I have a negotiated procurement with two offers. One is slightly higher than the Govt. estimate. The other is more than 30% below it. The low offeror has verified their price. May I not make award by determining that their price is not reasonable, without making the determination that the offeror is not responsible? So far, I haven't been successful in finding any case law to support this. Prompy replies are greatly appreciated!!!

By joel hoffman on Tuesday, February 12, 2002 - 08:58 am:

777, Please rephrase your question - too many double negatives to understand.

Is it a supply contract? If services or construction, I would advise that you REALLY need to examine the price to determine that the offeror understands the scope of work, before accepting a very low price. One of the reasons for conducting an RFP is to allow examination and discussions. Negotiation is a two way street. I think you owe it to the offeror to ensure that they understand the SOW.

If supply contract, you may want to carefully review the product to assure yourself that it meets your specs.
happy sails! joel

By Vern Edwards on Tuesday, February 12, 2002 - 09:02 am:

You don't say whether the contract type is to be fixed-price or cost-reimbursement. Since you used the word "price," I'll assume that it is to be fixed-price.

There is a great deal of case law on this issue. If there is a general rule, the GAO has stated it most succinctly in Possehn Consulting, B-278579, 98-1 CPD ¶ 10 (January 9, 1998), in which it sustained a protest because an agency improperly rejected a fixed-price offer as being too low:

"A determination that an offeror's price on a fixed-price contract is too low generally concerns the offeror's responsibility, i.e., the offeror's ability and capacity to successfully perform the contract at its offered price. Cromartie Constr. Co., B-271788, July 30, 1996, 96-2 CPD ¶ 48 at 5; Envirosol, Inc., B-254223, Dec. 2, 1993, 93-2 CPD ¶ 295 at 5; Ball Technical Products Group, B-224394, Oct. 17, 1986, 86-2 CPD ¶ 465 at 2. As part of the technical evaluation, an agency may assess the reasonableness of a low price to evaluate an offeror's understanding of the solicitation requirements, so long as the RFP provides for evaluation of offeror understanding as part of the technical evaluation. Cromartie Constr. Co., supra; Envirosol, Inc., supra."

So the answer to your question depends in part on the evaluation factors for award that were described in your RFP.

By joel hoffman on Tuesday, February 12, 2002 - 09:15 am:

777, I don't know what your actual objective is. However, if price is an important consideration and the lowball offer is determined to be otherwise acceptable, I'll add to my above advice.

Why pay more than you have to? If you determine that the price is unrealistically low for the scope of work, through careful discussions you CAN tell the offeror that you think so, then request final revisions from both. If the low guy raises its price to within the range that your consider realistic, fair and reasonable, and reduces the risk of failure, both the Taxpayer and the Contractor win. Maybe the higher guy will cut you a deal, too.

Of course, I don't know what or how much you have already discussed with them. happy sails! joel hoffman

By Anon777 on Tuesday, February 12, 2002 - 09:46 am:

Price and past performance are the only evaluation factors. Although the low offeror's past performance is significantly lower than that of the other offeror's, it is not so low to be unawardable, and given the incredible price difference, I wouldn't be able to determine that the high offeror's proposal represents the best value to the Government.

This was a firm fixed price contract, so I haven't received cost and pricing data. I may ask for other than C&P data, however, I am confident that the low will not be able to perform at his price. Based upon Vern's message, it looks like I'd have to determine that they are not responsible. I was hoping to avoid that if legally possible, because they are small and may get a COC. SBA regularly gives these, but is not held accountable in any way when firms they grant COCs fail.

By Anonymous on Tuesday, February 12, 2002 - 11:10 am:

Anon 777: be careful; rejecting an offeror because you don't think they can "perform at [that] price" could get you into trouble. "Buying in" is not improper if an offeror understands the requirements.

And I don't read Vern's message the same way you do. I think the only way you can award to the higher-priced offeror is if: (1) the RFP provides for a price evaluation, AND (2) you reasonably determine the low-priced offeror doesn't understand the work requirements (nonresponsible).

By C Mercy on Tuesday, February 12, 2002 - 11:51 am:

SBA does not hand out COC's like they were gumballs...it is much harder to acquire one then the myth suggests. If the low offeror fully understands the scope, then Joel and Verns positions should be heeded. If a COC is ultimately required it is your job to carefully examine the elements and ensure that you write directly to them in a factual matter so that SBA can address them properly.

By Smokey on Tuesday, February 12, 2002 - 01:27 pm:

My 2 cents worth....

I am guessing this is a requirement less than $100k, which makes it a RFQ vs RFP. Easier to deal with this type.

Joel has the answer...hold discussions with them. Explain your concerns, carefully examine the requirement(s), and request best and final.

Explain to the low guy that you are concerned he will not be successful. You will find most contractors are thrilled when we are honest with them.

good luck....

By Anon777 on Tuesday, February 12, 2002 - 03:00 pm:

Thanks to all. Just FYI - this is an RFP. Also, C Mercy, I speak from experience, I can only recall one time out of approximately 10-15 cases, where SBA didn't issue a COC against the wishes of the CO, and that is when a contractor submitted forged bonding documents. I'm glad to hear that your experience is different, it gives me a small grain of hope that there are some competent SBA people out there.

By joel hoffman on Tuesday, February 12, 2002 - 04:02 pm:

777, Why aren't you discussing the too low price??? Unless your RFP says you won't, you should - and you may get protested for notdoing it. Part 15 is "Contracting by Negotiation" happy sails! joel

By Eric Ottinger on Tuesday, February 12, 2002 - 04:10 pm:

Anon777,

Random thought.

If the offeror appears to be proposing at a loss, you might want to take a look at their balance sheet. That might give you what you need for your responsibility determination.

Eric

By Smokey on Tuesday, February 12, 2002 - 04:58 pm:

777....sorry for my assumption that this was a RFQ. With only 2 eval. factors, it sounded small to me. Additionally, you mentioned he verified his price, how did you handle this without holding discussions?

Again, I agree with Joel..you could find yourself in a pickle on this one.

By joel hoffman on Tuesday, February 12, 2002 - 11:36 pm:

777, just a suggestion. You don't need "cost or pricing data" (which is unrelated to 'FFP'). You can ask for a price breakdown or partial price breakdown, though, if necessary to properly evaluate the reasonableness of the pricing. You can also discuss scope of work and ask how the offeror priced the scope of work. No problem in advising the firm where you think it is too low, if you discover what appears to be an error. I agree that you have a challenge, if you don't explore the firm's pricing. Good luck. happy sails! joel

By Vern Edwards on Wednesday, February 13, 2002 - 02:41 am:

Anon777:

I agree with you about the COC process. Don't make a determination of nonresponsibility.

It sounds like you don't have a lot of offerors; maybe only two. If that's the case, then try this:

Notify the offerors that you are going to amend the RFP and conduct discussions. Include both offerors in the competitive range. Issue an oral amendment that adds "understanding of the work" as an evaluation factor. Make understanding of the work and past performance equally important and, together, significantly more important than price. Tell the oferors that you will evaluate understanding on the basis of a one-hour oral presentation in the form of an interview (no prepared briefing or slides) and that discussions will follow. If you haven't already done so, tell the offerors to submit price breakdowns (not cost or pricing data) within five working days. Schedule oral presentations to take place two days after the receipt of the price breakdowns (which should give you time to review them and prepare questions). Confirm the amendment in writing by fax or email.

Videotape the oral presentations. During the presentations, ask 10 to 15 questions that are designed to determine how well each offeror understands the critical components of the work. Permit a reasonable number of follow-up questions, but do not let the presentations become an ordeal, either for the offerors or for yourselves. After the oral presentation with the low-priced offeror, tell it that you consider its price to be too low (assuming that you still do after the offeror's oral presentation) and discuss your concerns.

After the oral presentations/discussions, give the offerors five days to submit final price revisions. Do not let them submit any other information, except for their side of any bad past performance reports if they have not already had the chance to do so. Score the offerors on understanding of the work based on their answers to your questions. Make your final tradeoff analysis based on price, past performance and understanding of the work, then select the winner.

If you act expeditiously, you should be able to get through this process in less time than it would take for you to make a determination of nonresponsibility and go through the COC process. If you take care to act reasonably, your decision will be unassailable.

By Anon777 on Wednesday, February 13, 2002 - 08:17 am:

I'm sorry I wasn't clear in my previous messages - I have conducted negotiations, that is when I told the offeror his price was very low and to look at the solicitation requirements and confirm his offer or submit a new one. He verified his original price. Also, in my previous post, when I stated that I was going to ask for "other than cost and pricing data" I basically am referring to a cost breakdown the Joel suggested. I like Vern's suggestion of reopening negotiations and adding the "understanding of work" evaluation factor.

Again - thanks to all for your input. This board is the best! I called my legal counsel two days ago, and they still haven't gotten back to me. This community responded immediately. Thanks Bob Antonio for keeping this board alive. (I'm a regular poster, but posted as Anon777 for procurement integrity purposes.)

By joel hoffman on Wednesday, February 13, 2002 - 03:42 pm:

777 requested some advice...

"Prompy (sic) replies are greatly appreciated!!!"

happy sails! joel

By Anon2U on Wednesday, February 13, 2002 - 09:28 pm:

Vern,

Your advice was great and can be applied to a lot of competitive situations with only a few offerors.

By Anon777 on Thursday, February 14, 2002 - 08:25 am:

Anon 2/13 @ 3:18 p.m: I haven't read anywhere on this site that open solicitations couldn't be discussed. As long as one takes care to hide the identity of the agency and procurement, and doesn't provide too specific info, I don't believe such postings violate procurement integrity. Does anyone disagree?

Joel - I tried to catch my "prompy" typo and change it to promptly but couldn't stop the post in time - I hate it when that happens!

By Vern Edwards on Thursday, February 14, 2002 - 08:43 am:

Anon777:

Don't worry about it.

All:

I suggest that the best way to solicit opinions from participants in this forum about ongoing business transactions is to anonymously describe the relevant facts as hypotheticals and to ask questions without revealing that they pertain to real current events.