Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest sustained.
1. Rejection of a bid as nonresponsive for failing to provide the price for one of many line items included in the bid schedule was improper, where the item for which the price was omitted is divisible from the solicitation’s overall requirements, de minimis as to total cost, and would not affect the competitive standing of the bidders; the omission should be waived as a minor informality under such circumstances.
2. Rejection of a bid as nonresponsive because it was unbalanced is improper where the agency failed to conduct a risk analysis to determine whether the protester’s unbalanced bid posed an unacceptable risk to the government, as required by Federal Acquisition Regulation § 15.404-1(g).
General Counsel P.C. Highlight:
W.B. asserts that the agency unreasonably rejected its bid. W.B. claims the omission of the one line item price in its bid was a waivable minor informality and did not render the bid nonresponsive. GAO first states that there is no dispute that W.B. failed to submit a price for line item 0036 of the IFB’s bid schedule. However, while W.B.’s bid omitted the price for line item 0036, it provided prices for all other of the tree removal line items. Next, GAO states that to be responsive a bid must constitute an unequivocal offer to perform the exact thing called for in the solicitation such that acceptance of the bid will bind the contractor in accordance with the material terms and conditions of the solicitation. Because the failure to include a price for an item evidences a bidder’s intent not to be bound to perform the item, as a general rule, a bid must be rejected as non-responsive if the bid, as submitted, does not include a price for every item requested by the IFB. However, where the omission pertains to some immaterial defect in or variation of a bid from the exact requirements of the IFB, it can be corrected or waived where it is not prejudicial to other bidders. A defect or variation is immaterial if the effect on price, quantity, quality, or delivery is negligible when contrasted with the total cost or scope of the services being acquired. Thus, a contracting agency may waive the failure to bid on an item as a minor informality if the item for which the price is omitted is divisible from the solicitation’s overall requirements, de minimis as to total cost, and would not affect the competitive standing of the bidders.
Line item 0036 is divisible from the overall ID/IQ contract requirement because the work to be accomplished under the ID/IQ contract will be ordered through the issuance of individual task orders. Because the agency was not obligated to order any of indefinite-quantity work, this line item cannot be reasonably said to be an essential or integral part of the overall contract. Moreover, the price for line item 0036 is de minimis as to the total cost and would not affect the competitive standing of the bidders. In this regard, the estimate in the revised IGE for line item 0036 was $187 per tree with an extended price of $7,480. This amount represents less than .07 percent of the IGE for the total contract cost of $10,304,987.10. In addition, it is evident from W.B.’s bid pricing W.B. priced its tree removal services in an economy of scale fashion, its unit prices per tree were lower as the total quantities of trees became higher. Thus, it would be logical to assume that W.B.’s bid for the removal of 21 to 50 trees would be lower than its bid for 11 to 20 trees. However, even assuming that W.B. would have priced line item 0036 at the same price as for removal of 11 to 20 of the same-sized trees (line item 0030), that is, $275, the maximum total price for this line item would be $11,000, which is .12% of W.B.’s overall bid price of $8,984,611.70. Considering that the price of line item 0036 in comparison to the overall contract cost is much less than 1%, W.B.’s omission of the line item pricing for item 0036 is clearly de minimis as to the total cost. Accordingly, the agency’s rejection of W.B.’s bid as nonresponsive, because it did not include a price for line item 0036, was improper.
The agency also concluded that 33 line items in W.B.’s bid were 50% over the revised IGE, 59 items were 30% over the revised IGE, and 54 items were more than 50% under the revised IGE. The contracting officer determined that this analysis provided sufficient evidence to indicate the presence of unbalanced pricing in W.B.’s bid and that the bid should be rejected as nonresponsive. W.B. argues that the rejection of its bid on this basis did not comply with FAR §15.404-1(g). GAO states that the IFB included the clause at FAR §52.214-19(d), a materially unbalanced provision regarding the line items. FAR §15.404-1(g)(1) provides that unbalanced pricing exists when, despite an acceptable total evaluated price, the price of one or more contract line items is significantly overstated or understated, as indicated by the application of cost or price analysis techniques. While unbalanced pricing may increase risk to the government, agencies are not required to reject an offer solely because it is unbalanced. Rather, where the contracting officer receives an unbalanced bid or offer, the contracting officer is required to consider the risks to the government associated with the unbalanced pricing in making the award decision, and whether a contract will result in unreasonably high prices for contract performance. An offer properly may be rejected if the contracting officer determines that the lack of balance in the bid or offer poses an unacceptable risk to the government. GAO will review for reasonableness both an agency’s determination as to whether an offeror’s prices are unbalanced, and an agency’s determination as to whether an offeror’s unbalanced prices pose an unacceptable risk to the government.
The record shows that the contracting officer’s determination that W.B.’s bid was unbalanced was reasonable, given the numerous line items where W.B.’s prices were significantly higher or lower than the IGE. However, a bid or offer may not be rejected merely because it is unbalanced. Instead, FAR §15.404-1(g)(2), (3) requires that the contracting officer consider the risks associated with the unbalanced pricing and only reject an unbalanced bid or offer where it is determined that the lack of balance posed an unacceptable risk. Here, there is no contemporaneous documentation indicating that the contracting officer determined that W.B.’s bid was materially unbalanced in accordance with FAR §52.214-19(d), or that this lack of balance posed an unacceptable risk in accordance with FAR §15.404-1(g). The only further explanation of the contracting officer’s determination here is provided in an affidavit provided in response to this protest, where the contracting officer simply stated that “[t]he number of such items and the reasonable potential for greater cost of ordering significantly higher cost items caused me to reasonably doubt that the Protester’s bid would result in the lowest overall cost to the Government, even though it may have been the lower evaluated bid.” Thus, the record is devoid of any evidence to show that the contracting officer conducted any type of analysis of the unbalanced line items to consider the risks to the government associated with the unbalanced pricing in making the award decision. Accordingly, GAO finds unreasonable the agency’s rejection of W.B.’s bid as materially unbalanced because the contracting officer failed to perform the risk analysis required by FAR §15.404-1(g). The protest is sustained.