An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too
GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.
The decision in SURVICE Engineering Company, LLC, B-414519 (July 5, 2017) involved a price realism analysis of rates proposed for workers to provide engineering, program management, and administrative services at Eglin Air Force Base. (Steve Koprince blogged about the unequal evaluation component of this case here.)
The solicitation called for a fixed-price labor-hour contract and required offerors to submit a professional compensation plan. The Air Force said it would evaluate the plan pursuant to FAR 52.222-46, which includes a price realism component.
Price realism, for the uninitiated, is an evaluation of whether an offeror’s price is too low. In the context of a fixed-price labor hour contract like the Air Force solicitation, “this FAR provision anticipates an evaluation of whether an awardee understands the contract requirements, and has proposed a compensation plan appropriate for those requirements.”
The Air Force initially concluded that the price proposed by Engineering Research and Consulting Inc., or ERC, was too low, comparing the price to “Government estimates.” But after discussions and revisions, the agency decided that the revised salary ranges were acceptable. The Air Force awarded the contract to ERC.
The protester, SURVICE Engineering Company, LLC, as the incumbent, obviously knew what it was currently paying the employees who were doing the work.
GAO agreed, stating that “the record is silent as to whether, in the end, any of ERC’s rates were lower than incumbent rates but nevertheless acceptable to the Air Force.”
It concluded, “the Air Force did not reasonably compare ERC’s salaries to incumbent salaries, a necessary step to determine whether the proposed salaries are lower than incumbent salaries. Accordingly, we find that the agency failed to reasonably evaluate whether ERC offered ‘lowered compensation for essentially the same professional work,’ as envisioned by FAR provision 52.222-46.
This content originally appeared on SmallGovCon.
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