Reasonable Pricing Isn't Enough
Editor’s note: This is the first of two (or maybe three) posts on a recent GAO decision.
In the world of government contracting, price matters. In the past few years, though, the government has been experimenting with an innovative method called “highest technically rated reasonable price,” also known by its obligatory initialism: “HTRRP.”
So, what is HTRRP? Why does it matter? What is its legal status? And what is the future of HTRRP? Let’s go ahead and dive in.
The legal requirement for considering price
We begin with the law, specifically the Competition in Contracting Act, also known by its obligatory acronym: “CICA.” Consistent with its name, CICA generally requires “full and open competition” among contractors. CICA also mandates that contracting officers lay out the “evaluation factors” that the government will use when selecting the winning contractor.
Critically, though, CICA requires that “in each solicitation for competitive proposals, an executive agency shall … include cost or price to the Federal Government as an evaluation factor that must be considered in the evaluation of proposals.” 41 USC 3306(c).
Normally, the government has complied with this by using one of two evaluation methods: lowest-price technically acceptable and best value.
Lowest-price, technically acceptable source selection
The “easiest” method to comply with CICA is to simply treat price as the primary evaluation factor. If a contractor meets the minimum requirements of a solicitation, the contractor with the lowest price wins. For reasons that I won’t bother repeating here, people in the #govcon game love to hate on using lowest-price technically acceptable (initialism: “LPTA”) for contracts.
Personally, I have no truck against LPTA conceptually, though there are times when it’s not the best approach. That said, you know who does have truck against LPTA? Congress. Congress has truck against LPTA. So much so that in 2018, Congress passed a law that said:
It shall be the policy of the United States Government to avoid using lowest price technically acceptable source selection criteria in circumstances that would deny the Government the benefits of cost and technical tradeoffs in the source selection process.
Ok. Must consider price, but LPTA bad. Got it. If LPTA is disliked, though, what’s the alternative?
Best value source selection
The dominant alternative to LPTA is “best value source selection,” also known by the word “tradeoffs.” Under a best-value approach, the government must weigh price along with “quality” factors, which include “technical capability, management capability, prior experience, and past performance of the offeror.” After weighing all the factors, and making tradeoff decisions (e.g., “will I accept a higher price for higher quality?” or “will I accept a lower price from a less experienced vendor?”) the government picks the best contractor.
On the one hand, best value creates space for more conversation about tradeoffs in public procurement. Which I think is lovely. On the other hand, best value necessarily involves more paperwork and justification. Which, I dunno, feels like a variation on a theme of how we feel about contracting-officer autonomy.
In any event, after the 2018 law change and the general acquisition-policy distate for LPTA, I thought we’d live in a best-value-only world. But I was wrong, kinda.
The Sevatec decision
In the mid-2010s, a critical mass of people at GSA were willing to try out some crazy things in federal procurement. I was among them. So it was that, in 2016, GSA tried a kind of crazy thing when it established the Alliant 2 Governmentwide Acquisition Contract.
Specifically, when creating Alliant 2, GSA said that “[t]he source selection process on the Alliant 2 Unrestricted Master Contract will neither be based on the Lowest Priced Technically Acceptable (LPTA) nor Tradeoffs.”
Wait a second, you might be thinking. Neither LPTA nor tradeoffs? How is that supposed to work? It turns out that GSA used the HTRRP approach.
To implement HTRRP, GSA proposed a pretty complex technical scoring approach, involving 7500 total possible points. And then GSA would use those point scores to rank, from top to bottom, the contractors and pick the top 60. Then, GSA would conduct a review of “pricing of these 60 offerors for fairness and reasonableness.” And, finally, “if any of the top 60 offerors’ prices are found to be fair and reasonable, those firms will be awarded a contract.”
Boom. You pick the highest technical rated proposals, and if the contractors had reasonable prices, they get a contract!
Is this legal, you might be wondering? That was the question before the Government Accountability Office in Sevatec, Inc. And, you know what? The GAO said it was ok: “Insofar as the proposed source selection process considers the price of every awardee (and rejects those firms that lack fair and reasonable pricing), the agency has satisfied its requirement to consider price to the government.”
The FY19 NDAA
So, then, in 2018 Congress passed the John S. McCain National Defense Authorization Act for Fiscal Year 2019, which included a provision (section 876), entitled “Increasing competition at the task order level.” That section effectively codified the Sevatec decision.
If an executive agency issues a solicitation for one or more contracts for services to be acquired on an hourly rate basis… and the executive agency intends to make a contract award to each qualifying offeror and the contract or contracts will feature individually competed task or delivery orders based on hourly rates…the contracting officer need not consider price as an evaluation factor for contract award.
But, where Congress giveth, Congress taketh away:
If price is not considered as an evaluation factor for contract award, cost or price to the Federal Government shall be considered in conjunction with the issuance … of any task or delivery order under any contract resulting from the solicitation.
In other words, Congress says that you may create an indefinite-delivery/indefinite-quantity (initialism: “IDIQ”) contract for services, and you won’t need to consider price at the contract level. But, if you do, you must consider price at the task-order level. Got it? Good.
In tomorrow’s post, we will start to explore some of the legal and practical limits — good and bad — of HTRRP.