A. The Best Practices Procurement Manual (BPPM), Section 4.5.3, Competitive Range, discusses this issue.
Competitive Range is typically defined as “those offerors whose proposals have a reasonable chance of being selected for award.” The determination must take into account the evaluation criteria and the basis for award as stated in the RFP. If the RFP indicates that the award will be made on the basis of "Best Value" to the agency, then a number of scenarios are possible. For example, one offeror may have a very competitive price but be so far removed technically from the competition that the company has no reasonable chance of award, assuming that technical factors are of high importance in the selection decision. Such a proposal might contain such major weaknesses or performance risks that the agency would not consider the firm for award given the quality of the various competitors’ technical proposals. Likewise, a proposal that is high in price may offer such a compelling technical/performance advantage that it stands a very high chance of being selected for award because it represents the “best value” to the agency. This might be the case if the product being offered had a life cycle cost projection far below the competition, thus making it a better value in spite of its higher acquisition cost. In summary, the competitive range determination is a qualitative judgment based on the factual content of the proposals, and it must carefully consider both technical merit/performance and price. It does not lend itself to a predetermined formula since the relative values of the products that will be offered, and their prices, cannot be predicted in advance so as to reduce the determination to a predetermined formula.
You might also want to consider the guidance in the Federal Acquisition Regulation FAR Part 15.306(c), Competitive Range, which states the competitive range shall be comprised of all of the most highly rated proposals - price being one of the factors of rating.
(1) Agencies shall evaluate all proposals in accordance with 15.305(a), and, if discussions are to be conducted, establish the competitive range. Based on the ratings of each proposal against all evaluation criteria, the contracting officer shall establish a competitive range comprised of all of the most highly rated proposals, unless the range is further reduced for purposes of efficiency pursuant to paragraph (c)(2) of this section.
(2) After evaluating all proposals in accordance with 15.305(a) and paragraph (c)(1) of this section, the contracting officer may determine that the number of most highly rated proposals that might otherwise be included in the competitive range exceeds the number at which an efficient competition can be conducted. Provided the solicitation notifies offerors that the competitive range can be limited for purposes of efficiency (see 52.215-1(f)(4)), the contracting officer may limit the number of proposals in the competitive range to the greatest number that will permit an efficient competition among the most highly rated proposals (10 U.S.C. 2305(b)(4) and 41 U.S.C. 253b(d)). (Posted: December, 2010)