Court’s Roadmap to Recovering Bid/Proposal Costs

One potential outcome of a successful protest before the Court of Federal Claims is an award of bid preparation and proposal costs. Such an award may be the only consolation if the CFC declines injunctive relief. This was the case in Innovation Development Enterprises of America, Inc. v. U.S. The protester prevailed in showing it had been prejudiced by an improper sole-source award of a bridge contract for support services, but the CFC determined injunctive relief was mooted by the performance of the bridge contract and award of a successor contract.

The CFC’s subsequent opinion denying the protester’s claim for BP&P costs provides a tutorial on recovering those costs. It begins with the “fundamental question” whether costs can be recovered if the protester did not draft or submit a proposal, delineates the subset of general business and contract preparation activities that incur recoverable BP&P costs, and applies the standard of reasonableness.

There Must Be a Bid or Proposal

The protester claimed $14,323 for 148 hours its owner spent to “explore the notion” of competing for the next five-year contract and to position the protester to compete against the incumbent, which had subcontracted with the protester. The protester’s concession it never submitted a proposal and its failure to allege it prepared even a draft proposal precluded any cost recovery. The CFC referred to the FAR 31.205-18(a) definition of bid and proposal costs as “costs incurred in preparing, submitting, and supporting bids and proposals (whether or not solicited) on potential Government or non-Government contracts.” According to the court, this definition “is predicated on the foundational acts of actually preparing a draft proposal and submitting an actual proposal to a government agency.” The court found no case where a successful protester recovered BP&P costs without submitting a bid, and it noted the Government Accountability Office had specifically rejected such a recovery.

Recoverable Costs v. Nonrecoverable General Business/Pre-Contract Costs

In addition to addressing the rather self-evident requirement of working on or submitting an actual bid or proposal, the CFC noted BP&P costs are a subset of the possible investments contractors may choose to make in competing for government contracts. To be recoverable, BP&P costs must be incurred in furtherance of the submission of a particular proposal. General business costs and costs to prepare for contract performance are not recoverable.

The CFC categorized various costs, as summarized below:

Potentially Recoverable Costs
Nonrecoverable General Business Costs
Nonrecoverable Pre-Contract Costs
Developing engineering and cost data needed to support bids or proposals
Building capacity to produce a better proposal, including proposal preparation training
Equipment and labor to meet anticipated contract requirements
Researching specifications
Marketing and networking, including market research and direct selling defined by FAR 31.205-38(5)
Developing and testing a product to qualify it for listing on a qualified products list
Reviewing bid forms
Obtaining product or supplier certifications
Examining costs factors
Other pre-contract logistics, such as submitting source approval requests, travel costs to find suitable suppliers
Preparing draft and actual bids
Printing and delivering proposals

 

Returning to the case before it, the CFC concluded that even if the protester could recover BP&P costs, its “bid preparation” narrative described nonrecoverable general small business management activities such as business planning and looking for business opportunities. Specific listed activities included analysis, budgeting, scheduling, partner identification, and checking the FedBizOpps website twice a week.

Costs Must Be Reasonable

The CFC concluded that, even if its costs were otherwise recoverable, the protester did not meet its burden to show the costs were reasonable. The hourly rate of $96.61–$97.85 claimed for the owner’s labor was excessive, and it was impossible to determine the correct, actual rate of compensation. In addition, the protester’s documentation showed certain specific charges for labor hours were excessive for the tasks described.

(Innovation Development Enterprises of America, Inc. v. U.S., No. 11-217 C, Jan 17, 2014)

About Marilynn Helt

Marilynn Helt is a Senior Writer/Analyst in the Government Contracts group at Wolters Kluwer Law and Business. Marilynn analyses new developments affecting government contracting and supports the group’s legal research tools, with a focus on revising and updating explanations of contracting topics. With over 20 years’ experience providing authoritative content for legal professionals, Marilynn has written articles and edited and helped launch outside-authored treatises, books, and journals. Marilynn has prior law firm experience in international tax and estate planning. She received a BA in humanities and German from Valparaiso University, an MA in German literature from Washington University in St. Louis, and a JD magna cum laude from the University of Illinois College of Law.
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