Bob Lohfeld

OPINION

How crazy subcontractors can kill your bid

Have you ever had a subcontractor kill your bid? Surprisingly, it’s not all that infrequent that a subcontractor can do you in.

Here are some of the situations we have seen this year from companies who have called us for help, generally after it is too late to fix the problem. Since many of these teaming nightmares could have been prevented with some good counseling earlier in the bidding process, I thought I would share some of these with you and also offer advice that you can use to keep these problems from happening to you.

Subcontractor teaming restrictions

A recent government solicitation stated that prime contractors were encouraged to team with multiple smaller businesses in order to fulfill the socioeconomic goals of the procurement. The request for proposals further stated that subcontractors shall be limited to teaming with only one prime contractor and cannot be a subcontractor on multiple teams. I’m sure you have seen this kind of restricted teaming language before.

The prime contractor who called said they selected their small business subcontractors and executed teaming agreements with each, wrote a fine proposal which was submitted on time, and then got a letter back from the government saying their proposal had been rejected.

They explained that apparently, their subcontractor thought that if teaming with one prime contractor was good, teaming with multiple primes was better. Even though the subcontractor signed an exclusive teaming agreement with the prime contractor, they teamed with multiple companies in order to increase their chances of winning. All prime contractors who teamed with this subcontractor had their proposals rejected.

We told the prime that in the future, when an RFP contains specific language restricting subcontractor teaming, we recommend that this language be included in an addendum to the teaming agreement and the addendum be signed by an executive of the subcontractor certifying that they have teamed in accordance with the teaming restrictions.

Regrettably, in this case, it was too late to correct the problem.

Subcontractor conflict of interest

A solicitation required the prime and its subcontractors to individually certify that they had no organizational conflict of interest (OCI). Less than one week prior to submission, the subcontractor’s contracting officer (CO) on a related contract indicated he thought the subcontractor had an OCI on the job the company was bidding.

The subcontractor communicated the news to the prime and indicated the issue was resolved. The subcontractor signed the OCI certification, and the prime contractor submitted the proposal. Shortly after the proposal was submitted, the contracting office notified the prime contractor that their bid had been rejected due to the subcontractor’s OCI.

The prime contractor challenged the rejection by asking the CO to evaluate the bid without the subcontractor’s input, and while the CO sympathized with the prime contractor, the decision rejecting the bid stood.

Clearly this subcontractor wanted to run from its OCI problem and signing a statement that a conflict doesn’t exist does not make the conflict go away. We advised that the prime to get an OCI determination directly from the government before submitting its proposal and if this could not be resolved prior to submission, the prime should either submit an OCI mitigation plan with its proposal or submit an alternate proposal without the subcontractor rather than risk its entire proposal being rejected because of an unresolved OCI problem.

Getting the subcontractor to certify that an OCI problem does not exists is not sufficient since it is the government who is the final arbitrator of whether or not there is an OCI issue.  Relying on the subcontractor’s certification statement cost the prime contractor its bid.

Subcontractor poor past performance

A prime contractor identified several small businesses that had direct contract experience with the customer and invited these companies to join their team. The sales reps from the small businesses boasted how well they knew the customer, how strong their relationships were, and how insightful they were about the work being competed. It was a perfect match, and the prime signed up the subcontractors.

The prime and the subcontractors worked hard on the proposal. The prime submitted the bid, and shortly thereafter was told they lost. In the debriefing, the government indicated the subcontractors’ past performances was marginal and was overstated in the proposal. As a result, the government down-scored the proposal based on the poor subcontractor past performance and overstated claims.

I suppose no sales rep has ever told a prime contractor that his/her firms performance was marginal and they had a lousy relationship with the customer. After all, sales reps wouldn’t last very long in that position if they didn’t put a positive spin on a marginal situation.

This problem occurs continually in teaming and runs the gambit from stretching the truth to outright lying. Knowing that this goes on, we always recommend that you do your own due diligence. You can trust, but you must always verify and never let a subcontractor’s unchecked claims about its past performance sink your proposal.

Subcontractors with extreme incumbentitis

The government changed the size standard on the recompete of a contract, forcing the incumbent to look for a company with the right size standard and socio-economic certification to prime their contract. After careful deliberation, they identified a partner who had a long-term history with the client and an outstanding reputation. The teaming agreement was signed and the proposal was begun.

Next, the incumbent proceeded to make the new prime’s life miserable. They developed an extreme case of incumbentitis, could not understand the necessity of improving their processes on the new contract, thought every benefit rested on the argument that they were the incumbent, and were extremely cautious sharing information with the prime contractor even to the detriment of the bid.

The incumbent insisted that the proposal only had to conform with section C (statement of work) of the RFP, not section L (proposal instructions) and M (proposal evaluation criteria). According to subcontractor, they never paid attention to L and M, only the SOW. They were quite adamant and disrupted all review meetings.

To resolve these issues, we arbitrated a meeting between the top executives of both firms resulting in the subcontractor changing out the people supporting the proposal. With new, more reasonable players involved, progress is being made towards a winning proposal but much valuable time has been lost in the exercise of forming a highly functioning team. We’ll have to wait to see how this one turns out.

A positive outlook on teaming

Not all teaming arrangements turn out badly. If you want to read more about teaming and the characteristics that make teaming successful, refer to Washington Technology’s articles by Nick Wakeman about the WT Insider Reports.

However, if you can’t resist telling your story about how a subcontractor sunk your bid, please add it to the comments section below. Truth is stranger than fiction so let’s hear what you have to say.

Reader Comments

Thu, Nov 21, 2013

The use of "third party" fact checkers is sad--and bad!! A company so large and yet so unskilled that it can't vet a teammate regarding very common attributes. Sure, hire a private eye if you want to check out the criminal or marriage history of a sub's CEO, but if you do not have enough business moxie to check out, say, whether a company is "responsible," you should not be in the business. And shareholders of your firm should flee.

Wed, Nov 20, 2013 Kihei

How about small companies or Universities who seek out a large systems integrator to bolster their chance for winning and then refuse to listen the sage advice of the company that they teamed with. Not all subcontractors are the small boys in the game.

Wed, Nov 20, 2013 Matt Hastings Washington, DC

I believe both primes and subcontractors are guilty of making many of the same mistakes. It really just comes down to the quality of the individuals at the company you're teaming with for a given deal. Matt Hastings www.AlphaBrook.com

Wed, Nov 20, 2013

Consider 3rd party review of sealed packages: We sometimes have to deal with subcontractors we don't trust completely. Some trust red flags for me are a lack of experience in a sub being a part of a large USG proposal or inherent conflicts of interest due to the sub being on multiple prime teams. If I have a red flag on a large bid (100M+) - I now try to retain a 3rd party review house to review sub sealed cost packages. As a prime I will only get back info from this review on the completeness/compliance/reasonableness of the package against agreed to rates and USG requirements. Note that it is best if this review is agreed to up front with the sub during teaming negotiations. I can't go into details on the two real world examples where we were burned but suffice it to say that the subs got better deals (workshare or rates) from another prime. Our debriefs (and a protest) after our losses revealed that the sub sealed packages delivered to us had contributed to if not caused our loss. In one case - the prices in the package were much higher than what was agreed with the sub and had been in our cost volume. If I'd had a 3rd party review I would have replaced the sub (or they may not have tried that trick in the first place).

Mon, Nov 18, 2013 Jack Runamucka Virginia

I detect a fair amount of big-company bias against small companies in this column. Of course, we all know it is common for behemoth contractors (BCs) to subcontract with small firms in order to get a (big) piece of the pie. Every one of the sins attributed to "subcontractors" (and in the context of this column this refers to small or smaller firms), BCs exhibit them all, too. Sometimes, when the BC is the prime, the BC crushes or smothers or (for lack of a better word) cheats the subcontractor named in the proposal. It remains unclear if TINA can be used to govern the legal and contractual relationship between prime and sub (in addition to the relationship betw govt and contractor). So, BCs not infrequently do not put a proper teaming agreement in place, sometimes tell Large Fibs in the teaming agreements, especially re how much money and how many hours the subs will get, and for what portion of the work. Sometimes the BC has a horrendous, flaming OCOI and does not inform the clueless subs that, well, it is unlikely to obscure that fact from the government. Sometimes the subs don't know about the lousy work the prime did for the govt that will condemn the bid to failing.

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