So, what is "adequate price competition"?
There are two standards in FAR for adequate price competition, one fairly obvious and the other, not so intuitive.
First the common-sense standard. A price is based on adequate price competition if two or more responsible offerors, competing independently, submit priced offers that satisfy the Government's expressed requirement and if award will be made to the offeror whose proposal represents the best value where price is a substantial factor in source selection and there is no finding that the price of the otherwise successful offer is unreasonable (see FAR 15.403-1(c)(1)(ii)).
The foregoing standard is straight forward - two or more responsible offerors and no shenanigans.
The second standard says that if you can't get two bidders, maybe one will do - but we'll still call it adequate price competition. The standard reads: A price is based on adequate price competition if there was a reasonable expectation, based on market research or other assessment, that two or more responsible offerors, competing independently, would submit priced offers in response to the solicitation's expressed requirement, even though only one offer is received from a responsible offeror and if based on the offer received, the contracting officer can reasonable conclude that the offer was submitted with the expectation of competition. For example, circumstances indicate that the offeror believed that at least one other offeror was capable of submitting a meaningful offer, and the offeror had no reason to believe that other potential offerors did not intend to submit an offer. Additionally, there must be a determination that the price is otherwise reasonable and the determination must be approved at a level above the contracting officer (see FAR 15.403-1(c)(1)(iii)).
Here are some rather obvious questions.
- How is the contracting officer going to reasonably conclude that the one offer was submitted with the expectation that other offers would be submitted? What kind of documentation is available to support this determination?
- How is the contracting officer going to document that the one offeror had no reason to believe that other potential offerors did not intend to submit offers?
- How is the contracting officer going to document that the one offeror believed that at least one other offeror was capable of submitting a meaningful offer?
- How is the contracting officer going to document that the one offer was otherwise reasonable?
Prime contractors should be thinking about these questions as they pertain to their subcontracting policies, procedures, and practices. Many prime contractors have based their own subcontracting methods on what FAR requires of the Government contracting.