Price Realism: Agency Erred By Failing To Conduct Analysis

An agency erred by failing to conduct a price realism analysis for a time-and-materials contract with fixed-price fully-burdened labor rates.

In a recent bid protest decision, the GAO acknowledged that a solicitation of this type does not always require that the agency engage in a price realism analysis, but found that the terms of the particular solicitation called for such an analysis–and that the agency acted unreasonably by ignoring the solicitation’s requirement.

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Price Reasonableness vs. Price Realism: The GAO Explains The Difference

Price reasonableness and price realism are both benchmarks against which a procuring agency may evaluate an offeror’s price, but price reasonableness and price realism–though they are often confused for one another–are not the same thing.

As the GAO explained in a recent bid protest decision, one of the terms involves consideration of whether an offeror’s price is too low, whereas the other evaluates whether the price is too high.  The distinction is particularly important for fixed-price procurements, in which the question of whether pricing is too low is not one the procuring agency is always required to ask.

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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.

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GAO: Agency Properly Upped Contractor’s Proposed Labor Rates

Here’s hoping that you had a wonderful Thanksgiving, full of relaxation, family time, football and lots of food.

For one Arizona contractor, the holiday was a little less festive this year, after the contractor lost out on a Navy cost-reimbursement contract–in part because the Navy unilaterally upped some of the contractor’s proposed labor rates.  The GAO found nothing wrong with the agency’s decision, holding that the Navy reasonably determined that the contractor’s proposed labor rates were unrealistically low.

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Price Realism and Fixed-Price Contracts: The Solicitation Controls

If price realism is evaluated by a procuring agency under a solicitation for a fixed-price contract, the solicitation must inform offerors that price realism will be considered, says the GAO in a recent bid protest decision.

In GAO Protest of Emergint Technologies, Inc., B-407006 (Oct. 18, 2012), the GAO sustained a bid protest because the procuring agency in question failed to inform offerors that price realism would be evaluated–and seemed to fundamentally misunderstand the concept of a price realism evaluation.

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Price Realism: Agency Improperly Used Unacceptable Proposals for Comparison

Earlier this week, the International Cycling Union announced that it would strip Lance Armstrong of his seven Tour de France titles, stating that overwhelming evidence existed that Armstrong had won those titles by doping.  For cyclists who play by the rules, it is only fair that they not be forced to chase Armstrong’s Tour record, which he apparently achieved in an unacceptable way (and you can count me among those who think Roger Maris and Hank Aaron have pretty strong claims to baseball’s single-season and career home run marks, too).

When it comes to sporting records, comparing a clean athlete to a cheater seems unfair.  Similarly, in the government contracting world, using unacceptable proposals as a basis of comparison for other proposals’ price realism is improper, according to a recent GAO bid protest decision.  In GAO Protest of Lifecycle Construction Services, LLC, B-406907 (Sept. 27, 2012), the GAO sustained the protest because of significant errors in the agency’s evaluation of the protester’s price realism–including comparing that price to the prices of three unreasonably high-priced proposals.

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How Low Can You Go? GAO Denies Price Realism Protest

When is a competitor’s low price simply too low to be realistic?  Maybe never, at least when it comes to challenging the low price in a GAO bid protest.

As seen in a recent GAO bid protest decision, when a fixed-price solicitation does not call for a price realism analysis, the procuring agency is not required to conduct one–and a competitor will not succeed in challenging the award on the basis of a supposedly unrealistically low price.

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