LPTA to Negotiated Procurement?

[Guest Vern Edwards]

Okay, good...except that you didn't say it very clearly the first time.

I surrender.

[Guest Vern Edwards]

However...

Let's think this through. FAR 15.403-3( says:

Adequate price competition. When adequate price competition exists (see 15.403-1©(1)), generally no additional information is necessary to determine the reasonableness of price. However, if there are unusual circumstances where it is concluded that additional information is necessary to determine the reasonableness of price, the contracting officer shall, to the maximum extent practicable, obtain the additional information from sources other than the offeror. In addition, the contracting officer may request information to determine the cost realism of competing offers or to evaluate competing approaches.

FAR 15.404-1((2)(i) says:

Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes price reasonableness (see 15.403-1©(1)).

Now, in light of those two passages, assuming that you are conducting an LPTA, and assuming that you have adequate price competition, why isn't the determination of price reasonableness automatic absent some indication that the price is not reasonable. What more is there to do?

[joel hoffman]

However...

Let's think this through. FAR 15.403-3( says:

FAR 15.404-1((2)(i) says:

Now, in light of those two passages, assuming that you are conducting an LPTA, and assuming that you have adequate price competition, why isn't the determination of price reasonableness automatic absent some indication that the price is not reasonable. What more is there to do?

Vern, I apologize in advance for traveling today and for using the BB.

Well, In this case, the questioner said that the proposal included features that the government doesn't want to pay for. So the price wasn't reasonable in his or her eyes.

In other cases you might actually have a government estimate that

- lo and behold- is somewhat realistic and where the lowest proposal is a lot higher than the IGE. Or I might have a pretty good idea what the commodity is selling for.

For construction, I have often had to investigate significantly higher (lowest priced) proposals and/or the IGE for validity or misunderstanding of the scope. I've found problems with one, both or all proposals before. In such cases, I don't "automatically" assume anything. I've seen too many interesting situations to assume anything anymore.

[joel hoffman]

Vern, I apologize in advance for traveling today and for using the BB.

Well, In this case, the questioner said that the proposal included features that the government doesn't want to pay for. So the price wasn't reasonable in his or her eyes.

In other cases you might actually have a government estimate that

- lo and behold- is somewhat realistic and where the lowest proposal is a lot higher than the IGE. Or I might have a pretty good idea what the commodity is selling for.

For construction, I have often had to investigate significantly higher (lowest priced) proposals and/or the IGE for validity or misunderstanding of the scope. I've found problems with one, both or all proposals before. In such cases, I don't "automatically" assume anything. I've seen too many interesting situations to assume anything anymore.

And for construction, Part 36.2 (I think- don't have FAR handy on the BB) discusses further measures for price analysis.

If all prices are above the budget, we have to evaluate and determine what the problem or problems are, regardless of the amount of competition.

I personally don't understand why just because we have "adequate price competition" , as defined in 15.4, when using competitive negotiation methods, that we are to automatically assume that the price is reasonable. If that's what people routinely do, I'm not surprised how much of the taxpayers' money is wasted. I know many of our contracting offices are loathe to use the tools available and to conduct discussions. They seem to automatically think that the initial price is what we must pay and that the only problem is unrealistic budget, estimate or gold plated requirements, not that contractors can provide better pricing if pushed.

Now, please realize that most of my perspective is that of construction contracting, and O&M or technical type services, not commodities and supplies and related services

[Guest Vern Edwards]

Joel:

I thought that I had asked a rather straightforward question. I don''t think that either of your posts was responsive. But let's just forget it. I've spent entirely too much time at Wifcon Forum in the last few days. I need a break.

Vern

[Jacques]

My apologies for previously highjacking this thread. I should have stuck to baierle?s facts. Only read or respond to this post if you actually want to (obviously).

In response to Post #20, I?m not suggesting a CO sit on his hands--though, if there is a decent chance of APC, sitting on your hands may be preferable to requiring other than cost or pricing data. I agree with the observation in Nash & Cibinic, Cost or Pricing Data in Competitive Negotiations: Overkill, 1 N&CR ? 23 (Mar. 1987), made in the context of the first prong, that ?the existence of adequate price competition cannot be finally determined until after proposals have been received and evaluated.?

APC. It is plain that APC can exist notwithstanding discussions. UTL Corp., B-185832, 76-1 CPD ? 209. What I could not find in the cases or in the literature is an answer to this narrow question: ?In the context of a competitive range of one, when does the CO make his final APC determination and final reasonableness determination?? It seems reasonable to conclude the existence of APC under the second prong cannot be finally determined until after the FPR from the one offer standing has been received and evaluated.

Reasonableness. Elsewhere, Nash & Cibinic write, ?The mere presence of competition is inadequate to assure that the prices proposed are fair and reasonable.? Nash & Cibinic, Formation of Government Contracts (3d Ed. 1998), at 1313. CO must analyze prices, even in the face of adequate price competition, though price analysis doesn?t have to be a Herculean effort. ?The complexity and circumstances of each acquisition should determine the level of detail of the analysis required.? FAR 15.404-1(a)(1). To do what Vern suggests in Post #20 should be done?determine ?whether the reductions are commensurate with the value of the deleted elements and the new price fair and reasonable??should be done in comparison to other prices (or the government?s estimate, etc, etc.). In other words, analyze the price.

[Guest Vern Edwards]

Here is what I said in Post # 20:

During the discussions, the CO should demand any information necessary to determine price reasonableness. If he can determine price reasonableness without cost or pricing data, then he should. The CO should not conclude the discussions until he and the offeror have agreed upon (a) what is to be deleted from the proposal, ( how much the price will be reduced, and ( c) the new price. Then and only then should the CO instruct the offeror to submit an FPR that confirms the deletions, reductions, and price agreed upon during discussions. The CO should instruct the offeror not to make any other changes to its initial proposal without first discussing them with the CO. This approach is well within the rules in FAR 15.306 and 15.307 and is especially appropriate when conducting discussions with only one offeror.

I stand by that. How the CO determines price reasonableness during that process is a matter of judgment. Comparison with a government estimate might well be good enough, depending on who prepares the estimate and based on what. I think that the determination of adequate price competition and price reasonableness can and should be made during discussions and prior to submission of the FPR, especially when there is only one offeror in the competitive range. The Nash article and GAO decision you cite predate significant changes in the standard for adequate price competition.

[Jacques]

Thanks, Vern. You've crystalized the issue for me.

While the citations are no longer current, the concerns remain, so let me encourage folks to consider Nash & Cibinic, Negotiation After Source Selection: A Puzzlement, 1 N&CR ? 21 (March 1987), especially this extended quote from the Second Opinion (which I hope amounts to fair use):

Second, is the likelihood that some COs might see the proposed greater freedom to conduct post-selection discussions as a license to indiscriminately seek price reductions from the selected offeror. If...there has been adequate price competition, the CO should not seek additional price concessions from the selected offeror. Once a competitor has been through the rigors of price competition, the CO should not attempt to chop the price further. If the selected offeror's price is unreasonable, the selection should not have been made in the first place.

This is an ethical, rather than legal, issue, and I'm not suggesting baierle is being indistriminate, it is intended as a general comment and concern.

[mskitty]

And for construction, Part 36.2 (I think- don't have FAR handy on the BB) discusses further measures for price analysis.

If all prices are above the budget, we have to evaluate and determine what the problem or problems are, regardless of the amount of competition.

I personally don't understand why just because we have "adequate price competition" , as defined in 15.4, when using competitive negotiation methods, that we are to automatically assume that the price is reasonable. If that's what people routinely do, I'm not surprised how much of the taxpayers' money is wasted. I know many of our contracting offices are loathe to use the tools available and to conduct discussions. They seem to automatically think that the initial price is what we must pay and that the only problem is unrealistic budget, estimate or gold plated requirements, not that contractors can provide better pricing if pushed.

Now, please realize that most of my perspective is that of construction contracting, and O&M or technical type services, not commodities and supplies and related services

I'm new to this forum and am a first year contract specialist intern. There is a debate within my command on this very issue. When a solicitation closes and all prices are above the budget, is negotiations acceptable? If so at what point?

Thank you for any clarification

mskitty

[Guest Vern Edwards]

Thanks, Vern. You've crystalized the issue for me.

While the citations are no longer current, the concerns remain, so let me encourage folks to consider Nash & Cibinic, Negotiation After Source Selection: A Puzzlement, 1 N&CR ? 21 (March 1987), especially this extended quote from the Second Opinion (which I hope amounts to fair use):

This is an ethical, rather than legal, issue, and I'm not suggesting baierle is being indistriminate, it is intended as a general comment and concern.

Jacques:

Nash and Cibinic were talking about an entirely different issue than baierle. There is no connection. baierle wants to cut unnecessary elements from a proposal and obtain commensurate price reductions. In their scenario the agency has already conducted two rounds of discussions and has selected the offeror, and the CO is thinking about reopening discussions in order to cut the price. Prof. Cibinic's addendum talks about seeking "indiscriminate" price cuts. The rules in FAR about conducting discussions were very different than they are now, and the authors emphasized that they were talking about "post selection" negotiations (they put the term in italics), of which the GAO generally disapproved.

I see absolutely no ethical issue in baierie's inquiry. Absolutely none. We have taken this thread far off track at the risk of confusing someone who came here for guidance. At this point, we have probably confused everyone.

[Guest Vern Edwards]

When a solicitation closes and all prices are above the budget, is negotiations acceptable? If so at what point?

mskitty: Good question. Would you mind posting the above question in a new thread? Just start a new one. This thread has become so byzantine that I fear any attempt to answer you here will only add to the confusion. We'll keep our eyes open for it.

[traipse]

The problem you run into with long time CO's (and those that wish they were CO's) is that there is a great deal of avoidance of answering questions directly, and an absolute need to be right. CO's that operate in black and white terms are dinosaurs and symptomatic of what's wrong with the profession and the very reason we remain undervalued to the organization's we serve.

At some point you have to stop admiring the problem (and stroking your ego) and make a decision.

The answers to the original question and to mskitty's question are both yes.

[brian]

.

... It's wrong to include a proposal in the competitive range and invite the offeror to incur more bid and proposal expense if you evaluated them properly and don't think they can win.

Yeah, that seems like it's probably wrong. But the GAO says "go for it."

See Champion Business Services, http://www.wifcon.com/cgen/290556.htm

Well, actually, GAO says that they have no authority to admonish an Agency for doing that.

.