(Editor’s Note.  The following leaves room for cost realism type analyses under fixed price contracts.)

Eurest protested an $850 million award to Marriot for a fixed price nationwide foodservices contract for the U.S. Marine Corps.  Eurest asserted the USMC could not reasonably conclude Marriott’s bid represented the lowest cost to the government because they did not conduct a price realism analysis.  USMC asserted such an analysis addressing the likelihood of Marriot meeting its target price would have essentially violated FAR 15.404-1 which prohibits the adjustment of fixed price contracts based on the results of a cost realism analysis (which are commonly conducted for cost type contracts only).  

The GAO ruled for the protester saying USMC could not meaningfully evaluate the realism of the proposed price without determining whether offerors were likely to meet their target costs.  It further stated though the FAR precludes adjustments to fixed prices as a result of a cost analysis, it does not preclude agencies from performing “ a critical price evaluation” that considers whether a propose price “reflects the ultimate cost to the government.”   This was particularly important because Marriott reduced its proposed staffing in its final proposal revisions without providing a rationale for the reduction (Eurest Support Services, GAO, B-285133.3).

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