Counsel Commentary – Price Risk Assessments: A New Protest Ground?

Recent bid protest decisions are testing long-standing limits on challenging low-priced offers in fixed-price contracts. 

A price realism analysis considers whether an offeror’s proposed price in a contract bid is too low, which can create a risk of poor performance or indicate that the offeror does not adequately understand the contract’s requirements. However, agencies are generally not required to conduct a price realism evaluation for fixed-price contracts, and are prohibited from performing it for fixed-price contracts unless the solicitation expressly requires it. 

Typically, unless a solicitation specifically calls for a price realism analysis, an unsuccessful offeror cannot challenge an awardee’s price for being too low. But a pair of recent bid protest decisions may suggest otherwise, noting that the awardee’s price can be challenged for being too low if the agency fails to consider “price risk” under the Defense Federal Acquisition Regulation Supplement (DFARS) clause 252.204-7024. 

In his monthly Contract Management Magazine column, “Price Risk Assessments: A New Protest Ground?” Rogers Joseph O’Donnell shareholder Stephen L. Bacon explains the ruling from the Government Accountability Office (GAO) that interpreted the “price risk” requirement as a matter of first impression. He also analyzes what the decision could mean for government contractors. 

Bacon explains that “the interpretation of this requirement could continue to evolve and may have substantial impacts on [Department of Defense] procurements.” 

The piece appears in the magazine’s June issue (subscription required) and is the latest entry in Bacon’s monthly Counsel Commentary column. It is published by the National Contract Management Association and was used with permission.

Read Bacon’s latest Contract Management article here.