Friday, June 14, 2019

DoD Removes "Reasonable Expectation" Rule from Adequate Price Competition

The FAR (Federal Acquisition Regulation) has been amended to eliminate the so-called "Reasonable Expectation" rule when it comes to awarding contracts based on adequate price competition for DoD, NASA, and the Coast Guard procurements.

The Reasonable Expectation rule provided that a price is based on adequate price competition when 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. There's more to the rule but that covers the essence of it. Agencies other than DoD, NASA, and the Coast Guard can still use the "reasonable expectation" rule in awarding contracts based on price competition.

This tightening of the adequate price competition rules was brought about by the FY 2017 National Defense Authorization Act. Evidently, Congress had some concerns over the potential abuse of the reasonable expectation rule and took action to eliminate it - at least for DoD, NASA, and the Coast Guard. Our limited research did not uncover any anecdotal evidence of abuse of the reasonable expectation rule. In fact, one commentator writing in response to the rule after it was first proposed stated that it was unclear what problem this rule was trying to resolve. The respondent urged reconsideration of the regulation until the actual problem can be identified and targeted with an expected outcome that proves an acceptable solution.

The Defense Department is working on a rule to implement this at the subcontractor level.

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