This article is an excerpt from the 2020 edition of The Art of Tendering: A Global Due Diligence Guide, which is available for purchase.
In its February 2019 decision in Apogee Engineering, LLC, the U.S. Government Accountability Office (GAO) ordered a re-evaluation after finding that the government failed to maintain proper evaluation records. The dispute dealt with a Department of Transportation Request for Proposals (RFP) for the provision of security assessment services. The complainant argued that the contract award went to an abnormally low bid and that the government failed to conduct a proper price realism analysis:
Price Realism
Apogee argues that the agency failed to perform a reasonable price realism analysis of CASE’s proposal. In this regard, Apogee argues that CASE’s price was too low to accomplish its proposed technical approach. Comments & Supp. Protest at 10. For the reasons that follow, we sustain this aspect of Apogee’s protest.
In addition to assessing price proposals for reasonableness, the RFP provided that proposals would be assessed for realism, explaining that the purpose of this analysis was to determine if the offeror’s proposed prices reflected an understanding of, and addressed the RFP’s requirements. RFP at 52. The record shows that CASE’s proposed price was 22 percent lower than the independent government cost estimate (IGCE). AR, Tab 10, Award Summary, at 18. In evaluating CASE’s pricing, the agency found that “while significantly below the IGCE, CASE’s price proposal was not an outlier among all [price] proposals, and the Technical Evaluation Panel separately assessed each offeror’s cost proposal for price realism and reasonableness.” Id. The agency specifically found that CASE would provide discounted labor rates and its proposed labor costs would be held constant for the base year and option year 1, and escalated at a rate of 1 percent for option years 2-4. AR, Tab 16, Cost Evaluation, at 6. The agency also found CASE’s labor rates “to be reasonable,” further concluding that CASE’s price proposal was “reasonable.” Id.
The GAO agreed with the complainant, finding that the government’s contemporaneous evaluation records failed to show that the evaluators had conducted any meaningful analysis of the elected bidder’s pricing against that bidder’s proposed technical approach:
We find that the record fails to provide a basis for our Office to conclude that the agency reasonably evaluated the realism of CASE’s pricing. As our Office has stated, an agency’s assessment of price realism requires a consideration of the offeror’s technical approach. See, e.g., GiaCare and MedTrust JV, LLC, B-407966.4, Nov. 2, 2016, 2016 CPD ¶ 321 at 9; Solers Inc., B-409079, B-409079.2, Jan. 27, 2014, 2014 CPD ¶ 74 at 7. In this respect, we have stated that the comparison of offerors’ price proposals in the context of a price realism analysis is an inherently limited methodology given the requirement to consider each offeror’s unique technical approach. GiaCare and MedTrust JV, LLC, supra; see Health Net Fed. Servs., LLC, B-401652.3, B-401652.5, Nov. 4, 2009, 2009 CPD ¶ 220 at 21.
The contemporaneous record contains no meaningful consideration of the agency’s findings with respect to CASE’s pricing against its proposed technical approach. The record does not show that the agency considered whether CASE’s discounted labor rates would introduce risk to its proposed ability to capture incumbent employees. Additionally, the agency’s mention of CASE’s low escalation rates as a “cost savings” measure fails to account for potential risks to retention, despite CASE’s claims to the contrary. The agency’s post-comments assertion that it reviewed CASE’s price proposal in conjunction with its technical proposal is not borne out by the contemporaneous record.
Where a solicitation provides for the evaluation of price realism, the agency must conduct such an evaluation in a manner that is reasonable. GiaCare and MedTrust JV, LLC, supra. In this case, while the solicitation provided for a price realism evaluation, the contemporaneous record contains nothing documenting an assessment of CASE’s proposed pricing in conjunction with the firm’s technical approach. While the record does show that the agency was aware of CASE’s low price, the record suggests that the agency was only concerned with whether CASE’s price was reasonable, i.e., whether it was too high. Although the agency has provided post-comment assertions on the matter, it has failed to establish that it performed an adequate price realism evaluation. Accordingly, we sustain Apogee’s protest regarding the evaluation of price realism. See Valor Healthcare, Inc., B-412960, B-412960.2, July 15, 2016, 2016 CPD ¶ 206 at 8.
The GAO therefore ordered a re-evaluation and directed that the originally awarded contract be terminated and awarded to the complainant if the complainant’s submission proved to be the best bid after the re-evaluation.
As this case illustrates, purchasing institutions need to follow through with their evaluation plans once they have committed to those plans in their solicitation documents, and they must maintain real-time records of their evaluations if they hope to defend any resulting contract award decisions against subsequent challenge.
