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  • Writer's pictureMichael Vecchio

The Underbid Contract-Is it really worth the cost?

Updated: Oct 12, 2023

During my contracting career as a Contracts Team Leader and Contracting Officer for the United States General Services Administration (GSA)-Public Buildings Service, I had the sole responsibility to draft and issue a Contracting Officer's Final Decision Letter to one of GSA's mechanical maintenance contractors. In accordance with the Federal Acquisition Regulations, the letter was sent to Headquarters, General Services Administration, Board of Contract Appeals, Washington, D.C.

One of our mechanical maintenance contractors, I'll refer to them as XYZ Corporation for privacy purposes, purposely and knowingly underbid a mechanical maintenance contract to be performed at one of the Federal Buildings being managed by our GSA Property Management Center. After contract award and during contract performance, the successful awardee ( XYZ Corporation), knowingly and willfully submitted fraudulent charges, via company invoices, to the Contracting Officer for payment by our Finance Office located in Kansas City, Missouri. These falsely complied charges were submitted by XYZ Corporation to compensate for underbidding the contract. At the time of contract award, XYZ Corporation knew that they could never successfully perform the contract at the total price they had proposed to the General Services Administration-Public Buildings Service.

Upon extensive research by Mr. Michael Vecchio, Contracting Officer, I found that XYZ Corporation had overcharged the General Services Administration-Public Buildings Service approximately $90,000 in excess bogus contract costs. With the issuance of Mr. Vecchio's Final Decision Letter, XYZ Corporation was ordered by Headquarters, General Services Administration, to reimburse the United States Government approximately $76,000 in fraudulent charges.

Lesson Learned: The potential contractor(s) proposing/bidding on a project should always read/review the Statement of Work attached to a Request for Proposal or Invitation for Bid. Never purposely and knowingly underbid a contract with the sole purpose of beating any and all competitors. The contractor who reads and understands the Statement of Work and submits a fair and reasonable price for the contract, will, in most cases, be the successful offeror or bidder.

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