Price Evaluation of IDIQ Contract

[Ham]

I have:

• A competitive, IDIQ type solicitation planned as a small businesses set-aside award with a five year period of performance
  
• Contract award will be made to a single offeror in accordance with one of the criterion under FAR 16.504( c )(1)(ii)( B )
  
• Task Orders (TOs) will be firm fixed price orders for services
  

The literature points to two possible strategies in evaluating price in IDIQ solicitations for services - a sample task method and an estimated quantities method.

Sample Task Method

Under the sample task method, the solicitation requires offerors to submit prices for one or more real or fictional TOs. GAO has found the sample TO method of price evaluation to constitute “adequate price evaluation” whereby “nothing (was) improper in the agency’s determination that the awardees’ and protesters’ proposed prices were fair and reasonable” (see C. L. Price and Associates, Inc., Comp. Gen. Dec. B-403476.2, 2011). In order to comply with CICA, the GAO has held that when using a sample TO as the basis for evaluating competing proposals, the offerors' proposed prices must be based on rates that will be binding on the TO as well as on all future work under the contract (see CW Government Travel, Inc.--Reconsideration, Comp. Gen. Dec. B-295530.2, 2005 CPD 139). Lastly, the agency must award the sample TO contemporaneously with the award of the contract, in order to meet an agency’s bona fide need (see U.S. Small Business Administration – Indefinite-Delivery Indefinite-Quantity Contract Guaranteed Minimum, Comp. Gen. Dec. B-321640).

Estimated Quantities Method

Under the estimated quantities method, cost elements such as the estimated number of labor hours by job position and the unit amounts of materials/supplies are specified by the Government (usually based on prior experience) and presented in the solicitation in the form of annual pricing spreadsheets. Offerors develop their annual contract prices by multiplying the Government provided amounts by the offeror’s ceiling costs for each of the specified cost elements in the spreadsheet. The total proposed contract price is then the sum of all annual prices. In effect, the Government and the contractor are negotiating the reasonableness of such unit costs but not their realism for the work to be performed.

There is no intent on the part of the Government to obligate fiscal year funds in the amount of such annual prices. As a federal agency has stated in one of its solicitations “the purpose of the pricing spreadsheet is to provide a uniform pricing template for evaluation of offerors for award. The estimated total number of hours provided (by the Government) are (sic) not contractual commitments and are not intended to represent actual expected experience of any given contractor. The dispersion of hours was chosen based on actual experience and this is determinative of the price evaluation.”

Questions

Under the estimated quantities method, because there is no means for evaluating and comparing the realistic labor mixes and quantities that would be expected on actual TOs, are the requirements of CICA met when the prices are not contractual commitments but merely the aggregate of mechanically calculated ceiling costs? Does such a price evaluation method possibly “minimize the potential impact of cost or price as to make it a nominal evaluation factor” (see The MIL Corporation, B-294836, Dec. 20, 2004) thereby failing the CICA standard for considering price as a meaningful factor in proposal evaluation and source selection?

Under the estimated quantities method how do you determine which offeror’s proposed contract price provides best value when you only have ceiling costs and the distribution of these costs on future TOs is unknown?

Since I’m dealing with a competitive solicitation resulting in a single award would I be better off doing a requirements type contract with option years rather than a multiple year IDIQ contract?

Lastly, I haven’t been able to get my hands on "Evaluating Price or Costs in Task Order Contracts " in the November 2005 issue of the Nash & Cibinic Report or Vern Edwards’ “Task Order Contracting, Understanding and Using Task Order Contracts”. If anybody can send copies to me via email (without violating copyright) that would be appreciated.

[jdm843]

I've encountered a similar dilemma before. Which did you use, sample task or estimated quantities?

[napolik]

Here is the rule on evaluating price or costs relevant to your circumstance:

“Agencies must consider cost to the government in evaluating competitive proposals. 10 U.S.C. sec. 2305(a)(3)(A)(ii) (1994); Health Servs. Int'l, Inc.; Apex Envtl., Inc., B-247433, B-247433.2, June 5,1992, 92-1 CPD para. 493 at 3-4. While it is up to the agency to decide upon some appropriate, reasonable method for proposal evaluation, an agency may not use an evaluation method that produces a misleading result. Id. at 4. Such method must include some reasonable basis for evaluating or comparing the relative costs of proposals, so as to establish whether one offeror's proposal would be more or less costly than another's. See Health Servs. Int'l, Inc.; Apex Envtl., Inc., supra; Penn, Ferrara, Adler & Eichel, 66 Comp. Gen. 242, 245 (1987), 87-1 CPD para. 134 at 3-4. Where estimates for various types of required services are not reasonably available, an agency may establish a reasonable hypothetical, consistent with the RFP requirements, to provide a common basis for comparing the relative costs of the proposals. See High-Point Schaer, 70 Comp. Gen. 524, 528-30 (1991), 91-1 CPD para. 509 at 6-8.” Aalco Forwarding, Inc., et al., B 277241.15, Mar. 11, 1998, 98-1 CPD para. 87 at 11.

So, if the labor hours and labor categories on the annual pricing spreadsheets do not reflect likely actual usage, you should use a sample task method. The sample task(s) must be reasonable and consistent with the RFP requirements, and it must enable you to establish whether one offeror's proposal would be more or less costly than another's.