CO provided a "competitive price range" for an LPTA procurement then awarded outside of range

Please quote the wording of the notice of competitive price range amendment.  Thanks. In other words is this an absolute requirement or a recommendation?

This is from Amendment 5 out of 6. Amendment 6 revised the SOW to remove 1 FTE, issued a new Schedule B, and extended the due date for the BAFO. 

"This change is hereby issued to Solicitation No. [number and name]... for the following:

"(1)  Revise the Competitive Price Range: $[xxxxxx] to $[xxxxxx].

"Best & Final proposal to be issued by [due date] to: [email address of CO]

"End of Change"

So a subsequent amendment reduced the required labor after they revised the  competitive price range in Amendment 5.

Was the term “competitive price range” defined anywhere in the RFQ? Unless the term signifies a mandatory requirement, I doubt that a protest over award of a lower quote would be successful.

EZK81 said:

Hi everyone -

Different possibly the same conclusion.

EZK81 said:

1. I've never seen a contracting office provide a competitive price range on an LPTA procurement. Is this a done thing?

Never seen it but that does not mean it isnot done (obviously).  Would be interesting to view RFQ's by same agency to see if the wording is used in other solicitations.  Might be their thing!

EZK81 said:

2. Are they allowed to award outside that range, once it is formally provided as an amendment to the RFQ?

Going off the basic info provided agency set a range and asked for BAFO's.  I do not see wording in your posts that BAFO's have to be in the range.  So one might concluded something to the effect of - Agency - Here is our range.  Offerors - Here is our BAFO's.   Agency - Views the BAFOs and makes the final award decision.  Wording that you have provided so far does not indicate that to be considered the BAFO must be within the competitve price range.

EZK81 said:

3. If yes, how can they justify price reasonableness on a bid lower then their established competitive range?

My response provided above suggests why but more to the point LPTA means they will take the lowest price of the techincally acceptable proposals not that they will take the lowest price in the competitive price range.    And while you may have a view of what is reasonable price the agency would support why they believe it is reasonable.   My mind wanders to this - FAR 15.404-1(b)(2)(i) - "Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1))."

Hope these thoughts help with your debrief strategy.

Quote

Was the term “competitive price range” defined anywhere in the RFQ? Unless the term signifies a mandatory requirement, I doubt that a protest over award of a lower quote would be successful.

The term "competitive price range" was only used in the amendment on SAM.gov. Interestingly, there was a nearly identical procurement from the same contracting office going on simultaneously, and they also provided a competitive price range for that one on SAM and had a BAFO round (but did not amend the SOW at any point). We have not received a notification about the second one yet. 

It makes sense that the competitive range was not supplied as a requirement. But I have to wonder if it was meant to be an internal piece of data only. I do not think it provided a benefit to Offerors in preparing their offers, and it doesn't seem likely it would have increased price competitiveness for the Government during the BAFO round. It was simply confusing. If other small businesses like ours read it the same way and tried to ensure their offers were within the provided range, the government would likely have received mostly similar prices with one or a few outliers, one of which won the award. I'm obviously frustrated about the loss, but generally confused overall (and worried we'll face the same result on the other similar procurement).

Thank you both for your insights. If possible, I'll report back if I find out anything in the debrief.

EZK81 said:

Thank you both for your insights. If possible, I'll report back if I find out anything in the debrief.

You’re welcome. I’d ask what they intended the competitive price range to signify. But mainly focus on the “lowest priced technically acceptable” basis of a competitive award, next time.

Edit: I just thought of this. You said that your base Quote was about $1 above the lower end of the range. What if the winner had quoted $1 lower…?

I also think it could have been quite convoluted if several competitors thought the number was a lower limit but had determined that they could provide the services for less, so just quoted the low end of the “range”.

EZK81 said:

Thank you both for your insights.

You are welcome.   Joel's idea of proposed question for the debrief is a good one.   I will say I have seen agencies use unique ways to try and guide offerors on hoped for pricing.  As you say it might or might not help the agency get competitive BAFO's.

EZK81 said:

We received a notice of an unsuccessful bid, and the letter provided the award amount for all 5 years. On average across 5 years, their price was about 18% lower than the low end of the competitive range. The RFQ prescribed hours for each year, so outyear pricing could only go down by lowering hourly rates--not impossible, but highly unlikely. If they bid within the competitive range for the Base Year, the option years would have had to be reduced 22% on average.

A major organization is currently examining LPTA procurements and what they see is a lack of COs conducting proper price realism analysis.  They think companies intentionally propose low rates to receive awards and then convince agencies later in performance to allow higher price labor categories to be added to enhance performance.   They also think government program personnel are underestimating the amount of required work including labor category positions in their planning estimates which contributes to problems.

formerfed said:

A major organization is currently examining LPTA procurements...

@formerkoWhat organization? Is it a secret?

Vern Edwards said:

@formerkoWhat organization? Is it a secret?

Professional Services Council.  I wasn’t going to say the name until they announced it.

@Vern Edwards  

Edit:  more information from the PSC website.  Should be interesting

Quote

Continuing our member advocacy, David Berteau will present a PSC research paper entitled “LPTA By Any Other Name” – Recapturing Requirements Discipline in Solicitation and Award,” at the Naval Post Graduate School’s 21st Annual Acquisition Research Symposium in May 2024

Oh. Them.

Thanks.

EZK81 said:

I've never seen a contracting office provide a competitive price range on an LPTA procurement. Is this a done thing?

I found the phrase "competitive price range" in 25 GAO protest decisions ranging from 1962 - 2019, and in one COFC protest decision from 1999. I found the phrase "reasonable price range" in 15 GAO decisions, ranging from 1955 - 1994, and in four COFC decisions, 1991 - 2024.

I did not read any of the decisions.

EZK81 said:

3. If yes, how can they justify price reasonableness on a bid lower then their established competitive range?

Remember, price fair and reasonableness is only concerned with a price being too high. Mountaineers Fire Crew, Inc.; ASP Fire, LLC; Diamond Rd. Maint. Inc. (d/b/a Diamond Fire), B-413520.5 et al., Feb. 27, 2017.

That being said, I wonder why they would include a range if they didn’t plan on using it for something. Without reading the entire solicitation, I would think that the range could reasonably be interpreted as establishing what it says - the competitive price range. Thus, my question would be what does ‘competitive price range’ mean and what’s its role in the evaluation.

While you may have missed your initial protest window (since this question should have been asked prior to the solicitation due date), an answer could help you …

Jamaal Valentine said:

Remember, price fair and reasonableness is only concerned with a price being too high.

That's an extremely helpful citation, thank you. I had mistakenly been conflating reasonableness and realism. (I do mostly NASA proposals, and they very often conduct realism analysis.)

joel hoffman said:

Edit: I just thought of this. You said that your base Quote was about $1 above the lower end of the range. What if the winner had quoted $1 lower…?

It feels like playing Price is Right... 

joel hoffman said:

I also think it could have been quite convoluted if several competitors thought the number was a lower limit but had determined that they could provide the services for less, so just quoted the low end of the “range”.

We initially had determined a lower price, but increased it because we thought our bid would be deemed non-compliant if it didn't fit into their range. Looking back, that was obviously a bad decision. But sometimes it is so hard to know how to interpret seemingly conflicting direction in the RFQ. I've been a professional proposal manager for 20 years, and some COs still find novel ways to confound me!

EZK81 said:

We initially had determined a lower price, but increased it because we thought our bid would be deemed non-compliant if it didn't fit into their range. Looking back, that was obviously a bad decision.

Depending on the text of the RFP, the lowest price of the range might not have been a limit. It might just have been the lowest price received. And if the agency had asserted that the lowest price of the range was a "limit" if might have been in trouble if the RFP had not stated that price realism would be an evaluation factor.

formerfed said:

A major organization is currently examining LPTA procurements and what they see is a lack of COs conducting proper price realism analysis.  They think companies intentionally propose low rates to receive awards and then convince agencies later in performance to allow higher price labor categories to be added to enhance performance.   They also think government program personnel are underestimating the amount of required work including labor category positions in their planning estimates which contributes to problems.

I am concerned that studies like this will swing the pendullum even further to promoting the essay contests. 

formerfed said:

They think companies intentionally propose low rates to receive awards and then convince agencies later in performance to allow higher price labor categories to be added to enhance performance.

And I wonder what  company involved in any type of contracting method does not do this same thing.  Think about it!   I am ever vigilant in my personal business for such buy in.   And with regard to Federal contract I will point to most recent discussions (and even older ones) about key personnel and the shell game involved.   Isn't proposing rates on supposed key personnel that will not be existent at contract performance a form buying in.

The issue is not Sealed Bid, LPTA and/or Tradeoff.  It is an issue of an organization supporting good faith and fair dealing by their memebership and the organizations support of improving the acquisition workforce of the Federal government.  In truth a sealed bid, LPTA, Tradeoff, and even selection of contractors pursuant to the Brooks Act can yield effective and prudent prices for contracts done right.  Price realism analysis is just a portion of the game.  And game it is!

To provide some additional context in light of the reasonableness/realism point, I looked at the evaluation factors again. Here is the language from the price evaluation factor (emphasis added). It does in fact say "realistic," but it is couched in terms of the Offeror's GSA Schedule. Since discounts are expected/encouraged, I'm not sure what that means in terms of "unrealistically low pricing." (Note that the priced units on Schedule B were hours; therefore a reduction of the level of effort could not be used to lower the total price.)

"The Government considers price an important factor in selecting the successful contractor. The contractor’s proposed pricing will be evaluated against the Government’s estimated level of effort. Unrealistically high or low pricing will be considered indicative of a lack of understanding of the complexity and risk associated with the work to be performed.

"The Government expects to receive price competition through the receipt of multiple quotes. Contractors shall propose fixed hourly rates that are in accordance with its GSA schedule pricing; however, discounts are strongly encouraged. The contractor’s total price in RFQ Attachments, will automatically be computed.

"The Government will evaluate price quotes for award purposes by calculating the sum of the base and all option periods to determine a total proposed price. Evaluation of options does not obligate the Government to exercise the options.

"The Government will evaluate Cost/Price to ensure it is complete, reasonable and realistic by verifying that all prices/labor rates and cost to the Government are in accordance with the offeror’s GSA contract.  Discounts offered by each offeror to its rates will be evaluated.  Each offeror’s level of effort and mix of labor proposed will be evaluated to determine that the total price proposed is fair and reasonable.   

"The Government intends to award a contract on lowest price technically acceptable (LPTA) proposal for Budget Analyst Support Services."

C Culham said:

The issue is not Sealed Bid, LPTA and/or Tradeoff.  It is an issue of an organization supporting good faith and fair dealing by their memebership and the organizations support of improving the acquisition workforce of the Federal government.  In truth a sealed bid, LPTA, Tradeoff, and even selection of contractors pursuant to the Brooks Act can yield effective and prudent prices for contracts done right.  Price realism analysis is just a portion of the game.  And game it is!

That might be true if we had a solid enterprise wide contracting workforce.  But we don’t.  One of the big reasons I hear contracting people admit is they like LPTA because it’s easier and quicker and it puts all the burden on program officials.  We just don’t have enough experienced and capable 1102s.  And it’s getting worse.  Lots of bright people are entering the 1102 workforce.  Most quickly progress but then drop out because they hit a wall where they are no longer challenged by the work or can’t get promoted.

Some of the complaints by many of the top companies is they won’t propose on LPTA for all the obvious reasons.

EZK81 said:

It does in fact say "realistic," but it is couched in terms of the Offeror's GSA Schedule.

Well dopey me.  Should have asked if this was a GSA FSS procurement.   That said the agency language does intrige me in that FAR 8.404(d) says this (emphasis added)......

(d) Pricing. Supplies offered on the schedule are listed at fixed prices. Services offered on the schedule are priced either at hourly rates, or at a fixed price for performance of a specific task (e.g., installation, maintenance, and repair). GSA has already determined the prices of supplies and fixed-price services, and rates for services offered at hourly rates, under schedule contracts to be fair and reasonable. Therefore, ordering activities are not required to make a separate determination of fair and reasonable pricing, except for a price evaluation as required by 8.405-2(d). By placing an order against a schedule contract using the procedures in 8.405, the ordering activity has concluded that the order represents the best value (as defined in FAR 2.101) and results in the lowest overall cost alternative (considering price, special features, administrative costs, etc.) to meet the Government’s needs. Although GSA has already negotiated fair and reasonable pricing, ordering activities may seek additional discounts before placing an order (see 8.405-4).

C Culham said:

By placing an order against a schedule contract using the procedures in 8.405, the ordering activity has concluded that the order represents the best value (as defined in FAR 2.101) and results in the lowest overall cost alternative (considering price, special features, administrative costs, etc.) to meet the Government’s needs.

This passage of FAR is puzzling.

Jamaal Valentine said:

This passage of FAR is puzzling.

It never changed from decades ago when schedules were mostly used for supplies (equipment).  It allowed ordering agencies to factor in items other than price in such as warranties, special feature, etc. and conclude the selection is the lowest cost alternative.

GSA and OMB have tried to change it

https://federalnewsnetwork.com/commentary/2024/02/providing-best-value-through-the-multiple-award-schedule/

https://www.gsa.gov/system/files/Cleared - GSA MAS Best Value Legislative Proposal.pdf

The "By placing an order" pricing language has been in the FAR 8.404 since 1997.

Thanks @formerfed

On 3/29/2024 at 3:22 PM, C Culham said:

Although GSA has already negotiated fair and reasonable pricing, ordering activities may seek additional discounts before placing an order (see 8.405-4).

But this does not preclude a price being unrealistic if it is too steeply discounted, correct?

EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct?

Agreed.

EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct?

You would have to explain what you mean by unrealistic. For example, under FAR 15.404-1(d)(1), “Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.”

Would a deep discount (or even at or below-cost) be unrealistic in and of itself? Shouldn’t you consider the offerors methodology for performing the work? Moreover, unrealistic under a fixed-price arrangement would likely be defined as another thing.

So what do you mean by unrealistic?

EZK81 said:

But this does not preclude a price being unrealistic if it is too steeply discounted, correct?

@EZK81For an illustration of how price realism might work in the competitive placement of an order against a GSA schedule contract, see the GAO's bid protest decision in the matter of ManTech Advanced Systems International, Inc., dated August 14, 2023. To find that decision use the link below or go to Google or some other search engine and search for B-421560.4. The pertinent part of the decision with respect to your question is on page 4.

https://www.gao.gov/products/b-421560.4

Jamaal Valentine said:

You would have to explain what you mean by unrealistic. For example, under FAR 15.404-1(d)(1), “Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.”

Would a deep discount (or even at or below-cost) be unrealistic in and of itself? Shouldn’t you consider the offerors methodology for performing the work? Moreover, unrealistic under a fixed-price arrangement would likely be defined as another thing.

So what do you mean by unrealistic?

Since the government provided a "competitive price range," my original assumption was that they had done an independent estimate and that prices below the low end of the range would not pass a realism evaluation. Otherwise, why provide a low end for an LPTA RFQ? Why not just provide a budget/ceiling, or nothing at all? The winning bid was about 18% lower than the low end of their competitive range and 28% below the high end. 

This was a staffing contract with labor categories and productive work hours prescribed, so the fully burdened rate was the only variable (i.e., the discounted FSS rate). The proposal was only past performance and pricing so there was no methodology to evaluate, and they did not ask for resumes or letters of commitment. I can easily see how bidding a rate that is 18-28% less than the IGE could be considered unrealistic or a high level of risk. The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so. 

But obviously I'm wrong, since that wasn't the government's finding. ¯\_(ツ)_/¯

Vern Edwards said:

@EZK81For an illustration of how price realism might work in the competitive placement of an order against a GSA schedule contract, see the GAO's bid protest decision in the matter of ManTech Advanced Systems International, Inc., dated August 14, 2023. To find that decision use the link below or go to Google or some other search engine and search for B-421560.4. The pertinent part of the decision with respect to your question is on page 4.

https://www.gao.gov/products/b-421560.4

That's a really helpful example, thank you! I wish our potential customer had been so transparent about their realism analysis...

EZK81 said:

The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so.

You may want to read GAO: Lower-Paid Incumbents An “Obvious” Price Realism Concern.

On 3/28/2024 at 11:07 AM, EZK81 said:

We received a notice of an unsuccessful bid, and the letter provided the award amount for all 5 years. On average across 5 years, their price was about 18% lower than the low end of the competitive range. The RFQ prescribed hours for each year, so outyear pricing could only go down by lowering hourly rates--not impossible, but highly unlikely. If they bid within the competitive range for the Base Year, the option years would have had to be reduced 22% on average.

EZK81 said:

This was a staffing contract with labor categories and productive work hours prescribed, so the fully burdened rate was the only variable (i.e., the discounted FSS rate). The proposal was only past performance and pricing so there was no methodology to evaluate, and they did not ask for resumes or letters of commitment. I can easily see how bidding a rate that is 18-28% less than the IGE could be considered unrealistic or a high level of risk. The awardee has to find and maintain staff over 5 years at that low price point, with little to no annual escalation--without providing a plan for doing so.

We don’t know what, if anything, the successful offeror provided to the government in way of explanation.  I’ve seen situations where a contractor feels they will learn processes well over time and develop methodologies, tools and techniques to become more efficient.  The strategy is replace staff over time with lower paid employees.  This would be a good point to discuss during the debriefing.

Hey, it was a lowest priced technically acceptable award scenario. The government apparently didn’t want a higher performing contractor if it cost more than that.

On 3/28/2024 at 3:19 PM, C Culham said:

Different possibly the same conclusion.

Never seen it but that does not mean it isnot done (obviously).  Would be interesting to view RFQ's by same agency to see if the wording is used in other solicitations.  Might be their thing!

Going off the basic info provided agency set a range and asked for BAFO's.  I do not see wording in your posts that BAFO's have to be in the range.  So one might concluded something to the effect of - Agency - Here is our range.  Offerors - Here is our BAFO's.   Agency - Views the BAFOs and makes the final award decision.  Wording that you have provided so far does not indicate that to be considered the BAFO must be within the competitve price range.

My response provided above suggests why but more to the point LPTA means they will take the lowest price of the techincally acceptable proposals not that they will take the lowest price in the competitive price range.    And while you may have a view of what is reasonable price the agency would support why they believe it is reasonable.   My mind wanders to this - FAR 15.404-1(b)(2)(i) - "Comparison of proposed prices received in response to the solicitation. Normally, adequate price competition establishes a fair and reasonable price (see 15.403-1(c)(1))."

Hope these thoughts help with your debrief strategy.

I saw it done once at NSA then they awarded to the lowest bidder who was almost 45% below the lower threshold.