GAO Denies Protest in Air Force Intranet Support Award: Price Realism, Discussions, and Best Value All Upheld

In a recently published decision, the Government Accountability Office (GAO) denied a bid protest filed by SMS Data Products Group, Inc. challenging the Department of the Air Force’s award of a task order to Abacus Technology Corporation under a small business set-aside for intranet control support services. The protest—B-423341, B-423341.2, B-423341.3—centered on several key procurement issues: price realism, the sufficiency of discussions, and the agency’s best-value determination. Ultimately, the GAO found the agency’s evaluation was reasonable and consistent with the Federal Acquisition Regulation (FAR) and solicitation terms.

The solicitation, issued under FAR subpart 16.5, contemplated a fixed-price task order with an extensive performance period, and evaluation criteria based on technical acceptability, past performance, and price. Past performance was weighted more heavily than price, but in instances where offerors received a “substantial confidence” rating and were technically acceptable, the award would go to the lowest-priced offeror with a realistic Professional Compensation Plan.

SMS, the incumbent, challenged the evaluation after its bid—priced at over $128 million—lost to Abacus’s $116 million proposal. SMS argued that Abacus’s lower price was unrealistic, particularly under FAR 52.222-46, which requires agencies to evaluate whether proposed compensation levels for professional employees are likely to retain skilled labor and ensure high-quality performance. However, the GAO found that the Air Force had conducted a robust and multilayered price realism analysis. The agency compared Abacus’s labor rates against incumbent rates, competitive averages, and market data from reputable sources like the Economic Research Institute and Salary.com. Notably, two-thirds of Abacus’s proposed rates exceeded the incumbent’s, and those that did not were nonetheless above at least one of the government’s market comparators.

SMS also contended that the Air Force’s discussions during the proposal process were misleading. The agency had flagged several SMS labor rates as unrealistically low, prompting the company to increase its pricing. SMS argued it had no choice but to raise its price, only to see the contract awarded to a lower-priced competitor. The GAO rejected this claim, noting that the agency had offered SMS the opportunity to either revise its rates or justify them. SMS chose to raise its price instead of defending the original figures. The record, therefore, did not support a finding that the discussions were unfair or misleading.

Another point of contention involved whether the Air Force properly considered price risk under DFARS 252.204-7024 and made use of the Supplier Performance Risk System (SPRS). SMS claimed that Abacus’s lower rates should have triggered concerns about risk. The GAO again sided with the agency, which explained that SPRS lacks service-specific pricing data unless linked to a part number, which was not the case here. A declaration from the SPRS program manager supported this limitation, and GAO found no fault in the agency’s explanation or methodology.

SMS further alleged that Abacus’s pricing should have been deemed unreasonable because some labor category rates were higher than SMS’s incumbent rates. GAO dismissed this argument, reiterating that price reasonableness reviews determine whether prices are too high—not whether they are too low—and that the solicitation only required such review at the total evaluated price level, not for individual labor categories.

Finally, the GAO upheld the agency’s best-value tradeoff decision. Given that both SMS and Abacus were rated technically acceptable and had substantial past performance confidence, the award went to the lowest-priced offeror with a realistic compensation plan, as specified in the solicitation. With Abacus offering a more competitive price and a satisfactory plan, the agency’s integrated assessment was found to be reasonable and adequately documented.

In denying the protest in its entirety, the GAO reaffirmed several important principles for government contractors. First, even incumbent offerors must carefully substantiate their pricing strategies and be prepared to justify labor rates flagged by evaluators. Second, discussions must be carefully navigated, but merely increasing a price based on agency feedback does not make the discussions misleading. And third, a best-value tradeoff must align with the solicitation’s structure, especially when past performance is used as a threshold and price becomes the distinguishing factor.

Disclaimer: This blog post is a general summary for informational purposes only and does not constitute legal advice or a guarantee of accuracy. Readers should consult official sources and legal counsel before making business decisions based on this content.