The cost of TDY
If you ever find yourself in need of a drinking buddy, ask a federal employee if they’ve ever traveled on official duty before.[1]
Federal travel is a surprisingly complex area of policy,[2] with an entire subtitle of the Code of Federal Regulations dedicated to “interpret[ing] statutory and other policy requirements in a manner that balances the need to assure that official travel is conducted in a responsible manner with the need to minimize administrative costs.” There’s even an odd government abbreviation, TDY, which stands for Temporary Duty Travel.[3]
Still, there are some pretty well understood basic rules for TDY. One of those rules is that—for the most part—if you’re going to stay at a hotel, the hotel’s cost needs to be lower than the maximum “per diem” rate. Another rule is that a room generally needs to be refundable.
If individuals needed to negotiate rates and conditions with hotels to ensure compliance with the Federal Travel Regulations on a trip-by-trip basis, though, there’d probably be a lot of noncompliance. The rates might be too high, or someone might accidentally book a room with a resort fee. Because compliance with the government's travel rules requires third parties (i.e., hotels) to bend their practices to meet government requirements, the government's approach is to centralize procurement and externalize compliance risk.
Accordingly, the government established a government-wide contract for TDY lodging, under a program called FedRooms[4] and a program called DOD Preferred. To make it simple, I’m just going to refer to both as FedRooms.
Earlier this year, the General Services Administration and the Department of Defense issued a solicitation for a contractor to manage FedRooms. But, as we’ve seen before with government travel programs, the economics of FedRooms involve the government passing money from one agency to another through a contractor. Here’s how GAO described it:
As relevant here, the solicitation explained that government-wide lodging programs are operated as a “self-funding and revenue-generating model,” under which the contractor “recoups its operating costs via a service fee model included in the negotiated rate that the contractor collects from each property on all consumed and reported room nights.” Under the price funding model factor, each offeror was directed to use the funding model template provided in the solicitation to “propose funding models to recover its operating and marketing costs, inclusive of the contract access fee to GSA and DOD.”
In other words, the solicitation contemplated that the winning vendor would collect fees from hoteliers, and pass a portion of those fees back to the government. As you might expect, then, one factor that the government was interested in was knowing how much money it would get under the contract.
Ultimately, 5 vendors submitted bids, including CW Government Travel, Inc. and AdTrav Corporation, and the government held discussions with 3 of the vendors. Despite both receiving 'high confidence' scores, CW’s proposed cost was 65% higher than AdTrav's. The government awarded the contract to AdTrav, and CW protested.
On protest, CW argued that AdTrav’s proposed price was not “realistic”:
The protester mainly argues that the agency failed to evaluate the offerors’ price funding models consistent with the solicitation’s evaluation criteria, which required the agency to assess whether an offeror’s proposed price funding model was adequate to recover the necessary operating and marketing costs. In this regard, CW contends that AdTrav’s price funding model was “unrealistically low” and inadequate to support the operating and marketing costs necessary to successfully perform the requirements of the solicitation. The protester also argues that AdTrav’s unrealistically low price demonstrates that the awardee did not understand the technical requirements.
Weirdly, though, as we’ve covered before, an unrealistically low price is not something the government is always worried about. As I wrote:
Actually, the government doesn't really care if a vendor is willing to bid too low. The government uses price realism to make sure that a vendor understands what the government wants. If the government says "I want a Ferrari" and a vendor says "cool, I'll sell you a brand-new Ferrari for $10,000", the government uses price realism to double check the math. But if the vendor looks at the government square in the eye and says "Yes, I know that a brand new Ferrari is extremely expensive, many many multiples above $10,000. But I have sooo many Ferraris and I will take the loss here, but please buy my Ferrari", the government could — though I am certainly not offering legal advice here — look at the vendor, look square into the camera, shrug, (document the hell out of it for the file), and move past the price-realism concerns.
If a vendor lowballs the government, that’s on the vendor. But, like, what if CW was right? What if AdTrav did went too low? What if the price was unrealistically low? How little is too little? After all, if the vendor makes too little money, and fails to effectively manage the program, that’s certainly a risk to the government, right?
Not really?
While an agency may conduct a price realism analysis in awarding a fixed‑price contract for the limited purposes of assessing whether an offeror’s low price reflects a lack of technical understanding or risk, offerors must be advised that the agency will conduct such an analysis. Because below-cost prices are not inherently improper in a fixed‑price context, an offeror competing for award of a fixed-price contract must be given reasonable notice that its business decision to submit a low‑priced proposal will be viewed negatively by the government in assessing the risk associated with its proposal.
In the absence of an express price realism provision, we will only conclude that a solicitation contemplates a price realism evaluation where the RFP expressly states that the agency will review prices to determine whether they are so low that they reflect a lack of technical understanding, and where the RFP states that a proposal can be rejected for offering low prices. Absent a solicitation provision notifying offerors that a price realism analysis would be conducted, agencies are neither required nor permitted to conduct one in awarding a fixed-price contract.
In other words, unless the government explicitly tells vendors it will consider price realism for fixed-price contracts, the government can’t conduct a price-realism analysis. Without a price-realism warning, the government’s limbo stick only cares whether vendors’ prices are too high. If the government doesn’t anticipate a risk of nonperformance, the government can’t penalize a vendor for a basement-level price.
And in the case of the FedRooms contract, the government didn’t give a price-realism warning:
Here, we conclude that the solicitation provisions at issue cannot reasonably be understood to require a price realism evaluation. In this regard, although the evaluation criteria for the price funding model did, by its terms, require some consideration of how an offeror’s funding model would “accomplish the objectives” of the solicitation it did not inform offerors that a proposal could be rejected for offering low prices, which is a requirement for a price realism evaluation.
Sorry CW, better luck next time. But, look on the bright side, if you need a drinking buddy, you know whom to call. Not during TDY, though; alcoholic beverages are not an allowable expense.
[1] And if you ever want hot goss, ask a federal executive assistant about their favorite travel reimbursement stories. But be prepared to buy them many rounds and thank them for their service.
[2] If you ever find yourself in need of a drinking buddy, ask me about why these policies are complex. But be prepared to buy me many rounds and hear me complain about Congress.
[3] Temporary Duty... Yonder? Yay? Yeet?
[4] Tangentially, until this year, the government used to allow travelers to book a hotel room through FedRooms.com, which was provided as a service by a contractor, but shut that down to ensure “compliance with governmentwide policy for official government websites.” Two observations here. One, FedRooms.com used to allow “leisure travel” for federal government employees even if they were traveling outside of TDY. But now that perk is gone. Two, I personally find it hilarious that the governmentwide policy for official government websites meant the demise of a site intended for governmentwide policy for official government travel. I guess website compliance is more important than travel compliance? I’m not sure inspectors general would agree.