Agency’s Use of Independent Government Cost Estimate (IGCE) was Rational

In this post-award bid protest case, a contractor who offered the government a very low price on a government contract failed to win the award. It complained that the Agency improperly used an inadequate Independent Government Cost Estimate (“ICGE”) to conclude that the contractor was not offering a realistic price. The Court of Federal Claims held that the ICGE was adequate and dismissed the bid protest. The case is D&S Consultants, Inc. v.United States,2011U.S.Claims LEXIS 2098 (October 14, 2011).

This case is also an important illustration of perils a contractor can face by bringing its protest to the Government Accountability Office (“GAO”) before appealing to the Court of Federal Claims. Had the contractor skipped the GAO its protest and gone straight to the Court of Federal Claims, its case would have been much stronger.

The Department of Veterans Affairs (“DVA”) issued a Request for Proposals for its Transformation Twenty-One Total Technology (“T4”) Program – a total IT services solution for the Agency. The DVA anticipated entering into fifteen Indefinite Delivery/Indefinite Quantity, Multiple Award Task Order contracts with contractors. The ceiling value of the T4 Program was $12 billion with a minimum of $50,000 guaranteed to each awardee. The protester in this case, D&S Consultants, Inc. was one offeror who was unsuccessful in joining the top 15. It protested to the GAO, lost, and appealed to the Court of Federal Claims. During its GAO protest, the DVA supplemented the Administrative Record with “explanations” regarding the ICGE.

The main basis for D&S’ procurement protest was the ICGE. The contractor acknowledged that the DVA was permitted to make a “price realism” analysis, but was upset that the ICGE (1) lacked sufficient records to support the calculation, and (2) was based on irrational assumptions and critical miscalculations. After all, if the ICGE is inaccurately high, a contractor can legitimately and competitively offer the government prices below that estimate.

On the first point – the sufficiency of the records – D&S’ claim was weakened by its trip through the GAO. At the GAO proceeding, the DVA supplemented the Administrative Record. D&S complained that these supplements were “post-hoc rationalizations” that were not considered by the DVA at the time of the award and shouldn’t be considered by the Court. The Court, however, ruled that these supplements were not post-hoc documents, rather they were “explanatory materials that did not offer new rationales for past decisions” and that they merely “illuminated the methodology the agency employed.” The Court noted that the Agency need not provide an exhaustive detail in support of the calculation. It also noted that the contemporaneous documentation was sufficient. (In past cases, documentation of only one page was deemed insufficient, but one that was ten pages was sufficient).

The Court then held on the second point that the Administrative Record (as supplemented) showed that the DVA did an adequate job in developing and applying the IGCE.

D&S also argued in its protest that the DVA (1) failed to properly consider its competitive advantages that justified its low price; (2) failed to evaluate its proposal accordance with the RFP’s evaluation criteria; (3) failed to consider that its apportionment of hours was rationally related to its ability to recruit and retained the necessary workforce; (4) improperly concluded that it would have difficulty recruiting and retaining an adequate workforce; (5) engaged in misleading and inadequate discussions with it; and (6) engaged in unequal discussions with competitors. The Court disagreed with each contention by giving a lot of deference to the DVA’s judgment.

The procurement protest was overruled.

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