Protest challenging an agency’s decision to bundle ten contracts into one procurement is denied. The protester alleged the agency improperly calculated the savings that would result from consolidating the contracts. But GAO found that the agency reasonably calculated the savings that could be realized through the reduction in personnel, the consolidation of services, and reduced administrative costs. The agency also properly found that the new bundled contract could only be performed by large businesses. GAO noted that despite the bundling, small business participation was still possible and encouraged through teaming agreements.
The Army had been procuring support services for its enterprise resource planning systems under ten separate contracts. Six of those contracts were performed by small businesses. After conducting market research, the Army concluded that it could save about $146 million if it procured these services through a single contract. The Army also found that due to the complexity and magnitude of its requirements, this single contract could only be performed by a large business.
The Army issued a solicitation for this new bundled contract. InSap Services, which had been the prime contractor under four of smaller unbundled contracts, protested alleging that the Army’s decision to bundle was not justified.
GAO first noted that the Army’s decision to bundle was at least facially valid. Under the Small Business Act, an agency may consolidate requirements through bundling if it results in measurable benefits, including cost savings and quality improvements. Those benefits must be at least five percent of contract value of $9.4 million, whichever is greater. Here, the contract was worth about $991 million. The Army’s expected savings ($146 million) exceeded five percent ($49 million) of the contract’s value.
InSap, however, took issue with the Army’s savings calculations. InSap claimed that the Army had failed to consider the difference between the contractor manpower equivalents (CMEs) necessary for the bundle and those currently working on the ten different contracts. GAO found the Army properly identified the CMEs that would be eliminated through bundling and that it properly accounted for the costs that would be incurred by having government employees perform tasks that had been performed by CMEs. While InSap may have disagreed with the Army’s approach to these calculations, GAO found that the Army was not required to identify each and every CME that would carry over from the ten contracts.
InSap further alleged that the Army had overstated the savings that could be realized from a reduction in help desk CMEs. InSap also contended that the location of the help desk should not even be a relevant cost factor. But GAO found that the Army had adequately explained why it believed it could reduce help desk CME’s. Indeed, GAO reasoned that the assumption of savings from a centralized help desk rather than various desks in multiple locations was intuitively reasonable.
InSap contended that the Army’s estimation for the cost of labor was unreasonable because large businesses that ultimately performed under the bundled contract would likely have higher overhead rates than the small businesses that performed under the ten contracts. But GAO found that InSap had not provided sufficient information to suggest that the Army’s estimated labor rates were unreasonable.
InSap also alleged that the manner by which the Army calculated the hours and dollar values associated with administering ten separate contracts did not take into account the significant variations among those contracts in size, scope, and method of procurement. Basically, the Army estimated the administrative costs for the ten contracts by averaging the hours spent on the contracts, dividing that number by hours worked in a fiscal year, and then multiplying the result by the average yearly cost of employing a federal employee. GAO did not find this method unreasonable. Given the amount of savings that bundling would yield, any issue with the agency’s estimates was likely immaterial.
Finally, InSap alleged that the Army failed to properly consider the ability of small businesses to perform the bundled contract. GAO found, however, the the Army’s market research supported its conclusions about the inability of small business to perform the bundled contract. In fact, the Small Business Administration had concurred with the Army’s procurement approach. In any event, the bundling did not foreclose the participation of small businesses. The solicitation encouraged teaming agreements and included a small business utilization evaluation factor.
InSap is represented by Devon E. Hewitt, Michael E. Stamp, and Scott M. Dinner of Protorae Law PLLC. The government is represented by Lynn A. Marshall and Pamela J. Kennerly Ignatius of the U.S. Army as well as John W. Klein, and Meagan K. Guerzon of the Small Business Administration. GAO attorneys Michael P. Grogan and Amy B. Pereira participated in the preparation of the decision.
