GAO Protest Decision-When are Communications with an Agency Not Considered the Forbidden Discussions during Procurement–“The Acid Test” and Price Realism

By: Christine V Williams on 01/20/2022

Clarifications on a procurement are not necessarily in violation of FAR Part 15–The Acid Test as Well as the Agency’s Duty to Conduct Price Realism

Clarifications or Negotiations–Clarifications Found

Cherokee CRC, LLC, a small business, protested the issuance of an order by the United States Department of the Interior, Bureau of Indian Affairs (BIA), to Walga Ross Group JV (WRG), another small business.  CRC protested on several grounds, the leading grounds being that the agency conducted unfair negotiations with WRG because the agency asked for a clarification on WRG’s price and that the agency failed to conduct a true price realism evaluation.  The protest of CRC was denied.

Noticeably, the task order competition was conducted pursuant to FAR Part 16.5 and the GAO used FAR Part 15 as the evaluation standards of fairness in negotiated procurements because when an agency engages in exchanges with vendors such exchanges must be fair and reasonable.

In turn, the discussions provision of FAR part 15 describe a spectrum of exchanges that may take place between an agency and an offeror during negotiated procurements. “The
agency’s characterization of a communication as clarifications or discussions is not
controlling; 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. ”

The GAO went on to find that in “situations where there is a dispute regarding whether communications between an agency and an offeror constituted discussions, the acid test is whether an offeror has been afforded an opportunity to revise or modify its proposal.”

The GAO went on to find, in denying CRC’s protest, that “clarifications, on the other hand, are limited exchanges that agencies may use to allow offerors to clarify certain aspects of their proposals or to resolve minor or clerical issues. See FAR 15.306(a)(2). Therefore, clarifications are not to be used to cure proposal deficiencies or material omissions, or materially alter the technical or cost elements of the proposal, or otherwise revise the proposal.”

Price Realism

GAO Standards of Evaluation

The GAO stated its standards for price realism and when and how such realism is applicable to a Firm Fixed Price (FFP) contract. “[A] solicitation contemplates the award of a fixed-price contract, the agency is not required to conduct a realism analysis; this is because a fixed-price contract places the risk and responsibility for loss on the contractor.”

“An agency may, however, provide for the use of a price realism analysis for the limited purpose of measuring offerors’ understanding of the requirements or to assess the risk inherent in an offeror’s proposal. When a solicitation provides for a price realism analysis, the manner and depth of an agency’s price realism analysis is a matter within the sound exercise of the agency’s discretion. ”

Applying these standards in reviewing protests challenging price realism evaluations, the GAO’s focus is on whether the agency acted reasonably and in a manner consistent with the solicitation’s requirements.

In this case, the GAO found that the solicitation specified that the agency would evaluate overall price and found CRC was objecting to a specific item in the overall price evaluation.  Accordingly, the GAO followed its own precedent in denying the protest on this ground as well.  “In the context of a fixed-price contract, we find nothing unreasonable about the agency’s price realism evaluation where the solicitation provided for the agency to evaluate overall price, not the price categories.”

Here is the link to the case: