Including marginal rated offeror in price reasonableness analysis?

I don’t understand your questions. One must not make broad assumptions without understanding and considering  the specific context of the referenced protest.

Here is a link to the protest:

https://www.gao.gov/products/b-405942.4%2Cb-405942.8

Note that the agency stated that the non-price factors were significantly more important than the price,  that it intended to award without discussions and that marginal ratings in the evaluation would not be considered for award.

There would no need to evaluate price reasonableness in the instant example because award was to be made without discussions, price was least important factor and the marginal rating was clearly unacceptable for award. 

If the scenario were different and discussions were contemplated, the answers to your questions might be “yes”.

Right, in the instant case of Six3 Systems, Inc. - B-405942.4; B-405942.8, the marginally rated offeror was properly not included in the trade-off analysis, and I assume also was not included in the price comparison with other offers received for price reasonableness purposes.

I guess another way of phrasing my question is:

When is it proper to not include an offeror's price in the price comparison with other offers received for price reasonableness purposes? Only when they are not included in the trade-off analysis?

Sam101 said:

Right, in the instant case of Six3 Systems, Inc. - B-405942.4; B-405942.8, the marginally rated offeror was properly not included in the trade-off analysis, and I assume also was not included in the price comparison with other offers received for price reasonableness purposes.

I guess another way of phrasing my question is:

When is it proper to not include an offeror's price in the price comparison with other offers received for price reasonableness purposes? Only when they are not included in the trade-off analysis?

I think that this has been discussed earlier in the WIFCON Forum that the prices for non conforming (thus unacceptable) offers should be excluded from comparisons in a price analysis. But I don’t have time to do the search and still dont know if the Search feature has been fixed. I’m pretty sure that Vern Edwards explained it at least once. But it makes sense that the price may be affected by the proposal weaknesses, non-conformance or other deficiencies **or undesirable aspects, thus exclude it from comparisons of prices for conformance with the solicitation requirements.

It may depend upon the basis for the unacceptably of the offer, whether or not the unacceptable **or undesirable aspect or aspects of the proposal or quote are material to the basis of the price.

Does that make sense to you ?

P.S., in reading the Protest cited above, the basis for the marginal rating very likely would have affected the protestors price. 

**Edit: added “or undesirable”

Assuming a solicitation says that it's OK to award to a marginally rated offeror, then the price reasonableness analysis can look like this:

Offeror A: $750,000.00

Offeror B: $789,000.00

Offeror C: $775,000.00

Independent Government Estimate (IGE): $783,000.00.

Choice 1: Apparent awardee's, Offeror B's price is reasonable, their price is close enough to the IGE, and other offers received are lower than offeror B's, but not too much lower, and by the way, Offeror C was rated marginal.

Choice 2: Apparent awardee's, Offeror B's price is reasonable, their price is close enough to the IGE, and other offers received are lower than offeror B's, but not too much lower.

Which way is more proper? Choice 1 or Choice 2?

I don't think I ever mentioned non-price ratings in a price reasonableness determination... but is there a good reason to include the fact that one or more offerors' prices whose price you're comparing the apparent awardee's price to rated marginal for a nonprice factor in a price reasonableness determination? Or does it not matter?

Vern had comments on this related thread:

Assuming that Marginal is not ineligible for award, but still bad, leaving any mention of non-price ratings out of the price reasonable analysis might make the reader think that all compared prices are of not bad non-price ratings... but I don't know if that matters for price reasonableness purposes. So that's what I'm asking about.

Sam101 said:

Assuming a solicitation says that it's OK to award to a marginally rated offeror, then the price reasonableness analysis can look like this:

Offeror A: $750,000.00

Offeror B: $789,000.00

Offeror C: $775,000.00

Independent Government Estimate (IGE): $783,000.00.

Choice 1: Apparent awardee's, Offeror B's price is reasonable, their price is close enough to the IGE, and other offers received are lower than offeror B's, but not too much lower, and by the way, Offeror C was rated marginal.

Choice 2: Apparent awardee's, Offeror B's price is reasonable, their price is close enough to the IGE, and other offers received are lower than offeror B's, but not too much lower.

Which way is more proper? Choice 1 or Choice 2?

I don't think I ever mentioned non-price ratings in a price reasonableness determination... but is there a good reason to include the fact that one or more offerors' prices whose price you're comparing the apparent awardee's price to rated marginal for a nonprice factor in a price reasonableness determination? Or does it not matter?

You are only discussing prices, not why B is a better value than A or C, considering both price and non-price factors.

joel hoffman said:

Does that make sense to you ?

Yes, that makes sense, in the context of the marginal rating being un-awardable, but in the context of the marginal rating being still awardable, it's confusing.

joel hoffman said:

You are only discussing prices, not why B is a better value than A or C, considering both price and non-price factors.

Right, so the reader will assume (or not care and not assume anything) that the prices are for similar quality services, or items.

And see this case:

https://www.gao.gov/assets/830/826402.pdf

The government properly made award to a marginally rated offeror.

I wonder how the price reasonableness determination looked like for this award.

Sam101 said:

I don't think I ever mentioned non-price ratings in a price reasonableness determination... but is there a good reason to include the fact that one or more offerors' prices whose price you're comparing the apparent awardee's price to rated marginal for a nonprice factor in a price reasonableness determination? Or does it not matter?

I think we're talking about "price analysis techniques and procedures to ensure a fair and reasonable price" as described in FAR 15.404-1(b)(2)(i), which says "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))."

FAR 15.403-1(c)(1)) has two main components, (A) "Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement" and (B) "Award will be made to the offeror whose proposal represents the best value (see 2.101) where price is a substantial factor in source selection."

So the first question, regarding whether you can include a marginally-rated offeror in your "adequate price competition" would seem to depend on whether they "satisfy the Government's expressed requirement." Since the concept of Marginal could differ across solicitations there is probably no single answer to the question of whether a Marginally-rated offer satisfies the Government's expressed requirement. It depends on what marginal means in your situation.

The second part, "Award will be made to the offeror whose proposal represents the best value" is a little less clear, some people seem to take this to mean that the very existence of a best value competition automatically makes all acceptable offers F&R, but I think if you think a bit more about how a best value tradeoff is made, e.g. The difference in price is/is not worth the difference in quality, then you find yourself much closer to the meaning of fair & reasonable, a price that is "worth it" for whatever you're getting. So I take this to mean that if you don't include the non-price details in your comparison (e.g. whatever likely brought you to a marginal rating) then a simple comparison of proposed prices received won't get you to F&R.

The next question would be whether you can still use the price proposed by a marginal or even unacceptable offeror who clearly does not satisfy the Government's expressed requirement in some other form of non-FAR 15.404-1(b)(2)(i) price analysis. I would argue that you still may be able to, but you would need to know and explain how the marginal/unacceptable stuff affected the price, and again, you couldn't do a direct trade-off comparison.

Witty_Username said:

I think we're talking about "price analysis techniques and procedures to ensure a fair and reasonable price" as described in FAR 15.404-1(b)(2)(i), which says "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))."

Thanks, Witty. I forgot the citation.

On a related note, regarding competitive range determinations, see Addx Corporation B-417804; B-417804.2; B-417804.3, https://www.gao.gov/assets/b-417804.pdf.

Addx Corporation rated marginal but GAO still said that the government should have considered Addx Corporation's price during the competitive range determination.

If the government states in RFP that "offerors who rate below Acceptable may not be considered for award and their price will not be evaluated", but then when performing the competitive range determination, the government "evaluates" a marginal offeror's price, by "considering" their price for competitive range determination purposes, how is that "offerors who rate below Acceptable may not be considered for award and their price will not be evaluated"?... Because the government is now evaluating the marginal offeror's price even though they said they wouldn't?

I don't know if the solicitation in Addx Corporation B-417804; B-417804.2; B-417804.3 that "offerors who rate below Acceptable may not be considered for award and their price will not be evaluated". It probably should have, although I'm not sure if GAO differentiates "competitive range determination price comparison" and price analysis for price reasonableness purposes prior to making an award.

Above, posted by Sam101, a distinction was made between (1) a 'competitive range determination price comparison' and (2) a 'price analysis for price reasonableness purposes prior to making an award'.  This got me thinking, could (2) be completed without the price proposal of an offeror who received a 'no confidence' past performance assessment rating from the KO, in a situation similar to below?

In an OCONUS RFP using Parts 12/15, where the KO intends to award without discussions, with a best value source selection method, where there are only two evaluation factors (past performance (PP) & price, with PP significantly more important than price).  The RFP does not state that "offerors who rate below Acceptable may not be considered for award."  Does the price proposal from the offeror with a 'no confidence'  PP rating need to be included in the price analysis?  Including their price proposal in the analysis heavily skews the results and ultimately gives unrealistic results.

The way I see it there are three instances where the government considers competing offerors' prices:

1. When determining competitive range.

2. When documenting trade-off analysis.

3. When determining price reasonableness.

When an offeror does not meet all requirements of the SOW, it doesn't hurt to consider their price for competitive range and trade-off purposes, but it may not make sense for price reasonableness purposes.

The cases cited so far in this thread talk about competitive range and trade-off, but not price reasonableness.

On 4/8/2024 at 7:06 PM, Sam101 said:

So I have these 2 questions:

1. If the marginally rated offeror is included in the trade-off analysis, can't it also be included in the price reasonableness analysis?

2. Can the marginally rated offeror be included in the price reasonableness analysis even if it's not included in the trade-off analysis?

Let's assume that the definition of Marginal is "the proposed approach is terrible and the risk of unsuccessful performance is certain."

Your questions cannot be definitively answered without reviewing the entire evaluation scheme.

The key question is does the priced offer satisfy the Government’s expressed requirement? See Contract Pricing Reference Guide, Volume 1, paragraph 6.1.1. (Any proposed price used for comparison must be a part of an offer that satisfies the Government’s requirement. In negotiations, don’t compare prices of ‘technically unacceptable’ offers).

I think you should start with the basic concept that price analysis involves comparisons. The comparisons have to support the purpose. How does comparing the price of an offer that doesn’t satisfy the Government’s need help establish price fair and reasonableness? What factors affect comparability? Can you adjust for them?

NOTE: 

Common usage of ‘technical acceptability’ can refer to (1) a rating of any non-priced factor or (2) conformity with the material terms of the solicitation.

Jamaal Valentine said:

Your questions cannot be definitively answered without reviewing the entire evaluation scheme.

The key question is does the priced offer satisfy the Government’s expressed requirement? See Contract Pricing Reference Guide, Volume 1, paragraph 6.1.1. (Any proposed price used for comparison must be a part of an offer that satisfies the Government’s requirement. In negotiations, don’t compare prices of ‘technically unacceptable’ offers).

I think you should start with the basic concept that price analysis involves comparisons. The comparisons have to support the purpose. How does comparing the price of an offer that doesn’t satisfy the Government’s need help establish price fair and reasonableness? What factors affect comparability? Can you adjust for them?

NOTE: 

Common usage of ‘technical acceptability’ can refer to (1) a rating of any non-priced factor or (2) conformity with the material terms of the solicitation.

Thanks, Jamaal. This ought to be obvious. But apparently isn’t to everyone.

Thank you all for walking me through this... but just so I'm clear, is this correct?:

When an offeror is unacceptable (un-awardable), and the solicitation explicitly states that any rating below Acceptable is not eligible for award, the government must consider their price for the green text but not the red text:

1) When determining competitive range.

2) When documenting trade-off analysis.

3) When determining price reasonableness.

When an offeror is unacceptable (un-awardable), and the solicitation DOES NOT explicitly state that any rating below Acceptable is not eligible for award, the government must consider their price for the green text but not the red text:

1) When determining competitive range.

2) When documenting trade-off analysis.

3) When determining price reasonableness.

General—
You have to evaluate the offeror’s ability to perform the prospective contract successfully. FAR 15.305(a). A proposal that fails to conform to a material solicitation requirement is technically unacceptable and cannot form the basis for award. Wyle Laboratories, Inc., B‑413964, May 27, 2016. This rule applies even if a solicitation is silent about it.

Again, we start by asking if they satisfy the Government’s express requirements. If they don’t, their price isn’t necessarily useful for comparisons. But maybe they don’t and you want to give them an opportunity to submit a revised offer.

Competitive Range—
If you are going to conduct discussions, you’ll establish a competitive range. FAR 15.306(c). 

FAR 15.306(c) goes on to state that “[b]ased on the ratings of each proposal against all evaluation criteria, the contracting officer shall establish a competitive range comprised of all of the most highly rated proposals.” [e_mphasis mine_]

Excluding proposals from the competitive range without considering prices may be proper were proposals are found unacceptable. Possehn Consulting, B-278579.2, July 29, 1998.

Tradeoff Process—
A tradeoff process involves an evaluation of price in relation to the perceived benefits of an offeror’s proposal. FAR 15.101-1(c). Here, the tradeoff process “permits tradeoffs among cost or price and non-cost factors and allows the Government to accept other than the lowest priced proposal.” I am not aware that price must be considered for unacceptable offers because the offer is excluded (ineligible for award as-is by rule).

In contrast, GAO has found it improper to exclude technically acceptable proposals from the competition without considering price, under solicitations that used tradeoff source selection processes. See Kathpal Technologies, Inc.; Computer & Hi-Tech Management, Inc., B-283137, December 30, 1999.

Jamaal Valentine said:

I am not aware that price must be considered for unacceptable offers because the offer is excluded (ineligible for award as-is by rule).

That's what I thought too, but see Six3 Systems, Inc. - B-405942.4,B-405942.8:

Quote

Read together, the solicitation's definition of a marginal rating (which encompassed a failure to clearly meet solicitation requirements) and its statement that a proposal must meet the solicitation requirements to be considered for award adequately advised offerors that a rating of marginal may render a proposal ineligible for award. In other words, and stated conversely, the solicitation effectively informed offorers that ratings of acceptable or higher may be necessary for a proposal to be considered for award. Accordingly, we see no merit in Six3's argument that the agency was required to consider its lower-priced, marginal-rated proposal for award.[6] See Superior Landscaping Co., Inc., B-310617, Jan. 15, 2008, 2008 CPD ¶ 33 at 3, 4, 8 (proposal rated marginal properly excluded from best value tradeoff where solicitation provided that proposal must receive rating of at least acceptable to be considered for award).

Emphasis added.

But, actually, now that I'm re-reading the above quote from Six3 Systems, Inc. - B-405942.4,B-405942.8, I just realized that it's not about the solicitation's "statement that a proposal must meet the solicitation requirements to be considered for award adequately advised offerors that a rating of marginal may render a proposal ineligible for award", but rather the definition of marginal AND that statement COMBINED.

But this is what bugs me about GAO cases, they confuse the reader... why couldn't they just simply state that the solicitation's definition of a marginal rating (which encompassed a failure to clearly meet solicitation requirements) ALONE makes it so that the government doesn't have to include the marginal offeror in the trade-off process?

If the definition of marginal being un-awardable alone is enough, then this is true regardless of whether the solicitation has the above green statement:

When an offeror is unacceptable (un-awardable), by the definition of Marginal OR Unacceptable in the RFP, the government must consider their price for the green text but not the red text:

1) When determining competitive range.

2) When documenting trade-off analysis.

3) When determining price reasonableness.

Sam101 said:

When an offeror is unacceptable (un-awardable), by the definition of Marginal OR Unacceptable in the RFP, the government must consider their price for the green text but not the red text:

1) When determining competitive range.

…for inclusion in conducting discussions. If no discussions, there is no competitive range or competitive range determination.

Sam101 said:

2. When documenting trade-off analysis.

If the firm is initially included but no longer in the competitive range after discussions at the time of a trade off analysis for selection, it’s not included in the trade-off analysis and its price isn’t considered.

Sam101 said:

3. When determining price reasonableness.

…of the selected vendor.
If the firm is not included in the competitive range for discussions or is no longer competitive (unawardable) due to unacceptable ratings (and/or price) the government doesn’t have to and might be unable to consider its price (per the previous reasoning in this thread ).

Not including an unsat offeror in the price analysis and/or trade-off analysis feels like you are eliminating them from competition and therefore creating a competitive range.  Is there a way to eliminate an unsat offeror from the competition without creating a competitive range?  If so, how do you speak to this in your award decision document?

BONUS QUESTIONS (if you are feeling generous with your time):  How and when does a KO notify an unsat offeror that they are no longer being considered for award or that they did not receive the award?  

Thx everyone who has been participating in this discussion!

Sam101 said:

But this is what bugs me about GAO cases, they confuse the reader...

First, good writing is hard. Second, researching, reading, and interpreting law (including case law) requires specific knowledge, skills, and abilities. The good news is that good writing and legal interpretation can be learned.

Jamaal Valentine said:

good writing is hard

True.

adt110549601 said:

Not including an unsat offeror in the price analysis and/or trade-off analysis feels like you are eliminating them from competition and therefore creating a competitive range.  Is there a way to eliminate an unsat offeror from the competition without creating a competitive range?  If so, how do you speak to this in your award decision document?

Please read FAR 15.306 (c) Competitive range. Read (1) through (5).

Why would you “eliminate an offeror from the competition without creating a competitive range? Competitive range is only used for conducting discussions. You don’t need to remove an unsatisfactory offeror from the competition if there are no discussions. You evaluate proposals, make a selection and then inform unsuccessful offerors per 15.503 and following paragraphs…
:

adt110549601 said:

Not including an unsat offeror in the price analysis and/or trade-off analysis feels like you are eliminating them from competition and therefore creating a competitive range.  Is there a way to eliminate an unsat offeror from the competition without creating a competitive range?  If so, how do you speak to this in your award decision document?

The decision to establish a competitive range is a matter within the sound judgment of the procuring agency. Dismas Charities, Inc., B-284754, May 22, 2000, 2000 CPD para. 84 at 3. You establish a competitive range if you are entering into discussions. See FAR 15.306(c).

But establishing a competitive range doesn’t require you to enter into discussions. Information Sciences Corp., Gallagher, Hudson, & Hunsberger, Inc. (d/b/a Development InfoStructure or DEVIS) v. U.S. and Symplicity Corporation, No. 07-744, March 18, 2008.

adt110549601 said:

How and when does a KO notify an unsat offeror that they are no longer being considered for award or that they did not receive the award?

Read FAR 15.503 and see if you find your answer. See also FAR 13.106-3(c) or any other FAR part that governs your particular acquisition. For example, FAR 8.405-2(d) or FAR 16.505(b)(6).

Circle back and let us know what you settle on.

Jamaal Valentine said:

Read FAR 15.503

So, in accordance with FAR 15.503(a)(1) Preaward notices of exclusion from competitive range. The contracting officer shall notify offerors promptly in writing when their proposals are excluded from the competitive range or otherwise eliminated from the competition. The notice shall state the basis for the determination and that a proposal revision will not be considered.

Why is FAR 15.503(a)(1) titled "Preaward notices of exclusion from competitive range" when or otherwise eliminated from the competition means eliminated from competition even if a competitive range is not established? Such as an unacceptable rating but the government does not form a competitive range?

This still feels tricky when you have offered prices in a proposal from an offeror that has received a marginal/unsat/no confidence past performance rating.  I keep looping up and down this thread.  There are several good nuggets of information.

The tricky part is when an RFP says the Government will evaluate offered prices, but DAU’s Contract Pricing Reference Guide, Volume 1, paragraph 6.1.1 (link above) says to not compare prices of ‘technically unacceptable’ offers (and for good reason, I might add).  How do you evaluate the price proposal from an unsat offeror without a comparison that is required as part of an analysis?  The Gov’t plans to award without discussions, so this unsat offeror is not being kicked out so to speak.

Thx again everyone, especially Joel and Jamaal!

@adt110549601

Have you considered stating that you will only evaluate prices of offers and offerors that are eligible for award? That will put everyone on notice.

Also, it might be useful to distinguish, in your thinking, that evaluation is not synonymous with scoring/rating.

Jamaal Valentine said:

@adt110549601

Have you considered stating that you will only evaluate prices of offers and offerors that are eligible for award? That will put everyone on notice.

That can be tricky. If you decide to conduct discussions and have one or more firms with deficiencies that may be curable, You need to consider pricing and non-price aspects of the proposals in establishing the initial competitive ranges.

However, technically, materially deficient proposals aren’t eligible for award unless and until the firms can clear the deficiencies during or after discussions.

joel hoffman said:

If you decide to conduct discussions and have one or more firms with deficiencies that may be curable, You need to consider pricing and non-price aspects of the proposals in establishing the initial competitive ranges.

Emphasis added.

Right, so, the way I see it, a firm being ineligible for award CAN become eligible AFTER discussions.

And you need to consider pricing when forming a competitive range, so that's why this is true:

When an offeror is unacceptable (un-awardable), the government must consider their price for the green text but not the red text:

1) When determining competitive range.

2) When documenting trade-off analysis.

3) When determining price reasonableness.

joel hoffman said:

That can be tricky

But it's like that by default, isn't it?

Even if the solicitation does not state that unacceptable offerors are not eligible for award, the definition of unacceptable (and probably marginal as well) in the solicitation likely means the same thing as if the solicitation does state that unacceptable offerors are not eligible for award, since the government cannot award to an unacceptable offeror (an offeror who cannot meet the critical requirements of the SOW, at least based on their proposal) by default, right?

joel hoffman said:

You need to consider pricing and non-price aspects of the proposals in establishing the initial competitive ranges.

Maybe not. Possehn Consulting, B-278579.2, July 29, 1998 and other cases suggest it’s not an issue to eliminate unacceptable offers from the competitive range without any consideration of price. 

How would they establish themselves as an interested party in that regard?

Can you have adequate price competition with two offerors, when one of them receives a marg/unsat/no condidence past performance rating?  

FAR 15.403-1(c)(1) Adequate price competition. (i) A price is based on adequate price competition when—
(A) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement; 

So is it possible for a marg/unsat/no confidence rated offeror to submit an offer that still satisfies the Government's expressed requirement?

If the answer is, no, would you remove the marg/unsat/no confidence offeror from the competition?  This changes whether you would make a sole source award decision or a best value award decision.

adt110549601 said:

Can you have adequate price competition with two offerors, when one of them receives a marg/unsat/no condidence past performance rating?  

FAR 15.403-1(c)(1) Adequate price competition. (i) A price is based on adequate price competition when—
(A) Two or more responsible offerors, competing independently, submit priced offers that satisfy the Government’s expressed requirement;

Keep reading through FAR 15.403-1(c)(1)(ii).

adt110549601 said:

So is it possible for a marg/unsat/no confidence rated offeror to submit an offer that still satisfies the Government's expressed requirement?

If the answer is, no, would you remove the marg/unsat/no confidence offeror from the competition?  This changes whether you would make a sole source award decision or a best value award decision.

What do you mean by “sole source award decision or a best value award decision?” What’s the difference between the two?

@Jamaal Valentine, first, thx for hearing me out! 

With two offers, there would be a trade-off best value decision (adequate competition); with one offer, award could be made to a responsible offeror with fair and reasonable pricing (no longer best value, if one of the offers was no longer considered).

@adt110549601

 No worries. Thanks for the explanation.

Two things: First, verify that your use of the term ‘best value’ aligns with FAR [if that’s your goal]. Start with FAR 2.101 and then check FAR part 15. I think a search of “best value” will return 10 hits in FAR part 15. Lastly, let us know what you find.

This wifcon thread is a good supplement to this thread:

So, the way I see it, there are 2 instances of price reasonableness analysis when a competitive range is formed:

One for the competitive range formation, and one during trade-off documentation.