Skip to content

Brought to you by

Dentons logo

Government Contracts Advisor

Industry insight & analysis

open menu close menu

Government Contracts Advisor

  • Home
  • About us

A Recent Court of Federal Claims Protest Decision Finds Adequate Price Competition, But Inadequate Price Analysis

By Phillip Seckman and Lauren N. Colantonio
March 2, 2023
  • General
Share on Facebook Share on Twitter Share via email Share on LinkedIn

In SLS Federal Services v. United States, the Court of Federal Claims sustained a post-award bid protest brought by SLS Federal on a US$5 billion Navy contract for global contingency construction, enjoining the Navy from proceeding with performance because of the agency’s failure to correct a defect in its solicitation and its failure to perform an adequate price reasonableness analysis. SLS Fed. Servs., LLC v. United States, No. 22-1215, 2023 WL 140970, at *2 (Fed. Cl. Jan. 3, 2023). The key flaw the Court found was that the Navy had not asked for any pricing data at the proposal stage and subsequently failed to do so after promising corrective action in response to a Government Accountability Office (“GAO”) bid protest. SLS Federal successfully argued the Navy failed to perform a price analysis because it failed to collect and consider pricing data from offerors.

The Court started by first rejecting the government’s protest waiver defense. The Court determined that while SLS’s price analysis challenge was, in truth, a solicitation defect protest, the agency’s decision to undertake a corrective action effectively waived its waiver defense. Accordingly, Blue & Gold Fleet, which normally requires an offeror to protest an apparent solicitation defect prior to submitting a proposal, and its progeny, did not bar consideration of SLS’s protest. 

The Court then turned to the issue of price analysis. Holding the agency’s corrective action was unreasonable and failed to address the original “impropriety” of not considering the pricing data, the Court found the agency had entirely failed to perform a price analysis. Specifically, rather than securing proposed pricing, the agency claimed its collection of cost data from offerors was sufficient. The Court, however, found the agency could not have analyzed price reasonableness because, “the regulation — which allows evaluation of price without separately considering cost — presupposes that agencies possess, at the very least, some pricing information.” The Court largely took issue with the Navy’s failure to consider any pricing data during the bid and solicitation stages. 

FAR 15.4 explains the procedure for how the government determines whether it is getting a fair and reasonable price, which is a fundamental requirement of federal procurement. Before making an award, a contracting officer must first conclude the government is getting a fair and reasonable price through either a price or cost analysis. In the context of SLS Federal, the Court explained that cost analysis was not applicable because there was adequate price competition, an exception to the requirement for submission of certified cost or pricing data. Thus, a price analysis was required but could not be performed in the Court’s view because the solicitation did not call for the submission of price, instead only calling for the submission of cost data.

It is not clear from the decision exactly how the competing proposals could satisfy the exception for adequate price competition, but simultaneously fail to contain adequate pricing information for a price analysis. After all, under FAR 15.403-3(b), when adequate price competition exists generally no other data is necessary to determine the reasonableness of price, absent unusual circumstances. Here, a component of what the Court describes as cost data that was submitted by the offerors were labor rates. It is not clear from the decision, but to the extent these labor rates were “wrap rates” (meaning a rate made up of direct labor, indirect cost, and profit), it is not clear why a comparison of these rates was not sufficient for price analysis purposes. 

Nonetheless, none of the parties disputed (apparently) that the only data the solicitation called for was cost information. Thus, the Court found that the agency failed to appreciate a key difference between price and cost. To get there, the Court pointed to the definition of price analysis in FAR 15.404-1(b)(1) and noted the fact that a price includes the contractor’s anticipated profit.  So, the Court found, a price analysis was not possible because the agency only received and considered cost information. The agency’s consideration of only the cost information provided by offerors was inadequate.

This case highlights an important potential exception to the Blue & Gold Fleet waiver doctrine. That said, if you’re faced with a solicitation that fails to call for the submission of prices, meaning the necessary analysis cannot be performed, it is a solicitation defect issue that should be protested before the deadline for proposal submission. The protester was saved here by the agency’s decision to take corrective action relating to the original price analysis protest ground. That fact pattern may not apply in many cases.  

Share on Facebook Share on Twitter Share via email Share on LinkedIn
Subscribe and stay updated
Receive our latest blog posts by email.
Stay in Touch
Phillip Seckman

About Phillip Seckman

Phillip Seckman represents clients concerning government and commercial contract matters. His practice spans a broad range of subjects related to federal procurement law, state and local procurement law, and complex federal regulatory issues. He concentrates his practice in the areas of commercial item acquisitions, GSA schedule contracting, cybersecurity, compliance, internal investigations, and bid protests (both federal and state). A significant component of his practice involves government contract cost allowability, proper cost accounting, and contract cost and pricing issues.

All posts Full bio

Lauren N. Colantonio

About Lauren N. Colantonio

Lauren Colantonio is a member of the US Government Contracts practice and focuses on all aspects of government contracts counseling and litigation.

Prior to attending law school, Lauren was the Small Business Administrator at a major defense contractor where she oversaw FAR compliance processes and educated small business owners about the federal procurement process. In industry, Lauren also analyzed data and identified trends in the company’s federal subcontracting spend and participated in the company’s Defense Contract Management Agency yearly compliance audit. She then served as an administrative aide to a US Senator on Capitol Hill. As the Grants Coordinator, she assisted constituents seeking federal aid and secured over US$25 million of federal grant funding.

While earning her Juris Doctor, Lauren also served as a legal extern to the Honorable Timothy Tymkovich during his tenure as Chief Judge of the US Court of Appeals for the Tenth Circuit. At the Tenth Circuit, Lauren reviewed and edited opinions as well as contributed to published scholarship.

Full bio

RELATED POSTS

  • General

Comment Period Extended for the Potentially Impactful Proposed Rule for the Disclosure of Greenhouse Gas Emissions and Climate-Related Financial Risk

By Phillip Seckman and Lauren Colantonio
  • General

You’re invited: An Introduction to Cost Recovery and Compliance Under Government Contracts and Grants

By Steven Masiello
  • General
  • Government Contracts

The Most Important Contract Disputes Decisions Of 2021

By Steven Masiello, Joe Martinez, Eric Roberson, and Jessica Chao

About Dentons

Dentons is designed to be different. As the world’s largest law firm with 20,000 professionals in over 200 locations in more than 80 countries, we can help you grow, protect, operate and finance your business. Our polycentric and purpose-driven approach, together with our commitment to inclusion, diversity, equity and ESG, ensures we challenge the status quo to stay focused on what matters most to you. www.dentons.com

Dentons boilerplate image

Twitter

Categories

Subscribe and stay updated

Receive our latest blog posts by email.

Stay in Touch

Dentons logo

© 2023 Dentons

  • Legal notices
  • Privacy policy
  • Terms of use
  • Cookies on this site