It is not uncommon for a disappointed offeror in a fixed-price procurement to be astonished at how low the awardee’s proposal price ends up being. This astonishment can lead to the desire to file a bid protest based on the argument that the awardee’s price is unreasonably low. Unfortunately, in many of the instances this protest argument is simply not viable because the solicitation did not require (nor allow) the government to conduct a “price realism” analysis. Just this month, GAO dismissed such a protest, because the solicitation did not contain a price realism clause. Why is this argument raised so often in the absence of a “price realism” clause? Because both contractors and the government are commonly confused by the distinction between price reasonableness and price realism.
Price Reasonableness vs. Price Realism
It seems like every few months, GAO or the Court of Federal Claims is issuing a decision wherein it needs to explain the distinction between price reasonableness and price realism because the protester has argued the awardee’s price is “unreasonably low.” GAO recently reiterated this distinction in Mountaineers Fire Crew, Inc.; ASP Fire, LLC; Diamond Rd. Maint. Inc. (d/b/a Diamond Fire), B-413520.5 et al., Feb. 27, 2017: Continue Reading Price Realism Bid Protests: When Can You Argue that the Awardee’s Price is Too Low?