Bidding can be counterintuitive

You know a bid protest is going to be a fun read when the discussion section opens with: "As an initial matter, both protesters argued that BAH could not have submitted a proposal meriting a technical factor rating of outstanding given BAH’s alleged poor performance as the incumbent." Cue the Michael Jackson popcorn gif!

It's such a common-sense argument: "sure, they may look good on paper, but they suck!"[1] But this isn't common-sense, dear reader. This is government contracting and there are rules! And the first rule is to do whatever the solicitation says.

The solicitation said that, to win, a proposer's "technical approach" was going to be the most important thing, followed by past performance, and then by price. You might be able to anticipate where this goes...

Technical approach and past performance are different things! In the scheme of this solicitation, how you performed in the past is less important than how you say you're going to perform this time. Contrary to the conventional wisdom in life about only being as good as your last performance: when responding to this solicitation, you're only as good as your next performance!

Thus begins the opening salvo of Cognosante MVH, LLC; Pro Sphere-Tek, Inc., B-421150,B-421150.2,B-421150.3,B-421150.4,B-421150.5,B-421150.6 (Jan 10, 2023), a high-stakes bid protest concerning the VA's replacement of its Electronic Health Records Management (EHRM) system, which was awarded to Booz Allen Hamilton Inc. (BAH) to the tune of $860M.[2]

Before getting into the other salvo that I'm going to write about, let's get philosophical. This is definitely not legal advice, but there are really three options in most bid protests: (1) the agency screwed up some procedural thing; (2) the agency rated the winner too high; and (3) the agency rated the protestor too low.

After GAO rejected the past-performance thing, the next logical move is to argue that the agency rated the protestor too low. A lot of the time this really doesn't work, and this time was no different.

But, this one is kinda wild.[3]

Remember how the "technical approach" was the most important thing for the proposal? Well, one of the protestors — ProSphere — argued that the VA screwed up by rating its technical approach too low. Unlike BAH, which received an "outstanding" rating, ProSphere received an "acceptable" rating because it had a weakness that risked delivery:

The record shows that the evaluators assessed a weakness in ProSphere’s proposal under the technical factor because some of the firm’s proposed rates were unrealistically low, which “reduce[d] the feasibility of the Offeror’s approach for attracting, recruiting, and retaining a skilled workforce."

Ok, look. On the one hand, good on the VA for looking at a contractor's labor rates and saying "this is risky because they won't actually be able to hire people". Anyone who's been on the business end of an inverse pump-and-dump maneuver[4] is a bit wary when the price looks too good to be true.

But on the other hand, it is kind of a weird thing to say "you're not charging us enough"?

How did they reach that conclusion, you may wonder? How did the VA conclude that the rates were too low? Here's where it becomes sort of hilarious. As it turns out, the VA maintains a "database" — probably an Excel spreadsheet — that they call the "Book of Awarded Rates (BOAR)", which is updated monthly, contains the lowest rate for every labor category on the T4NG contract vehicle, and is a great government acronym.

In conducting the rate comparison, the contracting officer found rates “available in the BOAR for all of the [labor categories] required for this effort.” The contracting officer considered any rate that was ten percent or more below the lowest awarded T4NG rate to be unrealistically low, and the record reflects that this threshold was chosen “to allow for a reasonable variance from the minimum awarded rates to account for competition.”... The contracting officer’s initial analysis found that approximately [DELETED] percent of the total hours proposed by ProSphere were “associated with unrealistically low rates.”

In other words, because ProSphere's rates were more than 10% below BOAR rates, the VA downgraded ProSphere's technical approach.

ProSphere argued that the VA "should have used 'an industry accepted standard, such as the Economic Research Institute.'" And the agency said "yes, but we used the BOAR!" And GAO was basically like "yeah, that's fine!"

This legal analysis, on paper, seems totally internally consistent and reasonable. The VA isn't required to go out and obtain commercial data when it has its own data source, thank you very much.

But it's also kind of funny? Because a contributing factor to the government paying $200 million more for BAH to do the work over ProSphere is that maybe the government already pays too much for its incumbents?

Like, it'd be one thing if the past-performance score of ProSphere were lower than BAH, indicating that ProSphere's rates meant it had a lower-quality workkforce with unrealistically low rates. But ProSphere had a much higher past-performance score than BAH and a much lower price. And, anyway, remember past performance in this solicitation is less important than what you say your future performance is going to be.

I guess that, as a blind item, I wouldn't have expected that the low bid with the highest past-performance rating would get dinged because it was too inexpensive? But that's the way government contracting goes sometimes!

In conclusion, the case teaches two counterintuitive lessons: (1) you're only as good as your next performance, and (2) you should only be as cheap as the last lowest bidder.[5]

[1] I should be very explicit that I am not making this argument. I am just characterizing the protestors' argument. I don't have any personal knowledge whatsoever of how BAH performed! They might have been awesome! I sure don't know, so calm down.

[2] When I first sat down to write this post I thought that it would be mostly about the arguments in the protest about organizational conflicts of interest (referred to as "OCI" in the biz). But in this case, the OCI analysis was not actually all that interesting and I'm just going to skip it (and other items, too). Sorry, lawyers, you'll need to read the opinion yourself.

[3] Well, one of the situations was wild. The others might be too, but I can't really tell because the opinion has so many redactions! For example, the opinion has sentences like this, which feels like a bid-protest version of a circa 1992 Dr. Dre radio cut: "The evaluators explained that the combined use of these tools would enable BAH to: '[DELETED]'; '[DELETED]'; [DELETED] as well as 'provide [DELETED]'; and '[DELETED]' by providing new hires with [DELETED]." My read of the opinion is that GAO is doing a lot of deference to the agency's analysis. But I dunno, man, it can be hard to reason about this [DELETED] sometimes.

[4] I just made that up! Surely, there's a better name for this!

[5] But please maybe don't treat these as (1) life lessons, (2) legal advice, or (3) bid-strategy advice?

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