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I'm looking for some insight on whether there are restrictions to using Price Preferences as an evaluation criteria on an Unrestricted Solicitation? What I'm looking at is declaring a 6% price benefit to a Small Business offer. In other words, the leading Large Business offer MUST exceed the leading Small Business by 6%. Are there any restricitons to this price evaluation?

I understand there is more to it than just declaring the preference. I would need to draft bullet proof language to show how it will be evaluated.

Applicability - I'm leaning towards LPTA, FSS and OM, Unrestricted Competition.

Whether through Ebuy or Fedbizzopps and within the solicitation I would draw attention to how the price will be evaluated. For this to benefit the Socioeconomic Program they need to be fully aware of it's existance.

Can this be done?

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Your approach may be problematic.

If you anticipate receiving offers from two or more small businesses, perhaps a small business set-aside would be better.

If you do an unrestricted acquisition, you will already have a built-in 10% price preference for HUBZone small business concerns amenable to the solicitation provision at FAR 52.219-4.

You wrote, "I'm leaning towards LPTA, FSS and OM, Unrestricted Competition" -- but I don't understand your meaning -- are you contemplating a FAR Part 15 acqusition? FAR Part 13 or 14? FAR Subpart 8.4 (for schedules)? FAR 16.505 (for task orders under multiple award IDIQ contracts)? You should select one, and should not mix them.

How you answer this question will be important for anyone to me more helpful, I think.

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Right, if through Market Research I find 2+ Small Businesses I will do a set-aside. I'm looking at situations that haven't uncovered any (maybe one is out there, but wasn't found) or only 1 Small Business. Unrestricted competitions.

I wouldn't consider this evaluation on a Trade Off; it wouldn't be effective. I believe I can do it using FSS (8.4) and certainly OM (13 OR 15). I also wouldn't look to do it when competing IDIQ's like you mention. Right now I'm trying to get the foundation in place before looking at other areas.

Thoughts?

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I wouldn't consider this evaluation on a Trade Off; it wouldn't be effective. I believe I can do it using FSS (8.4) and certainly OM (13 OR 15). I also wouldn't look to do it when competing IDIQ's like you mention. Right now I'm trying to get the foundation in place before looking at other areas.

Thoughts?

Which FAR cites allow you to pay a price premium to award a contract to a firm solely because it is a small business?

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No FAR Part cites that we can do it. At the same time, I have not been able to find a FAR Part that says we can't. As far as paying premiums, we are subject to paying premiums whenever we do set-asides. Historically, small businesses charge more for the same widget that we can get from a large business. It's simple economy of scales. Small Businesses are the jugernaut of our economy; hence the push to set requirements aside. I'm simply looking for a way to level the playing field between a Small and a Large Business in an Unrestricted Competition.

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This is an interesting question. The price preference programs that are described in FAR were established per official public policy. You are asking if an individual or an organization can establish its own policy to "level the playing field between a Small and a Large Business in an Unrestricted Competition."

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... Historically, small businesses charge more for the same widget that we can get from a large business. It's simple economy of scales. ..."

It's intuitive that a small biz costs more.

That doesn't make it true.

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To Joel, Yes, I guess that's what I'm looking to do.

Also, as far as precedance, FAR Part 25.105 b (1&2) speaks to how Small and Large Domestic firms are compared to a Foreign firm in a foreign acquisition. I'm simply looking to take that same 6% difference applied in FAR 25 and using it in a domestic, unrestricted competition. I understand FAR 25 is for Foreign Acquisitions, I DO. I'm simply taking the relationship (between small & large) Congress has allowed for in foreign buys and applying it to domestic buys. I spoke to a person at the FAR Counsel as to how they came up with the 6% difference, the response I got was 'that is what congress deemed necessary for Small Businesses based on historical data. So, that 6% I first mentioned in this first post is actually FAR Based.

Does anyone see any issues with what I'm thinking of trying?

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I suspect that the GAO and the COFC would consider a price evaluation preference that is not authorized by statute to be inconsistent with full and open competition. Of course, full and open competition is not required in simplified acquisitions and when placing orders against existing contracts.

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I'm not an attorney. However, I believe that there is case law where such preferences have been thrown out because the Government couldn't prove a disadvantage to warrant the preference or that it was in the best interest of the government (taxpayers) to pay the additional premium price that such preferences might result in.I believe that some of the arguments against such preferences have been based upon "equal protection" under the US Constitution. At a minimum, it appears that the courts will strictly scruntinize such preferences.

I don't think that an individual KO should be instituting public policy such as this.

See, for example:

http://www.aronsonbl...com/gcsg/?p=199

http://www.law.nyu.e..._pro_073785.pdf

http://law.justia.co...84/1431/464470/

http://www.thefreeli...es.-a0144152490

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To Joel, Yes, I guess that's what I'm looking to do.

Also, as far as precedance, FAR Part 25.105 b (1&2) speaks to how Small and Large Domestic firms are compared to a Foreign firm in a foreign acquisition. I'm simply looking to take that same 6% difference applied in FAR 25 and using it in a domestic, unrestricted competition. I understand FAR 25 is for Foreign Acquisitions, I DO. I'm simply taking the relationship (between small & large) Congress has allowed for in foreign buys and applying it to domestic buys. I spoke to a person at the FAR Counsel as to how they came up with the 6% difference, the response I got was 'that is what congress deemed necessary for Small Businesses based on historical data. So, that 6% I first mentioned in this first post is actually FAR Based.

Does anyone see any issues with what I'm thinking of trying?

gmdubya, you certainly can't justify a personal policy, instituting a price preference, on a phone call with "a person" at the FAR Council office, using the basis that CONGRESS established for another program. That 6% price difference is intended to protect domestic industry from foreign competition for various reasons. How does that justify protecting small business enterprises from large business price advantages - if there are any?

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I don't know whether there is case law, but I think Joel has pointed out some problems with a predetermined price preference. Who decided that 6 percent was in the best interests of the government in this case? What analysis was performed that supports a 6 percent priference? Can such a preference be reasonable without consideration of other differences among offerors? Etc.

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This is an interesting question. Prior to the FAR expressly permitting small business set-asides under FSS contracts, GSA advised that agencies could use socioeconomic status as an evaluation factor for award. This may still be common practice. This implied that 1) an agency could attribute value to the socioeconomic status of an offeror and 2) an agency would potentially be willing to pay more to obtain the benefit of awarding to an offeror with a desirable socioeconomic status.

In gmdubya's scenario, the agency would be stating how much they value socioeconomic status up front. If evaluating socioeconomic status was ok in awarding FSS orders, I don't see how GSA could say that using a price evaluation preference would be wrong.

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In gmdubya's scenario, the agency would be stating how much they value socioeconomic status up front. If evaluating socioeconomic status was ok in awarding FSS orders, I don't see how GSA could say that using a price evaluation preference would be wrong.

How do you square the application of a price preference that is not based on statute or regulation with FAR 3.101?

"Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none."

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According to GSA, agencies were authorized to use "socioeconomic status" as an evaluation criterion in awarding FSS orders. Presumably, they thought this was authorized by statute and regulation because it fell within the wide latitude that agency officials had in choosing appropriate evaluation factors. Use of such a factor provides a preference that is not expressly authorized by statute or regulation. Do you think that conflicts with FAR 3.101?

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How do you square the application of a price preference that is not based on statute or regulation with FAR 3.101?

"Government business shall be conducted in a manner above reproach and, except as authorized by statute or regulation, with complete impartiality and with preferential treatment for none."

Is it possible that 15 USC 644(a) provides a statutory basis for this preference?

"To effectuate the purposes of this chapter, small-business concerns within the meaning of this chapter shall receive any award or contract or any part thereof, and be awarded any contract for the sale of Government property, as to which it is determined by the Administration and the contracting procurement or disposal agency . . . to be in the interest of assuring that a fair proportion of the total purchases and contracts for property and services for the Government in each industry category are placed with small-business concerns."

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This is an interesting question. Prior to the FAR expressly permitting small business set-asides under FSS contracts, GSA advised that agencies could use socioeconomic status as an evaluation factor for award.

Don, when did GSA so advise agencies?

According to GSA, agencies were authorized to use "socioeconomic status" as an evaluation criterion in awarding FSS orders. Presumably, they thought this was authorized by statute and regulation because it fell within the wide latitude that agency officials had in choosing appropriate evaluation factors. Use of such a factor provides a preference that is not expressly authorized by statute or regulation. Do you think that conflicts with FAR 3.101?

Don, are agencies still specifically authorized to use "socioeconomic status" as an evaluation criterion in awarding FSS orders?.

The Adarand Constr., Inc. v. Pena Decision, 515 U.S. 200 (1995), has caused a lot of follow on scrutiny over the basis for price preferences as well as other special preference programs. One of the links above, http://www.thefreelibrary.com/Socio-economic+policies.-a0144152490 has some discussion, including a mention of an article by Vern Edwards in "The Nash and Cibinic Report" concerning the propriety of cascading set-asides.

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Joel,

GSA first advised agencies that this was permissible in 2005. See here. The last extension to this policy is here. It seems like the policy is still effective.

Thanks, Don. Again, I'm not an attorney or small business specialist. However, it would seem to be reading a lot into said policy that it authorizes price preferences. I can see it as authorizing the use of set-asides to assist in meeting government and agency goals for awards to the various small business groups.. It appears from the little reading that I've done that the courts are indicating that there must be some documented basis of disadvantage to develop and use a price preference to justify paying additional sums.

And gmdubya has stated that he/she came up with "6%" based on a conversation with "a person at the FAR Counsel".

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joel,

I don't think the letter does anything more than authorize the use of socioeconomic status as an evaluation factor when placing orders under Federal Supply Schedules. However, given that this practice is permissible, I don't see how GSA could say that use of a price preference is impermissible. The only difference is that the agency would be specifically stating how much small business status would be worth in the solicitation instead of stating something vague like "socioeconomic status will be considered."

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joel,

I don't think the letter does anything more than authorize the use of socioeconomic status as an evaluation factor when placing orders under Federal Supply Schedules. However, given that this practice is permissible, I don't see how GSA could say that use of a price preference is impermissible. The only difference is that the agency would be specifically stating how much small business status would be worth in the solicitation instead of stating something vague like "socioeconomic status will be considered."

GSA’s opinions on procurement matters do not necessarily coincide with GAO’s or the Courts'. As an example, see The Argos Group, LLC, B-406040, Jan 24, 2012.

Regarding the impact of FAR 3.101 on the application of pricing preferences, see this Congressional Research Service Paper on the use of geographic pricing preferences: http://assets.opencrs.com/rpts/R41115_20101001.pdf.

I believe the principle set out on page 8 applies to socioeconomic price preferences as well: “Agency attempts to favor local vendors without specific statutory authority would violate both procurement integrity regulations and the Competition in Contracting Act (CICA) of 1984.”

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GSA’s opinions on procurement matters do not necessarily coincide with GAO’s or the Courts'. As an example, see The Argos Group, LLC, B-406040, Jan 24, 2012.

Regarding the impact of FAR 3.101 on the application of pricing preferences, see this Congressional Research Service Paper on the use of geographic pricing preferences: http://assets.opencrs.com/rpts/R41115_20101001.pdf.

I believe the principle set out on page 8 applies to socioeconomic price preferences as well: “Agency attempts to favor local vendors without specific statutory authority would violate both procurement integrity regulations and the Competition in Contracting Act (CICA) of 1984.”

I agree with everything you wrote. However, wouldn't 15 USC 644(a) provide adequate statutory authority (as cited by Navy_Contracting_4 in post #16)?

Even if you don't think it does, the point I'm trying to make is that I don't think it would be consistent for GSA to state that consideration of socioeconomic status in awarding orders is permissible, but the use of the price preference is impermissible. I'm not arguing that either technique is legal (i.e., would hold up at GAO or the Courts).

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I don't think it would be in the "best interests of the Government" to let individual COs or contracting offices establish formulaic price preferences when placing orders against GSA FSS contracts. That's not the same as making an analytical best value decision based on proposal evaluations and comparisons. If something like that is to be done it should be done on the basis of thorough economic analysis and coordinated governmentwide policymaking.

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I agree with everything you wrote. However, wouldn't 15 USC 644(a) provide adequate statutory authority (as cited by Navy_Contracting_4 in post #16)?

!5 USC 644 contains about 20 paragraphs. Subparagraph (a)(3) refers to the requirement that a "fair proportion of the total purchases and contracts for property and services for the Government in each industry category are placed with small-business concerns."

The subsequent paragraphs and their subparagraphs address means of assuring that the fair proportion is achieved (e.g. priority for labor surplus concerns, procurement strategies involving contract bundling, goals for awards to small businesses and their socioeconomic subsets, and the use of set asides in the placement of orders under multiple award contracts). Since I cannot find any mention of a price preference, I conclude that it is not authorized.

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