Protest Filed by Holmes & Narver Services, Inc. and Morrison-Knudsen Company, Inc.

GAO discussed a bid protest against an Army cost comparison. The original cost comparison determined that contracting with the low offerer would be more economical than performing the required services in-house. After an appeal, the Army determined that the cost of contracting with the low offerer would be higher than the cost of in-house performance. After an unsuccessful appeal to the Army, the low bidder protested to GAO, which held that the Army did not properly apply guidelines contained in a transmittal memorandum to Office of Management and Budget (OMB) Circular A-76. The guidelines provided that, under a cost comparison, certain costs that would be incurred whether a service was performed by contract or in-house could not be charged against the cost of contracting out. However, OMB also approved an alternative approach to cost comparisons, which the Army used in the instant comparison. Upon reconsideration, GAO held that the use of the alternative method was proper.