Markon LLC (B-423767): Cost Realism, Unstated Criteria, and the Limits of “Off-the-Record” Instructions

In Markon LLC, GAO reviewed a Central Intelligence Agency (CIA) best-value source selection for a FAR Part 15 hybrid contract supporting business operations, IT engineering, and business enterprise modernization. Although the non-cost factors were significantly more important than cost, the procurement still required a cost realism analysis and the calculation of a probable cost for evaluation purposes. The protest is instructive because it shows how easily an agency can convert an otherwise defensible cost realism exercise into a sustainable error when it relies—explicitly or implicitly—on evaluation criteria that never made it into the final solicitation.

The central flaw was procedural and evidentiary rather than purely quantitative. The CIA conducted one-on-one “industry” sessions before finalizing the solicitation and later internally documented an oral message that offerors should propose how functions would be executed without focusing on the technology used. The agency did not incorporate that instruction into the final RFP. Yet, during cost realism, the Cost Evaluation Team treated Markon’s proposed efficiencies and modernization-driven staffing adjustments as “noncompliant” with those oral directions and made an upward probable-cost adjustment on that basis. GAO sustained because the record showed the agency, and ultimately the SSA, relied on those in-person Q&A “instructions” as a basis for finding Markon’s costs unrealistic—despite the fact that oral communications that would alter written solicitation terms do not amend the solicitation, and the final RFP controls the evaluation.

Equally important for contractors, GAO’s discussion frames cost realism as a comparison exercise: agencies must evaluate whether proposed costs are realistic for the offeror’s unique technical approach, not whether the approach conforms to informal expectations that were never made enforceable. Here, the technical evaluators had assessed strengths under each technical subfactor, including the modernization approach, and did not downgrade Markon for nonconformance with solicitation requirements. That disconnect mattered because the cost team effectively nullified the proposal’s efficiency narrative by adding back all claimed savings rather than testing whether the proposed approach plausibly supported them, and then justified the adjustment by reference to non-solicitation “instructions.” For federal contractors, the lesson is direct: if your approach depends on efficiencies, automation, or process improvements, you must (i) make the assumptions explicit and traceable across volumes, and (ii) ensure the approach is defensible strictly under the solicitation’s stated criteria, because GAO will not permit agencies to penalize you for failing to follow guidance that was never incorporated into the RFP.

The decision is also balanced: GAO denied Markon’s past performance challenges, including objections to the agency’s interpretation of “federal business enterprise” and to the ratings assigned under certain subfactors, emphasizing that disagreement with an agency’s documented judgment does not establish unreasonableness. The remedy underscores the practical stakes: GAO recommended a reevaluation of cost realism consistent with the solicitation and procurement law, a new award decision, and reimbursement of protest costs.

Disclaimer: This post is for general informational purposes only and does not constitute legal advice. Readers should consult qualified counsel for advice on specific procurements, protests, or compliance questions, and should rely on the official GAO decision text for authoritative statements of fact and law.