GAO: Agency's Upward Adjustment of Incumbent's Proposed Labor Rates is Reasonable
Incumbent contractors should heed this GAO decision regarding the reasonableness of an agency's upward adjustment of the protester's (the incumbent) proposed labor rates.
Here, the protester argued that the agency's cost realism analysis was flawed because the agency upwardly adjusted its costs (in 5 of 13 labor categories), which were the protester's same rates charged to the government during the incumbent contract. Despite that fact, the agency adjusted the rates because they were "below the lower bound of its acceptable labor rate range and thereby raised concerns regarding the protester's ability to recruit and retain qualified personnel successfully at the low proposed rates."
Ultimately, GAO denied the protest because it found the upward adjustments to be reasonable in light of the importance placed on recruitment/retention in the RFP and the incumbent's issues with the same during contract performance.
The decision is worth reading, in part, due to the lengthy analysis on the agency's cost realism analysis, including applicable GAO precedent, FAR provisions, and details on the agency's establishment of an acceptable range of labor rates for various labor categories.
GAO Decision: https://www.gao.gov/products/B-417244#mt=e-report