Protest of Bid Rejection for Price Unreasonableness

A construction company protested the rejection of its bid for price unreasonableness and the subsequent cancellation of the invitation for bids (IFB) by the Army. When the protester's bid was higher than the Army estimate and substantially higher than the contract price for the previous year's work, the Army reviewed its estimate and found an error which increased its estimated price. The protester's bid still exceeded the revised estimate by 26.5 percent; therefore, the Army determined that all bid prices were unreasonable and cancelled the solicitation. After receiving authority to obtain the procurement by negotiation, the Army issued a request for proposals and signed a "resume of negotiations" with the protester which stated that the price mutually agreed to by both parties was fair and reasonable. The Army contended that the protest was rendered moot by the protester's acceptance of the negotiated contract, and that the protest should be dismissed for want of a clear issue for resolution. The protester contended that the Army price reasonableness determination was arbitrary and capricious, that economic necessity coerced it into signing the contract, and that its participation in the negotiated procurement need not preclude the consideration of its protest on the merits. GAO held that an award to the protester under the IFB at a higher price than that which was agreed to as fair and reasonable would not enhance the competitive bidding system. Economic need cannot support a claim of duress unless there has been a violation of contractual rights. In this case no contract existed at the time of the negotiations and agreement. The protest was rendered moot by the protester's subsequent acceptance of the negotiated contract.