This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In September 2005 in R&G Food Services, Inc., the U.S. Government Accountability Office (referred to as the GAO) upheld an unsuccessful proponent’s complaint after finding that the Department of Agriculture failed to properly disclose or evaluate anticipated contract work volumes. The case involved a Request for Proposals (RFP) for hot and cold meals for 27 forest firefighting field locations throughout the western United States and Alaska.
The GAO found that the Department improperly evaluated pricing when it failed to consider the anticipated volumes that would be ordered under the contract. It also found that the Department’s decision to disqualify the complainant’s proposal due to concerns over proposed mileage pricing was unreasonable, given the marginal nature of those costs compared to the total contract cost. By focusing on the marginal mileage charges instead of on the meal charges that would make up the bulk of the contract costs, the GAO found that the evaluators failed to properly assess the proposals:
The record reflects that mileage is by no means the largest component of cost to the government. Rather, the parties agree that meals are the primary cost for the services to be provided under the contract…. [I]n light of the substantial difference in the relative costs for meals and mileage, the agency’s price evaluation, to the extent that it considered only offerors’ unit prices, failed to reflect the likely actual cost to the government of the offerors’ approaches.
Even though the nature of the food services contract made it difficult to predict precise future volume requirements, the GAO found that the Department should have relied on past data as a basis for assessing the probable costs of the competing proposals:
We recognize that the evaluation of price in the award of an indefinite-quantity contract can be challenging. Nonetheless, in our view, the way in which the agency evaluated prices here (i.e., examining only unit prices without also considering the estimated quantities of each item) does not satisfy the legal requirement to consider cost to the government. Moreover, there appears to be no reason why the Forest Service could not develop estimates for each of the delivery items to be considered in the contract award determinations…. [W]ithout using such estimates, the Forest Service’s evaluation here failed to account for the difference in the relative proportions of the cost for meals and mileage in the total cost to the government, and, as a result, there was no direct relationship between the evaluated prices of a particular offeror and the actual price of performance by that offeror. See Health Servs. Int’l, Inc.; Apex Envtl., Inc., supra, at 3.
The GAO therefore recommended that the proposals be re-evaluated to take into account the anticipated costs to the government.
As this case illustrates, historical data relating to past volumes can be material to the proper evaluation of bid costs and should be disclosed to prospective bidders and transparently incorporated into the institution’s cost-calculation formulas.
