Even if the government releases confidential information about an incumbent contractor during a recompete, too bad. It’s not enough to sustain a protest. That’s what a State Department contractor found out when information useful to competitors leaked out. Smith Pachter McWhorter attorney Joe Petrillo sorted out the case on Federal Drive with Tom Temin.
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Tom Temin: What did happen here, Joe?
Joe Petrillo: Right, Tom. Well, this is a story related in the GAO bid protest decision decided a couple months ago, case brought by Tetra Tech the case concern the State Department acquisition for guard services. At the US Embassy in Malawi. contract was typical one year base period for when your options evaluation was LPTA. State Department is willing to go with lowest price technically acceptable proposal for guard services in Malawi. Nonetheless, State Department required offerors to fill out a spreadsheet showing how they derive their pricing than the spreadsheet had labor rates, indirect labor costs, other direct costs, profit margins complete price breakdown. The spreadsheet that was included in the solicitation for offers to fill out was derived from the existing contract, someone in the government took the existing contracts spreadsheet, removed the data and put it in the solicitation. But they made a mistake in that they left in the income and contractors name. And they left in the profit rate for the third option year. So it was a fairly recent contract period that was covered. This was put into the solicitation later amendment took it out, but everyone got to see it. And the incumbent contractor which was going to bid the re-compete protested or Well, first they objected, asked for something to be done. And when that didn’t occur, they protested to the Government Accountability Office. In the protest, they said this was a procurement integrity act violation. And the protests, they also suggested that things should be done to mitigate the competitive harm. They wanted this to be converted from LPTA to a best value trade off. So the lowest price wouldn’t necessarily win. And they also wanted the agency to require a profit floor, basically a minimum percentage required to be proposed as profit by all the offer roars to equalize that factor.
Tom Temin: And just to be clear, the only information besides the name of the contractor was their margin in one year, all of the cost basis that that incumbent had put in there — that was not there.
Joe Petrillo: No, that was not there, no information about their direct labor rates or their overhead rates and indirect cost rates, other things like that. So it was a fairly limited release. The reasons GAO gave for denying the protest, which it did seem to be more broader reaching than a limited disclosure. One part of this was based on the fact that the release was inadvertent and accidental. The Procurement Integrity Act requires and knowing disclosure. And GAO came to the conclusion that this was just sloppiness. Someone didn’t intend to release it but they did it in a careless manner.
Tom Temin: That’s an interesting finding because if they had inadvertently released all of the cost basis, labor rates and so forth, then anyone could have easily outbid that company, just by bidding a cent less per hour here and there and maybe taking a cent less profit. And so even if it had been inadvertent, it would still seem to spoil the whole procurement.
Joe Petrillo: A very good point. I mean, maybe there needs to be a better mechanism than the Procurement Integrity Act, which requires a knowing disclosure. A careless disclosure can be just as harmful as you’re pointing out.
Tom Temin: So what’s the aftermath, too bad, and what happened?
Joe Petrillo: Well, there’s another part of the GAO holding, I think that also raises a question about what should be done about these situations. And that is, GAO held that this wasn’t information covered by the Procurement Integrity Act. The Procurement Integrity Act covers information that basically is in bids and proposals in terms of the contractors information, information that that’s submitted with the proposal for the procurement and question this related to the prior contract. And so according to GAO, it wasn’t even covered by the Procurement Integrity Act. So we have their question about whether there is a gap in the Procurement Integrity Act that maybe needs to be filled, and maybe there needs to be something else that’s done to address situations where competitively important information is released.
Tom Temin: Is it also a little surprising to see a services contract like guard services listed as lowest price technically acceptable? When you think of technically acceptable, does that mean the guards are upright and breathing and they will stand on this square on the floor in front of the Guard Station — what does that mean?
Joe Petrillo: Depends on how the State Department defines it in the solicitation. And that wasn’t really discussed in this particular case. But if you are going to go down the LPTA route, why asked for a breakdown of the cost elements. It seems to me that the only thing you could do with that is look at it and decide whether or not it’s unrealistically low, as if there’s some number in your head where if the offer goes below that for cost element, you don’t think they can perform the contract. It’s a very odd way of, I think, conducting your procurement. And it does show the advantages of having caused technical trade offs where you can make qualitative decisions about these things.
Tom Temin: So do we know who won the re-compete?
Joe Petrillo: Not the GAO decision, and I’m not sure it’s even been decided yet. But we’ll have to see how this unfolds in the future. If the Procurement Integrity Act isn’t available, maybe there are some other legal hooks available for those whose information is disclosed by the government, even if accidentally, and where it has a major competitive impact.
Tom Temin: Joseph Petrillo is a procurement attorney with Smith Pachter McWhorter. Thanks so much.
Joe Petrillo: Thank you, Tom.