GAO: Agencies Must Adequately Explain Why a Superior Technical Offer Warrants Paying a Higher Price
A Government Accountability Office ("GAO") bid protest decision highlights an important aspect of "best value" in government contracting: a proper tradeoff decision must provide a rational explanation as to why a superior technical proposal warrants paying a higher price.
The protest of Alpha Omega Integration, LLC, B-419812; B-419812.2, August 10, 2021, 2021 CPD ¶ 302 involves a challenge to the U.S. Department of Agriculture's ("Agency") award under a solicitation for information technology services. The solicitation used a best-value source selection process with a two-phased approach: (1) past performance and (2) technical, oral presentations, and price. [1] Following evaluations, the Agency assigned the protester and awardee identical non-price adjectival ratings and the protester's evaluated price was $586,211.58 lower than the awardee's price. [2]
Notably, the agency did not assign any strengths, weaknesses, or deficiencies as part of its evaluation; however, the Agency's trade-off section of the award memorandum did say that "the stronger oral presentation by [Alpha Omega] did not overcome Synergy’s overall stronger responses in both past performance and technical approach which are the two most important factors per the terms of the RFQ and warrants a trade-off to Synergy to achieve the best value." The memo also noted that, "Synergy has demonstrated unique innovative processes as well as their ability to take ownership of these processes through their past performance package as well as through their technical approach.”
In its protest, the protester challenged various aspects of the Agency's evaluation and best value tradeoff decision. Regarding the tradeoff, the protester argued that the Agency failed to adequately document its tradeoff and that the record did not show that the Agency "performed a qualitative and comparative assessment of acceptable quotations." In other words, the source selection decision "failed to explain what capabilities or features in Synergy’s quotation warranted paying a price premium."
The Agency argued that its decision was reasonable, that the contracting officer "extensively exercised independent judgment throughout the evaluation and award process," and that the protester's arguments were a mere disagreement with the Agency's reasonable (and "textbook") tradeoff analysis. [3] Ultimately, however, GAO agreed with the protester and sustained the protest because "the selection decision [did] not explain, beyond references to the adjectival ratings, the capabilities or features identified to justify the tradeoff decision."
In sustaining the protest, GAO first noted that, in a "'best-value' procurement, the source selection authority's function is to perform a tradeoff between price and non-price factors that is, to determine whether one quotation’s superiority under the non-price factor is worth a higher price." [4] And, where price is of lower importance than non-price factors, agencies are still required to meaningfully evaluate price. [5] Thus, before an agency can select a higher-priced, higher technical quotation over a lower-priced, acceptable quotation, the "award decision must be supported by a rational explanation of why the higher-rated quotation is, in fact, superior, and explaining why its technical superiority warrants paying a price premium."
GAO concluded that the Agency "fail[ed] to identify, with any specificity, or substantively discuss, the superior capabilities or features of Synergy’s quotation that would justify the payment of a price premium." In other words, because the Agency failed to provide any substantive discussion on the merits of the awardee's quotation and why it was the best-value in light of the higher price, the Agency's decision was not adequately documented and therefore was unreasonable. And, as GAO noted, because the protester offered the lower price, it could have been deemed "best value" on that basis. [6]
Takeaway
This decision provides a great reminder on an agency's obligation to adequately document its tradeoff analysis. In order to select a higher-priced offer where the technical approaches were evaluated equally (at least from an adjectival standpoint), an agency must still explain why the higher-priced offeror provides the best value (i.e., through a qualitative and comparative assessment). Without more, GAO will likely find that the decision was not adequately documented and unreasonable.
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[1] The two-phased approach included a down-select after phase 1, which was intended to minimize costs for vendors with little or no chance of receiving an award. The Agency planned to only invite three vendors to participate in phase 2.
[2] The protester and the awardee scored the same under the non-price factors: past performance – substantial confidence; technical approach – high confidence; and oral presentation – some confidence. That said, and as GAO explained in the decision, "ratings, whether numerical, color, or adjectival, are merely guides for intelligent decisionmaking." One Largo Metro LLC, et al., B-404896 et al., June 20, 2011, 2011 CPD ¶ 128 at 14.
[3] A portion of the Agency's award memorandum also includes:
The evaluation team discussed the overall value to the USDA for the trade-off and clearly demonstrated the value of the trade-off with the following statement. “The evaluation team recommends award to Synergy priced $586,211.58 higher than the next lowest price submitted by Alpha Omega Integration, LLC. The additional cost provides incredible value to the Government based on Synergy’s demonstration of technical expertise and comprehensive approach to addressing both current and future challenges for EAS. Synergy has demonstrated unique innovative processes as well as their ability to take ownership of these processes through their past performance package as well as through their technical approach.”
[4] Coastal Env’ts, Inc., B-401889, Dec. 18, 2009, 2009, CPD ¶ 261 at 4.
[5] e-LYNXX Corp., B-292761, Dec. 3, 2003, 2003 CPD ¶ 219 at 7.
[6] System Eng’g Int’l, Inc., B-402754, Jul. 20, 2010, 2010 CPD ¶ 167 at 5.
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