By Brian Hebbel
Most of the Government acquisitions for services awarded in 2021 were Best Value Acquisitions, or at least, that’s what the solicitation stated. As a Government contracting officer for over 30 years, I have seen some disturbing trends in terms of how Best Value acquisition awards and other negotiations are being completed in FY2021. As a taxpayer and former public servant, based on these trends, I’m not sure contracting officers are making the best decisions for the services being provided to our nation.
From what I have seen, Best Value (BV) appears to be disguised as Lowest Priced Technically Acceptable (LPTA) and Schedule and GWAC contracting officers in some cases are driving down labor rates, making it difficult for contractors to hire and/or retain staff, even if they win a contract award. In other cases, the Fixed Price of a contract has no bearing on the technical proposal being submitted. What does this all mean? In my opinion, the net result is that the Government is not getting the best contractors, best contractor employees, or best technical solutions to perform the services needed. This is a significant concern, particularly at this point in time when our nation is under stress for a lot of reasons (COVID, Ransomware, etc). To support this sheepish thesis, let’s discuss some acquisitions I have witnessed over the past year. In addition, I’ll discuss what contractors can do to overcome this alarming trend.
We all know what the evaluation criteria for most Best Value solicitations state: The Technical Proposal is significantly more important than the Cost Proposal; the Technical Proposal is more important than the Cost Proposal; or the Technical Proposal and Cost Proposal are equal. However, are these variations as impactful as we think in terms of the contracting officer making an award based on Best Value?
When contracting officers are making Best Value Determinations/Decisions and documenting their contract files, cost is a fairly objective decision point, particularly on Fixed Price efforts where a “Cost Realism” is not required. The Technical Proposal Evaluation, on the other hand, is subjective. One aspect contained in a technical proposal may be evaluated as a strength by one technical panel, while a different technical panel may find it as a deficiency or weakness. I’ve witnessed this dozens of times during the Mock Technical Evaluation Panel Exercises my company provides to industry.
As I searched GAO 2021 Protest decisions, a few key points popped out:
- GAO will not reevaluate proposals or substitute their judgement for that of the agency but will ensure the judgement was reasonable with the stated evaluation criteria. (Epsilon: Feb 2, 2021)
- Agencies are not required to spoon-feed an offeror during discussions by identifying every possible area where a proposal may be improved. (Torrent Technologies: Jan 19, 2021).
- An agency may properly select a lower-cost, lower rated technical proposal if it decides that the cost premium involved in selecting a higher rated, higher cost proposal is not justified. (Stargate Inc; January 22, 2021).
What does all of this mean? Contracting officers often have a tough time making Best Value Source Selection decisions. It is a subjective process, and the apparent awardees are often not self-evident. The trend is not to have discussions but to pick a contractors’ based on the initial proposals to avoid protest risk; or to pick the contractor with the lowest cost because it is easier to document the rationale. The trend includes more fixed priced contracts; less data to evaluate the fixed price; and easier decision-making for contracting officers based on price.
In one contract award in FY2021, I witnessed an incumbent contractor receive a follow-on award, basing their fixed price at one-third of their previous contract award amount for the same work. The solicitation included a technical proposal and a bottom-line fixed price with no backup data required to support the price. This was a crazy award for sure, but easy for the contracting officer to evaluate based on the price. The FAR 15.305 (a) (1) states… “Normally competition establishes price reasonableness. Therefore, when contracting on firm fixed price… comparison of the proposed prices will usually satisfy the requirement to perform a price analysis.” No detailed analysis is needed, and the bottom line is acceptable.
If the Government is following this trend, is it receiving high quality labor/services in its contracts or are the services being received merely the minimally acceptable services?
Is this why studies have shown there is an actual documented trend in CPARS ratings heading towards more Satisfactory ratings in all evaluation areas including Quality, Schedule, Cost and Management?
As a former contracting officer for over 30 plus years, I can tell you for sure that it is easier to pick a lower cost, lower rated proposal over a high cost, higher rated proposal. Contracting officers have to justify in writing paying a price premium for an award. For a lower price, lower rated proposal, all they have to say in their award document is that: “They couldn’t justify paying a premium price for the higher technical rating.” It is harder to justify paying a price premium than it is to not justify it. As the cost difference becomes greater, it becomes even harder for a contracting officer to justify paying a price premium. Therefore, I see the trend continuing, as past studies have proven, that price is the reason most contractors lose opportunities.
This leads me to GSA. I’ve witnessed GSA MAS contracting officers/negotiators driving down labor rates as new GSA MAS contracts (not task orders) are being negotiated. They are demanding discounts below contractors’ current labor rates, and in my opinion, not taking into consideration the real inflation rates and the changes to the information technology workforce resulting from COVID. The workforce can now work from home for any contractor in the country. Government contracts are not tied to a particular location, at least for the time being. Contractors now have better access to top candidates from around the country who can perform work on Government contracts. As a result, labor rates are being driven higher. My fear for contractors negotiating contracts with GSA is that they will not be able to find labor/ candidates willing to work at the rates negotiated with GSA. Social Security beneficiaries are expecting to see raises of over six percent at year’s end. So why is GSA driving down the labor rates?
GSA’s attempt to drive down labor costs places more risk on Government contractors to successfully complete the work and more risk on the Government for successful contract completion.
I think COVID has upended the labor pool and GSA’s negotiation tactics are not matching the reality in the marketplace. As a tip, I was told by a former colleague that you can go back to GSA after the first year of a GSA MAS contract award and renegotiate your labor rates. You may want to consider this going forward in FY2022. The result of all of this is that Best Value, fixed price acquisitions may again result in the Government receiving awards from the lowest priced offers, with additional risks being placed on contract performance.
I have also witnessed contractors having difficulty finding the information technology labor on fixed price contracts awarded prior to COVID. Labor rates have gone up and for small businesses in particular, this change has left them holding the bag. IT personnel know they can secure, and are demanding higher wages, at the threat of seeking new employers. As a result, contractors — small business contractors in particular — are having difficulty retaining their labor pool if they are not receiving a competitive salary. If Government officials do not recognize these changes in the marketplace, high quality skilled personnel will find other jobs, resulting in a lower quality of skills and services being provided to the Government.
What do these trends mean? There is now a struggle in the marketplace to win contracts and keep labor rates low. There has always been that struggle, but COVID has had a significant impact on it. Even though industry sees and feels the winds of change, Government contracting officials do not easily see or know how to handle these marketplace trends. As a result, contracting officers will continue to call acquisitions Best Value, when in reality, they appear to be Lowest Priced Technically Acceptable procurements in Sheep’s Clothing. Be careful as you move through FY2022, or you might find your contract wins and the bottom-line being clipped and sheared before you know it. If this becomes reality, who wins? You be the judge of that.
Happy and healthy FY2022. All the best always!
About Brian Hebbel
Brian Hebbel had more than 34 years of Federal contracting experience, prior to his retirement in 2017. He was a Senior Acquisition Official (Group Director) at the Centers for Medicare & Medicaid Services, Office of Acquisition and Grants Management. Prior to his retirement, he was the longest serving contracting official at CMS, provided oversight to three contracting divisions awarding $1,500,000,000 in contract awards in FY2017. He provides consulting services and unique contract training to industry.
He is an author of “How to Market & Sell to the U.S. Government, A View from the Inside”. Brian is the President of Bring Acquisition Results to Contractors (BARC).
Additional content from this year’s edition is available here.
