Decided: October 27, 2021
Agency: Defense Logistics Agency
Disposition: Protest Sustained
Keywords: Discussions; Proposal Evaluation; Competitive Range
This case is a rare example of GAO sustaining a protest based on competitive range adequacy of discussions and proposal misevaluation. GAO noted here when an agency determines that an offeror’s proposed prices are unreasonably high, the agency is required to advise the offeror of this finding during discussions. Without notice that an offeror’s price is determined to be unreasonable, the proposal is effectively rendered unawardable since the offeror isn’t afforded a reasonable chance to amend a proposal and receive an award.
GAO also sustained this protest because the agency’s conclusions were irrational. GAO also found that the ongoing pandemic played a role in the GAO’s irrational conclusion, noting that the government’s price estimate failed to take into consideration dramatic shifts in market conditions and supply line disruptions resulting from the pandemic and instead was based on outdated historical pricing data that bore little relation to current market conditions. If you were involved in a bid and feel the agency similarly failed to conduct adequate discussions or misevaluated a proposal, you may have similar grounds for a protest. GCPC can help you evaluate the merits of your case and navigate the bid protest process.
Summary of Facts
Science Applications International Corporation (“SAIC”) protests the award of a contract to Noble Sales Company d/b/a Noble Supply and Logistics under request for proposals (“RFP”) No. SPE4A5-20-R-0150, issued by the Defense Logistics Agency (“DLA”) for the acquisition of hardware and abrasives under federal stock group 53. The RFP contemplated the award, on a best-value tradeoff basis, of a fixed-price with economic price adjustment. The DLA received proposals from SAIC and Noble. The agency evaluated those proposals, engaged in two rounds of discussions with the offerors, and solicited, obtained and evaluated final proposal revisions. The DLA made award to Noble, concluding that its proposal represented the best overall value to the government (SAIC’s overall price was roughly $1.5 billion and Noble’s price was roughly $1 billion). SAIC filed this protest.
Basis of Protest
SAIC argues that the DLA misevaluated proposals, failed to engage in meaningful discussions, and made an unreasonable source selection decision.
SAIC first argued that the DLA failed to engage in adequate discussions. GAO found that the record shows that throughout the acquisition, the DLA found SAIC’s prices to be unreasonably high, but never advised SAIC during discussions that its prices were unreasonably high. Because of this, SAIC argues that discussions were inadequate and not meaningful. GAO stated that “where an agency determines that an offeror’s proposed prices are unreasonably high, the agency is required to advise the offeror of this finding during discussions.” GAO elaborated that when an offeror’s price is determined to be unreasonable, it effectively renders its proposal unawardable and, thus, the offeror must be advised that its price has been found unreasonably high in order to afford it a reasonable chance to receive award.
GAO found here that while the DLA engaged in price discussions with SAIC it never informed SAIC that its proposed prices were unreasonably high. GAO noted that saying certain prices are high is not the same as saying prices are considered unreasonably high. GAO concluded that without being told that its prices were found to be unreasonably high, SAIC effectively was eliminated from the competition. GAO sustained the protest on this basis.
SAIC also argued that the evaluation failed to consider the risk posed by the low prices offered by Noble. GAO noted that when reviewing protests of an agency’s evaluation and source selection decision, it will not reevaluate proposals or quotations, but it will review the record to determine whether the evaluation and source selection decision are reasonable and consistent with the solicitation’s evaluation criteria, and applicable procurement laws and regulations.
GAO found that, here, the DLA specifically sought out pricing data from the offerors to support their proposed prices and requested detailed information from the offerors to substantiate their proposed pricing. GAO found that the DLA’s request amounted to a request for pricing data from the offerors. GAO noted that having made the request, the agency could not simply ignore the information provided when determining whether it should have confidence that the offerors’ proposed prices were fair and reasonable.
GAO found that during the acquisition process, SAIC provided detailed, extensive information in support of its proposed unit prices, whereas Noble provided essentially no such information. GAO noted that “despite Noble’s failure to furnish any meaningful information that would have given the agency confidence that its prices reflected prevailing market conditions” and were reliable, the DLA found that SAIC’s prices were unreasonably high and Noble’s prices were fair and reasonable. The record shows that the DLA concluded that a majority of Noble’s unit prices were reasonable, based entirely on a comparison of those prices to SAIC’s initial proposed unit prices, ultimately finding that since the unit prices were equal to or lower than SAIC’s proposed unit prices, they were reasonable.
During the acquisition, SAIC provided the DLA detailed information, advising that it could not meet the agency’s price objective. SAIC’s conclusion was based on prices currently offered by qualified suppliers and direct negotiations with suppliers who stated that they were unable to meet the agency’s unit price objectives for items. Noble provided essentially no evidence to support its quoted prices and indicated it faced a challenge obtaining quotes from approved sources.
GAO found that the agency’s expectations seem to have been driven by the government’s estimate, but that estimate failed to take into consideration dramatic shifts in market conditions and supply line disruptions resulting from the pandemic. GAO also noted that “the record is devoid of any explanation for the agency’s decision to discount or ignore the data presented by SAIC.” GAO stated that since SAIC provided the agency with robust, empirical support for its quoted prices, “the contemporaneous record should, at a minimum, have included an explanation for why the agency essentially ignored SAIC’s pricing data.” GAO indicated that such an explanation would provide a basis for it to evaluate the rationality of the agency’s conclusion that SAIC’s prices were unreasonably high. However, GAO concluded that without such explanation, it had no basis to conclude that the agency acted rationally in evaluating these prices.
GAO ultimately found that DLA’s evaluation of whether prices were fair and reasonable essentially ignored the realities of a dramatically different market and instead was based on outdated historical pricing data that bore little relation to current market conditions. Thus, GAO held that the agency’s conclusion that the prices submitted by SAIC were not fair and reasonable was irrational. GAO sustained the protest on this basis.
Our Government Contracts Practice Group has extensive experience in government contract law, helping clients solve their government contract problems relating to the award or performance of a federal government contract, including bid protests, contract claims, small business concerns, and teaming and subcontractor relations. If you need more guidance or information, contact Craig Lawless, Senior Counsel in our Government Contracts practice area at General Counsel, P.C., 703-266-1865.