TRAX International Corporation

The procurement

Aberdeen Test Support Services at the Army's Aberdeen Test Center, Maryland, under an IDIQ contract with cost-plus-fixed-fee and fixed-price line items. Technical was significantly more important than cost, and the RFP called for a FAR 15.404-1(d) cost realism analysis of the cost-reimbursable line items. ERC's final proposal was $640.5 million (probable cost about $652.0 million); TRAX's was $653.8 million.

The protest

Compared with its 2021 final proposal revision, ERC cut its indirect rates over the 5-year life of the contract. TRAX argued the cuts rested on ERC's projection of large new-business growth with little matching growth in indirect expenses, and that the Army accepted those projections without testing them.

The agency’s answer

The contracting officer found ERC's projected increase in business over the period not unreasonable. The Army said the government relies on offerors to estimate their projected costs, and that it was within its discretion to rely on ERC's exercise of business judgment in proposing its price.

What decided it

Cost realism requires the agency's own informed judgment, so relying on ERC's business growth forecast wasn't a realism analysis.

GAO found that the contracting officer gave no basis for calling ERC's projected growth reasonable and did not dispute TRAX's figures. An agency need not evaluate every cost element, but failing to evaluate the realism of the rates at all is unreasonable, and relying on an offeror's business judgment substitutes price analysis for cost realism. GAO also sustained grounds on ERC's disclosure statement, the evaluation of professional compensation, and misleading and unequal discussions, and recommended discussions, revised proposals, a new tradeoff, and reimbursement of TRAX's protest costs.