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GAO Finds "Highest Technically Rated at a Fair and Reasonable Price" Is a Permissible Evaluation Scheme

GAO Finds "Highest Technically Rated at a Fair and Reasonable Price" Is a Permissible Evaluation Scheme

On January 11, 2017, the Government Accountability Office ("GAO") issued its decision in Sevatec, Inc., et al., B-413559.3 et al. (Jan. 11, 2017), finding that the Federal Acquisition Regulation ("FAR") permits agencies to use a source selection scheme that provides for award to proposals receiving the highest technical rating with a fair and reasonable price.

In Sevatec, the General Services Administration ("GSA") issued a solicitation for its Alliant 2 procurement, which aims to establish multiple-award indefinite delivery/indefinite quantity, or IDIQ, contracts under which task orders will be issued for a broad range of information technology services. The solicitation stated that GSA will award approximately 60 contracts to offerors submitting the highest-rated proposals at a fair and reasonable price, and specified that the award would be based on "neither … Lowest Priced Technically Acceptable (LPTA) nor Tradeoffs."

Under the solicitation's terms, companies were to self-score their proposals using objective criteria set forth in the RFP, resulting in a total point score for their proposals. Agency evaluators would then rank the top 60 proposals by technical point score and verify that the offerors' scores were correctly calculated. Next, evaluators would consider whether the top 60 offerors' prices were fair and reasonable by evaluating a variety of cost factors, including direct labor rates for 31 categories at four different skill levels and the fairness and reasonableness of an offeror's fringe benefits, general and administrative costs, overhead, and profit. Awards would be made to these top-rated proposals, as long as the evaluators found that the offerors' prices were fair and reasonable; if any firm's prices were not considered to be fair and reasonable, that firm would be eliminated from the competition, and evaluators would consider the next highest ranked proposal.

Several companies challenged this evaluation scheme, arguing that merely determining that prices are fair and reasonable does not satisfy the Competition in Contracting Act's requirement that "cost or price … must be considered in the evaluation of proposals." 41 U.S.C. § 3306(c)(1)(B). The protesters also argued that this evaluation scheme did not provide for meaningful consideration of price because the agency's evaluation would not consider the price of those offers with technical scores that fell below the top 60.

GAO, noting that it had never previously considered the propriety of such an evaluation scheme, concluded that the protesters failed to establish that it was improper. While the FAR specifically provides for an LPTA source selection process and a "tradeoff" process, it does not expressly mention a "highest technically rated with a fair and reasonable price" type evaluation scheme. FAR §§ 15.101-1, 15.101-2. However, GAO noted that "the FAR explicitly recognizes that these two processes are not the only source selection processes available to the agency, as FAR § 15.100 provides that [LPTA and tradeoffs] are only 'some' of the processes available."

The Sevatec decision highlights the flexibility that agencies have in drafting an evaluation scheme under which they will evaluate proposals. It also highlights how important it is for companies to ensure that they understand the ground rules of the competition before submitting proposals, since evaluation schemes can vary so widely from one procurement to the next, and failing to tailor a proposal to optimize its success under a particular evaluation scheme could be fatal to a firm's success. GAO's decision can be accessed here.

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