GovernmentExecutive.com

A public-private competition to provide logistics support for an Army garrison in Hawaii has run afoul of the government's outsourcing rules, according to the General Accounting Office.

In a May 14 decision, GAO sustained a protest by BAE Systems that alleged an Army appeals board violated Office of Management and Budget Circular A-76 when it decided to keep support work in-house at the garrison.

While BAE won the original competition, an Army appeals board overturned this ruling after reworking the in-house bid to meet the Army's performance requirements. GAO dismissed the Army's reasoning in an expansive ruling that attempted to clarify some basic rules that govern A-76 competitions.

GAO found numerous flaws in the Army's response to a core problem at the start of the competition: the in-house bid failed to meet the requirements of the performance work statement, which sets out the standards that all competitors must fulfill. Instead of revising the in-house bid as A-76 rules direct, the Army sealed the bid and left it unaltered even after requirements in the performance work statement were changed.

"Once the [agency] determined that the in-house offer did not satisfy the performance work statement requirements, that deficiency needed to be resolved before the agency could proceed to the public/private cost comparison," GAO stated.

But the Army did not square the in-house bid with the performance work statement, opting instead to adjust the in-house bid so it matched some of the performance standards in BAE's proposal. A-76 rules mandate that the performance work statement - not a competitor's bid - is the baseline for performance, GAO said.

"In our view, the [agency] erred in simply adopting the private-sector offeror's proposed staffing levels to determine the amount of staffing required by the in-house offer to comply with the performance work statement requirements," the decision said.

The Army appeals board revised the in-house bid so it met BAE's performance standards at a lower cost, prompting the board to award the contract to the in-house employees. GAO rejected the board's revisions to the in-house bid and further noted that the board failed to consider some additional performance strengths in BAE's proposal, meaning the private firm was held to a higher standard than the in-house group.

"This is another instance in which we concluded that a public-private cost competition was flawed because there was not an apples-to-apples comparison between the in-house plan and private sector proposal," said GAO Associate General Counsel Daniel I. Gordon.

The Navy failed to consider strengths in a private-sector proposal in a bid protest case decided last month.

The BAE case sets one main precedent, according to the lead attorney for the contractor. GAO rejected BAE's argument that the in-house bid should have been rejected as unacceptable when it failed to meet the requirements in the performance work statement. This means contractors and in-house teams should be prepared to adjust their bids to properly address performance requirements throughout an A-76 competition.

"GAO is saying that an iterative competitive process has to be undertaken, where both [competitors] would have the opportunity to revise their proposals to address the requirements," said Kenneth Bruntel of Crowell & Moring, a Washington law firm.

Because GAO sustained the bid protest, the Army must conduct a new cost comparison between BAE and the in-house group.