Unbalanced Pricing & Associated Risks in Federal Contracts

July 3, 2025 Sareesh Rawat, Esq.

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.

While both overstated and understated prices are relevant to an unbalanced pricing analysis, the primary risk the government assesses in this context is the risk posed by overstated prices. This is because low prices are not inherently improper and do not by themselves establish unbalanced pricing. Thus, to sustain a protest alleging unbalanced pricing, a protester must specifically identify one or more line or subline items and demonstrate that their pricing is significantly overstated. In B-421025.2; 421025.3, a bid protest decision issued by the Government Accountability Office (GAO) on July 6, 2023, the protester failed to identify any line items in the awardee’s proposal that contained overstated pricing. Instead, the protester merely observed that because the awardee had reduced its pricing on certain line items during discussions with the government, its pricing on other line items could now be overstated. Predictably, the GAO dismissed the allegation, noting that the protester had failed to meet the threshold requirement for proving unbalanced pricing because it could not demonstrate that any particular line item in the awardee’s proposal was overstated.

Furthermore, for unbalanced pricing to exist, the relevant proposed prices must be for line or subline items, rather than the total evaluated price (TEP). In B-422826, a bid protest decision issued by the GAO on November 20, 2024, the protester’s allegations of unbalanced pricing in a Defense Health Agency (DHA) contract were dismissed because they were solely related to differences between the TEPs. The offerors were required to provide prices for three “stepladder ranges,” for services involving healthcare environmental cleaning. The stepladder ranges included pricing for a base period, four option periods, a transition period, and a period for service extension. Each of these periods of performance represented a separate line item. The DHA added the proposed prices of all the line items to compute a TEP for each stepladder range. During the post-award protest, the protester alleged that the awardee’s pricing for stepladder 3 was unbalanced because it was inconsistent with its proposed pricing for stepladders 1 and 2. However, the GAO was unpersuaded by the protester’s argument because the stepladder prices represented TEPs and not pricing for individual line items. Consequently, the protester’s allegation of unbalanced pricing was dismissed because it could not demonstrate that the stepladder prices were for individual line or subline items.

It is also worth noting that, unless the solicitation specifically calls for it, unbalanced pricing evaluations are only mandated in FAR Part 15 procurements. In B-422081.2, a bid protest decision issued by the GAO on January 23, 2025, the underlying solicitation did not provide for the evaluation of proposed prices for balance. The acquisition was conducted under FAR 16.505, and the solicitation expressly stated that, regardless of the language used, the policies in FAR 15.3 did not apply to the ordering process. Following the award, the protester challenged the task order award, asserting, among other arguments, that the awardee’s pricing was materially unbalanced and that the procuring agency had failed to perform an unbalanced pricing analysis. The GAO dismissed the protester’s arguments, noting that the agency was not required to conduct an unbalanced pricing analysis because the solicitation did not call for it. Furthermore, the protester was reminded that the unbalanced pricing evaluations were not required in FAR Part 16 procurements. Consequently, the allegations regarding unbalanced pricing were dismissed due to the protester’s failure to state a valid basis for protest.

Even when unbalanced pricing is detected, the agency may waive the risks associated with it if they do not rise to unacceptable levels. Additionally, while the FAR generally instructs COs to utilize cost and price analysis techniques, it does not identify the precise manner in which a CO must assess proposals for risks associated with unbalanced pricing. In B-421311; 421311.2, a decision issued on March 15, 2023, the agency’s price analysis technique considered offered unit pricing that was more than 15 percent higher or lower than the average market price as unbalanced. Based on this methodology, the CO determined that the awardee’s pricing was unbalanced and proceeded to assess the risks associated with the unbalanced pricing. As a result of its risk assessments, the CO found that although the awardee’s proposed pricing was unbalanced, it did not pose an unacceptable risk of the government paying unreasonably high prices during contract performance. Furthermore, the CO determined that there was no risk of the awardee being unable to perform at the offered price. During the protest that followed, the GAO reviewed the unbalanced pricing risk assessment methodologies employed by the CO and found no reason to disturb the CO’s determinations. Consequently, the protest ground alleging unbalanced pricing was denied.

An offeror’s pricing is unbalanced when one or more line items are significantly over- or understated, despite an acceptable total evaluated price. Procuring agencies are required to conduct unbalanced price evaluations in FAR part 15 acquisitions and on proposals received in response to solicitations that call for unbalanced price evaluations. Once the agency determines that an offeror’s pricing is unbalanced, it proceeds to conduct a risk assessment to determine whether the unbalanced pricing poses an unacceptable price or performance risk. The GAO reviews for reasonableness both the agency’s determination regarding whether an offeror’s prices are unbalanced and the determination regarding whether the risks associated with the unbalanced prices are unacceptable. While both under- and overstated prices are relevant to an unbalanced pricing analysis, the primary risk the government is concerned with is the risk posed by overstated prices. Ultimately, contractors should remember that even when unbalanced pricing is detected, the procuring agency retains considerable discretion to waive any associated performance or pricing risks following a risk assessment, provided such risks do not rise to unacceptable levels.

This Federal Procurement 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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