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Integrity of Procurement Compromised by the Government’s Misleading Statements

Posted on February 12th, 2016 by

The Court of Federal Claims finds that the Department of State mishandled a procurement to construct an embassy compound in Maputo, Mozambique.  During pre-award discussions, the Government informed one offeror that its price was above the Independent Government Cost Estimate (“IGE”).  This statement proved false and was unfairly done to put pressure on the offeror to lower its price. This offeror ended up getting the award.  A protest followed.

The Court held that the Government violated the fundamental requirement of fairness in the procurement process by misguiding the awardee that its price was above the IGE, when it was not:

The “technique” of misinforming an offeror that its price was high when in fact its price was low, and concomitantly misguiding that offeror about how “high” certain sub-elements were, is not a “price analysis technique or procedure” that meets the fundamental purpose of the FAR to ensure the “final price is fair and reasonable.” FAR 15.404-1(a)(1)  Because the awardee’s price resulting from the erroneous discussion letter was not based upon reality or the offeror’s accurate understanding of its pricing status vis-à-vis the IGE, that price cannot be said to be “fair” or “reasonable.” Nor can such a price form the basis of an “adequate price competition” within the meaning of FAR 15.404-1, as one offeror’s price was influenced by erroneous, misleading discussions that were never corrected. As such, Plaintiff has established that the Agency violated the procedure in the FAR for assessing price reasonableness.

Given the Government’s misleading statements, the Court upheld the protest. The Court directed the Government to open discussions with the company that received the award, but not the other offerors.  While normally when discussions are reopened for one offeror, they are reopen for all offerors, in this case the Court felt that allowing the awardee to change its price, but not others, was the appropriate remedy. In reaching this decision, the Court found that all other offerors were already given a fair opportunity to revise their offerors during discussions, and that they would be given an unfair competitive advantage if allowed to revise their pricing again since the awardee’s price and the IGE have now been publicly disclosed.

CADDELL CONSTRUCTION COMPANY, Plaintiff, v. THE UNITED STATES, Defendant, and PERNIX GROUP, INC., Intervenor, Court of Federal Claims, Docket No. 15-645C (February 10, 2016)


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