This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its January 2014 decision in the matter of Iron Vine Security, LLC, the U.S. Government Accountability Office (GAO) ordered the Department of Health and Human Services to conduct a re-evaluation after finding that the Department failed to properly evaluate the complainant’s pricing information. The dispute dealt with a Request for Quotations (RFQ) for services and materials in support of an information security program. The complainant took issue with how the Department conducted the “price realism” analysis of its proposed pricing. The GAO agreed with the complainant and sustained its protest:
Iron Vine argues that CMS’s price evaluation was flawed, and that the agency’s best value tradeoff was therefore unreasonable. Specifically, the protester asserts that the RFQ required CMS to evaluate the realism of the offerors’ proposed costs, and that the agency failed to evaluate the realism of the vendors’ proposed labor rates as required by the RFQ. For the reasons discussed below, we agree that the RFQ required the agency to conduct a price realism analysis of the vendors’ proposed labor rates, and that the agency failed to conduct such an analysis. We sustain the protest on this basis.
The GAO found that the price evaluation was flawed since the RFQ rules expressly stated that the “price realism” assessment would include an assessment of proposed “time and materials”, but the Department failed to take proposed labour rates into account in that evaluation. While the Department maintained that the RFQ did not require an assessment of labour rates, the GAO disagreed, finding that they were an integral part of a “time and materials” assessment:
Here, the RFQ required that vendors provide proposed labor rates (both with and without additional discounts) in their price/cost volumes, and specifically stated that “time and materials” would be “evaluated on the basis of cost realism.” RFQ at 43, 45. Further, the RFQ identified the contract line item numbers (CLINs) for the information security support services as “time and materials.” Id. at 4-5. We think therefore that the RFQ clearly advised vendors that the agency’s evaluation would include a realism assessment of the vendors’ proposed “time and materials,” which included proposed labor rates. We note that it would be unreasonable for the agency to exclude the time-and-materials labor rates from its realism assessment because the two largest elements of cost in a time-and-materials line item are labor rates and number of hours.
The GAO therefore ordered the Department to conduct a re-evaluation of the proposals and, in the event that the re-evaluation changed the original result, ordered that the original contract award be promptly terminated.
As this case illustrates, public institutions should ensure that the evaluation procedures that they establish in their solicitation documents accurately reflect their actual evaluation plans since inconsistencies between the description of an evaluation process and the conduct of the actual evaluation can be fatal to the defensibility of resulting contract awards.
