Negotiated acquisitions

Army Lawyer, Jan, 2007 by Andrew S. Kantner

The GAO felt that a price reasonableness analysis should also look at quantity estimates and agreed with Port-a-Pit that its overall cost may have been lower depending on the relative percentages of the elements of the contract. (97) Since Port-A-Pit had a higher mileage price but lower meal and sink prices than the awardee, the offer could have been competitive if the Forest Service had used historical data to create realistic estimates to better conduct the price reasonableness evaluation. (98) Limiting the evaluation to analyzing the unit prices in isolation resulted in an improper basis to consider the proposed costs to the government. (99)

Cost Realism

Serco-stantial Evidence

The GAO, in Serco, Inc., (100) informed agencies that cost realism should not be done in a vacuum when evaluating proposals. The U.S. Navy Space and Naval Warfare Systems Command (SPAWAR) issued a RFP for various support services for the maintenance, modernization, and new system installation for the command, control, communications, computer, intelligence, surveillance and reconnaissance (or C4ISR) requirements on the U.S. west coast. (101) The RFP called for the award for ID/IQ performance-based contract for all requirements. Non-price evaluation factors would be significantly more important than price; the key non-price evaluation factors assigned points were: understanding of work-sample tasks, and management plan. (102) Offerors were also required to respond to sample tasks which would be evaluated for cost/price. (103)

The Navy received two timely proposals: Serco and AMSEC. After reviewing the evaluation and realizing that there was some confusion regarding the sample tasks, the SPAWAR amended the RFP to disclose the Independent Government Estimate (IGE), conduct discussions, and request revised proposals. (104) The amended RFP warned offerors that unsubstantiated estimates would result in cost realism adjustments (105) and may affect the offeror's technical evaluation. (106)

AMSEC's revised proposal did not use the IGE in its staffing estimate and relied on its initial proposal along with a written explanation of how the staffing levels were calculated. (107) The SPAWAR found the explanation unsatisfying and normalized AMSEC's evaluated cost to reflect the IGE. (108) Despite this increase in overall price, the Navy awarded the contract to AMSEC because, as the source selection official stated, there was no "significant risk." (109)

Serco challenged the evaluation, stating that the cost realism adjustment should have affected the evaluation of AMSEC's understanding of work and management plan since the proposed staffing levels showed a fundamental misunderstanding of the requirements. (110) The GAO agreed, stating that the judgment that the offeror's staffing levels were unrealistically low should have been reconciled with the positive assessment of the technical approach. (111) This result is especially reinforced by the fact that the RFP amendment contained a requirement to review the effect cost realism adjustments on the ultimate technical evaluation. (112) Here the fact that the SPAWAR more than doubled AMSEC's sample task hours should have impacted the acceptability of the technical piece, or at least raised the risk assessment of AMSEC's proposal. (113)