Contract Awarded to Company for More than Twice the Price of a Competitor is Still “Best Value”

In this post-award bid protest case, a task order from the Department of Labor seeking quotations for the maintenance and operation of its Integrated Management Information System drew three contractors.  The winner, Microtechnologies, LLC, bid almost $40 million.  A rival, Med Trends, Inc, bid almost $17 million – less than half as much.  Remarkably, the high bidder won.  The case is Med Trends, Inc. v. United States, 2011 U.S. Claims LEXIS 1872 (September 13, 2011).

The Agency considered the bids on a “best value” analysis, wherein price (obviously) was less important than other factors.  It relied heavily on its independent government cost estimate (“IGCE”), which was based on historical contracting pricing data from other, similar contracts.

Med Trends argued that the Agency’s price analysis and its best-value tradeoff were both arbitrary and capricious and, therefore, unreasonable.

The Court held that the price analysis was not arbitrary or capricious.  Med Trends had argued that the price comparison failed to be adjusted to material difference between the terms of the acquisitions – that the analysis was not necessarily an “apples to apples” comparison.  The Court wrote that there was nothing in the record proving this was the case and that the FAR specifically allows the use of an IGCE absent evidence to the contrary.

The Court held that the best-value tradeoff was not arbitrary or capricious.  Med Trends had argued that the best-value tradeoff was really based solely on price quotations and the IGCE.  It also argued that the Contracting Officer did not analyze, as was promised in a published Q&A, the quality of the contractor’s Level of Effort estimates.  The Court wrote that the Contracting Officer, using a rating system of technical approach, past performance, and price, had a rational basis for awarding the contract to Microtechnologies due to its superior ratings and despite the significant difference in price.  The Court disagreed with Med Trends that the Q&A promised any special analysis.

This case is being appealed to the United States Court of Appeals for the Federal Circuit in order to test the common reliance by the government on IGCEs.  For policy reasons, it does seem odd that an agency can estimate how much something should cost and then treat a low price bid by a contractor as a negative factor.  This effectively creates a bias against contractor efficiencies and taxpayer savings.  Just because “we always did it that way” doesn’t mean that a future contractor can’t “do it better.”

Dave Albo – Attorney are bid protest attorneys and government contracts lawyers.

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