We all know that contracts often ride on price. But as SAIC found out, if the government doesn’t believe you can do the work for the price you proposed, it just might adjust it upward, then deem your proposal too expensive.

Protesting contractor: Science Applications International Corp., McLean

Lesson: Offer a realistic price if you want to win contracts

Decision: Denied by Government Accountability Office August 5, 2013

Post-mortem: The Navy issued a request for proposals for information technology services, informing potential offerors that the Navy intended to award a cost-plus fixed-fee task order. As RFPs often claim, non-cost factors were to be significantly more important than cost, “with cost becoming more important as the ratings for non-cost factors approached equality.”

This was the second proposal. After the first proposals SAIC was awarded the contract and SRA International Inc. of Fairfax filed a protest. As a result, the Navy took corrective action and issued a new solicitation.

In the second solicitation the Navy informed offerors that if costs proposed appeared unrealistic they might infer among other things, a “lack of credibility” on the part of the offeror. Both SAIC and SRA proposed offers that the Navy determined to be unrealistic. The Navy determined that SAIC offered a price that was $12.9 million below the actual cost, and SRA offered a price that was $17.9 million below the actual cost. The final evaluated proposals, with the Navy’s adjustments, resulted in SRA offering a price that was $2 million less than SAIC. With all other technical factors essentially identical, the source selection authority determined that SAIC’s proposal “offered no particular advantage to the government that outweighed SRA’s… cost advantage.” SRA was awarded the task order.

SAIC protested a number of grounds, some of which it withdrew during the course of the protest. Its primary arguments centered on an objection to how the Navy had conducted its cost realism analysis, specifically arguing that the Navy unreasonably increased SAIC’s labor rates to match the incumbent’s rates. The weakness with SAIC’s protest is that there was a very specific requirement in the solicitation to document how an offeror achieved its proposed labor rates. The GAO found that the Navy’s cost adjustment was reasonable based on SAIC’s “lack of documentation provided to support [its] assertion that it was proposing actual costs.”