realism of proposed costs for the cost reimbursement component.

GAO was very critical of the cost realism analysis, stating that the Air Force evaluators “never analyzed whether the number of hours proposed by each offeror was realistic from a cost standpoint.” The Air Force argued that it conducted a “price analysis” (where it checked for adequate price competition and compared prices received) and that was sufficient. GAO rejected that argument and described the difference between a price analysis and the required “cost realism analysis” as follows:

…price analysis techniques under FAR § 15.404-1(b)(2)(i) are for the purpose of establishing a fair and reasonable price, while the techniques for cost realism analysis—for the purpose of determining whether proposed costs are too low—are set forth under FAR § 15.404-1(d)(1).

The Air Force also characterized the proposed costs as “fairly uniform pricing”. But GAO found the facts showed otherwise—proposed labor hours ranged from 325,545 to 655,732.58 hours—which is a variation of more than 100 percent. GAO also noted that 7 out of 20 offerors’ proposed labor hours were below the minimum baseline calculated by the Air Force and that two of the awardees proposed hours were “significantly” below the minimum. Importantly, the record showed that the Air Force had not performed any analysis of that data.

GAO also criticized the Air Force’s failure to analyze whether proposed hours were realistic for the work to be performed. The Air Force argued that its technical evaluators did that when they checked proposed hours and determined that offerors had “a good grasp of labor categories, wage rates and knowledge of skills required to complete the work.” GAO disagreed because the record showed that the evaluator’s “analysis” was limited to checking to see if the proposed hours in the sample task order matched the hours set forth in the proposal.

The takeaway for contractors preparing proposals is to be careful not to price your proposals too low, especially in cost reimbursement contracts (where a cost realism analysis is always required). Alternatively, you should be sure to give the Government enough information to be able to determine that your low costs are realistic. As GAO said:

[T]he agency is required to take reasonable, documented steps to assess what costs are likely to be incurred under each offeror’s technical approach, and explain the basis for a conclusion that the proposed costs are realistic for the work to be performed.

Sometimes contractors can help agencies bridge the gap between technical approach and proposed costs by making it clear that the hours proposed and skill mix/labor mix are sufficient to successfully accomplish the task. A “crosswalk” between technical aspects of a proposal and the hours and job descriptions sometimes does the trick. But any tool that shows with specificity that you can complete the project for the costs proposed works.

Protesters should be on the lookout for agency evaluations that confuse a price analysis and a cost realism analysis and where agencies drop the ball as the Air Force did here. It’s no surprise that unreasonable cost or price evaluations are a top protest ground at GAO. After all, GAO used to be called the “General Accounting Office.”

In the spirit of the season, and like Dickens’ spirits, we plan a few more “visits” in future posts on the other winning protest grounds identified by GAO. So, as Marley may have said to Scrooge, “Be forewarned!” And don’t forget to check back in the coming weeks.