Summary
While not advertised as an LPTA competition, this 157 FTE/year 8(a) set-aside contract for consolidation of IT services at Ames Research Center looks like a rate shootout for the largest and savviest 8(a) firms.
Background
NASA Ames Research Center Consolidated Information Technology Services (ACITS) 4 is a five-year follow-on contract to the existing ACITS3 contract. The incumbent contract is held by ASRC Research and Technology Solutions (ARTS) under contract # NNA13AB88C and runs through August 31, 2018. Currently ACITS3 has cumulative funding obligations of about $164M. ACITS4 is an 8(a) set-aside with a $27.5M size standard under NAICS code 541512. This single award contract consists of a Firm Fixed Price (FFP) Phase-in; Cost Plus Fixed Fee (CPFF) Contract Management and Technical Requirements (“Core Technical Services”); and a CPFF IDIQ Contract Task Orders.
Cost and Pricing Requirements
Offerors must submit both a cost volume and an Excel pricing model containing 16 different spreadsheet tabs. Certified cost and pricing data are not required. However, very thorough and detailed information must be provided in the cost volume including:
- Detailed explanation of all pricing estimating methodologies
- Disclosure of the basis for all projections, rates, ratios, percentages, factors
- A narrative portion that explains all judgment-based elements of cost/price projections and profit policies including any proposed price ceilings and team fee sharing arrangements.
Labor Rates and Compensation
The draft solicitation identifies 42 standard labor categories (SLCs) for the ARC Core and Technical Services IDIQ portions of the contract. SLCs were not provided for Contract Management portion, leaving offerors to propose their own labor categories. Offerors must submit a Total Compensation Plan. Curiously, this information is requested in the Mission Suitability Volume, not in the Cost Volume.
Offerors should pay close attention to identifying the basis of their proposed labor rates and well as indicating whether a position is filled by incumbent staff or new hires. NASA has not provided any data on incumbent salaries. NASA’s example seems to imply that offerors either bid incumbent or new hire. The larger labor categories such as Application/SW Developer may require a blend of incumbents and new hires.
NASA provided their guidance on escalation rates from 2019-2024 ranging from 2.9% to 3.0% (it begs the question why they didn’t decide on one or the other). These rates are guidance and offerors are not required to bid these escalation rates.
Labor Effort
Offerors must use the NASA provided labor plugs totaling 257,401 hours (or 139.9 FTE) for Core Technical Services and 36,186 hours (or 19.25 FTE) IDIQ Task Orders. No labor plugs were provided for contracts management portion.
The draft RFP defines ‘productive time’ “the total available hours for productive work in a year, excluding overtime and paid time off (vacation, holiday, etc.).” Perhaps NASA wants to level the playing field by removal of uncompensated overtime. Separately, NASA wants to understand ‘non-productive’ time which is stated as ‘paid hours for non-work time such as vacation, holidays, sick leave, and other personal leave’. Absent from either of these definitions are hours associated with indirect labor and uncompensated overtime (even though offerors are required to address uncompensated overtime in their Total Compensation Plans). The accounting for indirect time might be an issue for offeror’s senior staff, key personnel and for smaller subcontractors whose principals typically straddle direct and indirect work.
Other Direct Costs
Offerors must include the NASA provided ODC plug figures totaling $96.2 M across the three contract portions (Contract Management, Core Technical, and IDIQ Task Order). The plugs are not provided in the RFP document, but were shown in the Excel template.
Indirect Costs
Offerors must use Exhibit 10 to map their indirect rates from their accounting year and then compute a weighted average indirect rate. Offerors proposing different indirect rates by year should pay attention to this tab. These weighted rates should be linked to the pricing buildup in Exhibits 2, 3, and 4 in the pricing model.
In Exhibits 11 and 12, Offerors must also provide full details on the composition of each indirect rate pool, including indirect pool cost elements and the total value of the cost base. In theory, the rates shown in Exhibit 11 should tie to and feed rates in Exhibit 10. This detail is designed to ensure NASA can discern whether offerors proposed credible and realistic indirect rates. The RFP is silent on whether offerors must use current negotiated rates. Primes should be careful to ensure that their subcontractors fully understand these requirements since the draft RFP presumes (in our opinion) a CPFF type subcontract will be flowed down to major subcontractors.
NASA also foresees offerors will bid ‘impacted indirect rates’. Exhibit 12 provided a breakout of G&A base dollars into three buckets entitled: ‘Existing Business Base’, ‘This Contract’, and ‘Forecasted Business Base’. This breakout was not found in the Exhibit 11 tab for the Fringe and Overhead pools. Presumably, offerors with a single overhead pool could also experience a significant beneficial impact on their overhead rate should they win this bid and should clarify with NASA whether they can provide this detail in Exhibit 11.
Subcontractors
Proposed subcontractor budgets that exceed a five-year total of $2M are considered ‘major subcontractors’. Major subs must also submit a cost proposal in the same format as the prime. Subs may submit sanitized bids to primes and unsanitized bids directly to NASA (of course this complicates management of the proposal pricing for both the prime and the subs). This seems like a low threshold for requested detailed pricing information and will increase both time and effort for prime bidders with many smaller subcontractors.
Cost Realism and Total Evaluated Cost
NASA will perform cost realism analysis. Additionally, the draft RFP states, “Cost information supporting a cost judged to be unrealistic and the technical/management risk associated with the proposal will be quantified by the Government evaluators and included in the assessment for each Offeror.” We’re not sure we understand what this statement means. It’s possible NASA intends to summarize the information provided by offerors whose cost element was deemed unrealistic. We suggest offerors request NASA to clarify the intent of this statement.
Evaluated price is defined as “The overall value for selection purposes will be the sum of the cost plus Fixed fee proposed for the ACITS4 Contract Management (CLINs 0002, 0005, 0008, 001 l, 0014), the ACITS4 Core Technical Services (CLINs 0003, 00006, 00009, 0012, 0015), and ACITS4 IDIQ Task Orders (CLINs 0004, 0007, 0010, 0013, 0016). Phase-in (CLIN 0001) will not be included in the evaluated total cost for selection purposes, but it will be evaluated for reasonableness and realism.” This removes the incumbent’s price advantage and somewhat levels the playing field. So, bidding “zero” for Phase-In price doesn’t improve the non-incumbent’s pricing competitiveness.
Summary
While not an LPTA type contract, the draft solicitation fixes ODCs and most of the proposed labor effort. Therefore, differences in pricing will be limited to differences in salaries, indirect rates, and proposed fee. The pricing requirements while lengthy, are not overly complex, since NASA has fixed both labor level of effort and ODCs. Primes should carefully consider their indirect rate strategy along with closely monitoring and managing their subcontractors. Smaller, less mature subs may have a more difficult time accommodating NASA’s requirement for detailed indirect rate data. Primes should carefully consider which teammates are considered ‘major subcontractors’ for this bid.
Finally, we think offerors should take the hint from NASA that the era of bidding one percent or less for labor escalation is probably over. Recent wage trends[1] across all workers, as shown in the Employment Cost Index, is now firmly above 2.5 percent and is approaching 3 percent wage growth for professional scientific, and technical services.
[1] Bureau of Labor Statistics, Table 9 WAGES AND SALARIES (NOT SEASONALLY ADJUSTED): Employment Cost Index for wages and salaries, for private industry workers, by occupational group and industry
About the author: Mike Gallo is Partner and Principal Consultant at Federal Pricing Group, a firm focused on providing expert contracts pricing to small and mid-sized federal government contractors and cost-related acquisition support services to federal agencies. You can find more resources like this article at
https://www.federalpricinggroup.com/.
