When a solicitation closes and all prices are above the budget, is negotiations acceptable? If so at what point?

I'm new to this forum and am a first year contract specialist intern. There is a debate within my command on this issue: When a solicitation closes and all prices are above the budget, is negotiations acceptable? If so at what point?

Thank you for any clarification you can offer

mskitty

mskitty, in order to better focus this discussion, are you asking about any particular type acquisition process or acquisition in general? For instance, FAR Part 15 outlines the competitive negotiated source selection process. But there are several other types of acquisitions. Even a Part 14 IFB acquisition can provide for conversion to a negotiated method under certain circumstances. Can you provide more information on the "debate" within your command? Thanks.

mskitty, in order to better focus this discussion, are you asking about any particular type acquisition process or acquisition in general? For instance, FAR Part 15 outlines the competitive negotiated source selection process. But there are several other types of acquisitions. Even a Part 14 IFB acquisition can provide for conversion to a negotiated method under certain circumstances. Can you provide more information on the "debate" within your command? Thanks.

The debate is in general within the command. We work on many different types of acquistions. My interest would be focused on the acquisition of commercial items with simplified acqusition procedures through negotiations (FAR Part 15, 13.5 and 12).

mskitty

Here is a situation that offers lots of debate:

Once a solicitation has closed, all quotes are above the allowable funding, the quoters have been evaluated based on the LPTA, can you request that the quoter reduce their price further to meet the budget? Many believe this is requesting the LPTA quoter to make additional concessions the government has no right to ask for. Would this be entering into "discussion" or "negotiation"? I think much of the confusion can be attributed to these terms as well and how we are using them in this scenerio.

I hope this offers more of a focus on our debate. It gets pretty heated!

mskitty

I'm unclear on what the debate is, so I may be stating the obvious.

In order for offerors to propose a lower price, they would have to revise their proposals. This would require setting a competitive range and opening discussions with the offerors in the competitive range.

My concern about concessions was driving an already reasonable offeror lower once you had a competitive range of one. In baierle's case, it may have been that the government's motive was to remove excesses not integral to the offeror's design (similar to FAR 15.306(d)(4)) which seems perfectly appropriate. However, if the motive was to drive an already reasonable price lower, I find that troubling.

Is the debate between entering discussion or amending the solicitation or cancelling it? If so, shouldn't that depend on the totality of the circumstances? (In other words, shouldn't that be decided case-by-case?) Wouldn't you want to consider how clear your requirement was, whether the customer would accept something less, how close the prices are to your desired funding, how much the requirement would need to change to get an appropriate price, etc.? Of course, whatever you do, be mindful of FAR 15.206(e):

If, in the judgment of the contracting officer, based on market research or otherwise, an amendment proposed for issuance after offers have been received is so substantial as to exceed what prospective offerors reasonably could have anticipated, so that additional sources likely would have submitted offers had the substance of the amendment been known to them, the contracting officer shall cancel the original solicitation and issue a new one, regardless of the stage of the acquisition.

Sorry if I'm answering a question other than your's.

Here is a situation that offers lots of debate:

Once a solicitation has closed, all quotes are above the allowable funding, the quoters have been evaluated based on the LPTA, can you request that the quoter reduce their price further to meet the budget? Many believe this is requesting the LPTA quoter to make additional concessions the government has no right to ask for. Would this be entering into "discussion" or "negotiation"? I think much of the confusion can be attributed to these terms as well and how we are using them in this scenerio.

You said you are using simplified acquisition procedures pursuant to FAR Subpart 13.5. The answer to your questions depend on how the solicitation was written. Did it say you were conducting the acquisition pursuant to FAR Part 15? Did you use words and terms like discussions and competitive range?

If you're using commercial item procedures, it is perhaps worth noting that FAR Part 12 is not freestanding. ?Contracting officers shall use the policies in this part in conjunction with the policies and procedures for solicitation, evaluation and award prescribed in Part 13, Simplified Acquisition Procedures; Part 14, Sealed Bidding; or Part 15, Contracting by Negotiation, as appropriate for the particular acquisition.? FAR 12.102(. FAR 12.603?(2)(ii) requires identification in the combined synopsis/solicitation of whether the solicitation is issued as an IFB, RFQ, or RFP. When using simplified acquisition procedures, a Contracting Officer is not required to follow Parts 14 or 15, but may ?use any appropriate combination of the procedures.? FAR 13.003(g)(2); FAR 13.106-2((1). Of course, if you're going to enter discussions, you need to be fair, so at the very least be careful if borrowing only some of FAR 15.306. A CO can borrow procedures from Part 15, but only when not inconsistent with Parts 12 and 13. Ibid.

(As an aside, as it relates to amendments, the rule at FAR 15.206? permitting amendments to solicitations to only be provided to offerors in the competitive range may not be the end of the story under a commercial item buy borrowing from Part 15. Rather, if an amendment to a combined synopsis/solicitation is required, FAR 12.603?(4) seems to require the government publicize that amendment ?in the same manner as the initial synopsis and solicitation.?)

STOP! DAMMIT! If she is using simplified acquisition procedures she need not worry about the rules in FAR Part 15 unless the solicitation said so or alludes to such rules.

Stop prognosticating, guessing, and rattling off regulations. Wait until you have enough information to make an INTELLIGENT statement. Wait for her to answer the questions she's been asked.

CRIMINY!

My interest would be focused on the acquisition of commercial items with simplified acqusition procedures through negotiations (FAR Part 15, 13.5 and 12).

mskitty,

Don't mix negotiations and FAR part 15 with simplified acquisition of commercial items and FAR 13.5. Many people unnecessarily do that. Simplified acquisition procedures are that - intended to be simple.

If you received quotes that are for more money than you intended, you have flexibility in dealing with the situation. Forget about what Jacques says about a competitive range - you don't have competitive ranges with simplified acquisitions - unless you like to make your job complicated.

Think of you asking roofing companies to put new shingles on your house. If the quotes come in over your budget, just tell one or more that the quote is high. Ask them to "sharpen their pencil" and provide another quote. Or you could bargain and see what they could do in terms of providing something less experience. If you make a change to your requirements, give other firms a chance to quote on the same basis.

You have to use reason though. If quotes came in double your estimate, go back and verify the estimate is right.

mskitty,

Are you talking about quotations under FAR Part 13 or proposals under FAR Part 15 (including the LPTA process)?

For simplified acquisitions under FAR Part 13, yes, you can negotiate price and nothing else -- even prices that seem reasonable may still be negotiated downwards. It need not be a general rule that you always negotiate price and nothing else, but you can when circumstances warrant -- and in your case, it is okay to ( a ) tell each of a few of the lowest-price quoters that you appreciate its quotation but its price is too high to allow for an award; and ( b ) invite it to sharpen its pencil and give you new a lower price. Just be fair. You might succeed in getting the price you can afford to pay. You might not.

For LPTA proposals under FAR Part 15, the same idea applies. Just be fair. Negotiations in a Part 15 environment allow for bargaining and may apply to price and nothing else. I differ with Jacques in this matter. Yes, a competitive range is for the purpose of allowing discussions (negotiations) and proposal revisions, and it is okay if the only matter negotiated is price and the proposal revisions affect only price.

For simplified acquisitions under FAR Part 13, yes, you can negotiate price and nothing else...

What makes you think that?

I'm unclear on what the debate is, so I may be stating the obvious.

In order for offerors to propose a lower price, they would have to revise their proposals. This would require setting a competitive range and opening discussions with the offerors in the competitive range.

Jacques,

See FAR 13.106-2(a)(3):

If using price and other factors, ensure that quotations or offers can be evaluated in an efficient and minimally burdensome fashion. Formal evaluation plans and establishing a competitive range, conducting discussions, and scoring quotations or offers are not required.

Wow Jacques. You're like a duck flying low over a marsh at sunrise on opening day. Everybody is taking shots at you. I think you overdid it newbie.

Wow Jacques. You're like a duck flying low over a marsh at sunrise on opening day. Everybody is taking shots at you. I think you overdid it newbie.

I want to thank all of you for the discussion. I giggle because this is how our discussions go! Jacques position is the one we face most often. The question whether we site FAR 15 or 13.5 in our solicitation is another. These are SAP solicitations that address services, supplies or both. They are most often but not always, evaluated as LPTA.

When we ask what would the conditions be under FAR 15 or 13.5 that would allow us to "discuss or negotiate" with the lowest quoter, to go even lower to meet the governments budget. The answer is most often "never do it". This response doesn't answer our question, under what circumstances can we approach the lowest quoter to request that they go back and sharpen their pencil?

Again, thank you all for your discussion. My fellow interns and I are looking up the FAR sections mentioned and discussing the topics you have raised among ourselves.

mskitty

mskitty, what provisions are you using? Are you using 52.212-1 untailored? Are you using 52.212-2?

nder what circumstances can we approach the lowest quoter to request that they go back and sharpen their pencil?

I assume that you would ask for nothing but a price cut. No change in other proposal content.

My answer is that if you are using SAP and the rules in Part 15 are not implicated in any way, then there is no express prohibition against it in FAR and I know of no GAO decision that would preclude it. However, it would be foolish and unethical, so you must not do it. In the private sector it is considered a form of "sharp practice" that violates the purchasing profession's ethical standards.

Is that clear enough for you?

[T]here is no express prohibition against it in FAR and I know of no GAO decision that would preclude it. However, it would be foolish...

Vern, I sense your tongue is deeply embedded in your cheek, but this is the most pragmatic statement related to simplified acquisition I've heard in a long time.

Is Part 13 a tool or a religion?

Put differently, if you had a map (or a GPS receiver) that took you to the wrong location as often as Part 13 brought you to the wrong side of a protest decision, you?d throw it out and get a new map. It's time for a new map.

Vern, I sense your tongue is deeply embedded in your cheek, but this is the most pragmatic statement related to simplified acquisition I've heard in a long time.

Is Part 13 a tool or a religion?

Put differently, if you had a map (or a GPS receiver) that took you to the wrong location as often as Part 13 brought you to the wrong side of a protest decision, you?d throw it out and get a new map. It's time for a new map.

What is your point? Drop the metaphors and make a clear and precise statement. For once.

mskitty - Just an observation but you continue to mention LPTA evaluation while also stating you are using only FAR Part 13/12 or at least that is the sense I get in reading your posts. As a question for your internal discussion where in FAR Part 13/12 do you see reference to LPTA?

It seems like you're looking for a test case to get the GAO decisions "back on track." It is rational?though perhaps short-sighted?for a CO to want to avoid an area where the trend in the decisions appears to try to contain CO's discretion and limit flexibility.

While the decisions are the problem, I'm not sure one correct decision is the solution. Courts and the GAO have a tendency to "fill the gaps" when they feel flexibility is likely to be "abused" (as they see it). If all we have is FAR 13.106-2(a)(3) to hang our hats on for the proposition that the government can negotiate with some, but not all, vendors (without some safeguards similar to FAR 15.306 & 15.307), I predict the endeavor is doomed to failure. (The default language on discussions in FAR provision 52.212-1 doesn't help, either.)

Simplified acquisition is a volume business, often with inexperienced buyers and COs. I work in a bureaucracy. If and when we break this code, the government is going to need something to institutionalize the tried and tested procedures that the GAO and COFC can live with. Acquisition reform (IMHO) does not have its own institutional momentum?it must be taught to each new cohort.

PS: I don't think the answer is less in the solicitation, I think it is more. If you don't want to GAO to fill the gaps, fill them in advance. Describe how the government intends to handle negotiations.

mskitty, what provisions are you using? Are you using 52.212-1 untailored? Are you using 52.212-2?

We are using 52.212-2

PS: I don't think the answer is less in the solicitation, I think it is more. If you don't want to GAO to fill the gaps, fill them in advance. Describe how the government intends to handle negotiations.

How would you suggest we do that?

I assume that you would ask for nothing but a price cut. No change in other proposal content.

My answer is that if you are using SAP and the rules in Part 15 are not implicated in any way, then there is no express prohibition against it in FAR and I know of no GAO decision that would preclude it. However, it would be foolish and unethical, so you must not do it. In the private sector it is considered a form of "sharp practice" that violates the purchasing profession's ethical standards.

Is that clear enough for you?

I will preface this post with the admission that I'm not involved with the government's simplified acquisition methods, so do not claim any expertise. however, I have worked both in private sector and in City Government where the purchasing agents bought stuff every day. I am also familiar with construction contracting purchasing by primes.

When I was assigned to a huge construction program in Saudi Arabia, I worked with a fellow contract administrator who is Korean. Mr. Chong once told me (paraphrasing), "You Americans are so gullible and naive. If somebody offers you a price or you see a price on something, you believe it and just pay it. In Korea, we negotiate for everything, including a loaf of bread." His favorite expression to me was "Use your imagination," which meant "Get out of your box".

In the proposed scenario here, all quotations exceed the agency's budget. Vern says that it would be unethical to go back and ask for a lower price. So, I guess the purchasing system fails to provide a solution and the buyer tells the customer, "Sorry, we didn't get quotes within the budget but there isn't anything I can ethically do about it."

As far as private sector not going back after receiving quotations for ethical reasons, what proof do you have of that, Vern? When I was City Engineer, 35 years ago, my office was across the hall from the purchasing agent, who bargained all the time with suppliers. He was a gee whiz negotiator. In fact, the mayor was a buyer for Broan Manufacturing Corp., who makes many of the bathroom fans sold in the US. He also told me how he would bargain with suppliers. Prime construction contractors do it all the time with their subs and suppliers. And I'm not talking about the practice of "bid shopping", either. I'm talking about some ethical primes that I know who prepare their own estimates, get sub prices, then negotiate to get them within the budget, before submitting a bid or proposal to the Gov't.

I've told the story of my secretary in a USACE construction office about 28 years ago who made the lab boys check at least three places for prices on 3 magic markers that they needed. The cheapest ones were at Wal-Mart, so she called them up and asked the manager for a 10 cent per marker reduction, which WalMart accepted! I've always thought that was a bit extreme, considering the fact that the effort involved and driving around town cost more than the magic markers, but it apparently didnt bother the WalMart guy.

When I took a business law class in night school that same year, we were all amazed when the Prof told us that the prices in stores are all negotiable and the UCC provides the opportunity for bargaining for almost anything. I've since learned to bargain on occasion in stores, when I know that I'm dealing with somebody who has the authority to offer or accept a lower price.

The fact that we say that we are looking for the lowest-priced acceptable product should not preclude the ethical or practical possibility of asking for a price break when the lowest price exceeds the budget or when you have some knowledge that the price is unreasonable.

I thought that a quotation wasn't a proposal and that the government then goes back with an offer or purchase order for the supplier to accept.

How would you suggest we do that?

Use your imagination and experience (and/or the experience of others). Think of times when you've wanted to negotiate but felt constrained. What do you wish you could have been able to do (consistent with basic fairness)?

mskitty, I don't have a good answer for you. Everyone's conception of basic fairness is different. But almost any attempt would probably be better than where we are today. Maybe it's worth a try.

It seems like you're looking for a test case to get the GAO decisions "back on track." It is rational?though perhaps short-sighted?for a CO to want to avoid an area where the trend in the decisions appears to try to contain CO's discretion and limit flexibility.

While the decisions are the problem, I'm not sure one correct decision is the solution. Courts and the GAO have a tendency to "fill the gaps" when they feel flexibility is likely to be "abused" (as they see it). If all we have is FAR 13.106-2(a)(3) to hang our hats on for the proposition that the government can negotiate with some, but not all, vendors (without some safeguards similar to FAR 15.306 & 15.307), I predict the endeavor is doomed to failure. (The default language on discussions in FAR provision 52.212-1 doesn't help, either.)

Simplified acquisition is a volume business, often with inexperienced buyers and COs. I work in a bureaucracy. If and when we break this code, the government is going to need something to institutionalize the tried and tested procedures that the GAO and COFC can live with. Acquisition reform (IMHO) does not have its own institutional momentum?it must be taught to each new cohort.

Jacques: You cannot come to the point. We were asked a straightforward question. I have seen nothing from you in the way of a straightforward response.

The answer to mskitty's question is as I gave it above. What she does with the answer is up to her. I did not say that she should negotiate for a lower price in her case. In fact, I said it would be unwise and unethical. But since we have not been able to get all of the necessary facts from her, the best answer is a direct one--nothing prohibits. As best I can tell, you think that it would be improper, under simplified acquisition procedures, ever to negotiate a lower price with only the low-priced quoter/offeror. (If I have got it wrong, that's your fault.) You state no basis for your concerns other than vague allusions to trouble with simplified acquisitions and some unspecified trend in protest decisions.

Since 1994, when the threshold went to $100,000, the GAO has rendered 134 decisions involving simplified acquisition procedures. It has sustained 28. Of the 28, only one involved discussions, and the GAO sustained the protest because the agency used Part 15 procedures but did not follow Part 15 rules for discussions. See Kathryn Huddleston & Assocs., Ltd., Comp. Gen. Dec. B-289453, March 11, 2002. Twenty eight sustained protests in 16 years hardly makes SAP a dangerous area, especially in light of the sheer number of SAP acquisitions conducted each year.

FAR Part 13 establishes no rules whatsoever for the conduct of negotiations in a simplified acquisition. It expressly states that agencies need not follow Part 15 and need not establish a competitive range and conduct "discussions," a term of art used in competitive negotiated acquisitions. I agree that it would be best to tell quoters/offerors in advance what you will or might do with respect to negotiation. But nothing in FAR prohibits negotiations with only the low price quoter in a simplified acquisition. While equitable treatment and fairness are always considerations, it does not follow that agencies must conduct negotiations with multiple quoters/offerors when conducting a simplified acquisition. If you are going to suggest that some course of conduct is wrong or dangerous, you ought to produce more in the way of argument than vague allusions to a non-existent "trend in the decisions."

As far as private sector not going back after receiving quotations for ethical reasons, what proof do you have of that, Vern?

I didn't say that, so why should I prove that?

I addressed mskitty's situation, in which she solicited competitive "proposals" (her word) and told the competitors that she would award on the basis of lowest-price technically acceptable. To announce that and then go to the lowest price offeror and ask for a price reduction without any basis except her budget problems would be considered unethical in the private sector. Any number of textbooks on private sector purchasing will confirm my assertion. Any firm that regularly engages in such a practice would soon find itself having difficulty in getting proposals from quality firms. See the short entry on "sharp practice" at this UC Santa Cruz website: http://purchasing.ucsc.edu/glossary/glossary-s.html.

On the other hand, there is no problem with asking for quotes and then negotiating for a lower price, provided that you didn't conduct a formal competition and say you would award on a low price basis. To do that and then ask for a further reduction is unfair and unethical.

And by the way, working for a city engineer is not working in the private sector.

I was in private practice for 4 years working for a consulting engineer. Worked with developers and various contractors, sometimes as design-build team.

Vern, I must have been projecting my desire that Kathryn Huddleston & Associates, Ltd., B-289453, Mar. 11, 2002, 2002 CPD ? 57 and Finlen Complex, Inc., B-288280, Oct. 10, 2001, 2001 CPD ? 167, be limited to their facts.

I have not been able to find a post-Finlen decision involving negotiations under simplified acquisition procedures where the GAO has denied a protest involving negotiations with some, but not all, vendors, where the agency didn't argue that it met the requirements of FAR 15.306 & .307. This isn't an argument, it's just an observation. I worry--hopefully unfounded--that a future GAO decision will cite cases like Priority One Servs., Inc., B-288836, B-288836.2, Dec. 17, 2001, 2002 CPD ? 79 for the proposition that "It is the actions of the parties that determine whether discussions have been held and not merely the characterization of the communications by the agency" and reinterpret the facts of Huddleston to conclude that "Discussions occur when a procuring agency provides a vendor with the opportunity to revise or modify its quotation." American Floor Consultants & Installations, Inc., B-294934; B-294934.2, Dec. 16, 2004, 2004 CPD ? 248, at 2.

All of this is neither here nor there if the agency describes how it's going to handle negotiations in the solicitation.

It's neither here nor there anyway.

mskitty,

You've read here that ( 1 ) you can negotiate price only when circumstances suggest doing so is appropriate, ( 2 ) you can legally but such is unethical, and ( 3 ) you cannot.

What have you decided?

mskitty,

You've read here that ( 1 ) you can negotiate price only when circumstances suggest doing so is appropriate, ( 2 ) you can legally but such is unethical, and ( 3 ) you cannot.

What have you decided?

The governments estimate should have supporting documentation that identifies the market research utilized to create the estimate. Far to often we find that the end user makes one call to a vendor, aquires a price and there's your government estimate. Since the governments estimate is the bases for funding allocation (budget) for many activities the budget is unreliable on its own. Having the ability to negotiate or discuss a lower price after the close of solicitation is a tool that we should be able to utilize with boundries. I was hoping the FAR offered a more definitive answer because these negotiations or discussions are being conducted.

Thank you all for your educational discussion. We (myself and fellow interns) are reading the blog.

mskitty

Hi mskitty,

The situations you describe are fairly common. You'll become more familiar with what tools are available to CO's as you progress through your career. For now, whether you think it's right, wrong or indifferent, you'll need to follow the advice and direction of the CO's you're working with. When you have your own authority you'll be able to make up your own mind about what you think is in the best interests of the Government given all of the circumstances you are dealing with at that moment. Then move on, you have other procurements and other issues to tackle. A good debate is healthy, but don't make it the point of your work. Vern is correct when he says that if there is nothing that prohibits a course of action then you are free to employ it, but it's up to you to decide if what you've come up with is the right thing to do. It won't always be easy, and you'll often find yourself in the situation where there is no right answer. Don't let that intimidate you into not making a decision or being ultra-conservative. Focus on readiness, rather than resistance.

Hi mskitty,

The situations you describe are fairly common. You'll become more familiar with what tools are available to CO's as you progress through your career. For now, whether you think it's right, wrong or indifferent, you'll need to follow the advice and direction of the CO's you're working with. When you have your own authority you'll be able to make up your own mind about what you think is in the best interests of the Government given all of the circumstances you are dealing with at that moment. Then move on, you have other procurements and other issues to tackle. A good debate is healthy, but don't make it the point of your work. Vern is correct when he says that if there is nothing that prohibits a course of action then you are free to employ it, but it's up to you to decide if what you've come up with is the right thing to do. It won't always be easy, and you'll often find yourself in the situation where there is no right answer. Don't let that intimidate you into not making a decision or being ultra-conservative. Focus on readiness, rather than resistance.

Traipse,

Thank you for the great advise. I agree with everything you stated.

mskitty

Traipse,

Thank you for the great advise. I agree with everything you stated.

mskitty

For what its worth, I'd use some form of simplified acquisition method that allows some discussion if all proposals blow the budget, if for no other reasson than to find out why.

Especially if you are requesting "quotes". I thought quotes aren't technically "offers" and that the Government then replies with an "offer", anyway. It would seem that such a method would ethically allow for "talk".

Heck, maybe I just like to negotiate or bargain.

I sometimes wonder why a program office can get an estimate or "quote" from a source to use for budget purposes that doesn't follow through when the government actually goes out for bids, proposals or quotes. Must be that the firm doesnt realize all the government BS that the actual acquisition process entails.

At the risk of reviving a stale topic that folks may not be very interested in, let me offer a couple of thoughts.

I have worked for companies that regarded the lowest priced technically acceptable quote as the place to start price negotiations. I always took a dim view of that practice, and certainly understand Vern's concerns about the ethics of negotiating price when there are solicitation provisions that describe a different process, but that's how many organizations do business. There may be room in the federal way of doing things, particularly SAP, to implement commercial best practices (if this indeed is one).

On another aspect of this thread, I have seen times when agencies canceled solicitations because "all proposals were outside the awardable range." It took a while to find what that meant: by statute, public works contracts cannot be awarded at a price more than 25% over the gov't estimate (which excludes profit). As bidders in a small prequalified MATOC pool, we thought the agency was throwing the baby out with the bathwater. After several canceled RFPs, the agency finally called for discussions on a task order. We went in with responsive base proposal and more importantly an alternative proposal based on a longer schedule (nonresponsive to the original RFP) that allowed us to lower our price because of the availability of a specialized piece of equipment at a more favorable rate by waiting in line for it instead of paying a premium to use it within the agency's schedule. Eventually on that basis we won the job. The moral was, I think, it may be in the agency's and taxpayers' best interest to open discussions to find out what can reasonably be done or changed to fill a requirement within budget. It may not always work out by allowing an award, but at least it will give the agency a better idea of why a solicitation failed and an opportunity to align future solicitation requirements with market conditions.

Interesting. Keep in mind, however, that the rules might have required the agency to amend the solicitation and give other competitors a chance to revise their proposals based on the longer schedule. But I can't say that the agency did anything wrong, since the solicitation may have provided for alternate proposals. In any case, I would not object to such a procedure in principle, since it was not just an attempt to drive down the price without a concession on other contract terms.