GAO: Agency Need Not Raise Offeror’s High Price In Discussions

When an agency decides to hold discussions with offerors, must it discuss with an offeror the price proposed for the contract? Not unless that offeror’s proposed price is so high as to be unreasonable.

As the GAO held in a recent bid protest decision, unless an offeror’s price is so high as to make its proposal unacceptable, the offeror is not entitled to be informed during discussions that its price is too high–even if the price is significantly higher than competitors.

The GAO helped shed light on this issue in Joint Logistics Managers, Inc., B-410465.2, B-410465.3 (May 5, 2015). There, the United States Marine Corps issued a task order RFP seeking “Care of Supplies in Storage” services in Albany Georgia, for one base year and one option year. The award was to be made on a best-value basis, considering technical approach, past performance, and price. Price was considered significantly less important than the combined non-price factors; but, price would become increasingly more important if proposals were considered technically equal or if an offeror’s price was so high as to diminish the value of any technical superiority.

Three offerors submitted proposals, including Joint Logistics Managers (JLMI) and PrimeTech International (PTI). After an initial evaluation, the agency entered into discussions with each offeror.  In discussions with JLMI the agency stated that JMLI’s proposal contained no weaknesses or deficiencies. Following the conclusion of discussions, each offeror submitted a final proposal revision.

In the agency’s evaluation of final proposals, PTI and JLMI received identical adjectival scores for technical risk, past performance confidence, and past performance relevance.  JLMI’s proposal was rated as “outstanding” under the technical factor, but was priced at $19.5 million; PTI’s proposal, though only rated as “good” under the technical factor, was priced $2.9 million less than JLMI’s ($16.6 million).

The Source Selection Authority determined that the prices of both PTI and JLMI to be fair, reasonable, and realistic. The SSA also acknowledged the technical superiority of JLMI’s proposal.  However, the SSA determined that the technical superiority of JLMI’s proposal was not justified given its price premium compared to PTI’s proposal, and therefore determined PTI to be the best value to the government. The agency awarded the contract to PTI.

JLMI protested the award, alleging, in part, that the agency failed to conduct meaningful discussions regarding JLMI’s proposed price. Specifically, JLMI maintained that the agency should have advised it that its price was unreasonably high.  JLMI contended that the Contracting Officer knew, prior to discussions, that JLMI’s high price would preclude it from the award.

The GAO rejected JLMI’s argument. The GAO noted that, under the FAR, discussions “must, at a minimum, address significant weaknesses, deficiencies, and adverse past performance information to which the offeror has not yet had an opportunity to respond.”  Although pricing issues “are within the ambit of discussions . . . these issues are treated distinctly from significant weaknesses and deficiencies in the non-price proposal.”

In this regard, “contracting officers are specifically given the discretion, rather than imposed with the obligation, to discuss whether an offeror’s price is considered to be too high or too low.”  Unless an offeror’s proposed price “is so high as to be unreasonable or unacceptable, an agency is not required to inform an offeror during discussions that its proposed price is high in comparison to a competitior’s proposed price, even where price is the determinative factor for award.” The GAO denied JLMI’s protest.

As the Joint Logistics Managers case demonstrates, an offeror cannot count on an agency to inform the offeror in discussions that its price is too high as compared to its competitors.  Even where, as here, price was the determining factor in the award, the agency need not raise an offeror’s high price unless the price is so high as to render the proposal unacceptable.

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