Esegur-Empresa de Seguranca, SA

Decision

Matter of: Esegur-Empresa de Segurança, SA

File: B-407947; B-407947.2

Date: April 26, 2013

DIGEST

Protest arguing that awardee’s proposal should have been rejected as unacceptable on the basis that its price was too low is sustained where the solicitation established that the agency would evaluate whether offeror’s prices were unrealistically low, and the record reflects that the agency failed to perform a price realism evaluation of the awardee’s low price.

Esegur-Empresa de Segurança, SA (Esegur), protests the award of a contract to Securitas, S.A., by the Department of the Air Force under request for proposals (RFP) No. FA4486-12-R-0017 for a contractor to provide unarmed security guard services at military family housing areas located in Portugal. Esegur challenges the agency’s evaluation of the awardee’s proposed price.

We sustain the protest.[1]

BACKGROUND

The RFP, issued on July 13, 2012 as a commercial item acquisition under Federal Acquisition Regulation (FAR) part 12, provided for the award of a fixed-price, performance-based contract for all labor, tools, equipment, materials, and supervision necessary to perform unarmed crime prevention patrols of the military family housing areas adjacent to Lajes Field Airbase, in Portugal. RFP at 74. The anticipated contract is for a 1-year base period and four 1-year option periods. Id. at 34-35.

The RFP informed offerors that award would be made on a lowest-priced technically acceptable basis considering the following three factors: technical, past performance, and price. RFP at 71-72. In this regard, the RFP established that the agency would first evaluate offerors’ prices, and then evaluate the apparent lowest-priced proposal for acceptability under the technical and past performance factors. If the lowest-price offeror was evaluated as unacceptable, the agency would then consider the acceptability of the next lowest-price offeror, continuing this process as necessary. Id. at 72.

As it relates to the protest, regarding the evaluation of price, the solicitation provided as follows:

Unrealistically high, low, or unbalanced prices may serve as a basis for rejection of the proposal. The price evaluation will document the reasonableness and completeness of the total evaluated price.

RFP at 69-70.

Eight offerors, including Esegur and Securitas, submitted timely proposals.[2] The agency evaluated initial proposals and conducted two rounds of written discussions with each offeror. Final revised proposals were requested and received by December 10, 2012. CO Statement at 2-3. Securitas’ total price of €843,198.00 was the lowest and its final revised proposal was rated acceptable under the technical and past performance factors. The record reflects that Securitas’ price was approximately 17 percent lower than the independent government estimate, and that the agency found Securitas’ price “to be fair and reasonable” based on adequate price competition and a comparison with historical prices, citing Federal Acquisition Regulation (FAR) §§ 15.404-1(b)(2)(i) and (ii). Agency Report (AR) exh. 24, Source Selection Decision, at 2; AR, exh. 27, Determination of Price Reasonableness. On January 16, 2013 the agency made award to Securitas with performance scheduled to begin on January 20. AR exh. 29, Notice of Award. The same day, the agency provided the protester with notice of the award decision. Id. exh. 30, Notice to Unsuccessful Offeror. This protest followed.

DISCUSSION

Esegur essentially argues that the agency’s evaluation of the awardee’s low price proposal was improper. According to the protester, the awardee’s price is lower than the minimum price an offeror could possibly propose to provide the solicited services, and, as a consequence, the awardee should have been found unacceptable on the basis that its price was too low.[3] Protest at 2-3; Protester’s Comments at 2-9. In responding to the protest, the Air Force does not argue that it properly considered whether the awardee’s price was too low. Rather, the agency contends that it was not required to evaluate whether the awardee’s price was too low because the solicitation did not require a price realism evaluation. The solicitation only required the agency to evaluate prices for reasonableness (whether the awardee’s price was too high), and it properly conducted this analysis. According to the agency, a price realism evaluation was entirely optional under the terms of the solicitation, to be performed solely within the agency’s discretion.

Before awarding a fixed-price contract, an agency is required to determine whether the price offered is fair and reasonable. Federal Acquisition Regulation § 15.402(a). An agency’s concern in making this determination in a fixed-price environment is primarily whether the offered prices are too high, as opposed to too low, because it is the contractor and not the government that bears the risk that an offeror’s low price will not be adequate to meet the costs of performance. Sterling Servs., Inc., B-291625, B-291626, Jan. 14, 2003, 2003 CPD ¶ 26 at 3; CSE Constr.,
B-291268.2, Dec. 16, 2002, 2002 CPD ¶ 207 at 4. Although not required, an agency may choose to provide for a price realism analysis in a solicitation for the award of a fixed-price contract for the purpose of assessing whether an offeror’s low price reflected its understanding of the contract requirements or to avoid the risk of poor performance from a contractor that is forced to provide services at little or no profit. See The Cube Corp., B-277353, Oct. 2, 1997, 97-2 CPD ¶ 92 at 4; Ameriko, Inc., B-277068, Aug. 29, 1997, 97-2 CPD ¶ 76 at 3.

Here, notwithstanding the agency’s argument to the contrary, the solicitation contemplated a price realism evaluation of the awardee’s low price by the Air Force. As noted above, regarding the evaluation of price, the solicitation advised offerors that “unrealistically” low prices may serve as a basis for rejection of a proposal. RFP at 69. Implicit in the solicitation’s reference to “unrealistically” low prices is the presumption that the agency would actually consider whether an offeror’s price is in fact unrealistic and, as a consequence, unacceptable.

To the extent the Air Force believes that the evaluation of prices for realism was optional because the solicitation indicates that unrealistically low price proposals “may” be found unacceptable, see Agency’s Memorandum of Law, at 6, the Air Force’s belief is based on an unreasonable reading of the solicitation. The RFP’s use of the term “may” in this instance refers to the agency’s discretion to reject an unrealistically low price, as opposed to reserving to the agency the right to evaluate prices for realism in the first instance. See Halfaker & Associates, LLC, B-407919, B-407919.2, Apr. 10, 2013, 2013 CPD ¶ ___ at ___ (rejecting agency’s argument that solicitation did not require a realism evaluation where the solicitation provided that “[u]nrealistic rates, as determined by the Contracting Officer, may also be considered in risk assessment”); Waterfront Techs., Inc., B-401948.16, B-401948.18, June 24, 2011, 2011 CPD ¶ 123 at 15 n.16 (finding that solicitation, which indicated that “[t]he Government may reject any proposal that is evaluated to be unrealistic,” required the agency to evaluate prices for realism); Cf. Guident Technologies, Inc., B-405112.3, June 4, 2012, 2012 CPD ¶ 166 at 13 n.9 (holding that agency was not required to perform a price realism evaluation where the solicitation advised that the “Government reserves the right to conduct a price realism analysis to determine whether an offeror’s proposed prices are realistic for the work to be performed”).[4] Accordingly, we sustain the protest because the agency failed to contemporaneously evaluate whether the awardee’s low price, which was 17 percent below the government’s estimate, was realistic, as it was required to do by the terms of the solicitation.[5]

RECOMMENDATION

We recommend that the Air Force reopen the record and evaluate awardee’s low price for realism. If, based on this evaluation, the agency concludes that the awardee’s proposal is unacceptable, we recommend that the agency terminate the awarded contract and make a new award decision consistent with the terms of the solicitation. Finally, we recommend that the Air Force reimburse Esegur’s costs of filing and pursuing its protest. 4 C.F.R. § 21.8(d)(1). Esegur’s certified claim for costs, detailing the time expended and costs incurred, must be submitted to the Air Force within 60 days after this decision. 4 C.F.R. § 21.8(f)(1).

The protest is sustained.

Susan A. Poling
General Counsel