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Determining Fair and Reasonable LPTA

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8 hours ago, Matthew Fleharty said:

If a determination of fair and reasonable pricing is concerned with too high of a price, I think, generally (because there are exceptions to every rule) it is perfectly reasonable and sound business judgment to consider the LPTA offeror of a competition as not too high (and, therefore, fair and reasonable) by virtue of having competed against the market for the contract.  The fact that you have X number of unevaluated proposals simply serves as evidence of the competitiveness of that market for the requirement.

It sounds like you are saying you believe competition [generally] = fair and reasonable price … without any analysis or comparisons. This has been discussed here previously:

The number of proposals received is evidence of competition, but not necessarily effective competition. This is especially true when dealing with proposals that include technical offers that may vary.

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Jamaal,

There is a difference between can and does...I caveated my statement for that very reason, don’t try to put my position in a box I didn’t build. I also didn’t say that you don’t need any analysis...it’s just a different kind of analysis (market based rather than comparison based).

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1 hour ago, Matthew Fleharty said:

Jamaal,

There is a difference between can and does...I caveated my statement for that very reason, don’t try to put my position in a box I didn’t build. I also didn’t say that you don’t need any analysis...it’s just a different kind of analysis (market based rather than comparison based).

I included your caveat of generally. (a paraphrase of FAR's 'normally') Your post and references to adequate price competition = a fair and reasonable price are clear.

10 hours ago, Matthew Fleharty said:

As for all this talk about "adequate price competition normally establishing a fair and reasonable price," whether it is misplaced or not, compare the second standard  to the situation at hand:

  • Adequate price competition (15.403-(c)(1)(ii): an expectation that two or more responsible offerors, competing independently, would submit priced offers even though only one offer is received...
  • This situation: numerous offers are received, though only one offer is evaluated IAW the solicitation's procedures because it is the LPTA

If some are willing to hang their hat on "adequate price competition = a fair and reasonable price" why wouldn't they be equally okay doing so in a situation where one receives more than one offer, but only evaluates one?  I think the second situation is far more defensible than the first, regardless of how the FAR defines "adequate price competition" (frankly, it's too narrow...).

What is unclear is what you mean by market based because you also seemed to rely on the other prices (with unknown merits of comparability) as evidence of an effective competition. 'By virtue of competing against the market'? That is overly simplistic and doesn't consider several basic considerations such as a mistakes and defective, vague, or ambiguous solicitations or otherwise ineffective competitions.

If you are simply saying that the LPTA can be determined fair and reasonable without a comparison of other proposed prices - most of us are. You even said as much earlier. If not, what is your market-based analysis based on if not comparisons (comparisons to market prices, propsed prices, catalogs, IGEs, etc.)? Maybe you didn't mean it's not comparison based.

Lastly, you answered Don's last question with a question. I would like to know what your actual answer is to his specific question. (It's a key question)

7 hours ago, Don Mansfield said:

Shouldn't you determine whether what you are comparing to the lowest priced offer is comparable? Or do you just assume that it is?

 

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Guest Vern Edwards
2 hours ago, Retreadfed said:

Can someone tell me what "fair and reasonable price means"?

Yes---a price the buyer is willing to pay and the seller is willing to accept.

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Nuthin’ 

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Guest Vern Edwards

Joel, I think it's time for us to give it a rest. Don't you agree?

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21 minutes ago, Vern Edwards said:

Joel, I think it's time for us to give it a rest. Don't you agree?

Actually, yes.  I was just curious about the specific circumstances, which I suppose I should have inquired about at the beginning. I didn’t want to reopen the endless debate  I will ask Brent privately. 

 

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12 hours ago, Jamaal Valentine said:

What is unclear is what you mean by market based because you also seemed to rely on the other prices (with unknown merits of comparability) as evidence of an effective competition. 'By virtue of competing against the market'? That is overly simplistic and doesn't consider several basic considerations such as a mistakes and defective, vague, or ambiguous solicitations or otherwise ineffective competitions.

Jamaal, apologies if what I wrote was unclear, but I thought my answer to your question:

On 9/17/2018 at 5:35 PM, Jamaal Valentine said:

What is your reasonable argument? Does it involve or rely on comparison of proposed prices?

With:

22 hours ago, Matthew Fleharty said:

Not one bit...

Was as clear as possible; however,  you're fixated on the concept of comparison of proposed prices while I was stating another way of analysis to determine the price fair and reasonable separate from relying on comparison of proposed prices (technically evaluated or not).  If you'd like to discuss it, you know how to get in touch with me, but an answer to your questions here would only result in repeating myself.

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We don’t really know the reason for or the specific meaning of the original question.

From a protest standpoint , it probably is defendable, as cited herein. The higher priced offers weren’t in line for award, so they aren’t interested parties in an award protest.

If the question is “Can we do it? “ , it’s now too late for the pool members to protest the terms of the award decision.

The task order competition said that this is how award would be made. 

If the question concerned the business sense of simply saying that the price is fair and reasonable because it is the lowest priced offer, then it might depend upon the fuller context of the situation, as was discussed herein.  

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Guest Vern Edwards
19 minutes ago, joel hoffman said:

The higher priced offers weren’t in line for award, so they aren’t interested parties in an award protest.

Unless they are protesting the conduct of the process and they would be in line for award if the protest were sustained. The No. 2 might protest that the No.1 was improperly determined to be technically acceptable.

Arrrgggh! Why am I still reading this?

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13 hours ago, Vern Edwards said:

Yes---a price the buyer is willing to pay and the seller is willing to accept.

If that is what a fair and reasonable price is, what is all this arguing about?  It seems as if folks here are looking for a "magic formula" to tell them what price is fair and reasonable., i.e., what they would be willing and able to pay for what they are buying.  Also, nobody other than Vern has defined what it is that they are talking about.  Is there a common understanding of what this term means in the FAR or are folks here making up their own definition as they go along without sharing that information?

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27 minutes ago, Retreadfed said:

If that is what a fair and reasonable price is, what is all this arguing about?  It seems as if folks here are looking for a "magic formula" to tell them what price is fair and reasonable., i.e., what they would be willing and able to pay for what they are buying.  Also, nobody other than Vern has defined what it is that they are talking about.  Is there a common understanding of what this term means in the FAR or are folks here making up their own definition as they go along without sharing that information?

 Well, what you are willing to pay also depends upon how important price is in the selection process. If you’re going to use the lowest price technically acceptable method, then I suspect that price is extremely important and probably the most important factor. So the customer might be looking for the lowest  amount of money to spend for the effort. Or the project may be under funded. Who knows? We didn’t have any context For this scenario.  

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3 minutes ago, joel hoffman said:

 Well it also depends upon how important price is in the selection process. If you’re going to use the lowest price technically acceptable method, then I suspect that price is extremely important and probably the most important factor. So the customer might be looking for the lowest  amount of money to spend for the effort. Or the project may be under funded. Who knows? We didn’t have any context to the acquisition. 

I wouldn't say that price is, "probably the most important factor" since the proposals must first be technically acceptable.  It's just that the government isn't willing to pay more for a higher quality or more innovative approach.  

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34 minutes ago, Desparado said:

I wouldn't say that price is, "probably the most important factor" since the proposals must first be technically acceptable.  It's just that the government isn't willing to pay more for a higher quality or more innovative approach.  

How would price be equal to the non-priced factors in practice?  If two or more technically acceptable offers from responsible offerors are found, the lowest fair and reasonably priced offer wins.  You can’t pay a penny more to get a better technical offer.

And there are “likely” more than one other-than-price factors. 

If there are more than one non-price factors and if price is “equal” to all of them when considered together as “technical” , then price would have to be the most important factor. 

One doesn’t usually describe a weighted comparison between price and non-priced factors when using the LPTA method.

But the reality is that you are looking for the lowest, fair and reasonably priced offer that meets your minimally acceptable criteria from a responsible offeror.

Its a step beyond best value trade off with price as the most important factor. 

 

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Joel - With the methodology I implemented in my office, the "If two or more technically acceptable offers from responsible offerors are found, the lowest fair and reasonably priced offer wins." does not apply since we don't look at any additional offers once one is found technically acceptable (starting with the lowest price and working our way up).

There are several non-price factors, but all of them are on a pass/fail basis to determine technical acceptability.

In practice, technical is the most important up to the point of acceptability, then price is the most important.

 

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Des, in a source selection, it is necessary that the proposal be technically acceptable. Your method is not different in that respect.

The (lowest fair and reasonable) Price is the discriminator between acceptable proposals for award in an LTPA.  Thus - guess what? Price is the most important  factor.

Industry will tell you this. In fact, industry tells us (and it is true) that price is THE most important individual factor when we say “price is approximately equal to all factors other than price when combined”.  

You will see this stated often in GAO decisions: 

“ It is a fundamental principle in a negotiated procurement that a proposal that fails to conform to a material solicitation requirement is technically unacceptable and cannot form the basis for award.”

(http://www.wifcon.com/pd15_305.htm)

(Sorry, I can’t edit the text size on my iPhone).

We don’t need to quibble over this. 

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Joel -  The way I was interpreting what you were saying was basing an assumption that all proposals were technically acceptable, which obviously is not the case. 

I still contend that when reviewing proposals to determine the award that guess what? Technical is the most important to the point of being acceptable.... then lowest price.

We may simply have to agree to disagree on this minor point.

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3 hours ago, Matthew Fleharty said:

I think very little (if any) of the disagreement on this forum dealt with "what is a fair and reasonable price?" - the objections came from "can you properly prove it IAW the FAR"

This discussion has focused on techniques for determining if a price is fair and reasonable.  My question is if you cannot define what fair and reasonable is, how do you know that you have it regardless of the techniques you apply?  Is this something like Justice Stewart's explanation of pornography in that "I can't define it but I know it when I see it"?

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13 minutes ago, Retreadfed said:

This discussion has focused on techniques for determining if a price is fair and reasonable.  My question is if you cannot define what fair and reasonable is, how do you know that you have it regardless of the techniques you apply?  Is this something like Justice Stewart's explanation of pornography in that "I can't define it but I know it when I see it"?

You can find a more pertinent example in the oral arguments for Kingdomware Technologies, Inc. v. United States, No. 14-916 (2016) where Chief Justice Roberts says:

Quote

These terms imply a lot of discretion: What's fair? What's reasonable? What's best value?  The idea that that's going to operate as a significant restraint on the requirement that the VA locate veteran businesses seems a real stretch to me.

 

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1 hour ago, Desparado said:

Joel -  The way I was interpreting what you were saying was basing an assumption that all proposals were technically acceptable, which obviously is not the case. 

I still contend that when reviewing proposals to determine the award that guess what? Technical is the most important to the point of being acceptable.... then lowest price.

We may simply have to agree to disagree on this minor point.

Des, I wasn’t saying that all proposals are technically acceptable. If there are more than one, then lowest price is the discriminator for award..

Let me put it another way by asking you a couple of questions. 

Am I correct in assuming that you don’t want to pay a dime more for a better product, better service, better reputation, better approach, shorter completion, etc., as applicable to your LTPA method?

If yes, then, would it be fair to guess that you are likely looking to award to a firm that will give you the best available price, not an average price?

You are probably hoping that there will be some reasonable number of interested firms who will robustly compete price-wise, knowing full well that they don’t intend to provide any more than what you are asking for. , Someone may have some approach that allows them a competitive advantage that might also benefit you but that’s not what you are looking for . 

Your standard for “fair and reasonable” is probably different than it would be if you were willing to pay more for some added value. 

I don’t think that it is that complicated.

I do think that good business practice should involve some idea or sense of what someone would or “should” expect to pay under the market conditions and solicitation provisions, if possible. 

For DoD, I think that is one aspect of their “Better Buying Power initiatives. After all, old Shay Assad was in a huge Defense Industry firm. 

 

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Agreed on all points.  This is why we start with the lowest priced proposal and when we get to one that is technically acceptable, we stop.  No other proposals are reviewed. 

We determine F&R on several factors (IGE, past contracts for similar purchases, bid abstract, etc).

Again, I don't think we really feel differently about the process.  I just had an issue with the statement that price is the most important factor.  In reality, if all proposals were technically acceptable, you'd be right.... but since they aren't, technical is the most important up to acceptability, then price. 

If we wish to continue the conversation, we probably should do so privately as I'm sure others are tired of seeing me say the same thing over and over again. :)

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Competitive RFPs have requirements for stating the relative importance of factors … this is based on 10 U.S.C. 2305(a)(2) and implemented in places like FAR 15.203, 15.304, etc.

If the relative importance is unstated the factors are presumed approximately equal. That's not to say that price cannot or will not be the discriminator as technical offers approach or are deemed equal (in this case - acceptable).

Here are a couple definitions of Fair and Reasonable Price (CPRG offers another):

https://thelawdictionary.org/fair-and-reasonable-price/

https://www.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=1ae4716b-d8f3-4839-9785-adbd19d5a26f

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1 hour ago, Jamaal Valentine said:

Competitive RFPs have requirements for stating the relative importance of factors … this is based on 10 U.S.C. 2305(a)(2) and implemented in places like FAR 15.203, 15.304, etc.

If the relative importance is unstated the factors are presumed approximately equal. That's not to say that price cannot or will not be the discriminator as technical offers approach or are deemed equal (in this case - acceptable).

Here are a couple definitions of Fair and Reasonable Price (CPRG offers another):

https://thelawdictionary.org/fair-and-reasonable-price/

https://www.dau.mil/acquipedia/Pages/ArticleDetails.aspx?aid=1ae4716b-d8f3-4839-9785-adbd19d5a26f

Jamaal, just to clarify, the LPTA method is outlined in 10 USC 2305 (a)(4)(B). There is no relative importance of factors assigned in this method. It is described in FAR 15.101-2

The  relative importance of factors including price and non-priced is required for the Trade-off process. See 15.101-1 for that specific requirement. 

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