This article is an excerpt from the 2023 edition of The Art of Tendering: A Global Due Diligence Guide.
As recent U.S. Government Accountability Office (GAO) cases illustrate, price evaluations remain a leading source of bid protests. These cases serve as a reminder to public institutions across all jurisdictions of the importance of establishing and implementing defensible price evaluation procedures.
For example, in its August 2021 decision in Africa Automotive Distribution Services, Ltd., the GAO ordered the government to perform a new price evaluation or redraft and re-tender its requirements based on revised price calculation rules. The dispute dealt with a Request for Proposals (RFP) issued by the Department of the Army for the provision of commercial heavy duty vehicles. The complainant challenged the Department’s shipping cost calculations since those costs were not based on the actual shipping routes required to deliver the vehicles:
On October 13, 2020, US21 filed a protest with our Office, and on November 23, the protester filed its comments on the agency report and a supplemental protest. Protest (B-418246.4, B-418246.5) at 1; Comments & Supp. Protest at 1. Collectively, the protester argued that the Army’s evaluation of the protester’s transportation costs was unreasonable because the agency used shipping routes for the calculation that bore no resemblance to the actual shipping routes from Ukraine to Somalia and Ukraine to Iraq.
While the Department performed a re-evaluation to address the complainant’s concerns, the GAO found that the re-evaluation was still flawed since the revised shipping costs were calculated on a port-to-port rather than door-to-door basis:
We find that by using the described approach (i.e., evaluating only the estimated port-to-port rates), the agency failed to estimate the cost of transporting the vehicles from an offeror’s manufacturing facility–F.O.B. origin–to the port of embarkation. Thus, by declining to evaluate a distinct component of the offerors’ estimated transportation costs–a component that would likely vary between the offerors–the Army failed to meaningfully assess the cost of performance between the competing proposals, as required by the RFP. Accordingly, we conclude that the agency’s evaluation was not consistent with the solicitation.
The GAO directed the Department to either perform a re-evaluation based on the original solicitation, or redraft and re-tender its solicitation to reflect revised price evaluation rules.
Further, in its August 2021 decision in Deloitte Consulting, LLP, the GAO ordered a re-evaluation after finding that the government gave an unfair advantage to the incumbent by failing to properly factor the incumbent’s transition costs into the price evaluation. The dispute dealt with a Task Order Request for Proposals (TORFP) issued by the Department of Health & Human Services for information technology services. While the Department argued that its solicitation was ambiguous with respect to whether transition costs were part of the price evaluation, the GAO disagreed, finding that transition costs were clearly contemplated in the price evaluation:
Here, we disagree with the agency’s assertion that the solicitation was ambiguous regarding transition. As noted above, the agency sought questions from offerors, and incorporated its responses to those questions into the solicitation. Further, the question at issue was clearly posed by a non-incumbent offeror seeking to eliminate what it perceived as an unfair advantage for the incumbent. As discussed above, the agency would not have been obligated to neutralize AFS’s advantage as the incumbent; however, that is clearly what its response to the offeror’s question sought to do. Specifically, in response to the concerns expressed about AFS’s incumbent advantage during the transition period due to substantially lower transition costs, the agency unambiguously stated: “The incumbent will be required to propose all transition costs along with full performance of the PWS requirements. The incumbent should not be advantaged as the prior contract will have expired prior to the start date for the new award.” AR, Tab 1l, Questions and Answers at Question No. 16 (emphasis added). It is difficult to imagine how the agency could have more clearly stated its intent to address the questioner’s concerns. The agency’s assertion that the solicitation was ambiguous is without merit.
After determining that the proper assessment of transition costs could have impacted the overall evaluation, the GAO ordered the Department to either perform a re-evaluation that included those transition costs or amend its solicitation and seek new bids based on clarified price evaluation rules.
Similarly, in its December 2021 decision in Meridian Knowledge Solutions, LLC, the GAO ordered the government to perform a new price evaluation based on its original evaluation rules, or redraft and re-tender its requirements based on a revised price evaluation plan. The dispute dealt with a Request for Quotations (RFQ) issued by the Department of Homeland Security for information technology support services that contemplated multiple blanket purchase order (BPA) contract awards for periods of up to ten years.
The GAO determined that the Department’s price evaluation was unreasonable since the solicitation required vendors to price the base year and all nine option years for evaluation purposes, but bidders were awarded contracts for less than ten years based on their actual availability. This allowed bidders to artificially lower their prices for later years when they would not be providing any services and distort the price evaluation to their advantage:
In this case, the agency’s decision to consider the later, lower-priced option years for vendors that could not perform in those years had the effect of making those vendors seem more attractively priced than they actually were. Moreover, because the solicitation did not contemplate BPAs of varying lengths, it was not clear to all vendors that some vendors, but not others, would be able to freely submit lower option-year pricing confident that their FSS terms would preclude the issuance of a BPA covering those years. Accordingly, comparing all vendors on the basis of ten years of pricing when several vendors knew they would be unable to perform all ten years was clearly irrational, and this may have worked to the competitive prejudice of the protester.
The GAO determined that allowing shorter contract awards was inconsistent with the rules of the RFQ and ordered the Department to re-evaluate the quotations based on full-term awards or revise and re-tender its RFQs with evaluation rules that were more accurately aligned to shorter-term contract awards.
Finally, in its June 2022 decision in Apprio, Inc., the GAO ordered a re-evaluation after finding that the government was unable to provide records to show that it had conducted a complete price evaluation. The dispute dealt with a Request for Quotations (RFQ) issued by the Department of Homeland Security for training services that contemplated a cost realism analysis. However, the GAO concluded that “the contemporaneous evaluation record does not demonstrate any evaluation of the essential costs elements” and that those records were “inadequate for our Office to conduct a meaningful review of the agency’s evaluation judgments.” More specifically, the GAO noted that the evaluation record did not include any consideration of cost escalation over the life of the contract:
In sum, we conclude that FEMA’s response to the protest does not show that the agency evaluated the realism of Leidos’s direct labor rates or the escalation of those rates for the option years. We conclude that the agency’s response to the protester’s arguments relies on judgements that are not found in the contemporaneous record and that the agency does not contend were made contemporaneously.
The GAO ordered the Department to conduct a re-evaluation so that its full price assessment was supported with proper evaluation records.
As these cases illustrate, flawed price evaluations can undermine the integrity of evaluation and award decisions and subject those decisions to successful legal challenge.
