There is a a DoD contracting office whose contract vehicle of choice is an “omnibus” multiple award ID/IQ contract that has a large number of primes (20+), a base period of 10 years with no options, and permits FFP, CPFF, CPAF, and T&M task/delivery orders. Each prime contract had a nominal minimum and a maximum equal to the anticipated value of the entire contract ($2B). The statement of work is fairly broad and provides for the development and delivery of various systems in support of the program offices that this contracting office supports. This contract does not have any priced CLINs or established prices, no established profit/fee guidance or cap, and no established overhead rates. Each “order” is competed (for the most part) under the concept of fair opportunity and allows each contractor to propose prices/costs as the requirement seems to dictate. CLIN’s for each order are created as required to meet the needs of the requirement. Prime contractor’s can add/subtract “team members” as needed to compete under the fair opportunity concept. When this MAC was competed 2-3 years ago, it was stated that it would be the preferred vehicle for requirements for the program offices that the contracting office supports. There is a “reopener” clause included in the contracts that permits other prime contracts to be added in the event it is decided by the Gov’t that it is needed to sustain a competitive environment. This contract also has a clause that permits competition/award of orders on a small-business set-aside basis. Under these circumstances, only the small businesses that have prime contracts have the fair opportunity to compete. An argument has been made that what that contracting office has created is an agreement to restrict competition to a group of best-value selected primes. The argument also contends that a valid ID/IQ contract does not truly exist. What I’m looking for are thoughts on this argument and perspectives on the CICA compliance of this MAC (not to mention regulatory considerations of some other well-founded contracting principles).

By Anonymous on Tuesday, January 28, 2003 - 02:56 pm:

If the contract has no priced line items how was best value analysis achieved?

By Anonymous on Tuesday, January 28, 2003 - 03:05 pm:

I personally don't see problems with this. This is similar to some other big contract vehicles such as the HHS "ITOP" and the Commerce "COMMIT" programs.

The awards are competitively established. The extent of what offerors compete for, which is an ID/IQ contract with known min and max for work spelled out in the SOW, is clear cut. Furthermore the ground rules for task orders are spelled out. So if the resulting orders are within the scope of the contract and the task order award process is consistent with what is laid out, it is fine.

It's also commendable that the agency does small business set-asides.

I'm curious as to why you think it doesn't comply with CICA as well as the other regulatory considerations.

By AnonyMAC on Tuesday, January 28, 2003 - 03:38 pm:

As I understand it, the best value decision was made based on a demonstrated understanding of the technology areas identified in the SOW, a demonstrated ability to manage such areas on a program level, and past/present performance in those technology areas. To understand how the offeror might price things, a representative list of labor categories was provided as a part of the RFP. Each offeror provided their rates for each of these labor categories (though they are not used to price any orders). The Gov't established the maximum (dollar figure) that is the same for all of the primes. As best as I can tell, the ability of an offeror to price the labor categories, the presence of an approved acct'g system, and a track record of pricing orders was also evaluated. In essence, it appears that if an offeror demonstrated an acceptable track record in the technology areas of the SOW they were awarded a contract.

By formerfed on Tuesday, January 28, 2003 - 03:50 pm:

AnonyMAC,

I believe they had to consider price/cost in the award selection. From what you described, they must have done a price realism exercise or had offerors propose against something like a model/sample task.

By AnonyMAC on Tuesday, January 28, 2003 - 04:04 pm:

The reason for initiating a discussion on this topic was to help resolve the question of whether or this MAC is consistent with the principles of CICA. Not sure yet if I think it is or isn't. One argument on why it isn’t CICA compliant is that it appears that this agency has created a MAC environment to limit competition to those contractor’s who received awards when the MAC was competed. The lack of anything resembling pricing is bothersome from the fact that orders are competed as if no MAC exists. In other words, the MAC primes are free to propose any combination of labor, materials, overhead, and profit as they see fit under each competition. For example, GSA FSS contracts are ID/IQ MAC’s. They have a price list of one form or another that you can use in any combination to arrive at a price and has established procedures for discounting those prices in the event it’s a significant order. These MAC vehicles don’t have anything like that. I can’t speak for the ITOP and COMMIT MAC’s you reference. This SOW permits orders for product deliverables that can run the spectrum from small to large in both size and unit cost. Clearly, the prime contracts were competed so at least the principles of CICA were considered; however, the SOW is very, very top level and is in terms of technology areas vice specific requirements so, in practice, it almost appears that it’s more of a qualified bidders list (if you will) wrapped in the terminology of a MAC. The small business set-aside element of this MAC is commendable, but an argument can be made that it doesn’t truly follow the intent of the rule of two of FAR 19.502-1 as the rule of two is applied only to the SB’s that have awards under this MAC.

By AnonyMAC on Tuesday, January 28, 2003 - 04:13 pm:

Formerfed-

The offeror’s proposed against a set of T&M labor categories. To the best of my knowledge there was no sample task order. Only the labor category rates were evaluated for price realism/reasonableness. I believe part of the idea was that real price/cost realism would be evaluated as a part of the fair opportunity process. Keep in mind that relative to discussions on the RFP I have only the solicitation to go by. Can’t really speak for what was actually done as I was not a participant.

By Vern Edwards on Wednesday, January 29, 2003 - 07:58 am:

If the contract was competed as described in the last post, then I don't think it was done in compliance with CICA. The GAO has ruled in the past that price must be an evaluation factor and that evaluation of rates alone is not sufficient.

Such a contract does nothing more than to establish a limited pool of prospective offerors for future competitions that are shielded from protests. It may be administratively economical, but it is the kind of thing that will lead to stricter limitations on task order contracting in the long run. It is not consistent with the spirit of CICA.

By formerfed on Wednesday, January 29, 2003 - 09:12 am:

AnonyMAC,

Do you know someone in that office to ask, or is there any way of finding out more on the price evaluation? It just seems odd that something flawed like that could slip by. I would expect an unsuccessful offeror to at least protest on that issue.

By ANON2;56 on Wednesday, January 29, 2003 - 09:25 am:

Vern is right on the money.....and along with your comments on small business what about the rule of two for Hubzone firms. Secondly I think the ITOP was a DOT action. One of the unplanned outcomes was use of the MAC disrupted many of the 8a,HZ and SB plans operating administrations were trying to execute.
By the way were the minimums high enough to compel submission of sub contracting plans by the large MAC holders?

By AnonyMAC on Wednesday, January 29, 2003 - 09:59 am:

Formerfed/Anon2;56-

Price was evaluated. To paraphrase from the solicitation, the T&M labor rates were multiplied by the estimated hours the Gov’t determined to be representative of the effort anticipated to be expended as T&M for the first couple of years of the contract. In practice I don’t see that the T&M rates have been used much as few of the orders have been T&M in nature. My guess is that if I’ve read this correctly it “slipped” by because some of the necessary elements where there on face value and that there was a combined lack of expertise in MAC contracting on most levels. To my knowledge, no protests were received, but that could be because just about everyone who demonstrated a technical competency got a contract.

Subcontracting plans were submitted (not because of the minimum but because of the anticipated value). In practice, individual orders do reflect varying subcontracting goals as appropriate for the order in question.

I have to admit the lack of identified prices for anything in the basic contracts give me reason to pause. Pricing for individual orders appears to be unique to each requirement and not based on anything in the contract or provided in response to the solicitation.

Mr. Edwards statement that “Such a contract does nothing more than to establish a limited pool of prospective offerors for future competitions that are shielded from protests” appears to hit the nail on the head.

Maybe I'm missing something, but I've talked to one or two folks in that agency and I think that I've got the story straight. Seems like a inquiry waiting to happen.

By formerfed on Wednesday, January 29, 2003 - 11:18 am:

AnonyMAC,

Your statement that "it “slipped” by because some of the necessary elements were there on face value and that there was a combined lack of expertise in MAC contracting on most levels" might be a good way to summarize it.

Based on what you've said thus far, there are both positive and negative perspectives.

On the negative side, just using T&M rates to evaluate proposals is shaky at best. One could argue they are indicative of an offerors entire pricing structure so T&M is a realistic indicator of pricing in general. The big problem is you said they are priced only for the first couple years of a ten year contract. If there's no link of option year prices to what was bid, in effect these are unpriced options and the option isn't valid. Having too broad a SOW where just about anything in the way of a task order fits is suspect as well.

The only thing that is good from what you said is that the task orders are competed. As long as this continues and nothing gets priced exceptionally out of line as what might happen with a sole source, maybe no inquiry ever happens.

By formerfed on Wednesday, January 29, 2003 - 11:20 am:

AnonyMAC,

I just remembered you saying there are no options. How then are prices established beyond what was proposed?

By AnonyMAC on Wednesday, January 29, 2003 - 12:51 pm:

formerfed-

The contracts include a statement that rates for the remaining years may be requested later. There is no clause or citeable paragraph that I've seen on how the rates would be requested or subsequently incorporated. Given that only a single digit % of orders use the T&M rates it probably doesn't matter. On the vast majority of the orders (which are not T&M) the contractors would seem to simply propose what they think is necessary for labor and material. The contracts do include a statement that such labor categories proposed in orders will be binding for that order. The majority of the orders do appear to be competed; however some are awarded in accordance with the exceptions at FAR 16.505.

You seem to keying in on one of the areas that makes me scratch my head. How can you have an unpriced ID/IQ contract with a min/max where pricing occurs at the order level? Fundamentally I'm beginning to think that they have created a "contract" that restricts competition to a pool of "precertified" contractors for administrative/economical purposes.

By formerfed on Wednesday, January 29, 2003 - 03:15 pm:

AnonyMAC,

I see your concern better now. I originally thought offerors proposed all labor on an hourly rate but were free to discount them when competing for task orders. The really unusual part is how rates are only valid for an initial period, but somehow they get established for remaining years later. Then it looks like price wasn’t appropriately considered in the source selection.

If this program got this far without attracting attention, the issues might never surface.

By Anonymous on Thursday, February 06, 2003 - 01:53 pm:

Vern, you stated that the "GAO has ruled in the past that price must be an evaluation factor and that evaluation of rates alone is not sufficient." Can you provide the case(s)?

By Eric Ottinger on Thursday, February 06, 2003 - 05:02 pm:

Anon,

Take a look at United International Engineering, Inc.; Morrison Knudsen-Dynamics Research; PRC Inc; and Science Applications International Corporation, Comptroller General Decision , No. B-245448.3; B-245448.4; B-245448.5; B-245448.6; B-245448.7; B-245448.8; B-245448.9; B-245448.10, January 29, 1992

“While a reasonably derived agency estimate of direct, unburdened labor rates for comparable labor categories, based upon historical experience, can provide an objective standard against which the realism of proposals can be measured, an agency may not mechanically apply that estimate to determine evaluated costs. It may well be that in some instances an estimate has limited applicability to a particular company, as for example where such company currently employs comparable personnel in the same geographic area for a different combination of wages and benefits. In those instances, any absolute reliance upon estimates could have the effect of arbitrarily and unfairly penalizing the firm and depriving the government of the benefit available from such a firm. Accordingly, in order to undertake a proper cost realism evaluation, the agency must independently analyze the realism of an offeror’s proposed costs based upon its particular approach, personnel and other circumstances. See Allied Cleaning Servs., Inc., 69 Comp. Gen. 248 (1990), 90-1 CPD 275 (realism of proposed prices); Kinton, Inc., supra; cf. Range Technical Servs., 68 Comp. Gen. 81 (1988), 88-2 CPD 474.”

There are several cases where the Comp. Gen. opines that the agency should use sample tasks for the purpose of making cost comparisons. Personally, I am not sure that I have that much confidence in sample tasks used for that purpose.

Eric

By Anonymous on Wednesday, February 26, 2003 - 10:36 am:

Vern/Eric,

I am also interested in following up on Vern's statement about GAO ruling that evaluation of rates is insufficient to meet the requirement that price always be evaluated as part of the source selection process. If, for example, you are awarding a competitive T&M or Labor Hour contract the contract pricing to be evaluated and ultimately awarded is at the "rate" level since there is not a firm SOW established at the contract level -- only at the order level.

Regarding Eric's posting it appears to not be on point since it refers to "cost realism" analysis, which means evaluation of the realism of an offeror's cost proposal under a solicitation for a cost-type contract. The purpose there is to analyze whether a cost proposal is a realistic projection of anticipated costs given the offeror's technical proposal, rate structure and accounting system. What is at issue here is whether competitive price proposals have been substantively evaluated at all as part of the source selection process.

By the way, I agree with Vern and others that the contract and source selection process used here, as described, is an inappropriate application of multiple award contracting to set up a mechanism for future contracting with a preselected universe of contractors within a constrained environment that is not a meaningful contract structure in and of itself.

By Linda Koone on Thursday, February 27, 2003 - 09:50 am:

Anonymous:

I believe that 'S. J. Thomas Co., Inc., B-283192, October 20, 1999' supports Vern's comments regarding evaluation of rates.

The webmaster has a link to this case under the Protest area of this site.

By Eric Ottinger on Thursday, February 27, 2003 - 12:40 pm:

Linda,

Good catch.

However, in the S.J. Thomas case, the agency evaluated only the “markup” (AKA the “load factor”), not the labor rates. The discussion is excellent. Obviously, the GAO is very ambivalent.

http://frwebgate3.access.gpo.gov/cgi-bin/waisgate.cgi?WAISdocID=3676426144+0+0+0&WAISaction=retrieve

I was about to concede that Anon 10:36 appears to be right. I put “T&M” and “realism” into the search. Nothing came up to indicate that this rule would be applied in a T&M type competition as it would in a cost type competition.

However, I see no practical difference, in this regard, between a CPFF LOE tasking contract and a T&M tasking contract. You could argue tht the only thing that you are buying on the T&M is just the labor hour. But that is a silly argument. Nobody just buys hours. We always buy hours to get some work done.

Eric

By Vern Edwards on Thursday, February 27, 2003 - 06:12 pm: