(Editor’s Note. Unbalanced bidding is a powerful pricing weapon to use against other bidders and its use by others must be anticipated. The rules on unbalanced bidding have become more liberal. As a result, unbalanced bidding can be used more often because it provides great flexibility of pricing and in many cases, allows contractors to use government funds without paying interest or providing security. An article in the July/August 2001 issue of the Lyman Report by Joseph Petrillo of the firm Petrillo & Powell tracks recent changes in rules covering unbalanced bidding, how the rules have been interpreted in bid protest decisions and how the rule changes and decisions impact bidding strategies.)

Unbalanced bidding can arise whenever the government is ordering more than one separately priced item. Individual items can be overstated or understated and usually arises under one of the following common circumstances.

1. When there is uncertainty about how many individually priced items the government will actually order. This arises regularly under indefinite-quantity and requirements contracts where the government might use estimated quantities for bidding and evaluation purposes but where actual orders can and often do vary from estimates used for price evaluation.

2. Where the contract provides for option periods for increased quantities or additional periods. An example is for supply contracts where only one portion of the items are awarded initially and the balance is subject to the placement of orders later while for service contracts a scope of work awarded for one term is followed by a succession of options for additional periods of performance. The government often provides estimated quantities to be used for evaluation purposes but since they are not obligated to order the estimated amounts, considerable uncertainty exists over how much of the individually-priced items will be supplied.

In either of these circumstances, offerors have flexibility in how they distribute their total price among the various contract line items. "Unbalanced bidding" refers to cases where there is an unusual or discrepant distribution of price among the line items. For example, if performance of services are expected to cost about the same each year, a price for one period which is much higher or lower than others might be unbalanced.

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