We dismiss this aspect of the protest. Where, as here, fixed unit prices are being offered to the government, a protest that a bid should be rejected solely for being too low does not provide a legally cognizable basis for rejection of the bid. SMC Info. Sys., B‑224466, Oct. 31, 1986, 86-2 CPD para. 505 at 5-6. To the extent that an agency has concern that a firm’s pricing is too low, its recourse lies solely in finding the firm nonresponsible. Id. In making award to Conduit, DEA determined the firm to be responsible, see Federal Acquisition Regulation (FAR) sect. 9.105-2(a)(1), and ALC’s protest based on Conduit’s allegedly low price amounts to a challenge to that affirmative determination of Conduit’s responsibility. Our Office does not consider challenges to affirmative responsibility determinations except in limited circumstances not alleged or present in this case. 4 C.F.R. sect. 21.5 (c) (2006). (AllWorld Language Consultants, Inc., B-298831, December 14, 2006) (pdf)

MSC responds that, whether or not TAL’s warranted rate is accurate, since the solicitation contemplated the award of a fixed-price contract, TAL will only be paid at its warranted rate. In this regard, the Navy points out that the solicitation specifically addressed the government’s redress should the offeror’s ship fail to perform at the warranted fuel consumption rate; under the heading “Contract Terms and Conditions,” the solicitation provides that, if the contractor breaches its fuel or speed warranties, “… the hire [payment] may be equitably decreased, the Charter may be terminated, or the Vessel may be placed off-hire, at Charterer’s option so as to indemnify the Charterer to the extent of such failure.” RFP at II-7. MSC concludes that TAL’s stated fuel consumption rate was the proper basis for evaluating its price. We agree with MSC. As the agency asserts, the contract is fixed-price in that--in light of the provisions that enable the agency to recover from the contractor any increased operation costs due to breaches of the warranted fuel and speed warranties--the contractor will only be entitled to payment based on its warranted fuel consumption rate. Thus, the accuracy of TAL’s warranties is irrelevant. This conclusion is consistent with our decision in United States Lines, Inc., B-197894, Oct. 20, 1980, 80‑2 CPD para. 299 at 2 (ability of awardee to perform at warranted rate of consumption is irrelevant, since contract provisions protect the government if the warranty is breached). The foundation for this analysis is our long-standing view that a below‑cost bid or offer is permissible in a fixed-price environment, since contract payment will be based on the offered price, which is not subject to adjustment during performance barring unforeseen circumstances. See GTSI Corp., B-286979, Mar. 22, 2001, 2001 CPD para. 55 at 5.  (Sealift, Inc., B-298588, October 13, 2006) (pdf)

PHT also argues that Airtronic’s price is unreasonably low. With respect to a fixed-price award, a protester’s claim that an offeror submitted an “unreasonably” low price‑‑even that the price is below the cost of performance--is not a valid basis for protest. An offeror, in its business judgment, properly may decide to submit a price that is extremely low. Diemaster Tool, Inc., B-238877, Apr. 5, 1990, 90-1 CPD para. 375 at 2. An agency decision that the firm can perform the contract at the offered price is an affirmative determination of responsibility, which we will not review except in circumstances not alleged here. Bid Protest Regulations, 4 C.F.R. sect. 21.5(c) (2005). (PHT Corporation, B-297313, December 8, 2005) (pdf)

The protester argues that Ultima's price is too low to be based on the minimum number of personnel required to perform the contract work satisfactorily, and that the agency was remiss in failing to perform a price realism analysis of the quotation. Regarding the protester's assertion that Ultima's price is too low, a protester's claim that another firm submitted an unreasonably low price--or even that the price is below the cost of performance--is not a valid basis for protest. Brewer-Taylor Assocs. , B-277845, Oct. 30, 1997, 97-2 CPD 124 at 4.  (Government Contracts Consultants, B-294335, September 22, 2004) (pdf)

Although TRT generally argues that the agency was required to reject CMC’s quote because it is substantially lower than TRT’s quote, we see no basis to question CMC’s eligibility based upon its price. First, in a fixed-price procurement, the fact that a firm, in its business judgment, submits a price that is low because it may not include any profit, is below-cost, or may be an attempted buy-in, does not render the firmineligible for award, since below-cost pricing is not prohibited. See Property Analysts, Inc., B-277266, Sept. 12, 1997, 97-2 CPD ¶ 77 at 6. Second, to the extent TRT alleges that the RFQ required higher-priced, specialized TRT refinishing products and services that are not reflected in CMC’s price, TRT is factually incorrect. The solicitation did not require any specific approach to accomplish the scope of work’s general performance specifications. While the RFQ’s work statement was derived from TRT’s FSS contract, that contract’s references to TRTspecific approaches and products were deleted by the agency.2 Thus, since the RFQ contains only general performance-based specifications and did not require any unique or specialized TRT methods, TRT’s argument that CMC intends an approach substantially lower in price or different from TRT’s provides no basis to question the firm’s selection.  (The Refinishing Touch, B-293562; B-293562.2; B-293562.3, April 15, 2004) (pdf)

The foundation of our approach to this analysis is our long-standing premise that a below-cost bid or offer is permissible in a fixed-price environment. Even in cases, like here, where an offeror proposes labor rates that are below cost, we have held that the submission of a below-cost or a low-profit offer is not illegal and provides no basis for challenging an award of a firm, fixed-rate contract to a responsible contractor, since fixed-rate contracts are not subject to adjustment during performance, barring unforeseen circumstances. ORI, Inc., B-215775, Mar. 4, 1985, 85-1 CPD para. 266 at 4. In addition, we have applied this principle in cases like this one where the solicitation expressly requires that the labor rates be fully-burdened. See, e.g., Pulau Elecs. Corp., B-280048.4 et al., May 19, 1999, 99-2 CPD para. 99 at 11 (where, in a protest sustained on other grounds, we denied a challenge to an agency's acceptance of an offeror's discounted prices for fixed-price orders despite an RFP requirement that the labor rates used in computing prices be fully-burdened).  (GTSI Corporation, B-286979, March 22, 2001)

In any event, we have long held that there is nothing inherently improper in a no-cost contract. See, e.g., T.V. Travel, Inc. et al.--Recon., B-218198.6 et al., Dec. 10, 1985, 85-2 CPD para. 640 at 6. We have reviewed numerous procurements with no-cost contracts without any question as to whether they violated the prohibition against improper augmentation. In each, the contractor was dependent upon third parties for payment. See, e.g., CW Gov't Travel, Inc. d/b/a Carlson Wagonlit Travel; American Express Travel Related Servs. Co., Inc., B-283408, B-283408.2, Nov. 17, 1999, 99-2 CPDpara. ___; Scheduled Airlines Traffic Offices, Inc., B-257292.9, May 16, 1995, 95-2 CPD para. 113 (travel services); Downtown Copy Center, B-240488.8, Dec. 28, 1992, 92-2 CPD para. 443 (photocopying, distribution, and sale of agency documents); System Planning Corp., B-244697.4, June 15, 1992, 92-1 CPD para. 516 (operation of agency lost and stolen securities program); TS Infosystems, Inc., B-240986, Dec. 4, 1990, 90-2 CPD para. 458 (redaction and publication of agency news report). We also do not believe that the contractual arrangement is defective for want of consideration.  (N&N Travel & Tours, Inc., B-283731.2, December 21, 1999)

According to CCD, Maratech’s proposal is dramatically less than CCD’s on 279 items. In some instances the difference is nearly 25,000% (Maratech’s price was *** for an item whereas CCD’s price for that same item was ***). The fact that Maratech’s proposal on a single item may have been 25,000% less may be eye-catching, but it does not prove that CCD’s prices were reasonable or that Maratech’s were not. As noted above, CCD does not directly allege that Maratech cannot perform the contract at the price offered. CCD has not introduced any evidence by affidavit or otherwise to show that the contract cannot be performed at Maratech’s price. Indeed, a firm, in its business judgment, properly may decide to submit a price for a fixed-price contract that is extremely low. Brewer-Taylor Assocs., B-277845, 97-2 C.P.D. ¶ 124 at 4 (Oct. 30, 1997). Absent strong evidence that Maratech’s prices are so low that it is unlikely that the contractor can perform the contract at the offered price, the plaintiff is not likely to succeed in showing that the responsibility determination in this case was arbitrary and capricious. See id.; Government Contracts Consultants, B-294335, 2004 C.P.D. ¶ 202 (Sept. 22, 2004) (holding in similar circumstances before the GAO that a responsibility determination will not be set aside absent evidence that the contracting officer failed to consider available relevant evidence or violated a statute or regulation). While the GAO’s standard is obviously not binding on this court, it provides useful guidance in determining the circumstances in which an award should be set aside when a protestor questions a putative awardee’s prices as being too low. In view of the foregoing, the court finds that the allegations in the present complaint, even if proved, do not establish that the Air Force’s decision was arbitrary or capricious in conducting its price analysis or finding that Maratech was responsible. (CC Distributors, Inc., v. U. S.,  No. 05-571C, June 15, 2005) (pdf)