Federal Supply Schedule Acquisitions Require Price Comparisons to Determine Lowest Overall Cost, Says GAO

In a recent protest, GAO examined the rules for price evaluation and source selection methodology required under the Federal Supply Schedule (FSS) Program. At a minimum, an agency must perform price comparisons to evaluate what vendor will be lowest cost along with any additional features and benefits to the government. Because the FSS solicitation at issue failed to include proper price evaluation terms, GAO sustained a challenge to those terms.

Noble Supply & Logistics, Inc., B-418141 (Jan. 16, 2020). concerned an RFQ issued under FAR subpart 8.4 for vendors holding Hardware Superstore FSS contracts. The RFQ anticipated four separate single-award Blanket Purchase Agreements (BPAs) for stocking industrial product inventory at various military installations for the Departments of the Navy, Army, and Air Force, and the U.S. Marine Corps.

The RFQ instructed vendors to submit separate quotations for each military branch, which the agency would evaluate to ensure that pricing was “fair and reasonable.” The RFQ used neither a lowest-priced technically acceptable nor a best-value trade-off source selection methodology. Instead, the agency planned to issue a BPA on a best-value basis to the highest technically rated reasonably-priced offerors for each of the four military branches.

The protester challenged the RFQ’s highest technically rated reasonably-priced evaluation and source selection methodology, arguing that it failed to meaningfully consider price as required by the FAR. GAO agreed with the protester and sustained the protest.

GAO explained that “[t]he FSS program provides agencies with a streamlined process for obtaining commonly used goods and services at prices associated with volume buying.” Under FAR § 8.404(d), agencies must review vendors’ FSS schedules and establish BPAs with the schedule contractors that will provide the required supplies or services representing the best value and “result[ing] in the lowest overall cost alternative (considering price, special features, administrative costs, etc.) to meet the Government’s needs.” As such, GAO found:

Thus, it is evident from the statutory and regulatory framework that consideration of lowest cost to the government is an imperative when using the FSS. Consistent with this mandate, our Office has recognized that use of the FSS in lieu of conducting a full and open competition is premised on following the procedures of FAR subpart 8.4 to reach a determination regarding which FSS vendor meets the agency’s needs at the lowest overall cost.

GAO clarified that agencies conducting FSS procurements are not required to use a lowest-price technically acceptable procurement model and may, in some cases, select a more advantageous quotation at a higher price. It explained that the FAR contemplates the consideration of “the lowest overall cost alternative,” and allows the government to consider features in addition to price when making a source selection decision. But GAO explained:

[T]o meaningfully consider the lowest overall cost alternative, any best-value determination under the FSS program requires a weighing of the value and benefits associated with a vendor’s approach against its associated cost to the government. An agency must use an evaluation method that provides a basis for a reasonable assessment of the price of performance under the competing quotations, so as to establish whether one vendor’s quotation would be more or less costly than another’s.

And GAO found that the RFQ’s highest technically rated reasonably-priced price evaluation scheme solely considered the reasonableness of the pricing, meaning whether prices were too high. GAO sustained on this basis, explaining:

Such an evaluation, by its nature, does not provide a basis to assess whether one vendor’s pricing will result in the “lowest overall cost alternative” as required under an FSS procurement. Without any comparative assessment of prices, any best-value determination will be made without a weighing of the value and benefits associated with a vendor’s approach against its associated cost to the government. Such an approach is not permitted in the context of an acquisition under the FSS program.

GAO’s decision in this protest provides a blueprint for what an agency evaluation of quotations must look like for an Federal Supply Schedule acquisition. In reaching its decision, GAO distinguished the standards for these acquisitions from those applicable to FAR part 15 acquisitions. GAO said that, while a highest technically rated reasonably-priced source selection method may meet the standards of price evaluation under FAR part 15, under FSS it was not enough.

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