Unbalanced pricing exists when despite an acceptable total evaluated price, the price of one or more line items is significantly over- or understated. Federal Acquisition Regulation (FAR) 15.404-1(g)(2) instructs contracting officers (COs) to analyze offers with separately priced line items or subline items to determine whether the prices are unbalanced. If unbalanced pricing is detected, the FAR requires that the CO consider the risks to the government in making the award decision and whether the contract award will result in paying unreasonably high prices for contract performance. If the performance or pricing risks associated with unbalanced pricing rise to unacceptable levels, the procuring agency may reject the offer containing the unbalanced pricing. Alternatively, the agency may accept the offer with unbalanced pricing if, after conducting a risk assessment, it determines that the offer does not pose an unacceptable performance risk and that the government is unlikely to pay unreasonably high prices. The methodology and scope of an agency’s cost or price analysis are matters within the agency’s discretion, and the GAO only reviews the record to ensure that the evaluation is reasonable and consistent with the terms of the solicitation and the applicable law.

Firm-fixed-price contracts place maximum risk and full responsibility upon the contractor for all costs and resulting profit or loss incurred in performing a government contract. Fixed price contracts provide for a price that is not subject to any adjustment based on the contractor’s cost experience. Meanwhile, fixed-price contracts with economic price adjustments provide for upward or downward revisions of the stated contract price upon the occurrence of specified contingencies. There are three general types of price adjustments. First, price adjustments based on established prices provide for increases or decreases from an agreed-upon level in published prices of specific items. Second, adjustments based on actual costs of labor or materials contemplate increases or decreases in the specified costs of labor or materials actually experienced by the contractor during contract performance. Finally, adjustments based on labor or material cost indexes provide for increases or decreases in labor or material cost standards or indexes identified explicitly in the contract. In fixed-price contracts that do not provide for economic price adjustments, the contractor assumes the risk of unexpected costs not attributable to the government.

Procuring agencies often take corrective actions in response to bid protests, both following bid protest decisions and voluntarily before decisions are rendered on the merits of the protest. The scope of corrective actions is typically within the discretion of the procuring agency, provided the action is appropriate to remedy a flaw that the agency believes exists in its procurement process. Protesters may nevertheless challenge the scope of corrective actions as overly broad or too narrow, with the former challenge typically more difficult to sustain. When filing such protests at the Government Accountability Office (GAO), protesters should file within ten days of the announcement of the corrective action, if revised proposals are not required. Otherwise, protesters must file their protests before the deadline for submitting the revised proposals. In such protests, the GAO will generally not object to a particular corrective action taken by a procuring agency, provided the action reasonably relates to and remedies the concern that prompted it.

In B-423269.2, a protest decision issued on April 23, 2025, the GAO denied a bid protest challenging the scope of the procuring agency’s corrective action as overly broad. The underlying procurement involved a request for proposal (RFP) issued by the United States Marine Corps (USMC) for the acquisition of support services for its Program Manager Expeditionary Radars portfolio. The RFP contemplated a best-value tradeoff evaluation and was issued under Navy’s SeaPort indefinite-delivery, indefinite-quantity (IDIQ) contract. The USMC received two timely proposals in response to the RFP, which were subsequently evaluated. The agency assigned the protester’s technical proposal an overall rating of “acceptable” with a total evaluated price of approximately $35.5 million. Meanwhile, the awardee’s proposal received a technical rating of “outstanding” with an evaluated total price of approximately $54 million and was determined to represent the best value to the government. In its initial protest, the protester challenged the USMC’s evaluation of its technical proposal and argued that the agency had failed to adequately explain why the awardee’s proposal justified a 52% price premium.

At the outset of a small business set-aside procurement, the contracting officer (CO) assigns the procurement a North American Industry Classification System (NAICS) code, which has a corresponding size standard. The CO is also responsible for structuring the procurement as one for manufactured products or supply items, or for services. When a contract for manufactured products or supply items is set aside for small business, the prime contractor must either manufacture the end item or qualify under the nonmanufacturer rule. Entities may qualify as a manufacturer if they manufacture the end item in the United States. Under the relevant regulations, a manufacturing entity utilizes its own facilities to perform the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being procured. Notably, there can only be one manufacturer of an end item for size purposes. The Small Business Administration (SBA) conducts an analysis under three factors enumerated in 13 C.F.R. § 121.406(b)(2)(i) to determine whether an entity is the manufacturer. These factors are:

• (A) The proportion of total value in the end item added by the efforts of the entity, excluding costs of overhead, testing, quality control, and profit.
• (B) The importance of the elements added by the entity to the function of the end item, regardless of their relative value.
• (C) The entity’s technical capabilities; plant, facilities and equipment; production or assembly line processes; packaging and boxing operations; labeling of products; and product warranties.