Report: EPA's total labor-hour giveaway

Contractors are figuring out how much money officials will accept for bids by knowing a job's estimated number of labor hours, a report says

The Environmental Protection Agency may have hurt its chances for getting really good prices on contracts when it told companies how many total labor hours it estimates for a job before contractors submitted their proposals, a new report states.

For 13 of 27 work assignments or task orders audited, there was no difference between the EPA’s labor-hour estimate and the contractor’s proposal, and for 21 of those orders, the difference was within 5 percent, according to a report by the agency's inspector general released Sept. 10.

Labor hours generally represent the majority of the contract's costs. For example, the cost for the labor hours, and the corresponding associated costs, consumed $422,000 of $490,000 spent on one job. When the EPA gives out the total labor hours and the labor rates are either fixed or can be estimated based on historical data, the contractors can figure out the labor and corresponding cost that officials are willing to accept, the reports states.

Knowing that information, “the contractor does not have an incentive to seek a more efficient or innovative approach to meet the government’s requirement,” the report states.

The agency's contract management and program officials say it’s common practice to hand out the government’s estimated total labor hours. However, they agreed with the IG’s recommendation and now plan to leave out those estimates.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

Reader Comments

Thu, Oct 15, 2009

If you read the report, you'd know these are unique EPA contracts called "Work Assignment" contracts which allows EPA to award cost reimbursement contracts based on a large estimated number of hours to be worked, and then assign hours to various projects to the contractor through the work assignments, so in many ways Work assignments are similar to task orders under IDIQ contracts. Work assignments have been a staple of EPA since before the FAR was written, and the EPA acquisition supplement (EPAAR) actually REQUIRES the contracting officer to give the contractor the number of hours to use for each work assignment (see the Work Assignment clause at EPAAR 1552.211-75). So this practice of giving contractors the estimated labor hours on individual contract actions in a sole source environment has been going on for well over 35 years. Also note that the Work Assignment clause instructs the contractor to prepare a Work Plan for EPA on how they will perform the Work Assignment, which EPA pays for, which is similar to paying for bid and proposal costs.

Mon, Sep 14, 2009 Pattie DC

When we post an RFP/RFQ, we give an estimated dollar range or a labor hours range but not both. And the philosophy on how to set the ranges varies with the KO. Some use the IGCE as the middle of the range, others as the top end and one even puts it about 1/4 of the way from the top. If a vendor submits a bid that's outside the range, that's fine but they need to tell us why - maybe they see risk we don't or have an innovative approach that will result in less manpower needed down the raod.

Mon, Sep 14, 2009

Is this Contracting Official crazy or what? The Independent Government Cost Estimate is priveledged information that is prohibitted from being disclosed to any and all perspective bidders. This is a FAR (Federal Aquisition Regulation) requirement. Prosecute or at the very least fire all offending individual's supervisors for their ineffective oversight and improper training of their subordinantes. This has not been acceptable policy for over 30 years. But as is typical of the federal government, the managers will not be held accountable, (more likely promoted), and the workers more likely will receive the adverse action.

Mon, Sep 14, 2009 James Bethesda

Why isn't the EPA using performance based contracts like the rest of the government has been instructed to?

Mon, Sep 14, 2009 Jason Chantilly

Now wait a minute. LH in an RFP provide an easy way to bid and make a proposal instead of guessing on FTE which can lead to modifications later. If the Governemtn is interested in the contract seeking a better aproach then use CPIF or CPAF.

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