FAR Price Analysis Improper Price Realism Analysis GAO

There is a recent trend increase in GAO bid protests for government contract pricing improper price realism evaluation and bidders’ technical proposals. Why is this becoming a problem?

Some government contractors believe that the new generation of contracting personnel require more training or simply may require a more thorough understanding of the rules.

Your role as a government contractor, however, should change your proposal writing efforts.

You still have an obligation to make sure that your pricing and labor mix can meet the agency’s FAR price analysis requirements.

This usually becomes a problem when the agency’s government contract pricing evaluation of your proposal is deemed unrealistic because it is below the government’s undisclosed estimate.

To avoid possibly losing in a GAO bid protest for price realism, you want to make that you elaborate on why your price is realistic, and the number of labor mixes is sufficient. Sometimes, a valid reason could be a comparison to standard commercial practices.

Government Contract FAR Pricing Analysis and Realism Evaluation Requirements

To avoid losing in a government contact protest, a federal contracting agency must perform a price analysis evaluation to determine the extent to which your proposed costs are realistic for the work to be performed. FAR 15.404-1(d)(1). See the difference between GAO price realism vs price reasonableness in a bid protest.

An agency’s price 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 given other cost information reasonably available to the agency as of the time of its evaluation.  GAO decided this issue in SGT, Inc., B-294722.4, July 28, 2005, 2005 CPD ¶ 151 at 7.

The challenge in a GAO protest

 If for some reason, you believe that the agency has unreasonably conducted a price analysis of your proposal, and the merits of your technical proposal, you bid protest may have merit.

The agency also has to produce documentation to support its price analysis in its source selection decision.  See information about government contract pricing and economic price adjustment.

The only way to eventually prove a lack of proper documentation for price realism is to have a protest lawyer who can be admitted to a protective order.

• You have to show why the agency’s price realism evaluation was unreasonable;
• Your technical proposal must prove your ability to meet the government’s requirements;
• Unequivocal language and explanation in your proposal are critical.

GAO – Protest Standard for Improper Price Realism Analysis & Evaluation

GAO’s assessment of a FAR price analysis and review of an agency’s price realism analysis evaluation is limited to determining whether the cost analysis is reasonably based. See Jacobs COGEMA, LLC, B-290125.2, B-290125.3, Dec. 18, 2002, 2003 CPD ¶ 16 at 26.

Fixed price government contracts price realism analysis requirements: If you are contemplating filing a GAO bid protest for award of a fixed-price contract, or portion of a contract (such as a fixed-price CLIN), an agency is only required to decide whether your offered prices are fair and reasonable, that is, whether proposed prices are too high. FAR 15.402(a).

A price realism evaluation, in contrast, applies government contract pricing cost realism analysis techniques to fixed prices and is intended to check whether proposed prices are too low by assessing your understanding of the requirements. See FAR 15.404-1(d)(3). See also information about agency cost evaluation methods.

Watch for solicitations where the agency reserves a right:  When an agency states in a solicitation that it “reserves the right” to conduct a price realism evaluation, the decision to perform such an analysis is a matter within the agency’s discretion.

• When the agency elects to conduct a price realism evaluation, the GAO analysis will review the evaluation for reasonableness.

Government contract pricing and price realism analysis challenges in a GAO bid protest can be tricky. If you believe that a government contracting agency has conducted an improper FAR price analysis on your proposal, Call a GAO protest lawyer at 1-866-60-5518.