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Adequate Price Competition = Fair and Reasonable Price


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Does adequate price competition establish a fair and reasonable price [ipso facto]?

EXAMPLE SCENARIO: In response to a anticipated FFP award, a LPTA solicitation with a Government estimate of $400K was issued and you receive three competitive quotes for $150K, $250K, and $325K.

Each quote is for the same quantity and delivery of identical services and the government would like to determine the price of $150K as fair and reasonable based on adequate price competition.

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Price reasonableness concerns itself with whether the offered price is too high. With the competition you received, it seems easy to say that $150K is not too high -- therefore, it is not unreasonable -- so therefore, it is reasonable based on adequate price compeition.

Price realism is another matter, but we don't usually do price realism analyses for FFP acquisitions.

Even though the $150K price is reasonable, I wonder if there is any possibility of a mistake. A prudent contracting officer might send the $150K offeror a note saying something like, "Because of the wide variance in the prices received, the Government invites you to carefully review your price and verify that it does not contain any mistake. Please notify me by _____ whether or not there is a mistake. This notice only asks you to verify whether or not there is a mistake -- it does not afford you an opportunity to revise your price."

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Does adequate price competition establishes a fair and reasonable price [ipso facto]?

http://www.merriam-webster.com/dictionary/ipso%20facto "Full Definition of IPSO FACTO

: by that very fact or act : as an inevitable result"
My answer to your specific question is, "not necessarily". What if all prices received are too high or higher than you think that you want to pay? What if your solicitation is unclear and/or contains mistakes or latent ambiguities which might result in industry interpretations other than that intended?

EXAMPLE SCENARIO: In response to a anticipated FFP award, a LPTA solicitation with a Government estimate of $400K was issued and you receive three competitive quotes for $150K, $250K, and $325K.

Each quote is for the same quantity and delivery of identical services and the government would like to determine the price of $150K as fair and reasonable based on adequate price competition.

In this case, if you are satisfied that the quotes are "technically acceptable", that is, they meet your requirements and the lowest priced offeror is "responsible", you could say that the price is "fair and reasonable", based upon "adequate competition". I also think that "adequate competition" should represent a reasonable meeting of the minds about what can and will be provided for that price, where you are also evaluating the technical acceptability of the service.

Noting that each quote is "for the same quantity and delivery of identical services" , there is a huge spread of pricing for "identical services". The lowest quote is 60% of the second lowest, about 46% of the highest and is 38% of the government estimate. I would want to assure myself that the quotes are, in actuality, technically acceptable beyond a doubt. And I would probably examine the basis of the government's estimate with whoever prepared it. If your solicitation provides for some type of communications, I would probably take advantage of it.

Back in the old days of always using IFB's for construction contracts (where every bidder saw all the bid prices), my office was stuck a few times with ridiculously low priced contracts from dirt bags or from firms who ended up defaulting because they couldn't perform the scope of work for those prices without unbearable losses or went bankrupt trying to perform. I would ask myself, how the heck did the government award that contract? It would seem even more risky in your scenario, where the "winning" firm has no knowledge of any other quotes to check against before accepting the government's offer of award at that price.

Bottom line, I would take full advantage of the method that you are using to look beyond simply awarding based upon a seemingly 'good deal', j

justified on the basis of adequate price competition ["by that very fact" or as an "inevitable result"].

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Joel,

Everything you say is right, but we don't want to mix matters. Whether or not the offeror can/will successfully perform the contract is a matter of responsibility, not price reasonableness. The contracting officer determine the price reasonable (based on adequate price competition) and still determine the offeror non-responsible (because he or she doesn't believe the offeror can/will successfully perform).

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Guest Vern Edwards

See FAR 15.404-1(2):

(2) The Government may use various price analysis techniques and procedures to ensure a fair and reasonable price. Examples of such techniques include, but are not limited to, the following: (i) Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1[c](1)(i)).

However, a CO might observe something about bids, proposals, or quotes or have other information that suggests that the price might not be fair and reasonable.

See the Contract Pricing Reference Guides, Vol. 1, Price Analysis, Ch. 6, Comparing Prices.

https://acc.dau.mil/CommunityBrowser.aspx?id=379482

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Joel,

Everything you say is right, but we don't want to mix matters. Whether or not the offeror can/will successfully perform the contract is a matter of responsibility, not price reasonableness. The contracting officer determine the price reasonable (based on adequate price competition) and still determine the offeror non-responsible (because he or she doesn't believe the offeror can/will successfully perform).

ji, I'll stand by my advice. I offer it so that people can decide whether to simply be purchasing agents, clerks, or smart business persons. If Jamaal is using LPTA, I think that other considerations than the cheapest price are also being considered. Here, the customer was apparently prepared to pay up to $400k, it it were necessary, to obtain the services. "We" should try to assure "ourselves" that the customer will receive and be satisfied with the services received.

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I agree that we should try to assure ourselves that the customer will receive and be satisfied with the services received. However, if Jamaal has any of the concerns that your raised, he should not address them by calling the $150K price unreasonable. The price is reasonable according the the GAO's and COFC's jurisprudence. It might not be realistic, but that is another matter entirely -- and the offeror might not be able to perform at that price, but that is also another matter entirely.

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We = federal contracting officers subject to the FAR.

A price realism analysis is not required for a FFP acquisition. The FAR requires a cost-realism analysis for cost-reimbursement contracts. FAR 15.404-1( d )( 2 ). The GAO has consistently acknowledged over the years that a realism analysis is not required for FFP (or T&M) acquisitions, and has further opined that an agency may not do a price realism analysis for a FFP (or T&M) acquisition unless the soliciation specifically allows for such.

Thus, my statement that we don't usually do price realism analyses for FFP acquisitions. Sometimes, we do -- but only if we had the forethought to include text in the solicitation specifically allowing for a realism analysis. The following might be helpful, from Beyel Brothers Inc., B-406640:

Beyel’s argument reflects a lack of understanding as to the distinction between price reasonableness and realism. The purpose of a price reasonableness review in a competition for the award of a fixed-price contract is to determine whether the prices offered are too high, as opposed to too low. Sterling Servs., Inc., B-291625, B-291626, Jan. 14, 2003, 2003 CPD ¶ 26 at 3; WorldTravelService, B-284155.3, Mar. 26, 2001, 2001 CPD ¶ 68 at 4 n.2. Arguments, such as the one raised by Beyel here, that an agency did not perform an appropriate analysis to determine whether prices are too low such that there may be a risk of poor performance concern price realism. C.L. Price & Assocs., Inc., B-403476.2, Jan. 7, 2011, 2011 CPD ¶ 16 at 3; SDV Solutions, Inc., B-402309, Feb. 1, 2010, 2010 CPD ¶ 48 at 4. A price realism evaluation is not required where, as here, a solicitation provides for the award of a fixed-price contract and does not include a requirement for a price realism evaluation. C.L. Price & Assocs., Inc., supra; WorldTravelService, supra , at 3.

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Guest Vern Edwards

Jamaal:

You are a welcome addition to the Wifcon membership and one day you will be answering more questions here than you ask. Learn to answer them properly.

You asked: "Does adequate price competition establish a fair and reasonable price [ipso facto]?" Then, you described an example.

When answering such a question, start with the governing rule or official guidance, if any. You'll notice that the first two responses to your question cited no such information. Instead, they offered unsupported personal views. Do you know them personally? Do you know whether they are competent and whether their assertions are true? Can you take what they said to others in your organization in support of any decision you might make? Now they're off track and bickering about their answers, and a third party is having to ask one them what he's talking about. They've gotten themselves into a back and forth that they probably cannot resolve since they're coming at the problem from two different places. One of them has referred to GAO and COFC "jurisprudence," as if those two forums have anything to do with your question. And he has not cited a single case. And now he's back with more distracting and irrelevant commentary.

In short, instead of providing a useful answer, they've provided distractions.

When you start answering questions more authoritatively, do it right. If the question is grounded in regulation or policy, start by citing any pertinent regulations and official policy and guidance, THEN add commentary of your own IF you've got something informative to say.

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Jamaal,

I hope my answer was helpful to you. But in case it didn't meet your needs, I have edited it below...

Price reasonableness concerns itself with whether the offered price is too high [for example, see GAO Bid Protest case B-406640, Beyel Brothers Inc., and DMS All-Star Joint Venture v. United States, Fed. Cl. No. 09-737C, January 26, 2010]. With the competition you received, it seems easy to say that $150K is not too high -- therefore, it is not unreasonable -- so therefore, it is reasonable based on adequate price compeition.

Price realism is another matter, but we don't usually do price realism analyses for FFP acquisitions. [The FAR requires it only for cost-reimbursement acquisititions. FAR 15.404-1( d )( 2 ).]

Even though the $150K price is reasonable, I wonder if there is any possibility of a mistake. A prudent contracting officer might send the $150K offeror a note saying something like, "Because of the wide variance in the prices received, the Government invites you to carefully review your price and verify that it does not contain any mistake. Please notify me by _____ whether or not there is a mistake. This notice only asks you to verify whether or not there is a mistake -- it does not afford you an opportunity to revise your price." [for example, see GAO Bid Protest case B-293042.3, PCA Aerospace,Inc.]

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ji20874,

It's one thing to say that a price realism evaluation is not required by the FAR. It's another thing entirely to say that contracting officers subject to the FAR don't usually perform a price realism analysis on FFP acquisitions. What is the basis for your claim?

You wrote:

Price realism is another matter, but we don't usually do price realism analyses for FFP acquisitions. [The FAR requires it only for cost-reimbursement acquisititions. FAR 15.404-1( d )( 2 ).]

You are wrong. The FAR requires a cost realism analysis for cost-reimbursement contracts. Cost realism. Cost realism is not price realism. We don't do price realism analysis on cost-reimbursement contracts.

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Hi, Jamaal,

I felt my ears burning!

Sorry to answer a question with a question. The way you worded the question leads me to think you are worried the price is to high, but the example seems inconguent with that.

Are you worried that the price is too low, or too high? Any concerns that your requirement is described adequately, given the wide range of proposed prices?

I think the worry about prices being too high is answered already. Bob Antonio has a great collection of GAO decisions here:

http://www.wifcon.com/pd15_404.htm

regarding price realism (e.g. Lilly Timber is a good read) if you are worried prics are too low. I hope this was helpful.

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I think that I answered the actual question correctly in the first part of my first post. If one receives several bids, quotes or offers that are all higher than you know or are pretty certain something can be bought for, the lowest price or the prices might not be fair and reasonable ipso facto. If one just decides to buy a thousand hammers for $400 each because that was the lowest quote and you know that they are otherwise available for $25, $50 or $100 each, then I'd say you are probably a fool.

In my opinion, Jamaals actual example didn't represent a problem with prices being too high to be reasonable.

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Guest Vern Edwards

ji20874:

You first mentioned GAO and COFC "jurisprudence" in the following quote:

However, if Jamaal has any of the concerns that your raised, he should not address them by calling the $150K price unreasonable. The price is reasonable according the the GAO's and COFC's jurisprudence.

Emphasis added.

The sentence in bold italics is nonsense. Neither of the cases you cited in Post #11 passed judgement on the fairness and reasonableness of any price nor made any holding on the relationship between adequate price competition and price reasonableness. Neither is pertinent to the question that Jamaal asked, which was: "Does adequate price competition establishes a fair and reasonable price [ipso facto]?" Neither provides any basis for saying that Jamaal's lowest quote is fair and reasonable. Both decisions addressed realism analysis, which was not a concern expressed by Jamaal. That issue came up between you and Joel. Jamaal cannot say that the lowest price he received is fair and reasonable based on anything in those decisions.

Whether or not the price of $150,000 is fair and reasonable turns in part on what information Jamaal has other than the quotes that he received. The wide spread among the prices proposed suggests that competition may have been ineffective, perhaps due to problems with the statement of work or other parts of the RFQ. $150,000 might be too much to pay for what the government actually wants. On the other hand, it might be a great deal.

When answering a question, we should answer the question asked:

"Does adequate price competition establishes a fair and reasonable price [ipso facto]?"

That was the only sentence in the OP that ended with a question mark.

Answer:

According to FAR 15.404-1(2), "normally," yes, but see the Contract Pricing Reference Guides, Vol.1, Ch. 6.

THEN add any personal commentary based on knowledge and experience. Provide citations to authoritative unofficial sources.

I'm not trying to educate you about this, ji20874. I'm trying to educate the next generation of Wifcon participants.

I hate it that Wifcon Forum has become a Q&A site, but since that's what it has become we should make it the best one that we can.

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I understand the pertinent case law concerning price fair and reasonableness (too high) and price realism (too low and a right that must be reserved in FFP).

I understand that price realism isn't mentioned in the FAR and the boards and courts don't appear to distinguish it much differently from cost realism as used throughout the FAR.

My specific question is, CAN you PROPERLY say that the $150K in the scenario is fair and reasonable simply because it was received through adequate price competition?

My thought is that the FAR requires a comparison of the prices. I don't know what is required by that comparison, but since the prices, including the government estimate, are so widely dispersed, seemingly with no correlation, I believe it would be irresponsible to simply select the low and determine them fair and reasonable based solely on the above.

Just because I believe it would be irresponsible or unprofessional doesn't mean it's un-allowable or improper.

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Jamaal,

The FAR does not require a comparison of the prices. Refer to FAR 15.404, what the FAR requires is proposal analysis (which can consist of various methodologies) to determine the final agreed-to price is fair and reasonable. In this case, you're using price analysis so I'd refer you to 15.404-1( b )( 2 ) where the FAR lists multiple price analysis techniques and procedures you can utilized in making a determination of price fair and reasonableness.

Vern has already quoted 15.404-1( b ) ( 2 ) ( i ) which discusses the technique of "comparison or proposed prices received in response to the solicitation" followed by "Normally, adequate price competition establishes a fair and reasonable price" which is precisely the rule you need to consider. The use of the word "normally" indicates that there are situations where adequate price competition does not establish a fair and reasonable price. Therefore, in my opinion, the answer to your question as to whether or not it does so "ipso facto" would be no.

If you're concerned about making the determination solely based on adequate price competition (the definition of which is worth looking up at FAR 15.403-1( c ) ( 1 )), then resort to additional price analysis techniques. I'd argue that the use of several different techniques will make your determination more sound anyways.

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Guest Vern Edwards
I understand that price realism isn't mentioned in the FAR and the boards and courts don't appear to distinguish it much differently from cost realism as used throughout the FAR.

Although the FAR itself does not use the term "price realism," it does discuss it and make an important distinction between realism analyses for cost-reimbursement contracts and fixed-price contracts. See FAR 15.404-1(d)(3):

Cost realism analyses may also be used on competitive fixed-price incentive contracts or, in exceptional cases, on other competitive fixed-price-type contracts when new requirements may not be fully understood by competing offerors, there are quality concerns, or past experience indicates that contractors’ proposed costs have resulted in quality or service shortfalls. Results of the analysis may be used in performance risk assessments and responsibility determinations. However, proposals shall be evaluated using the criteria in the solicitation, and the offered prices shall not be adjusted as a result of the analysis.

Price realism has been a protest issue before the GAO and the COFC. It has not been an issue at the boards of contract appeals except for the period when the old GSBCA handled protests of IT procurements. The GAO has noted significant distinctions between cost realism and price realism. See e.g., NJVC, LLC, B-410035, 2014 CPD ¶ 307, October 15, 2014:

Where a solicitation contemplates the award of a fixed-price contract, an agency may provide in the solicitation for the use of a price realism analysis for the purpose of measuring an offeror's understanding of the requirements. IBM Corp., B–299504, B–299504.2, June 4, 2007, 2008 CPD ¶64 at 10 –11. Price realism involves many of the same considerations as cost realism, except with an analysis of price, instead of elements of cost. See id. (analogizing price realism to cost realism analysis stated in the FAR). Price realism, however, may also be used by the agency to evaluate whether an offeror can realistically perform its technical solution at the fixed price proposed in order to assess the risk inherent in an offeror's proposed approach. DynCorp Int'l LLC, B–407762.3, June 7, 2013, 2013 CPD ¶160 at 8–9; Triad Int'l Maint. Corp., B–408374, Sep. 5, 2013, 2013 CPD ¶208 at 8. This is so because, unlike a cost realism analysis where a probable cost of performance is determined, no adjustment to price is permitted in a fixed-price contract. See id. Analyzing whether an offeror's fixed price is so low that it reflects a lack of understanding of solicitation requirements is the crux of a price realism evaluation. Science Applications Int'l Corp., B–407105, B–407105.2, Nov. 1, 2012, 2012 CPD ¶310 at 10. Likewise, consideration of whether an offeror's fixed price is so low that it creates a risk that the firm cannot perform its proposed technical solution at the price offered is also a price realism analysis. See IBM Corp., supra, at 10–11.

For those who want to know more, I wrote a lengthy piece about price realism analysis in the January 2014 edition of The Nash & Cibinic Report, "Price Realism: A Primer."

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Matthew:

I do not agree or disagree with your initial statement. First, the discussion was limited to establishing price fair and reasonableness through adequate price competition. Secondly, I don't understand how your reference negates the statement, in it's context, or suggests the FAR doesn't require a comparison of prices in a competitive LPTA procurement (exceptions such as technically unacceptable offers noted).

Nonetheless, the the rest of what you said is what I would like to develop and understand. Can you explain your last paragraph a little more? You say that if I would like to make the determination based solely on adequate price competition then I should resort to additional price analysis techniques.

Vern:

Thank you for the references. You also stated "Whether or not the price of $150,000 is fair and reasonable turns in part on what information Jamaal has other than the quotes that he received. ". I believe this to be true, and was searching for an authoritative reference that says as much. I believe I found it in the CPRG VOL 1 Chp 6.1.1.

Unfortunately, absent a mandate like "shall" it's hard to get people to consider official or unofficially guidance. It's easier to bypass what's right for what's seemingly allowable - that is accept any price received under competition as fair and reasonable.

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Joel:

You did address my specific question and I thank you for taking the time. Furthermore, I agree with what you put in your posts, but I want to know what the rules supporting it are. I wouldn't have an issue working through a scenario like this, I just want some supported information on adequate price competition establishing price fair and reasonableness ipso facto.

I just finished my first read of the Contract Pricing Reference Guide Vol 1 Chapter 6.1.1, which uses terms like should, could, and normally. To me, that suggest what a prudent businessperson would do.

As a result, the answer to the original question, for me, is no. I don't believe adequate price competition establishes fair and reasonable prices in and of itself. In order to be consistent with the rules I know of, price analysis is required...the degree of such price analysis will vary, but in this scenario simply comparing prices and determining the lowest is by default fair and reasonable is not a reasonable price analysis absent additional findings.

I'm fully convinced not all will see it that way and could determine otherwise. Maybe I could have asked the question another way:

Given the scenario, would a determination of the lowest price being fair and reasonable, solely on the basis of adequate price competition, be compliant with the governing rules?

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Jamaal,

If you're looking for a "shall" statement to support the use of price analysis beyond merely relying on the basis of adequate price competition for determining price fair and reasonable, perhaps a combination of the following will suffice:

FAR 15.404-1( a ) ( 2 ) states "Price analysis shall be used when certified cost or pricing data are not required." Moreover, FAR 15.404-1( b ) ( 3 ) states in part "...if the contracting officer determines that information on competitive proposed prices...is not available or is insufficient to determine that the price is fair and reasonable, the contracting officer may use any of the remaining techniques as appropriate to the circumstances applicable to the acquisition."

As for your previous question, it wasn't clear that your intent was a preference on making the determination solely based on adequate price competition. My point was that a better way to determine a price fair and reasonable is to use multiple methods of price analysis that arrive at the same/similar conclusion (with the amount of effort tailored to the nature of the acquisition at hand).

In relation to your comments on what is right vs allowable and what a prudent business-person would do, don't forget what the FAR states at 1.102( d ) which encourages sound business judgment as the driving force when exercising authority in situations that involve the exercise of initiative (though I don't think this is one of those, it may be a point to bring up if someone just wants to hit the easy button rather than perform additional analysis as a "sanity" check).

Lastly, if this is an issue that you have found yourself disagreeing with your Contracting Officer, sometimes the best you can do is present your argument and let him/her make the decision. There are inevitably going to be situations you encounter where you disagree with a CO (or when you become a CO where you disagree with policy or maybe even a SSA), but you have to ultimately respect the person with the authority to make the decision (unless the decision is immoral, unethical, or illegal).

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...Unfortunately, absent a mandate like "shall" it's hard to get people to consider official or unofficially guidance. It's easier to bypass what's right for what's seemingly allowable - that is accept any price received under competition as fair and reasonable.

Jamaal, you are apparently dealing with FOOLS, if they demand cookbook, mandated rules or case law for determining price reasonableness. The FAR has never been specific enough to lead those by the hand who havent any clue how to determine if they are paying a reasonably fair price for something.

Your scenario, with widely varying prices for the "same quantity and delivery of identical services" and an even higher government estimate (which might or might not represent any kind of reality) suggests to me that it wouldn't be very prudent to simply declare the lowest price "fair and reasonable" because there was "adequate competition" and make an award.

I would suggest taking full advantage of the acquisition method chosen to assure that both the government and the industry understand the stated scope of work. You may end up avoiding problems for both the contractor and the government if the scope of work isn't clear or doesn't represent what the government really intends.

I've found over the years that taking short cuts up front in the contract formation often results in difficulties and messes down the road that somebody had to deal with and that harmed one or both parties. To me, it is "easier" to get it right up front...

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Oh, I found that a primary rule of thumb for negotiating a new contract or a change to a contract is to make sure that everyone mutually understands the intended scope of work and intended requirements.

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I've found that as a junior member of a larger team my opinion, logic, or informational guidance is not likely to sway popular belief. Especially, not when it leads to additional work.

As a contracting officer I prefer to provide my team with references that support my decisions. It's easy enough to direct a contract specialist to provide more findings, but I'd rather compel them that additional findings are required not because I ask but, because it's appropriate given the scenario. My hope is that by equipping them with information will make us all better in the long run.

Thanks y'all! Hopefully the wifcon readers found the discussion beneficial. I know I did.

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Guest Vern Edwards

Jamaal:

I've found that as a junior member of a larger team my opinion, logic, or informational guidance is not likely to sway popular belief. Especially, not when it leads to additional work.

Here is your original scenario:

In response to a anticipated FFP award, a LPTA solicitation with a Government estimate of $400K was issued and you receive three competitive quotes for $150K, $250K, and $325K.

We know what the policy says about comparisons of prices received through adequate price competition. We also know that you have concluded that it does not work in your scenario. What we don't know is how you came to that conclusion. In order to persuade your opponents in your organization, assuming that they are amenable to persuasion, that your conclusion is sound, you must explain your reasoning and justify your proposed alternate course of action.

A first question is whether you did, in fact, get adequate price competition. The mere fact that you received quotes from more than one firm does not mean, ipso facto (to use your phrase), that the RFQ produced adequate price competition. In your opening post you said: "Each quote is for the same quantity and delivery of identical services...." And for the same quality? Are you sure?

Sealed bidding is the classic example of determining price reasonableness based on the comparison of prices obtained through adequate price competition. See FAR 14.408-2. The famous case of A.B. Dick Co., 89-2 BCA ¶ 21731, ASBCA No. 32572, Feb. 22, 1989, is one in which there was the appearance of adequate price competition, but not the actuality.

The USAF CO conducted a sealed bid acquisition of copying machines. The specification said: "Provide reproduced copies 8½ inches wide x 11 inches long and 8½ inches wide x 14 inches long without manually changing paper trays." What the government wanted was "dual cassette" (two paper tray) copiers, but it was not familiar with the industry terminology. The low bidder was A. B. Dick. It turned out that the low bidder had offered a copier with only one paper tray that could produce copies of both sizes without manually changing paper trays. According to the board:


Dick based its bid on providing single cassette copiers with a manual by-pass feature which would permit manually feeding legal-size paper stock when the cassette was loaded with letter-size paper. Single cassette copiers with a manual by-pass feature were a common product in the copier industry in 1985 when the contract at issue was advertised and awarded. Dick's smallest dual cassette copier had a standard cost 25 to 30 percent higher than its single cassette copier.

There was nothing in the IFB that required mechanical feeding, or precluded manual feeding of the paper stock into the copier. There is no evidence that the single cassette machines which Dick intended to provide could not have met the specified monthly maximum copy requirements for each machine/location, even if the entire monthly quantity were manually fed through the by-pass.

Dick's price was much lower than the nearest competitor, and one competitor warned the CO that Dick could not provide "dual cassette copying" at that price. The CO asked Dick to verify and "certify" that its bid was based on dual cassette copying. Dick responded as follows:

We certify that our bid is in compliance with Part I, Section C, paragraph 3.d which states: “Provide reproduced copies of 8½ inches wide x 11 inches long and 8½ inches wide x 14 long without manually changing paper trays.”

Despite having been warned and having a clue, the CO awarded the contract without further inquiry and then terminated it for default when the company delivered the one-tray machines, saying that Dick knew or should have known what the government had meant by its spec. The board concluded that each party had known of the other party's intention and so there was no meeting of the minds and no contract to terminate:


The Government knew, or ought to have known, that the specification as advertised could be met by at least two different types of copier—dual cassette or single cassette with manual by-pass. In this regard, it should be remembered that the single cassette copier with manual by-pass was a common industry product when the contract was advertised, bid and awarded. Dick knew, from the Government's verification request after the opening of bids, that the Government wanted to restrict the specification to permit only the dual cassette copier. However, Dick's carefully worded reply to that request did not accept the Government's restrictive interpretation, and the Government knew or ought to have known from that response that its interpretation had not been accepted.

In these circumstances, we find an absence of manifestations by the parties of mutual assent to a fundamental term of the proposed contract. Where, as here, the parties attach materially different meanings to their manifestations and each party has reason to know the meaning attached by the other, there is no enforceable contract.

The board affirmed its decision upon reconsideration, 90-1 BCA ¶ 22535, December 5, 1989.

Technically, there was adequate price competition as we define it today. See FAR 15.403-1[c](1)(i):


(1) Adequate price competition. A price is based on adequate price competition if—

(i) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government's expressed requirement and if—
(A) Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection; and
There is no finding that the price of the otherwise successful offeror is unreasonable. Any finding that the price is unreasonable must be supported by a statement of the facts and approved at a level above the contracting officer....
Emphasis added. FAR presumes that the "expressed" requirement is clear and unambiguous and that the offerors are competing on the same basis.

The competition in A. B. Dick did not produce adequate price competition, because the bidders did not compete on the same basis. The low price could not be said to be fair and reasonable based on comparison of proposed prices obtained through adequate price competition, because the competitors' prices were not comparable. They were not comparable because the government did not clearly and unambiguously specify what it actually wanted. Upon learning what was what, the CO should have cancelled the solicitation and conducted a new competition with a properly written spec.

A. B. Dick is a case in which it appeared that there had been adequate price competition when, in fact, there had not, because the government's "expressed requirement" was subject to more than one reasonable interpretation and did not yield comparable prices.

In your scenario you are buying services, and service specifications (statements of work) are especially susceptible of vagueness and ambiguity. The price spread in your example, from $150,000 to $325,000, suggests that something is amiss. Until you sort that out, I don't think you can be sure that you have, in fact, had adequate price competition.

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