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Can an agency consider price when evaluating for Technical Approach?

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Can an agency consider price when evaluating for Technical Approach?  I remember seeing a GAO decision once where the GAO stated that an agency must consider the offeror's Technical Approach when evaluating cost/price (this was a cost-reimbursement contract in the GAO decision).  But does it go the other way?  Does an agency have to consider Cost/Price when evaluating Technical Approach?  

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Looking for this (FAR 15.404-1(d)(1))?

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Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.

 

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Guest Vern Edwards
2 hours ago, govt2310 said:

Can an agency consider price when evaluating for Technical Approach?  I remember seeing a GAO decision once where the GAO stated that an agency must consider the offeror's Technical Approach when evaluating cost/price (this was a cost-reimbursement contract in the GAO decision).  But does it go the other way?  Does an agency have to consider Cost/Price when evaluating Technical Approach?  

By using the term "price," I presume that you are asking about an approach to be used when performing a fixed-price contract.

You must consider price--the dollar amount--when making tradeoffs and determining best value, but that's separate from the use of pricing information in the evaluation of technical approach. You don't want to consider price when evaluating technical approach, but you might want to consider pricing information, which is entirely appropriate under the right conditions.

When thinking about evaluating technical approach, keep in mind that a cost estimate in support of a price is nothing more than the dollarization of estimates of the material, labor, and other resources that will be used or consumed in the performance of the contract. When evaluating technical approach, you would not consider the dollar amount of the price, but you might look at the cost breakdown accompanying the price proposal in order to assess the likely success of a given proposed approach. Depending on what the CO asks for and the form of submission, that information might shed more light on the nature of a proposed approach than words alone.

For instance, if an offeror says that its approach entails the performance of tasks X, Y, and Z and their completions by certain dates, the provision of material and labor estimates and graphics showing their time-application to a work breakdown structure during the period of performance might tell the evaluators a lot about what the words in the offerors' descriptions of their approaches really mean. In this application, the cost information is considered part of the description of the technical approaches. It is not used in order to validate proposed technical approach, but to develop a full understanding of it. This kind of use is not necessarily the same as a price realism evaluation, which is mainly concerned with whether estimated resources are sufficient.

If I have done something many times, and if I know the various ways to do it, and you describe your approach in general terms, giving me me a description of the numbers and kinds of workers you plan to employ, and of the equipment they're going, the the timing of their arrival and performance on the job puts flesh and bone, so to speak, on your description.

Of course, the success of this type of application depends on the knowledge and experience of the CO and the evaluators, and it must be coordinated with the writing of the instructions for the preparation of technical proposals. It's not for amateurs.

 

 

 

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On Monday, August 01, 2016 at 0:22 PM, govt2310 said:

Does an agency have to consider Cost/Price when evaluating Technical Approach?

For a cost-reimbursement contract, an agency must perform a cost realism analysis, as pointed out by Don above.  FAR 15.404-1( d )( 2 ).

For a fixed-price contract, an agency may perform a cost realism analysis.  FAR 15.404-1( d )( 3 ).

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On August 1, 2016 at 11:41 AM, Don Mansfield said:

Looking for this (FAR 15.404-1(d)(1))?

Quote

Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.

 

 

3 hours ago, ji20874 said:

For a cost-reimbursement contract, an agency must perform a cost realism analysis, as pointed out by Don above.  FAR 15.404-1( d )( 2 ).

For a fixed-price contract, an agency may perform a cost realism analysis.  FAR 15.404-1( d )( 3 ).

If a cost realism analysis is to be performed, this would be part of the separate price analysis, not part of the technical analysis, However, the price analysis team would likely use the technical proposal as part of the cost realism analysis. The government would describe the price evaluation criteria in the solicitation.

Having read both the DoD Source Selection Procedures and the Army Source Selection Supplement to those D0D procedures, I think that both documents are poorly written concerning how one would evaluate both technical risk and overall proposal risk. The DoD SS procedures refer to some type of cost risk in the technical evaluation,

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3.1.2.2.2. Technical Risk Rating. Assessment of technical risk, which is manifested by the identification of weakness(es), considers potential for disruption of schedule, increased costs, degradation of performance, the need for increased Government oversight, or the likelihood of unsuccessful contract performance. Technical risk shall be rated using the ratings listed in Table 3. For firm-fixed-price contracts, the reference to increased cost may be removed from the risk rating descriptions. Table 3. Technical Risk Ratings Rating Description Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal Government monitoring will likely be able to overcome any difficulties. Moderate Can potentially cause disruption of schedule, increased cost or degradation of performance. Special contractor emphasis and close Government monitoring will likely be able to overcome difficulties. High Is likely to cause significant disruption of schedule, increased cost or degradation of performance. Is unlikely to overcome any difficulties, even with special contractor emphasis and close Government monitoring.

The Army organization did cite cost risk in in the technical evaluation in the Arcadis US, Inc. protest.  However, I think that they may have incorrectly assumed that the increased cost risk would be to the government, not as a risk to the contractor's ability to successfully perform the contract.  

The DoD/Army "Confidence Assessment" is essentially based upon past performance and experience.

The Army SS Supplement defines "risk" as 

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Risk, as it pertains to source selection, is the potential for unsuccessful contract performance. The consideration of risk assesses the degree to which an offeror’s proposed approach to achieving the technical factor or subfactor may involve risk of disruption of schedule, increased cost or degradation of performance, the need for increased Government oversight, and the likelihood of unsuccessful contract performance. (For firm-fixed-price contracts, the reference to increased cost may be removed from the risk definition.)

The DoD SS procedures require that technical risk be evaluated and rated either together with the technical rating or as a separate rating.  

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3.1.2.2.2. Technical Risk Rating. Assessment of technical risk, which is manifested by the identification of weakness(es), considers potential for disruption of schedule, increased costs, degradation of performance, the need for increased Government oversight, or the likelihood of unsuccessful contract performance. Technical risk shall be rated using the ratings listed in Table 3. For firm-fixed-price contracts, the reference to increased cost may be removed from the risk rating descriptions. Table 3. Technical Risk Ratings Rating Description Low Has little potential to cause disruption of schedule, increased cost or degradation of performance. Normal contractor effort and normal Government monitoring will likely be able to overcome any difficulties. Moderate Can potentially cause disruption of schedule, increased cost or degradation of performance. Special contractor emphasis and close Government monitoring will likely be able to overcome difficulties. High Is likely to cause significant disruption of schedule, increased cost or degradation of performance. Is unlikely to overcome any difficulties, even with special contractor emphasis and close Government monitoring.

 

 

 

I noted the lack of clear explanation about what is meant by "increased cost" and specifically how it would or could apply to a FFP contract.

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Under a fixed price contract, the review of a Contractor's technical understanding through review of proposed price(s) is normally called a "price realism analysis."  They are allowable, but not mandatory, for fixed price contracts. Per Unisys Corp., B‑400340.5, B-400340.6, Jan. 20, 2010, 2010 CPD ¶ 45 at 9:

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Where, as here, a solicitation anticipates award of a contract with fixed prices, there is no requirement that an agency conduct a price realism analysis.

In order to conduct a price realism analysis, however, the Solicitation must clearly state that the agency will conduct one. 

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We have reviewed the RFP, including the language cited by Arctic, and conclude that a price realism analysis was not required by the terms of the RFP. In this regard, the RFP does not explicitly call for a price realism evaluation. Neither does the RFP include any language that prices would be reviewed to determine whether they are so low that they reflect a lack of technical understanding. Finally, the RFP does not provide that proposals could be rejected for offering low prices. Absent such language, our decisions are clear that agencies cannot conduct a price realism analysis, as the protester alleges should have occurred here. See Dyncorp Int’l LLC, supra at 8-9 (absent solicitation provision providing for price realism evaluation, agencies are neither required nor permitted to conduct one in awarding a fixed-price contract). 

Source: Arctic Slope Mission Services, LLC B-412851, B-412851.2: Jun 21, 2016, [amongst about a million other cases]

When comparing a price realism analysis to a cost realism analysis, see Ball Aerospace & Tech. Corp., B-402148, Jan. 25, 2010, 2010 CPD ¶ 37:

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"A price realism evaluation is conducted for the purpose of measuring a vendor's understanding of the contract requirements or to assess the risk inherent in a vendor's proposal or quote-not for the purpose of determining the probable cost to the government. Id. Moreover, a price realism analysis does not permit the agency to adjust a vendor's quoted price based on the results of the analysis..."

It is confusing to apply the term "cost realism analysis" to a fixed price contract.  A cost realism analysis typically is more involved than a price realism analysis.  For example, in a cost realism analysis, you care about:

- Quality of the Offeror's cost estimating system and existence of forward price rate agreements;

- The Government's probable cost; and

- Offeror's understanding of the technical requirements.

Conversely, in a price realism analysis, the only thing that is really important is if the Offeror understands the technical requirements.

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