Agency Botched Price Evaluation by Misapplying Solicitation’s Calculation Methods; Crowley Government Services, Inc., Petro Star, Inc., GAO B-419347 et al.

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Protest challenging agency’s price evaluation is sustained. The solicitation allowed offerors to use either (1) a government-preferred price escalator, or (2) their own, properly supported, escalator in setting prices. The RFP provided different calculations for evaluating price when offerors used their own escalator and when they used the government estimator. In this case, however, GAO found that the agency improperly applied the same calculation for assessing those offerors that used the government escalator and those that used their own escalators.

The Defense Logistics Agency (DLA) issued an RFP for the award of multiple fixed-price requirements contracts to provide petroleum products. The RFP provided that awards would be made on a lowest-price technically acceptable basis.

Due to volatility of petroleum prices, the RFP included an economic-price adjustment clause. Under this clause, the prices the government paid for petroleum would be adjusted daily. The adjustments were keyed to escalation publications called preferred base reference indexes, which contained the government’s preferred escalators. The RFP instructed offerors to use the government-preferred escalators in establishing their prices.

But DLA amended the RFP to provide another way for offerors to price their proposals. Instead of using the government-preferred escalators, the amendment provided that offerors could use their own escalators, referred to as uncommon escalators. If an offeror chose to use an uncommon escalator, they had to provide detailed supporting data for the escalator.

DLA made multiple awards. Two unsuccessful offerors, Crowley Government Services and Petro Star, filed protests challenging the government’s price evaluation. The protesters argued that the RFP provided a method for calculating prices when an offeror used an uncommon escalator. But, the protesters argued, DLA used the method for uncommon escalators in evaluating prices where offerors used government-preferred escalators. The protesters contended this resulted in a flawed price evaluation and awards to other than the lowest-priced technically acceptable offerors.

DLA, however, argued that under the RFP, it was entitled to apply an evaluation factor to CLINs in which offerors had used an uncommon escalator. DLA reasoned that by applying the evaluation factor to all prices—i.e., those that used uncommon escalators and those that used government-preferred escalators—the agency could make an “apples-to-apples” comparison of prices.

GAO found that the plain language of the RFP stated that vendors using an uncommon escalator would be evaluated in a certain way. Nothing in the solicitation provided that the agency would also use the uncommon escalator approach to evaluate offers that used a government-preferred escalator.

Additionally, GAO continued, the solicitation also made it clear that the evaluation factor that the government used for its apples-to-apples comparison was only to be used for offers that used an uncommon escalator.

One of the protesters, Crowley, also argued that the agency had erred in evaluating prices in those instances where the offeror relied on an uncommon escalator. Crowley contended that where an uncommon escalator had been proposed, DLA was required to subtract the government-preferred base reference price from the offerors’ proposed price to arrive at an appropriate margin.

GAO found this argument did not withstand logical scrutiny. When calculating price where an uncommon escalator was proposed, subtracting the base reference price from the proposed price would not produce an accurate margin. Rather, it would yield a margin that bore no relation to the proposed uncommon base reference price.

GAO recommend that DLA either reevaluate prices consistent with the RFP or amend to the RFP to accurately reflect its intended method for evaluating prices.

Crowley is represented by James Y Boland, Christopher G. Griesedick, and Krista A. Nunez of Venable LLP. Petro Star is represented by Damien C. Specht and James A. Tucker of Morrison and Foerster. Intervenor Delta Western, LLC is represented by Howard W. Roth and Michael Schmidt of Oles Morrison Rinker & Baker, LLP. The agency is represented by Jacqueline Neumann, Matthew Vasquez, and Howard M. Kaufer of the Defense Logistics Agency. GAO attorneys Scott H. Riback and Tania Calhoun participated in the preparation of the decision.

GAO Crowley Government Services