5.2. What is the Problem?

5.2.1. Price evaluation requires more than just a cursory bottom line check and price decisions based on such methodology are particularly problematic for requirements and indefinite delivery-indefinite quantity (IDIQ) type contracts. Given that the quantities are generally the Governments best estimates, and the Government may order all, more, some, or none, proposed prices that are too high or too low may put both parties at risk.

5.2.2. Unless the Government has provided for volume breaks, sliding scale pricing, or specified unique ordering combinations with associated minimum quantities, offerors must look at each contract line item number (CLIN) individually as a single requirement. Consequently, the Government must evaluate each CLIN as a single requirement. Suppose the Government estimates it will purchase 50 CY of asphalt and then actually purchases 800 CYs. If the offeror anticipated the Government's requirement would be no more that 50 CY, and he bid "high" for that item so he could bid "low" on something else, the Government ends up paying a premium price when it orders 800 CY. On the other hand, if the offeror bids too low for an item and the Government purchases more than the anticipated quantity the contractor could end up bankrupt or in default because he does not have the plant, equipment, financial or manpower resources to support huge quantity overruns.