Government Contracts Monitor

Don’t Let Creativity Prevent You from Delivering the Mail

September 14, 2015

By: Eric Whytsell

Creative solutions are often rewarded in Government procurement. However, offerors need to be careful not to let their creativity prevent them from submitting well-crafted proposals that fulfill the requirements of the RFP. Last month’s decision of the Government Accountability Office (GAO) in Viatech, Inc., B-411388 (July 21, 2015) brought home this lesson with “extreme prejudice”.

The case involved a protest of the Army’s conclusion that the protester’s probable cost of performing a cost-reimbursement contract could not be determined. The solicitation contemplated a cost-reimbursement type task order and provided that the Government would evaluate the realism of the offeror’s proposed costs by determining a most probable cost for the offeror’s proposed technical approach, which could then be adjusted for evaluation purposes. It also made clear the danger of proposals lacking clarity: “Proposals with unclear, inconsistent or missing information may be judged to mean the offeror does not fully understand the requirements or understand what it takes to meet or exceed the requirements. Those proposals may receive ratings of unacceptable and therefore be ineligible for award.”

In its cost proposal, protester Viatech identified three different subcontractors, each with its own labor rates, overhead and G&A. It went on to explain that its “proposed labor mix to include categories and rates are submitted for evaluation purposes only” and to reserve the right to “vary the labor mix during task execution.” While this may have seemed like an innovative approach that would allow Viatech, in its words, to “provide the best value support solution in response to this [solicitation],” the Army evaluators found themselves unable to determine a probable cost. According to the agency, given the variety of labor, overhead, and G&A rates and the assumption that Viatech could use its own personnel or those of any of its three subcontractors, there was no way to calculate what cost was “probable.”

As a result, the Army found Viatech’s most probable cost to be “undeterminable.” The task order was awarded to an offeror whose proposed price was almost $20M more than that of Viatech.

Viatech protested, arguing that the agency improperly failed to evaluate the most probable cost of its proposal and instead unreasonably found its costs to be undeterminable. GAO disagreed. Particularly problematic was the range of rates that might be charged under Viatech’s proposed approach. As GAO explained, “Viatech’s approach of reserving the right to shift hours from the two companies it identified (which had the lowest indirect rates) to other related companies (with very much higher indirect rates) raised the possibility that the costs incurred would be much higher than Viatech proposed.” GAO rejected Viatech’s claim that its proposal’s reference to changing the labor mix “from time to time” was intended solely to account for contingencies based on “illness, pregnancy, death, family emergencies, when the government has an urgent need for a certain position, etc.” Unfortunately for Viatech, that limitation was not set forth in its proposal but instead was first voiced in its protest filing.

Noting that offerors are charged with the “responsibility to submit a well-written proposal, with adequately detailed information which clearly demonstrates compliance with the solicitation requirements and allows a meaningful review by the procuring agency,” GAO held that Viatech failed to do so. It also concludes that the agency reasonably found Viatech’s proposal to be unclear as to which affiliated company would perform the contract work, as agencies are “not required to infer information from an inadequately detailed proposal, or to supply information that the protester elected not to provide.” Similarly, GAO found that, based on the record, the agency was not required to clarify the extent to which Viatech intended to transfer employees or work among the various companies.

In the end, Viatech’s desire to preserve flexibility proved to be its downfall. Given the almost $20M price differential, a clearer cost proposal might have turned Viatech into the awardee (if the agency’s price reasonableness adjustment was not too big). Thus, this was an expensive lesson for Viatech to learn. But you can learn it for free: no matter how creative you get, make sure that you clearly address all of the solicitation requirements.

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