Maybe it’s happened to you: your company receives a notice of unsuccessful offeror, and your eyes pop. You can’t believe that the winner’s price is so low. “There’s no way they can successfully perform for that,” you say.
But before you file a GAO bid protest, you should carefully check the solicitation’s evaluation criteria. As one unsuccessful offeror recently learned the hard way, GAO often won’t listen to an argument that “the other guy’s price is too low.”
Price realism—the evaluation of whether a proposed price is too low—is a method the government may use to evaluate fixed price offers to ensure that offerors are proposing pricing that reflects an understanding of the work required by the solicitation.
Prices that are unrealistically low can result in proposal elimination. This means price realism is an important consideration when preparing a bid. But what if an agency decides after proposal submission that a price realism evaluation will not be performed? In a recent decision, GAO confirmed that offerors must be given the opportunity to revise their proposals.
Negotiating with the federal government regarding pricing can sometimes feel like trying to win an RV from Bob Barker. Such was the experience of one protester. The government recommended a price increase during discussions and the contractor raised its price. The price increase, however, ultimately cost the offeror the award.
The agency’s conduct was subsequently protested before GAO, but GAO was not receptive.
GAO recently held in ATA Aerospace, LLC, B-417427 (July 2, 2019) that agencies are required to explain how offerors’ proposed labor hours and prices are, or are not, in line with historical data from predecessor contracts when conducting cost realism evaluations.
Unless a solicitation for a fixed-price contract provides that the agency can conduct a price realism analysis, it can’t. Even so, agencies sometimes perform this analysis without alerting prospective offerors of the possibility.
If they do, however, the ground is fertile for a protest.
Let’s suppose you’re a contractor that provides services to the federal government. Typically, your contract will require you to pay your employees the prevailing wage rates promulgated under the Service Contract Act.
What if you suspect that, under previous contracts, your competitors failed to pay their employees the mandated prevailing rates? Can you use a pre-award bid protest to obligate a procuring agency to police possible ongoing non-compliance through solicitation provisions? If you say yes, perhaps you should keep reading.
An incumbent contractor won a protest at GAO recently where it argued that the awardee’s labor rates were too low, because they were lower than the rates the incumbent itself was paying the same people.
GAO faulted the agency for concluding that the awardee’s price was realistic without checking the proposed rates against the incumbent rates. In other words, GAO told the agency to start at the obvious place—the compensation of the current employees.