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Sunday, January 12, 2014

Unfair and reasonable price and ranking conditions in solicitations

It is one thing to carefully tailor specifications to meet minimum needs. Another to tailor competition. And yet another to tailor out any judgment or consideration process. The following is another from Lexology.com (reg. req'd.), in association with the Association of Corporate Counsel, and its excellent coterie of contributors. It involves US federal government contracts and its laws and regulations.

This is a selection of excerpts from the article. You will need to read the whole article for context, citations, sources, etc.

Beware of protest-proof procurements by Thomas P. Barletta , Peter L. Wellington, Paul R. Hurst , Michael J. Navarre and Anthony Rapa, of the firm Steptoe & Johnson LLP
Some federal government agencies are taking extraordinary steps to try to insulate their source selection decisions from the bid protest process. Below, we discuss three examples of this phenomenon: (1) solicitations that call for awarding the contract to the highest technically rated offeror who proposes a “fair and reasonable” price; (2) solicitations that prescribe specific point scores for various technical features and call for ranking the technical merits of the proposals based solely on the total points earned; and (3) solicitations that provide for very limited, highly circumscribed cost/price evaluations.

Occasionally solicitations will provide for award to the highest technically rated offeror who has proposed a “fair and reasonable” price. Under such an approach, all proposals are subject to a threshold determination as to whether their proposed prices are “fair and reasonable.” Proposals that clear this bar are then evaluated strictly according to their respective technical merits. Price does not otherwise factor into the agency’s analysis of which proposal offers the best value to the government. The solicitation may even explicitly assert that the agency will not engage in a price/technical tradeoff analysis in evaluating proposals. An offeror who waits until after award to file a protest asserting that its price advantage outweighed the awardee’s technical advantage will likely be met with a motion to dismiss the protest as an untimely challenge to the terms of the solicitation. Therefore, potential offerors who believe that their pricing is likely to provide them with a competitive advantage should consider filing pre-award protests on the ground that this approach is contrary to fundamental principles of procurement set forth in the Federal Acquisition Regulation (FAR), statutes and case law.
[I point out here that this RFP format is specifically authorized in Guam procurement law (5 GCA §§ 5216, and 5121) for the procurement of professional services. Indeed, it is the form prescribed for the method of source selection for professional services first adopted, and later abandoned, by the ABA Model Procurement Code.]
It is well-established that source selection officials are required to meaningfully consider price in making source selection decisions. The FAR provides that "[w]hile the SSA may use reports and analyses prepared by others, the source selection decision shall represent the SSA’s independent judgment. The source selection decision shall be documented, and the documentation shall include the rationale for any business judgments and tradeoffs made or relied on by the SSA, including benefits associated with additional costs." See FAR § 15.308.

Furthermore, agencies are required by statute to make award “to the responsible source whose proposal is most advantageous to the United States, considering only cost or price and the other factors included in the solicitation.” See 41 U.S.C. § 3703(c) (formerly 41 U.S.C. § 253b(d)).

The Government Accountability Office (GAO) has consistently upheld these principles in requiring agencies to consider price when making best value determinations, and has sustained protests where agencies have failed to engage in price/technical tradeoff analysis.

In Cyberdata, GAO sustained a protest where a solicitation provided for downselecting quotations based on technical factors only. Offerors were to be ranked strictly based on their technical scores without regard to price, and the top twelve were to be invited to give oral presentations. Price was to be considered only when a smaller number of quotations were chosen from among the top twelve as offering the best value. GAO sustained the protest, holding that
"a best value analysis necessarily encompasses consideration of an offeror’s price or cost since, to be meaningful, a best value determination requires a weighing of the value and benefits associated with a firm's approach against their associated cost to the government. In a best value procurement, it is the function of the source selection authority to perform a tradeoff between price and non-price factors, that is, to determine whether one proposal's superiority under the non-price factor is worth a higher price. Even where, as here, price is stated to be of less importance than the non-price factors, an agency must meaningfully consider cost or price to the government in making its selection decision. Thus, before an agency can select a higher-priced proposal that has been rated technically superior to a lower-priced but acceptable one, the decision must be supported by a rational explanation of why the higher-rated proposal is, in fact, superior, and explaining why its technical superiority warrants paying a price premium."
It is also noteworthy that GAO invoked the “significant issue” exception to its timeliness rules in the Cyberdata protest, which had been filed after award, because the subject was “one of widespread interest to the procurement community.” However, there can be no assurance that GAO would invoke this rarely-used exception again in a similar situation, so it would be prudent for potential offerors to file pre-award protests when faced with solicitations that provide for award to the highest technically rated offeror with a “fair and reasonable” price.

We have also seen examples of solicitations that prescribe specific point scores for various technical features and call for ranking the technical merits of the proposals based solely on the total points earned. Under such an approach, the agency will merely confirm the presence or absence of the prescribed technical features in each proposal, add up the prescribed points for each feature found to be present, and select the proposal(s) with the highest point total(s). In some cases, the offerors may even be instructed to score themselves by submitting self-scoring worksheets. In any event, under this approach, the technical evaluation consists merely of mechanically comparing offerors’ point scores, without any judgments or analyses regarding the actual qualitative differences between the technical proposals. An offeror who waits until after award to file a protest asserting that its technical proposal is qualitatively better than other proposals regardless of their respective point scores will likely be met with a motion to dismiss the protest as an untimely challenge to the terms of the solicitation. Therefore, potential offerors who believe that their technical proposals will contain qualitative advantages not adequately captured by the point scores should consider filing pre-award protests on the ground that this approach is contrary to fundamental principles of procurement law.

In a number of post-award protests, GAO has strongly criticized technical evaluations that relied exclusively on point scores. It has consistently held that “[a]n award decision is not reasonable . . . where the agency makes its award decision based strictly on a mechanical comparison of the offerors’ total point scores.”

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