The growing significance of price in contract bids

The growing significance of price in contract bids

More and more we are seeing agencies place greater emphasis on price — much more than they have in the past. That requires bidders to strike a balance between price and the quality of the services they are offering if they want to win a contract.

Protesting contractor: MVM Inc., Ashburn

Contracting agency: Department of Justice, Drug Enforcement Agency (DEA)

Protest issue: Whether or not price should have been weighed so heavily in the award decision.

GAO decision, May 26, 2011; public decision released May 1, 2012: Denied.

Post-mortem: The original solicitation was issued in May of 2010, with DEA listing five labor categories for linguists and supervisors that would serve field offices around the world. AllWorld was initially excluded from the competitive range, offering a rate that the agency deemed unreasonably low, and filed a protest with the GAO. The DEA took corrective action, allowing AllWorld to submit an offer. The company ultimately won the contract.

There are several interesting issues raised by this case. Overall MVM’s offer was rated as Excellent while AllWorld’s offer was rated as Very Good. In the end though, the agency’s source selection authority could not overlook MVM’s price, which was significantly higher. In documenting her decision the SSA stated, “It is not in the Government’s best interest to pay a price premium of over $72 million unless the technical benefits conferred by the premium offeror are enormous or the lower-priced Offeror is not able to perform the work.”

This is the new reality: Budget cuts and pressure to make budgets go much further are causing agencies to look much harder at what they are getting in return for a premium and whether it’s worth the additional money.

Worth noting too that AllWorld was excluded from the competition and could have simply walked away — as most contractors probably would have done. But by filing a pre-award protest they were able to have their offer considered and ultimately won a contract worth more than $309 million. Not every award or exclusion from competition should be protested, but contractors should look very carefully at all their options to determine whether a protest will give them another chance to compete.