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Vern Edwards

A Competition Revolution

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15 hours ago, Vern Edwards said:

P.S. The name of GSA's procedure was not "highest rated technical offer" (HRTO). It was "highest technically rated [offerors] with a fair and reasonable price." The award was not based on the technical rating alone. Price was a consideration.

Very useful to explain how this is different from the Qualifications-based engineering style procurements.  Prices come in with the proposals, they are actual offers.  Appreciate that distinction very much . . .

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Did the fact that GSA conducted a thorough cost/price analysis have any bearing on the outcome? What would have happened if GSA had instead conducted a simple price evaluation based on adequate competition?

The depth of analysis appears to be immaterial to the decision, yet GAO did make a point to directly quote the steps GSA took.

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I am wondering if this is similar to our best-value-for-budget or build-to-budget efforts. Essentially, we award to highest rated offer (technical solution) that is affordable.

I will do some in-depth reading and thinking soon. (On travel)

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43 minutes ago, FrankJon said:

Did the fact that GSA conducted a thorough cost/price analysis have any bearing on the outcome? What would have happened if GSA had instead conducted a simple price evaluation based on adequate competition?

Nothing in the decision indicates that the holding was based on the thoroughness of the agency's cost/price analysis. I will not speculate on what would have happened had the agency done anything differently in that regard.

29 minutes ago, Jamaal Valentine said:

I am wondering if this is similar to our best-value-for-budget or build-to-budget efforts. Essentially, we award to highest rated offer (technical solution) that is affordable.

It is not similar. The decision turned in part on the agency's determination that award prices were fair and reasonable. FAR requires a determination of award price fairness and reasonableness. The fact that an agency can afford a price does not make that price fair and reasonable. Based on its past decisions, I do not think the GAO would have accepted a mere determination of affordability.

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1 hour ago, Vern Edwards said:

Based on its past decisions, I do not think the GAO would have accepted a mere determination of affordability.

Agreed. We always include a price fair and reasonbleness determination.

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1 hour ago, FrankJon said:

What would have happened if GSA had instead conducted a simple price evaluation based on adequate competition?

If you or anyone reading this is a Federal contracting frog: Do it! 

Explain to your leadership (after your management) how valuable and pivotal these changes can be, and then do it! (You might want to use a small, insignificant, or easily substituted requirement as your test case.)

If you are feeling froggy, jump, and then find a way to have a loser protest the method!

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One of the big challenges now will be to develop appropriate adaptations of the "highest technically rated offerors with a fair and reasonable price" for single award non-IDIQ contracts.

I am thinking about an adaptation that I call “best qualified offeror with a fair and reasonable price.” This would be a form of qualifications-based selection, but with consideration of price as required by CICA and FAR 15.304(c)(1). I assume that everyone reading this has read the GAO's Sevetec decision and understand the principles on which the decision is based. 

Assume an acquisition for a fully-specified IT project or for five years of IT fully-specified support services. Assume that the acquisition is valued at about $50 million and that market research suggests that we’ll get between 10 to 15 responses to our solicitation. We would proceed as follows:

1. solicit information about offeror qualifications (experience, past performance, etc.) but not “narrative“ "technical" proposals or price proposals; we'll allow 30 days for submission;

2. evaluate offeror qualifications and rank offerors from best to worst (this step may entail making tradeoffs among nonprice factors); allow 30 - 60 days for evaluation;

3. identify the top two (or three, but not more) “best and most closely qualified” offerors;

4. solicit price proposals from the top two (or three) offerors; disclose the government’s budget; allow 30 to 60 days for submission;

5. evaluate price reasonableness; conduct discussions if necessary; allow 30 - 60 days for evaluation and discussion;

6. award to the best qualified offeror with a fair and reasonable price; no qualification/price tradeoffs.

One my objectives is to eliminate the cost of preparing  price proposals for all but the top two (or three) offerors while still getting adequate price competition and competitive pricing. I think that would be attractive to industry. Another objective is to reduce the government’s cost of price proposal evaluation.

We want adequate price competition so we won’t have to require submission of certified cost or pricing data. We want proposals from the top two (or three) also in case the best qualified offeror will not agree to a fair and reasonable price. Also, I am also concerned that the GAO would not go along with asking for a price from only the best qualified offeror. I worry that they think seeking only one price would not comply with CICA.

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2 hours ago, FrankJon said:

Did the fact that GSA conducted a thorough cost/price analysis have any bearing on the outcome? What would have happened if GSA had instead conducted a simple price evaluation based on adequate competition?

From a theory standpoint, I don't think one can satisfy the requirement of "adequate price competition" in a HTROFRP (highest technically rated offeror with a fair and reasonable price) environment because offerors are not competing on price, they are competing on based on technical ratings.  I suspect the GSA contracting team understood this and showed considerable foresight in fashioning the fair and reasonable price evaluation methodology in the manner they did.

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One of the greatest benefits of this decision is the clarity it provides regarding our ability to evaluate in phases … e.g. non-priced factors first; and then price and price related factors from a smaller pool.

This has been widely rejected in some offices. The general belief was that price had to be considered in all phases.

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31 minutes ago, Matthew Fleharty said:

From a theory standpoint, I don't think one can satisfy the requirement of "adequate price competition" in a HTROFRP (highest technically rated offeror with a fair and reasonable price) environment because offerors are not competing on price, they are competing on based on technical ratings. 

Matthew: I think you need to reread FAR 15.403-1(c)(1) and then explain to us why there was not adequate price competition.

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36 minutes ago, Vern Edwards said:

Matthew: I think you need to reread FAR 15.403-1(c)(1) and then explain to us why there was not adequate price competition.

Vern: I don't think the HTROFRP approach satisfies FAR 15.403-1(c)(1)(I)(A), particularly the requirement that "price is a substantial factor in source selection."  I think the consideration of price (which is what occurred in the HTROFRP approach to satisfy the CICA requirements) and price as a substantial factor in source selection are different.  The only substantial factor in source selection at play in HTROFRP is technical...I think those views are supported by the GAO's analysis regarding consideration of price on pg. 8 which states "The relatively low importance of price in an evaluation scheme that does not contemplate tradeoffs, as is the case here, is unobjectionable."

Maybe I'm wrong, I'm certainly always open to hearing other opinions on issues.  What are your thoughts Vern (and others)?

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44 minutes ago, Matthew Fleharty said:

I don't think the HTROFRP approach satisfies FAR 15.403-1(c)(1)(I)(A), particularly the requirement that "price is a substantial factor in source selection."  I think the consideration of price (which is what occurred in the HTROFRP approach to satisfy the CICA requirements) and price as a substantial factor in source selection are different.  The only substantial factor in source selection at play in HTROFRP is technical...I think those views are supported by the GAO's analysis regarding consideration of price on pg. 8 which states "The relatively low importance of price in an evaluation scheme that does not contemplate tradeoffs, as is the case here, is unobjectionable."

That is why people are reluctant to innovate. There is always someone on some staff who is ready to find a reason why not. There is always someone ready to read a regulation as restrictively as possible.

FAR 15.403-1(c)(1)(i) says:

Quote

(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
(B) 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....

FAR does not define substantial. What's your definition? Where did it come from? Why is it pertinent here?

My American Heritage Dictionary of the English Language 5th gives the following first defintiion of substantial: "Considerable in importance, value, degree, amount, or extent."

Why wasn't price considerable in importance in the Alliant 2 procurement?  GSA expressly stated that an offeror whose price was not fair and reasonable would not be selected for award: "Failure to establish fairness and reasonableness on any one of these aspects may result in disqualification for award." Why was price not substantial if a firm's price could result in its disqualification even if it was among the most higly technically rated? Why was price not "considerable in importance," especially in light of the fact that the fundamental purpose of all pricing procedures, including the submission of certified cost or pricing data, is to establish fairness and reasonableness?. See FAR 15.402(a).

Why do you say: "I think the consideration of price (which is what occurred in the HTROFRP approach to satisfy the CICA requirements) and price as a substantial factor in source selection are different"? Really? Even if price could result in the elimination of a highly technically rated offeror? Different how?

Why must you read the regulation as restrictively as possible, especially in light of the guidance in FAR 1.102? And what about FAR 15.403-1(c)(iii). How can we ever encourage people to innovate and take risks if they must continually contend with people who positively look for reasons not to try something? What's the motto: No can do?

Why look for reasons why not, Matthew? Why reach out for them? Why try to find them hiding in the closet? Tell me that you were just playing devil's advocate. Because if not, i'm disappointed.

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Vern,

I'm just taking the information in front of me and analyzing it - I'm certainly not firm in my position, just trying to drive a discussion on the issue.  I find merit in your argument that disqualification could certainly meet the test of substantial; however, I quoted the court who decided the case in reaching my conclusion which I still think conflicts with the definition you provided.  Consider the juxtaposition between the two:

  • Definition: "Considerable in importance" 
  • GAO: "Relatively low importance of price..."

Can one have both "considerable" and "relatively low" at the same time?

As an aside, I don't tend to try to find the most restrictive interpretation - I also find value in determining the least restrictive, but a better exercise, and what I hope we're doing through this conversation/debate, is arriving at what is the most likely interpretation.

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For what it's worth, I think Matthew raises an interesting and valid point of discussion (which is, after all, the purpose of message boards).

In Sevatec, price could not have been less of a factor. F&R determination is the bare minimum. If this meets the meaning of the word "substantial" in FAR 15.403-1(c)(1)(i), that renders this use of the word superfluous. Isn't it more likely that the drafters meant something by using this word? Am I missing something?

 

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I don't try to anticipate GAO or court interpretations unless there is case law on the matter. What I do is decide what I want to do, build an argument in support, and then try to anticipate and deal with counterarguments.

You must distinguish between price as a substantial factor when determining the existence of (a) adequate price competition and (b) the GAO's requirement that price be a substantial factor as required by the GAO's interpretation of CICA. I know of no definitive interpretation or guidance with respect to the former. Although the terminology is the same, the underlying legal requirement is not.

I think substantial as used in FAR 15.403-1(c)(1) means nothing more than sufficiently influential to affect an offeror's pricing decision.

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13 minutes ago, Vern Edwards said:

I think substantial as used in FAR 15.403-1(c)(1) means nothing more than sufficiently influential to affect an offeror's pricing decision.

I like this interpretation/definition.

EDIT: Would the process identified in the solicitation for assessing the fairness and reasonableness of price be what influences offerors' pricing decisions?  Could/should one expect different results if the promulgated technique is comparison of proposed prices received in response to the solicitation versus a more detailed analysis as used by the GSA team?

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9 minutes ago, FrankJon said:

In Sevatec, price could not have been less of a factor.

Sure it could have. It could have been no factor at all.

10 minutes ago, FrankJon said:

F&R determination is the bare minimum.

What's wrong with "bare minimum"? Bare minimum doesn't mean not substantial. Even the minimum of something can be substantial. Think minimum altitude for a combat parachute operation.

5 minutes ago, FrankJon said:

So then what is a Government contracting scenario where price is not influential?

11 minutes ago, FrankJon said:

If this meets the meaning of the word "substantial" in FAR 15.403-1(c)(1)(i), that renders this use of the word superfluous.

That's an empty statement. The purpose of certified cost or pricing data is to provide a basis for determining fairness and reasonableness when there is no other basis for doing so. If you can determine fairness and reasonableness without cost or pricing data based on price analysis, then your are don't need certified cost or pricing data. See FAR 15.403-1(c)(iii).

15 minutes ago, FrankJon said:

Isn't it more likely that the drafters meant something by using this word?

I don't know. What did they say when you asked them? How shall we establish the degree of likelihood?

Another negativist speculator.

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6 minutes ago, FrankJon said:

So then what is a Government contracting scenario where price is not influential?

Architect-engineer selections under FAR Subpart 36.6.

Broad agency announcements pursuant to FAR 35.016.

Sole source procurements.

 

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9 hours ago, Matthew Fleharty said:

Would the process identified in the solicitation for assessing the fairness and reasonableness of price be what influences offerors' pricing decisions?  Could/should one expect different results if the promulgated technique is comparison of proposed prices received in response to the solicitation versus a more detailed analysis as used by the GSA team?

I think that the influence of price competition on competing firms is most intensive in sealed bid procurements, in which price is the only evaluation factor and low price wins. Price competition doesn't get more intensive than that. So that's one extreme end of the price competitin spectrum.

I think that a case in which there will be 60 awards and no direct price comparisons provides the least intensive price competition. It's the other end of the price competition spectrum. Pricing is still competitive, and the competition still influences offerors, but the competition is not as intensive as in sealed bidding. 

But least intensive doesn't mean that price is not a substantial factor when the RFP says that a price that is not fair and reasonable might be disqualifying. A competitor cannot be sure what "fair and reasonable" will mean to the buyer or what the buyer's standards of fairness and reasonableness will be. In such a situation an offeror must be concerned about not asking for "too much," so competition will be influential, which is all that I think is required.

Remember that when talking about adequate price competition all we're talking about is justification for not demanding submission of certified cost or pricing data. FAR 15.403-1(c) is very liberal in that regard. Look, too, at FAR 15.402(a)(3).

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19 hours ago, Gordon Shumway said:

This was an interesting read...

Gordon! How are you, old friend? Give my best to Bob and Flo Shumway. How's the weather over in Melmac? Have you received any royalties for the many Internet memes bearing your likeness? PepeTheFrog is owed a king's fortune.

19 hours ago, FrankJon said:

So then what is a Government contracting scenario where price is not influential?

Also, small business innovation research (SBIR) awards.

A better question is: Why do some contracting frogs (usually, Government employees) think a detailed and constricting statute or regulation must be required to make an intelligent decision about spending a budget? Statutory and regulatory straight-jackets about "evaluating price" are poor substitutes for competence, confidence, experience, critical thinking skills, and intelligence. If the contracting frog needs its webbed hands held to make decisions about pricing of a contract, is the contracting frog a contracting professional?

19 hours ago, Vern Edwards said:

What's wrong with "bare minimum"?

Agreed. "Fair and reasonable." Will poor spending decisions be solved by burdensome statutes and regulations? Or is it more reasonable that individual or systemic failures should be punished or publicized? Are FOIA, GAO, Inspectors General, and the few remaining media outlets with integrity a better deterrent for malfeasance than all of the words in FAR Subpart 15.4?

20 hours ago, Vern Edwards said:

A competitor cannot be sure what "fair and reasonable" will mean to the buyer or what the buyer's standards of fairness and reasonableness will be. In such a situation an offeror must be concerned about not asking for "too much," so competition will be influential, which is all that I think is required.

Agreed. Some Federal frogs are fantasizing that businesses might submit proposals, expecting 10+ competitors, and not be concerned with price competitiveness. Think it over, naysayers and those with no business experience!

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On 1/14/2017 at 0:04 PM, PepeTheFrog said:

Gordon! How are you, old friend? Give my best to Bob and Flo Shumway. How's the weather over in Melmac? Have you received any royalties for the many Internet memes bearing your likeness? PepeTheFrog is owed a king's fortune.

Pepe! All is well, thank you for asking. I always enjoy your thorough responses on this message board, you are a great resource for us tadpoles.

 

On 1/12/2017 at 3:25 PM, Vern Edwards said:

I just spent an hour discussing this with Ralph Nash, and we think the approach and the decision are positively revolutionary. They key now is for people at the working level to conduct source selection to understand the key features of the HTRRP method and the principles that underlie the decision. Then the innovators at various agencies need to go to work to develop acquisition-specific variations and refinements.

I agree with Mr. Edwards. Understanding the features of the HTRRP method and the principles that underlie the decision are absolutely key to refining this strategy. Having a strong understanding of both will allow those at the working level to clearly articulate a business case to those who hold the decision making authority within a contracting shop. Going to battle against those who default to "we've always done it this way (tradeoff/LPTA)" will be one of the biggest challenges to advancing this new approach. 'Innovation' does seem to be the new hot topic in acquisition, but few actually put their money where their mouth is. Equally as important will be to recognize what parts of the specific approach GAO did not rule on. The decision clearly delineates several areas that were not protested, which should be fully understood when attempting to recreate something similar.

There is no doubt that the HTRRP method is a game changer. I am excited to see the acquisition community push the boundaries and refine it further. Bravo zulu GSA!

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The key to understanding what GSA did and what the GAO decided is to think in terms of the best value continuum mentioned in FAR 15.101. Remember that "An agency can obtain best value in negotiated acquisitions by using any one or a combination of source selection approaches."

Since the enactment of the Competition in Contracting Act (CICA) in 1984 the GAO has consistently held that under the statute and FAR price has to be a significant factor in source selection.

Traditionally, before the GAO's Sevatec decision, there were two main types of source selection procedure in use: (1) tradeoff analysis and (2) LPTA. See FAR 15.101. With respect to those two types of procedures the GAO has consistently ruled that in order for price to be a significant factor in a source selection the government must directly compare the prices of competing offerors. Why? Because the procedures themselves require direct comparisons in order to determine relative lowness or to make tradeoffs. Any price evaluation procedure that did not involve direct price or cost comparisons made price only a "nominal" factor, which violated CICA and FAR.

Sevatec recognizes that FAR 15.101 permits the use of a third type of procedure: "highest technically rated offeror(s) with a fair and reasonable price" (HTRFRP). Under that procedure agencies need not compare offerors prices. Why? Because the procedure itself does not call for it. An agency using an HTRFRP type procedure may select the highest technically rated offeror if it has a fair and reasonable price. It need not compare that offeror's price with the prices of other offerors, because a determination of fairness and reasonableness can be made without such comparisons. Price is significant because an offeror cannot win if its price is considered to be too high.

Think of it this way: We know that when using an LPTA type procedure an agency must compare prices. It may then identify the offeror with the lowest price and determine whether its proposal is technically acceptable without evaluating the other offerors' technical proposals. See Environmental Restoration LLC, B-413781, Dec. 30, 2016. If the the technical proposal of the offeror with the lowest price is technically acceptable, then the game is over.

Well, when using an HTRFRP type procedure an agency must compare offerors' technical proposals. It may then identify the offeror that is the highest technically rated and determine whether its proposed price is fair and reasonable without evaluating the other offerors' price proposals. If the highest rated offeror has a fair and reasonable price, then the game is over.

In short, LPTA and HTRFRP are at opposite ends of the best value continuum. Moreover, there is more than one way to conduct an HTRFRP source selection. That's where innovation comes into play.

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40 minutes ago, Vern Edwards said:

Price is significant because an offeror cannot win if its price is considered to be too high.

Vern,

I don't see why you need to make that argument. When the GAO responded to the protester's assertion that price was not a significant factor when using HTRFRP and was therefore inconsistent with prior decisions, they didn't say "Yes, it is consistent and here's why..." They essentially said "we were talking about the tradeoff process when we said that." After reading both Sevatec and Electronic Design, Inc., I think that the position they took in Electronic Design, Inc. et. al.--that price must be a "significant" factor in source selection--was overly broad. 

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