Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
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GAO Digest:
1. Protest that agency improperly failed to conduct price realism evaluation of awardee’s proposed price is denied where record shows that agency, in fact, conducted such an evaluation, and reasonably determined that awardee’s prices were realistic.
2. Protest that awardee’s prices were impermissibly unbalanced is denied where prices were virtually identical for all quantity ranges of essentially identical units being purchased, and record fails to establish that awardee’s unit prices were overstated or understated.
3. Agency did not conduct unequal discussions with protester and awardee where record shows that agency discussed all concerns relating to each firm’s proposal; fact that agency did not discuss price with protester is unobjectionable where record does not show that agency found its proposed prices unreasonable.
4. Agency’s decision to select lower-rated, lower-priced proposal for award, even though technical considerations were more important than price, was unobjectionable where tradeoff is fully supported by record.
General Counsel P.C. Highlight:
GD asserts that the agency did not adequately evaluate AO’s price proposal for realism. As reflected in the solicitation, the utility of evaluating prices for realism in the context of a fixed-price contract is limited to evaluating the technical understanding of the offeror and assessing the risk inherent in an offeror’s proposal. Agencies may use a variety of price evaluation methods to assess realism, including an analysis of pricing information provided by the offeror, or a comparison of the prices received to one another, to previously proposed or historically paid prices, or to an independent government estimate. The nature and extent of an agency’s price realism analysis ultimately are matters within the discretion of the agency, unless the agency commits to a particular evaluation method in the solicitation.
Here, the record shows that the agency compared offerors’ proposed prices to one another, to an independent government estimate, and to historical pricing information. Particularly revealing, is the agency’s comparison of the proposed unit prices to prices historically paid for similar or identical items. The record shows that, contrary to GD’s assertion, the agency did consider the realism of AO’s prices. Based on a comparison with the prices at which AO previously performed, it concluded that AO’s current prices were realistic. On this record, GAO concludes that the agency’s price evaluation was reasonable.
GD next asserts that AO’s prices should have been found to be impermissibly unbalanced as between the solicitation’s quantity requirements. GAO finds that there is no merit to this aspect of GD’s protest. By way of background, the RFP required offerors to submit pricing based on discrete and differing quantities for each of the different MCPCs during the option periods. Offerors were required to provide fixed unit prices for each of the quantity ranges, for each size MCPC, for each option year. In calculating the offerors’ evaluated prices, the agency multiplied their proposed unit prices by the maximum number of units in each quantity range. The agency then calculated a weighted average based upon the likelihood of its exercising the option within a particular quantity range; the agency assigned a 10 % likelihood of exercising the options at each of the four lower quantity ranges, and a 60 % likelihood that it would exercise the option at the highest quantity range
The agency reasonably determined that AO’s prices were not unbalanced. First, a comparison of the awardee’s prices to those of the protester, without more, is insufficient to show that the awardee’s prices are unbalanced. Second, unbalanced pricing exists where the prices of one or more contract line items (CLINs) are significantly overstated, despite an acceptable total evaluated price (typically achieved through under pricing of one or more other line items). The protester has neither alleged nor shown that AO’s prices were overstated. Low prices (even below-cost prices) are not improper and do not themselves establish (or create the risk inherent in) unbalanced pricing. In any case, the agency reasonably determined that AO’s proposed prices for the low quantity ranges were not understated. In this respect, the record includes historical pricing information reflecting the prices previously paid by the agency to AO for the 81 millimeter MCPCs. Those prices were, respectively, for quantities of 45,277 and 220,465 units, that is, quantities within the lowest quantity range included in the current solicitation. GAO notes as well that, for the base quantity, which definitely will be ordered, AO proposed a price of [deleted]. Given the relative comparability of these prices to those in question, there is no basis to conclude that AO’s prices for the low quantity ranges were understated.
GD next maintains that the agency should have afforded it discussions relating to its prices because, according to GD, the agency found its prices unreasonably high. GAO states that as a general matter, although discussions must address deficiencies and significant weaknesses in a firm’s proposal, the precise content of discussions is largely a matter of the contracting officer’s judgment. GAO reviews the adequacy of discussions to ensure that agencies point out weaknesses or deficiencies that, unless corrected, would prevent an offeror from receiving award. In terms of discussing price, agencies are not required to advise a firm that its prices are considered high, unless it has determined that the offeror’s prices are unreasonably high, such that they would preclude award to the firm.
The discussions were unobjectionable. GD’s argument is based on the flawed premise that the agency considered its prices unreasonably high so as to preclude award to GD. This simply is not the case. While the record does reflect the agency’s finding that some of GD’s option year prices for smaller quantity ranges were high in comparison to its base year price, the agency also determined that its option year prices for the larger quantity ranges were more favorable. The agency’s ultimate conclusion regarding GD’s pricing was that they “implie[d] a relatively inefficient improvement curve both within the option period and most importantly over time/contract period of performance.” The record also shows that the source selection authority (SSA) determined that the price range among all four offerors of 19.1% indicated a “close competitive grouping.” Thus, there is no indication that the agency found GD’s prices to be unreasonably high, or that they otherwise precluded award to the firm. It follows that the agency was not required to discuss GD’s proposed prices with the firm.
GD challenges the reasonableness of the agency’s price/technical tradeoff. GAO states that it is well-settled that an agency properly may select a lower-rated, lower-priced proposal, even where price is a less important evaluation factor than technical merit, where it reasonably concludes that the price premium involved in selecting the higher-rated proposal is not justified in light of the acceptable level of technical competence available at a lower price. The extent of such tradeoffs is governed only by the test of rationality and consistency with the evaluation criteria. A protester’s disagreement with the agency’s determinations as to the relative merit of competing proposals and its judgment as to which proposal offers the best value to the agency, does not establish that the evaluation or source selection was unreasonable.
The tradeoff and source selection here were reasonable. There is no need for extensive documentation of every consideration factored into a tradeoff decision; the documentation need only be sufficient to establish that the agency was aware of the relative merits and costs of the competing proposals. Nonetheless, the record shows that the agency here considered and exhaustively documented the relative merits of the proposals in a 69 page, single spaced, SSDD; the SSA clearly was aware of the relative merits and comparative prices of the AO and GD proposals when he made his tradeoff. In this regard, the SSA comprehensively identified and described all of the strengths included in the GD proposal (as well as the fact that there were no identified weaknesses), and, correspondingly, identified all of the strengths and weaknesses found in AO’s proposal. The SSA then went on to extensively analyze the offerors’ prices. After performing this detailed analysis of the relative merits of the proposals, the SSA then made his tradeoff, extensively comparing the relative merits of the AO proposal with those of the GD proposal, and considering as well, the price difference between the two proposals. From the discussion in the SSDD, it is clear that the SSA understood the evaluated differences between the technical proposals and past performance of AO and GD, and reasonably decided to award to AO because of what the SSA viewed as the substantial price premium associated with the GD’s higher rated proposal. GAO concludes that there is no basis to object to the agency’s source selection decision here. The protest is denied.