Matter of GiaCare and MedTrust JV
Protesting an agency’s award of the contract based on a flawed price realism analysis is normally an uphill battle. However, in the matter of GiaCare and MedTrust JV, the importance lied in the solicitation itself. As the GAO recounted in sustaining GiaMed’s protest, “an agency may provide, in the solicitation, for the use of a price realism analysis for the limited purpose of measuring an offeror’s understanding of the requirements or to assess the risk inherent in an offeror’s proposal.” However, the legal factors to consider include:
- The depth of an agency’s evaluation in this regard [price realism analysis] is a matter within the sound exercise of the agency’s discretion.
- An agency may use a variety of techniques within its realism evaluation, and there is no obligation in a price realism analysis to verify each and every element of an offeror’s costs.
- In reviewing protest challenging price realism evaluations, we examine the record to determine whether the agency acted reasonably and in a manner consistent with the solicitation’s requirements.
In the solicitation, which was the subject of GiaMed’s protest, the RFP described what offerors were required to submit with their proposal and stated that “pricing must be considered realistic and reasonable” and that the agency would use price analysis, cost analysis, and cost realism techniques to evaluate offeror’s proposed pricing.
Price Realism Analysis
In this protest GiaCare and MedTrust JV, LLC (GiaMed ) protested the award of a nursing contract. Their protest challenged the agency’s evaluation of its proposal and the awardee, Global Dynamics’ proposal. The solicitation stated the award would be based on “best value.” It further stated that “when combined, the non-price factors were significantly more important than price.” Those non-price factors included personnel methodology, management capability, staffing approach, and past performance.
GiaMed’s primary contention was that “the Army’s price realism evaluation failed to take into account the risk presented by Global Dynamics’ unrealistically low price.” According to the protest, Global Dynamics’ technical proposal listed increased labor rates for the incumbent workforce, but its price proposal indicated lower rates for certain labor categories. GiaMed contended, amongst other things, that the Army failed to consider this discrepancy in evaluating Global Dynamics’ proposal.
The Army defended its evaluation of Global Dynamics’ price proposal, explaining that “both Global Dynamics and GiaMed proposed direct labor rates that were at the mean of all offerors.” The agency added that there were no significant differences between the 2 offerors and neither proposed unrealistically low or unbalanced direct labor rates.
The GAO determined that the record demonstrated “no meaningful consideration of the compatibility of Global Dynamics’ pricing and its proposed technical approach.” For example, the Army assigned a strength to Global Dynamics’ technical approach for retention and employee relations based on its increased percentage of pay above the incumbent’s employee rates. However, as GiaMed pointed out, Global Dynamics’ labor rates in its price proposal were lower than those of the incumbent, which therefore negated the augmentation the Army was expecting. The GAO determined that “the contemporaneous record does not show that the Army considered this discrepancy.”
Analysis and Assumptions
The GAO determined that the Army’s analysis was based on false assumptions and that it failed to properly document its “As we explained above, where an agency fails to document its analysis, it bears the risk that there may not be an adequate supporting rationale in the record for us to conclude that the agency had a reasonable basis for its decision.” Valor Healthcare, Inc., supra, at 6. Here the basis for the Army’s assumptions is undocumented and, therefore, we cannot conclude that its reliance on the contribution margin approach was reasonable. Solers, Inc., supra, at 8–9 (sustaining protest where record does not explain agency’s assumptions).
Failure to Consider Risk
In its protest, GiaMed alleged that Global Dynamics’ unrealistically low prices would severely limit its ability to deliver on its proposed technical approach. Specifically, GiaMed argued that Dynamics’ inability to provide its proposed salaries and benefits created a significant risk that it would not be able to recruit and retain the staffing required in the solicitation.
The GAO agreed. “There is nothing in the record indicating that the Army’s nonprice evaluators considered the potential impact of Global Dynamics’ direct or indirect rates on its ability to successfully perform the contract.”
The GAO agreed with the majority of GiaMed’s assertions and sustained its protest for the most part. It did afford the Army some leniency and its past performance evaluation, determining that it was within the agency’s discretion to assign favorable past performance rating based on Dynamics’ subcontractor’s past performance. However, as a related to GiaMed’s assertions of price realism analysis, the GAO sustained on essentially all points. Therefore, be on the lookout if the solicitation for which you are competing requires the agency to perform a price realism analysis and details what is required in an offeror’s proposal. If you feel good about your pricing and you are significantly under bid, a bid protest may be worth your while.Tags: Bid Protest