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Acquisitions can go wrong when the agency downplays price, but makes an award on price anyway. That’s what the Air Force found out in one recent buy of professional services. Federal Drive with Tom Temin  got the details from Smith Pachter McWhorter procurement attorney Joseph Petrillo.

Interview transcript:

Joe Petrillo: This is a bid protest brought by the Bionetics Corporation. And it grew out of a procurement by the Air Force of professional and technical services for the Air Force Primary Standards Laboratory which deals with metrology, and the contractor also had to do a lot of technical writing. The evaluation was the best value trade off. And there were three factors were technical approach, past performance and price, with the technical factor being significantly more important than the other two combined. The technical evaluation included staffing approach, recruitment, training and retention. So those were among the more important issues in the procurement. The solicitation had two features that proved important during the protest one was a standard FAR clause used in this type of procurement called evaluation of compensation for professional employees. And second was a statement in the evaluation criteria at the Air Force would not be conducting, quote, a realism analysis of any kind, close quote. So as we’ve talked about in the past, price reasonableness is whether the price is too high price realism is whether it’s too low. As the procurement played out, Bionetics ended up being slightly more highly rated than the awardee, AV international services, the Air Force determined that the differences in the technical proposals weren’t worth an additional 18% higher price. So the result of that was that AB International Services won the procurement, Bionetics protested to GAO.

Tom Temin: So in other words, there was almost a tie in terms of the most important criteria. And given how close they were, then the Air Force went to the lower price.

Joe Petrillo: Basically, that’s it. Now what is Bionetics complaining about in GAO, well the crucial issue turns out to be its contention that the Air Force had not performed the evaluation of professional compensation required by the standard for our clause. The Air Force admitted that they hadn’t done that. But they said, look the solicitation told you that we weren’t going to perform a price realism evaluation. The evaluation you’re complaining about is basically your price realism evaluation. So there was a patent ambiguity in the solicitation, it said two different things that were conflicting. And the rule is that you have to protest that before proposals are received, didn’t, your untimely. GAO considered that issue and agreed with the Air Force that the protest was untimely to the extent the Bionetics was complaining that there hadn’t been an evaluation of realism. So that part of the protest was dismissed. And here’s where it gets a little complicated. The evaluation of compensation clause anticipates two types of evaluations, one whether the awardee understands the contract requirements and proposes a compensation plan appropriate for those requirements. But it also requires a comparison of a proposed compensation with the incumbent contractors compensation to assess whether there’s a risk regarding personnel retention and program continuity. In other words, is the new contractor going to be paying so much less that three employees will bail and the program will be endangered? The first is an evaluation of realism in GAO’s view, the second has to do with the ability to perform the contract, maintain a qualified staff. That issue was timely, because it wasn’t encompassed in this statement that there wasn’t going to be a price realism evaluation. So the Air Force now is in trouble because they hadn’t done that type of evaluation. They hadn’t compared the awardees compensation or professional employees with what the incumbent contractor was compensating them. And that result that resulted in a sustain on the protest because the issue of personnel retention and such is very important in the evaluation criteria.

Tom Temin: We’re speaking with Joseph Petrillo, a procurement attorney at Smith Pachter McWhorter. So the question then is why would the Air Force have knowingly included two contradictory clauses, if you will, in the original solicitation?

Joe Petrillo: Yes, that is an interesting question. They have to go back now and reevaluate the compensation plans perform that missing evaluation and see whether the awardee is posing risks to program or performance and it seems to me that the Air Force put in this clause far clause because they had to, but they really weren’t that interested in going forward with a price realism evaluation. Perhaps they were hoping that the new contractor would in fact be able to cut costs. But that’s not what the far clause explains. It’s a very interesting well written and lengthy far clause that explains the government’s philosophy about making sure that compensation to professional employees is adequate so that they get the level and quality of services that they need. And sometimes when you include these clauses, you’re just including a one line citation to a far section, people sometimes forget that they’re there and don’t really study the contents of the clause. In this case, the contractor should have done that, as well as the agency because they failed to protest on the price realism issue, before proposals were issued.

Tom Temin: And there’s also the background assumption here that the Air Force thought that the new contractor coming in if there was one would retain basically the staff doing the work, just working under a new company. So I wonder if in some subtle way, the Air Force wanted new people to come in under a new contract, and not have the incumbent people stick around?

Joe Petrillo: Yeah, that’s unclear. It does seem that maybe that was one of the issues. But the assumption in the evaluation of compensation clause is that you want to retain people who’ve got understanding of the program and the necessary skills, I have to imagine that qualified metrologists are not all that common and might be difficult to fill slots like that if they become vacant, especially if they’re not familiar with what the Air Force is particular needs are in that area.

Tom Temin: Well, I don’t know the metrological metrics either, but what happens now that the protest has been sustained, does it switch over to Bionetics or do they have to start over?

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Joe Petrillo: Well, the Air Force has to reevaluate the compensation plans. And if the awardees compensation is lower than the incumbents are, there’s a significant gap there that could endanger the contract award, but then you’ve got to see what the other vendors have done in that area. So the question is, is the 18% price difference between the protester and the awardee something that is reflected in professional compensation, and if so, does it cause some risks here that should be evaluated?

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