When the federal government awards a contract, the government must ensure that the price it pays is “fair and reasonable.” In other words, the government cannot pay a price that is too high.
If a contract is awarded on the basis of competitive proposals, an agency may be able to establish price reasonableness by comparing the prices proposed by competing offerors. But as demonstrated in a recent GAO bid protest decision, competition alone doesn’t mean that the prices received are reasonable–the government still must compare offerors’ prices to determine reasonableness.