In a fixed-price procurement, an agency cannot reject an offeror for proposing a “too low” price unless the solicitation specifically contemplates a price realism evaluation.
This point is one of several interesting issues recently addressed by GAO in URS Federal Services, Inc., B-412580 et al. (Mar. 31, 2016). Another interesting issue—pertaining to an offeror’s protest of the awardee’s subcontractors’ size—will be addressed in a forthcoming post. But this post serves as a reminder of an important limitation to a protester’s ability to challenge an awardee’s price.
Agencies must notify offerors when price realism will be evaluated under a fixed price solicitation.
Recently, the GAO sustained a protest where a procuring agency rejected an offeror’s proposal because the offeror’s quoted prices were significantly lower than the government’s estimate–even though the solicitation did not notify offerors that price realism would be evaluated.
An agency’s preaward notice did not start the “clock ticking” for an unsuccessful competitor’s subsequent GAO bid protest.
In a recent decision, the GAO held that the protesters were not required to file their GAO bid protests within 10 days of receiving the agency’s preaward notice because the protests were based on an allegation that the agency had failed to conduct a price realism evaluation–and the protesters were not made aware of the awardee’s price in the preaward notice.
An agency awarding a fixed-price contract can only evaluate offerors’ proposals for price realism–that is, determine whether offerors’ proposed pricing is so low as to be unrealistic–if the solicitation calls for a price realism evaluation.
In a recent bid protest decision, the GAO confirmed that when a fixed-price solicitation does not advise offerors that a price realism evaluation will be conducted, the agency is not permitted to reject an offeror’s proposal because of unrealistically low pricing.
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.
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.
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.