How to Respond When a Proposal Price Exceeds the Budget

Under a Request for Proposals (RFP) process, often used for selecting consultants and other service providers, evaluation criteria typically include:

1. Qualifications and experiences of the proposer and staff
2. Proposed approach to the project
3. Proposed price

Evaluate and Rate Proposals:  Proposals are then evaluated and rated by the public agency, assigning points for each of the evaluation criteria based on the quality and appropriateness the proposal to the project.

3 options:  But what happens when the highest ranked firm's price is too high and more than the money available in the budget for the project?  

There are three options for addressing this situation:

• Award to another proposer:  Include language in the RFP alerting proposers that the agency reserves the right to award to other than the highest ranked proposer if their price exceeds the budget.  The agency would then look to the second highest ranked proposer to see if their price was within budget.  Here's some RFP language that I used in one recent RFP:

The public agency may also award to other than the highest ranked proposer if the price submitted by the proposer is more than the budget available for the project.

• Negotiate:  Because this is a proposal and not a bid, an agency may discuss the scope of work and price with the highest ranked proposer, and negotiate the price so that it is within the budget available. 

• Re-advertise:  If it appears the proposers did not understand the agency's scope of work and made assumptions that drove the price up, an agency could choose to revise the scope of work and re-advertise the RFP, asking for new proposals. 

Mike Purdy's Public Contracting Blog 

© 2012 by Michael E. Purdy Associates, LLC 

http://PublicContracting.blogspot.com