This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2015 decision in the matter of CFS-KBR Marianas Support Services, LLC, the U.S. Government Accountability Office (GAO) found flaws in the evaluation and award process conducted by the Department of the Navy and directed the Department to conduct a re-evaluation. The case dealt with a Request for Proposals (RFP) for operations support services on the island of Guam. The complainant alleged that Department failed to conduct an appropriate “cost realism” analysis when it assessed the adequacy of the complainant’s proposed staffing and that it then caused the complainant to increase its staff complement during negotiations and thereby render its pricing non-competitive. The GAO agreed with the complainant, finding that the Department’s “mechanical” application of estimated staff requirements failed to take the proposed delivery approach of each bidder into account and led to an unreasonable evaluation:
The record here shows that, in evaluating the offerors’ initial proposals, the agency mechanically applied a government estimate to evaluate the sufficiency of the offerors’ proposed staffing. In particular, the record shows that the agency evaluated all proposals against an undisclosed government estimate of the number of full time equivalent staff (FTE) that the agency considered sufficient to perform the requirements…[T]he record thus shows that the agency’s initial evaluation was based on a mechanical application of the government estimate to the proposals that did not consider the offerors’ varying technical approaches. In the absence of a cogent explanation for the Navy’s actions, such a mechanical application of the government estimate in the evaluation of proposals is unreasonable. We therefore sustain this aspect of Fluor’s protest.
The GAO also found that by relying on this flawed evaluation during subsequent negotiations, the Department led the complainant to alter its proposed staff complement and that this prejudiced the complainant’s competitive position:
On this record, we conclude that the agency’s discussion question relating to the adequacy of Fluor’s proposed staffing led it to increase its staffing to a degree that, ultimately, led its proposal to be noncompetitive. Because the record shows that Fluor’s revised staffing was raised in direct response to the agency’s discussion question, we conclude that the firm was misled to its competitive prejudice. We therefore sustain this aspect of Fluor’s protest.
The GAO therefore ordered the Department to conduct a re-evaluation and provide competing proponents with an opportunity to engage in meaningful negotiation discussions based on that re-evaluation.
As this case illustrates, purchasing institutions should avoid the application of arbitrary and undisclosed assumptions, including assumed staffing levels, when assessing the pricing of competing bid submissions since these types of flaws can prove fatal to the defensibility of an evaluation process.
