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Should DynCorp have been warned its pricing was killing its bid?

Several things stand out to me in a recent Government Accountability Office decision denying a protest by DynCorp.

First, there is the huge gap in the prices proposed by DynCorp, the incumbent, and KBR, the winner of a task order under the Logistics Civil Augmentation Program IV or LOGCAP contract. The Army was competing a following task to support military installations in the Arabian Peninsula.

DynCorp bid a price of $148.1 million, a whopping $111 million higher than KBR’s bid of $37 million. Yes, $37 million.

The second thing was that GAO said that the significant price difference didn’t matter, because this was going to be a cost-plus contract. “Regardless of the costs proposed, the government is bound to pay the contractor its actual and allowable costs,” GAO wrote.

Instead, the Army has to conduct a cost realism analysis to determine if the costs bid are realistic for the work to be done. GAO looks at the methodology used and determines whether it is reasonable.

And here is where the third thing stands out to me: GAO found several mistakes that the Army made in evaluating the bids, but none of the mistakes were egregious enough to show that DynCorp’s chances of winning were hurt.

Here again, the prices bid came into play. GAO wrote that “even if the protester was correct that KBR’s proposal should have been adjusted … it does not appear that the adjustments establish that, but for the alleged errors, the protester would have had a substantial chance for award.”

In other words, the Army’s mistakes couldn’t overcome the huge gap in the prices bid.

And a final issue: It appears that DynCorp may have been a victim of its own attempts to stand out from its competitors.

DynCorp argued that the Army had to have engaged in unequal discussions with KBR and Fluor, a third bidder, regarding the true nature of the requirements. Otherwise, there wouldn’t have been such a wide disparity between DynCorp’s proposed costs and the costs proposed by KBR and Fluor. (Fluor’s bid was $40.1 million.)

But the Army told GAO that DynCorp’s proposed hours and costs were not seen as a significant weakness. They found that DynCorp’s proposal was “realistic and reasonable” because it proposed a unique technical/management approach. In fact, the Army saw that part of DynCorp’s proposal as a unique strength.

But the uniqueness wasn’t enough to overcome a price that was some 300 percent higher than its competitors. GAO said it doubts that any discussions would have significantly closed the pricing gap.

GAO said just because the price gap was so significant, the Army still didn’t need to enter into discussions with DynCorp because its price and staffing proposals were not seen as weaknesses.

My conclusion is that I don’t quite buy the Army and GAO’s reasoning here because it seems obvious to me that gap is why DynCorp lost.

To use the car analogy: The Army wanted to buy a car and DynCorp bid a Lamborghini while KBR bid a Chevy.

It seems to me that while the Army might love the capabilities of the Lamborghini, it’s never going to buy the Lamborghini over the Chevy.

Don’t you think it is reasonable for the Army to tell DynCorp, Hey, we love your proposal but we can’t afford to buy it, especially when we have other bids that we reasonably expect will get the job done.

It seems to me that the Army should have had the conversation with DynCorp.

The Army and GAO might argue that the pricing wasn’t a weakness for DynCorp but in reading GAO’s decision, it’s obvious that the pricing was DynCorp’s fatal flaw, and they should have been warned.

Posted by Nick Wakeman on Aug 24, 2015 at 8:53 AM


Reader Comments

Tue, Sep 29, 2015

DynCorp was the incumbent.

Thu, Aug 27, 2015

I would change your car analogy to the bid from DynCorp as a Honda Accord and the bid from KBR as a Yugo Coupe. The argument that the award was cost plus could also be used to justify the higher bidder.

Thu, Aug 27, 2015

If there were 3 credible bids, it would be interesting to know where the 3rd bid lay in the range. That could also provide a clue into where the problem lay.

Wed, Aug 26, 2015 Mel Ostrow

Your comment seems a bit emotional, which diminishes the plausible logic it displays. You've always seem to proffer views that are consistent with industry's bridling at excessive regulation--say along the lines one can predict for PSC on almost any issue. If u want the govt to intervene and tell a large, sophisticated company their price was out in left field, that is rather a large intervention in the natural-as-possible selection process. It is playing god, if u know what I mean. DynCorp was so clueless it never could have recovered from its mis-think of the reqt; an adjusted bid would not have intensified competition. Let big companies fail in these transactions, just the way the govt lets the droves of smaller firms to fail. The big companies already have enuf advantages. Make sense to U?

Wed, Aug 26, 2015

They had 3 credible technical bids. I don't see why the government should be expected to "coach" a bidder when they missed the mark. Aside from fairness, that is a slippery slope because then everyone expects to be coached and then the argument becomes who gets coached on what?

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