Washington Business Journal by Lee Dougherty, Attorney, General Counsel PC
Date: Friday, December 2, 2011, 1:06pm EST
The administration has been clear: Greater risk needs to be shifted to industry in contracts, often through fixed pricing. Those contractors willing to shoulder more of that burden will often walk away with the win.
Protesting contractor: WingGate Travel Inc.
Contracting agency: Defense Human Resources Activity on behalf of the Defense Travel Management Office
Protest issue: The solicitation places undue risk on the contractors.
Post-mortem: After an earlier protest this year of an award of six contracts for travel management services, the DTMO took corrective action: It provided additional detail about the expected workload, and made crystal clear the fact that the solicitation was for fixed-price contracts and that “offerors must price this risk accordingly,” considering for example any emergency requirements that might come up down the road.
The protestors argued that the choice of a fixed-price contract with no opportunity to adjust pricing if needed was unreasonable. GAO disagreed – noting that some risk is part of business, especially in terms of fixed-price contracts.
This case is a poignant reminder that just because the government has assumed the risk in the past, does not mean it will do so in the future. This is a bid protest, which means that there were companies willing to take that risk and, as such, were awarded the contracts. They may regret it if costs pile that they then must absorb, just as government could find themselves at a loss if huge fluctuations cause the company to default on its contract obligations. But the fact remains – both parties are willing to shoulder such risk.
I am reminded of a quote by Hellen Keller, “Security is mostly a superstition.”