Government Contracts Monitor

The Silent Treatment: Agencies Don’t Have to Tell You When Your Price Is Too High

May 22, 2015

By: Eric Whytsell

Earlier this year, we published an article warning our readers not to expect more from discussions concerning their proposals than agencies are required to provide. Specifically, your price may be entirely reasonable but completely uncompetitive but, if so, the agency does not have to tell you a thing. In short, the requirement that discussions be "meaningful" does not ensure you will obtain any information about your proposed price. The recent GAO decision in Joint Logistics Managers, Inc., B-410465.2; B-410465.3 (May 5, 2015) reiterates and makes clear that an agency’s failure to inform a contractor that its price is uncompetitive does not make the agency’s discussions with offerors unequal.

The protestor, Joint Logistics Managers, Inc. (JLMI), argued that the agency failed to conduct meaningful discussions concerning JLMI’s proposed price and that discussions improperly favored the awardee, PrimeTech International, Inc. (PTI).

JLMI based its first protest ground on the assertion that the agency did not advise JLMI that its price was unreasonably high and that the contracting officer knew it was too high for JLMI to receive the award. The GAO made short work of this argument, explaining that, "[u]nless an offeror’s proposed price is so high as to be unreasonable or unacceptable, an agency is not required to inform an offeror during discussions that its proposed price is high in comparison to a competitor’s proposed price, even where price is the determinative factor for award." Here, the record showed the agency found JLMI’s price both to be fair and reasonable based on a comparison with other offers received and to be lower than the government’s independent estimate. As a result, GAO found the agency was not required to raise the issue of the firm’s price with JLMI during discussions.

JLMI also argued, however, that the agency engaged in unequal discussions because it pointed out weaknesses in PTI’s technical proposal but did not advise JLMI that its price was too high. GAO began its analysis by noting that while discussions may not be conducted in a manner that favors one offeror over another, they need not be identical among offerors and should instead be tailored to each offeror’s proposal. It then turned to the record, which revealed that the agency discussed two technical weaknesses with PTI but informed JLMI that its proposal contained no deficiencies or weaknesses (because the agency did not consider any aspect of JLMI’s technical proposal to constitute a weakness). On this evidence, the GAO concluded the agency properly tailored discussions based on the offerors’ proposals.

In doing so, GAO rejected the core assertion underlying JLMI’s unequal discussions allegation –that its significantly higher price should have been treated as a significant weakness, thereby warranting discussions so that JLMI could assess whether to lower the price in order to enhance its proposal’s potential for award. GAO explained that "[t]he flaw in JLMI’s argument is that a significantly higher price, or a price that is too high, is not a significant weakness or a deficiency as contemplated by the regulatory scheme delineating the rules for discussions." In this regard, the FAR 15.001 defines a deficiency as "a material failure . . . to meet a Government requirement or a combination of significant weaknesses . . . that increases the risk of unsuccessful contract performance to an unacceptable level." The GAO made clear that it does not consider either of these definitions as covering circumstances where a price is significantly high or too high to be competitive. Indeed, it noted that issues pertaining to price, while falling within the ambit of discussions, "are treated distinctly from significant weaknesses and deficiencies in the non-price proposal." More particularly, unless the price in question is considered unreasonable, the decision to discuss whether it is considered to be too high or too low is left to the contracting officer’s discretion. For this reason, GAO found no merit to JLMI’s second protest allegation.

Given the GAO’s established precedent, this outcome should come as no surprise. But the fact that these battles are still being fought highlights the persistent belief among contractors that the agency must reveal price information during discussions in order for them to be fair. Under GAO precedent, that’s simply not the case: an agency may discuss high prices but they don’t have to.

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