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Maureen

Taking Exception to Proposal Outliers in Competion

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Scenario: FFP requirement with options, IDIQ. Several proposals come in priced within reasonable range of each other and the IGCE. Another comes in 30% below the IGCE. Cost/price analyst will be conducting unbalanced pricing assessment IAW FAR 15.404-1(g). If we were to find unbalanced pricing issue, I know I can rely on what 15.404-1(g) says in terms of the risk of paying unreasonably high prices. However, my gut tells me that all line items will be lower. And this is still a risk.

Problem: I want our team (policy/C&P team) to be able to articulate to the specialist and KO why this is a performance risk. I can craft an argument addressing whether the outlier fully comprehended the requirement, as evidenced by how removed this offeror is from the rest of its competition. Naturally, a technical review can mitigate this concern. However, I would like to be able to find policy, case law, whatever, that I can use to say hey, you need to consider this. Does such a thing exist? The Contract Pricing Reference Guides focus on Part 14, or the assessment of unbalanced line items. I kind of want something that talks about a proposal in its entirety being suspect.

Hope this makes sense. It's Monday morning after all. Thanks!

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Doesn't the FAR permit contractors to submit prices lower than expected cost? If so, why are you penalizing the contractor for doing so?

H2H

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A contractor can certainly propose lower than an IGCE. And I do not want to penalize the company. However, I don't want the Government to be 6 months down the road with a contractor who is going broke because he misunderstood the requirement and does not have sufficient funding to hire the appropriate personnel or appropriate number of people. The Government's estimate and the other competitors are closer in agreement. This outlier makes me nervous.

Maybe it's a factor of ensuring the technical review is spot on and can support the decision to award to the outlier. But I do believe our C&P team has an obligation to point out the fact that the offer is definitely an outlier and the KO better be sure the technical review is sound.

Thanks!

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Maureen,

Did the solicitation say that the Government would evaluate price realism to determine either the offeror's understanding of the work or performance risk?

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To follow-up on Don's comment, if the solicitation doesn't say you will evaluate price realism (or performance risk), then you cannot. However, if this offeror is otherwise the successful offeror, all evaluation factors considered, then you may select it as the successful offeror and then determine it to be non-responsible.

The GAO has ruled repeatedly that we cannot evaluate price realism on a FFP acquisition unless something in the solicitation points to a price realism evaluation. In situations where a price is so low as to suggest that the offeror does not understand the requirement or cannot successfully perform, this is dealt with as a matter of responsibility.

For example, see AGE Logistics Corporation, B-412049, December 9, 2015:

  • "...where a solicitation does not provide for a price realism analysis, a determination that an offeror’s price on a fixed-price contract is too low generally concerns the offeror’s responsibility..."
  • "...assuming that East/West did submit an offer that is below anticipated costs, there is no prohibition against an agency accepting below-cost prices on a fixed-price contract..."

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As a matter of fact, it did....

"Unrealistically low and/or unreasonably proposed costs/prices may be grounds for eliminating a proposal from competition either on the basis of lack of understanding of the requirement or unreasonable/unrealistic proposal. Proposals that fail to me the requirements set forth in FAR Clause 52.212-5, Instructions to Offerors (and its Addendum) will be rated as unacceptable."

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Hmmm, maybe the answer to Don's question is YES instead of NO?

Maybe your solicitation does allow for a price realism analysis after all?

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Maureen,

Based on the language in your solicitation, I believe that you can take price realism into account in your evaluation of understanding of the requirement. That is well-established in the GAO's case law. The key is that offerors were on notice of the Government's intentions in that regard. What you have to be able to do is deduce a lack of understanding from the lack of realism in the prices. You have to be able to show a reasonable connection between the two. In what way do the low prices indicate that the offeror does not understand what would be required of it?

Price realism need not be an express criterion if understanding is a criterion and you made a link between price realism and your assessment of understanding.

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Maybe the offeror's price is so low because it has an innovative solution that nobody (including the government) has figured out yet?

Back in the day, this small business started under-cutting all the established contractors in the environmental remediation business. Turns out that all the established players were using large, fixed wastewater monitoring stations. Multiple sites meant multiple stations. The small upstart put wheels on their equipment and moved it from site to site. Everybody else bid multiple stations; the little guy just bid one or two. Huge cost savings to the customer.

Just something to consider.

H2H

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Maureen:

See Logistics 2020, Inc., B-408543, Nov. 6, 2013:

Where, as here, an RFP contemplates the award of a fixed-price contract, or a fixed-price portion of a contract, an agency may provide in the solicitation for the use of a price realism analysis for the limited purpose of measuring an offeror's understanding of the requirements or to assess the risk inherent in an offeror's proposal. Ball Aerospace & Tech. Corp., B–402148, Jan. 25, 2010, 2010 CPD ¶37 at 8...

Here, although the solicitation did not expressly provide for a price realism analysis under the price/cost factor, the RFP nonetheless informed offerors that the agency “may reject any proposal that is evaluated to be ... unrealistically high or low cost when compared to the Government estimates such that the proposal is deemed to reflect an inherent lack of competence or failure to comprehend the requirements and risks of the program.” RFP at 120. Given the solicitation's express statement that proposals would be evaluated to determine if prices were “unrealistically high or low,” we see no basis for any conclusion other than that the agency committed itself to a review of price realism.

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Yes, it appears that price realism can be done. To be honest, I don't believe our RFP language was necessary. The requirement is a very standard installation support requirement (albeit possibly not as clearly defined as it should be). Nevertheless, we have it in the solicitation. We have some hiccups to get through (not the least a "get it awarded now" date), but everyone's comments have been helpful and are very much appreciated.

You all are awesome and I very much appreciate this site. Been going here since 1999 for help and have never been disappointed. Thank you.

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