I cannot find anything in FAR 5, 12 or 15 addressing this issue, so I've informed the customer they must evaluate, determine the contractor not qualified for award, and cancel the RFP in order to re-solicit. Can the closing date be extended to allow more time for offers? Is there a better recourse than cancelling the RFP?
This is a great question. I think what you informed the customer to do (evaluate the proposal) was the correct advice. Just be sure they evaluate the proposal in complete accordance with the solicitation 52.212-1 and 52.212-2 and how you said the government would do the evaluation. I hope you haven’t pre-determined the contractor who did propose is not qualified… That’s a dangerous assumption.
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The difficulty here is going to be how you determine the price to be fair and reasonable. See FAR 15.403-1(c)(1(ii).
If you were to amend the solicitation after receipt of proposals, the only firms eligible for the amendment are those who “are not eliminated from the competition”; see FAR 15.206(c). In this case that would only be the contractor who submitted a proposal because they are now the only interested party; everyone else disqualified themselves by not submitting a proposal. This is has been discussed in many a GAO decision.
The other option, which you correctly identified, would be for you to cancel the solicitation and re-solicit. But this has complications associated with it as well, mainly a sustainable protest. Although the FAR does not specifically state this; the FAR implies, all else being equal, the government would need to change “requirements or terms and conditions” as the reason for canceling and resoliciting. Much of it has to do with how long you originally gave offerors to submit a proposal. Basically, the more time you allowed for proposal receipt (without changing any other terms or conditions), the less reasonable it would be to cancel and resolicit. Again, there have been many GAO decisions on this over the years.
I checked the VAAR and it is silent on this. If you were in DoD, we have a policy when only one proposal is received in response to a competitive solicitation (See DFARS 215.371-1), in case you were interested in learning more about it.