Knowledge is Power . . . If You Know How to Use It
Discussions with an agency prior to submitting a final proposal can lead to a more well-informed submission by an offeror; however, such is not always the case. The Government Accountability Office (GAO) decision in Quality Control International, LLC (QCI), B-417984 (December 20, 2019) provides guidance as to how offerors should rely on information supplied by the agency in crafting their best, most competitive bid.
QCI protested the General Service Administration (GSA), Public Buildings Service’s award of a contract for maintenance services—including mechanical maintenance, custodial services, grounds maintenance, and pest control services—at multiple GSA facilities in Montana. The underlying request for proposals (RFP), a small business set-aside, was governed by the procedures of FAR parts 12 and 15. The RFP anticipated the award of a fixed price contract, with an indefinite delivery component, and a base period of one year, as well four option years.
The solicitation stated that proposals would be evaluated based on four non-price factors—staffing plan, management plan, experience, and past performance—and price, where the non-price factors combined were considered approximately equal to price. Of relevance to QCI’s protest, price was to be evaluated based on multiple metrics: low price, price reasonableness, price realism, and balance. Award would be made to the offeror whose proposal provided the best value to the Government.
GSA received proposals from various offerors prior to the closing date, and from these established a competitive range, which included QCI and Phoenix Management Inc. (Phoenix). After evaluating QCI’s initial proposal, GSA conducted its first round of discussions and informed QCI that QCI’s proposal was both unreasonably high in some respects—in particular as pertained to QCI’s markup rates, i.e., general and administrative (G&A), overhead, and profit rates—and unrealistically low in others, including the overall proposed price. GSA directed QCI to revise its proposal to address these price reasonableness and price realism concerns.
In response, QCI submitted a revised proposal, increasing its proposed price. However, GSA remained concerned that QCI’s markup rates were too high. The agency informed QCI of this continued concern in a second round of discussions. Following the second round of discussions, the agency informed offerors that they should submit their most competitive offers in their final revised proposals (FRPs). In its FRP, QCI decreased its proposed price such that the price was lower than that in its revised proposal, though still higher than that in its initial proposal.
In the end, the contract was awarded to Phoenix, which offered a lower price and fared slightly better in non-price factors as compared to QCI. Following a written debriefing from GSA, QCI filed this protest with the GAO.
QCI challenged the agency’s conduct during the pre-FRP discussions, asserting that the agency misled QCI, coerced QCI into raising its prices, and caused QCI competitive harm when GSA ultimately awarded the contract to a lower-priced offeror. GSA argued that it in good faith provided QCI with accurate information about its concerns, and, moreover, that the agency never required QCI to raise its price.
GAO sided with the agency. An agency cannot consciously, i.e., in bad faith, mislead or coerce offerors into raising their prices. However, an agency is free to accurately and in good faith indicate its concerns to offerors and provide offerors with an opportunity to revise their proposals or otherwise address the concerns. According to the GAO, the latter is what occurred here: GSA discussed concerns of price reasonableness, i.e., that aspects of QCI’s price were too high, and price realism, i.e., that other aspects of QCI’s price were too low, and required QCI to address these concerns but not to take any particular action. QCI responded to these concerns by choosing to raise (in its revised proposal) and then lower (in its FRP) the proposed price.
The important lesson here is that offerors should take the time to digest information provided by the agency, address this information in a meaningful way, and know that any change it chooses to make in response to the information is a business decision that may result in its losing out on the award. Information that is not adequately addressed by offerors may indeed cause offerors competitive harm, but such harm will not be actionable where the information provided by the agency is accurate and provided in good faith.
Contact Judith Araujo for more information.