This month’s Bid Protest Roundup highlights a trio of U.S. Government Accountability Office (GAO) decisions. The first decision, Deloitte Consulting, highlights the risk of severing a teaming partner after quote submission. The second, Kauffman and Associates, Inc., illustrates how a latent ambiguity in the solicitation can reset the competition. The third, Conti Federal Services, emphasizes that an agency’s upward cost adjustment must remain reasonable.
Deloitte Consulting, LLP[1]
Teaming partners may greatly enhance performance. A teammate may add unique experience and expertise. It is important, however, to ensure teammates are suitable to a specific effort. Teammates are best screened for responsibility and freedom from potential organization conflict of interest (OCI). As the awardee in Deloitte discovered, failure to do so may lead to loss of award.
In Deloitte, the GAO found the agency failed to consider the performance impact of the awardee’s attempts to mitigate a potential OCI. After submission of quotes, but before evaluation began, the agency notified the eventual awardee of a potential conflict of interest with one of its teammates. The teammate’s current contract with the Cybersecurity and Infrastructure Security Agency included applicable restrictions on future work. The awardee in response severed relationships with the teammate and notified the agency of its actions. The agency proceeded to evaluate quotes and selected the awardee.
The trouble was the agency neither requested revised quotes nor assessed the impact of severing the teammate on the awardee’s likely performance. The protestor had outscored the awardee on both technical and management factors but lost on price. The agency determined that “Deloitte’s superior approach” did not warrant the “higher price premium of $85,652,484,” or 28 percent. Deloitte challenged the agency’s technical evaluation of the awardee as unreasonable, as the quote on which it was based no longer accurately described how the awardee proposed to perform.
The agency counterargued that “no material changes” were made to the awardee’s technical price, so the quote was still accurate. The GAO disagreed. The awardee’s quote highlighted the strengths the teammate brought to the team, which unsurprisingly aligned with the solicitation’s performance and delivery requirements. The awardee touted the Team’s resulting value to the agency. For instance, a chart described a specific “accelerator” or pre-built interface, process, or workflow, that was only possible due to the teammate’s inclusion.
Moreover, nothing in the record showed the agency had considered how the loss of the teammate would affect performance. The GAO gave little weight to the agency’s post-protest declarations, noting that rather than “fill in gaps in the record; they attempt to create a record.” The failure to consider the elimination of the teammate caused the GAO to find the technical evaluation of the awardee’s quote unreasonable and sustain the protest.
Takeaways
Sometimes, despite best efforts, OCI issues arise after submission of offers or quotes. Here, had the teammate played a less prominent role in the quote or the OCI mitigated more easily, the awardee might have resolved the issue without a proposal revision. Given the circumstances, the awardee might have asked the agency to permit quote revisions. Had the awardee in Deloitte done so, it may have mitigated the potential OCI without jeopardizing its chances of award. Instead, the awardee unilaterally sought to resolve the issue by severing its teammate. As a consequence, the awardee found itself thrown out of the frying pan and into the fire: its quote was inaccurate and the agency’s evaluation unreasonable.
Kauffman and Associates, Inc.[2]
Ambiguities arise where parties offer two or more reasonable but conflicting interpretations of a solicitation’s plain language. Two flavors of ambiguities exist: patent and latent. Patent ambiguities, those which are obvious, gross, or glaring, must be raised before the date set for submission of quotes or offers. Latent ambiguities are more subtle and may be raised once a party becomes aware of the other’s differing yet reasonable interpretation. While generally more difficult to detect, latent ambiguities may prove to be a potent way to reset a competition.
In Kauffman, the GAO handed the agency a resounding defeat. Sustaining five of the protestor’s grounds, the GAO sent the Department of Health and Human Services, Centers for Medicare and Medicaid Services (CMS) back to the drawing board, recommending the agency revise the solicitation, allow vendors to submit revised quotes, and pay the protestor associated protest costs and attorneys’ fees. The big win resulted when the protestor identified a myriad of agency errors: a latent ambiguity in the solicitation’s requirements, unequal treatment, inconsistent, unsupported, and unreasonable technical evaluations, and a faulty price evaluation.
CMS sought quotes for training services for the Indian Health Service on CMS benefits and programs, under the procedures of the Federal Acquisition Regulation (FAR) subpart 8.4. The solicitation was issued to five vendors. The agency was determined to accept the best-value quote, defined as the highest technically rated quote with reasonable pricing. Quotes were evaluated on the basis of five equally weighted factors: (1) technical approach; (2) personnel; (3) management plan; (4) past performance; and (5) cost. Two or more significant weaknesses under a single factor knocked a vendor out of competition.
The agency botched each factor’s evaluation.
The first issue, the one that led to revision of the solicitation, was a latent ambiguity in the technical approach factor. In Kauffman, the ambiguity turned on the solicitation’s statement that the evaluation would “consider each [vendor’s] documentation of the interrelationship between this effort and others already out in the field.” The agency interpreted the phrase to indicate that vendors needed to demonstrate their prior experience providing training support. As a result, the agency assigned one of two significant weaknesses to the protestor’s quote for failing to document prior successful trainings.
The protestor argued that the requirement was forward-looking, with the requirement assessing how the vendor’s effort would dovetail with others “in the field.” The GAO found the cited language unclear as to whether vendors needed to demonstrate relevant prior experience. As a result, because the ambiguity led to one of the two significant weaknesses under the technical approach and had knocked the protestor out of competition, the GAO sustained the protest on this basis alone.
Kauffman also prevailed in challenging the second significant weakness assigned for technical approach. CMS faulted Kauffman for not submitting a plan to track and deploy continuing education units. The protestor pointed out that the agency had essentially ignored the same weakness in the awardee’s proposal and thus not treated the vendors even-handedly. The GAO agreed.
Under the personnel factor, the protestor argued that the awardee had failed to explain how personnel would be integrated, what the responsibilities of proposed personnel would be, or how their time would be allocated under the contract, as required by the terms of the solicitation. The agency had no answer. The GAO sustained the protest.
Under the management plan factor, Kauffman challenged the evaluation as unreasonable because the awardee failed to describe how it would protect proprietary and confidential data, a solicitation requirement. The agency sought to waive away the omission as a “clerical error,” arguing it had failed to check the appropriate evaluation box. According to the agency, the error was of no consequence because both vendors received excellent ratings under the factor and thus were “treated equally.” The GAO disagreed. The GAO found that had the agency reasonably evaluated the awardee’s management plan, it likely would have assigned a weakness and a lower rating, making the error more than clerical.
Kauffman successfully challenged the agency’s past performance evaluation as unreasonable and incompatible with the solicitation. The solicitation instructed vendors to disclose past performance in a separate administrative volume, yet CMS assigned the awardee a strength based on information contained in the technical volume. The GAO agreed with the protestor and sustained the protest on this basis as well.
The protestor also challenged CMS’s price evaluation. In particular, the protestor argued CMS unreasonably found the awardee’s price to be “fair, reasonable, and realistic,” when in fact the quoted prices impermissibly exceeded the awardee’s FSS pricing. The GAO sustained the argument. While vendors may discount prices below their FSS rates, vendors may not propose higher rates. The agency’s attempt to dismiss the issue by claiming the discrepancy required “a simple clarification” and had no bearing on the award decision fell flat. The record showed no attempt to notify the awardee of the discrepancy, and correction would have required revised pricing to make the quote eligible for award.
Takeaways
A latent ambiguity, if found, is a potent means to drive greater corrective action. The protestor in Kauffman found numerous protest grounds and successfully challenged CMS’s evaluation under each of the five factors. Yet it was the latent ambiguity in the solicitation that prompted the GAO to send CMS back to the drawing board to revise its solicitation. This provided a full reset of the competition.
Conti Federal Services, LLC[3]
In cost-type contracts, where the government is bound to pay the contractor its actual allowable costs, an offeror’s proposed estimated costs are not dispositive. Consequently, when evaluating proposals for cost-type contracts, an agency must conduct a cost realism analysis to determine if the proposed estimate is unrealistically low for the work to be performed. If an agency finds a proposed cost to be unrealistic, the agency has broad discretion to calculate a most probable cost (MPC) and upwardly adjust the proposed cost for evaluation purposes. Cost adjustments, however, must remain reasonable.
In Conti, the protestor leap-frogged from third in line for award after the agency botched the cost realism analysis. The agency sought environmental remediation services for a superfund site. The solicitation contemplated award of a single cost-plus-fixed-fee award. Notably, all non-cost factors combined were approximately equal to cost.
The agency established a competitive range consisting of the three most highly rated offerors. The agency rated Conti’s proposal equally under the non-cost factors but noted that Conti’s strengths were less well aligned to the proposed work than the awardee’s. As the MPC put Conti’s offer $6,500 higher than the awardee’s, the agency determined Conti’s offer was not worth the price premium. The agency found the awardee’s proposal, which it considered to be technically superior to the third offer, did merit the associated price premium.
There was a fly in the ointment, however. The agency, in calculating Conti’s MPC, used the labor rate of a superintendent for the site safety and health officer Conti proposed. Conti argued the adjusted rate was unreasonable as a superintendent required higher qualifications and more duties than the position proposed. Moreover, the agency’s use of the superintendent rate resulted in an MPC that was higher than the independent government estimate (IGE). In response to the protest, Agency council proposed an “updated” MPC based on median salaries for the position listed on salary.com, which was even lower.
The GAO found that in proposing an “updated” MPC, the agency admitted its original MPC was unreasonable. Moreover, had the agency used either the IGE or the “updated” MPC, the agency would have marked up Conti’s offer by $21,000 to $66,000 less. Either alternative would have erased the $6,500 cost delta between the protestor and awardee, and potentially changed the best value analysis, thus prejudicing Conti. Consequently, the GAO sustained the protest and recommended re-evaluation and reimbursement of protest costs.
Takeaways
When competing for a cost-type contract, if not selected for award it is important to double check any upward adjustment that the agency made once given a post-award debriefing. While an agency may calculate a realistic MPC for evaluation purposes, an agency’s markup must remain reasonable. Although GAO caselaw states agencies may not apply the IGE woodenly, if the markup exceeds the agency’s own IGE and results in altering the cost-ranking of offers, the agency may open the door to a sustainable protest.
[1] Deloitte Consulting, LLP, B-422094; B-422094.2, Jan. 18, 2024 (Publicly released on Feb. 1, 2024).
[2] Kauffman and Associates, Inc., B-421917.2; B-421917.3, Jan. 29, 2024 (publicly released on Feb. 12, 2024).
[3] Conti Federal Services, LLC, B-422162, et seq., Feb. 1, 2024 (publicly released on Feb. 14, 2024).