GAO Sets Notice Standard for Price Realism Evaluations

On October 18, 2012, the General Accountability Office (GAO) issued its decision in Emerigent Technologies, Inc., B-407006 addressing an agency's use of price realism evaluations.  While the GAO reaffirmed that agency's have that discretion, the GAO emphasized that before an agency can do so it must provide clear notice alerting offerors of that intention. The decision notes GAO's position that price realism evaluation involves assessment of offerors' low fixed prices to determine whether they reflect a lack of understanding of the contract requirements or risk inherent in the offerors' approach.  Noting in the solicitation that a price evaluation factor includes reasonableness generaly was deemed insufficient to meet the notice requirement, and instead the GAO concluded that the solicitation notice must contain express language alerting offerors to the possibility that a decision to submit low pricing might be considered as reflecting upon their understanding or ability to perform. A copy of the decision is currently located on the GAO's website, at the following link:
http://www.gao.gov/products/D03568