Thursday, July 25, 2019

Do Incumbent Contractor Possess an Unfair Advantage for Follow-on Work?

Earlier this year, the Navy solicited bids for custodial services at its Portsmouth Naval Shipyard. The solicitation required pricing for labor to include health benefits for employees and their families based on a collective bargaining agreement between the incumbent contractor and a workers union.
The contractor shall provide the employees covered by this agreement with health insurance equal to or greater than the policies now being offered at no cost to the employees and to the family members of these employees where applicable at no cost to the employees.
As part of the solicitation package, the Navy provided a list of the incumbent contractor's 31 employees and a breakdown of the medical, dental, and vision insurance rates currently being provided by the incumbent contractor.

One potential contractor, Integrity National Corporation protested the terms of the solicitation because it did not contain sufficient information for offerors to calculate required health benefits. Integrity contended that the Navy should be required to provide more specific information regarding which medical, dental, and vision insurance plans have currently been selected by each of the incumbent's employees. Depending upon which mix of benefits each employee selects, the difference in cost to Integrity could be $667 thousand per year. Integrity complained that only the incumbent contractor knows the actual costs and unless the Navy provides the current plan selection information, it is impossible for any offeror other than the incumbent to offer a realistic price and compete under the solicitation's selection criteria.

The Navy responded by asserting that there is no federal regulation that requires disclosure of such information and further contended that such information would be of limited value because the collective bargaining agreement provides for employees to have the opportunity to change plans every year. In this regard, the Navy argues that all prospective offerors, including the incumbent if it chose to bid, will have to estimate projected costs and balance risks.

The GAO (Government Accountability Office) ruled that the solicitation did, in fact, provide sufficient detailed information to allow offerors to compete intelligently and on a relatively equal basis. While the incumbent is benefited by having more information about current plan selections, GAO noted that an agency is not required to compensate for every competitive advantage gleaned by a potential offeror's prior performance of a particular requirement. An incumbent contractor's functional knowledge of the costs related to a requirement is not generally considered to constitute an unfair advantage that the procurement agency must eliminate.

The full GAO decision can be accessed here.

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