Agencies have the final say in wage determinations

The last few nails are poised atop the coffin of the General Services Administration
Board of Contract Appeals' future adjudicating information technology bid protests.

Nonetheless, an area of continued dispute will likely just shift locales from GSBCA to
the General Accounting Office. Specifically, decisions from both bodies consistently
afford agencies the upper hand in the application of base labor rates.

As a point of reference, under the Service Contract Act, the Employment Standards
Administration issues wage determinations for allowable minimum hourly rates in more than
250 occupational categories. Agencies must refer to these rates for specific geographical
areas when considering an offer by a professional services vendor.

What the agencies do with this information and when they request it of vendors, is the
focus of many professional service contractors' concerns.

A GAO review of a protest against the Navy was not favorable to a bidder when the
service disagreed with how the vendor manipulated ceiling rates based on anticipated
orders. In its protest, the vendor maintained that its proposal justified adjustments to
the ceiling rates.

The Navy countered that it did not believe the adjusted ceilings would effectively
limit costs. Of particular concern to the service: The minimum quantity required for
implementation of the rate ceilings exceeded the basic quantity stated in the request for
proposals and the Navy's best estimate of the number of service hours it likely would

Consequently, the Navy gave the bid a lower ranking than other proposals. GAO ruled
that the service reasonably downgraded the protester's proposal on the basis that low wage
rates might adversely affect the vendor's ability to recruit and retain qualified

The State Department was equally successful in defending a protest against its
application of standard base labor rates before GSBCA. In this case, the board ruled that
it's up to the contracting officer to decide the level of complexity required for a review
of labor rates.

State made its intentions clear in the solicitation, the board found. The contracting
officer wanted to sensitize bidders to the issue of wage determination; State didn't
intend to apply rigorous correlations of categories and classifications.

Though such correlation calculations appeared appropriate in the Navy buy reviewed by
GAO, they were not considered mandatory at State by GSBCA. Either way, the power in this
area resides with the agencies. So whatever labor rate application an agency decides to
use in its evaluation--as long as it is consistent with the language in the
solicitation--vendors might as well forego any objections.

Bob Deller is director of market research for Global Systems & Strategies in
Potomac, MD.

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