Can a Competitor’s Price Be “Too Low” in a Fixed-Price Contract?

Unsuccessful offerors often instinctively want to file a bid protest when they lose to a competitor with a shockingly low price, arguing that the winner cannot possibly perform the work at that rate. However, a recent Government Accountability Office (GAO) decision serves as a stark reminder: arguing "the other guy's price is too low" is almost always a losing strategy in fixed-price competitions.

As Steven Koprince explains in a recent analysis, contractors frequently confuse the concepts of "price reasonableness" and "price realism". In a standard fixed-price contract, the government's only required duty is to determine price reasonableness—meaning they are only evaluating whether the offered price is too high. Agencies are neither required nor permitted to evaluate if a price is too low (price realism) unless the solicitation explicitly states that they will do so.

In the recent GAO case Mustang Survival Manufacturing, Inc. (2026), a protester challenged a Navy award because the winning offeror proposed a price roughly 20% lower than historical averages for submarine survival suits. The GAO denied the protest, confirming that because the solicitation did not include a price realism clause, the Navy was strictly prohibited from evaluating if the price was too low. Furthermore, the GAO has historically held that submitting a "below-cost" offer is completely permissible in fixed-price contracts, as a contractor may intentionally take a loss to get a "foot in the door" and build past performance with a new agency.

STRATEGIC ACTION PLAN FOR YOUR BUSINESS

As your advisor, I want to ensure you are not wasting resources on unwinnable protests or miscalculating your pricing strategy. Here is how you should handle pricing evaluations moving forward:

• Check for a "Price Realism" Clause: Before submitting your proposal or deciding to protest an award, carefully review the solicitation's evaluation criteria. If there is no explicit language stating the agency will conduct a "price realism" evaluation, assume the agency will not—and cannot—reject a competitor for bidding too low.
• Use Strategic Underbidding to Your Advantage: Because below-cost offers are not inherently improper in fixed-price contracts, you can use this rule as a strategic tool. If you have the financial runway, you might choose to submit a highly aggressive, even below-cost bid to break into a coveted agency. The agency cannot disqualify you simply for being too cheap, even if your rates fall below the Service Contract Act-specified wages (provided you do not take exception to the Act's provisions).
• Understand the Exception for Cost-Reimbursement: Remember that these rules apply strictly to fixed-price contracts. If you are competing for a cost-reimbursement contract, an entirely different framework applies, and cost realism will be heavily scrutinized.

Credits & Further Reading: This analysis is based on insights and an article authored by Steven Koprince, published on his blog and newsletter, The FedLift Launchpad.

• Read the full analysis here: Why "The Other Guy's Price Is Too Low" Usually Fails In Bid Protests