The need to strike a balance on price in proposals

The need to strike a balance on price in proposals

Contractors are left to strike a balance in pricing for proposals. Bid too low, and the government might find it unrealistic and adjust up – making the proposal no longer competitive. Bid too high, and risk that another offeror with a substantially lower priced will win the contract.

Protesting contractors: Energy Enterprise Solutions LLC (EES), Germantown; and Digital Management Inc. (DMI), Bethesda

Contracting agency: Department of Energy

Protest issue: Whether the proposed cost were realistic.

GAO decision, Feb. 7, 2012: Denied.

Post-mortem: EES and DMI protested the award of a contract for information technology support services to ActioNet Inc. of Vienna, based on their allegation that DOE did not apply a correct cost realism standard in its evaluation.

The solicitation for information technology support services dictated most variables related to total estimated cost, leaving little room for differences among the offerors. Nonetheless, both protestors submitted proposals that included “significantly lower proposed compensation, coupled with the absence of explanation for the significant departure.” DOE determined that neither protestor offered realistic costs and their proposed price was adjusted upward. GAO agreed with the decision.

Conversely, GAO denied another protest in January that alleged that Phacil Inc. in Arlington should not have won a contract, based on the fact that its cost was not realistic. The agency argued, and GAO agreed, that a reasonable cost realism analysis was done.

So what’s the standard? According to the GAO in the EES/DMI decision, cost realism evaluation “need not achieve scientific certainty.” That isn’t exactly reassuring for contractors trying to prepare a competitive proposal.

My best advice to potential offerors is this: Comply with every iota of the solicitation and if you are going to deviate, provide copious explanation as to why.