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To Contents	HUBZONE VS SDB PROCEDURES
By Anonymous on Tuesday, January 09, 2001 - 12:02 pm: While reading the GAO case on AMI yesterday, it made sense to me. But when I thought about it later it occurred to me that if AMI had been an SDB the results may have been different. The following FAR coverage seems to say the opposite of what GAO had to say about the HZ evaluation when it comes to SDBs. Have I read this wrong? (c) Do not evaluate offers using the price evaluation adjustment when it would cause award, as a result of this adjustment, to be made at a price that exceeds fair market price by more than the factor as determined by the Department of Commerce (see 19.202-6(a)). By Linda Koone on Tuesday, January 09, 2001 - 03:43 pm: If I understand FAR 19.1103(c) correctly (and I'm not sure that I do), I don't believe that the Comp Gen would have changed its decision in the AMI case based on an SDB evaluation adjustment instead of the HUBZone evaluation adjustment. I interpret the exception to using the price evaluation adjustment to being those cases when the lowest evaluated price exceeds the fair market price by more than 10%. The case doesn't address whether the Forest Service established a 'fair market price'. But if they used the Government estimate as the fair market price, then Degerstrom's price exceeded it by more than 10% prior to adding the adjustment factor, so the adjustment wouldn't be the cause of the price exceeding the fair market price by more than 10%. If they used Degerstrom's awarded price as a fair market price, AMI's price was within 10% of that price and therefore, the adjustment would have to be made. Certainly, there could be occasions when the SDB evaluation preference wouldn't apply based on FAR 19.1103(c), but I don't think the decision in this case would have been different if AMI was an SDB. Anyone else? By bob antonio on Wednesday, January 10, 2001 - 03:26 pm: Anonymous and Linda: I tried to look at the various parts of the FAR applicable to this last night. It seems that it comes down to the definition of a "fair market price" since that is the amount that the factor will increase. So, what is a "fair market price?" It seems like it is a "fair and reasonable price" since this section of the FAR leads us back to the standard price analysis procedure in Part 15. Footnote 9 in the bid protest decision did touch on a "fair market price." It is below "In supporting its claim that AMI's bid was unreasonably high, the agency specifically claimed that AMI's bid for three line items greatly exceeded the government's estimate for these line items and were thus unreasonably high. However, given that AMI's total price for these three items is actually less than Degerstrom's assertedly reasonable price for these items, this agency claim cannot form a basis for determining AMI's bid unreasonably high, particularly given AMI's unrebutted assertions that some necessary costs elements were not included in the government's estimate." There were 9 bids on this item. The low and next low were about $686,000 and $744,000. Suppose the other seven bids were grouped from $744,000 to $790,000. What would be the "fair market price." By Linda Koone on Thursday, January 11, 2001 - 07:33 am: Bob: Actually (and I didn't notice this before) "fair market price" is defined at FAR 19.001 as 'a price based on reasonable costs under normal competitive conditions and not on lowest possible cost. (FAR 19.001)' Under your scenario, it would be difficult to establish the price of $686,000 as the fair market price based on this definition. By bob antonio on Thursday, January 11, 2001 - 10:10 am: Linda: The "fair market price" comes right out of legislation. I think it may be from the HUBZone legislation. I found the specific citation in law for the adjustment under the HUBZone program. Does anyone know a citation in law for the adjustment under the Small Disadvantaged Business (SDB) Program? I was searching the Small Business Act in Title 15 and did not find it. If the law requires an adjustment and the FAR says to ignore it under some cases as anonymous noted, then it is possible that the FAR is wrong. That is the angle I am working towards. By Linda Koone on Thursday, January 11, 2001 - 02:37 pm: Sometimes I'm amazed what I still have in this office. I think the evaluation adjustment for SDBs was initially included in the '1207 Program', part of the 1987 DoD Appropriations Act (P.L. 99-661) and I believe was extended in the FY 90 DoD Authorization Act (P.L. 101-189) I don't have a copy of either P.L., though. By Anonymous on Thursday, January 11, 2001 - 02:44 pm: I do not think you will find it in law. I think it was a DOJ creation under the White House "mend not end" initiatives created by the Addarand decision. I also think the FAR is wrong. After several readings I think the authors assumed it was the price offered by the SDB that was adjusted....not other offers. I also think ,the way the thing is written, that twice the DOC per centage is considered before award. By Anonymous on Tuesday, January 16, 2001 - 11:25 am: I found someone who explained this to me. Where the two procedures differ is that in the HZ case (AMI) if after the price adjustment is made and the low evaluated offer is from the Hubzone firm and its price exceeds fair market value then you have a bid bust in that you cannot revert back to the original bids submitted and make award to someone else. Now exceeding fair market value in this case is,of course a matter of judgement. The difference in the SDB procedure is that an SDB can exceed fair market value by no more than ten percent and still be awarded. If the SDB is the low evaluated offerer and his price exceeds fair market value by more then ten percent you again have a bid bust.

HUBZONE VS SDB PROCEDURES

By Anonymous on Tuesday, January 09, 2001 - 12:02 pm:

While reading the GAO case on AMI yesterday, it made sense to me. But when I thought about it later it occurred to me that if AMI had been an SDB the results may have been different. The following FAR coverage seems to say the opposite of what GAO had to say about the HZ evaluation when it comes to SDBs. Have I read this wrong?

(c) Do not evaluate offers using the price evaluation adjustment when it would cause award, as a result of this adjustment, to be made at a price that exceeds fair market price by more than the factor as determined by the Department of Commerce (see 19.202-6(a)).

By Linda Koone on Tuesday, January 09, 2001 - 03:43 pm:

If I understand FAR 19.1103(c) correctly (and I'm not sure that I do), I don't believe that the Comp Gen would have changed its decision in the AMI case based on an SDB evaluation adjustment instead of the HUBZone evaluation adjustment.

I interpret the exception to using the price evaluation adjustment to being those cases when the lowest evaluated price exceeds the fair market price by more than 10%.

The case doesn't address whether the Forest Service established a 'fair market price'. But if they used the Government estimate as the fair market price, then Degerstrom's price exceeded it by more than 10% prior to adding the adjustment factor, so the adjustment wouldn't be the cause of the price exceeding the fair market price by more than 10%.

If they used Degerstrom's awarded price as a fair market price, AMI's price was within 10% of that price and therefore, the adjustment would have to be made.

Certainly, there could be occasions when the SDB evaluation preference wouldn't apply based on FAR 19.1103(c), but I don't think the decision in this case would have been different if AMI was an SDB.

Anyone else?

By bob antonio on Wednesday, January 10, 2001 - 03:26 pm:

Anonymous and Linda:

I tried to look at the various parts of the FAR applicable to this last night. It seems that it comes down to the definition of a "fair market price" since that is the amount that the factor will increase. So, what is a "fair market price?" It seems like it is a "fair and reasonable price" since this section of the FAR leads us back to the standard price analysis procedure in Part 15.

Footnote 9 in the bid protest decision did touch on a "fair market price." It is below

"In supporting its claim that AMI's bid was unreasonably high, the agency specifically claimed that AMI's bid for three line items greatly exceeded the government's estimate for these line items and were thus unreasonably high. However, given that AMI's total price for these three items is actually less than Degerstrom's assertedly reasonable price for these items, this agency claim cannot form a basis for determining AMI's bid unreasonably high, particularly given AMI's unrebutted assertions that some necessary
costs elements were not included in the government's estimate."

There were 9 bids on this item. The low and next low were about $686,000 and $744,000. Suppose the other seven bids were grouped from $744,000 to $790,000. What would be the "fair market price."

By Linda Koone on Thursday, January 11, 2001 - 07:33 am:

Bob:

Actually (and I didn't notice this before) "fair market price" is defined at FAR 19.001 as 'a price based on reasonable costs under normal competitive conditions and not on lowest possible cost. (FAR 19.001)'

Under your scenario, it would be difficult to establish the price of $686,000 as the fair market price based on this definition.

By bob antonio on Thursday, January 11, 2001 - 10:10 am:

Linda:

The "fair market price" comes right out of legislation. I think it may be from the HUBZone legislation. I found the specific citation in law for the adjustment under the HUBZone program. Does anyone know a citation in law for the adjustment under the Small Disadvantaged Business (SDB) Program? I was searching the Small Business Act in Title 15 and did not find it.

If the law requires an adjustment and the FAR says to ignore it under some cases as anonymous noted, then it is possible that the FAR is wrong. That is the angle I am working towards.

By Linda Koone on Thursday, January 11, 2001 - 02:37 pm:

Sometimes I'm amazed what I still have in this office.

I think the evaluation adjustment for SDBs was initially included in the '1207 Program', part of the 1987 DoD Appropriations Act (P.L. 99-661) and I believe was extended in the FY 90 DoD Authorization Act (P.L. 101-189)

I don't have a copy of either P.L., though.

By Anonymous on Thursday, January 11, 2001 - 02:44 pm:

I do not think you will find it in law. I think it was a DOJ creation under the White House "mend not end" initiatives created by the Addarand decision. I also think the FAR is wrong. After several readings I think the authors assumed it was the price offered by the SDB that was adjusted....not other offers. I also think ,the way the thing is written, that twice the DOC per centage is considered before award.

By Anonymous on Tuesday, January 16, 2001 - 11:25 am:

I found someone who explained this to me. Where the two procedures differ is that in the HZ case (AMI) if after the price adjustment is made and the low evaluated offer is from the Hubzone firm and its price exceeds fair market value then you have a bid bust in that you cannot revert back to the original bids submitted and make award to someone else. Now exceeding fair market value in this case is,of course a matter of judgement. The difference in the SDB procedure is that an SDB can exceed fair market value by no more than ten percent and still be awarded. If the SDB is the low evaluated offerer and his price exceeds fair market value by more then ten percent you again have a bid bust.