Link: GAO Opinion
Agency: Department of the Navy
Disposition: Protest denied.
1. Protest challenging agency’s use of allegedly flawed independent government estimate (IGE) and comparison with proposed prices in determining that protester’s proposed price was unreasonable is denied; challenged IGE was replaced and not used in reasonableness determination, and Federal Acquisition Regulation (FAR) specifically provides for use of proposed prices in determining price reasonableness.
2. Protest that agency’s providing awardee opportunity–after receipt of final revised proposals–to confirm apparent mistake in price proposal constituted improper discussions is denied, where mistake and intended price were apparent from face of proposal; confirmation of error therefore constituted clarification.
General Counsel P.C. Highlight:
EMS challenges the Navy’s determination that its proposed price was unreasonable. First, EMS asserts that there were several flaws in the original independent government estimate (IGE) used by the agency in evaluating initial proposals. Further, EMS asserts that the Navy’s use of the IGE was not based on market research and did not involve “careful consideration of the products or services being acquired.”
GAO finds the arguments are without merit. First, as the Navy points out, while the original IGE challenged by the protester was used in the initial evaluation, it was not used in the evaluation of final proposal revisions (FPR). Rather, the Navy’s evaluation was based on the IGE as revised following issuance of amendment No. 8, together with a comparison with other proposed prices. As discussed, the IGE revisions were aimed at resolving the CLIN discrepancies underlying the protester’s challenge to the original IGE. EMS also challenges the revised IGE, asserting that the Navy “fails to explain how the [revised] IGE was calculated or to give any indication that it was prepared any differently than the first IGE or the ‘market’ average.” However, this assertion fails to state a valid basis of protest, since the protester has provided no argument or evidence indicating that the new IGE may have been erroneous. Finally, EMS asserts that the agency’s reliance on a comparison of offerors’ prices was unreasonable, since it included only the proposed prices, rather than prices in the “larger market place.” GAO states that this argument is without merit. The FAR specifically provides that a price reasonableness determination may be based on a comparison of prices received in response to the solicitation. There is no requirement that an agency consider broader marketplace prices in its analysis. Before awarding a fixed-price contract, an agency is required to determine that the offered price is fair and reasonable. Because the Navy found EMS’s proposed price to be unreasonable, EMS was ineligible for award.
EMS asserts that the Navy improperly conducted price discussions only with IMS after receipt of FPRs. The record indicates that, following receipt of FPRs, the Navy contracting specialist discovered that errors in IMS’s proposal had resulted in a significant overstatement of IMS’s price. The contracting specialist advises that, with regard to five separate CLINs in IMS’s proposal, each relating to accelerated delivery of certain supplies and services, the proposed “Amount” (approximately $160,000 in each case) had not been carried forward to the “Net” amount entry for each CLIN. Rather, the “Net” amount for each CLIN had been drastically miscalculated, increasing the proposed “Amount” entry for each of the five CLINs from approximately $160,000 to over $7 million each. The contracting specialist determined that the overstatement was clearly erroneous and contacted IMS to confirm that, in each case, the stated CLIN “Amount” was correct and that the calculated “Net” amount was erroneous. IMS confirmed that this was the case.
EMS asserts that the contracting specialist’s contact with IMS to confirm the error constituted discussions, since it “allowed IMS to modify its proposal,” and that EMS similarly should have been permitted to revise its proposed price. GAO does not agree. While discussions provide a firm the opportunity to make substantive revisions to its proposal, and thus must be held with all competitive range offerors, agencies are permitted to initiate limited exchanges–clarifications–with any offeror in order to clarify aspects of a proposal or to resolve minor or clerical mistakes. Here, the contracting specialist contacted IMS only to confirm an obvious error in its pricing; IMS’s confirming this error and the apparent intended price did not rise to the level of a proposal modification, but, rather, constituted a permissible clarification. The protest is denied.