GAO: Low Price Not Evidence of Technical Unacceptability

An awardee’s low price, by itself, is not evidence that the awardee cannot meet the solicitation’s technical requirements, according to a recent GAO bid protest decision.

In Midwest Tube Fabricators, Inc., B-407166, B-407167 (Nov. 20, 2012), the protester argued that the awardee could not meet the solicitation’s requirements at the awarded price.  The GAO dismissed the protest, holding that the protester’s allegation did not present a valid basis of protest.

The Midwest Tube Fabricators GAO bid protest decision involved a Defense Logistics Agency solicitation for 5770 bent, seamless, stainless steel tubes.  After reviewing competitive proposals, the DLA announced that it had made award to E.W. Packaging Corporation, Inc., as the lowest-priced technically-acceptable offeror.

Midwest Tube Fabricators, Inc., a disappointed competitor, filed a GAO bid protest.  Midwest alleged that EWPC could not have met the solicitation’s technical specifications at its price, and must have supplied “inferior low carbon steel.”  Later in the protest process, Midwest supplemented its initial allegations by noting that in prior procurements for the same item, the DLA had paid a higher unit price than EWPC’s.

The GAO noted that in order to be legally sufficient, a bid protest must “provide, at a minimum, either allegations or evidence sufficient, if uncontradicted, to establish the likelihood that the protester will prevail in its claim of improper agency action.”

However, the GAO wrote, under a solicitation for a fixed-price contract, “there is no prohibition against [a] procuring agency’s acceptance of [a] low or below-cost offer.”  (In fact, offerors sometimes intentionally submit below-cost bids to gain past performance or gain a toehold in the federal market).  For this reason, the GAO held, an allegation that an offeror’s price is too low is not evidence that the offeror cannot meet the solicitation’s requirements.

The GAO held that Midwest had presented its argument regarding prior unit prices too late in the bid protest process to be considered.  However, the GAO noted, the DLA was purchasing many more tubes in this case than in the prior procurements, and “it is reasonable to expect that a vendor’s price for an item will decrease as the purchase quantity for that item increases.”  The GAO dismissed Midwest’s protest.

Of course, the Midwest Tube Fabricators decision doesn’t mean that a competitor’s low price should always be ignored.  In some cases, for example, a price realism challenge may be an option.  In others, investigating the low price may lead to specific evidence of technical unacceptability.  Nevertheless, the Midwest Tube Fabricators GAO protest demonstrates that, at least for a fixed-price contract, suspicions that a competitor’s price is too low to meet the solicitation’s requirements may not be enough, on its own, to sustain a challenge to the award.

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