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Government Not Required to Evaluate Line Item Pricing for Realism

A price evaluation was not arbitrary and capricious, according to the Court of Federal Claims, because the solicitation did not require the offerors' contractually binding prices to be evaluated for realism. The protester challenged contract awards for two geographic regions in a recompeted fixed-price procurement for post-disaster debris removal. To address concerns about the awardees' "radical drop" in pricing, the government requested offerors to provide an updated sample task order price but did not require offerors to use their proposed line item pricing, which was contractually binding. The protester's contention the awardees' revised prices were "too low" challenged the government's price realism analysis.

Outermost Limits

In a fixed-price procurement, however, the government may use price realism analysis at its discretion to assess an offeror's understanding of the solicitation requirements and to avoid the risk of poor performance. Although the court found the government's price realism determination "pushe[d] up against the outermost limits" of its discretion, the solicitation did not require the government to analyze contractually binding pricing for realism, and it would have been error for the government to reject low offers based on an unstated cost-realism evaluation criterion. In addition, the risk for not performing at the contractually binding price fell on the awardees, who were "tried-and-true" contractors with outstanding past performance records, understanding of the work, and technical solutions. Finally, the court was required to afford discretion to the government's price realism assessment and willingness to assume risk. (Ceres Environmental Services, Inc. v. U.S., et al., FedCl, 55 CCF 79,553)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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