[Protest of Army Determination To Perform Support Functions In-House]

A firm protested an Army determination to continue in-house performance of various functions because it was more economical than contracting the work to an outside source. The protester contended that the cost for the one-time, labor-related expenses, specifically severance pay, was improperly determined because the Army used a mock reduction in force to develop the costs. The methodology used in cost comparison analysis is outlined in Office of Management and Budget Circular A-76 which indicates that a 2-percent factor should be applied to calculate severance pay. GAO has held that, in order for the Army to deviate from the 2-percent formula, it must have a reason for the unusual rate usage and have requested approval for the deviation. GAO found that the Army did not do either; therefore, the cost comparison was defective. Accordingly, the protest was sustained, and GAO recommended that the Army evaluate the conversion costs consistent with this decision.