When a contractor comes in so much lower in their price, yet claims to meet all the requirements of the RFP, I get very nervous. I certainly hope that SMART is smart enough to take the $20 million in savings and set it aside for the overruns which will come with this contract. Every time I see such a large difference in the pricing, it inevitably comes down to one of two things. 1st - the government agency did not write their requirements clear enough in the RFP, allowing for Sumitomo to underbid. This lack of clarity generally results in the buyer saying "it does not meet the reqs" and the contractor showing them it techincally does. Since they were written poorly, the actual expectation of the buyer is not acurately conveyed and it gives the contractor the ability to charge for change orders, since the requirements end up changing. The 2nd possibility is Sumitomo did not understand all the requirements or they were willing to take the financial risk, knowing the contract would be a cost-plus sort of arrangement. This sort of contract is one where the contractor is able to recoupe the cost of an overrun, but not charge their ususal fee on top. I am not sure if this is the type of contract used here, but it is common.

Either way, such a large disparity would make me very nervous. If I were SMART (no pun intended), I would have engaged them and made sure they fully understood the requirements and then set aside the money saved to pay for the inevitable overrun. Either way, it works out cheaper in the end for SMART, but it looks bad in the media.