Link: GAO Opinion
Agency: Department of the Air Force
Disposition: Protest denied.
Protest that agency should have rejected awardee’s proposal for offering unbalanced prices is denied where awardee’s price was low overall and agency considered risk of high and low line item prices for contract performance and reasonably determined that awardee’s pricing did not pose unacceptable risk to government.
General Counsel P.C. Highlight:
Cherokee (the incumbent contractor) argues that Wind River’s pricing was unbalanced and that its proposal should have been rejected on this basis. GAO states that unbalanced pricing exists where, despite a proposal’s low overall price, individual line item prices are either understated or overstated. While unbalanced pricing may increase risk to the government, agencies are not required to reject an offer solely because it is unbalanced. FAR sect. 15.404-1(g)(1). Rather, where an unbalanced offer is received, the contracting officer is required to consider the risks to the government associated with the unbalanced pricing in making the award decision, including the risk that the unbalancing will result in unreasonably high prices for contract performance. In the context of an ID/IQ contract, as here, a key consideration is the accuracy of the government’s quantity estimates; if the estimates are reasonably accurate, then evidence of mathematical unbalancing generally does not present a risk that the government will pay unreasonably high prices for contract performance.
Cherokee does not challenge the accuracy of the agency’s estimated quantities. Moreover, GAO finds nothing in the record to suggest that the agency was concerned about the accuracy of its estimated quantities. Where a protester does not challenge the estimated quantities used in the calculation of total item prices, there is no basis in the record for GAO to find a risk that the agency will pay unreasonably high prices for the items; it follows that, in such cases, there is no basis for us to object to mathematically unbalanced pricing. In any event, even if the estimates were in question, as noted above, the agency conducted a risk assessment and determined that the risk associated with Wind River’s pricing strategy was acceptable. In this regard, the CO analyzed the risk in two ways: by cost comparisons with recent delivery orders and by total maximum cost. Specifically, the CO compared each CLIN price with the corresponding IGE price and then conducted an analysis of five recent delivery orders under the current contract, which showed that Wind River’s prices would result in a lower cost than the IGE on four of the five. The CO also assessed the maximum possible liability to the Air Force by comparing the maximum cost under each IGE price with the maximum cost under each of Wind River’s CLIN prices. Other than asserting generally that Wind River’s pricing may pose a risk to the agency, Cherokee does not challenge this risk assessment, and GAO finds no basis for questioning it. Thus, to the extent that Wind River’s pricing may be viewed as unbalanced, the agency has satisfied the FAR requirement by reasonably determining that the risks of any unbalancing were not significant enough to render its offer unacceptable. The protest is denied.