Pricing lessons from NTT Data's failed FEMA bid protest
NTT Data didn’t get the result they were looking for when they challenged the Federal Emergency Management Agency's selection of BAE Systems for IT operations and management support.
But the unsuccessful protest offers a window into the different ways agencies can evaluate pricing and why you should pay attention to how the process is described in solicitations. It is also important to note that the Government Accountability Office doesn’t like to question which price evaluation methodology agencies use.
“The depth of an agency’s price realism analysis is a matter with the sound exercise of the agency’s discretion, and we will not disturb such an analysis unless it lacks a reasonable basis,” GAO wrote in its decision to deny NTT Data’s protest.
In other words, GAO will only question the price evaluation methodology if it doesn’t follow the parameters set forth in the solicitation.
That’s a pretty high bar for a protester to clear.
FEMA used a methodology that is described in the Federal Acquisition Regulations. The agency compared bidders’ prices and compared proposed prices against published price lists.
NTT Data argued that there are other techniques allowed under the FAR that more accurately evaluate pricing, such as the Independent Government Cost Estimate and available market data. FEMA also could have looked at option year pricing. All are reasonable approaches for price evaluations.
But GAO said NTT Data's argument was not persuasive because “the nature and extent of an agency’s price realism analysis are matters within the agency’s discretion,” GAO wrote.
FEMA also didn’t need to use those other methods because they weren’t required in the solicitation, GAO wrote.
NTT Data also challenged FEMA’s technical evaluation of its proposal, which received lower scores than BAE’s. GAO also rejected those arguments.
On top of the lower technical scores, NTT Data also had the highest price among 10 bidders with a price of $196.3 million. BAE had the second-highest at $158 million.
This led to another price challenge by NTT Data. The company questioned whether it was realistic for BAE to deliver its proposal at the price it bid. This challenge failed as well because the solicitation was structured as an evaluation of labor rates. Bidders could not propose approaches that would either reduce hours or substitute higher or lower skilled labor. (This is just an aside, but it sounds like FEMA doesn’t want any innovation, which doesn’t make sense.)
GAO also ruled that NTT Data would still have the highest price even with the highest technical scores and past performance rating. The company couldn’t show why FEMA would have picked them over BAE, which had the high scores and the lower price.
Given GAO’s findings, it isn’t hard to see why they denied NTT Data’s protest. But at the same time, it is hard to ignore NTT Data’s argument that other methodologies would have been a better way to evaluate the pricing.
Perhaps NTT Data should have made those arguments when the solicitation came out and described the price evaluation methodology, instead of waiting until after FEMA chose someone else.
Posted by Nick Wakeman on Jan 09, 2020 at 8:19 AM