Link: GAO Opinion
Agency: Department of Homeland Security
Disposition: Protest denied.
Keywords: Price realism analysis; misleading discussions
General Counsel P.C. Highlight: In a fixed price contract it is unobjectionable for a offeror to submit a below cost proposal as the contractor bears the risk and an agency is not required to afford offerors all-encompassing discussions.
GAO denied the protest of Vizada Inc. where it was denied award of a contract under a request for proposals (RFP), issued by the Department of Homeland Security, United States Coast Guard, for maritime data communications system to support the Coast Guard’s large cutter fleet.
Vizada first asserts that the agency failed to conduct a proper price realism analysis and that the awardee’s price was unrealistically low. GAO stated that where, as here, a fixed-price contract is to be awarded, a solicitation may provide for the use of a price realism analysis to measure an offeror’s understanding of the requirements or to assess the risk inherent in a proposal. As GAO has repeatedly held, the depth of an agency’s price realism analysis is a matter within the agency’s discretion. In reviewing protests challenging price realism evaluations, GAO’s focus is whether the agency’s review was reasonable and consistent with the terms of the solicitation. As a general matter, it is unobjectionable for an offeror to submit a below-cost proposal for a fixed-price contract, since fixed-price contracts generally are not subject to adjustment during performance, and the contractor, not the agency, bears the financial risk of cost overruns.
The RFP stated that offerors’ fixed-priced proposals would be evaluated for price realism to determine if there were proposals that were unrealistic in terms of overall price or reflective of an inherent lack of management and/or technical competence or comprehension of the requirements. The awardee’s proposal was the lowest priced and within 23% of the independent government cost estimate (IGCE). Because the awardee’s price was significantly lower than the prices in the other proposals, an additional review of the price proposal was undertaken to ascertain if it was unrealistically low. The agency concluded that the price was realistic, and reflected an exercise of business judgment, rather than a lack of competence, or a lack of understanding the RFP requirements. Based on GAO’s review of the record, GAO finds that the agency’s analysis of the awardee’s price was reasonable and consistent with the terms of the solicitation.
Vizada challenges the agency’s evaluation of the awardee’s proposal asserting that the agency should have disqualified the awardee as technically unacceptable for its failure to meet the mandatory technical requirements of the solicitation. GAO states that the evaluation of technical proposals is a matter within the agency’s discretion, and GAO will not disturb an agency’s judgments regarding the relative merits of competing proposals absent a showing those judgments are unreasonable or inconsistent with the RFP’s evaluation criteria. In this regard, a protester’s mere disagreement with the agency’s judgments does not render an evaluation unreasonable.
GAO finds that the agency reasonably interpreted and understood the awardee’s explanation “subject to space segment availability” as a realistic statement about the limits of satellite space segment availability. Because the agency did not set a maximum order amount and, at some point, all offerors’ satellites would reach their maximum capacity of available space segments, it would be impossible for any offeror to guarantee, based upon only the satellites proposed, that it could meet the agency’s unlimited demand for bandwidth. Also, Vizada’s assertion that the awardee cannot comply with the 36 Mbps requirement is based upon the assumption that the awardee’s proposal language “maximum of 18 Mbps” in its section 5.3.6 response was meant to limit its total bandwidth capacity to 18 Mbps. The agency, however, did not read and evaluate the awardee’s statement of work (SOW) section 5.3.6 in the same manner as Vizada, particularly given that the awardee’s proposal otherwise demonstrated compliance with the 36 Mbps requirement. Instead, the agency understood this phrase to address the requirements in section 5.1 of the SOW that required the contractor to provide a total of 6 Mbps of Ku-band bandwidth in year one; a total of 12 Mbps of Ku-band bandwidth in year two; and for years three through five a total of 18 Mbps of Ku-band bandwidth. GAO finds the agency’s interpretation to be reasonable.
Vizada also claims that the awardee misrepresented the status and condition of one of the satellites it proposed, and that the agency failed to reasonably find and evaluate this misrepresentation where the satellite has reached its end-of-life status and will not be available to fulfill the requirements of the contract because it is scheduled to be replaced in the third quarter of 2011. GAO states that an offeror’s misrepresentation that materially influences an agency’s consideration of its proposal generally provides a basis for proposal rejection or termination of a contract award based upon the proposal. For a protester to prevail on a claim of material misrepresentation, the record must show that the information at issue is false. However, the record provided no convincing evidence, beyond Vizada’s speculation and innuendo, that the awardee knew or should have known that the satellite would be replaced in the near term. The fact that the satellite will in fact be replaced early in the contract does not show that the agency or the awardee knew or should have known of the replacement prior to contract award.
Finally, Vizada argues that the discussions were misleading because the agency failed to notify it of its two assigned weaknesses under the management approach evaluation factor, and one weakness under the relevant past performance factor. GAO states that the Federal Acquisition Regulation (FAR) requires agencies conducting discussions to inform offerors of deficiencies, significant weaknesses, and adverse past performance information to which the offeror has not had the opportunity to respond. Although discussions must address deficiencies and significant weaknesses identified in proposals, the precise content of discussions is largely a matter of the contracting officer’s judgment. Agencies are not required to “spoon-feed” an offeror during discussions; agencies need only lead offerors into the areas of their proposals that require amplification or revision. An agency is not required to afford offerors all-encompassing discussions, or to discuss every aspect of a proposal that receives less than the maximum score, and is not required to advise an offeror of a minor weakness that is not considered significant, even where the weakness subsequently becomes a determinative factor in choosing between two closely ranked proposals.
The record shows that the agency did not conduct misleading discussions. For example, the record shows that none of the proposal weaknesses referenced in the protest were significant weaknesses. While the protester makes much of the agency’s terminology in its technical evaluation consensus report to the contracting officer, which listed all strengths and weaknesses as “significant discriminators,” GAO does not believe that the weaknesses assigned to Vizada under the management approach or relevant past performance evaluation factors were matters that the FAR required to be brought to Vizada’s attention. The protest is denied.