Accounting System Adequacy - Part I

Yesterday we discussed a GAO decision regarding the appeal of a prospective contractor who was excluded from the bidding process because its accounting system had not been reviewed for adequacy by a federal audit agency. The solicitation required that prospective contractors be able to demonstrate that their systems had been approved by the Government. The contractor believed that this requirement was unreasonable. After all, how does a contractor or prospective contractor go about securing a government audit? It cannot. Audits are only initiated at the request of a contracting officer or because a company was actually awarded a contract. A prospective contractor cannot go out and order up a federal audit. So, for this particular solicitation, only existing government contractors could bid. Timing is everything however. GAO stated that if the company believed the requirement to be unfair, the time to protest would have been prior to submitting the proposal, not after bid submission. The protestor had spent a lot of time and effort to find a work-around alternative to having a federal agency audit of its accounting system. It should have used that time to file a protest.


Today we will discuss two additional GAO protest decisions related to accounting systems. In both of these cases, the contracting officer disqualified prospective contractors because they had inadequate accounting systems. The companies protested and GAO sustained their protests because the contracting officer had relied on advice based primarily on unreasonable or unsupported conclusions – in one case, this advice came from DCAA (Defense Contract Audit Agency) and in the other case, this advice came from a private firm contracted by DOT to conduct audits, BMC. The GAO also stated that the Agency's reliance upon the advice of an auditor, such as the DCAA, does not inslulate the Agency from responsibility for error on the part of the advisor.

The two cases are somewhat related. Both involve an RFP issued by the Federal Transit Administration (a Department of Transportation Agency) to provide support to ensure compliance with statutory, administrative, and regulatory requirement and to monitor the projects to determine whether the projects are progressing on time, within budget, and in accordance with plans and specifications. The solicitation contemplated the award of 15 to 25 cost-reimbursement ID/IQ task order contracts. Award was to be made to responsible offerors whose proposals contained the combination of criteria offering the best value to FTA, considering the following evaluation criteria; technical and management, cost/price, and socioeconomic status.

Two of the bidders were joint ventures formed specifically for the purpose of bidding on this effort. One was PMO-JV formed in Florida and the other was MD-JV formed in Delaware. Both submitted timely proposals. FTA reviewed the proposals and determined that both were among the most “highly rated” technical proposals. Both contractors were invited in to make oral presentations on technical aspects of their proposals. After the oral presentations, FTA rated the technical proposals from both joint ventures as technically acceptable. So far, so good.

But, the goodness did not last. Tomorrow we will tell you why.