Questions about contract award based on price only

[newContractor]

Hello all -

By posting this, I feel like I'm poking my head into a clubhouse in which I don't belong! I'm a (new) small business that has responded to a limited number of federal solicitations. As such, I've 'dipped my toes' into FAR but do not pretend to be a contracting officer or anything even CLOSE to that. The information contained here in the WifCon.com forums has answered a number of my 'contract process' questions (e.g., how does FAR deal with new contractors that have no past performance history) but I have yet to find an answer to the question below.

Put directly, my question is this: how can a contracting officer (CO) evaluate solicited proposals based upon price only? An RFQ for which I recently submitted a proposal stated this under FAR 52.212-2:

(a) The Government will award a contract resulting from this solicitation to the responsible offeror whose offer conforming to the solicitation will be most advantageous to the Government, price and other factors considered. The following factors shall be used to evaluate offers: Price.

Does this imply that, regardless of anything else, whichever proposal comes in at the lowest--reasonable, I would guess--price would be awarded the contract, regardless of past performance, experience, etc? Are estimated travel costs taken into account for a response to an RFQ evaluated solely on price? Frankly, I'm surprised that this would be allowed. Does the 'responsible offeror' and 'other factors considered' phrase allow them the ability to use past peformance, experience, etc., as an evaluation means without explicitly stating that the CO will do so?

Additional details: This is an RFQ for for non-personal services to conduct data management and database creation for natural resources data. A technical proposal was required along with the quotation.

Thanks for your help and guidance. I appreciate all of the information I've already gleaned from past discussions and available blogs.

nC

[ji20874]

Price is the ONLY factor that will be used to select the best value quoter. After making that selection, then the contracting officer will determine if the selected quoter is responsible. YES means the award is made. NO means the award is not made to that firm, but the next quoter in line becomes the selected quoter and that firm's responsibility is considered on a YES or NO basis.

It seems to me (a guess) that your technical proposal will be evaluated to see if it conforms to the solicitation, on a YES or NO basis.

But the relative goodness of your technical proposal and the relative goodness of your performance history will not be considered in a trade-off with price to make the initial selection.

You can ask the contracting officer specifically, if you want to.

Here's an illustration that might be helpful--

Quoter Quoter Quoter Quoter
A B C D
------ ------ ------ ------
Price $ 100 $ 102 $ 103 $ 104
Past Performance poor poor poor great!
Technical Expertise nil nil nil great!

Based on the information in the original posting, the award will go to Quoter A; unless the contracting officer finds ( 1 ) the quotation does not conform to the solicitation; or ( 2 ) the firm is not responsible – and the same process all the way to Quoter D. Price is the only factor evaluated weighed in the selection process, past performance and technical expertise are both YES-NO and are considered after the price evaluation, not before.

In contrast, if this were set up as a trade-off, and the evaluation factors were price, past performance, and technical expertise, then the contracting officer could select Quoter D at the beginning, because Quoter D provides the best value (in my opinion). All three factors are weighed in the evaluation process. Or, with these same facts, a contracting officer could still select Quoter A by reasoning the risk associated with the lack of technical expertise and the poor past performance is offset by the price savings.

[napolik]

There are 2 broad approaches to source selection identified in FAR 15.1 – The Tradeoff Process and the Lowest Priced Technically Acceptable (LPTA) Process. When using the Tradeoff process, the contracting officer considers factors other than price when identifying the proposal representing the best value to the Government. In addition to price, the other evaluation factors could include Past Performance, Experience, Technical Approach, Staffing Plan, Résumés, etc.

When using the LPTA process, the source selection decision is based upon price alone among those proposals determined to be technically acceptable. In making the source selection decision, the contracting officer considers only evaluated price. However, the contracting office can require that each competing contractor demonstrate the acceptability of its offered supply or service by providing information on one or more factors (e.g. Past Performance, Experience, Technical Approach, Staffing Plan, Résumés, etc.).

The price to be used in the LPTA source selection should be identified in the solicitation provisions. The evaluated price could include the value of options and/ or travel. However, the solicitation must define the evaluated price if the contracting officer will consider costs or prices other than the extended prices of line items in the basic quantity of supplies or services.

Regardless of source selection process used, the contractor identified as submitting the proposal representing the best value or as submitting the LPTA proposal must be determined to be a responsible prospective contractor (i.e. meets the standards set out in FAR 9.104). Normally, the solicitation will not identify the specific standards to be applied to establish a contractor’s responsibility.

Sometimes, the responsibility standards set out in FAR 9.104 are used as evaluation factors in the Tradeoff or LPTA processes.

It could be that the solicitation you identify will be awarded to the contractor submitting the lowest priced, acceptable proposal. However, read carefully all the solicitation provisions to ascertain if there is a requirement to submit information other than line item prices and if there is another provision listing factors to be used in establishing the best value or technical acceptability.

Some contracting officers put into their solicitations multiple provisions addressing requirements for proposal submission, evaluation and award. Some of these provisions can be confusing and contradictory. Here is a good example of one from a solicitation posted on e-Buy last week:

The following factors shall be used to evaluate offers on an acceptable or unacceptable basis:

(i) Lowest evaluated price;

(ii) Best Value of Technical capability to meet the Government requirement;

(iii) The Government will utilize the Past Performance Information Retrieval System (PPIRS) and System for Award Management (SAM) to evaluate an Offeror's past performance. Technical and past performance when combined, are significantly less important than price.

After you read all the solicitation provisions, call the contracting officer to ask which source selection process is being used.

[newContractor]

That was an excellent illustration. Thanks for offering it.

I'm wondering what the process is like when the situation isn't as black or white as the illustration. For example, as a new contractor, my company has no past performance history and I know that FAR 15.305(a)(2)(iv) states that my company will be rated neither favorable nor unfavorably because of a lack of our performance history. As a result, what if the illustration looked something more like this:

Quoter Quoter Quoter Quoter
A B C D
------ ------ ------ ------
Price $ 100 $ 102 $ 103 $ 104
Past Performance poor neutral good great!
Technical Expertise nil great! acceptable great!

How much leeway is a CO allowed to move beyond 'neutral' ratings?

Ultimately, I'm trying to gain some insight into how the decision-making process of a CO when confronted with a contractor that provides a technically proficient proposal, offers a lower price than a competitor (exclusive of travel costs; this particular RFQ is for work in HI), yet has no past-performance history.


These discussion boards are an eye-opening look into the contracting process and, as a biometrician, something I've never considered that much in depth. Now however, as a business owner, it's one that I am interested in. I've always tried to limit my questions of the CO primarily because the responses I get generally seem very curt, from which I infer they're not very interested in sharing any further details. However, the information here suggests that queries of the CO are almost required if the true process of the proposal submission, evaluation and award are to be determined.

The price to be used in the LPTA source selection should be identified in the solicitation provisions. The evaluated price could include the value of options and/ or travel. However, the solicitation must define the evaluated price if the contracting officer will consider costs or prices other than the extended prices of line items in the basic quantity of supplies or services.

This is fascinating. I had no idea that if LPTA were the source selection that the value to be used needs to be identified in the provisions. I thoroughly read the provisions of the solicitation I'm referring to here and don't recall seeing any value against which the responses would be evaluated. Is this requirement codified somewhere in the FAR?

Thank you for all of your insight.

[ji20874]

nC,

For your RFQ in the original quotation, past performance will not be evaluated in the selection decision. That's what the solicitation says. Your past performance might be evaluated in the responsibility determination, but that is after the selection decision -- see FAR 9.103 and 9.104-1( c ) -- "A prospective contractor shall not be determined responsible or nonresponsible solely on the basis of a lack of relevant performance history..."

Now, to your hypothetical -- if price is the only evaluation factor, then Quoter A will be selected for award, and award will be made to Quoter A if the contracting officer finds that its quotation conforms to the solicitation (this decision can be made either before or after the price evaluation, and is YES or NO) and it is a responsible firm (this decision is necessarily made after the price evaluation, and is YES or NO), and so on to B, and then C, and finally D. However, in contrast, if the evaluation factors are price, past performance, and technical expertise, the contracting officer will do a trade-off and select the best value quotation -- the contracting officer doesn't make YES or NO decisions, but can see all manner of differentiations and degrees of goodness and risk. The contracting officer could select A, B, C, or D--

. A -- the government will willing to bear the risk of the poor past performance with some additional monitoring, and the risk of poor technical performance is high but the potential impact is small, and the price premium to a high-periced quoter is too high.

. B -- the government is willing to pay a price premium to B to obtain the confidence associated its better technical expertise.

. C -- the government is willing to pay a price premium to C to obtain the confidence associated with its better past performance (GAO case law seems to allow this, making one wonder if neutral really means neutral), and B's better technical expertise doesn't really make that much difference.

. D -- the government is willing to pay a price premium to D to obtain the confidence associated with its better past performance and its excellent technical expertise.

Here's another example, maybe a little more down to earth--

Barber Barber Barber
A B C
------ ------ ------
Price $ 100 $ 102 $ 103
Reputation poor okay great!
Technical Expertise community worked in worked in
college Hollywood Paris

If price is the only evaluation factor, then you will go to A; unless you adopt that the “poor” reputation is in fact unacceptable in an absolute sense (not in a comparative sense with the other barbers). If all three are evaluation factors, well, you could select any of the three barbers. You could say A is good enough, because the haircut is for a kid and a bad haircut possibility is not the end of the world. You could select B because that barber worked in Hollywood and probably has a better chance of giving a haircut that will best accentuate your good features. Or you could select C because you’re going to a fund-raising dinner with the President and you’re hoping for an ambassadorship, and you need to look your very best. Any of the three could be a best value decision.

[C Culham]

New – This post is not to disagree with the posts so far in this thread but to add a substantive response to your very first question.

Your post indicates that the acquisition is apparently for a “commercial item” since it references FAR 52.212-2. As such and pursuant to FAR 12.203 a CO may use any of the processes discussed in FAR Part 13, 14, or 15 to complete the acquisition.

If the CO is using FAR Part 13 processes for evaluation the CO has wide discretion in choosing the evaluation procedures, FAR Parts 14 and 15 are not mandatory, with the CO allowed to use some but not necessarily all of the evaluation procedures of FAR Part 14 or 15. Reference FAR 13.106-2((1). FAR Part 14 as you may know is Sealed Bidding and as such is the process where “price alone” basis of evaluation for award is used. (Also see FAR 13.106-1(a)(2).)

If the CO is using fully FAR Part 14 then the sole determining factor for award is again price (yes a responsibility determination is required but per say responsibility is not an “evaluation” factor).

So the short answer is Yes the CO can use price alone.

I have provided the above clarification as for me the previous responses in this thread get to the details of a partial or full use of FAR Part 15 procedures rather than providing a “how can a CO” use price alone as the evaluation factor for award.

[napolik]

This is fascinating. I had no idea that if LPTA were the source selection that the value to be used needs to be identified in the provisions. I thoroughly read the provisions of the solicitation I'm referring to here and don't recall seeing any value against which the responses would be evaluated. Is this requirement codified somewhere in the FAR?

The FAR does address a requirement to identify in solicitations for sealed bids price related factors, but it does not state explicitly a requirement to identify all cost/ price related factors in solicitations for competitive proposals.

14.201-8 -- Price Related Factors.The factors set forth in paragraphs (a) through (e) of this subsection may be applicable in evaluation of bids for award and shall be included in the solicitation when applicable. (See 14.201-5©.)(a) Foreseeable costs or delays to the Government resulting from such factors as differences in inspection, locations of supplies, and transportation. If bids are on an f.o.b. origin basis (see 47.303 and 47.305), transportation costs to the designated points shall be considered in determining the lowest cost to the Government.(b ) Changes made, or requested by the bidder, in any of the provisions of the invitation for bids, if the change does not constitute a ground for rejection under 14.404.© Advantages or disadvantages to the Government that might result from making more than one award (see 14.201-6(q)). The contracting officer shall assume, for the purpose of making multiple awards, that $500 would be the administrative cost to the Government for issuing and administering each contract awarded under a solicitation. Individual awards shall be for the items or combinations of items that result in the lowest aggregate cost to the Government, including the assumed administrative costs.(d) Federal, state, and local taxes (see Part 29).(e) Origin of supplies, and, if foreign, the application of the Buy American statute or any other prohibition on foreign purchases (see Part 25).

While the FAR doesn’t have explicit guidance beyond sealed bidding, the United States Code has it in two locations -10 U.S.C. § 2305(a)(2)(A)(i) and 41 U.S.C. 253a(b )(1)(A). Government agencies must identify “all significant factors and significant subfactors” which the agency “reasonably expects to consider in evaluating sealed bids (including price) or competitive proposals (including cost or price, cost-related or price-related factors and subfactors, and noncost-related or nonprice-related factors and subfactors)”.

[newContractor]

Thanks so much for all of the responses. They've been enlightening. As a fisheries scientist and biometrician, whenever I write a proposal in response to an RFP or RFQ I always find myself lost in the clauses and provisions, barely keeping my head above water when I read them. After discovering this forum a few months ago--and doing some serious reading--I've gotten a better understanding of the contract award and selection process.

Regarding including a price 'disclaimer' in an LPTA, how does FAR 15.306(e)(3) apply? Would this be an instance where an offeror would simply need to ask the CO about what price they consider reasonable?

(e) Limits on exchanges. Government personnel involved in the acquisition shall not engage in conduct that—

(3) Reveals an offeror’s price without that offeror’s permission. However, the contracting officer may inform an offeror that its price is considered by the Government to be too high, or too low, and reveal the results of the analysis supporting that conclusion. It is also permissible, at the Government’s discretion, to indicate to all offerors the cost or price that the Government’s price analysis, market research, and other reviews have identified as reasonable (41 U.S.C. 2102 and 2107)

[Guest Vern Edwards]

I think this thread is about source selection that is not governed by FAR Part 15, but just in case... You cannot do a price-only source selection under Part 15. You must evaluate price and at least one nonprice factor. See FAR 15.304(c ).

[joel hoffman]

It appears to me that newContractor has submitted a quotation for a commercial service in Hawaii where it either isn't clear what the basis of award is or he doesn't understand the basis of award. He didn't identify the basis of pricing but hints that his prices may not be the lowest if travel costs to Hawaii are to be considered. The RFQ appears to be confusing in that there is some type of non- price submittal involved in addition to some type of price submission. However 52.212-2 says both that price and other factors will be considered but only price will be evaluated. We can't tell from the info here how prices are identified or evaluated. Does the price include travel costs or not, for instance?

[newContractor]

It appears to me that newContractor has submitted a quotation for a commercial service in Hawaii where it either isn't clear what the basis of award is or he doesn't understand the basis of award. He didn't identify the basis of pricing but hints that his prices may not be the lowest if travel costs to Hawaii are to be considered. The RFQ appears to be confusing in that there is some type of non- price submittal involved in addition to some type of price submission. However 52.212-2 says both that price and other factors will be considered but only price will be evaluated. We can't tell from the info here how prices are identified or evaluated. Does the price include travel costs or not, for instance?

Though I haven't responded to a large number of RFP/RFQ solicitations, this has been the most confusing of those to which I have responded. For all of the past solicitations, evaluation factors have all been price, past performance, technical, etc. In other words, it's been clear how my company would be evaluated.

Here, I didn't understand the basis of award but with some help, I gather that lowest price is chosen for award (if the price is "reasonable") then the technical proposal is checked to make sure it's adequate on a 'yes/no' basis. If yes == award is made; no == the technical proposal from the next lowest offeror is evaluated and so on until an offeror has been identified. As I read the 52.212-2 in this RFQ, I read it as price is the only factor that will be evaluated for contract award. The caveat, however, is that the technical proposal must be acceptable. The required technical proposal appears to me to be the 'other factors' aspect of the 52.212-2.

For this solicitation, I submitted separate proposed work costs and estimated travel costs. I think my work costs are very reasonable, particularly given my proposed methods; however, the RFQ had no indication of what the government considers a 'reasonable' price. As a result, I'm at a total loss as to how my proposed cost compares to theirs. The fact that I haven't heard anything yet may be a good sign; the deadline for submissions was Friday 18 July and, if it's a 'price only' issue with no discussion, I would think that the determination could be made relatively quickly. (Also, the 'period of performance' is scheduled to begin on 1 August.)

If you haven't guessed by now, I'm not a contracting officer. I'm a small business owner (fisheries science and statistician)--without a legal department--submitting responses to federal government solicitations while trying to understand and decipher the fine print of the solicitations to which I respond. It's difficult and trying to handicap myself compared to unknown competition can be maddening. For example, I always have questions that I'd like to ask the CO but I'm always afraid that any questions I ask--beyond the clarifications for the SOW--would annoy the CO, thus reducing my chances of being successful.

Thanks for everyone's help. You've all been patient with me and I appreciate it.

[joel hoffman]

You might be correct concerning what the RFQ means. Good luck to you, newContractor!

[VA1102]

I'd be interested in seeing the Instructions to Offerors (52.212-1) in the solicitation. The solicitation language included in the excerpt from 52.212-2 appears to me to be somewhat ambiguous; is it "price" or "price and other factors?" Also, the fact that a technical proposal has to be submitted, makes me wonder how they're going to evaluate the proposal and use that in any award decision. I'd recommend that next time, you submit a question in writing to the Contract Specialist/Contracting Officer to clarify the basis for award.

Good luck on the proposal, and let us know how it turns out.

[ji20874]

I am supposing that the "price" includes both your work costs and your travel costs. Are the travel costs buried in the "price" you quoted? Or are you thinking that the "price" only includes work costs, and travel costs are separate and somehow reimbursable (maybe that's what your RFQ says?)?

Imagine the scenario below -- I would think everyone would agree that Quoter B provides the best value (a local firm with a higher work cost but less travel) -- what do you think?

QUOTER QUOTER
A B
------ ------
WORK COSTS $1,000 $1,400
TRAVEL COSTS $4,000 $ 25
------ ------
TOTAL PRICE $5,000 $1,425

[newContractor]

I am supposing that the "price" includes both your work costs and your travel costs. Are the travel costs buried in the "price" you quoted? Or are you thinking that the "price" only includes work costs, and travel costs are separate and somehow reimbursable (maybe that's what your RFQ says?)?

Imagine the scenario below -- I would think everyone would agree that Quoter B provides the best value (a local firm with a higher work cost but less travel) -- what do you think?

QUOTER QUOTER

A B

------ ------

WORK COSTS $1,000 $1,400

TRAVEL COSTS $4,000 $ 25

------ ------

TOTAL PRICE $5,000 $1,425

Without question, B provides the best value. I was simply surprised that price (defined as total price) could be the sole determining factor for the government in awarding a contract, provided an acceptable technical proposal.

I proposed clearly defined work costs of X and travel cost as Y for a totalPrice = X + Y. There was no language in the RFQ that states that travel costs were reimbursable; I did, however, make the assumption that travel will be a reimbursable cost. I estimated travel costs from the Defense Travel Management Office as that was where I was directed after learning that lodging/meals are established by DOD for non-continental US destinations.

[Guest Vern Edwards]

Your reference to FAR 52.212-2 tells me that the procurement is for a commercial item. If so, then travel should not be reimburseable at cost, unless the agency is going to award a time-and-materials contract or is going to ignore the fact that they otherwise should not use a cost-reimbursement line item. Based on what you've said, it does not sound like they're using T&M pricing.

Based on what you have posted so far about the RFQ, I think the best course is for you to expect the selection to be based on a lowest price technically acceptable scheme, with technically acceptable meaning compliant with the terms of the solicitation.

[newContractor]

Your reference to FAR 52.212-2 tells me that the procurement is for a commercial item. If so, then travel should not be reimburseable at cost, unless the agency is going to award a time-and-materials contract or is going to ignore the fact that they otherwise should not use a cost-reimbursement line item. Based on what you've said, it does not sound like they're using T&M pricing.

Based on what you have posted so far about the RFQ, I think the best course is for you to expect the selection to be based on a lowest price technically acceptable scheme, with technically acceptable meaning compliant with the terms of the solicitation.

Hmm. Based upon what is requested in the 'statement of work,' I would have called this RFQ as a procurement for services. However, it seems as though there are very specific definitions in the FAR and very specific ways to use different FAR parts. You are all much more familiar and more educated with vastly more experience than I in FAR and I will agree that you are probably right.

My question answered, I'd consider this thread finished. Though I have SO MANY QUESTIONS about FAR, interpretations of the clauses and provisions therein, what kind of timelines I can expect on different RFQs and RFPs, and whether asking questions of the CO on a given solicitation will reduce my chances of award, I'll have to save them all for another time or just learn from experience!

Thanks again all. I appreciate your time and experience.

[Guest Vern Edwards]

The term "commercial item" includes services. See the definition in FAR 2.101.

[newContractor]

Good luck on the proposal, and let us know how it turns out.

I was asked by the CO on Friday to "review the cost you submitted with your proposal. Can you do the work for the price that you quoted? Please confirm your numbers." I verified my bid as submitted. The CO mentioned that the review of technical proposals is not yet complete but would be finished "NLT next week."

I presume that this means either one of two things: 1) my price was far lower than other submitted prices that the CO thinks I made a mistake and asked me to confirm my bid or 2) I was simply the low bidder and he wanted to 'double check' or 3) something else entirely. I lean toward 2 because I infer from FAR 14.407-3(g)(1) that if he thought my bid were a mistake, his email would have included additional information regarding why he thought my bid were a mistake, namely that

(i) That its bid is so much lower than the other bids or the Government’s estimate as to indicate a possibility of error;

(ii) Of important or unusual characteristics of the specifications;

(iii) Of changes in requirements from previous purchases of a similar item; or

(iv) Of any other information, proper for disclosure, that leads the contracting officer to believe that there is a mistake in bid.

Had it been #3, why ask for bid verification at all?

I'm looking forward to seeing what the rest of this process is like. This is the first bid I've submitted that I've had any contact with the CO other than the normal "Q&A" session or the 'thanks but no thanks' emails.

nC

[Guest Vern Edwards]

Who knows? Good luck.