Low prices increasingly important in proposals, but winners need more than that – Published November 16, 2012

Low prices increasingly important in proposals, but winners need more than that

Washington Business Journal by Lee Dougherty, Attorney, General Counsel PC

Date: Friday, November 16, 2012, 1:21pm EST – Last Modified: Friday, November 30, 2012, 1:53pm EST

 

In this time of tight federal budgets, agencies are putting more emphasis on price in awarding contracts, but even today low prices alone won’t win you the work.

Protesting contractor: Science Applications International Corp., McLean

Contracting agency: Defense Intelligence Agency (DIA)

Protest Issue: Whether an agency’s contracting officer focused too much on the low price of a proposal and not enough on the technical aspects

Decision: Sustained in part and denied in part by the Government Accountability Office, Nov. 1, 2012

Postmortem: Last week I gave my sage advice on the secret to being a successful contractor. Do what no one else does, or do what others do but do it better and cheaper. I received comments from some readers who believe that doing it better is irrelevant due to the current budgetary climate and a sense that the only thing which really matters is being cheaper.

Although there is a trend to award contracts to the lowest-price technically-acceptable (LPTA) offer, best value is still a driving factor in many solicitations. Unless it is a strictly LPTA contract award, proposing to do the work better than the competition continues to be my advice.

However, figuring out how to do something better and cheaper is difficult for most contractors. In a time when the margin is so small, how can you propose a solution that is not only better than competitors, but also cheaper?

Computer Sciences Corp. of Falls Church found a way that was $24 million (18 percent) cheaper than SAIC’s offer, and as a result CSC was awarded the contract. SAIC protested that although CSC’s solution was cheaper it was not better and that the government failed to evaluate CSC’s offer according to the terms of the solicitation.

DIA solicited offers for intelligence analysis support of the ORION Analytical Capability program. The ageny estimated that the price range for the acquisition would be between $145 and $156 million. SAIC offered a solution with a price of $134 million, and CSC offered its solution at $110 million, both considerably under the government estimate.

The solicitation informed offerors that a price realism analysis would be conducted. After evaluation the contracting officer “found the proposals technically equal” and determined that “in light of CSC’s lower price” to award the contract to CSC.

CSC was able to achieve a significantly lower offered price in large part by proposing to do the work with workers who did not have security clearances. Individuals with security clearances demand a much higher salary, and by proposing to do work with uncleared workers CSC was able to reduce its offered price.

CSC did not say in its proposal what the labor mix between cleared and uncleared workers would be. It simply stated that “large numbers” of uncleared laborers would be used. The problem is that the contracting officer was so focused on price that he failed to even look at how CSC achieved that price.

During the protest, the contracting officer claimed he had reviewed the “amount and type of labor” CSC proposed and found it acceptable. The GAO pointed out that the contracting officer could not have conducted this review because “no such information exists in CSC’s proposal.”

The DIA failed to evaluate the technical proposal and focused solely on the proposed price, and as a result the GAO sustained the protest on this ground. SAIC also argued other grounds, which were discussed in the GAO’s decision and denied.

There is no doubt that with the shrinking budgets facing government agencies price is the driving factor in many, if not most, contract awards. The days of the government paying a premium for a slightly better technical solution are long gone.

But that does not mean the government can pay the lowest price without consideration of the technical solution proposed. If your price is not competitive you will not win contracts; however, when your technical solution is not in accordance with the terms of the solicitation, even if you win the award you will likely lose the contract after a protest.