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By Nick Wakeman

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Low price draws protest from incumbent

When you are the incumbent, and your bid is $27 million higher than a competing bid, you have to expect to lose. But a gap that large has to give you pause.

That was the situation for Alliant Enterprise Joint Venture when it lost a Defense Department contract to SBD Alliant Joint Venture. Both companies hold positions on the General Services Administration’s Alliant Small Business and were competing for a task order for work where Alliant Enterprise or AEJV was the incumbent.

The contract was for a broad range of IT support for the Defense Acquisition University and the rest of the defense acquisition training and logistics community. The work includes network operational support, enterprise and regional help desk, video services support, software and web development and other services.

Five companies bid on the task order, and SBD Alliant won with a $79.6 million bid, compared to AEJV’s $106.5 million bid.

That’s a substantial gap and one that AEJV jumped on in its protest to the Government Accountability Office.

According to GAO, AEJV’s chief complaint was about SBD’s proposed labor hours and staffing levels, which led to the lower price. SBD’s bid included a decrease in its labor hours for various tasks over time. For example, the Defense Acquisition University has several projects underway that will reduce the requirements for network operations support. The company submitted several examples of reduced hours in the out years of the five-year contract.

AEJV, on the other hand, proposed consistent labor hours across the entire life of the contract.

GAO concluded that SBD’s explanation was reasonable, and therefore the Defense Acquisition University acted reasonably in picking the lower price. GAO also rejected AEJV’s arguments about how performance was evaluated.

With both the price evaluation and past performance arguments knocked down, AEJV didn’t stand a chance with its argument that the agency didn’t conduct a best-value procurement but rather a lowest price, technical acceptable competition. There was no need for a price/technical tradeoff because SBD was a higher technical rating and a lower price.

There are a few ways to read this decision and the bidding strategy of the two companies.

On one hand, you could argue that AEJV took its customer for granted and failed to propose cost savings measures that SBD proposed by bidding lower labor hours in the out years.

But you could also argue that SBD lowered its labor hours as a way of hooking the Defense Acquisition University. SBD is taking a risk because some of actions it says justify the lower labor hours haven’t happened yet.

What happens if those actions aren’t completed on schedule? Does SBD’s price go up?

You could also see AEJV as an incumbent who knows its customer and knows how things get done at the Defense Acquisition University and bids what it sees as the most realistic proposal. And they still lost.

From the customer's point of view, how do you walk away from a bid that is $27 million less than your current contractor? You look like a hero for saving that much money and you pray that nothing goes wrong over the next five years.

Posted by Nick Wakeman on Jul 24, 2015 at 12:24 PM


Reader Comments

Mon, Jul 27, 2015 Brian Seagrave Govplace, Inc

Technologies are available to government and IT service providers to integrate and automate services, and lower levels of effort by more than half. Success only requires a contractor willing to lower costs and a customer willing to try something new. The times are changing. Government contracting paradigms need to catch up.

Mon, Jul 27, 2015 BB FL

I would be interested to find out what type of contract/task order resulted from the competition. FFP/T&M/Cost Plus, etc... That would show where and who bears the actual risk of the lower bid. My guess is the Govnt specified a cost type contract and they will ultimately bear the risk, both financial and performance.

Mon, Jul 27, 2015

The statement says it all “and you pray that nothing goes wrong over the next five years.” The pressure to save dollars now (Government) and to win contracts (Contractors) is driving them both to bid things that are executable and both parties know it – but have let the momentum pull them into this. The day will come when companies fail and government offices will be terminating contracts due to this strategy.

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