Agency Pays 72.6% Price Premium; GAO Upholds Award

I often caution would-be bid protesters that when it comes to “best value” procurements, the GAO gives agencies wide discretion to pay a price premium for a proposal evaluated as superior.

Case in point: a recent bid protest decision in which the GAO upheld the procuring agency’s decision to pay a whopping 72.6% price premium.

The GAO’s decision in Countywide Transportation, B-408422 (Sept. 16, 2013) involved a VA solicitation for transportation services.  The solicitation established a best value evaluation system.  Price was specifically assigned a 15% weight in the overall evaluation, and various non-price factors comprised the remaining 85%.

Countywide Transportation, the incumbent, submitted a proposal. Countywide proposed to perform the transportation services for a total price of $80,752.

In its evaluation, the VA determined that a competitor, Virgo Medical Services, Inc., was superior under the two most important non-price factors: technical approach and management approach.  The VA made award to Virgo, even though Virgo proposed a total price of $139,416.30–nearly 73% higher than Countywide.

Countywide filed a GAO bid protest.  Countywide argued, in part, that the VA had erred by paying such a large price premium award to Virgo.

After reviewing the procurement file, the GAO determined that the VA had adequately documented its rationale for the price premium.  “On this record,” the GAO wrote, “we have no basis to object to the SSA’s conclusion that the higher-priced offeror provided the best value to the agency, particularly where, as here, cost/price was worth only 15 percent as an evaluation factor under the solicitation.”  The GAO denied the protest.

As highlighted in the GAO’s statement, the Countywide case involved a solicitation with a low numerical weight–15%–assigned to price.  Many competitive solicitations do not include such specific evaluation weights. Nevertheless, my best guess is that the outcome would not have changed if the solicitation had used more typical terminology, such as stating that the non-price factors “outweigh” or “significantly outweigh” price.

In fact, even if the solicitation deemed price equal to the non-price factors, I think there is a good chance that the GAO still would have found the decision to be within the wide bounds of an agency’s discretion when making a price/technical tradeoff.  In any event, at least in this case, an agency acted within the bounds of reasonableness by paying 72.6% more for a higher-ranked proposal.  Talk about wide discretion.

Leave a Reply

Your email address will not be published. Required fields are marked *