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The “Best Value” Objective of Negotiations

The “Best Value” Objective of Negotiations

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Achieving the “best value” is the overall goal of negotiations, and is a phrase used to describe the desire to achieve the greatest overall benefit in negotiating a contract while taking into consideration inherent tradeoffs between cost, price, performance and the schedule of construction. Under 48 C.F.R. § 15.302, the objective of source selection is to select the proposal from a contractor that represents the best value for the work required. The best value also indicates that the expected outcome of the contract, in estimation, will provide the greatest benefit in accordance with the requirements of the contract.
A contracting party can obtain the best value in negotiations by using any one or a combination of selection approaches, relative to the varying importance of cost to price. However, the less definitive the requirements of the contract are, the more technical considerations will need to be in selecting a contractor to perform the construction. In Banknote Corp. of America, Inc. v. U.S. (2004), it was found that under federal government contracting procedures, an analysis of the tradeoffs between cost and other technical factors would be required only where one proposal is lower in cost while the other is better in performance and technical factors.

Where selection is limited to a single contractor, evaluation of factors should be tailored accordingly. Under 48 C.F.R. § 15.002(a), when contracting with a sole contractor, the request of proposal should be tailored to remove unnecessary information and requirements, such as evaluation criteria and preparation instructions. Where a situation of competitive bidding is taking place from multiple sources, all essential evaluation factors and rankings must be disclosed in order to create a clear understanding to the parties involved. Under 10 U.S.C.A §2305, it is required that disclosure of all evaluation factors and ranking of those factors are placed in three classes, 1) significantly more important than cost or price; 2) equal to cost or price; and 3) significantly less important than cost or price. Also, under 48 C.F.R. § 15.101-1(a), a tradeoff process will be appropriate when it is in the best interest of the government to consider an award other than to the lowest price offered or highest technically rated offeror.

The disclosure of ranking of factors will assure that some reasonable objectivity in the selection of a proposal is based on best value. In TRW, Inc. v. Unisys Corp. (1996) it was held that the contractor is entitled to make a business judgment in deciding whether the value of non-price factors justifies a higher price, so as to achieve an overall best value. In determining whether a proposal is acceptable, non-cost factors should be considered, including technical adequacy of the proposal and the responsibility factors such as past performance, experience, capability and integrity of the contractor. In Al Andalus General Contracts Co. v. U.S. (2009), it was upheld that a proposal did not meet the best value because it failed to provide adequate information about past performance, experience, and capability.

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