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 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.

The Lifecycle Construction Services GAO bid protest involved an Army Corps of Engineers solicitation for construction services.  The solicitation stated that the Corps intended to award up to five contracts and place up to $100 million in task orders under those contracts.  The solicitation called for the evaluation of three factors: experience, past performance, and price.

With respect to the price factor, the solicitation required offerors to submit a “coefficient” for each of 14 locations where work would be performed, as well as applicable overhead rates.  The solicitation provided estimates of the total work to be performed at each of the 14 locations, to which offerors’ coefficients would be applied.

The Corps received 19 timely proposals, including  a proposal submitted by Lifecycle Construction Services, LLC.  Following proposal submission, the Corps conducted a price evaluation on 15 of the 19 proposals (one had been withdrawn, and three others had significant pricing errors), for a single location–Fort Bragg, North Carolina.  The Corps’ price evaluation included a price realism component.

The Corps compared offerors’ Fort Bragg coefficient to a government estimate, and concluded that none of the 15 offerors, including Lifecycle, had proposed a coefficient more than 15 percent below the government estimate, a level deemed reasonable by a government cost estimator.

However, rather than relying on the government estimate, the Corps calculated the median of all 15 offerors’ coefficients for Fort Bragg and Pope Air Force Base, which resulted in a median price materially higher than the government estimate.  Because Lifecycle’s price was more than 15 percent below this median, the Corps deemed Lifecylce’s price “excessively low.”

The Corps subsequently determined that, of the 15 offerors comprising the median, several had proposed unreasonably high prices, or were otherwise unacceptable and ineligible for award. Nevertheless, the Corps did not amend its finding that Lifecycle’s price was excessively low.

Lifecyle filed a GAO bid protest, challenging the Corps’ price evaluation.  The GAO agreed that the price evaluation had been flawed, in two respects.

First, the GAO held that because three of the proposals used to establish the median “were, themselves, unreasonably high,” and because “several others were proposed by offerors/proposals that were determined to be unacceptable or ineligible for award,” the median “could not be reasonably relied upon as a valid benchmark for comparison.”

Second, the Corps erred by only evaluating prices for Fort Bragg and Pope Air Force Base, because “[n]othing in the RFP advised offerors that the prices proposed for the locations other than the Fort Bragg/Pope Air Force Base area would not be meaningfully considered.”  The GAO sustained the protest.

The Lifecycle Construction Services GAO bid protest decision demonstrates that when agencies use comparisons to evaluate price realism, those comparisons must be reasonable and meaningful.  Where, as here, a comparison is made using unacceptable proposals, it taints the evaluation–just like it would taint the cycling record books to continue to include Lance Armstrong.

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