February 17, 2014

Is Competing Rates Amongst Single or Sole Sourced Team Members "Competition?"

I've been getting this question from clients a lot lately when I do Price Analysis training. The logic moves like this: ten subs are added to the team on a single or sole source basis (usually follow-on justifications). Since they were added on a noncompetitive basis, the logic goes, documenting price competition is a waste of time because you (the contractor) won't get competitive credit anyway from DCMA during a CPSR since both you and the sub "know" they're getting the work.

This logic is an example of something I see with surprising frequency - contractors working diligently to talk themselves out of competition and into a write-up during a CPSR. Thinking too much can definitely be more harmful to purchasing system health than not thinking enough, and the approach described above is definitely thinking WAY too much about an easy situation.

Every CPSR Report says the exact same thing - Competition (as defined by 52.244-5) is documented via adequate price competition. That means - ten technically qualified contractors bidding on the same labor categories can most definitely be subjected to price competition. And very well should be competed.

But how can a single sourced vendor be categorized as a competitive procurement? Well, for starters, those ten vendors should have never been "single sourced" in the first place. 

Take this very common situation: Government has an upcoming recompete. They issue an RFI on a full and open basis. 100 companies respond, the list of participants is narrowed to 20 - all incumbents in one form or another (as primes or subs) on the current contract. The RFP is then issued to those 20 companies on a full and open basis and their rates are subjected to competitive price analysis and negotiations prior to award.

Question - should the government have had to get approval for 20 sole source awards based on the follow-on procurement justification in FAR 6.302-1(a)(2)(ii) prior to award under that recompete?

If the answer is "no," then why would a contractor do something different?

The question on competition to a contractor is not necessarily "Does the sub know they're getting work?" The real question is "Does the sub know they're getting their rate?" If other subs are in the mix, and they're all competing for work on the ID/IQ (one can assume the subs aren't just joining the ID/IQ for one or two task orders), competitive motivation still exists for the sub to submit their lowest rates even in a downselect situation. And if the primary goals of subcontractor competition (establishment of competitive rates for service amongst qualified offerors; negotiation into the competitive range or rate rejection on all submissions) are met during the analysis, then effective competition can still be accomplished and documented even with downselected subcontractors.

In short and in general, always make sure you're not making things harder on your system than they need to be. "Hard" Does NOT equal "Compliant." Especially when it comes to the "Big C;" it's not always easy to clock competition for service contractors so make sure you take advantage when you can.