CO provided a "competitive price range" for an LPTA procurement then awarded outside of range

[C Culham]

12 minutes ago, EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct? 

Agreed.   

[Jamaal Valentine]

4 hours ago, EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct? 

You would have to explain what you mean by unrealistic. For example, under FAR 15.404-1(d)(1), “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.”

Would a deep discount (or even at or below-cost) be unrealistic in and of itself? Shouldn’t you consider the offerors methodology for performing the work? Moreover, unrealistic under a fixed-price arrangement would likely be defined as another thing.

So what do you mean by unrealistic?

[Vern Edwards]

7 hours ago, EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct? 

@EZK81For an illustration of how price realism might work in the competitive placement of an order against a GSA schedule contract, see the GAO's bid protest decision in the matter of ManTech Advanced Systems International, Inc., dated August 14, 2023. To find that decision use the link below or go to Google or some other search engine and search for B-421560.4. The pertinent part of the decision with respect to your question is on page 4.

https://www.gao.gov/products/b-421560.4

[EZK81]

17 hours ago, Jamaal Valentine said:

You would have to explain what you mean by unrealistic. For example, under FAR 15.404-1(d)(1), “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.”

Would a deep discount (or even at or below-cost) be unrealistic in and of itself? Shouldn’t you consider the offerors methodology for performing the work? Moreover, unrealistic under a fixed-price arrangement would likely be defined as another thing.

So what do you mean by unrealistic?

Since the government provided a "competitive price range," my original assumption was that they had done an independent estimate and that prices below the low end of the range would not pass a realism evaluation. Otherwise, why provide a low end for an LPTA RFQ? Why not just provide a budget/ceiling, or nothing at all? The winning bid was about 18% lower than the low end of their competitive range and 28% below the high end. 

This was a staffing contract with labor categories and productive work hours prescribed, so the fully burdened rate was the only variable (i.e., the discounted FSS rate). The proposal was only past performance and pricing so there was no methodology to evaluate, and they did not ask for resumes or letters of commitment. I can easily see how bidding a rate that is 18-28% less than the IGE could be considered unrealistic or a high level of risk. The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so. 

But obviously I'm wrong, since that wasn't the government's finding. ¯\_(ツ)_/¯

[EZK81]

15 hours ago, Vern Edwards said:

@EZK81For an illustration of how price realism might work in the competitive placement of an order against a GSA schedule contract, see the GAO's bid protest decision in the matter of ManTech Advanced Systems International, Inc., dated August 14, 2023. To find that decision use the link below or go to Google or some other search engine and search for B-421560.4. The pertinent part of the decision with respect to your question is on page 4.

https://www.gao.gov/products/b-421560.4

That's a really helpful example, thank you! I wish our potential customer had been so transparent about their realism analysis... 

[Jamaal Valentine]

1 hour ago, EZK81 said:

The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so.

You may want to read GAO: Lower-Paid Incumbents An “Obvious” Price Realism Concern.

[formerfed]

On 3/28/2024 at 11:07 AM, EZK81 said:

We received a notice of an unsuccessful bid, and the letter provided the award amount for all 5 years. On average across 5 years, their price was about 18% lower than the low end of the competitive range. The RFQ prescribed hours for each year, so outyear pricing could only go down by lowering hourly rates--not impossible, but highly unlikely. If they bid within the competitive range for the Base Year, the option years would have had to be reduced 22% on average. 

 

3 hours ago, EZK81 said:

This was a staffing contract with labor categories and productive work hours prescribed, so the fully burdened rate was the only variable (i.e., the discounted FSS rate). The proposal was only past performance and pricing so there was no methodology to evaluate, and they did not ask for resumes or letters of commitment. I can easily see how bidding a rate that is 18-28% less than the IGE could be considered unrealistic or a high level of risk. The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so. 

We don’t know what, if anything, the successful offeror provided to the government in way of explanation.  I’ve seen situations where a contractor feels they will learn processes well over time and develop methodologies, tools and techniques to become more efficient.  The strategy is replace staff over time with lower paid employees.  This would be a good point to discuss during the debriefing.

[joel hoffman]

Hey, it was a lowest priced technically acceptable award scenario. The government apparently didn’t want a higher performing contractor if it cost more than that. 

[Cyber TJ]

On 3/28/2024 at 3:19 PM, C Culham said:

Different possibly the same conclusion.

Never seen it but that does not mean it isnot done (obviously).  Would be interesting to view RFQ's by same agency to see if the wording is used in other solicitations.  Might be their thing!

Going off the basic info provided agency set a range and asked for BAFO's.  I do not see wording in your posts that BAFO's have to be in the range.  So one might concluded something to the effect of - Agency - Here is our range.  Offerors - Here is our BAFO's.   Agency - Views the BAFOs and makes the final award decision.  Wording that you have provided so far does not indicate that to be considered the BAFO must be within the competitve price range.

 

My response provided above suggests why but more to the point LPTA means they will take the lowest price of the techincally acceptable proposals not that they will take the lowest price in the competitive price range.    And while you may have a view of what is reasonable price the agency would support why they believe it is reasonable.   My mind wanders to this - FAR 15.404-1(b)(2)(i) - "Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1))."

Hope these thoughts help with your debrief strategy.

I saw it done once at NSA then they awarded to the lowest bidder who was almost 45% below the lower threshold.