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Asking for labor category price discounts as in B-400777 Optimus Corporation when awarding FAR 8.4 BPAs


Sam101

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If according to GAO case B-400777 Optimus Corporation asking for price reductions does not constitute discussions and we have this scenario when awarding a FAR 8.4 BPA using trade-off:

Vendor A:

LCAT 1: $175.00 (equals the GSA pricelist)

LCAT 2: $135.00 (equals the GSA pricelist)

LCAT 3: $105.00 (equals the GSA pricelist)

Non-price ratings:

Technical Approach:  Good

Vendor B: 

LCAT 1: $125.00 (already discounted from the GSA pricelist)

LCAT 2: $100.00 (already discounted from the GSA pricelist)

LCAT 3: $95.00 (already discounted from the GSA pricelist)

Non-price ratings:

Technical Approach:  Acceptable

Can the CO only contact Vendor A and ask "can you decrease all of your LCATS that are above $105 by 25% and everything else by 10%?" and if they say yes award to them and if they say no award to Vendor B?

I don't see why not.

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Have you read the following FAR passage?

 

Beyond what the FAR allows/requires my only thought is requesting on the specific discounts you note.   On one hand I see nothing in the FAR that would prevent it but as you have painted your scenario, would you be asking Vendor B to do so because those are the exact percentages that Vendor A discounted their pricing.   Nothing in the FAR, says you cannot state specifics, nor did I do any research of case law to align my thinking. yet it just seems odd doing it after receipt of pricing and with knowledge of what another vendor quoted you and ask for the same discount if that is the case.   I wouldn't do it but that does not mean its wrong.

What I would have done is what the FAR says is to be done.  I would have sought the price reductions from every vendor at time of getting pricing if the order is to be in excess of the SAP.  

 

8.405-4 Price reductions.

Ordering activities may request a price reduction at any time before placing an order, establishing a BPA, or in conjunction with the annual BPA review. However, the ordering activity shall seek a price reduction when the order or BPA exceeds the simplified acquisition threshold. Schedule contractors are not required to pass on to all schedule users a price reduction extended only to an individual ordering activity for a specific order or BPA.

 

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IMHO you are okay to do this.  See FAR 15.404-1(b):

Quote

(2) The Government may use various price analysis techniques and procedures to ensure a fair and reasonable price. Examples of such techniques include, but are not limited to, the following:

(i) Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1)).

...

(3) The first two techniques at 15.404-1(b)(2) are the preferred techniques.

I do believe this is what we mean when we say, "Competition is the government's policy."

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Just now, Voyager said:

IMHO you are okay to do this.  See FAR 15.404-1(b):

I do believe this is what we mean when we say, "Competition is the government's policy."

I might agree it is okay to do but your citation is completely off base.  Pulling FAR 15 into a discussion regarding GSA FSS is not appropriate.  Note the OP is raising a question regarding GSA FSS BPAs for goodness sake.  FAR 8.4 is the reference and that is it.

Here is why I posted as I did with regard to the OP's question.  It is unknown when the OP wants to seek the discounted pricing - at BPA establishment or with regard to a call against the BPA that is established (see below).  

So again the OP should be paying attention and following FAR 8.4.   

8.405-4 Price reductions.

Ordering activities may request a price reduction at any time before placing an order, establishing a BPA, or in conjunction with the annual BPA review. However, the ordering activity shall seek a price reduction when the order or BPA exceeds the simplified acquisition threshold. 

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1 hour ago, C Culham said:

your citation is completely off base.  Pulling FAR 15 into a discussion regarding GSA FSS is not appropriate.  Note the OP is raising a question regarding GSA FSS BPAs

Well, unfortunately no price or technical analysis techniques are described in FAR Subpart 8.4.  For that reason, I have always practiced that my emphasized language in the following citation in FAR Subpart 8.4 opens the door for the CO to seek price analysis techniques listed in the FAR at large.  Is that not the case according to the courts now?

Quote

48 CFR 8.405-3(c)(3) BPAs for hourly-rate services. If the BPA is for hourly-rate services, the ordering activity shall develop a statement of work for each order covered by the BPA. Ordering activities should place these orders on a firm-fixed price basis to the maximum extent practicable. For time-and-materials and labor-hour orders, the contracting officer shall follow the procedures at 8.404(h). All orders under the BPA shall specify a price for the performance of the tasks identified in the statement of work. The ordering activity is responsible for considering the level of effort and the mix of labor proposed to perform a specific task being ordered, and for determining that the total price is reasonable through appropriate analysis techniques, and documenting the file accordingly.

I am not even in the slightest saying the CO should utilize any FAR Subpart 15.3 procedures - we can easily agree on that matter because of case law.  Why in case law or regulation do you disagree he/she should utilize the Price Analysis and Technical Analysis paragraphs in Subpart FAR 15.4?

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1 hour ago, C Culham said:

Here is why I posted as I did with regard to the OP's question.  It is unknown when the OP wants to seek the discounted pricing - at BPA establishment or with regard to a call against the BPA that is established

If I were the OP, I would not get wrapped up in the FAR's language and make a case about ordering activity vs. BPA-awarding activity's responsibilities here.  I would always seek the discounts as the BPA-awarding activity, because that is when the Government has the most negotiation leverage.

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3 hours ago, Sam101 said:

Can the CO only contact Vendor A and ask "can you decrease all of your LCATS that are above $105 by 25% and everything else by 10%?" and if they say yes award to them and if they say no award to Vendor B?

@Sam101When you ask, "Can the CO...," are you asking whether it would be okay with the GAO or the COFC? If so, then I don't know. I couldn't find a protest decision that dealt with your scenario.

FAR 15.306 does not apply, so it boils down to whether it would be unfair, because you must always be fair to all competitors, no matter what procedure you use. Don't you agree?

Is it fair competition, even under FAR Subpart 8.4, to bargain with Vendor A to get a lower price without bargaining with Vendor B to get a better technical approach?

How would you answer that question if asked by a protest tribunal?

(Why COs ask for proposed technical approaches under an 8.4 competition is a mystery. I'm inclined to think the answer has something to do with professional intelligence or the lack thereof.)

 

 

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36 minutes ago, Voyager said:

unfortunately no price or technical analysis techniques are described in FAR Subpart 8.4.

 FAR 8.405-2(d) Evaluation. The ordering activity shall evaluate all responses received using the evaluation criteria provided to the schedule contractors. The ordering activity is responsible for considering the level of effort and the mix of labor proposed to perform a specific task being ordered, and for determining that the total price is reasonable. Place the order with the schedule contractor that represents the best value (see 8.404(d) and 8.405-4). After award, ordering activities should provide timely notification to unsuccessful offerors. If an unsuccessful offeror requests information on an award that was based on factors other than price alone, a brief explanation of the basis for the award decision shall be provided.

38 minutes ago, Voyager said:

Why in case law or regulation do you disagree he/she should utilize the Price Analysis and Technical Analysis paragraphs in Subpart FAR 15.4?

15.400 Scope of subpart.

This subpart prescribes the cost and price negotiation policies and procedures for pricing negotiated prime contracts (including subcontracts) and contract modifications, including modifications to contracts awarded by sealed bidding.

 

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1 hour ago, Voyager said:

Well, unfortunately no price or technical analysis techniques are described in FAR Subpart 8.4.

 

59 minutes ago, C Culham said:

FAR 8.405-2(d) Evaluation. The ordering activity shall evaluate all responses received using the evaluation criteria provided to the schedule contractors. The ordering activity is responsible for considering the level of effort and the mix of labor proposed to perform a specific task being ordered, and for determining that the total price is reasonable. Place the order with the schedule contractor that represents the best value (see 8.404(d) and 8.405-4). After award, ordering activities should provide timely notification to unsuccessful offerors. If an unsuccessful offeror requests information on an award that was based on factors other than price alone, a brief explanation of the basis for the award decision shall be provided.

That passage does not describe any technique.

The first sentence says that the ordering activity must evaluate all responses. The second sentence says the ordering activity is responsible for considering various things. The third sentence instructs the ordering activity to place the order with a certain contractor. The fourth sentence tells the ordering activity to provide timely notification to the losers.The fifth sentence says that a brief explanation to any offeror who requests information. That passage does not describe or prescribe any method or manner of determining value. It doesn't say how to go about "considering" level of effort or labor mix or how to go about "determining" price reasonableness.

The Oxford English Dictionary, 3d ed>:

Quote

The formal or practical aspect of any art, occupation, or field; manner of execution or performance with regard to this. Also more generally: way of doing something.

 

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22 minutes ago, Vern Edwards said:

That passage does not describe any technique.

Exactly!  Voyager did not ask about technique.  Voyager asked about case law, regulation and paragraphs - "Why in case law or regulation do you disagree he/she should utilize the Price Analysis and Technical Analysis paragraphs in Subpart FAR 15.4?"   

I  agree that the techniques of 15.4 are sound.   I believe the OP can use any technique they want.  After all in reality the choice of issuing an order for establishing the BPA is a fair opportunity process.  

Coupled with this  "I would not get wrapped up in the FAR's language and make a case about ordering activity vs. BPA-awarding activity's responsibilities here." it seems to me that Voyager is furthering the ideals that has made GSA-FSS a misunderstood and confused process of acquisition that it has become.

Rather than debating case law, regulation and what the Oxford dictionary says maybe, just maybe ALL should read what the actual GSA FSS contract says.  Afterall it is definitive of how orders (a BPA established under a GSA-FSS is an order) shall be placed and what the effect of the orders pricing has on the overall GSA-FSS contract and what the contractor holding the contract shall do.  Lots of places to look in the contract I will simply offer this as the first place 552.238-81 and stop as I do not want to crawl into some academic discussion in Beginners.

In stopping I will simply again offer that the OP should read, understand and apply FAR 8.4 and any agency supplements thereto. 

Its a mystery to me as why anyone would want to go beyond FAR 8.4 and the clauses of a GSA-FSS contract!

 

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3 hours ago, C Culham said:

Pulling FAR 15 into a discussion regarding GSA FSS is not appropriate. 

 

31 minutes ago, C Culham said:

Its a mystery to me as why anyone would want to go beyond FAR 8.4 and the clauses of a GSA-FSS contract!

DOD Class Deviation 2014-O0011 requires application of FAR 15.404-1 techniques. But as you stated, FAR 8.405-4 governs ‘price reductions.’

https://www.acq.osd.mil/dpap/policy/policyvault/USA001004-14-DPAP.pdf

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3 hours ago, Vern Edwards said:

When you ask, "Can the CO...," are you asking whether it would be okay with the GAO or the COFC?

Yes, I am asking if it would be OK with GAO or the COFC and also if it's OK with the any plain text in FAR 8.4. I think at least it's OK with GAO, because of B-400777 Optimus Corporation.

3 hours ago, Vern Edwards said:

you must always be fair to all competitors, no matter what procedure you use. Don't you agree?

Yes, the government should always be fair to all competitors.

3 hours ago, Vern Edwards said:

Is it fair competition, even under FAR Subpart 8.4, to bargain with Vendor A to get a lower price without bargaining with Vendor B to get a better technical approach?

I would say it's better to enter into discussions with both Vendor A and Vendor B and let Vendor A decrease their price and let Vendor B propose a better technical approach, but sometimes it's better not to have discussions, whether that is because of time or something else.

3 hours ago, Vern Edwards said:

How would you answer that question if asked by a protest tribunal?

I would say "because it was not in the best interest of the government to enter into discussions, FAR 8.4 is not meant for discussions, if I knew that this procurement had a good chance of needing discussions I would not have used FAR 8.4, rather I would have used FAR 15."

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59 minutes ago, Sam101 said:

Yes, I am asking if it would be OK with GAO or the COFC and also if it's OK with the any plain text in FAR 8.4. I think at least it's OK with GAO, because of B-400777 Optimus Corporation.

@Sam101You must be careful when citing case law. First, what was the holding in Optimus and how does it apply to your scenario? Second, the Optimus decision is more than 10 years old, and the text of FAR 8.405-2(c)(3)(ii), which the GAO cited in Optimus, has changed. Are you aware of that? Do you know of any decision(s) which have made a holding based on the current FAR that would support what you want to do?

I asked you:

4 hours ago, Vern Edwards said:

Is it fair competition, even under FAR Subpart 8.4, to bargain with Vendor A to get a lower price without bargaining with Vendor B to get a better technical approach?

You responded:

59 minutes ago, Sam101 said:

I would say it's better to enter into discussions with both Vendor A and Vendor B and let Vendor A decrease their price and let Vendor B propose a better technical approach, but sometimes it's better not to have discussions, whether that is because of time or something else.

You did not answer my question. The issue is not discussions, because the discussions rule does not apply to acquisitions conducted under FAR Subpart 8.4. The issue is fairness. See FAR 1.102-2(c) and 1.602-2(b).

About my question, I asked you:

4 hours ago, Vern Edwards said:

How would you answer that question if asked by a protest tribunal?

You responded:

59 minutes ago, Sam101 said:

I would say "because it was not in the best interest of the government to enter into discussions, FAR 8.4 is not meant for discussions, if I knew that this procurement had a good chance of needing discussions I would not have used FAR 8.4, rather I would have used FAR 15."

That response does not address fairness. Again, the issue is not discussions. It's fairness. Again, see FAR 1.102-2(c) and 1.602-2(b).

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@Sam101For a more recent decision about acquisition procedures under FAR 8.405-2, see Deloitte Consulting LLP, B-420137.7, July 25, 2022:

Quote

Where, as here, a competition is conducted among FSS vendors pursuant to FAR part 8, there is no requirement for agencies to conduct discussions in accordance with FAR section 15.306. See FAR 8.404(a). However, exchanges that do occur with vendors in FAR part 8 procurements, like all other aspects of such procurements, must be fair and equitable. USGC Inc., B-400184.2 et al., Dec. 24, 2008, 2009 CPD ¶ 9 at 3. 

See also NextGen Federal Systems, LLCB- 420456, April 14, 2022:

Quote

Where, as here, a competition is conducted among FSS vendors pursuant to FAR subpart 8.4, agencies are not required to conduct discussions in accordance with FAR subpart 15.3. See FAR 8.404(a); AWS Convergence Techs., Inc., B–404002.2, B–404002.3, Apr. 20, 2011, 2011 CPD ¶95 at 9. If, however, an agency elects to conduct exchanges with vendors in FAR subpart 8.4 procurements, they must be fair and equitable. USGC Inc., B–400184.2 et al., Dec. 24, 2008, 2009 CPD ¶9 at 7-8. If an agency engages in exchanges with a vendor pursuant to a FAR subpart 8.4 procurement, our Office will look to the standards for discussions under FAR subpart 15.3 for guidance in determining whether the exchanges were fair and equitable. Ricoh USA, B–411888.2, Nov. 18, 2015, 2015 CPD ¶355 at 5-6.

Emphasis added.

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2 hours ago, Vern Edwards said:

Do you know of any decision(s) which have made a holding based on the current FAR that would support what you want to do?

Yes, DarkStar Intelligence, LLC B-420609,B-420609.2, which is from 2022, where the GAO said this:

Quote

Protest alleging that the agency conducted discussions with only the awardee is denied where the exchange was a request for a price reduction conducted after the agency had selected the awardee under Federal Acquisition Regulation subpart 8.4.

Quote

We conclude that there was no prejudice to the protester because the agency requested the price reductions from ChESS only after selecting that vendor for award. 

Quote

the agency requested that ChESS further improve its already successful quotation by quoting the agency a lower price. The record establishes that even if the request had not been made, ChESS’s quotation would have been selected for issuance of the task order.

 

2 hours ago, Vern Edwards said:

the text of FAR 8.405-2(c)(3)(ii), which the GAO cited in Optimus, has changed.

Yes, but 8.405-4 Price reductions says "the ordering activity shall seek a price reduction when the order or BPA exceeds the simplified acquisition threshold."

2 hours ago, Vern Edwards said:

The issue is fairness. See FAR 1.102-2(c) and 1.602-2(b).

Asking for a price reduction doesn't violate integrity, fairness, and openness, it's just following what "8.405-4 Price reductions" says and giving tax payers better performance at a lower rate.

I don't see how asking for price reductions would violate ensuring that contractors receive impartial, fair, and equitable treatment, competitors see that FAR 8.405-4 says that the government can ask for price reductions at any time before placing an order or establishing a BPA... so it's fair. Would it make a difference if the reason for asking for specific rate discounts was because the CO looked at the GSA CALC Tool and saw that the average for awarded rates were closer to Vendor B's rates?

I'm not sure what "price reduction conducted after the agency had selected the awardee" means in DarkStar Intelligence, LLC B-420609,B-420609.2 though, does it mean that even if the awardee said no to any price reductions that the agency would still be forced to award to them?

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2 hours ago, Vern Edwards said:

First, what was the holding in Optimus and how does it apply to your scenario?

The holding was that the government asking for only price reductions without allowing changing anything else in a quotation after the submission of initial quotations does not constitute discussions. This applies to my scenario because the government is asking Vendor A for a price reduction only, without allowing them to change anything else in their quotation, after submission of initial quotations.

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1 hour ago, Sam101 said:
Quote

Protest alleging that the agency conducted discussions with only the awardee is denied where the exchange was a request for a price reduction conducted after the agency had selected the awardee under Federal Acquisition Regulation subpart 8.4.

Emphasis added.

11 hours ago, Sam101 said:

Can the CO only contact Vendor A and ask "can you decrease all of your LCATS that are above $105 by 25% and everything else by 10%?" and if they say yes award to them and if they say no award to Vendor B?

Emphasis added.

The scheme you described in your opening post is to ask for price reductions before selecting the awardee.

Asking for a price reduction from the technically superior but higher priced quoter before making the award decision without seeking technical improvement from the the lower-priced, technically acceptable but inferior quoter before making an award decision might not seem fair to the GAO, especially if it applies FAR 15.3, as they said they would. 

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In addition, the discount negotiation objectives with the higher technically rated offeror bring rates almost identical to the lower priced source.  This conveys a suspicious tone that the agency only wanted Vendor A and sought very specific price reductions solely from them to get to equal pricing between the two. If I were you I would seek price reductions from both and let both make technical improvements.

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