With budget cuts making price more important in winning government contracts, contractors should know that the government is allowed to provide more helpful information during price discussions than the standard “sharpen your pencil” refrain. FAR 15.306 (e)(3) lets the government “inform an offeror that its price is considered by the Government to be too high, or too low, and reveal the results of the analysis supporting that conclusion. It is also permissible, at the Government's discretion, to indicate to all offerors the cost or price that the Government's price analysis, market research, and other reviews have identified as reasonable.”
Unfortunately, the government rarely uses this broad authority. Contracting officers can be reluctant to get more specific on price, and prefer to err on the side of caution when it comes to price discussions. In the end, they disclose only the bare minimum that they have to disclose. This safe approach, however, is not always the right one. In one GAO decision, an agency told an offeror simply that its price was “overstated” when its price was 8 times the government estimate. GAO said that the agency had to tell the offeror much more than “overstated.” Creative Information Technology, Inc. B- 293073.10, Mar. 16, 2005.
If the government is stingy with price information, it might help to remind the agency that the FAR lets the government be more helpful in discussing price with government contractors. In one case, the GAO had no problem with an agency telling offerors during the first round of discussions about those line item prices which varied from the government estimates by more than 20%, nor with telling offerors during the second round all of the agency's estimates. Kaneohe General Services, Inc., B- 293097.2, Feb. 2, 2004.
More recently, the GAO concluded that there was nothing wrong with the VA telling each offeror in the competitive range where its price stood in comparison to the average of all current offers in the competitive range. Walsh Investors, LLC, B-407717, B-407717.2, January 28, 2013. These decisions show that an agency can often give government contractors information more helpful pricing than to just “sharpen your pencil.” Because there is no harm in asking the government for more information, contractors should ask.
Terry O’Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC region business law firm. Terry can be reached at toconnor@BerenzweigLaw.com.