Solicitation Stated Agency Would Consider Price In Evaluating Technical Risk. Did This Obligate the Agency to Assess Price Realism?

The solicitation in this case required the agency to consider offerors’ prices in evaluating technical risk. The protester contended that this obliged the agency to perform a price realism evaluation. GAO, however, denied the protest, noting that a solicitation must have two things to mandate a price realism analysis: (1) it must state the agency will review prices to determine if they reflect a lack of understanding, and (2) it must state that a proposal can be rejected for offering low prices. In this case, the solicitation only had the first prong; it did not state that offers could be rejected for offering low prices. Consequently, the solicitation did not require a price realism analysis. 

Facility Services Management, Inc., GAO B-420102.3

Background

The Army Corps of Engineers posted an RFP seeking operation and maintenance services for medical facilities. The RFP provided that a comparison between technical level of effort and price would be used to evaluate technical risk. 

The Corps received five proposals, including offers from Facility Services Management, Inc. (FSMI) and Valiant Government Services. Following a best-value tradeoff, the Corps awarded the contract to Valiant, reasoning that FSMI’s higher rated proposal was not worth the price premium. FSMI protested.

Legal Analysis

• Agency Properly Assessed Technical Risk — FSMI alleged that the Corps failed to assess the technical risks posed by Valiant’s low prices. GAO disagreed, reasoning that the record showed the Corps had noted that Valiant offered a discount. The agency had duly considered the discount and reasonably concluded that it didn’t present a risk.
• Agency Could Accept Below Cost Prices – FSMI contended that Valiant’s prices must have presented a technical risk because it would be providing service at a loss or below cost. GAO, however, reasoned that this was a fixed-price contract. Because the contractor bears the risk of loss on a fixed-price contract, there is no prohibition on an agency accepting a below-cost prices on a fixed-price contract.

• Agency Was Not Required to Evaluate Price Realism – FSMI argued that because the RFP required the agency to compare technical level of effort to price in evaluating technical risk, it required a price realism analysis. GAO was not convinced. While the RFP provided that the agency would evaluate price in considering technical risk, it did not inform offerors that a proposal could be rejected for offering low prices, which is a requirement for a price realism evaluation.

FSMI is represented by John C. Dulske, Joanne Zimolzak, Bonnie Kirkland, and Carrie Gorner of Dykema Gossett PLLC. The intervenor, Valiant, is represented by Aron C. Beezley, Patrick R. Quigley, Lisa A. Markma, Nathaniel J. Greeson, Gabrielle A. Spiro, and Erik M. Coon of Bradley Arant Boult Cummings LLP. The agency is represented by Tamar Gerhart and Anna Kurtz of the Army. GAO attorneys Uri R. Yoo and Evan C. Williams participated in the preparation of the decision.