Even the small awards matter to the big contractors

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The big services contractors didn’t get that way by giving up on small awards. Deloitte and Grant Thornton have been protesting tooth and nail over a contract worth less than $3 million, and it’s not over yet. With the story, procurement attorney Joseph Petrillo of Petrillo and Powell joined Federal Drive with Tom Temin.

Interview transcript:

Tom Temin: And I guess you get big by arguing over the small things, Joe, but tell us about this particular deal that’s been trying to be awarded for a long time.

Joe Petrillo: Well, that’s right. As you point out, it’s not the biggest professional services contract available out there, but it’s been hotly contested. This is a procurement by Treasury for an accounting system that’s going to be used by HUD to develop Congressional Budget justifications. So it’s fairly specialized. In any event, there was an evaluation of technical proposals in the competition, which placed more emphasis on technical factors than on price. And after the initial proposals were submitted, the two competing companies in this instance, Deloitte and Grant Thornton, were evaluated as follows. Deloitte had a technical score of 100 points, Grant Thornton 91 points, but there was a big price difference. Deloitte proposed a price for about $3 million. And Grant Thornton was at 1.3. And this is a fixed price. So it’s not a cost estimate.

Tom Temin: So one was 10% better, but the better one was almost three times the price.

Joe Petrillo: Looking at the numbers, that’s how it came out. Interestingly, we’ll find out how important these numbers are later in the discussion. Given that situation, Grant Thornton protested.

Tom Temin: So the award did go to Deloitte for the higher price.

Joe Petrillo: Exactly. And the the advantage that Deloitte had was technical excellence there, and Grant Thornton felt that was a huge price difference. So they brought a protest and Treasury decided not to fight the protest. Even though it was a GAO and GAO will allow agencies to take corrective actions That’s what Treasury did here. They said they would cancel the award, conduct negotiations receive revised proposals. They went ahead and did that. And after the revised proposals were submitted, Deloitte still had the technically superior score of 70. I don’t know they may have changed the point scale wasn’t clear from the decision. A Grant Thornton was at 62. Deloitte cut its price about 10% to 2.7 million Grant Thornton stayed at 1.3. This time, however, Treasury decided that it would go with Grant Thornton, and Deloitte protested again to GAO. Aright. So we’ve got one of those procurements. Deloitte raised several objections to the evaluation. One didn’t get anywhere basically that the technical evaluation hadn’t given them adequate credit or those types of issues. They went nowhere, but two other issues were successful. One was that Deloitte contested that Grant Thornton proposal had failed to meet a mandatory requirement of the solicitation. Solicitation had a schedule that the contractors had to meet. There were three phases in the schedule, there were lists of what had to be accomplished in each phase. And Grant Thornton took two exceptions. One item, it shifted from the required phase of the schedule to a later phase. And the second item said, well, we’ll do our best to do this by the last phase. But if we can’t, then it may have to get postponed to the warranty phase, which really wasn’t a phase at all, it was after after performance was supposed to be finished. Or a later phase, which was confusing because there wasn’t any later phase.

Tom Temin: So these were protests that sounds like they were outside of the technical evaluation but more of I guess program performance, but nevertheless, that was the grounds for protest?

Joe Petrillo: Well, yeah, this is the concept of meeting mandatory requirements of a solicitation. In the sealed bidding world, you think of a question of whether an offer is responsive or not. In other words, does it meet all the things you have to in the solicitation. And in the negotiated contract world, the concept is called mandatory requirements of the solicitation, same idea, if you have to do something, and you say, well I’m not going to do that, it’s not fair for you to win that contract when other offerors are agreeing to do everything they’re required to do.

Tom Temin: Got it. Alright, so here we are back to the point where Grant Thornton has gotten the award. The second time Deloitte has protested on those grounds. Then what happened?

Joe Petrillo: Well, after that, what we’ve got is a situation where there’s a second issue that is successful. And this one goes back to your observation about the point scores. If you looked at the evaluation record, they were heavily reliant on assessing the differences in technical quality based on the point scores. And Deloitte had said, well, there’s no meaningful explanation of what the differences are and whether the price differences are worth the technical differences. And that’s the issue that has to be addressed. Usually, we see this kind of issue coming up where someone has a pretty close technical score, and a very much lower price, as happened here — but it’s it’s the low priced offeror that’s bringing the proposal and saying, hey I wasn’t that much worse, you could save the government some money if you go with my offer. In this instance, it’s the higher priced offer. But in GAO’s mind, the principles are the same either way. GAO does not like an evaluation that rests heavily on the technical scores, what they want to see or what are the specific differences and an explanation of what they’re worth to the agency.

Tom Temin: Got it. In this case that simply was not there, there was just a numerical score and two widely divergent prices.

Joe Petrillo: There was simply not enough of an explanation to satisfy GAO. And some of the explanation that was there didn’t seem to make much sense. For instance, on the reevaluation, Treasury decided that Grant Thornton could in spite of its lower technical score make an on time delivery – which GAO pointed out wait a minute, there’s one aspect of performance that they haven’t promised to do within the scheduled period, so how did you come to that conclusion?

Tom Temin: Alright. So where does it stand now? I mean, the award went from Deloitte then ended up with Grant Thornton with Deloitte protesting the second time around, who’s the final winner here?

Joe Petrillo: Well, the recommendation from GAO is that Treasury can conduct a proper evaluation, look at these differences, and either award to Deloitte with Grant Thornton out of the running right now because it’s proposal doesn’t meet the requirements. Or reopen for another round of discussions and another round of proposals and yet another evaluation. So that’s the choice.

Tom Temin: And meanwhile, the ultimate customer, HUD, is waiting for Treasury’s Assisted Acquisition Service, whatever they call it, to get through this.

Joe Petrillo: Well, I guess you’re right. They’re having to, you know, continue with whatever system they have in place to do Congressional Budget justifications.

Tom Temin: Joseph Petrillo is a procurement attorney with Petrillo and Powell. Thanks so much.

Joe Petrillo: Thank you, Tom.