When Booz Allen Hamilton said in a response to a Defense Information Systems Agency fixed price solicitation that its $24.6 million proposal was contingent on a variable labor rate, DISA erred in awarding a contract to the McLean, Va.-based contractor, says the Government Accountability Office.

The GAO, in a bid protest decision dated April 6 but released publically April 29, upheld a protest against BAH by incumbent Solers, of Arlington, Va., which challenged DISA's award on three grounds. GAO upheld all three, including that of BAH "taking exception" to the solicitation's requirement of proposing a fixed price. DISA also misevaluated Solers's past performance and relied on an "incorrect understanding" of the number of engineers proposed by BAH, the GAO concluded.

The solicitation, first issued in July 2010, was for the secure transfer of information between network domains. The GAO recommends that DISA either reopen discussions with offerors or simply terminate BAH's award and possibly give it to Solers.

Under the terms of the solicitation, DISA told offerors to provide pricing information regarding the basis for their fixed price offer, including labor rates. DISA told offerors that most the work would take place at the winner's own  facilities, but BAH's quoted labor rates assumed that much of its staff would be located at a DISA facility, the GAO decision states. That allowed BAH to offer a discounted labor rate based on the assumption that it would have lower overhead, since DISA would be supposedly supplying office space and office equipment such as computers.  

Normally under a fixed price contract, the internal logic behind a company's labor rate is nobody's business but its own, but in this case, BAH said in its proposal that higher labor rates "may need to be applied" if in fact its engineers and developmental staff did not spend a majority of their time working at DISA facilities.

BAH's proposal was premised on its personnel performing significantly more work onsite at DISA than was contemplated by the solicitation, the protest decision states--and because BAH made its labor rate contingent on that premise and also stated an intention to possibly pursue higher labor rates if conditions were different, BAH did not in fact offer a fixed price proposal. 

DISA and BAH's counterargument was that BAH made a fixed price offer with just the "suggestion" that it might request a price adjustment to the contract in the future, an argument the GAO rejected.

For more:
- download the bid protest decision, B-404032.3; B-404032.4 (.pdf)

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