Link: GAO Decision
Agency: Department of the Army
Disposition: Protest Denied.
In a fixed-price procurement which reserved an agency’s right to conduct a price realism analysis if necessary, the agency reasonably found the awardee’s price realistic and reasonable.
General Counsel PC Highlight:
Science Applications International Corporation (SAIC) protested the award to Harding Security Associates, Inc. of a contract for services supporting efforts to counter insurgency and improvised explosive devices (IEDs) in Afghanistan and elsewhere. The RFP contemplated the award of a fixed-price ID/IQ on a best value basis, considering technical, past performance, and price evaluation factors. Offerors were instructed to clearly identify all cost components included within their labor rates, but the RFP expressly advised offerors that the agency did not intend to conduct a price realism analysis, although it reserved the right to do so. During discussions, the agency expressed concerns to Harding about its overseas labor rates, in response to which Harding provided additional details about its compensation model and the successful implementation of that model on other Army contracts. The agency found all final prices to be reasonable and realistic, based on their respective technical approaches to executing the requirements. Although the agency acknowledged SAIC’s higher technical rating, it concluded that it did not warrant paying a 53% premium.
SAIC argued that despite the agency’s statement in the RFP that it did not intend to conduct a price realism analysis, it nonetheless was an abuse of discretion not to do so. The GAO disagreed, and noted that, although the RFP did not require the agency to conduct a price realism analysis, the agency did in fact assess the realism of the offerors’ proposed prices. It compared all prices, which had been received after robust competition, to each other and to historical monthly prices, and also compared offerors’ prices and indirect rates for the largest required labor category. Both Harding and SAIC were also given the opportunity during discussions to provide further cost information supporting their burdened labor rates. Finally, the GAO found reasonable the agency’s assessment of strengths to certain aspects of Harding’s proposal, noting that SAIC was likely not prejudiced by the strengths.
If an agency contemplates conducting a price realism analysis as part of its proposal evaluation process, it is required to indicate as such in the solicitation, so that offerors are on notice as to how low pricing may be considered by the agency. However, if the agency reserves the right to conduct a price realism analysis, but does not state that it will in fact perform one, disappointed offerors should not anticipate having a protest as to the lack of price realism analysis be sustained. Disappointed offerors should always request a debriefing so as to better understand the reasoning behind the agency’s source selection decision. If the agency expressed concern that the disappointed offeror’s pricing was too low as to indicate a lack of understanding of the requirement, the offeror should check whether such a consideration was within the terms of the solicitation. If it was not, there may be sustainable grounds to protest.