Pricing and Procurement Research Paper

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Contract and Pricing

Glen Mar Construction, Inc. files a protest with reference to the award of contract that the U.S. Department of Veterans Affairs awards to the Facility Defense Consultant under the bids invitation "(IFB) No. VA260-14-B-0412" issued for the construction of medical centers building. The Glen Mar protests on the ground that the agency's price evaluation is unfair and unreasonable because the bid results in the "awards to other than the lowest-priced bidder." (GAO 2015 p 1). The bidders are required to submit unit prices for the procurement of 10 line items for the construction of a clinic and 9 additive options. The agency sustained the protest.

Objective of this paper is to evaluate whether agency's awards to Hanke Constructors is just and fair.

Reason the Procurement was considered Fair and Reasonable based on a Sole-sourced or Competitive competition

A government procurement is the process that the United States government employs to acquire goods and services. However, the U.S. government heavily regulates a federal contract using the United States code. In the case of the Hanke award, the procurement is competitive making the procurement process to be reasonable and fair because 6 bidders submit the competitive bidding for the award. In other words, the procurement issued by the VA (Department of Veterans Affairs) is a competitive procurement. Manuel, (2009) defines a competitive procurement as any contract that has gone through a procurement procedure, which is expressly authorized, by the federal government statute and subject by the CICA ("Competition in Contracting Act"). On the other hand, any procurement that is not subject to Competition in Contracting Act is referred as sole sourced procurement. The CICA mandates a procurement to go through competitive procedures. However, sole source procurement can be applied if sole firm can only offer the service or supply the required goods to the federal government.

However, Department of Veterans Affairs procurement is a competitive procurement opened to firms interested in submitting the bid. The agency received timely bids from 6 firms, which include Hanke and Gle Mar. Since the Hanke was not the sole source bidder of the contract, the bidding was competitive. Competitive bidding occurs when multiple bidders submit a bid to a contract. The benefit of competitive bidding is that it will allow an agency submitting the solicitation to select the best bidder that can complete high quality contract at a reasonable price. Moreover, the competitive bidding allows an agency to have a value for its money because a bidder knows that it is facing a competition and offering a higher price for the contract will result in a rejection of its bids. In the case of the procurement of the contract issued by the VA (Department of Veterans Affairs), the agency offers the contact to one of the lowest bidder out of the six bidders, which will make the agency to enjoy cost reduction for the procurement. The competitive procurement is superior to sole-sourced procurement because the sole sourced procurement may make the agency to pay higher price for a procurement, which could have been procured at a reasonable lower price if the procurement is competitive. Moreover, the competitive procurement will allow the agency to save the taxpayer money and avoid procuring a high priced contract.

Reason they are able to offer an award to the company based on the information received from the government program office

The agency awards the contract to the Hanke Constructors following the information in the solicitation and the government program office. The agency received the bids from six firms and the Hanke price of additive option and based bid was lower than the price submitted by Glen Mar for the same work. The agency issued an IFB (invitation for bids) for the procurement of medical items for the VA Medical Center in Vancouver. Based on the "IFB amend. No A00002" (GAO 2015 p 4), the agency had determined that it would award the contract to only the base bidder. From the IFB amend, the "Hanke submitted the lowest bid of $9,036,214" (GAO 2015 p 4). However, the Gle Mar submitted a bid of $9,039,186 slightly higher that the Hankel bid price. However, the base bid submitted by the Gle Mar was $7,962,932. On the other hand, the Hanke base bid price was $8,004,923 slightly higher than the Glen Mar base bid for the same work. However, the agency awards the contract to the Hanke because the price for the additive option and based bid of Hanke was lower than that of the Gle Mar. Thus, the agency awards the contract for Hanke for the contract value of $8,004,923.

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Other reason making the agency awarding the contract to Hanke was that the Gle Mar did not challenge any ambiguity of the solicitation before the agency received the bids. Although, the agency awarded the contract to Hanke because its price was lower than that of the Gle Mar, however, based on the contention of Gle Mar, it was revealed that agency price evaluation of the contract was not fair and reasonable because the base price and additive prices of Gle Mar was actually lower than the Hanke. However, the agency nullified the first contest of the Gle Mar because the agency did not evaluate the additive price of the solicitation at the time of award.

Thus, the Gle Mar did not challenge any ambiguity relating to the solicitation before the receipt of bids. Since the Gle Mar did not challenge the solicitation before the bid was presented, the contention of Gle Mar's first protects would not be able to gain ground after the solicitation was issued which compelled the agency to award contract to Hanke.

Moreover, the Gle Mar did not file the protest based on the solicitation's terms. Under the "Bid Protest Regulations, 4 C.F.R. § 21.2(a) (1) (2014)" (GAO 2015 p 4), any federal agency has the right to dismiss untimely protest of solicitation. It is essential to realize that a solicitation might contain some ambiguity. For example, an ambiguity might exist if a solicitation reflects one or more interpretation. Moreover, an ambiguity might occur if a solicitation contains a gross, obvious and glaring error. However, if a protester does not challenge a solicitation before the submission of bids, the agency has the right to dismiss a subsequent challenge of the solicitation term.

3) Analysis on basis of the Award to the company for the price given to Agency

The agency is able to award the contract to the company based on the information in the solicitation because the government lacks sequence of order regarding the option of the time of award. In essence, the government may offer an award based on its discretion and contingent funding described in the solicitation. The issue makes the government to award the contract to the company by following the IFB solicitation. Typically, IFB follows the "reference FAR clause 52.217-5, Evaluation of Options" (GAO 2015 p 2). Based on the FAR clause, the government should evaluate the purpose of awards and add the total of the basic requirements with the total price of all options.

In the case, the government awards the contract based on the budget signed for the contract. In the case of the VA, the budget for the entire project was $9.3 million, and the breakdown of the budget of $7,870,000 will be used to carry out the construction; however, $1.03 million will be used for the design and $400,000 for the contingency. At the time of the award, the agency only had $7,993,000 out of the $9.3 million available for the project. The VA did not have option other than to offer the contract to the lowest bidder. As being discussed in the previous section, the Hanke's bid for the 9 additive options and base construction was $9,036,214. However, the Glen Mar's bid for the 9 additive options and base construction was $9,039,186. Based on the price difference between the two bidders, the VA was able to record a shortfall that is greater than $600,000 in order to procure additive options.

The shortfall is from "ranging in prices (from Hanke and Glen Mar) from $20,003 to $23,032 (option 6, window blinds for all outside windows) to $333,938 to $372,161 (option 3, a cover for the crosswalk from the new building to a nearby building)." (GAO 2015 p 7).

Moreover, the IFB requires the bidders to submit the unit prices for both 9 additive option and 10 line items for the clinic project. However, the agency has already clearly stated that the government may award any of the option items depending on the available funding for the project and the pricing for each optional item shall reflect the full scope during the time of award. However, the agency awards the contract to the Hanke because of the evaluation error in the solicitation. The agency agreed that the government did not use the price of the additive option in the solicitation during the award resulting in the ambiguity in the term….....

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