# What Constitutes a Reasonable Basis for a Government Agency to Cancel an Rfp? ▴ Question

**Published:** 2025-08-08
**Categories:** Question

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## Concept

![An abstract, precision-engineered mechanism showcases polished chrome components connecting a blue base, cream panel, and a teal display with numerical data. This symbolizes an institutional-grade RFQ protocol for digital asset derivatives, ensuring high-fidelity execution, price discovery, multi-leg spread processing, and atomic settlement within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-execution-1.jpg)

## The Inherent Discretion in Public Procurement

A government agency’s capacity to cancel a Request for Proposal (RFP) is a fundamental component of its discretionary power in procurement. This authority is not arbitrary; it is a calculated instrument designed to safeguard the public interest and ensure the responsible allocation of taxpayer funds. The decision to terminate a [solicitation](https://prime.greeks.live/area/solicitation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) is a complex one, rooted in a legal and regulatory framework that prioritizes fairness, competition, and the ultimate fulfillment of the agency’s mission. A [reasonable basis](https://prime.greeks.live/area/reasonable-basis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for cancellation is established when the agency can demonstrate that proceeding with the current RFP would be contrary to these core principles.

The U.S. Government Accountability Office ([GAO](https://prime.greeks.live/area/gao/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) has consistently held that an agency needs only a reasonable basis to cancel a solicitation, a standard that affords the agency wide latitude in its decision-making process. This discretion, however, is not absolute and is subject to scrutiny to prevent abuse.

> The core principle is that an agency’s procurement actions must always align with its evolving needs and the overarching goal of obtaining the best value for the government.

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## Foundational Pillars of a Reasonable Basis

The concept of a “reasonable basis” is not a monolithic entity but rather a composite of several distinct yet interrelated principles. These principles form the bedrock upon which a defensible cancellation decision is built. Understanding these pillars is essential for both government agencies seeking to exercise their discretionary authority and for contractors seeking to understand and potentially challenge such decisions. The most prominent of these pillars is the principle that the solicitation must accurately reflect the agency’s needs.

If an agency’s requirements change, for any number of reasons, continuing with a solicitation that no longer aligns with those needs would be an inefficient and potentially wasteful use of public resources. Another key pillar is the imperative to ensure fair and open competition. If a solicitation is flawed in a way that inhibits competition or provides an unfair advantage to certain bidders, cancellation may be the only way to rectify the situation and preserve the integrity of the [procurement process](https://prime.greeks.live/area/procurement-process/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). These foundational principles are not merely abstract ideals; they are operational mandates that guide the day-to-day practice of [government procurement](https://prime.greeks.live/area/government-procurement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

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## Strategy

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## Navigating the Decision Matrix for RFP Cancellation

The strategic decision to cancel an RFP is a multifaceted process that requires a careful weighing of various factors. An agency’s leadership must navigate a complex decision matrix, considering not only the immediate reasons for cancellation but also the potential long-term consequences. This process involves a thorough assessment of the current procurement landscape, the agency’s evolving needs, and the potential for achieving a better outcome through a revised solicitation or an alternative procurement method. A key strategic consideration is the timing of the cancellation.

While an agency can cancel a solicitation at any stage of the procurement process, the level of scrutiny applied to the decision may increase after proposals have been received and prices have been disclosed. In such cases, the agency must be prepared to provide a more robust justification for its actions to avoid the appearance of impropriety or a desire to steer the contract to a preferred bidder.

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## Proactive Vs. Reactive Cancellation Strategies

Agencies can adopt either a proactive or a reactive approach to [RFP cancellation](https://prime.greeks.live/area/rfp-cancellation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). A proactive strategy involves continuously monitoring the procurement process and making the decision to cancel as soon as it becomes clear that the current solicitation is no longer viable. This approach can save both the agency and the bidders time and resources. A reactive strategy, on the other hand, typically involves canceling a solicitation in response to an external event, such as a [bid protest](https://prime.greeks.live/area/bid-protest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) or a significant change in funding.

While a reactive cancellation may be necessary in certain circumstances, it can also be more disruptive and may lead to greater scrutiny from oversight bodies and the contractor community. The choice between a proactive and a reactive strategy will depend on the specific circumstances of the procurement and the agency’s overall risk management philosophy.

![An abstract visualization of a sophisticated institutional digital asset derivatives trading system. Intersecting transparent layers depict dynamic market microstructure, high-fidelity execution pathways, and liquidity aggregation for RFQ protocols](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-institutional-digital-asset-derivatives-rfq-execution.jpg)

## Common Scenarios Triggering RFP Cancellation

Several common scenarios can trigger an agency’s decision to cancel an RFP. A thorough understanding of these scenarios can help both agencies and contractors anticipate and navigate the complexities of the procurement process. The following table outlines some of the most frequent reasons for RFP cancellation, along with the strategic rationale behind each decision.

| Scenario | Strategic Rationale | Illustrative Example |
| --- | --- | --- |
| Change in Agency Requirements | Ensures that the procurement aligns with the agency’s current and future needs, preventing the acquisition of goods or services that are no longer relevant or effective. | A change in legislation requires an agency to adopt a new technology, rendering the specifications in an existing RFP obsolete. |
| Flawed Solicitation | Preserves the integrity of the procurement process by correcting ambiguities or errors in the RFP that could lead to an unfair or unequal evaluation of proposals. | The evaluation criteria in an RFP are so poorly defined that it is impossible for the agency to make a rational best-value determination. |
| Desire for Increased Competition | Promotes a more competitive procurement environment, which can lead to better prices and higher-quality proposals for the government. | An agency realizes that the technical requirements in an RFP are unnecessarily restrictive, limiting the pool of potential bidders. |
| Budgetary Constraints | Ensures that the agency does not commit to a procurement for which it lacks sufficient funding, thereby maintaining fiscal responsibility. | A government-wide budget cut eliminates the funding for a particular program, making the associated RFP untenable. |

In addition to these common scenarios, agencies may also cancel RFPs for other reasons, such as the discovery of a more advantageous procurement vehicle, concerns about the integrity of the procurement process, or the decision to perform the required work in-house. The key is that the agency must always be able to articulate a reasonable basis for its decision, grounded in the principles of fairness, competition, and the best interests of the government.

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## Execution

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## The Operational Playbook for RFP Cancellation

The execution of an RFP cancellation is a critical phase that requires careful planning and communication. A well-executed cancellation can minimize disruption and maintain positive relationships with the contractor community, while a poorly handled cancellation can lead to protests, legal challenges, and damage to the agency’s reputation. The following operational playbook outlines the key steps that an agency should take when canceling an RFP.

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**Internal Deliberation and Documentation** ▴ The decision to cancel an RFP should be the result of a thorough internal deliberation process involving legal counsel, procurement officials, and program managers. All reasons for the cancellation should be carefully documented, creating a clear and contemporaneous record of the agency’s decision-making process. This documentation will be crucial if the cancellation is later challenged in a bid protest.

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**Formal Cancellation Notice** ▴ Once the decision to cancel has been made, the agency must issue a formal cancellation notice to all parties that received the solicitation. This notice should be clear, concise, and provide a general reason for the cancellation. While the notice does not need to go into exhaustive detail, it should be sufficient to put bidders on notice of the agency’s rationale.

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**Communication with Bidders** ▴ In addition to the formal cancellation notice, the agency should consider providing additional communication to the bidders, particularly if proposals have already been submitted. This could include a debriefing or a more detailed explanation of the reasons for the cancellation. While not always required, this type of transparent communication can help to maintain goodwill with the contractor community.

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**Post-Cancellation Analysis** ▴ After the cancellation, the agency should conduct a post-cancellation analysis to identify any lessons learned from the process. This analysis can help the agency to improve its procurement practices and avoid similar issues in the future.

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## Quantitative Modeling and Data Analysis in Cancellation Decisions

Data analysis can play a crucial role in supporting an agency’s decision to cancel an RFP. By using quantitative models, an agency can provide a more objective and defensible rationale for its actions. For example, if an agency is canceling an RFP due to concerns about price reasonableness, it can use a statistical analysis of historical pricing data to demonstrate that the received proposals are significantly higher than the market average. The following table provides a simplified example of how such an analysis might be presented.

| Proposal | Proposed Price | Historical Average Price | Standard Deviation | Z-Score |
| --- | --- | --- | --- | --- |
| Proposal A | $1,500,000 | $1,200,000 | $100,000 | 3.0 |
| Proposal B | $1,650,000 | $1,200,000 | $100,000 | 4.5 |
| Proposal C | $1,475,000 | $1,200,000 | $100,000 | 2.75 |

In this example, the Z-score indicates how many standard deviations a proposal’s price is from the historical average. A high Z-score can provide a quantitative basis for determining that a price is unreasonable. By using this type of data-driven approach, an agency can strengthen its justification for canceling an RFP and reduce the likelihood of a successful bid protest.

> A data-driven approach to cancellation decisions can transform a subjective judgment into an objective, defensible position.

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## Predictive Scenario Analysis a Case Study

To illustrate the practical application of these principles, consider the following hypothetical case study. The Department of Innovation and Technology (DIT) issues an RFP for the development of a new data analytics platform. The RFP includes detailed technical specifications based on the agency’s understanding of the current technological landscape.

After receiving proposals, the DIT’s technical evaluation panel discovers a new, open-source technology that could provide the same or better functionality at a significantly lower cost. The panel also notes that the RFP’s specifications are so restrictive that they effectively exclude any solutions based on this new technology.

In this scenario, the DIT has a reasonable basis to cancel the RFP. The solicitation no longer reflects the agency’s needs, as it does not account for the new, more cost-effective technology. Furthermore, the restrictive specifications limit competition, preventing the agency from receiving proposals that could offer a better value to the government.

By canceling the RFP and issuing a new one with revised specifications, the DIT can take advantage of the latest technological advancements and foster a more competitive procurement environment. This decision would be in the best interests of the government and would be highly defensible in the event of a bid protest.

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## System Integration and Technological Architecture

The decision to cancel an RFP can also be influenced by considerations of system integration and technological architecture. In today’s interconnected world, it is rare for a new system or technology to operate in a vacuum. It must be able to integrate seamlessly with the agency’s existing infrastructure. If an RFP is issued without a full understanding of these integration requirements, it can lead to proposals that are technically sound in isolation but unworkable in the agency’s actual operating environment.

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**Legacy Systems** ▴ Many government agencies rely on legacy systems that can be difficult and expensive to integrate with new technologies. An RFP that fails to account for the complexities of these legacy systems may need to be canceled and reissued with more detailed integration requirements.

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**Cybersecurity Concerns** ▴ Cybersecurity is a paramount concern for all government agencies. An RFP that does not adequately address the agency’s cybersecurity requirements may need to be canceled to ensure that the resulting contract will not introduce new vulnerabilities into the agency’s network.

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**Interoperability Standards** ▴ Government agencies are increasingly adopting interoperability standards to ensure that their systems can communicate with each other. An RFP that does not adhere to these standards may need to be canceled to avoid the acquisition of a “siloed” system that cannot share data with other critical agency systems.

By taking a holistic view of its technological architecture, an agency can ensure that its RFPs are well-designed and that the resulting contracts will meet its long-term strategic objectives. When an RFP falls short of this standard, cancellation may be the most prudent course of action.

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## References

- U.S. Government Accountability Office. (1973, January 3). Cancellation of Request for Proposals. B-175138.

- Levine, A. (2015, June 18). Cancelled Solicitation ▴ What Can A Government Contractor Do? PilieroMazza PLLC.

- Watson & Associates LLC. (n.d.). Addressing Government Cancellation of Solicitation In A Bid Protest.

- WIFCON. (n.d.). Bid Protest decisions listed by Federal Acquisition Regulation.

- Bacon, S. L. (2023, February). A Shifting Legal Landscape for Canceled Solicitations. Contract Management, 13-17.

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## Reflection

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## Beyond the Cancellation a Strategic Reassessment

The cancellation of an RFP should not be viewed as a failure, but rather as an opportunity for strategic reassessment. It is a moment for an agency to pause, reflect on its needs, and ensure that its procurement strategy is aligned with its overarching mission. This process of introspection can lead to more effective and efficient procurements in the future, ultimately resulting in better outcomes for the agency and the public it serves.

For contractors, an RFP cancellation, while disappointing, can also be an opportunity to gain a deeper understanding of the agency’s evolving needs and to better position themselves for future opportunities. By viewing RFP cancellations through this strategic lens, both agencies and contractors can transform a potentially negative event into a catalyst for positive change.

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## Glossary

<a href="https://prime.greeks.live/area/reasonable-basis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Reasonable Basis

Meaning ▴ Reasonable Basis refers to the obligation for financial professionals, including those operating in crypto investing, to possess a legitimate and supportable rationale for any recommendation or action undertaken on behalf of a client. </a><a href="https://prime.greeks.live/area/solicitation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, segmented cream and dark gray automated device, depicting an institutional grade Prime RFQ engine. It represents precise execution management system functionality for digital asset derivatives, optimizing price discovery and high-fidelity execution within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-engine-optimal-institutional-digital-asset-execution-system.jpg)

## Solicitation

Meaning ▴ Solicitation, in the financial context, refers to the act of directly or indirectly requesting or inviting bids, offers, or expressions of interest for financial products, services, or transactions from potential clients or counterparties. </a><a href="https://prime.greeks.live/area/gao/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Gao

Meaning ▴ GAO, the Government Accountability Office, serves as the investigative arm of the U. </a><a href="https://prime.greeks.live/area/government-procurement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A symmetrical, angular mechanism with illuminated internal components against a dark background, abstractly representing a high-fidelity execution engine for institutional digital asset derivatives. This visualizes the market microstructure and algorithmic trading precision essential for RFQ protocols, multi-leg spread strategies, and atomic settlement within a Principal OS framework, ensuring capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-engine-for-institutional-digital-asset-derivatives-rfq.jpg)

## Government Procurement

Meaning ▴ Government Procurement refers to the comprehensive process by which public sector entities, at various levels, acquire goods, services, and works from external suppliers to fulfill their public mandates and operational needs. </a><a href="https://prime.greeks.live/area/procurement-process/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intricate metallic components signify system precision engineering. These structured elements symbolize institutional-grade infrastructure for high-fidelity execution of digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-precision-engineering-for-high-fidelity-execution-and-latency-optimization.jpg)

## Procurement Process

Meaning ▴ The Procurement Process, within the systems architecture and operational framework of a crypto-native or crypto-investing institution, defines the structured sequence of activities involved in acquiring goods, services, or digital assets from external vendors or liquidity providers. </a><a href="https://prime.greeks.live/area/rfp-cancellation/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
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## Rfp Cancellation

Meaning ▴ RFP Cancellation refers to the formal termination of a Request for Proposal (RFP) process by the issuing entity prior to the selection of a vendor or the awarding of a contract, rendering all previously submitted proposals null and void. </a><a href="https://prime.greeks.live/area/bid-protest/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two intersecting technical arms, one opaque metallic and one transparent blue with internal glowing patterns, pivot around a central hub. This symbolizes a Principal's RFQ protocol engine, enabling high-fidelity execution and price discovery for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/principal-grade-digital-asset-derivatives-rfq-execution-engine.jpg)

## Bid Protest

Meaning ▴ A Bid Protest, within the institutional crypto landscape, represents a formal challenge to the outcome of a Request for Quote (RFQ) process or a specific digital asset transaction, asserting that the selection or execution deviated from established protocols, fair market practices, or predetermined smart contract conditions. </a>

**Tags:** [GAO](https://options.greeks.live/area/gao/), [Change in Requirements](https://options.greeks.live/area/change-in-requirements/), [Bid Protest](https://options.greeks.live/area/bid-protest/), [Flawed Solicitation](https://options.greeks.live/area/flawed-solicitation/), [Procurement Integrity](https://options.greeks.live/area/procurement-integrity/), [Procurement Process](https://options.greeks.live/area/procurement-process/)	

## Discover More

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### [Can a Bidder Sue for Lost Profits If the Rfp Is Cancelled for a Legitimate Reason?](https://options.greeks.live/question/can-a-bidder-sue-for-lost-profits-if-the-rfp-is-cancelled-for-a-legitimate-reason/)
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A bidder's right to sue for lost profits hinges on proving the RFP cancellation was a bad-faith breach of the system's fair dealing protocol.

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### [Under What Specific Circumstances Is the Cancellation of an Rfp after Proposals Have Been Opened Considered Legally Justifiable?](https://options.greeks.live/question/under-what-specific-circumstances-is-the-cancellation-of-an-rfp-after-proposals-have-been-opened-considered-legally-justifiable/)
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An RFP cancellation after opening is legally justifiable when a compelling reason makes the award of a contract improper or contrary to the public interest.

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### [What Are the Most Common Mistakes That Agencies Make When Canceling an Rfp?](https://options.greeks.live/question/what-are-the-most-common-mistakes-that-agencies-make-when-canceling-an-rfp/)
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Canceling an RFP without a transparent, respectful, and procedurally sound protocol risks long-term reputational damage and vendor alienation.

- 
### [What Recourse Does a Contractor Have If They Believe an Rfp Was Canceled Improperly?](https://options.greeks.live/question/what-recourse-does-a-contractor-have-if-they-believe-an-rfp-was-canceled-improperly/)
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A contractor's recourse for an improper RFP cancellation is a structured challenge to the procuring agency's decision-making process.

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### [What Are the Primary Legal Risks When an Agency Cancels an Rfp?](https://options.greeks.live/question/what-are-the-primary-legal-risks-when-an-agency-cancels-an-rfp/)
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Canceling an RFP exposes an agency to legal challenges based on the reasonableness of its justification and the potential prejudice to bidders.

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### [What Are the Primary Reasons an Agency Might Cancel a Negotiated Rfp?](https://options.greeks.live/question/what-are-the-primary-reasons-an-agency-might-cancel-a-negotiated-rfp/)
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An agency may cancel a negotiated RFP due to funding shortfalls, altered requirements, or flaws in the solicitation itself.

- 
### [What Are the Key Differences between a Material and a Non-Material RFP Amendment?](https://options.greeks.live/question/what-are-the-key-differences-between-a-material-and-a-non-material-rfp-amendment/)
![Sharp, layered planes, one deep blue, one light, intersect a luminous sphere and a vast, curved teal surface. This abstractly represents high-fidelity algorithmic trading and multi-leg spread execution. The sphere symbolizes a prime brokerage liquidity pool, interacting with latent liquidity for optimal RFQ protocol price discovery within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-system-microstructure.jpg)

A material RFP amendment substantively alters project obligations or economics; a non-material one is a minor clarification.

- 
### [What Recourse Does a Bidder Have If They Believe an Rfp Was Improperly Cancelled?](https://options.greeks.live/question/what-recourse-does-a-bidder-have-if-they-believe-an-rfp-was-improperly-cancelled/)
![A meticulously engineered mechanism showcases a blue and grey striped block, representing a structured digital asset derivative, precisely engaged by a metallic tool. This setup illustrates high-fidelity execution within a controlled RFQ environment, optimizing block trade settlement and managing counterparty risk through robust market microstructure. It highlights a Prime RFQ intelligence layer.](https://options.greeks.live/wp-content/uploads/2025/08/precision-engineered-institutional-digital-asset-derivatives-rfq-execution.jpg)

A bidder's recourse for an improper RFP cancellation is a structured challenge to the procuring entity's decision-making process.

- 
### [What Is the “Reasonable Basis” Standard for an Agency to Cancel an Rfp?](https://options.greeks.live/question/what-is-the-reasonable-basis-standard-for-an-agency-to-cancel-an-rfp/)
![Precision-engineered multi-vane system with opaque, reflective, and translucent teal blades. This visualizes Institutional Grade Digital Asset Derivatives Market Microstructure, driving High-Fidelity Execution via RFQ protocols, optimizing Liquidity Pool aggregation, and Multi-Leg Spread management on a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/precision-engineered-multi-vane-system-illustrating-institutional-digital-asset-derivatives-rfq-protocols-market-microstructure-optimized-liquidity-aggregation-prime-os-high-fidelity-execution.jpg)

The "reasonable basis" standard is a permissive legal principle requiring a government agency to have a rational, defensible justification for canceling an RFP.

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---

**Original URL:** https://options.greeks.live/question/what-constitutes-a-reasonable-basis-for-a-government-agency-to-cancel-an-rfp/
