NASA (National Aeronautics and Space Administration) issued a solicitation for a variety of services including software development, data center operations, voice, imaging, and data communications, multimedia services support and other related services. Ultimately, the award was made to ASRC Federal Data Solutions (ASRC) whereupon one of the other bidders, AbacusSecure, appealed, challenging various aspects of NASA's evaluation and source selection process including its price realism analysis.
In evaluating price, NASA considered whether the proosed prices were unrealistically low. Both ASRC and AbacusSecure submitted prices that were lower than the Government estimate however there was only an 8.6 percent price difference between the two bidders. Accordingly, based on NASA's comparison of prices and the presence of adequate price competition, NASA concluded that neither price was unreasonably low.
AbacusSecure protested that NASA failed to perform an appropriate price realism analysis as part of its source selection process. Among other things, AbacusSecure asserted that NASA was required to assess the realism of ASRC's labor rates, arguing that they were too low to recruit the incumbent workforce.
NASA responded that its price evaluation was consistent with the terms of the solicitation. Specifically, NASA pointed out that the solicitation expressly put offerors on notice that price would be evaluated without evaluating separate cost elements and further, the solicitation did not require submission of labor rates for 90 percent of the line items. NASA further pointed out that it had noted the 8.6 percent difference in prices and had concluded on the basis of that comparison that ASRC's price was not unreasonably low.
The GAO (Government Accountability Office) did not sustain the appeal. GAO noted that there is no requirement that a price realism analysis be performed when award of a fixed-price contract because a fixed-price contract places the risk and responsibility for contract costs and ensuing profit or loss on the contractor. Nonetheless, a solicitation for a fixed-price contract may, as it did in this case, provide for a price realism analysis to assess the offerors' understanding of the solicitation requirements and potential risks (see Price Reasonableness vs Price Realism). In short, GAO found that NASA had done nothing inconsistent with the terms of the solicitation.
You can read the full text of the GAO decision here.
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