Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest sustained.
Protest of agency’s decision to retain custodial services in-house based on results of a standard public-private competition conducted pursuant to Office of Management and Budget (OMB) Circular No. A-76 is sustained where the agency failed to reasonably consider whether agency tender’s material and supply costs were realistic, as required by the solicitation and OMB Circular A-76.
General Counsel P.C. Highlight:
New Dynamics argues that the Army’s realism evaluation of the agency tender’s material and supply costs, as required by the solicitation and OMB Circular A-76, was unreasonable. Where, as here, an agency has conducted a cost comparison under OMB Circular A’76 and, in the process, used the procurement system to determine whether to contract out or to perform work in-house, GAO will consider a protest alleging that the agency has not complied with the applicable A-76 procedures in its selection process, or has conducted an evaluation that is inconsistent with the solicitation criteria or is otherwise unreasonable.
The solicitation required the ATO to submit a cost proposal using the A-76 COMPARE software. The RFP provided that the information contained therein was to be used to assess whether the MEO’s costs were realistic. This is consistent with the requirements set forth in OMB Circular A-76, which requires contracting officers to perform price analysis and cost realism analysis with respect to MEO costs, including, among other costs, the MEO’s Line 2 costs for materials and supplies. In its initial cost proposal, the ATO represented that the MEO’s Line 2 cost for materials and supplies was based on the incumbent MEO’s [DELETED] material and supply costs for [DELETED]. The ATO calculated its total Line 2 cost as [DELETED] using an annual cost of [DELETED] as the base for calculating the cost of each performance period as well as a 4.5 percent yearly inflation rate. Notwithstanding the fact that the Army sought further clarification regarding the ATO’s Line 2 cost–the Army noted during discussions that there was no specific breakdown of the ATO’s Line 2 cost as it related to the supply list provided in the solicitation–in its second cost proposal, the ATO merely reiterated the fact that its cost was based on the incumbent MEO’s [DELETED] costs and, without any explanation, reduced its annual base cost from [DELETED] to [DELETED]. As a result, the ATO’s total cost for Line 2 was reduced to [DELETED]. In its final cost proposal, the ATO again changed its Line 2 cost without explanation, reducing the total cost to [DELETED]. In this regard, the ATO used an annual cost for materials and supplies of [DELETED] to calculate its total cost. This amount, however, was inconsistent with the narrative section of the ATO’s cost proposal, which indicated that the base amount used to calculate the MEO’s Line 2 costs was [DELETED].
The documentation in support of the Army’s price evaluation reflects the Army’s conclusion that the MEO’s Line 2 costs were realistic. The sole basis for this conclusion was the ATO’s representation that the Line 2 costs were based on [DELETED] actual costs–the Army did not have any independent knowledge of the [DELETED] material and supply costs, nor was this information provided in the ATO’s cost proposal or through its response to the Army’s request for additional information during discussions. When the Army sought additional information regarding the ATO’s Line 2 costs during discussions, the ATO simply reiterated the representation from its initial proposal that the costs were based on [DELETED] costs, and proceeded to reduce its Line 2 costs without explanation. Without any insight into the actual [DELETED] costs, it was not possible for the Army to have reasonably assessed the validity of the ATO’s representations. Rather, the Army simply assumed that the ATO’s assertions were accurate, notwithstanding the fact that they were entirely unsupported as a consequence of the ATO’s failure to provide additional information concerning the Line 2 costs, as the agency had requested during discussions. The Army’s assumption in this case was also inherently unreasonable given the puzzling nature of the reduction to the ATO’s Line 2 costs with each revision of its cost proposal. Since the costs were purportedly based on a historical figure, a value that presumably would have been fixed, and because there were no changes to the solicitation requirements with respect to materials or supplies which could have supported any Line 2 cost changes, one would not have reasonably expected the ATO’s Line 2 costs to change each time it submitted a new cost proposal. Moreover, the ATO’s Line 2 costs in its final proposal were internally inconsistent–the narrative section specifies that they are calculated using a base value of [DELETED], while the Line 2 costs were in fact calculated using the lesser amount of [DELETED]. The protest is sustained.