Agency: Department of the Army
Disposition: Protest Denied
Decided: May 15, 2020
Keywords: Cost Realism; Proposal Detail
General Counsel P.C. Highlight:
When an agency evaluates a proposal for the award of a cost reimbursable contract or task order, the offeror’s proposed costs are not dispositive and the agency must perform a cost realism analysis to determine the extent to which the offeror’s proposed costs are realistic for the work to be performed.
Summary of Facts
AECOM Management Services, Inc., protests the issuance of a task order to Sigmatech, Inc., by the Department of the Army, Army Materiel Command, under RFP No. RS3-18-0077. The Army issued the solicitation on September 16, 2019, seeking proposals to provide technical, engineering, logistical, and material support services for the Aviation and Missile Command at Redstone Arsenal.
The RFP advised offerors that proposals would be evaluated on the basis of five factors, including cost/price. The RFP stated that “the Government will evaluate the realism of the offeror’s proposed costs in accordance with FAR 15.404-1(d) and/or (c),” and advised that “[t]he most probable cost may be determined by adjusting (for purposes of evaluation only) each offeror’s proposed cost, when appropriate, to reflect any additions or reductions in cost elements to realistic levels based on the results of the cost realism analysis to ensure a realistic cost.”
The RFP also instructed that “[e]ach offeror and its subcontractor(s) shall provide whatever information is necessary to help the Government understand why the proposed costs are realistic.” The RFP warned that “[a]n offeror may be found ineligible for award if the Contracting Officer determines that the low cost poses an unacceptable risk to the Government” and “[f]ailure by the offeror or it[s] subcontractor to submit the required information or documentation in the format . . . specified may render the offeror’s proposal incomplete and the proposal will be eliminated from the competition without further consideration.” The RFP noted that if a proposal “includes accounting approaches that deviate from standard industry accounting practices or caps proposed indirect rates,” offerors were required to “include documentation from DCMA/DCAA showing that the offeror’s accounting system/cost accounting standards allow for the deviation and/or rate cap.”
The Army ultimately found that AECOM’s cost proposal could not be evaluated because it failed to provide the required cost information and concluded that AECOM’s proposal was ineligible for award. The Army issued the task order to Sigmatech on January 15, 2020 and this protest followed.
Basis of Protest
AECOM argues that the Army unreasonably found that it could not evaluate the realism of AECOM’s proposed costs, and therefore improperly concluded that the proposal was ineligible for award. The Army argues that AECOM’s subcontractor, Subcontractor A’s, cost proposal did not provide information required by the RFP to support its proposed indirect cost rates or to conduct a cost realism evaluation. AECOM argues that even if Subcontractor A did not provide the required information, the Army had enough information to assess the realism of the indirect cost rates.
GAO explained that “when an agency evaluates a proposal for the award of a cost reimbursement contract or task order, the offeror’s proposed costs are not dispositive because, regardless of the costs proposed, the government is bound to pay the contractor its actual and allowable costs.” Thus, the agency must perform a cost realism analysis to determine the extent to which the offeror’s proposed costs are realistic for the work to be performed.
GAO further explained that the agency is not required to conduct an in-depth cost analysis, or to verify each and every item in assessing cost realism. Instead, “the evaluation requires the exercise of informed judgment by the contracting agency.” GAO’s review of an agency’s cost realism evaluation “is limited to determining whether the cost analysis is reasonable; a protester’s disagreement with the agency’s judgment, without more, does not provide a basis to sustain the protest.”
Here, the Army noted that Subcontractor A proposed caps for its general and administrative and overhead indirect cost rates, but did not provide documentation from DCMA or DCAA stating that the firm’s accounting system allowed these caps to be put into place. Without this information, the Army attempted to evaluate the realism of Subcontractor A’s proposed indirect costs by conducting a regression analysis intended to assess the confidence in the proposed indirect cost rates based on trends in the historical cost data. However, the information required to run this analysis was not provided. Subcontractor A provided some documentation concerning 3 years of incurred cost submissions, but the FY16 and FY17 information did not meet the RFP requirement, because it did not provide detailed cost pool information by expense account to allow the Army to validate the indirect cost rates for those years through a regression analysis.
AECOM argues that the Army could have calculated the missing cost pool data by using simple calculations. However, the Army states that it requested detailed cost pool and base information so that it could “validate” the proposed rates. GAO held that an offeror “is responsible for submitting 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.” Since AECOM failed to provide required information, GAO concluded that the Army reasonably found that the realism of AECOM’s proposed costs could not be evaluated.
AECOM also argues that the Army unreasonably failed to use the independent government cost estimate (IGCE) to evaluate the realism of its proposed costs. On this point, GAO noted that when assessing “the realism of offerors’ proposed costs, i.e., whether the costs are too low for the offeror’s proposed technical approach, agencies are not required to follow any particular cost realism evaluation method, or to evaluate offerors’ proposed costs using every possible method of analysis.” Thus, GAO determined the FAR does not require an agency to use an IGCE to evaluate the realism of an offeror’s proposed costs.
GAO concluded that the Army reasonably found AECOM’s cost proposal unacceptable, based on its failure to provide information required by the RFP to conduct a cost realism evaluation. GAO further held that the Army was not required to make assumptions about AECOM’s proposed costs.
The GAO denied the protest on this basis.