This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2007 decision in Sikorsky Aircraft Company; Lockheed Martin Systems Integration-Owego, the U.S. Government Accountability Office (GAO) ordered the Department of the Air Force to clarify its evaluation criteria and seek follow-up proposals from competing bidders. The case dealt with a Request for Proposals (RFP) for combat search and rescue helicopters. The complainants alleged that the Department failed to properly assess “best value” in their evaluation of competing proposals. The Department had set out the following criteria for determining “best value”:
Award was to be made to the offeror whose proposal represented the “best value” based on consideration of four evaluation factors:
-
mission capability, including (in descending order of importance) subfactors for Block 0 aircraft performance, system architecture and software, systems engineering, product support, management/schedule and Block 10 aircraft performance;
-
proposal risk, assessed at the subfactor level, and focusing on weaknesses associated with an offeror’s proposed approach and the resulting potential for disruption of schedule, increased cost, degradation of performance, the need for increased government oversight, and the likelihood of unsuccessful contract performance;
-
past performance; and
-
cost/price.
Of particular importance here, the solicitation provided that, for evaluation purposes, cost/price would be calculated on the basis of the Most Probable Life Cycle Cost (MPLCC) for the aircraft, comprised of the cost/price of:
-
system development and demonstration (SDD);
-
the award fee;
-
production;
-
operations and support (O&S);
-
other government costs; and
-
proposal risk adjustments, based on a quantification in terms of schedule and cost of the impact of the technical, programmatic and schedule risk of the offeror’s proposed approach. Mission capability, proposal risk and past performance were of equal importance and, when combined, were “significantly more important than” cost/price. RFP § M 8.
The protest focused on the Department’s calculation of “operations and support” costs under the “cost/price” category. The complainants alleged that the Department’s assessment of this category was flawed because it attributed the same points to each proposed helicopter even though newer, smaller aircraft attracted fewer operation and support costs:
Sikorsky and LMSI assert that the agency’s calculation of O&S costs using the same estimated cost for Unit Mission Personnel and Indirect Support for all proposals, irrespective of the aircraft offered, unreasonably failed to account for the reduced maintenance required by their generally newer design, smaller helicopters. They claim that this was inconsistent with the RFP’s requirement for detailed information regarding O&S costs generally, and maintenance costs specifically. The protesters read this information requirement, together with the MPLCC evaluation approach, as indicating that the O&S cost evaluation would take into account the helicopter offered.
The GAO agreed, finding that the failure to attribute accurate operations and support costs to the different proposed helicopters undermined the reasonableness of the Department’s “cost/price” evaluations:
We therefore sustain the protests on the basis that the Air Force, by ignoring differences among the proposed aircraft that could have a material impact on likely O&S costs, departed from its stated evaluation approach. Further, the evaluation of O&S costs based on each offeror’s proposed helicopter could have resulted in lower evaluated total costs for both of the protesters, which could have resulted in a different source selection.
The GAO therefore directed the Department to amend its RFP to clarify its intention regarding the evaluation of operations and support costs, and to reopen the process to receive revised proposals.
As this case illustrates, when faced with a legal challenge, the evaluation procedures of a purchasing institution may come under considerable scrutiny. In instances where the ranking and selection of competing bidders will be determined by factors other than the lowest price, great care should be taken to specifically and accurately draft the criteria that will inform that ranking. In so doing, the purchasing institution should ensure that the criteria disclosed in their solicitation documents align accurately with the criteria that will actually be applied to the evaluation of bids.
