UNBALANCED BIDS

In situations where an A-76 contract solicitation uses a multiple bid schedule for the fixed priced portion of the potential contract, or a combination of fixed priced and indefinite delivery contract line items (CLINs), a bidder may be tempted to bid higher than reasonable unit prices for easy to accomplish services; lower unit prices for the more difficult, more expensive to accomplish, most difficult to inspect, services; and low unit prices for those indefinite delivery services he/she anticipates the actual orders will be much less than the quantities shown on the bid schedule.

This type of bidding strategy is based on the Government's practice of awarding a contract based on the sum of the CLINs, with no regard to the individual CLIN prices.  This bidder attempts to bid less money than reasonable for the indefinite delivery items, and a reasonable, or perhaps a little higher, amount for the fixed priced portion.  The object is to come in with the lowest total bid amount and win the contract award.  Remember, the contractor always receives the fixed priced portion of the contract value, unless the Government can prove unsatisfactory performance.(Given the track record of most contracting agencies, most of them won't take payment deductions, even if unsatisfactory performance is documented, a fact fully appreciated by the aspiring bidder.)

The bulk of the invoiced contract payment will be for the easy, less expensive services, where performance is virtually assured.  As the more expensive, hardest to prove unsatisfactory performance, services are both under priced and non-performance less likely identified, either no payment deductions are probable, or the deducted payment value will be far less than the cost of doing the work.  As for the inadequately bid indefinite delivery services, that's not in the fixed price.  If the Government orders, but the contractor does not perform, there is no fixed priced payment deduction; the Government just doesn't pay.  The strategy will be to balk at indefinite quantity performance, hoping the Government will turn to other means (i.e. the purchase card) to get that work done, and stop trying to get the contractor to do it.  (Any of this sound familiar?)

Once the contract is awarded, there is no way to remedy this situation; if must be stopped during the evaluation of the bidder's (i.e. the offeror) price proposal.  Do not award a contract to a company clearly attempting to employ this strategy.  Even if the total value of the bid appears reasonable, but with more value in the fixed price than reasonable, and less than reasonable in the indefinite delivery, do not assume a "no risk" to the Government situation.  Just because the offeror is bidding enough overall money, do you really think that, as the contractor, he/she will use "fixed priced" money to cover indefinite delivery losses? Remember, the fixed priced money is automatically the contractor's, absent documented non-performance and payment deductions.

This contractor's indefinite delivery objective would be to convince the Government it will be much easier to acquire those services by other means than trying to get him/her to do it.

This bidding strategy is call unbalanced bidding, something clearly forbidden in the contract specification, but seldom enforced.  To prevent this from happening in your A-76 study, assure the price proposal evaluation team is aware of the strategy.  In the event "unbalanced bidding" is apparent, bring it to the offeror's attention by using the following:

Although the estimated quantities provided in Section B of the solicitation are realistic estimates of the anticipated quantities to be ordered during the contract term, your price proposal infers you assessed the probability the Government will/will not order a particular contract line item.  As a result, some of your proposed unit prices are lower or higher in comparison to fair market prices, and do not reflect the actual cost to perform the work.  It appears this strategy was used in both the firm fixed-price and indefinite quantity portions of your price proposal.  Such a business practice is viewed unfavorably by Source Selection Officials, because it results in an unbalanced proposal, and consequently imposes as unacceptable level of risk on the Government.  Accordingly, if you were awarded this contract, the Government would pay unrealistically high unit prices for some work, and there is absolutely no assurance you would acceptably perform those contract line items with unreasonably low unit prices.  Considering award will be made to that Offeror which provides the best value to the Government, you are requested to review and confirm the units prices you have proposed in Section B."
In the event the offeror does not change the price proposal to a more reasonable bid, the price proposal should be rejected as presenting an unreasonable risk to the Government, should the offeror's price proposal be selected.

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