The government wants lower prices, except when it doesn’t.  Your confidential information can’t be released under FOIA until it is.  Firm-fixed price contracts come with sometimes substantial risks.  These are among the lessons that the new year has already brought for government contractors.  Learning them can be the difference between sound government business and wondering what went wrong.

1.  There is Such a Thing as a Price That is Too Low: The GAO recently ruled that the Air Force properly acted to exclude a contractor whose prices were deemed to be unrealistically low.  In OBXtek Inc. (GAO, No. B-422057) GAO stated that the Air Force could not properly evaluate the protestor’s proposed rates as a substantial part of employee compensation was incentive-based and that the protestor offered unrealistically low rates for areas that had previously proven difficult to staff.  They upheld the Air Force’s decision to make a best value award to a higher-priced company.  Lesson:  Don’t low ball the government.

2.  A Judge May Not Agree That Your Information Is Confidential:  A federal district court judge recently ordered the Department of Labor to release summary EEO-1 reports for over a thousand companies that the agency had previously deemed held non-releasable sensitive company information.  DOL had given companies an opportunity to object to the release of the reports and contended that the information was not covered under FOIA.  The judge disagreed and is now requiring the agency to release all such information by February 20^th.  An article in JD Supra submitted by DCI Consulting dryly notes, “Federal contractors should prepare for potential outcomes of EEO-1 disclosure…” as a reporter from Center for Investigative Reporting submitted the original FOIA request.

3.  Firm-Fixed Price (FFP) Contracts Can Break Your Bank:  To date, Boeing has spent over $7 billion trying to get the next-generation tanker aircraft to straighten up and fly right.  This has resulted in a net loss to the company of over $2 billion, and counting, as the original Air Force contract was awarded on an FFP basis.  While this may be an extreme example, even experienced contractors need to remember that FFP deals can come with substantial risk.  No one wants to get “tanked” in the way that Boeing has been.  Plan accordingly.