The Government Accountability Office (GAO) recently embarrassed GSA, the government’s purchasing agent, by sustaining a protest lodged by an outside contractor. The contractor was not selected after GSA decided to select an internal agency bid as a result of an A-76 contracting out exercise.
GAO ordered GSA to re-do its evaluation of the in-house bid because of errors in GSA’s evaluation that could lead to the commercial bid being more advantageous than the in-house performance bid. GAO also ordered GSA to pay the protestor’s costs and attorneys’ fees.
This stunning reversal comes in a contracting out study by GSA that dates back to August 2002. At that time, GSA announced it would do an A-76 commercial activity study on its National Customer Support Center for Federal Supply Schedule users (referred to as NCSC) to determine if it would be more economical to perform this service in-house or through an outside contractor.
Two years–and countless hours of staff time later–the agency with the core mission of procuring things for the federal government is dealt a stinging rebuff by GAO and ordered back to the drawing boards on this procurement action.
An A-76 contracting out procedure is arduous and eats up agency staff as well as contractor proposers’ dollars. An overwhelming majority of the cases result in a decision to continue performance in-house, and if a protest is filed by the losing commercial proposer, it is rarely successful. (See related article listed on the left hand side of this page.)
The decision In the Matter of Career Quest, No. B-293435.2; B-29343503, dated August 2, 2004, proves one should never say “never.”
The “mouse that roared” in this case was Career Quest, a division of Syllan Careers, Inc. It was selected by GSA as the winning commercial proposal with an evaluated cost of $12,501,638. Following the A-76 script, GSA then compared the Career Quest evaluated proposal against the in-house “most efficient organization” (MEO) evaluated proposal. GSA evaluated the in-house proposal’s cost as $11,604,402. Because this gave in-house performance a lesser cost to the tune of $897,238, GSA selected in-house performance by the MEO.
Career Quest appealed within GSA. The appeal authority of GSA found that the MEO had been mis-evaluated and adjusted its cost upward another $327,000. But, since in-house performance was still more economical (although now by $520,236), it affirmed the decision to select in-house performance.
Career Quest then lodged a protest with the GAO.
GAO found that GSA had not properly evaluated the MEO cost proposal. The technical proposal indicated it would take 38.5 FTE’s (full time equivalent employees) to perform the work. But the cost proposal was calculated using four fewer FTE’s. The additional 4 FTE’s could add in excess of $1.2 million to the cost of in-house performance, which would make Career Quest more cost effective and therefore the winner of the competition.
Career Quest also persuaded the GAO that the agency bid had seriously understaffed the quality control function, citing industry standards, which Career Quest had followed in its bid that showed a ten-fold understaffing by the in-house proposal.
IGAO sustained the protest and sent the matter back to GSA, stating “On the record before us, we cannot determine the precise effect that these flaws had on the evaluation, but since additional staffing, if found to be required, could increase the MEO’s cost above the protester’s, we find that the protester has been prejudiced by the agency’s errors.”
The bad news for Career Quest is that rather than awarding the contract to them, the GAO is giving GSA another crack at its evaluation of the MEO proposal. Some might argue this allows more room for mischief. A reading of the GAO decision suggests that GSA had two shots at getting its cost evaluation of the MEO proposal right (in the initial evaluation and on appeal within the agency), so why give them another?
For those of you interested in A-76 contracting out procedures, this GAO decision is a good read as it spells out a lot of pitfalls the agency can encounter in evaluating in-house proposals. It’s sort of a primer on what not to do.