Competitions awarded based on lowest price are relatively straightforward to document, as long as you’re aware of the risk areas! In this webinar, we will talk through the essential elements required for an adequate and well-documented competition. We will use SpendLogic to illustrate concepts, but the information can be applied to any documentation process.
My name is Patrick Mathern and I’m the founder of SpendLogic. And I’m looking forward to talking to you today about low-price competitions. There’s some pitfalls associated with them. And overall, they’re fairly simple. But if you’re not careful, then you might find yourself in some trouble in a CPSR. So, that’s really what we’re going to focus on today.
I’m going to walk through some of the different things in a CPSR, you know, what’s the role of competition in CPSRs, the different types of competition. You’ve got low-price and best value. I’m going to talk about the differences between them. I’m going to get into some common mistakes, and then I’m going to show you, you know, how to avoid those, and finally, I’ll get into SpendLogic a little bit.
And those of you that are interested in our software, I can show you how it is that we make sure that you don’t get into some of those pitfalls. So, let’s get started. The first thing is I want to talk to you a little bit about SpendLogic. So, what we do is we help government contractors with their CPSR compliance. The way we do it is we have software that basically is TurboTax for price analysis.
It also includes commercial items and source justifications. And we automate the reports, we automate the calculations, and we standardize across the entire workforce. So, one of the things that we do, and this is what I’m going to be talking about specifically today is we have modules that are dedicated to competition.
So, this includes single awards, multiple awards, maybe you have a low-price competition or you have a best value, or perhaps you’ve got services and items and maybe even a mix of both. So, you know, no matter what you want to do in a competition, SpendLogic is built to handle that and make sure that you get a compliant report out the other side every time.
So, what I want to do is first start off with the role of competition in CPSRs. How’s it going to come up? What does that look like? So, first and foremost, if you’re logging into this and watching this, you probably know that there is a stated preference for competition in the FAR. And this is a pretty, you know, easy thing to understand.
As a procurement professional in the industry, you know that competition is the best way to make sure that you get fair and reasonable pricing every time. Competition makes sure that your suppliers keep their pencil sharp and that, you know, it’s not something that’s so specialized that they can charge anything they want. That’s a particular problem in government contracting as you all know.
So, if something is very specialized and you can’t compete it, then the price is kind of what they say the price is going to be. So, again, making sure that you get that competition is going to make sure that you get that fair and reasonable price every time. What they’re going to be looking for is that 60%’ish.
I mean, there’s nothing written, but if you have about 60% of your transactions being the result of competition, then you are going to, you know, get a passing grade as far as the level of competition that you’re doing. On the other side of things, if you have lower than that, you know, it depends on how low. If you have zero competition, if everything is done non-competitively, then you could get a significant deficiency, a significant finding that would, you know, cause a lot of pain and heartache for you.
So, you want to make sure that you have somewhere around 60%. That’s really what you should strive for. That’s the easiest way to get a pass on that. Also, once you pass that 60%, the CPSR team is going to say, “Okay, great. You do a lot of competition, but let’s make sure that it’s adequate.” Okay? And, you know, why do they have to do that? Well, so competition, when it’s adequate and, again, there’s a couple of things we can talk about regarding, you know, what is adequacy.
But if they determine that it’s adequate, then it implies price reasonableness. Okay? If you don’t have adequate competition, you know, you’ve got some ringers thrown in there or something, then, you know, your price that you get out of it isn’t necessarily reasonable. And the reason that that’s really important having adequate competition is that last bullet on the screen, the exception to TINA.
So, most of you probably know that TINA, the Truth in Negotiations Act, which is now actually the truthful cost or pricing data requirement doesn’t roll off the tongue quite as well. But anytime you have a procurement over $2 million, what you need to do is obtain certified cost or pricing data.
That includes a lot of work. All right? You’ve got to do a cost analysis, you have to get that certification, and you’re going to have to go through all of their accounting systems and all of their labor hours and everything that’s included in their bid. So, the way to get out of that is competition. But the DC man says, “Oh, wait, not just any competition. Okay? It needs to be adequate.” So, you know, the easiest way to think of this is to say, “Okay. You’ve got more than one bidder and they are reasonably suspected or expected to provide a bid that is, you know, going to fit the needs stated in the RFP or RFQ.”
So, adequacy is a big deal. Those are the two biggest things they’re going to check regarding competition. Now, if you’re not competing, there’s other things that are rolled in. You’ve got source justifications, non-competitive source justifications. So, you know, that’s something else. If you don’t compete, you’ve got to do that and they’re going to dig deeper into those.
So, again, if you conduct adequate competition, you’re going to get yourself out of a lot of work. So, there’s a couple of different types of competition. And, you know, what we’re really going to be talking about is LPTA here today. LPTA is low-price technically acceptable, okay? The other flavor is best value.
Now, I’m not sure that best value is actually called a best value. It’s really just other than…it’s awarded on factors other than price. Okay? So, that’s going to be the source or the subject of another webinar. We’re going to do that in about two weeks from now, so check back to watch that. But right now we’re going to focus on low-price.
So, the basic idea behind low-price is the source selection is, you know, everybody is…they state their qualifications based on a pass-fail. So, they either meet the requirement or they don’t meet the requirement. There’s nothing that says, “Oh, they meet the requirement better than the other person or a little less than.” It’s basically a zero or a one.
It’s binary. Second, the proposal approach. So, it’s basically check the boxes, tell us if you hit it, and then give us your price. Okay? So, there isn’t a whole lot of meat that goes into this thing. So, if you’re truly doing low-price award and you’re not doing best value, you’re just taking price into consideration, then this is what it’s going to be like.
It’s very simple, it’s very straightforward, but there are opportunities as I’m about to show you for ways to kind of mess it up and get yourself some findings. So, some common mistakes that lead to findings. These are the top ones that we’ve seen, okay? There’s lots of ways to kind of make a mess of this thing, but there’s also a lot of ways that you can, you know, get it right.
Most people, I think, get it right. And if they don’t, they typically go through, you know, a CPSR and then they write the ship and things are good. There’s a lot more findings in best value. And again, we’re going to talk about that in a couple of weeks. So, on low-price, number one, top of the list, one valid bid is received. Okay?
This is still coming up. The FAR has been changed, all right? If you get a single bid, even if you expected competition and everybody, you know, suspected that this was a competitive award, that no longer cuts the mustard. It used to be that you could just document it that way and competition counted. Not so much. The price is not reasonable based on that. Now, you get yourself out of a source justification because you attempted competition, but you’re not going to be able to rely on the price from that single bidder as a fair and reasonable price.
Second, we see clients that are conducting what we call market comparables or a comparison with the marketplace and calling it competition. So, the way this goes is they go look at a website and they say, “Okay. Well, this website has it for, you know, this price and another website has it for another price. Website A is lower, therefore, based on competition, it’s lower.”
Not necessarily the case and it’s going to get scrutinized. Another favorite of these is to have somebody actually provide a bid and then go out and find bids online or prices online to compare that to and call it a competition. Again, it doesn’t work. It’s going to be a finding.
And I’ll get into how you can fix that. And last, but not least, failing to tell the whole story. So, having a competition, but doing something that’s a little bit interesting. Maybe you’re splitting the award to multiple bidders or something like that. The procurement file doesn’t tell the whole story, so it leaves the reviewer to kind of scratch their head and determine for themselves what happened and the story gets jumbled.
They don’t like to…in fact, they won’t try to determine what happens. They just give you a finding. So, I’ll talk to you about that as well. First of all, let’s jump into one valid bid received. So, the best way to…a step that you can take today, the best way to remedy this is to update your policies and procedures.
So, FAR 15.403-1 now states that a price is based on adequate competition when two or more reasonable offers, you know, are received. So, again, if you relied on this in the past, and a lot of people did, myself included, not to age myself, but I was part of that crew that grew up kind of doing it the old way. And old habits die hard, right?
So, you’ve got to update your policies and procedures. And not far behind that, you need to go back and train your employees, all right, as well as your compliance reviewers. So, you know, you should have a couple of stops so that this doesn’t show up. Make sure that your forms are updated. So, the name of the game here is just make sure that you’re up to date with the latest requirements in the FAR and what’s going on in the industry.
Next step. When you have the market comparables versus competition issue. So, you’ve got…you’re calling things competition when they’re not really. There’s a couple of ways to combat this, right? The first is to modify your RFPs and RFQs to state that it’s a competitive…it’s going to be at a competitive award.
So, this is really foundational. Any time that you run a competition, it should really say it in your RFP or RFQ. What this is going to do is it’s going to trigger a certain response in your bidders. They’re going to say, “Oh, this is a competitive award. This isn’t single or sole source. So, I really need to make sure that I have my most competitive pricing included here.” Now, there is a pitfall associated with this.
We have seen some people that go ahead and just put it in everything and say, “Well, I’m going to try to get the best result, you know, that I possibly can right off the bat from everybody, so I’m going to call everything a competitive award even if it’s not.” The problem with this is that, you know, number one, if a CPSR reviewer looks at this and they see that you have a competition slapped all over it when it’s not actually a competition, they’re going to say that your approach, your company’s approach to competition is insufficient and they’re going to give you a finding around that.
Number two, your bidders are just always going to know that, okay, they say it’s competition but it’s not really. So, the effect kind of wears off. It’s like the boy who cried wolf, right? Then when it comes time to really have a competition, you’re not going to get the effect of that competition because you’ve always done it in the past. So, you know, make sure that you put it on there, but only when it’s necessary. And second, require that your RFP or RFQ dates are the same for all bidders.
So, what this means is that, number one, you have to have RFPs or RFQs, you know, sent to each of the bidders. So, if it’s a competition, that means everybody gets an RFP or RFQ and that all of those RFPs and RFQ are sent out on the same date and their responses are required on the same date.
Now, there can be a little bit of flexibility. It doesn’t have to necessarily be the absolute same date if there’s some extenuating circumstances, for instance, COVID-19. Let’s say that their office was shut down because in their state, they had an extra week of shutdown or something and they couldn’t work.
If there’s going to be some flexibility in dates, all you’d need to do is describe what that’s about. So, I’m not going to say that it has to be absolutely, you know, the same every single time, but what I will say is that if you sent out one bid, you know, two months ago, and then you decide, you know, today that you’re going to send out another request for bid, those aren’t going to align. So, if you’re sending them out at different times and, you know, receiving them at different times, you’re going to have an issue in your CPSR.
If you get into a single or sole source situation where two months ago you sent something out, you finally get it back, and you’re just shocked by the price and you decide to compete it, a best practice is to just send it out to all bidders again. So, even though you already sent it to the bidder two months ago, send it to them again as well as the others, receive it at the same time, and now everybody’s on a level playing field and your documentation is all going to line up.
Next, failing to tell the whole story. So, this is kind of a follow-on to what we just talked about. But any deviation that you have. So, if there’s a difference in dates, right, or if you decide to award part of the competition to one bidder and part of it to another, anything that you do that is not just strictly check-the-box low-price, make sure that there’s an explanation of that.
So, when you state that it’s low-price, it’s expected that everybody is a pass-fail, there’s no little bit better, a little bit worse, and you are going to truly award it based on who has the lowest price as long as they qualify and they aren’t removed for technical reasons. So, make sure that you explain everything that you do that is other than checking a box and taking the low price.
And next, seek out any tools and training that are available out there. There’s lots of things that are available. There’s lots of newsgroups and lots of resources available to you. I’m going to talk to you next about SpendLogic which is one of the tools that’s available out there. And I’m going to show you how to do a low-price competition in SpendLogic. So, I’m going to switch over to the SpendLogic screen here.
Okay. So, what you see on the screen is an example of a competition that I have started. And for those of you that are SpendLogic clients, the way that I did that was I clicked New Report and I chose Price Analysis. And then when I went through the first page, I indicated that this was a competition and I got to the Part screen.
So, on this screen, I added my parts and I added my quantities. When I click Next, it’s going to ask me some questions. Now, SpendLogic really helps tell the story. And we include some compliance flags along the way like the things that I just talked about. So, the first question that you’re going to be asked on the screen is here, “The RFP or RFQs were sent to bidders on?”
And you get to choose. Is it the same date or different dates? Based on what I just told you, for adequate competition, you’re going to understand that, okay, this could be a finding in a CPSR. If I have different dates, SpendLogic is going to ask me how I want to proceed. It’s going to allow it. So, again, if I have, you know, a minor difference in dates that are required, maybe there’s a week and there’s a good reason for it, then SpendLogic is going to give me the opportunity to continue forward.
However, it’s going to make it a little difficult for me and it’s going to try to weed out those cases where it’s truly a market comparables type analysis. So, I’m going to go ahead and say the same date. The next box is the same question, but the responses. Are the responses required on the same date or different dates? And again, if you were to choose different dates, you would get the same boxes and additional explanations required.
I’m going to say same date. As we continue on, we see that the next thing that it asked for is, you know, “What’s your flavor of competition?” And in this case, it’s low-price technically acceptable, so LPTA, but I could also do a best value. And the screen would change. And we’ll get into that next time. But for now, I’m going to keep it on low price. And I can either award to single or multiple awards.
In this case, I’m going to say a Single Award. But you can always come back, you can do a sensitivity analysis and break it down into multiple awards. You can do a partial award. There’s lots of different ways to do it. We have specific how-to videos published out on our website if you want to see exactly how to do any of those, or you can reach out to us at [email protected] at any time. So, as I click Next, what I’m going to see is that I get a competition bid table.
All right? When I start adding my bidders, it’s going to be asking questions around the bidder name, bid size. Are these bids or written no bids? Right? It’s telling the story. So, if you truly have written no bids, they’ve come back to you, then that’s enough for you to say, “Okay. I attempted competition and they were responsive, but I didn’t have enough information to actually determine price to be reasonable.”
So, in this case, I’m going to say it was a bid. I can add a file. Let’s see if I can find one real quick. So, that file that I added would typically be the bid that was provided by the supplier. And then was this bid considered in the competition? You can say yes or you can say that, “No, I removed it for technical reasons or it was outside of the competitive range.”
So, again, it’s helping you make sure that you tell the full story of what actually happened. So, I’ll say yes, in this case, it was considered. Then I’m going to get into my bids. I included two on the Parts tab. I included two parts. So, this is Part: abc1234, and I’ll tell it that I wanted it at $500 a unit. And the next one was Part: Z2.
And I’ll tell it that I wanted this at $300 a unit. Once I’ve done that, I can see that I have a single bid in the system. If I was to scroll down and try to continue, I can see a big red box. Okay? And what that big red box says is, “Hey, you’ve only got one bid.” So, this is one of those pitfalls that I just talked about.
SpendLogic isn’t going to allow you to have one bid. Even if you’ve entered multiple bids and some of them are written no bids or some of them were removed for technical reasons, it’s going to know that, okay, you need to have a valid bid in the system in order for this competition to be adequate, and it’s going to give you this red box. So, what you have to do in order to make that red box go away is add additional bidders.
So, I’ll add BACME, which is ACME with a B, and I will continue on. I will add their proposal. They were selected or they were considered in the competition. I’ll say that their bid on unit one was $400 a unit, and on unit two, we’ll call it also $400 per unit just to mix things up.
Okay. Once I’ve done that, I can see based on low price that ACME has taken the cake here. They were entered first. This is actually a tie. So, if you wanted to, you could actually go in and override the analysis here. We provide this ability because there’s certain times that there’s special things that need to happen, right? You can’t say that every time you run a low-price, that it’s going to…all the units are going to go to one bidder or the other.
If you were to click on Override, you could assign some of those units to another bidder or you could go ahead and just keep it as is. Once I type my supplier’s name in there, I find ACME, they’re in Florida. We preload all of the suppliers into the database. So, it’s already going to be in there.
Then I have an Award Summary. This is your opportunity to tell the details of anything special that’s happening. So, if there’s anything out of the ordinary, like I said, if you’re not just checking the boxes and walking through it and if the auditor is going to be kind of curious about how things happened based on what you’ve documented, then you can go ahead and put it here. In this case, I’m going to say Next.
I get to the risk check, I have no warnings. So, I can continue on. And then I’ll finally get to the Download Report screen. At that point, I can download a pre-formatted report. I’ll show you what that looks like. It actually downloads as a zip file, so it would include all of those documents that I uploaded into the system.
I’m going to just open the Word document so you can see what this looks like. This is the actual report that we just created. You can see that there’s a lot of information in here that we did not pull in. It’s going to be pre-formatted by SpendLogic. There is our bid table. There’s some notes. Not a low bid.
A low bid at total procurement value. And it shows that we gave everything to Acme Metals. So that’s the basics around running a competition in SpendLogic. And if you have any questions on any of that and if you’d like to learn more about it, you should reach out to us.
You can reach us anytime at [email protected]. If you liked our webinar here, we have lots more at spendlogic.com. They’re all free. If you just go there and click on Events or on the Resources tab, either one of those, you should be able to get there. If you have future topics you’d like to learn about, feel free to reach out to us, and be sure to tune in in two weeks. We’re also going to have a presentation that’s similar to this on best value.
So, we look forward to seeing you again. And if you have any questions, please let us know. Thank you.