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

[Guest Vern Edwards]

It seems like you're looking for a test case to get the GAO decisions "back on track." It is rational?though perhaps short-sighted?for a CO to want to avoid an area where the trend in the decisions appears to try to contain CO's discretion and limit flexibility.

While the decisions are the problem, I'm not sure one correct decision is the solution. Courts and the GAO have a tendency to "fill the gaps" when they feel flexibility is likely to be "abused" (as they see it). If all we have is FAR 13.106-2(a)(3) to hang our hats on for the proposition that the government can negotiate with some, but not all, vendors (without some safeguards similar to FAR 15.306 & 15.307), I predict the endeavor is doomed to failure. (The default language on discussions in FAR provision 52.212-1 doesn't help, either.)

Simplified acquisition is a volume business, often with inexperienced buyers and COs. I work in a bureaucracy. If and when we break this code, the government is going to need something to institutionalize the tried and tested procedures that the GAO and COFC can live with. Acquisition reform (IMHO) does not have its own institutional momentum?it must be taught to each new cohort.

Jacques: You cannot come to the point. We were asked a straightforward question. I have seen nothing from you in the way of a straightforward response.

The answer to mskitty's question is as I gave it above. What she does with the answer is up to her. I did not say that she should negotiate for a lower price in her case. In fact, I said it would be unwise and unethical. But since we have not been able to get all of the necessary facts from her, the best answer is a direct one--nothing prohibits. As best I can tell, you think that it would be improper, under simplified acquisition procedures, ever to negotiate a lower price with only the low-priced quoter/offeror. (If I have got it wrong, that's your fault.) You state no basis for your concerns other than vague allusions to trouble with simplified acquisitions and some unspecified trend in protest decisions.

Since 1994, when the threshold went to $100,000, the GAO has rendered 134 decisions involving simplified acquisition procedures. It has sustained 28. Of the 28, only one involved discussions, and the GAO sustained the protest because the agency used Part 15 procedures but did not follow Part 15 rules for discussions. See Kathryn Huddleston & Assocs., Ltd., Comp. Gen. Dec. B-289453, March 11, 2002. Twenty eight sustained protests in 16 years hardly makes SAP a dangerous area, especially in light of the sheer number of SAP acquisitions conducted each year.

FAR Part 13 establishes no rules whatsoever for the conduct of negotiations in a simplified acquisition. It expressly states that agencies need not follow Part 15 and need not establish a competitive range and conduct "discussions," a term of art used in competitive negotiated acquisitions. I agree that it would be best to tell quoters/offerors in advance what you will or might do with respect to negotiation. But nothing in FAR prohibits negotiations with only the low price quoter in a simplified acquisition. While equitable treatment and fairness are always considerations, it does not follow that agencies must conduct negotiations with multiple quoters/offerors when conducting a simplified acquisition. If you are going to suggest that some course of conduct is wrong or dangerous, you ought to produce more in the way of argument than vague allusions to a non-existent "trend in the decisions."

[Guest Vern Edwards]

As far as private sector not going back after receiving quotations for ethical reasons, what proof do you have of that, Vern?

I didn't say that, so why should I prove that?

I addressed mskitty's situation, in which she solicited competitive "proposals" (her word) and told the competitors that she would award on the basis of lowest-price technically acceptable. To announce that and then go to the lowest price offeror and ask for a price reduction without any basis except her budget problems would be considered unethical in the private sector. Any number of textbooks on private sector purchasing will confirm my assertion. Any firm that regularly engages in such a practice would soon find itself having difficulty in getting proposals from quality firms. See the short entry on "sharp practice" at this UC Santa Cruz website: http://purchasing.ucsc.edu/glossary/glossary-s.html.

On the other hand, there is no problem with asking for quotes and then negotiating for a lower price, provided that you didn't conduct a formal competition and say you would award on a low price basis. To do that and then ask for a further reduction is unfair and unethical.

And by the way, working for a city engineer is not working in the private sector.

[joel hoffman]

I was in private practice for 4 years working for a consulting engineer. Worked with developers and various contractors, sometimes as design-build team.

[Jacques]

Vern, I must have been projecting my desire that Kathryn Huddleston & Associates, Ltd., B-289453, Mar. 11, 2002, 2002 CPD ? 57 and Finlen Complex, Inc., B-288280, Oct. 10, 2001, 2001 CPD ? 167, be limited to their facts.

I have not been able to find a post-Finlen decision involving negotiations under simplified acquisition procedures where the GAO has denied a protest involving negotiations with some, but not all, vendors, where the agency didn't argue that it met the requirements of FAR 15.306 & .307. This isn't an argument, it's just an observation. I worry--hopefully unfounded--that a future GAO decision will cite cases like Priority One Servs., Inc., B-288836, B-288836.2, Dec. 17, 2001, 2002 CPD ? 79 for the proposition that "It is the actions of the parties that determine whether discussions have been held and not merely the characterization of the communications by the agency" and reinterpret the facts of Huddleston to conclude that "Discussions occur when a procuring agency provides a vendor with the opportunity to revise or modify its quotation." American Floor Consultants & Installations, Inc., B-294934; B-294934.2, Dec. 16, 2004, 2004 CPD ? 248, at 2.

All of this is neither here nor there if the agency describes how it's going to handle negotiations in the solicitation.

[Guest Vern Edwards]

It's neither here nor there anyway.

[ji20874]

mskitty,

You've read here that ( 1 ) you can negotiate price only when circumstances suggest doing so is appropriate, ( 2 ) you can legally but such is unethical, and ( 3 ) you cannot.

What have you decided?

[mskitty]

mskitty,

You've read here that ( 1 ) you can negotiate price only when circumstances suggest doing so is appropriate, ( 2 ) you can legally but such is unethical, and ( 3 ) you cannot.

What have you decided?

The governments estimate should have supporting documentation that identifies the market research utilized to create the estimate. Far to often we find that the end user makes one call to a vendor, aquires a price and there's your government estimate. Since the governments estimate is the bases for funding allocation (budget) for many activities the budget is unreliable on its own. Having the ability to negotiate or discuss a lower price after the close of solicitation is a tool that we should be able to utilize with boundries. I was hoping the FAR offered a more definitive answer because these negotiations or discussions are being conducted.

Thank you all for your educational discussion. We (myself and fellow interns) are reading the blog.

mskitty

[traipse]

Hi mskitty,

The situations you describe are fairly common. You'll become more familiar with what tools are available to CO's as you progress through your career. For now, whether you think it's right, wrong or indifferent, you'll need to follow the advice and direction of the CO's you're working with. When you have your own authority you'll be able to make up your own mind about what you think is in the best interests of the Government given all of the circumstances you are dealing with at that moment. Then move on, you have other procurements and other issues to tackle. A good debate is healthy, but don't make it the point of your work. Vern is correct when he says that if there is nothing that prohibits a course of action then you are free to employ it, but it's up to you to decide if what you've come up with is the right thing to do. It won't always be easy, and you'll often find yourself in the situation where there is no right answer. Don't let that intimidate you into not making a decision or being ultra-conservative. Focus on readiness, rather than resistance.

[mskitty]

Hi mskitty,

The situations you describe are fairly common. You'll become more familiar with what tools are available to CO's as you progress through your career. For now, whether you think it's right, wrong or indifferent, you'll need to follow the advice and direction of the CO's you're working with. When you have your own authority you'll be able to make up your own mind about what you think is in the best interests of the Government given all of the circumstances you are dealing with at that moment. Then move on, you have other procurements and other issues to tackle. A good debate is healthy, but don't make it the point of your work. Vern is correct when he says that if there is nothing that prohibits a course of action then you are free to employ it, but it's up to you to decide if what you've come up with is the right thing to do. It won't always be easy, and you'll often find yourself in the situation where there is no right answer. Don't let that intimidate you into not making a decision or being ultra-conservative. Focus on readiness, rather than resistance.

Traipse,

Thank you for the great advise. I agree with everything you stated.

mskitty

[joel hoffman]

Traipse,

Thank you for the great advise. I agree with everything you stated.

mskitty

For what its worth, I'd use some form of simplified acquisition method that allows some discussion if all proposals blow the budget, if for no other reasson than to find out why.

Especially if you are requesting "quotes". I thought quotes aren't technically "offers" and that the Government then replies with an "offer", anyway. It would seem that such a method would ethically allow for "talk".

Heck, maybe I just like to negotiate or bargain.

I sometimes wonder why a program office can get an estimate or "quote" from a source to use for budget purposes that doesn't follow through when the government actually goes out for bids, proposals or quotes. Must be that the firm doesnt realize all the government BS that the actual acquisition process entails.

[Cajuncharlie]

At the risk of reviving a stale topic that folks may not be very interested in, let me offer a couple of thoughts.

I have worked for companies that regarded the lowest priced technically acceptable quote as the place to start price negotiations. I always took a dim view of that practice, and certainly understand Vern's concerns about the ethics of negotiating price when there are solicitation provisions that describe a different process, but that's how many organizations do business. There may be room in the federal way of doing things, particularly SAP, to implement commercial best practices (if this indeed is one).

On another aspect of this thread, I have seen times when agencies canceled solicitations because "all proposals were outside the awardable range." It took a while to find what that meant: by statute, public works contracts cannot be awarded at a price more than 25% over the gov't estimate (which excludes profit). As bidders in a small prequalified MATOC pool, we thought the agency was throwing the baby out with the bathwater. After several canceled RFPs, the agency finally called for discussions on a task order. We went in with responsive base proposal and more importantly an alternative proposal based on a longer schedule (nonresponsive to the original RFP) that allowed us to lower our price because of the availability of a specialized piece of equipment at a more favorable rate by waiting in line for it instead of paying a premium to use it within the agency's schedule. Eventually on that basis we won the job. The moral was, I think, it may be in the agency's and taxpayers' best interest to open discussions to find out what can reasonably be done or changed to fill a requirement within budget. It may not always work out by allowing an award, but at least it will give the agency a better idea of why a solicitation failed and an opportunity to align future solicitation requirements with market conditions.

[Guest Vern Edwards]

Interesting. Keep in mind, however, that the rules might have required the agency to amend the solicitation and give other competitors a chance to revise their proposals based on the longer schedule. But I can't say that the agency did anything wrong, since the solicitation may have provided for alternate proposals. In any case, I would not object to such a procedure in principle, since it was not just an attempt to drive down the price without a concession on other contract terms.