This article is an excerpt from The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its April 2019 decision in Total Home Health, the U.S. Government Accountability Office (GAO) ordered a re-bid after finding that the complainant was improperly directed to make price adjustments during an evaluation process. The dispute dealt with a Request for Proposals (RFP) issued by the Department of Veterans Affairs for medical services and equipment.
The complainant claimed that the agency misled it during evaluation discussions by leading it to believe that incremental improvements in some of the price categories could impact the outcome when, in fact, there was a significant distance between the complainant’s pricing and its competitor’s pricing:
Misleading Discussions Regarding Price
THH argues that the VA conducted misleading discussions regarding its price because the agency directed the protester to concerns regarding its prices for three CLINs which, when combined, were significantly smaller than the difference between the protester’s overall price and the awardee’s overall price. The protester contends that the agency’s discussions misled it into believing that reducing its prices for those three CLINs would make its proposal competitive for award under the RFP’s LPTA criteria.
The GAO agreed with the complainant, finding that the agency conducted an improper evaluation process since it failed to provide sufficient feedback to allow the complainant to properly improve its price offer:
Discussions, when conducted, must identify proposal deficiencies and significant weaknesses and should discuss other aspects that reasonably could be addressed in order to materially enhance the offeror’s potential for receiving award. Federal Acquisition Regulation (FAR) §15.306(d)(3); Serco Inc., B-405280, Oct. 12, 2011, 2011 CPD ¶ 237 at 11. When an agency engages in discussions with an offeror, the discussions must be “meaningful,” that is, sufficiently detailed so as to lead an offeror into the areas of its proposal requiring amplification or revision. See FAR §15.306(d)(3); Southeastern Kidney Council, B-412538, Mar. 17, 2016, 2016 CPD ¶ 90 at 4. Agencies, however, are not required to “spoon-feed” an offeror during discussions by identifying every possible area where a proposal might be improved or suggesting alternative approaches. Vizada Inc., B-405251 et al., Oct. 5, 2011, 2011 CPD ¶ 235 at 11. Agencies may not mislead an offeror–through the framing of a discussion question or a response to a question–into responding in a manner that does not address the agency’s concerns. MCT JV, B-311245.2, B-311245.4, May 16, 2008, 2008 CPD ¶ 121 at 15-16; Multimax, Inc., et al., B-298249.6 et al., Oct. 24, 2006, 2006 CPD ¶ 165 at 12; Metro Mach. Corp., B-281872 et al., Apr. 22, 1999, 99-1 CPD ¶ 101 at 6.
Where an offeror’s price or cost is high in comparison to competitors’ prices or the government estimate, but is not considered unreasonable, the agency may, but is not required to, address the matter during discussions. IAP World Servs., Inc., B-297084, Nov. 1, 2005, 2005 CPD ¶ 199 at 4; AT&T Gov’t Solutions, Inc., B-413012, B-413012.2, July 28, 2016, 2016 CPD ¶ 237 at 26. Where an agency elects to conduct discussions with an offeror concerning price, it is not required to advise the offeror of the specific areas where its price or cost is too high or to provide a specific price that the offeror must meet; simply advising the offeror that its price is too high is sufficient. Northstate Heavy Equip. Rental, B-416821, Dec. 19, 2018, 2018 CPD ¶ 430 at 6.
While the GAO confirmed that it would have been adequate for the agency to simply inform the proponent that its price was too high, and then let the proponent make its own decisions regarding any price improvements in its final submissions, the GAO found that agency misled the proponent by focusing on specific pricing categories that would not impact the outcome of the price evaluation. The GAO agreed that this led the proponent to believe that its price was competitive in the other pricing categories when in fact its overall pricing was about $10 million higher than its lowest-priced competitor:
Thus, had the VA simply advised THH that its price was too high, and declined to provide additional information, we think that this would have satisfied the agency’s obligation to ensure that the discussions with the protester were meaningful. See Northstate Heavy Equip. Rental, supra.
As the record shows, however, THH asked the VA for additional information regarding the areas of its price proposal that were considered too high, and the agency elected to respond by identifying three CLINs. The protester argues that the identification of these three CLINs was misleading, because the protester understood the agency’s response to the question to indicate that they were the only areas where the price was too high. Protester’s Comments at 4. We agree with the protester.
As THH notes, the difference between the protester’s and awardee’s initial prices was approximately $10 million, or about 30 percent. See MOL at 4. For this reason, even if the protester had reduced its prices for CLINs 5, 11, and 14 to $0, the protester would not have been in line for award.
Although the VA’s response to the protest explains that the agency’s discussions identified only those CLINs where THH’s prices were high relative to the IGE, rather than to other offerors, these considerations were not communicated to the protester. Instead, the protester was advised that the agency “anticipated lower pricing” for the three identified CLINs. Protest, Exh. 7e, Email from VA to THH, Dec. 13, 2018. Under these circumstances–the specificity of the agency’s response regarding the three low-value CLINs and the absence of other explanatory information–we think the agency misled the protester during discussions into believing that revision of its price for the three identified CLINs would have been sufficient to enhance the protester’s prospect for award.
We also conclude that the protester was prejudiced by the misleading discussions. Competitive prejudice is an essential element of a viable protest, and we will sustain a protest only where the protester demonstrates that, but for the agency’s improper actions, it would have had a substantial chance of receiving the award. DRS ICAS, LLC, B-401852.4, B-401852.5, Sept. 8, 2010, 2010 CPD ¶ 261 at 21. Here, we recognize that the protester’s final price was ranked fourth-lowest, and was $11.3 million more than the awardee’s final price of $22.5 million. AR, Attach. 5, Price Summary, at 1. Nonetheless, THH submitted a declaration from the president of THH, who stated that, had the agency advised that its price was high in other than the three low-value CLINs, the protester would have been able to “submit a more competitively priced proposal that could have received a contract award.” Protest, Exh. 10, Decl. of THH President, Feb. 4, 2019, at 2.
We conclude that the protester was prejudiced because the agency’s discussions caused the protester to base its final revised price on misleading information. Although the agency and intervenor argue that there is no basis to conclude that the protester would have submitted the lowest price in the absence of these misleading discussions, we cannot assume for purposes of prejudice that the protester would not have submitted the lowest price. See Creative Info. Tech., Inc., B-293073.10, Mar. 16, 2005, 2005 CPD ¶ 110 at 9 (protest based on defective discussions must be sustained unless it is “clear from the record” that the protester was not prejudiced). We therefore sustain the protest.
Given the misleading feedback provided to the complainant, the GAO ordered the agency to conduct a re-bid exercise to obtain new pricing from the competing proponents.
As this case illustrates, while purchasing institutions may not be compelled to conduct dialogue sessions during an evaluation process, or to provide detailed feedback during those sessions to coach proponents on how to improve their bids, to the extent that they do provide proponents with information on how to improve their final offers, that information should not mislead proponents into thinking that they only need to make minor improvements to their initial bids to be competitive, when in fact significant improvements will be required to be competitive. Stated otherwise, any feedback provided to proponents should not put those proponents in a worse position with respect to improving their offers than they would have been had no information been provided to them at all.
