Protesting Price Reasonableness Evaluations

May 29, 2025 Sareesh Rawat, Esq.

The Federal Acquisition Regulation (FAR) requires contracting officers (COs) to purchase supplies and services from responsible sources at fair and reasonable prices. In determining price reasonableness, the procuring agency’s primary concern is typically whether the offeror’s quoted prices are too high. Generally, adequate competition between proposals received in response to the solicitation establishes the reasonableness of pricing. However, depending on the procurement, the government may employ various other price analysis techniques to establish price reasonableness. Such techniques may include comparing proposed prices to historical prices paid, competitive published price lists, an independent government cost estimate (IGCE), or prices obtained through market research for the same or similar items or services. Unsuccessful offerors may challenge the procuring agency’s price reasonableness evaluation techniques in a post-award protest. In such protests, the manner and depth of the government’s price reasonableness evaluation is typically within the sound exercise of the agency’s discretion. However, while it is the agency’s prerogative to select an appropriate method for evaluating price reasonableness, the chosen method must provide a reasonable basis for assessing the different proposed pricing under the competing proposals.

In B-422266.4, a decision issued on February 18, 2025, the Government Accountability Office (GAO) entertained a post-award bid protest challenging the agency’s price reasonableness determination. The procurement involved a fixed-price task order request for financial support services for the United States Space Force. The task order was awarded at an evaluated price of $184,970,025 under the General Services Administration’s (GSA) One Acquisition Solution for Integrated Services (OASIS) indefinite delivery indefinite quantity (IDIQ) contract. During the evaluation of the proposed pricing, the agency utilized three price analysis techniques to determine the reasonableness of the awardee’s average labor rates and proposed pricing. Firstly, the agency compared the awardee’s proposed labor rates to labor rates from the incumbent bridge contracts, which had followed on from previously competitively awarded task orders. Secondly, the awardee’s labor rates were compared to GSA’s CALC+ prices-paid database data. Finally, the agency compared the awardee’s labor rates to those of the Bureau of Labor Statistics (BLS). Based on these rate comparisons, the procuring agency concluded that each of the three techniques independently supported a finding that the awardee’s proposed pricing was reasonable. The protestor challenged the reasonableness of all three price reasonableness analysis techniques.

Incumbent Bridge Contract Labor Rates

The protestor argued that the agency improperly compared the awardee’s labor rates to the incumbent bridge contract labor rates because the labor mix on the bridge contracts was significantly more senior and thus represented an artificially inflated price that the agency should have downwardly adjusted for a more apt comparison to the current requirement. Additionally, the protestor alleged that the awardee had proposed a more senior mix than the minimum qualifications outlined in the solicitation and that the agency should have evaluated price reasonableness based on the minimum qualifications. However, the GAO found these arguments unpersuasive and pointed to the solicitation, which included “desired qualifications” for many of the positions in addition to the minimum qualifications. The GAO noted that it would have been irrational for the agency to establish desired qualifications in the solicitation but not allow offerors to propose rates that would permit the recruitment and retention of staff that met those qualifications. The GAO also determined that the incumbent efforts involved a remarkably similar scope of work to the current requirement, noting that the awardee would perform the services in question for the same agency at the same location. Ultimately, since price reasonableness determination is a matter within agency discretion, the GAO concluded that it had no basis to find the agency’s evaluation unreasonable.

CALC+ Prices Paid Database

As part of its price reasonableness analysis, the agency compared the proposed rates to labor rates derived from GSA’s CALC+ Prices Paid database. The CALC+ database contains historical pricing for labor categories across various multiple award IDIQ contracts. The protestor alleged that the agency’s use of the GSA CALC+ prices-paid database was improper for several reasons. Firstly, the protestor pointed to the CALC+ tool user guide and alleged that, according to the guide, it was inappropriate to use CALC+ data to assess price reasonableness. Secondly, the protestor referred to the analysis technique employed by the agency in utilizing CALC+ data. It alleged that it was inappropriate for the agency to create average rates and standard deviations based on historical CALC+ labor rates. The protestor argued that the standard deviation benchmark established by the agency did not bear a reasonable relationship to prices actually paid by the government because the labor rates obtained via the standard deviation methodology for the purposes of comparison with the proposed rates were, in some cases, higher than any historical price paid by the government as recorded in the CALC+ database. Finally, the protestor noted that several of the awardee’s individual rates even exceeded the standard deviation benchmark established by the agency, demonstrating that the awardee’s pricing was unreasonable even by those standards.

The GAO first dismissed the protestor’s argument regarding the agency’s use of the CALC+ database by noting that the protestor had relied on a selective reading of the user guide. The user guide only warned agencies not to rely on the CALC+ database as a sole or primary method of determining price reasonableness. However, nothing in the user guide prevented agencies from utilizing the tool to inform a broader price reasonableness analysis. In fact, using the CALC+ database to inform and support price reasonableness determination is one of the tool’s intended purposes. Consequently, since the agency utilized the CALC+ database tool consistent with its purpose as part of its broader price analysis, the agency was justified in employing the CALC+ historical rates methodology.

Furthermore, the agency did not rely solely or mechanically on the standard deviation analysis to make the award decision. The agency evaluated both the overall average rates of each offeror, and the average rates proposed for each individual labor category. The awardee’s overall average rates were within one standard deviation of the average of relevant historical CALC+ rates. Additionally, while some of the awardee’s individual labor category rates were higher than the standard deviation benchmark, the same was true for several of the individual labor category rates proposed by the protestor. Thus, the GAO ultimately found the agency’s decision to not mechanically reject the proposals based on this sub-component of its broader price reasonableness analysis was consistent with the recommendations of the CALC+ user guide.

BLS Labor Rates

Finally, the protestor alleged that the agency’s use of the BLS labor rates was improper because the agency’s calculation of wrap rates to burden BLS direct labor rates was incorrect. The protestor pointed to the record to support its argument, which suggested that the agency may have double or triple-counted specific fringe benefit rates in burdening the BLS rates to make them comparable to the offerors’ proposed rates. While the GAO noted the protestor’s argument concerning BLS labor rates, it did not resolve it. The GAO reminded the protestor of the requirement that it must demonstrate competitive prejudice for the protest to be sustained. Here, even if the protestor’s argument regarding the BLS labor rates was assumed to be correct, the protest could not be sustained because the agency had reasonably relied upon two additional independent price analysis techniques to determine the reasonableness of the awardee’s pricing. Thus, the GAO did not resolve the protestor’s argument regarding the agency’s use of BLS labor rates because the agency had established the reasonableness of the awardee’s pricing using historical prices on the incumbent bridge contract and the CALC+ prices paid database.

In making price reasonableness determinations, procuring agencies are concerned with whether the offered pricing is too high. While protestors may challenge price reasonableness evaluations, such protests are typically difficult to sustain as the manner and depth of the agency’s price reasonableness evaluations are squarely within the agency’s discretion. Additionally, the reasonableness of proposed pricing is often justified if the procuring agency receives at least two competing offers. The government typically also has various methods to determine price reasonableness, including comparing proposed pricing with historical pricing, IGCE, or market research data. When the government employs multiple techniques to evaluate price reasonableness, as the procuring agency did in the procurement described above, the protestor may need to demonstrate that each price reasonableness technique was independently unreasonable. However, despite these challenges, protestors may successfully protest the government’s price reasonableness evaluation if they can demonstrate that using a particular methodology was unreasonable under the circumstances. Additionally, depending on the facts of the procurement, protestors may attempt to prove that the government’s price reasonableness analysis was incomplete or was not conducted equally amongst all offerors. Finally, in certain situations, protestors may also rely upon other related but distinct arguments, such as the existence of unbalanced pricing.

This Bid Protest Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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Filing Pre-Award Protests Challenging Flawed Evaluation Methodologies

March 31, 2024 Sareesh Rawat, Esq.

Prospective contractors may raise pre-award protests challenging solicitations that contain flawed evaluation methodologies. While the government has discretion in selecting the appropriate evaluation methodologies for fulfilling its procurement needs, the stated evaluation scheme must generally provide a meaningful basis for differentiating between offerors, while supporting a reasonable award decision. Pre-award protests that challenge the government’s evaluation methodologies are distinct from post-award protests filed due to flawed agency evaluations or disparate treatment of offerors. Such pre-award challenges are raised in response to the agency's planned approach to evaluate one or more solicitation factors, rather than a failure to adequately evaluate the proposals.

While it is within the agency’s discretion to select an appropriate method to assess offeror pricing, the agency may not use an evaluation method that produces a flawed or misleading result. In B-409872.2, the GAO sustained a pre-award bid protest because it found that the solicitation’s price evaluation methodology could produce misleading evaluation results when analyzing the competitiveness of price proposals. The solicitation issued by the Defense Commissary Agency (DeCA), contemplated an indefinite-delivery requirements contract for fresh fruit and vegetables for military commissary stores in South Korea, Japan, and Guam. The commissary stores provided groceries and household items to members of the military and other authorized patrons. The incumbent contractor responsible for fulfilling the fresh fruit and vegetables requirement for the commissary store protested the solicitation terms for allegedly containing a flawed pricing evaluation methodology.

Challenging Inadequate Cost Realism Analyses

February 16, 2024 Sareesh Rawat, Esq.

U.S. federal agencies conduct realism analyses on cost-reimbursable contracts to determine whether costs in a prospective contractor’s proposal are realistic and consistent with the proposed technical solution. Under such contracts, the government must pay contractors all actual and allowable costs, regardless of the proposed costs. Proper realism analysis helps the government determine whether the contractor’s proposed costs are so low that they fail to reflect a clear understanding of the solicitation’s requirements. Since contractors may submit artificially low bids on cost-reimbursable contracts to gain a competitive advantage, cost-realism analysis is necessary to ensure performance under these contracts is not compromised. In recent years, such contractor strategies have also contributed to the government’s shift away from the use of cost-reimbursable contracts. The Federal Acquisition Regulation (FAR) § 15.404-1(d)(2) outlines the requirements of cost realism analysis under such contracts to determine the probable cost of performance. Under FAR § 15.404-1(d)(3), cost realism analysis may also be utilized under limited circumstances in certain fixed-price contracts when new or complex requirements still need to be fully understood. Contractors may challenge the adequacy of the government’s cost realism analysis in a post-award bid protest by alleging that the agency failed to conduct a cost realism analysis or did not conduct such an analysis on a reasonable basis.

Protesting Results of the Government’s Price Realism Analysis

June 19, 2024 Sareesh Rawat, Esq.

When evaluating the pricing of prospective contractors, the government must determine whether the proposed pricing is realistic for the work to be performed. The government performs price realism analysis to ensure that the offerors’ pricing reflects a clear understanding of the technical performance requirements. While the Federal Acquisition Regulation (FAR) does not provide agencies with a specific roadmap to conduct price realism analysis, the government must still conduct realism analysis on proposed pricing where the solicitation so requires. Furthermore, the government must also conduct such an analysis if the solicitation advises offerors that the government will review proposed pricing to ensure that the prices are not so low that they demonstrate a lack of understanding of the technical requirements. In the latter scenario, the solicitation must also warn offerors their proposed solution may be rejected if the government determines their proposed pricing as unrealistic. By conducting price realism analysis in such situations, the government ensures that offeror pricing is consistent with the proposed technical solution.

In B-422309, the Government Accountability Office (GAO) sustained a protest alleging that the price realism analysis conducted by the Air Force was unreasonable. The April 2024 bid protest decision concerned a Request for Proposal (RFP) that contemplated the award of an indefinite-delivery, indefinite quantity (IDIQ) contract for base operations support services at the Homestead Air Reserve Base in Florida. Under the IDIQ contract, the Air Force planned to issue fixed-price, time and material (T&M) and cost-reimbursable task orders for the management of materiel, fuel, and services such as ground transportation, traffic operations and real property maintenance. The evaluation under the RFP was to be conducted in two phases, first of which involved an evaluation of proposed pricing. Notably, the RFP advised prospective offerors that their proposed pricing would be evaluated for price realism, if necessary. The RFP also warned prospective offerors that their proposed prices must be based on their corresponding technical approach and demonstrate a logical correlation to the staffing proposed in the technical approach. All offerors with unfavorable proposed pricing were to be excluded from the competition after the first phase. Under the second phase of the evaluation, the Air Force would evaluate the offerors’ proposals for technical acceptability, starting with the lowest priced proposal. To conclude the second phase, the technically acceptable proposals would be evaluated for past performance, with the Air Force finally awarding the contract to the proposal offering the most favorable combination of price and past performance.

Limitation of Costs or Funds Clauses and Exceptions to their Applicability

July 21, 2024 Sareesh Rawat, Esq.

The Federal Acquisition Regulation (FAR) prescribes the use of Limitation of Costs or Funds clauses in cost-reimbursable contracts that are either fully or incrementally funded. These clauses require contractors to follow specific procedures to notify the contracting officer (CO) when anticipated costs on a cost-reimbursable contract exceed a pre-determined threshold (typically 75 percent of the estimated costs), provide a revised estimate of costs for the remainder of the contract, and seek the CO’s approval to obtain additional funding. While FAR § 32.706-2 instructs the CO to insert the limitation of cost clause (LOCC) at FAR 52.232-20 in fully funded cost-reimbursable contracts, it instructs the CO to utilize the limitation of funds clause (LOFC) at FAR 52.232-22 in cost-reimbursable contracts that are incrementally funded.

These otherwise nearly identical clauses serve the dual purpose of protecting the contractor and the government from unfunded cost overruns. Firstly, the contractor is protected from the risk of the government’s unexpected refusal to pay additional costs due to the prior approval requirements imposed by the LOCC and the LOFC. Secondly, the LOCC and the LOFC protect the contractor by relieving any performance obligations on the contract beyond the stated cost limitation in the absence of the CO’s approval of a raised ceiling. Meanwhile, the clauses also protect the government by limiting the inherent risks of overpayments in cost-reimbursable contracts. That is, the LOCC and LOFC help prevent unnecessary cost overruns by requiring the contractor to go through an approval process to obtain additional funding before continuing performance on the contract beyond the contract’s stated cost ceiling. By setting a cost limitation ceiling, the government effectively protects itself from unexpectedly having to pay the contractor more than the anticipated costs set aside for the contract. The use of the LOCC or the LOFC also discourages contractors from utilizing unrealistically low pricing to obtain a competitive advantage during the solicitation stage of a cost-reimbursable contract.

Protesting Price Reasonableness Evaluations

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