BCG Federal Corporation

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to a GAO Protective Order. The entire decision has now been approved for public release.

Decision

Matter of: BCG Federal Corporation

File: B-421923

Date: November 30, 2023

Jennifer S. Zucker, Esq., Jeffery M. Chiow, Esq., Christopher M. O'Brien, Esq., and Eleanor M. Ross, Esq., Greenberg Traurig, LLP, for the protester.
Jared Sammons, Esq., General Services Administration, for the agency.
Glenn G. Wolcott, Esq., and Christina Sklarew, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Due to the specific characteristics of the agency's requirements, the agency reasonably determined that requiring offerors to provide cost breakdown information for their proposed labor rates was the only acceptable method for evaluating cost/price reasonableness.

2. Requirement that offerors provide cost breakdown information for their proposed labor rates does not violate the statutory preference for acquisition of commercial items.

DECISION

BCG Federal Corporation, of Washington, D.C., protests the terms of request for proposals (RFP) No. 47QRCA23R0006, issued by the General Services Administration (GSA) and referred to as the “One Acquisition Solution for Integrated Services Plus (OASIS+)” unrestricted solicitation.[1] Agency Report (AR) Tab 1, Contracting Officer's Statement (COS) at 1;[2] see AR, Tab 2, RFP. BCG challenges the solicitation's requirement that offerors must provide cost breakdown information for their proposed labor rates. Protest at 2.[3]

We deny the protest.

BACKGROUND

On June 15, 2023, GSA issued the solicitation, seeking proposed labor rates for 20 labor categories covering eight “domains.”[4] See RFP at 21-35. The agency states that it selected a limited number of commonly used, broadly defined labor categories so that they would be “universally acceptable” across all domains.[5] COS at 8; see AR, Tab 8, Pricing Strategy at 58.

The solicitation contemplates the award of an unlimited number of IDIQ contracts[6] under which task orders for both commercial and non-commercial services[7] will be issued by federal agencies across the government.[8] The solicitation also provides that ordering contracting officers may issue all types of task orders, including fixedprice, cost-reimbursement, time-and-materials, and labor-hour task orders.[9]

Based on the agency's market research, which included consideration of data from prior procurements,[10] the agency concluded that subsequent task orders under the OASIS+ contracts will be for “predominantly non-commercial services.”[11] AR, Tab 10, Commerciality Determination at 1-3. Accordingly, the agency determined that this procurement does not meet the requirements to be considered a commercial item procurement.[12] Id.; see FAR 12.102(a).

The agency states that its original acquisition strategy did not include evaluation of cost/price at the IDIQ level. COS at 2. In this regard, the agency explains that it initially intended to use GSA's “Class Deviation DC-2020-14,” which is “based on Section 876 of the National Defense Authorization Act . . . [and] allows for the dismissal of consideration of cost/price as an evaluation factor for the award of certain . . . IDIQ multiple award contracts.” Id. However, in April 2023, the U.S. Court of Federal Claims (COFC) issued a decision which limited application of this class deviation to IDIQ contracts that “clearly feature time-and-materials and labor-hour task orders.” See AR, Tab 9, SH Synergy, LLC v. United States, 165 Fed Cl. 745 (Apr. 2023) at 68. Following that COFC decision, the agency changed its pricing strategy to require that all offerors submit cost/price information from which the agency will assess price reasonableness.[13] Id. Specifically, the solicitation provides that each offeror must: propose fully burdened labor rates for each of the 20 labor categories; identify its direct labor rates, indirect rates (including fringe benefits, overhead, and general and administrative expenses), and profit;[14] and submit a basis of estimate. RFP at 186-191. With regard to indirect rates, the solicitation states:

Offerors shall propose indirect rate percentages according to their most current DCAA [Defense Contract Audit Agency], DCMA [Defense Contract Management Agency] or CFA [cognizant federal agency] approved FPRA [forward pricing rate agreement], FPRR [forward pricing rate recommendation], and/or Provisional Billing Rates (PBR), if available. . . . If an Offeror does not have . . . approved FPRAs, FPRRs, Provisional Billing Rates, or other approved rates, Offerors shall propose indirect rate percentages generated from their accounting system.

Id. at 188 (emphasis added.)

Finally, the solicitation provides that a proposal will be rejected if the agency is unable to determine that an offeror's proposed rates are fair and reasonable, or a proposal reflects “missing or incomplete” pricing information.[15] Id. at 205-06.

On August 28, 2023, BCG filed its initial protest and, on September 8, submitted an amended protest.

DISCUSSION

BCG states that it “does not do business with any client using a cost-based pricing methodology” and does not maintain an accounting system that “accumulates and allocates the direct and indirect costs and profit that underlie its pricing.” Protest at 19.

In this context, BCG maintains that the solicitation's requirement that offerors disclose breakdowns of their proposed labor rates: (1) “violates” FAR subpart 15.4, which identifies various alternative methods for evaluating cost/price; and (2) “is incompatible” with the Federal Acquisition Streamlining Act of 1994 (FASA), which establishes a preference for the acquisition of commercial items.[16] Protest at 12-18. We find no merit in BCG's allegations.[17]

Alleged Violation of FAR Subpart 15.4

First, BCG complains that, in requiring all offerors to provide a breakdown of their proposed labor rates, the agency improperly relied on FAR section 15.404-1, which states:

[c]ontracting officers shall obtain data other than certified cost or pricing data[[18]] from the offeror . . . for all acquisitions (including commercial acquisitions), if that is the contracting officer's only means to determine the price to be fair and reasonable.

FAR 15.404-1(b)(1).

BCG notes that FAR section 15.404-1 identifies various alternative methods for assessing price reasonableness, including comparison of proposed prices to various benchmarks such as: other prices proposed in response to the solicitation; historical prices; parametric pricing (such as dollars per pound or other units); published price lists; independent government estimates; and prices obtained through market research.[19] See FAR 15.404-1(b)(2)(i)-(vi). BCG maintains that these alternative methods are “viable,” and asserts that the agency “irrationally” concluded that obtaining each offeror's price breakdown information was the “only means to determine the price [reasonableness].” Protest at 13.

The agency responds that the FAR: requires procuring agencies to determine whether offerors' prices are fair and reasonable; identifies various permissible techniques for making those determinations, including “[a]nalysis of data other than certified cost or pricing data . . . provided by the offeror”; states that such techniques may be used “singly or in combination”; and provides that the agency's approach should reflect “[t]he complexity and circumstances of each acquisition.” FAR 15.404-1(a)(1); 15.404-1(b)(2)(vii); see also SH Synergy, supra. In this context, the agency maintains that the complexity and specific circumstances reflected in the OASIS+ procurement drove the agency's determination that requiring cost breakdowns of offerors' proposed labor rates was the only acceptable methodology for assessing price reasonableness.

More specifically, the agency notes that, in preparing the solicitation, it considered the various alternative methods for assessing cost/price reasonableness and concluded that none was acceptable due to the following unique characteristics of the OASIS+ procurement: (1) each offeror's definition of a given labor category may differ based on the domain in which it is being used; (2) the scope of OASIS+ is considerably broader than the prior OASIS program or other prior contracts; (3) the OASIS+ labor categories are not the same as the labor categories under the prior OASIS program; and (4) offerors will be located all over the country. COS at 6-12. Accordingly, the agency concluded that comparison of proposed prices to the various benchmarks identified in FAR section 15.404-1 (including other proposed prices; historical prices; published price lists; market research; or independent government estimates) would lead to a range of rates that are essentially meaningless, and will fail to provide the necessary level of accuracy and reliability.

The agency further notes that, while the OASIS+ program does not require an accounting system review prior to award, [20] an offeror that does not know the buildup of its proposed rates creates great risk for the agency.[21] AR, Tab 7, White Paper at 17. The agency further notes that offerors have differing cost drivers, and that the agency will consider an offeror's explanation and rationale for its cost drivers in making price reasonableness assessments. COS at 11. In summary, the agency maintains, that due to the unique characteristics of this procurement, obtaining the cost breakdown information at issue here, as authorized by FAR section 15.404-1 is the only acceptable method that will provide the insight necessary for the agency to make the required price reasonableness determinations at the IDIQ level.

Procuring agencies must condition the award of a contract upon a finding that the

contract contains “fair and reasonable prices.” FAR 15.402(a), 15.404-1(a). See Crawford RealStreet Joint Venture, B-415193.2, B-415193.3, Apr. 2, 2018, 2018 CPD ¶ 121 at 9. As discussed above, the FAR identifies various permissible methods for assessing price reasonableness and provides that the manner in which an agency's price analysis is performed should be based on “[t]he complexity and circumstances of each acquisition.” FAR 15.404-1(a) and (b). Finally, contracting officers are directed to obtain the information at issue here “for all acquisitions (including commercial acquisitions) if that is the contracting officer's only means to determine the price to be fair and reasonable.”[22] FAR 15.404-1(b)(1).

Here, based on our review of the record, we reject BCG's assertion that it was unreasonable for the agency to require offerors to provide a breakdown of their proposed labor rates. As discussed above, based on the agency's assessment of its needs, it identified a limited number of broadly defined labor categories to perform a wide range of undefined requirements across all domains and, as a consequence, the agency recognized that offerors' specific application of the labor categories to different domains will likely reflect widely varying rates, rendering a comparison of fully loaded labor rates to each other an unreliable basis for evaluating price reasonableness. Similarly, the agency recognized that comparison of proposed prices to the other types of benchmarks identified in FAR sections 15.404-1(b)(2)(i-vi) would result in unreliable price reasonableness determinations due to: differences in the labor categories used in prior procurements; differences in the scope of the OASIS+ requirements from prior procurements; the nationwide location of offerors; and the need for the agency to assess the risk associated with an offeror's proposed rates. Accordingly, the agency reasonably determined that assessing the individual cost drivers associated with each offeror's unique labor rates was the only acceptable method for making reliable and accurate cost/price reasonableness determinations. BCG's protest to the contrary is denied.

Compliance with FASA

Next, BCG asserts that the requirement for offerors to provide cost breakdown information “do[es] not align” with the policy expressed in FASA that provides for acquisition of commercial items “to the maximum extent practicable.”[23] Protest at 1416; see 41 U.S.C. § 3307(b). BCG complains that, by requiring a breakdown of proposed labor rates, the solicitation fails to “maximize participation from commercial sources,” and asserts that the requirement “preclude[s] commercial service contractors from bidding.”[24] Protest at 15,17; Comments at 14-16, 18.

The agency responds that the OASIS+ solicitation complies with the requirements of FASA, noting that FASA establishes a preference for acquiring commercial items “to the maximum extent practicable”--not a mandate--and further provides that commercial item contractors are to be “provided an opportunity to compete.” COS at 12; see 41 U.S.C. § 3307(b). In this context, the agency notes that: the OASIS+ procurement is designed to address the government's unique requirements for complex task orders covering both commercial and non-commercial services;[25] the solicitation does not limit awardees, provided they demonstrate the necessary qualifications and offer a fair and reasonable price; and, although a majority of task orders will be for non-commercial services, the solicitation accommodates commercial item contractors by not requiring an accounting system review to be eligible for award. COS at 12-14. In short, the agency maintains that the OASIS+ solicitation at issue here fully complies with the FASA provisions.

Our decisions provide that a contracting agency has the discretion to determine its needs and the best method to accommodate them. General Electrodynamics Corp., B-298698, B298698.2, Nov. 27, 2006, 2006 CPD ¶ 180 at 3. This principle applies to the contracting format used to purchase the items which the agency has determined necessary. Voith Hydro, Inc., B-401244.2, B-401771, Nov. 13, 2009, 2009 CPD ¶ 239 at 4. Our Office will not object to an agency's determination in this regard unless the protester shows that it is clearly unreasonable. Id.

Here, we reject BCG's assertion that the OASIS+ solicitation fails to comply with FASA's stated preference for acquiring commercial items “to the maximum extent practicable” and BCG's assertion that the solicitation “precludes commercial items contractors from bidding.” First, as noted by the agency, FASA establishes a preference, not a mandate, for the acquisition of commercial items. Further, as discussed above, it is clear that, in structuring the OASIS+ solicitation, the agency took affirmative action to accommodate commercial item contractors and to encourage their participation; BCG has not demonstrated that the agency's efforts in that regard were clearly unreasonable. Finally, the agency appears to have been successful in such efforts in that no potential offeror other than BCG has filed a protest challenging the solicitation requirements and BCG, itself, submitted a proposal.[26] On this record, we conclude that the solicitation is consistent with FASA's stated preference for the acquisition of commercial items. BCG's protest to the contrary is without merit.

The protest is denied.

Edda Emmanuelli Perez
General Counsel