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The following is an installment in Crowell & Moring’s 2023 Bid Protest Sustain of the Month Series.  All through 2023, Crowell’s Government Contracts Practice will keep you up to date with a summary of the most notable bid protest sustain decision each month.  Below, Crowell Partner Cherie Owen discusses MPZA, LLC, B-421568, B-421568.2, July 3, 2023, 2023 CPD ¶ 165, in which GAO discussed the amount of documentation needed to support an agency’s price analysis.

In MPZA, the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) conducted a procurement to acquire IT support services.  The solicitation provided an estimated number of labor hours (1,912) per full-time equivalent (FTE) and provided estimates of the number of FTEs needed in various labor categories.  Offerors were required to propose fully burdened hourly labor rates for each labor category and were permitted to deviate from the solicitation’s estimated FTEs.  However, the solicitation warned that the agency would evaluate proposals that deviated from the agency’s estimates to assess whether the proposed level of effort and labor mix were appropriate for the requirements of the solicitation to ensure successful performance.  The agency would also evaluate whether the offerors’ proposed hourly rates were “reasonable.”  The agency reserved the right to perform a price realism analysis to evaluate whether proposed prices “are realistic, not too low, and mitigate any risk of poor performance on the contract.” 

The awardee, Eagle Harbor, proposed its own labor mix and level of effort, rather than using the estimates provided by the agency.  In challenging the award, MPZA argued, among other things, that, while the agency chose to perform a price realism analysis, the analysis was unreasonable and undocumented.  MPZA also argued that Eagle Harbor’s price proposal was unrealistic.  In resolving the protest, GAO found that the agency had contemporaneously documented its conclusions that (1) Eagle Harbor provided appropriate rationale for its adjustment of the number of labor hours per FTE; (2) its proposed level of effort and labor mix appeared appropriate for the requirements of the solicitation; and (3) its proposed prices appeared realistic.  However, GAO concluded that these documented conclusions were insufficient because they were only that – conclusions – with no explanation of how the agency reached those conclusions.  Missing was any documentation showing that the agency had performed an analysis of Eagle Harbor’s proposed labor hours, labor mix, or pricing. 

GAO further noted that even in response to the protest, the ATF failed to provide any explanation of the analysis the agency undertook to assess the appropriateness of Eagle Harbor’s customized labor mix or the realism of its proposed prices.  In short, GAO found that the agency’s conclusory statements were inadequate and that the agency had failed to explain how it assessed the appropriateness and realism of Eagle Harbor’s proposal. In light of this lack of documentation, GAO concluded that it had “no basis to conclude that the evaluation was reasonable.”  Therefore, GAO sustained the protest, recommending that the agency evaluate proposals consistent with the solicitation’s requirements and document its analysis before making a new selection decision.  

The MPZA decision serves as an important reminder that, even where a solicitation gives an agency discretion to determine whether to perform a particular analysis (here, price realism), if the agency chooses to perform that analysis, it must do so reasonably and must ensure that it sufficiently documents its analysis. 

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Photo of Cherie Owen Cherie Owen

Government contractors of all sizes — from Fortune 10 companies to small businesses — trust Cherie Owen to represent and advise them on a wide range of government contract matters, including bid protests at the Government Accountability Office, the Court of Federal Claims…

Government contractors of all sizes — from Fortune 10 companies to small businesses — trust Cherie Owen to represent and advise them on a wide range of government contract matters, including bid protests at the Government Accountability Office, the Court of Federal Claims, federal procuring agencies, and state courts. Cherie draws on the unique insights she gained as a senior bid protest hearing officer during her 12-year tenure at the GAO to identify the legal arguments and practical strategies most likely to result in strategic wins for her clients.

Clients rely on Cherie to provide counseling regarding contract formation and negotiation with respect to procurement contracts, grants, cooperative agreements, and Other Transaction Agreements. She also advises government contractors on business and compliance matters, including subcontractor agreements, suspension and debarment, and ethics and conflicts rules and mitigation strategies. In doing so, Cherie takes a pragmatic approach to addressing her clients’ legal and business concerns, leveraging her experience as both a GAO bid protest hearing officer and a judge on the GAO Contract Appeals Board. During her time at the GAO, she resolved over 600 protests, issued over 500 bid protest decisions, and conducted approximately 20 bid protest hearings. As one of only a few former GAO bid protest hearing officials in private practice, Cherie’s extensive familiarity with the inner workings of the GAO protest process distinguishes her from most other bid protest practitioners.

Cherie is a thought leader on topics relating to bid protests and agencies’ use of their Other Transaction Authority, holds several leadership roles in the ABA Public Contract Law Section, and maintains an active pro bono practice.