AFTERTHOUGHTS: PROPOSAL EVALUATIONS OF COST AND NON-COST FACTORS

Following each Professor’s Virtual class, we interview Professor Ralph Nash to get his thoughts on the topic following discussion.  On February 24th, 2016, Professor Ralph Nash and Tim Sullivan discussed proposal evaluations of cost and non-cost factors.

 

Background 

 

Competitive procurements pursuant to FAR Part 15 gained notoriety and use after the enactment of the Competition in Contracting Act (“CICA”) in 1984.  Under competitively negotiated contract formation techniques, the Government prepares a solicitation, which contains a statement of work and contract terms, and requests potential offerors to propose a price and submit information on other designated evaluation factors.  Once proposals are submitted, the Government must evaluate the proposals and choose an awardee to perform to contract.

Use of these competitive procedures raises concerns about how to best organize competition and evaluate proposals.  As structured, FAR Part 15 does little to promote open discussions and dialogue between industry and Government personnel.  The system that we have developed causes the Government to place emphasis on proposal evaluation and documentation.

In general, I believe that most procurements contain too many evaluation factors.  I have always tried to persuade contracting officers to avoid requiring the submission of technical proposals that spell out how the offeror will perform the work.  These kinds of proposals are very costly to prepare and to evaluate, and do not add a commensurate benefit to the source selection process.   Every procurement opportunity is unique, but there are solutions available to help address concerns raised with FAR Part 15.

 

What can the Government, specifically the contracting officer, do to improve the acquisition process when it comes to evaluating technical proposals?

 

Contracting officers should undertake strenuous efforts to limit the scope of their evaluations and the number of technical criteria included in the solicitation.  Procuring agencies too often micro-manage industry’s ability to solve problems for the Government.  In these situations, the RFP requires competitors to address many or all elements of the work, and explain how they will perform.

This emphasis on written technical proposals shifts the focus of the procurement from determining which offeror will be the best performer to which offeror can write the best proposal.  Premiums are placed on proposal writing and sophisticated contractors either establish a specialized proposal-writing staff or seek the help of professional writers to perfect organization, grammar, punctuation and spelling, thus creating what I call “an essay-writing contest.”   When one entity writes the proposal and another performs, discrepancies arise between what is promised in the proposal and what can actually be delivered.  When I ask government contracting personnel whether they believe that there is a strong correlation between good proposals and good performance, they almost all answer, “no,” yet the Government continues to require such proposals as part of the competitive negotiation process.

It is for that reason that I suggest that contracting officers reduce the number of evaluation criteria for all basic procurements.  Although such a detailed request theoretically helps the offeror to understand the contract requirements, it creates more work for the proposal writing team to explain how another group will perform.  The inclusion of more factors by the agency also opens the possibility to various grounds of protest.  Conversely, limiting the scope of evaluation criteria in fact affords the evaluating agency more discretion in making an award and makes the procurement slightly more impervious to litigation.

 

What is your concern with an agency’s overreliance on technical evaluations, and how should agencies approach acquiring mundane goods and services?

 

Requiring technical proposals causes offerors to be judged not by the quality of their work, but in their ability to describe what they plan to do.  A striking example of this “essay contest” occurred in Finlen Complex, Inc., B-288280, Oct. 10, 2001, 2001 CPD ¶ 167.  In that case, an agency was procuring hotel services through technical proposals, despite the dollar value of the acquisition falling into the simplified acquisition category.  The inquiry continued beyond the site visit, where the evaluation could have ended as having been sufficient to assess the offerors’ capability, to the evaluation of technical proposals.  The issue in this case arose from the Government’s expectation that vendors of overnight sleep and food accommodations could write a strong, persuasive proposal.

Given the basic nature of the procurement, such a highly scrutinized process was unnecessary and the Government could have made a determination based only on the site visits.  I have never understood why anyone would think that people running hotels and motels in a local area would have the ability write good technical proposals.

When the requirements of an acquisition are not so technical, as was the case in Finlen Complex, the factors to be relied upon in making an award selection should be past performance, experience and price.  Past performance and experience, especially for unsophisticated vendors without much experience in writing proposals, adequately gives the Government an opportunity to assess the quality of services or goods to be provided.  Coupled with differing prices among offerors, past performance and experience evaluations gives ample information to the Government to discriminate between proposals for simple procurements.

One concern with this technique might be a perceived barrier to entry for new businesses resulting from not having past experiences in government contracting.  When there are new entities that wish to contract with the government, and there is no relevant institutional past performance, the agency should review the individual persons involved with the procurement.  This ensures that individuals comprising the corporate entity have relevant experiences at other companies that did comparable work.

 

What can be done to ensure that the Government is adequately assessing the capability of potential offerors without obtaining technical proposals?

 

When an agency concludes that past performance is insufficient, it can call for oral presentations in lieu of written technical proposals.  FAR 15.102(a) provides that “[o]ral presentations by offerors as requested by the Government may substitute for, or augment, written information.”

The major advantage of this approach is that agency technical personnel are able to talk directly to the offeror’s team that will be performing the work, rather than reading proposals that were likely written by professional proposal writers.  This oral communication operates as a give-and-take dialogue to ensure that both industry and the Government are on the same page.  I liken this process to that of a job interview where the interviewer is probing to assess the skills of the prospective employee.  Although overlooked in recent years, this simple technique is efficient in finding qualified contractors.  I believe the decline in use of oral presentations is due to the fact that agency contracting personnel are not willing to allow their technical personnel to have a free-flowing discussion with the offerors’ technical personnel.  Without this, the oral presentation is not a very effective technique.

 

Should agencies be using price realism as an evaluation factor in firm-fixed-price contracts?

 

The use of price realism analysis in negotiated procurements is a nonmandatory procurement technique that is not satisfactorily addressed in the FAR.  As a general rule, price realism analysis should be used on firm-fixed-price contracts whenever a contracting officer sees the possibility that one or more of the offerors will propose an unreasonably low price, with the hope of gaining additional work in the future.

A low price represents to the Government either a fear of performance risk or a lack of understanding of the terms of the contract.  These fears need to be distinguished based on the company involved.  For instance, when it comes to sophisticated defense contractors that are pricing work under competitive business models, they may clearly understand the possibility of not receiving a profit or losing money on a particular contract.  Losing money on one contract under these circumstances might be beneficial to their future operations.  With millions in reserve funds, they might have the resources to take a strategic financial hit.  Smaller firms, however, run the risk of being unaware of issues in their proposals making it too difficult to fully perform at the proposed price. Most contracting officers understand that awarding a loss contract to such companies will create problems in obtaining full performance of that contract.

For this reason, I believe that evaluating price realism on procurements for firm-fixed-price contracts is a good technique. In such cases, the agency should use a solicitation statement instructing the offerors that they must explain low prices in their proposal.  Even without such an instruction, offerors are well advised to include such an explanation to justify their fixed prices as reasonable.  Such reasonableness can be established, of course, by showing that the offeror has a more efficient way to perform the work.

 

Do you have any advice for agencies if they do call for technical proposals?

 

Yes, I have taught for years that if you must call for technical proposals, you should never allow technical evaluators to evaluate the words in the proposal without seeing the resources that are proposed to be used to carry out those words.  This is necessary because words without manhours are hollow.  This means giving the technical evaluators the manhours proposed for the contractor and its major subcontractors (not the other elements of the cost proposal).  This can be done by instructing the offeror to include the manhours in the technical proposal or by extracting them from the cost proposal and giving them to the technical evaluators.  I prefer the former technique.

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