GAO Decision Shows Risk In Subcontractor Proposal Submissions

Recently, my colleague Ian Patterson shared an important tip in making sure that a proposal isn’t eliminated from competition: don’t assume that the agency knows what your proposal is talking about. Eliminate ambiguity, and explain your approach as clearly and directly as possible.

Now it’s my turn to share a proposal submission tip: make sure that any information submitted by subcontractors as part of the proposal clearly meets the Solicitation’s requirements.

If information submitted by a subcontractor fails to meet the requirements, the prime contractor runs the risk that its proposal will be rejected.

A recent GAO decision highlights this risk. In Leidos, Inc., B-418987 et al. (Oct. 29, 2020), GAO affirmed the Army’s decision to eliminate Leidos from competition due to a non-compliant subcontractor cost submission.

Specifically, the Solicitation (for intelligence analysis support services, under the Solutions for Intelligence Analysis 3 contract) instructed offerors to provide “components of their labor rates” as part of the cost volume. Prime offerors were “responsible for ensuring that the subcontractor provide a full and complete labor rate build that provides complete transparency for the direct labor rate component and each indirect rate applied to it along with profit or fee regardless of contract type.” The Solicitation also told offerors that their proposal could be rejected if it did not meet the Solicitation’s instructions.

Unfortunately for Leidos, one of its subcontractors failed to follow this instruction. So, the Army rejected Leidos’s proposal from consideration.

Leidos protested, but GAO found no problems with its exclusion. Simply listing commercial labor rates, as Leidos’s subcontractor did, failed to meet the Solicitation’s requirements. Thus, the Army acted within its authority to exclude Leidos from competition.

Frankly, this result isn’t surprising. But it gives a helpful lesson for prime contractors.

Now, I don’t know this for certain, but I bet that Leidos’s subcontractor submitted its pricing information directly to the Army. After all, pricing information is very confidential, and subcontractors often aren’t willing to share this breakdown with the prime contractor. For that reason, subcontractors often submit their own pricing information to the agency.

This leaves prime contractors in a difficult position. As Leidos shows, a prime risks proposal rejection if its subcontractor fails to follow the Solicitation’s instructions.

Still, a prime contractor can minimize this risk. For starters, be picky about their subcontractors. Only subcontract with companies you can trust to do a good job—when it comes to proposal submission and contract performance. Beyond that, educate your subcontractors about the Solicitation. Give them a copy of the Solicitation and walk them through each of the requirements and what’s expected of them. Give them time to ask questions (and give yourself enough time to ask the agency any questions). Give them an example of a submission that meets the requirements. And make sure they have a firm deadline to submit the information to the agency.

Subcontractors, too, should take heed. Make sure you understand the Solicitation’s requirements; if not, clarify things with the prime contractor. 

Finally, as Ian pointed out, don’t assume that a submission will be “good enough.” Make sure that the submission meets the exact proposal requirements, and clearly demonstrate compliance.

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Prime contractors have a lot on their plate. Ensuring that a complete and compliant proposal is submitted will go a long way to establish a productive relationship—both with the agency and subcontractors.

If you have any questions, please give us a call.