Bid Protest Weekly Newsletter by Bryan R. King, Attorney, General Counsel PC
Date: Wednesday, June 12, 2013, 5:25pm EST
Cantu Services, Inc., B-408012, B-408012.2
GAO addressed an interesting issue this week, in a protest of an award decision in which an incumbent offeror’s proposed price was determined to reasonable after comparison with the government estimate, which was based on the incumbent’s previous contract. To make matters more interesting, the incumbent’s previous contract was awarded on a non-competitive basis. In Cantu Services, Inc., the protester argued that the agency acted improperly in determining that the incumbent’s price was reasonable.
This procurement was conducted pursuant to the Randolph-Sheppard Act, in which blind vendors are given a priority for contract awards of food services. The RFP in this case informed offerors that if the blind vendor submitted a proposal that was included in the competitive range, the contracting officer would enter into discussions with only the blind vendor. Award would be made to the blind vendor on the basis of those discussions if the agency determined that the blind vendor offered a comparable cost for operation in comparison with the independent government estimate.
The blind vendor in this case was also the incumbent contractor, having been directly awarded the previous contract under the Randolph-Sheppard program, without competition. The independent government estimate was based upon the staffing levels and pricing of the incumbent contract. Thus in the agency’s determination of whether the blind vendor’s price was reasonable, it was effectively comparing its offered price against its own price under the incumbent contract. Cantu objected to this method of determination, arguing that the agency was unreasonable. GAO disagreed, and denied the protest.
Past GAO decisions have established that it is legitimate for an agency to compare offered prices to a government estimate to determine if a price is reasonable. It is also generally reasonable for an agency in preparing a government estimate, to consider the pricing information from the predecessor contract. GAO noted that an agency might have less confidence in pricing information from a predecessor contract that was awarded on a non-competitive basis; however, there is no presumption that such pricing information is inherently unreliable.
GAO also noted that in making its price reasonableness determination, the agency analyzed the government estimate by comparing the incumbent’s contract prices upon which the estimate was based to the prices of several other contracts for food services, several of which were competitively awarded. The agency found that the incumbent’s prices on the predecessor contract were within the normal price range for food services. Thus, while the agency did essentially compare the blind vendor’s current prices against its previous prices, it at least considered whether the previous prices were reasonable.