Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
Contracting officer’s determination that award under a small business set-aside was made at a fair market price is a matter of administrative discretion which GAO will not question unless the determination is unreasonable.
General Counsel P.C. Highlight:
GSC contends that the agency did not receive a fair and reasonable price under the set-aside, and therefore, the agency should cancel the solicitation and re-solicit the requirement on an unrestricted basis. In the agency report, the contracting officer (CO) stated that much of the price difference was due to the pre-award change in the agency’s needs. The CO stated that the difference in the prices originally proposed by VMI and ATSCC was less than 6%, and that the additional difference in prices is a result of the service requirement increase. GAO states that the Federal Acquisition Regulation (FAR) provides that a contracting officer shall set aside certain acquisitions for small business participation when there is a reasonable expectation that: (1) offers will be obtained from at least two responsible small business concerns; and (2) award will be made at fair market prices. In determining whether a fair market price has been achieved, FAR sect. 19.202-6(a)(1) directs agencies to the reasonable price guidelines in FAR sect. 15.404-1(b), which set forth numerous techniques available to contracting officers to analyze the reasonableness of proposed prices. A determination of price reasonableness for a small business set-aside is within the discretion of a CO, and GAO will not disturb such a determination unless it is clearly unreasonable. Furthermore, in view of the congressional policy favoring small businesses, contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable. The determination of whether a small business price premium is unreasonable depends on the circumstances of each case.
Here, the contracting officer compared the awardee’s proposed price with the government estimate and all of the proposed prices received in response to the solicitation. These are among the techniques available to a CO under FAR sect. 15.404-1(b)(2) to analyze the reasonableness of proposed prices. Using these techniques, the CO determined that the price offered by the awardee for the initial requirements was fair and reasonable. Also, the agency considered that the labor rate used to calculate the price for the additional quantity was the same labor rate initially proposed. Given this record, given the steps taken by the CO, and given the wide latitude afforded contracting officers in this situation, GAO sees no basis to question the contracting officer’s determination that the offered prices are fair and reasonable. The protest is denied.