Link: GAO Opinion
Agency: Department of Defense
Disposition: Protest denied.
Keywords: Risk; Changes clause; equitable adjustment
General Counsel P.C. Highlight: Shifting greater risk to the contractor is not grounds for protest. “The increasing burden of risk in federal contracting” an article published in the Washington Business Journal by Lee Dougherty regarding this protest.
GAO denies the protest of WingGate Travel, Inc., et al., based on the terms of a request for proposals (RFP), issued by the Defense Human Resources Activity (DHRA), on behalf of the Defense Travel Management Office (DTMO), for travel management services to support the commercial travel office (CTO).
The protesters specifically challenge the RFP provision, establishing that fixed transaction fees will not be adjusted as a consequence of variations from the solicitation’s estimated workload quantities absent a determination that the variation constitutes an “out of scope” change. According to the protesters, this provision, which was not included in prior contracts, puts undue risk on prospective small business contractors. GAO states that as a general rule, the contracting agency must give offerors sufficient detail in a solicitation to enable them to compete intelligently and on a relatively equal basis. However, the contracting agency has the primary responsibility for determining its needs and the method of accommodating them, including the choice of the appropriate contracting format. GAO will not question an agency’s choice of procurement approach, absent clear evidence that its decision is arbitrary or unreasonable, or in violation of statute or regulation. It is within the administrative discretion of an agency to offer for competition a proposed contract that imposes maximum risks on the contractor and minimum burdens on the agency, and an offeror should account for this in formulating its proposal. Risk is inherent in most types of contracts, particularly fixed-price contracts, and firms must use their professional expertise and business judgment in anticipating a variety of influences affecting performance costs. A mere difference of opinion between the protester and the agency concerning what will best suit the agency does not establish that the agency’s determination as to its requirements placed undue risk on the contractor.
The agency acknowledges that prior procurements for these services have included equitable adjustment provisions based on specified variations in estimated volumes of transactions. It explains, however, that this was done because the agency lacked historical data that would assist offerors in responding to the solicitation and in assessing risk. Having now provided that historical data in this procurement, the agency chose the current solicitation method to ensure that it would pay fixed rates for only those travel services that it required and only as they were required. Contracting agencies are not required to conduct present procurements in a certain manner simply because they conducted past procurements in that manner. Given the agency’s inclusion of extensive historical data in the current solicitation, information that was not available under prior solicitations, the protesters’ challenge, based on the agency’s deviation from former practice, lacks merit.
In addition, the protesters argue that GAO’s decision in BMAR & Assocs., Inc., B-281664, Mar. 18, 1999, 99-1 CPD para. 62, requires a different outcome. In BMAR, GAO sustained a protest on the basis that the solicitation at issue subjected contractors to unreasonable risk because it required fixed lump sum pricing for largely undefined civil engineering services. However, GAO state that here, the agency is procuring specific types of services on a fixed?price, transaction fee basis; the more transactions a prospective contractor performs, the more fee revenue it will earn. Moreover, the solicitation in BMAR had been issued in connection with a public/private competition under Office of Management and Budget Circular A-76. In the unique context of that competition GAO found that the lump sum pricing arrangement put private sector offerors at a competitive disadvantage in relation to the public sector competitor because the public sector competitor, unlike the private sector competitor, would not need to account for contingencies in its pricing. The solicitation here was not issued in connection with OMB Circular A-76. The protest is denied.