Monday, July 9, 2012


The Government Accountability Office (GAO) recently has issued an awful lowest price technically acceptable (LPTA) procurement decision.  Essentially, GAO has said it takes a hands off view since a fixed price contract places all the risk on the contractor and it is acceptable for an agency to base its "price realism" analysis on its own independent government estimate (IGE) even if the agency changes the IGE during proposal evaluation to meet the contractor's low ball price.

In Resource Ltd., B-406492; B-406492.2 (June 6, 2012), the solicitation provided for the award of an indefinite delivery/indefinite quantity (IDIQ) contract on a LPTA basis for custodial services.  Offerors were informed that proposals would be evaluated as acceptable or unacceptable under the technical capability factor.  The solicitation also provided that the agency would assess the reasonableness, realism and affordability of offerors' prices.

The so called assessment of price reasonableness and realism was based solely on the government's IGE.  Moreover, during proposal evaluation, the government lowered the IGE in an apparent justification of the successful contractor's price.

The protester argued that the agency failed to perform a proper realism evaluation and that the winning contractor's low ball price demonstrated the firm's lack of understanding of the work required and therefore represented an unacceptable performance risk to the government.

GAO denied the protesting, saying:
Where, as here, the award of a fixed-price contract is contemplated, a proposal's price realism is not ordinarily considered, since a fixed-price contract places the risk and responsibility for contract costs and resulting profit or loss on the contractor.  However, any agency may provide in the solicitation for a price realism analysis for such purposes as measuring an offeror's understanding of the solicitation requirements, or to avoid the risk of poor performance from a contractor who is forced to provide goods or services at little or no profit.
GAO's first order of business should be the preservation and protection of the integrity of the federal procurement system.  To that end, GAO should be as interested as most of us are in the FAR guidance on buying in.  It also should be wary of the potential for mischief LPTA creates and the damage that improper selection of LPTA contractors inflicts on the taxpayers.

Postscript: We do not criticize judicial tribunals.  GAO is not a judicial tribunal. We criticize GAO, however, because we respect and admire the institution as a quasi-judicial body.  The Court of Federal Claims often disagrees with GAO and sometimes we do too.

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