When it comes to “best value” evaluations, agencies ordinarily have broad discretion to accept higher-rated, higher-priced proposals.
How broad is that discretion? Well, in one recent case, the GAO held that an agency reasonably accepted the awardee’s higher-rated proposal, despite a whopping 91% price premium.
The GAO’s decision in Deloitte Consulting LLP, B-419336.2 et al. (2021) involved a DHS Request for Quotations seeking the establishment of a Blanket Purchase Agreement under which the awardee would provide program analysis and strategic support services. The RFQ was issued to holders of the GSA’s Professional Services Schedule with particular Special Line Item Numbers, as well as certain other GSA Schedule holders, and contemplated the award of a single BPA against which orders would be issued.
The RFQ provided for award on a best value basis, using a two-phase process. Only phase 2 was at issue in the GAO’s decision. In phase 2, the evaluation was to be based on five factors, listed in descending order of importance: management approach, technical approach, prior experience, socio-economic considerations, and price. Because the ultimate scope of work under the BPA was indefinite, price was to be evaluated based on a sample task.
DHS received quotations from four vendors, including Deloitte Consulting LLP and Grant Thornton. The evaluators assigned Grant Thornton a rating of “High Confidence” on the two most important factors: management approach and technical approach. Grant Thornton received “Some Confidence” scores on the other two non-price factors. Deloitte also received “Some Confidence” scores for these two factors, and a High Confidence score for technical approach. But unlike Grant Thornton, Deloitte’s management approach score was “Some Confidence.” Deloitte’s total evaluated price was $867,064. Grant Thornton’s was $1,653,118–a price premium of approximately 91%.
DHS concluded that the advantages of Grant Thornton’s quotation outweighed its higher proposed price, and made award to Grant Thornton. Deloitte then filed a bid protest with the GAO, challenging various aspects of the award. Among those challenges, Deloitte contended that DHS had unreasonably deemed Grant Thornton’s price to be reasonable, and that DHS had conducted an improper best value tradeoff.
With respect to reasonableness (that is, the question of whether Grant Thornton’s price was impermissibly high), the GAO wrote that “the manner and depth of an agency’s price analysis is a matter committed to the discretion of the agency, which we will not disturb provided that it is reasonable and consistent with the solicitation’s evaluation criteria and applicable procurement statutes and regulations.”
In this case, the GAO found that the agency had compared Grant Thornton’s pricing to the mean proposed by all four offerors and the agency’s independent government cost estimate, both of which supported the reasonableness of the price. The agency also noted that Grant Thornton’s proposed labor rates were “significantly discounted” from the rates in its underlying GSA Schedule contract, which “have already been determined to be fair and reasonable.”
The GAO held that “[o]n this record, the agency’s price reasonableness evaluation, and its conclusion that Grant Thornton’s price was reasonable, is unobjectionable.” Turning to the best-value tradeoff, the GAO reached a similar conclusion, holding, “the record shows that [HHS] provided a well-reasoned basis for a tradeoff that identified discriminators between the quotations and justified paying Grant Thornton’s higher price.” The GAO denied Deloitte’s protest.
The Deloitte case is a good example of the broad discretion agencies have to pay more for a higher-rated proposal in a best-value procurement. But in this case, price was the least important evaluation factor. Would the outcome have changed if, say, price had been equal in weight to all four non-price factors combined?
There’s no way to know for sure, but in my experience, the answer is almost certainly “no.” Where, as here, the offeror’s price is reasonable, and the agency provides a reasonable, contemporaneous written justification for paying the higher price, the GAO is very likely to defer to the agency’s discretion–even if the price premium is more than 90%.
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