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Price Realism Analysis Improperly Downplayed Maintenance Issues

A price realism analysis of aircraft maintenance proposals was arbitrary and capricous, according to the Court of Federal Claims, because the analysis did not adequately consider aging issues associated with the aircraft. The protest concerned a request for proposals for KC-135 depot maintenance that anticipated, among other things, a four-year fixed-price contract for programmed depot maintenance, with option years. Offerors were required to provide labor, fringe benefits, overhead, and general and administrative rates to enable the government to perform a price realism analysis. All of the aircraft were at least 40 years old, and "[t]he greatest unknown ... was the potential that the aging of the aircraft would require substantially more maintenance over time." In its final proposal, the awardee projected efficiencies enabling it to require fewer labor hours than the protester, and it reduced its final price by a sufficient margin so that it had the lowest total evaluated price. In a protest before the Government Accountability Office, the Comptroller General found the government failed to address and document the viability of the awardee's reduced labor hours and price properly, and recommended the government explicitly address the analytical relationship between aging aircraft and price realism (23 CGEN 112,527). Following corrective action consisting of price realism and risk analyses, the government affirmed the award. In a second protest, GAO found "no basis to question the adequacy or reasonableness of the [government's] actions, its analysis, or its conclusions" and found the protester's challenges to the cost/price evaluation to be "without merit" (23 CGEN 112,643).
Aging Fleet

The court determined the corrective action was "fatally flawed "because the government relied on a non-aging fleet for its conclusions and misinterpreted an RFP addendum. The price realism analysis recited that offerors were not required "to estimate the impact of aging aircraft issues in the out years" of the contract and the addendum advised that price adjustments would be negotiated to accommodate chronic aging aircraft. However, both the awardee and the protester were likely under the impression that aging was in fact an issue. Both offerors limited the use of applied learning curves to reduce hours for the depot maintenance work on the basis of leveling and aging aircraft concerns. Further, under the provisions of the addendum, many of the added maintenance tasks that resulted from servicing an aging fleet would not be eligible for renegotiation. Therefore, the "heavy reliance" the government placed on the addendum to address the age issue was not justified.

Moreover, the protester was prejudiced by the flawed analysis. Both the awardee and the protester "were considered as having submitted awardable offers," and the government concluded both were similarly priced, with the awardee "slightly lower by $15,048,602 at the bottom line T[otal] E[valuated] P[rice]." The awardee was selected on the basis of its superior mission capability proposal and lower price, but the inappropriate price realism analysis affected one of these two outcome determinative factors, as well as the award decision. There was a substantial chance the protester would have received the contract award had the government conducted an appropriate price realism analysis. The government was ordered to "resolicit the procurement and take the necessary steps in a new solicitation to address explicitly the role of an ever-aging KC-135 fleet on the PDM to be performed." (Alabama Aircraft Industries, Inc. - Birmingham v. U.S., et al., FedCl, 52 CCF 79,013)


(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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