Bid Protest Weekly Newsletter by Bryan R. King, Attorney, General Counsel PC
Date: Wednesday, May 15, 2013, 1:05pm EST
Esegur-Empresa de Segurança, SA, B-407947; B-407947.2, April 6, 2013
Earlier this month, we discussed a decision in which GAO denied a protest where the protester argued that the agency failed to conduct a price realism analysis. There, GAO determined the solicitation—for the award of a fixed-price contract—did not explicitly state that a price realism analysis would be conducted, nor did it inform offerors that proposals may be eliminated due to an unrealistically low price. In a decision recently released by GAO, we have almost identical arguments, but with a much different outcome.
In Esegur-Empresa de Segurança, SA, the protester challenged the agency’s award decision, arguing that the agency failed to conduct a price realism analysis. Had a price realism analysis been performed, argued the protester, the awardee’s proposal would have been determined to be unacceptable due to an unrealistically low price. The agency countered by arguing that the solicitation—again for a fixed-price contract—did not call for a price realism analysis, and thus one was not required. In this case, GAO agreed with the protester and sustained the protest.
While the solicitation in question did not appear to use the term “price realism,” it did inform offerors that unrealistically low prices may serve as a basis for the rejection of a proposal. GAO found that the solicitation’s notification that a low offer could be rejected was sufficient to require the agency to perform a price realism analysis. GAO read from that notification an implication that the agency would actually consider whether an offeror’s price was in fact unrealistic, and thus unacceptable.
The agency attempted to convince GAO that because the solicitation simply stated that unrealistically low price proposals “may” be rejected, this meant that the agency had the option to perform a price realism analysis. GAO rejected this argument. While GAO acknowledged that the “may” in the solicitation did give the agency discretion to reject an unrealistically low priced proposal as unacceptable, GAO pointed out that the agency would first have to conduct a price realism analysis to determine if proposals were unrealistically low in order to exercise this discretion. Thus, GAO determined that a price realism analysis was required.
GAO sustained the protest, and recommended that the agency reopen the record and evaluate the awardee’s price for realism.