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Lowest bidder doesn’t always win

In the 1998 movie Armageddon, oil drillers are launched into space to destroy a Texas-sized asteroid hurtling toward Earth. Their special skills are needed to drill a hole into the asteroid to plant a nuclear device that will destroy the asteroid and save Earth. Before they are launched into space, one of the drillers wryly remarks: “You know we’re sitting on four million pounds of fuel, one nuclear weapon, and a thing that has 270,000 moving parts built by the lowest bidder. Makes you feel good, doesn’t it?”

This observation echoes real astronaut Alan Shepard’s observation: “It’s a very sobering feeling to be up in space and realize that one’s safety factor was determined by the lowest bidder on a government contract.”

But some people may be surprised to learn that the lowest bidder doesn’t always win a government contract. The Government Accountability Office (GAO) underscored this point in a recent decision involving a bid protest involving the U.S. Marine Corps’ amphibious combat vehicles (ACVs).

What did the Marines want?

The request for proposal (RFP) indicated that the Marines would employ a two-phased strategy to procure the ACVs. In the first phase, two contractors would be chosen to provide test vehicles for evaluation. In the second phase, as a result of the evaluation, one of the contractors would to be chosen to manufacture the ACVs. This bid protest concerned the first phase.

For the first phase, the RFP indicated the proposals would be evaluated on a best-value basis according to the following criteria (listed in descending order of importance):

  1. Technical evaluation.
  2. Price.
  3. Energy considerations.
  4. Small business considerations.

When combined, the non-price factors were more important than price.

The technical evaluation factor had four subfactors for consideration, with each subfactor considered of equal importance:

  1. How well the ACV operated in the water.
  2. How well the ACV operated on land.
  3. The payload capacity of the ACV (how many Marines could be carried).
  4. The ability of the ACV to survive attack and to protect the Marines it carried (the protection factor).

These subfactors were to be evaluated in terms of risk (low risk being best and high risk being undesirable) and the credibility of the offeror’s data used to substantiate its assertions about its proposal. The criteria for evaluating the data considered three factors:

  1. Source of the data (independent or government test data being more credible).
  2. Offeror’s test data and artifacts.
  3. Offeror’s modeling, simulation, and analysis of the proposed vehicle.

The RFP indicated that the Marines were willing to pay more for a superior technical solution. The price was to be based on the average unit manufacturing cost (AUMC).

What were the results of the evaluation?

There were five offerors, and two were selected. The protester contested the award to only one of the awardees. The following table summarizes the evaluation by source selection authority (SSA) of the protester and the awardee proposals.

   Protester  Awardee
 Water operation  Low risk  Low risk
 Land operation  Low risk  Moderate risk
 Payload  Low risk  Low risk
 Protection  Moderate risk  Low risk
 Energy  Acceptable  Acceptable
 Small business  Acceptable  Acceptable
 Price  $868,883,267  $1,192,997,066

The evaluation is different in the areas of land operation and protection. In its rationale for awarding the contract, the Marine Corps observed that the awardee’s significantly increased protection justified the awardee’s increased price. In particular, the SSA observed the awardee’s proposal provided greater protection against loss of life or limb.

What was the basis for the bid protest?

The protester asserted that the Marine Corps’ best-value decision—

  1. Was inconsistent with the RFP’s stated evaluation scheme by giving undue weight to the protection factor.
  2. Failed to consider the evaluated differences between proposals.
  3. Was inadequately documented.

Why did the GAO rule against the protester?

In making a decision about a bid protest, the GAO will not re-evaluate proposals, but will only consider whether the decision was rational and consistent with the evaluation criteria. In making a best-value decision, the SSA has to determine whether a proposal’s technical superiority is worth the higher price. In making its tradeoff analysis, the SSA can ultimately focus on a particular discriminator (point of difference) even if the discriminator is not related to the most heavily weighted evaluation factors so long as the SSA has a reasonable basis for doing so. The protester’s disagreement with the SSA’s judgment about the relative merit of competing proposals does not establish that an evaluation was unreasonable.

The GAO found the SSA had conducted a detailed review of the two proposals, including reviewing the reports of the source selection advisory council and the source selection evaluation board. The record established that the evaluators found that the two proposals were almost equal, except for the marginally better land performance of the protester’s vehicle and the substantially increased protection of the awardee’s vehicle. The higher protection factor was the basis for the award, made in view of the proliferation of improvised explosive devices on the battlefield.

The GAO found this tradeoff analysis was reasonable and consistent with the evaluation criteria. When a technical evaluation includes several equally weighted factors, it’s not unusual for a SSA to distinguish between proposals on the basis of one of those factors.

The GAO also found that the record clearly established that SSA had sufficiently documented its decision. Although source selections must be adequately documented, documentation does not require extensive documentation of everything considered in a tradeoff decision. The documentation needs only to be sufficient to establish that the agency was aware of the relative merits and costs of the competing proposals and that selection was reasonable. In making its decision in this procurement, the SSA clearly identified discriminators between the offerors’ technical proposals and concluded that the substantial protection advantage of the awardee’s vehicle outweighed the marginal land-operations advantage of the protester’s vehicle. This substantial advantage justified the awardee’s higher price.

Lessons learned

  1. The lowest bidder doesn’t always win a government contract, especially when the RFP indicates that the government is willing to pay more for a superior technical proposal.
  2. The GAO will not re-evaluate proposals, but only review the procuring authority’s decision for reasonableness and adherence to its evaluation criteria.
  3. The requirement for the procuring authority to document its decision does not require extensive documentation, but merely sufficient documentation.

The lessons underscore the need to carefully read an RFP to make sure you understand what the government wants. In also suggests that an awardee should not be afraid to intervene in a bid protest when it is sure that it can show a superior technical proposal.

For more information, see General Dynamics Land Systems, B-412525, B-412525.2 (decided March 15, 2016).

Items on this web page are general in nature. They cannot—and should not—replace consultation with a competent legal professional. Nothing on this web page should be considered rendering legal advice.

© 2016


© 2015

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