What is “Best Value”?

  |  May 25, 2010

As a general principle, the Government and Government contractors are expected to award procurements, purchase orders, and subcontracts on a Best Value basis.  There are technical exceptions to this policy in which the Government will announce that the award might be made on “technically acceptable — least cost” or a similar basis, but these awards are simply in situations where technical acceptability is easily measured, where the buyer does not require discretion, and where the acquisition can be accelerated.

Most Government contractors have internal policies in which Best Value to the buyer is the stated and standard criterion.

The concept of Best Value assumes that, all other things being equal, award is made on the basis of the lowest evaluated price by a responsive and responsible offeror; but it also admits the possibility that lowest price might be unrealistically low, or that there might be advantages to a higher-priced offer.  Accordingly, the FAR gives the Government Contracting Officer [and the Source Selection Authority] the discretion to weigh the non-price factors to determine if they outweigh the pricing differences.

The discretion given the Contracting Officer is significant, and has been upheld in repeated court tests.  The Contracting Officer must describe in the solicitation the criteria on which he or she will base the procurement decision, and must adhere to these criteria.  As long as the Contracting Officer has a reasonable process, and follows it, then the best value decision is very difficult to overturn.

The case is not unlike that of a person who needs to buy a new car, and must decide between an Infinity G37 and a BMW 328xi.  The prices are $40,000 and $50,000, respectively.  There are advantages either way between the two — horse-power, fuel economy, comfort, safety, status, reliability, beauty, maintenance costs, and many more.  But at the end, the buyer must choose between having the Infinity plus $10,000 or the BMW.  Are the net non-price advantages of the BMW worth more than $10,000?
 
Many buyers when faced with this decision would make different choices based on their weighing of the non-price factors.  WE all think of this as a fundamental right to make the decision in our best interest, even when that decision seems odd to other parties.

The Government maintains that buyers need to be able to make subjective decisions that encapsulate a number of factors that are unique to each decision.  Some factors can be quantified [or approximated], some cannot.  The Government has the right and the discretion to make the decision that is in its best interest, as interpreted by the affected parties.

Similarly, contractors should make purchase decision based on Best Value.  The decision should be made on price and on non-price factors as specified in solicitations or as commonly understood by both parties.

The process through which this trade-off occurs is a Pricing Analysis.   The analyst has a choice between attempting to quantify or approximate the value of the factors that separate the two options to determine if they out-weigh the price differences or scaling the price of one option upward or downward in order to approximate the differences in the options.  Neither approach is very reliable or defensible, which is why the buyer is provided the authority to make the decision based on subjective factors.

The Contracting Officer must document the decision and the basis of the decision.  The documentation should include the non-price factors and the reason why those factors out-weighed the price differences.  The analysis should show that the decision is reasonable and is based on realistic assumptions, so that it is what a prudent businessman would normally make.

 

 

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