When a federal agency decides to perform a Price/Cost Realism Analysis it can change the outcome. In the Matter of: Solers Inc., the Request for Proposals (RFP) required offerors to propose the following systems engineering and technical assistance services in support of the DIBNet program:
The RFP said the agency would perform a realism analysis (is it too low to accomplish the objectives?) of the offerors’ price and cost. The RFP further stated that the cost-reimbursement contract line item numbers (CLINs) agency would be evaluated for the realism of the proposed costs. The RFP provided that the agency reserved the right to conduct a realism analysis of the offeror’s proposed price for fixed-price CLINs. The RFP required the offerors to “ensure price proposals include detailed information regarding the resources required to accomplish the task . . . [including] labor categories, labor hours, number of employees for each labor category, rates, travel, and incidental equipment.”
The agency advised Solers that DSA was selected for award and provided a debriefing on September 30. Solers protested arguing that the agency’s realism analysis of DSA’s proposed price/cost and the merits of Solers’s technical proposal were errant. The GAO concluded that the agency inadequately evaluated DSA’s price/cost proposals, and therefore did not demonstrate that the realism analysis was reasonable. The GAO added that DISA evaluated Solers’s technical proposal based on non-contemporaneous judgments and sustain the protest.
The Government Accountability Office (GAO) determined that “when an agency evaluates a proposal for the award of a cost-reimbursement contract, or portion of a contract (such as a cost-reimbursement CLIN), an offeror’s proposed costs are not dispositive because, regardless of the costs proposed, the government is bound to pay the contractor its actual and allowable costs.” Rather, an agency must perform a cost realism analysis to determine whether or not an offeror’s proposed costs are realistic for the work to be performed. The GAO decision indicates that an agency’s cost realism analysis “need not achieve scientific certainty; rather, the methodology employed must be reasonably adequate and provide some measure of confidence that the rates proposed are reasonable and realistic in view of other cost information reasonably available to the agency as of the time of its evaluation.” The GAO’s review of an agency’s cost realism analysis “is limited to determining whether the cost analysis is reasonably based.”
Price Realism Analysis
A price realism evaluation uses cost realism analysis techniques to fixed prices in order to evaluate whether proposed prices are too low. It does this by assessing an offeror’s understanding of the requirements. In the present case, the RFP stated that the agency “reserves the right” to conduct a price realism analysis, therefore the analysis was within the agency’s discretion. However, the agency chose to conduct a price realism evaluation, making it subject to review. Solers’s protest alleged that the record did not demonstrate the method DISA used in concluding that DSA’s proposed labor mix was realistic. Solers argued further that DSA’s proposed a level of effort for the fixed-price CLINs that was unrealistically low. The GAO agreed.
The GAO agreed with DISA in that a cost or price realism evaluation must consider each offerer’s unique technical approaches and so long as the costs are realistic given the technical approach, such an evaluation may be reasonable even if they differ greatly from other bidders or a government estimate. The GA concluded that in the present case, neither the contemporaneous record nor agency witness testimony showed how the agency evaluated the respective technical approaches in order to determine whether the proposed labor mix or level of effort were realstic.
Solers also protested that the agency evaluated its technical proposal unreasonably because by failing to recognize the aspects of its proposal that exceeded the solicitation requirements. DISA acknowledged that it viewed many areas of Solers’ proposal as being “advantageous” because they exceeded the solicitation requirements, but asserted that none of these areas were “strengths,” because they were not “quantifiable.” The GAOF concluded that the record did make clear the basis for DISA’s evaluation, and sustained the protest.
The GAO ruled that the record showed that DISA analysed whether Solers’ proposal provided quantifiable benefits in response to the protest. “Where, as here, an agency offers an explanation of its evaluation during the heat of litigation that is not borne out by the contemporaneous record, we give little weight to the later explanation.” The GAO concluded that the record demonstrated that the agency’s evaluation lacked a reasonable basis.
Because the record did not demonstrate that DISA reasonably considered the relative merits of the offerors’ proposals, GAO wrote that it had no basis on which to conclude whether such a review would have changed the DISA’s view of the proposals. It therefore sustained the protest.