Ruling Upends Bid Design on 90% of Federal IT, Services Work (1)

A federal court’s rejection of GSA’s method of awarding IT and services contracts will go far beyond the Polaris governmentwide vehicle.

The US Court of Federal Claims decision, if it stands, could upend IT and professional services solicitations, and potentially bids for all services contracts—roughly two-thirds of procurement spending—that involve labor. More than 90% of existing services dollars, more than $400 billion, fall into the questionable category identified by the court’s ruling.

Every contractor that submits bids on large indefinite delivery, indefinite quantity contracts could soon be required to break out labor costs for all relevant jobs under the contract in their pricing schedules. It recent years, bidders commonly combine labor costs with materials and overhead as part of the master contract bid.

In the meantime, GSA is in a complicated position. The agency could appeal the decision to the US Court of Appeals for the Federal Circuit, but that process would take months. Conforming the Polaris solicitation to comply with the court’s ruling, however, would also take months and potentially lead to even more protests, according to Cy Alba, a contracts attorney and partner at PilieroMazza.

See: Replay of What’s Next After Polaris Halted?

Adding a pricing section “might actually be the easiest way to comply with the order,” Alba said in an interview with Bloomberg Government. “It’s not easy, but it’s possible.”

Alba suggested timing for that kind of response: “I would think it’s going to take a little while potentially, six months, maybe a year, maybe longer. “

The protest that led to the court decision on Polaris stood out because it went beyond previous claims that mentor-protégé joint ventures were relying too heavily on the bigger partner’s past performance to maximize their proposal scores. Mentor-protégé relationships are designed to assist small businesses attempting to enter and grow their positions in the federal market by teaming with more experienced vendors.

The court agreed with the plaintiffs’ claim that that the General Services Administration under-emphasized the protégé’s past contracting performance, giving an advantage to larger bidders that had more complex contracting histories.

The court then went further, saying that the only labor estimates that can be pushed below the master contract to the task order level are for smaller and more explicitly labor-oriented contracts—time-and-materials and labor-hour.

That means the pricing calculations for virtually all professional services contracts must spell out the labor hours—a massive reset of how those bids have typically been offered.

“It’s certainly a very different reading,“ said Alba, referring to the court’s interpretation of GSA’s general solicitation language about “task or delivery orders based on hourly rates.” He added, “it was rather surprising because it dug into the nuance.”

The implications of the ruling go far beyond the Polaris solicitation and could impact the wording on to any task order-type bid. That means agencies may have to include labor schedules up front at the master contract level for potentially any services IDIQ—a massive reset of how those bids have typically been offered in recent years.

The contract types that could be excluded from evaluation at the master contract level accounted for only 4.3% of procurement spending in fiscal 2022. They accounted for 6.8% of all services contracts in that same year.

The plaintiffs’ position was evaluating labor costs up front will especially benefit small business like theirs, but Alba points out such cost disclosures cut both ways and could benefit large businesses capable of trimming rates and lowering total costs to make their prices more competitive.

To contact the reporter on this story: Paul Murphy in Washington at pmurphy@bloombergindustry.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Amanda H. Allen at aallen@bloombergindustry.com