Government Contracts Upward Cost Adjustment Arose from Unwarranted Assumptions
Wednesday, April 7, 2021

Upward Cost Adjustment Arose from Unwarranted Assumptions

By Government Contracts Editorial Staff

An upward cost adjustment to the protester’s proposal was improper because it was based on the cost evaluator’s unwarranted assumptions. The request for proposals contemplated the issuance of a predominantly cost-plus-fixed-fee type requirements task order for logistics support services at Fort Benning, Georgia. The RFP stated “[a]ny inconsistency, whether real or apparent, between promised performance and proposed cost must be adequately explained in the proposal.” If an offeror made a business policy decision to absorb a portion of the estimated cost, the offeror had to provide the approach “within the proposal (including any associated calculations).” In its proposal, the protester stated it made a business policy decision to provide a “cost-reduction benefit to the Government, wherein [the protester] absorbs [certain costs], and the associated financial risk” and that the benefit provided a “a no-risk cost savings of $22,176,308.” However, based on two concerns raised by the cost evaluator, the government applied an upward cost adjustment of $19,719,898 to the protester’s proposal. The protester contended the adjustment was improper because it made a legally binding promise to assume the costs at issue.

Unsupported Findings. The Comptroller General sustained the protest, finding the cost evaluator’s concerns lacked a reasonable basis. During discussions, the government noted an inconsistency between the protester’s cost and technical proposal. After asking follow-up questions, the protester aligned its cost and technical proposals, priced required items, and explicitly promised to assume liability for lump-sum cost savings reflected elsewhere in its proposal. Nevertheless, based on the protester’s follow-up questions, the cost evaluator found risk in the protester’s approach. This finding constituted “an unwarranted assumption about what [the protester] might do during performance,” arose from an informal and “clearly non-binding” exchange with the government, and was “directly contradicted by the actual contents of the [protester’s] revised proposal.” The cost evaluator’s other concern was that the protester could not absorb the cost of the proposed reduction. However, the evaluator’s belief about the protester’s “fiscal wherewithal” was unsubstantiated, and “the simple fact of the matter [was] that [the protester] expressly assumed legal liability for the cost reduction and explained that it was in a financial position to absorb the amount in question.” Absent the error, the protester offered the lowest evaluated cost/price among the three competitive range offerors, so the Comptroller General recommended the government issue the task order to the protester. (Vectrus Mission Solutions Corp., et al., 36 CGEN ¶117,156)

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