Learning from Bid Protests: Price “Credits” for IP Rights

by Bass, Berry & Sims PLC

Bass, Berry & Sims PLC

On January 24, 2018, the Government Accountability Office (GAO) denied a bid protest that in part, focused on the issue of price credit. VT Halter Marine, Inc. (VT) protested the award of a Department of the Army contract—for design and manufacture of maneuver support vessels (MSVs)—to Vigor Works LLC (VW). VT alleged the agency misevaluated the proposals and made an unreasonable source selection decision. The GAO disagreed. This bid protest provides a great example of the importance of understanding up front how the government plans to calculate price credits and how those credits can make your proposal more advantageous to the government.

RFP Price Credit

Like most evaluation schemes, the agency took price into consideration when deciding what company was awarded the contract. In this case, the agency awarded the indefinite-delivery, indefinite-quantity contract on a best-value tradeoff basis. The Request for Proposal (RFP) advised offerors that the agency would evaluate the proposals considering price and several non-price evaluation criteria. However, when it came to price, the agency used price credits, which in turn, assisted in making VW’s proposal more financially advantageous than VT’s.

With respect to each offeror’s total cost/price evaluation, the RFP provided for two possible adjustments. First, the RFP offered a price “credit” to firms for providing a technical data rights package. The credit amount was to be determined through a “multiplier” based off the extent of the data rights offered. Second, the RFP offered a price credit if the offeror proposed to exceed the threshold for functional draft and speed. The maximum amount of credit for each aspect was $39 million and $108 million, respectively.

Applied Credits

After rounds of negotiations and receipt of final proposals, the agency applied a price evaluation credit of $39 million to VW for offering unlimited data rights—with an additional $50.76 million for functional draft and speed—while VT received a $19.5 million credit for offering limited but beneficial data rights. Based on the total evaluation results, the agency ultimately awarded VW the contract as the agency believed the proposal offered the best value to the government—finding it both technically-superior and lower-priced.

VT’s Protest

VT raised several challenges to the agency’s proposal evaluation and alleged the agency failed to engage in meaningful discussions. However, a major part of VT’s protest revolved around the credit offered for data rights. VT believed that the agency unreasonably assigned VW’s proposal its $39 million price credit for its offer of unlimited data rights—arguing that VW’s proposal was silent in describing the data rights the firm intended to provide to the agency. Further, VT believed that it was unreasonable for the agency to assume that VW would provide unlimited data rights based only off VW’s pricing worksheet. Essentially, VT alleged that the agency awarded VW the highest credit available without actually knowing what unlimited data rights would entail.

GAO’s Treatment of the Price Credit

GAO found no merit in VT’s claim regarding improper use of the price credit. GAO believed that VW and the agency followed the instructions in the RFP that told all offerors how the agency planned to calculate the credit. GAO found that VT’s complaint of VW’s proposal lacking details was citing to provisions in the RFP that related to the performance, not formation, of the contract.

The GAO held that the RFP’s evaluation factor—relating to consideration of the data rights pricing credit—advised all offerors that the agency made an assumption relating to the potential value if data rights offered without restriction—creating the government baseline of $39 million. This nullified VT’s argument that the type of software that VW would provide was not worth that amount of money.

In addition, the RFP went on to inform offerors that the government would not perform a risk assessment when deciding what multiplier to use to calculate the credit. The record shows that VW submitted the required form with no reservations of any data rights. This, then, entitled the agency to give VW the highest multiplier possible because the government would receive all data rights. The GAO concluded that the agency evaluated VW’s proposal in the exact manner as described in the RFP and appropriately credited VW the full credit amount of $39 million.

GAO concluded that VT’s complaint over VW’s lack of software and data rights details to be a performance issue, as the RFP provisions citing the need for more details related to a contractor only after being awarded the contract.

So, lesson learned … price credits can play an important function in an overall best value analysis.  Thus, if there are questions about how the price credit will be calculated and/or applied, particularly in a data rights situation, offerors should use the Q&A process strategically to get the agency to clarify or refine the price credit process.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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