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How to evaluate for Balanced Pricing

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Does anyone have any guidance on how a CO is supposed to evaluate for "Balanced Pricing" in a Price Analysis? Some colleagues have proposed using the "Total Allocation of Price" or "Total Allocation of Cost" method for determining Balanced Pricing. I have never heard of this method before. Is anyone here familiar with it? Does anyone have any other methods for determining whether a price/individual CLINs are "balanced"?

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Please note that the problem of unbalanced pricing is somewhat different in sealed bid acquisitions than it is in negotiated acquisitions. Unbalanced pricing is a very complicated matter, and while FAR 15.404-1(g) and the Contract Pricing Reference Guides provide general information, you may need more detailed analysis., because the case law is very complex. The problem is that detailed analysis is generally available only in pricy publications. If you can get a copy, see "Unbalanced Bids and Proposals" in The Nash & Cibinic Report, May 2004.

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Vern is right -- in sealed bidding, the GAO has held that before a bid can be rejected for unbalanced pricing, it must be shown to be both mathematically and materially unbalanced. However, a contracting officer is not required to reject an offer solely because it is unbalanced; rather, he or she should consider the risks to the Government associated with the unbalanced pricing and whether a contract will result in unreasonably high prices for contract performance. Sometimes, unbalanced pricing presents a low risk.

There is no requirement in the FAR for a contracting officer to affirmatively evaluate for balanced pricing in a price reasonableness analysis, and no duty to certify that the pricing is balanced. However, if a contracting officer happens to observe unbalanced pricing, then FAR 15.404-1( g ) will be helpful to him or her as a starting point. I hope your agency doesn't require you to affirmatively evaluate for balanced pricing in a price reasonableness analysis.

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I've only been at this for about 14 years (unlike many old hands around here), but unbalancing concerns I have had thus far have all been in the RFP environemnt involving large numbers of line items where the quantities will vary. The gremlin has almost always been unit of measure issues which were a result of a lack of clarity on our part. Just to attempt to answer the original question, I just graph the % variation from the IGCE and look for spikes and troughs. It's a place to start . . .

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my opinion,

not based on any citation or research,

is that the only real problem with unbalanced pricing is the potential to pay too much too soon,

where the Contractor has collected way more than their effort to date is worth,

tempting the rare contractor to walk away with the job not finished.

I've only personally seen that once, in USGS, many years ago, on an 8(a) sole source,

but the memory sticks with me.

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Saw serious problems with it years ago on unit priced, Civil Works construction contracts. Once, to a dredger's demise. The dredger put all the money in mob and demob line items, underpriced the actual dreging line items (something like $ 0.24/cyd), that primarily consisted ot virgin cuts, not maintenance dredging of loose shoaling . Ran into a huge overrun, which bankrupted him after the project was finished.

Read about situations years ago where construction contractor unbalanced bid items, was paid too early, then defaulted. Bonding company, which was responsible for completing the project, litigated or claimed against the owner for not protecting its interests and owner had to pay thye bonding company additional funds due to owner's negligence. Source was probably Construction Claims Monthly. I don't have access to the CCM library any more.

Have also seen where firms unbalace line items based on guesses of overruns and underruns of unit priced items. Comparison of total costs/prices wont reveal unbalaced pricing in those cases.

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