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MustangBob

Showing your cards- Posting the total estimated value/range of a requirement

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Hello,

I wanted to see what others thought about posting the total estimated value, in the form of a range, for a requirement.

Without giving away too much information, it's a common practice at my employer to give the total estimated value, in the form of a range, for only the T&M, labor hour, and cost type CLINS at time of the solicitation. The value does not include any material, Firm Fixed Price, ODCs, or travel CLINS.

I am having a hard time being comfortable with showing a portion of my cards to potential offerors as 1) I fear it could potentially limit the government in receiving the best value for these types of services, 2) The only time I thought we could really give ranges was for construction type contracts, and 3) my experience with government IGCEs being accurate is worse than the odds in Vegas...

What do you think?

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I have a hard time with it being a blanket rule, but I have done it and I'm OK with it. I think the need to do this relates inversely to the quality of your requirements documents and/or the ability to define the requirement in advance. Possible I have worked on too many construction procurements.

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I wouldn't encourage a blanket rule, either, but I'm okay with the practice when it fits -- it can be helpful to the contracting agency in getting good proposals -- for example, if we only have $500K for a study, a $2 Million proposal would be a waste for everyone -- if all the proposals came in between $2 and 2 1/2 Million we have a failed procurement. If we share the budget amount as an estimate and not as an absolute ceiling, we can then invite offers to propose as much value as they can within the budget amount.

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My old organization used to do it routinely at the macro level - definitely not at a CLIN level. Would give estimated dollars or hours but never both. Vendors who proposed outside the range were asked to include an explanation in the cost proposal of why they were outside the range. Maybe they saw risks we didn't, etc

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I think there are at least a couple reasons to disclose amounts. One is the solicitation doesn't provide enough information for offerors to understand the full effort. Another is you don't have enough money for what is apparently needed for everything. So you tell everyone what you do have and try to get the most for your budget.

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The following sentence is quoted from a part of the FAR where the context is post-solicitation and post-proposal, but still pre-award -- it may be helpful for this discussion...

It is also permissible, at the Government's discretion, to indicate to all offerors the cost of price that the Government's price analysis, market research, and other reviews have identified as reasonable (41 U.S.C. 2102 and 2107)

see FAR 15.306( e )( 3 )

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If you were at a position to release your budget amount, would it not be prudent from a negotiating standpoint to publicize an estimate moderately less than your budget? Maybe 10-15-percent less, that way you have room to negotiate.

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If you were at a position to release your budget amount, would it not be prudent from a negotiating standpoint to publicize an estimate moderately less than your budget? Maybe 10-15-percent less, that way you have room to negotiate.

Would that really be an estimate, or an attempt to "game" the offerors?

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If there is competition and where price is a meaningful consideration, it shouldn't be a problem to disclose the budget for the scope, from my experience. Depends upon the situation.

On a large design-build project a few years ago that one District awarded, the winning proposal came in at full scope and more than seven million dollars below the cost limit identified in the RFP (36.302). Unfortunately for that District, the project delivery team mistakenly thought the project was underfunded. So they under emphasized quality factors and overemphasized price on a One Star Command Headquarters and Hangar project. They made price equal to all non-price factors when combined, i.e., price was the most important factor. The HQ building ended up being very "plain Jane". They achieved full scope. The architecture was starkly unattractive. The District did not bargain for better performance during the competition. After award, they thought they could issue changes to dress up the design but the Army disapproved because , upon award, it re-allocated most of the excess funds to other projects. The HQ was located near a large showcase Army HQ that was under construction. Needless to say there were some angry high level Army officials and local Installation personnel. Rather than realizing the causes, they deflected blame to the D-B process. But my main point here is that simply identifying the budget limit does mean that the contract will use it all .

There have been many other D-B projects where identifying the budget limit and letting competition do its thing has worked, even where quality and scope are the most important factors.

In design-build, unless one uses highly prescriptive bridging documents which limit flexibility and innovation, it is usually a necessity to identify the cost limit. Where prescriptive bridging documents are used, price is often the most important factor (i.e., "price equal to non-price factors" or "price is considerably more important than non-price factors").

This thread started out discussing a specific type of acquisition but quickly went general. So, I brought up DB as a special case.

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I do not think that it would be an attempt to "game" the offerors if there was some basis for that estimate. As a standard practice, the Government should not be using its budget as its estimating tool. The Government Estimate and the Budget should be two distinct amounts; i.e., how much does the Government think the work will cost and how much money is available to spend, respectively? If you give away the latter, then it is likely you will pay what you have budgeted. If you give away the estimate, though, the price that you will pay will be between the estimate and the budget. In negotiation, this is called bracketing.

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Thanks for the responses all!

There are some definitely good points here, my thoughts is that it could tie your hands when negotiating. I look at it in the terms of buying a car or a house, usually the first question asked by the salesman/Realtor is what's your budget...... If you say $30k for the car, they show you all the cars as close to the $30k range, no? what's the likely hood your going to be able to negotiate when you just told the sales man your budget is $30k. He's goal is to leave as little money on the table for his commission!

So, if you post a range for a requirement, say it's 10% below your budget and the range is between "$10 - $20 mil", what's the likely hood of a offeror leaving money on the table if you post the range? especially in this environment.

What's the likely hood that the offeror offering an innovative approach and come in at a cost savings of lets say $6 mil?

To add some more info for this healthy debate, more detail to the circumstances: FAR Subpart 8.4 buy- commercial services/labor contract. nothing out of the ordinary.

At my previous employer, I awarded a contract where there were two technically acceptable offerors, but we couldn't justify for coming to work in the Ferrari vs the Toyota. If I would have posted the range, based on the IGCE, it would have been a Toyota wrapped in a BWM body.. Not to toot my own horn, but in that requirement, I saved the government over $30mil..... If I would have posted the range, what's the possibility that I would have been able to save well over 30% of the IGCE value?

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Would that really be an estimate, or an attempt to "game" the offerors?

To add to this - The estimate is in fact a range that of course is less than the budget by a percentage. A lot of IGCEs are based on historical information and current labor rates with a percentage for inflation..... In saying that, If I post a range of $10 - $20mil and lets say the award is $12 mil. My thought this could eventually mess up the IGCE and go against posting the range because that award price goes into the "historical information" for formulating the IGCE for the next award 3 - 5 years down the road.

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If you were at a position to release your budget amount, would it not be prudent from a negotiating standpoint to publicize an estimate moderately less than your budget? Maybe 10-15-percent less, that way you have room to negotiate.

That sounds like a great basis for a superior knowledge claim down the road. The Government said within their advertised exhibit that they expected "x" requirement, but they really knew it was "z" requirement. They acted in bad faith to represent the requirement taking only "x" resources; we managed to negotiate to "y" cost, it ended up costing "z" which is what the Government estimated that it would cost in the first place. We want the sum certain difference of z-y. Where's my money.

That is much different than setting an anchor in negotiations. Because the negotiation is focused on how to accomplish the actual requirement.

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DAMB, I do not believe that the Government's budgeted amount constitutes superior knowledge.

To prevail on a claim for superior knowledge, a Contractor must show that: (1) it undertook to perform without vital knowledge of a fact that affects performance costs or direction; (2) the government was aware that the contractor had no knowledge of and had no reason to obtain such information; (3) any contract specification supplied misled the contractor or did not put it on notice to inquire; and (4) the government failed to provide the relevant information. AT&T Commcns, Inc. v. Perry, 296 F.3d 1307, 1312 (Fed. Cir. 2002); Resource Conservation Group, LLC v. United States, 96 Fed. Cl. 457, 466 (2011).

If the Contractor thought that the work would take more money to complete than estimated by the agency, then it has a duty to inquire before submitting a proposal. An estimate is just that... an approximation for how much the work should cost. The budget amount reflects the amount committed in the government's coffers for the project.

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There are (1) estimates, (2) budgets, and (3) amounts that you are willing to pay for a specific thing or a kind of thing. The three amounts are not necessarily the same. As a general rule with some exceptions, see, e.g., FAR 36.203, a CO can disclose any of those to prospective offerors. Whether it is wise or not in a specific acquisition, and how it should be done, are questions to be answered. Whatever you do, if you decide to disclose, be truthful.

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Thanks for the responses all!

There are some definitely good points here, my thoughts is that it could tie your hands when negotiating. I look at it in the terms of buying a car or a house, usually the first question asked by the salesman/Realtor is what's your budget...... If you say $30k for the car, they show you all the cars as close to the $30k range, no? what's the likely hood your going to be able to negotiate when you just told the sales man your budget is $30k. He's goal is to leave as little money on the table for his commission!

So, if you post a range for a requirement, say it's 10% below your budget and the range is between "$10 - $20 mil", what's the likely hood of a offeror leaving money on the table if you post the range? especially in this environment.

What's the likely hood that the offeror offering an innovative approach and come in at a cost savings of lets say $6 mil?

To add some more info for this healthy debate, more detail to the circumstances: FAR Subpart 8.4 buy- commercial services/labor contract. nothing out of the ordinary.

At my previous employer, I awarded a contract where there were two technically acceptable offerors, but we couldn't justify for coming to work in the Ferrari vs the Toyota. If I would have posted the range, based on the IGCE, it would have been a Toyota wrapped in a BWM body.. Not to toot my own horn, but in that requirement, I saved the government over $30mil..... If I would have posted the range, what's the possibility that I would have been able to save well over 30% of the IGCE value?

in your first example above, there is no competition. Of course the salesman will try to use the whole budget.

If the scope of your requirement is well defined , you might not need to identify the budget limit. I don't know what you were buying in your latter case. If you know what the sticker price is for a Toyota with the options you desire is and know your budget, you don't have to identify it, especially if it is much higher than necessary.

Identifying the budget ceiling is useful where there is considerable flexibility in meeting the requirement and/ or the proposers need to know the upper limit to compete within. It is also usefull when you identify the basic requirement plus identify betterment s that the customer would like to have if available within the budget.

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A range of $10 - $20 million is absurd. Utterly useless information.

LIKE

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