Don't Mistake a High Price for a Weakness or a Deficiency

Many offerors may believe that if they price their initial proposals too high, the agency will so advise them during discussions. However, a high price in an offer is not a weakness or a deficiency, according to the Government Accountability Office (“GAO”) and therefore, it need not be raised in discussions. Joint Logistics Managers, Inc., B-410465.2, .3, May 5, 2015.

Joint Logistics protested an award to Prime Tech International, alleging that the US Marine Corps (“USMC”) failed to engage in meaningful discussions concerning its price for support services. The solicitation stated that award would be made on a best value basis, considering technical, past performance and price. The non-price factors were significantly more important than price. Prime Tech’s price was $16.6 million and its technical rating was “good, low risk”, while Joint Logistics’ price was $19.5 million and its technical rating was “outstanding, low risk.” When the USMC entered into discussions, it advised Joint Logistics that its proposal contained no weaknesses or deficiencies.

The source selection authority found the prices of both offers to be fair, reasonable and realistic, but the technical superiority of Joint Logistics was not justified given its price premium. The agency made award to Prime Tech. Joint Logistics’ protest was that the USMC never advised the firm that its price was considered unreasonably high, and the government knew that this price was too high to receive award.

GAO denied the protest, noting that discussions with offerors must be meaningful, and must lead an offeror into the areas of its proposal requiring amplification or revision, including significant weaknesses and deficiencies. However, the GAO has long held that the decision to inform an offeror that its price is too high during discussions is considered discretionary. Only if the agency finds the price unreasonable must it be discussed. The USMC found Joint Logistics’ price fair and reasonable based on other offers received, and the agency was not required to raise the issue of price during discussions.

GAO also rejected Joint Logistics allegation that its higher price was a significant weakness. The GAO noted that a significant weakness is a flaw that appreciably increases the risk of unsuccessful contract performance. FAR 15.001. A deficiency is a material failure to meet a requirement that increases the risk of unsuccessful contract performance to an unacceptable level. Id. GAO noted that neither definition applies to circumstances where a price is significantly high or too high as a function of competitive standing. A contracting officer has discretion, rather than an obligation, to conduct discussions of whether an offeror’s price is considered to be too high or too low. FAR 15.306(e)(3).

This situation is a reminder that offerors must price their proposals competitively, and do their best to provide their best price in their initial offer. FAR 52.215-1(f)(4), Instructions to Offerors-Competitive Acquisitions, states that the government intends to make award without discussions, and that “initial proposal[s] should contain the offeror’s best terms from a cost or price and technical standpoint.” However, the government reserves the right to conduct discussions if necessary.

The alternate to this clause, which explicitly contemplates holding discussions, also states that the offeror’s “initial proposal should contain the offeror’s best terms from a cost or price and technical standpoint.”

Offerors shouldn’t make the mistake of assuming that the agency will always hold discussions, and should never assume that an agency will tell you that your price is too high if they do hold discussions.

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