Report: EPA's total labor-hour giveaway

Contractors are figuring out how much money officials will accept for bids by knowing a job's estimated number of labor hours, a report says

The Environmental Protection Agency may have hurt its chances for getting really good prices on contracts when it told companies how many total labor hours it estimates for a job before contractors submitted their proposals, a new report states.

For 13 of 27 work assignments or task orders audited, there was no difference between the EPA’s labor-hour estimate and the contractor’s proposal, and for 21 of those orders, the difference was within 5 percent, according to a report by the agency's inspector general released Sept. 10.

Labor hours generally represent the majority of the contract's costs. For example, the cost for the labor hours, and the corresponding associated costs, consumed $422,000 of $490,000 spent on one job. When the EPA gives out the total labor hours and the labor rates are either fixed or can be estimated based on historical data, the contractors can figure out the labor and corresponding cost that officials are willing to accept, the reports states.

Knowing that information, “the contractor does not have an incentive to seek a more efficient or innovative approach to meet the government’s requirement,” the report states.

The agency's contract management and program officials say it’s common practice to hand out the government’s estimated total labor hours. However, they agreed with the IG’s recommendation and now plan to leave out those estimates.

About the Author

Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.

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