BNUMBER:  B-257607.3
DATE:  September 12, 1995
TITLE:  United International Engineering, Inc.

**********************************************************************

Matter of:     United International Engineering, Inc.

File:          B-257607.3

Date:          September 12, 1995
                                                             J. 
Patrick McMahon, Esq., McMahon & David, for the protester.
Paralee White, Esq., Laurel Hockey, Esq., and G. Brent Connor, Esq., 
Cohen & White, for EER Systems Corporation, an interested party.
Lt. Col. Ronald K. Heuer, and William L. Strong, Esq.,  Department of 
the Army, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.
                                                             DIGEST

1.  Protest of high performance risk rating in procurement for 
software engineering support of battlefield automated systems is 
denied where, although protester proposed to subcontract 37 percent of 
effort to subcontractors with good performance records, the agency 
received reports of past performance problems and demonstrated 
inadequate software engineering capabilities on the part of the 
protester, and reasonably determined that there existed a significant 
risk that the protester lacked the technical expertise necessary in 
order to effectively manage the performance of its subcontractors in 
the software area.

2.  Protest that agency improperly considered as an advantage 
incumbent's superior experience with, and resulting knowledge of, 
software in weapons systems to be supported under contemplated 
contract, and as a disadvantage protester's relative lack of 
experience in this regard, is denied where solicitation requested 
information with respect to contracts for similar work and expressly 
provided for consideration of offerors' relevant and recent experience 
under a number of evaluation factors.
                                                             DECISION

United International Engineering, Inc. (UIE) protests the award of a 
contract to EER Systems Corporation under request for proposals (RFP) 
No. DAAH01-94-R-R008, issued as a small disadvantaged business (SDB) 
set-aside by the U.S. Army Materiel Command, Army Missile Command 
(MICOM), for battlefield automated systems engineering support 
(BASES).  UIE challenges the evaluation of past performance and 
experience and the overall cost/technical trade-off.

We deny the protest.

The solicitation contemplated award of a cost-plus-award-fee contract 
for 1 base year with 6 option years for engineering support of the 
software engineering directorate (SED), research, development and 
engineering center, MICOM, in providing total life cycle support of 
battlefield automated systems, including:  (1) acquisition and 
development of mission critical computer resources; (2) software 
verification and validation; (3) command, control and communications 
engineering and interoperability testing; (4) requirements definition 
for, and development of, software tools; (5) software quality 
assurance; and (6) configuration and data management.  The 
solicitation established 16 required labor categories, setting forth 
minimum educational and experience requirements and anticipated levels 
of effort for each.

The solicitation generally provided for award to be made to the 
responsible offeror whose proposal offered the best value to the 
government.  The RFP listed four specific evaluation factors:  (1) 
technical, including technical approach and resumes, which was 
described as "most important, and significantly more important than"         
(2) performance risk, (3) management and (4) "price," all of which 
were of equal importance.  

With respect to performance risk, the evaluation of which is at issue 
here, the solicitation provided that the agency would

     "make a performance risk assessment based upon each offeror's and 
     his subcontractor's current and past records of performance as 
     they relate to the probability of successful completion of the 
     required effort.  This assessment will focus on relevant and 
     recent . . . contractual activity performed since 1 Jan 91. . . 
     ."

The solicitation required offerors to describe government contracts 
"received or on-going since 1 Jan 1991 . . . which are similar to the 
effort required by this solicitation," including furnishing:  (1) the 
names and telephone numbers of the procuring and administering 
contracting officers and the contracting activity's technical and 
other representatives; (2) "a narrative explanation for the Statement 
of Work, similarities of that work with the work required by this 
solicitation, objectives achieved, and cost growths or schedule delays 
encountered"; and (3) an explanation of the reasons for any failure to 
"meet original requirements with regard to either cost, schedule, or 
technical performance," and of "any corrective actions taken to avoid 
recurrence."  In addition, the solicitation provided that the 
technical, management, and price evaluations would include an 
evaluation of "[p]roposal risk" that would "focus on those aspects of 
the offeror's proposal which may tend to decrease confidence in the 
ability to satisfy the contractual requirement in a timely and 
qualitative manner consistent with the proposed approach."

Seven proposals were received by the closing time.  Six--including 
EER's and UIE's--were included in the competitive range.  Following 
discussions with the offerors, the agency requested best and final 
offers (BAFO).  

Based upon its evaluation of BAFOs, MICOM determined that EER had 
submitted the proposal offering the best value to the government.  
Both UIE's and EER's proposals received above average ratings under 
the technical factor, and UIE's proposal received a higher management 
rating (above average) than EER's (average) and offered lower proposed 
($141,685,273) and evaluated ($146,335,538) prices than did EER's 
($162,555,326 proposed and $164,329,203 evaluated).  However, MICOM 
concluded that UIE's apparent advantage under the management and price 
factors was offset by (1) the fact that EER's proposal was evaluated 
as superior to UIE's under the technical evaluation elements for 
command, control, communications and intelligence engineering and 
interoperability testing, software quality assurance, and special 
level software engineering, while UIE's proposal was not found to be 
superior to EER's under any of the technical approach evaluation 
elements; (2) UIE's proposal of lower indirect rates than it 
historically had experienced, which MICOM determined "raises some 
doubt that UIE can effect its proposed technical approach and staffing 
within its proposed cost" and thereby increased overall proposal risk; 
and     (3) UIE's high performance risk rating, resulting from its 
past performance problems in the area of software engineering.  MICOM 
concluded that EER's proposal represented the best value to the 
government, and therefore  selected that firm for award.

Upon learning of the selection of EER, UIE and two other offerors 
protested EER's SDB status.  After the Small Business Administration 
(SBA) initially determined that EER was other than an SDB, MICOM 
selected Camber Corporation for award.  Thereafter, however, SBA 
determined that EER was in fact an SDB; MICOM thus rescinded the 
selection of Camber and again selected EER.  Upon learning of the 
resulting award to EER, UIE protested the selection, first to the 
General Services Administration Board of Contract Appeals (GSBCA), and 
then, after GSBCA declined to accept jurisdiction, to our Office.

PERFORMANCE RISK

UIE challenges MICOM's evaluation of its proposal as characterized by 
high performance risk as a result of perceived past performance 
problems in the area of software engineering.  According to the 
protester, MICOM unduly emphasized a single report of inadequate 
performance and failed to take into account UIE's overall performance.  
In this regard, UIE questions why its proposal received an overall 
high performance risk rating and EER's received an overall low 
performance risk rating when, in response to the agency's detailed 
performance questionnaire, MICOM received more ratings of inadequate 
performance for EER (10 of      679 responses) than for UIE (1 of 437 
responses).  Further, argues UIE, even if its prior performance with 
respect to software engineering was reasonably found to be 
unsatisfactory, this did not support MICOM's high performance risk 
appraisal since UIE had proposed to subcontract software engineering 
to firms with past performance records considered satisfactory by the 
agency.

In reviewing an agency's evaluation of proposals, we consider whether 
it was in accord with the evaluation criteria listed in the 
solicitation and whether the actual evaluation was reasonable.  John 
Brown U.S. Servs., Inc.,     B-258158 et al., Dec. 21, 1994, 95-1 CPD  
35; Information Sys. & Networks Corp., 69 Comp. Gen. 284 (1990), 90-1 
CPD    203. 

The evaluation of UIE's past performance and the resulting high 
performance risk rating were reasonable.  Notwithstanding UIE's claim 
to the contrary, the record establishes that MICOM based its risk 
assessment on a number of reports concerning UIE's performance under 
several contracts, which called into question the probability of UIE's 
successfully completing the required effort.  UIE identified 10 
contracts, of which 9 were considered relevant to this contract effort 
and were reviewed by the agency.  
MICOM received reports of performance problems under at least four of 
these contracts; the criticism of UIE's performance on three of these 
was considered sufficiently serious by MICOM as to raise "serious 
doubts that the UIE team could successfully perform this effort if 
managed by UIE and with two-thirds of the technical work proposed to 
be done by UIE." 

On the largest contract referenced by UIE (DAAH07-90-C-0008), and the 
one involving the most similar work--software engineering support--the 
contracting officer's technical representative (COTR) reported that:

     "[i]n the area of software development, UIE has demonstrated an 
     inability to plan, develop, and implement procedures which result 
     in the delivery of high quality products and services on schedule 
     and within budget.  Despite encountering problems in the software 
     development area, UIE has provided virtually no training for 
     their on-site personnel in this area, nor does it appear that 
     resources exist at the corporate level to provide assistance."

The COTR characterized UIE's software as "band aid, glitchy code"; he 
stated that he knew of "no [software] product they can market."  
Problems with UIE's performance led the contracting agency to issue a 
cure notice to UIE in March 1994 requiring correction of unacceptable 
software, and even then, according to the COTR, it took several 
attempts by UIE and "lots of help from [a] special government team" to 
get an acceptable product.  Likewise, according to the contracting 
agency's technical inspector, one of the sources identified by UIE in 
its response, and described by the protester as being "in the best 
position to judge the technical competence and performance of UIE," 
UIE "requires too much government direction, i.e., government has to 
show contractor how to do job, quality control."  

Further, it does not appear that UIE's performance difficulties under 
contract -0008 were limited to the failure to perform which led to 
issuance of the cure notice.  The contracting officer stated in the 
cure notice that "the unacceptable product initially produced by UIE . 
. . is not an isolated incident"; "[i]t appears that this is 
symptomatic of UIE's inability to plan, develop, and implement 
procedures which result in the delivery of high quality products on 
schedule and within budget."  Although UIE responded during 
negotiations to MICOM's expression of concern regarding UIE's 
performance under this contract by noting that the contract had been 
extended, both the COTR and the contracting officer advised MICOM that 
the extension was issued only because all of the contracting agency's 
similar contracts were being consolidated and the extension of UIE's 
contract was necessary so that the contracts would end on the same 
date.  Likewise, while UIE enclosed with its BAFO two letters from the 
contracting agency commending a number of contractor personnel for 
their efforts, UIE failed to furnish the cover letter to the letters 
of commendation, which specifically noted that the letters:  
"recognize individual contributions.  This, however, is not an 
indication that as a company, United Engineering's overall performance 
was up to the desired level."  In summary, reported the COTR, the 
contracting agency had "not been able to confidently assign support 
requirements to UIE with the expectation that the requirements will be 
understood and executed in an effective manner."  

While issuance of the cure notice led to replacement of UIE's program 
manager (PM) under contract -0008, and the new PM's efforts to cure 
the problems resulted in reports that UIE was "doing better" 
(according to the COTR) and that there had been no problems in the 
last 6 months (contracting officer), the COTR reported that UIE "still 
[has a] substantial learning curve.  SW [software] is still weak."  
MICOM reports that the contracting agency's technical 
inspector--again, the agency official described by the protester as 
being "in the best position to judge the technical competence and 
performance of UIE"--similarly advised that "[o]n software engineering 
efforts, UIE doesn't currently have anyone to do the job."

MICOM also relied upon reports that UIE had encountered performance 
problems under other contracts.  For example, under contract No. 
DAAH01-89D-0139, for technical support, including software modeling, 
the COTR reported that UIE was "not up on state-of-art" in the 
software field, resulting in UIE being "[v]ery slow getting started" 
and having "[s]everal false starts," which led to revision of the 
delivery schedule.  According to the COTR:

     "[w]hen [we] finally got [an] acceptable product, it was due to 
     lots of government work.  They were supposed to be experts and 
     government was more expert than they were.

     "[UIE] [w]anted to do good job but didn't have what it took to do 
     good job."

Although MICOM received a generally favorable report when, at UIE's 
suggestion during negotiations, it contacted the technical point of 
contact for one of the task orders under contract -0139, that task did 
not involve software engineering.  Moreover, even that contact 
cautioned that because UIE was "very penny wise" and lacked 
initiative, UIE  "only gives what [you] ask for."  He added that since 
they are a small company and lack resources, the agency can only "give 
them things [they are] good at."  According to the agency, the contact 
questioned whether UIE could perform as well on the sizable contract 
effort contemplated here as it could on a smaller contract effort.  

Under another contract (No. DAAH01-92-C-0312), for system engineering 
and integration support, the engineering supervisor reported that 
UIE's weakness was in "[i]n-depth technical expertise."  According to 
the engineering supervisor, UIE "[did not] have staff"; as a result, 
the "[p]rime doesn't do engineering.  Sub does it."  Although UIE 
claimed during negotiations that it had provided one-third of the 
engineers supporting the project office, the supervisor of the 
engineering supervisor confirmed that the project office looks to the 
subcontractor for all technical support.  The overall supervisor 
stated that:

     "the project office does not look to UIE for technical support 
     and doubts [it] could get it from them.  [The subcontractor] 
     provides all leadership and direction to the UIE employees, and 
     [the subcontractor] provides all the technical support to the 
     project office."  

MICOM reasonably concluded that these reports of past performance 
problems and demonstrated inadequate software engineering capabilities 
raised "serious doubts that the UIE team could successfully perform 
this effort if managed by UIE and with two-thirds of the technical 
work proposed to be done by UIE."

The fact that UIE proposed to subcontract approximately    37 percent 
of the contract effort to subcontractors that received good to 
superior software engineering experience ratings does not change our 
conclusion.  This is because, while the subcontractors in question 
were to perform approximately 37 percent of the overall contract 
effort, UIE's proposal indicated that UIE would take the lead in 
significant areas of contract performance, including contract 
technical management, program management, task requirements, 
acquisition/development engineering support, systems and management 
analysis and assistance, maintaining state-of-the-art practice, 
operational and acceptance testing, data collection, reduction and 
analysis, and software verification and validation.  MICOM reports 
that UIE's prior performance problems are related to these areas.  UIE 
does not adequately explain, nor is it otherwise evident, why its 
performance problems and demonstrated weaknesses with respect to 
software engineering capability are not relevant to the significantly 
larger portion of the contract that UIE would perform.  In addition, 
given the reported weaknesses in UIE's software engineering 
capabilities, we think the agency reasonably was concerned that there 
was a significant risk that UIE lacked the technical expertise 
necessary to effectively manage the performance of its subcontractors 
in the software area.

The fact that MICOM received more ratings of inadequate performance 
for EER (10 of 679 responses) than for UIE (1 of 437 responses) does 
not demonstrate that the performance risk ratings for UIE (high) and 
EER (low) were unreasonable.  The difference in risk ratings 
essentially reflected the fact that MICOM had received reports of 
significant problems on the part of UIE, but not EER, in meeting 
performance and delivery requirements related to software engineering.  
As noted by MICOM, while UIE received an inadequate performance rating 
in the technical area, and a total of five adequate/inadequate ratings 
in the technical and delivery areas, EER received no rating lower than 
good in the technical area or lower than adequate in the delivery 
area.  Rather, seven of EER's inadequate ratings were in the area of 
cost (with one in the personnel area and two in the subcontractor 
area).  MICOM found that EER's prior cost difficulties resulted from a 
number of factors, including the failure to anticipate the complexity 
of the required work and delays in obtaining clearances for proposed 
staff.  Based on EER's proposed approach to cost control under the 
contemplated contract, and the fact that EER was the incumbent 
contractor and possessed an already cleared staff (and, presumably, 
knowledge of the contract requirements), MICOM determined that EER's 
prior cost difficulties were unlikely to reoccur here.  Having 
evaluated EER as demonstrating outstanding past performance with 
respect to schedule, management and quality, MICOM assigned EER a low 
performance risk rating; there is no basis for finding this 
determination unreasonable.  Nor, as discussed above, has the 
protester furnished any basis for questioning the agency's 
determination that the reports of UIE's past performance problems in 
the technical and delivery areas and demonstrated inadequate software 
engineering capabilities raised serious doubts as to whether UIE could 
successfully perform the contemplated contract effort.  We conclude 
that the agency reasonably determined that UIE's past technical and 
delivery problems in the software engineering area were more 
indicative of high risk in performance of a software engineering 
contract than were EER's past cost problems.  UIE's proposal thus 
warranted a higher performance risk rating.

RELEVANT EXPERIENCE

UIE claims that the source selection authority (SSA) improperly took 
into consideration EER's experience as the incumbent contractor and 
the fact that, as a result of that experience, EER possessed more SED 
and MICOM-related experience.  For example, the SSA stated in this 
regard that:

     "EER is the incumbent contractor for the current BASES effort.  
     Their response to the RFP SOW was thorough. . . .  They have a 
     good knowledge of the software and computer resources in the 
     tactical weapons systems at SED, and current working knowledge of 
     the tools and procedures needed to perform the RFP SOW [statement 
     of work] requirements.  The proposal presented a very good 
     description of their experience with the ADA programming language 
     and with other languages used in tactical weapons systems.  EER 
     also presented their in-depth knowledge and experience of 
     software development in accordance with [Department of Defense 
     Standard No. 2167A           (DOD-STD-2167A)].  This extensive 
     background experience and capability made the proposal risk low.  
     The claims made by EER were substantiated by numerous examples of 
     support to SED projects."

In addition, UIE argues that MICOM improperly took into consideration 
UIE's relative lack of experience with MICOM systems and the fact that 
UIE's inadequate rating was received for the contract (-0008) 
involving "the most MICOM experience."

We find no improper consideration of offerors' experience.  The 
solicitation expressly provided for consideration of relevant 
experience under a number of evaluation factors.  The RFP stated that 
the agency would make a performance risk assessment based upon each 
offeror's "relevant and recent" experience as it related "to the 
probability of successful completion of the required effort."  For the 
cited contracts, offerors were required to explain the "similarities 
of that work with the work required by this solicitation."  Further, 
the solicitation provided that the required proposal risk evaluation 
would "focus on those aspects of the offeror's proposal which may tend 
to increase confidence in the ability to satisfy the contractual 
requirements in a timely and qualitative manner," including such 
factors as an offeror's "lack of corporate experience directly related 
to this requirement."  In addition, under the technical evaluation 
factor, the solicitation provided for consideration of (1) "the 
offeror's experience with the development and evaluation of software 
in Ada, higher order languages, in assembly languages and the 
languages of [weapons] systems shown in Appendix B of the SOW"; and    
(2) "the offeror's experience and knowledge with DOD-STD-2167A."  In 
view of these solicitation provisions providing for consideration of 
relevant experience, and given the fact that the contemplated contract 
called for furnishing software engineering support to SED/MICOM in 
performance of its mission to support battlefield automated systems, 
MICOM properly considered as an advantage EER's superior experience 
with, and resulting knowledge of, SED/MICOM-supported systems, and as 
a disadvantage UIE's relative lack of experience in this regard.  
Likewise, the agency could properly take into account, in determining 
"the probability of successful completion of the required effort," the 
fact that UIE encountered performance problems on a contract for 
related services.

PROPOSAL RISK

UIE challenges MICOM's assessment of an increased proposal risk as a 
result of UIE's proposal of inadequate indirect rates.  In this 
regard, as noted above, the solicitation generally provided that an 
evaluation of proposal risk would be undertaken as part of the 
technical, management and price evaluations, and that this evaluation 
would "focus on those aspects of the offeror's proposal which may tend 
to decrease confidence in the ability to satisfy the contractual 
requirement in a timely and qualitative manner consistent with the 
proposed approach."   

The Defense Contract Audit Agency (DCAA), in examining the realism of 
UIE's initially proposed costs, noted that UIE had proposed indirect 
rates which in many instances were below its actual, incurred rates 
for fiscal year 1993; this discrepancy contributed to DCAA's overall 
finding of a potential underestimation of costs by UIE.  UIE had 
proposed a newly created division for performance of this contract, 
and DCAA reportedly believed that it lacked the data to recommend 
specific indirect rates; instead, DCAA generally recommended that 
MICOM consider negotiating indirect rate ceilings with UIE.  Although, 
after being advised during negotiations of the agency's concern in 
this regard, UIE slightly increased most of the proposed general and 
administrative rates in its BAFO, the protester lowered its proposed 
labor overhead rates still further, resulting in an overall net 
decrease in its proposed indirect rates.  MICOM reports that, as a 
result, UIE's "Most Probable Price      [--i.e., evaluated cost--] . . 
. incorporated the initially proposed rates," that is, was adjusted 
upward by approximately $2.4 million.

Given this upward adjustment in evaluated cost, UIE challenges MICOM's 
concurrent determination that UIE's proposal of lower indirect rates 
than it historically incurred "raises some doubt that UIE can effect 
its proposed technical approach and staffing within its proposed cost" 
and thereby increased overall proposal risk.  UIE argues that it was 
improper for the agency to assign proposal risk as a result of the 
inadequate indirect rates when it was also adjusting UIE's evaluated 
cost upward to account for them.

UIE's position incorrectly assumes that the upward adjustment in its 
evaluated cost accounted for and corrected its inadequate indirect 
rates.  In fact, reports MICOM, "the adjustments did not eliminate the 
concern that UIE could well incur higher indirect rates than those 
proposed."  In other words, adjusting the BAFO indirect rates upward 
to the levels proposed in the initial proposal did not, in the 
agency's view, fully account for DCAA's concern that the initial rates 
themselves were lower than what UIE historically had incurred and were 
inadequate.  The overall proposal risk therefore was increased to 
reflect the agency's concern that the actual cost of performance could 
be even higher than the evaluated cost used in the cost/technical 
tradeoff.  We find no basis for questioning the assessment of an 
increase in proposal risk on this basis.

COST/TECHNICAL TRADEOFF

UIE challenges the overall cost/technical tradeoff on the basis that 
MICOM has failed to identify and quantify the value of any technical 
benefits that would warrant award to the higher-cost offeror.

In a negotiated procurement, there is no requirement that award be 
made on the basis of lowest cost unless the RFP so specifies.  Henry 
H. Hackett & Sons, B-237181, Feb. 1, 1990, 90-1 CPD  136.  
Cost/technical tradeoffs may be made in deciding between competing 
proposals; the propriety of such a tradeoff turns not on the 
difference in technical scores or ratings per se, but on whether the 
agency's judgment concerning the significance of that difference was 
reasonable and adequately justified in light of the RFP evaluation 
scheme.  Brunswick Defense, B-255764, Mar. 30, 1994, 94-1 CPD  225.  
Federal Acquisition Regulation          15.612(d)(2) requires that 
documentation supporting the selection decision show the relative 
differences among proposals; their strengths, weaknesses and risks; 
and the basis and reasons for the decision.  There is no requirement, 
however, that selection of a higher-cost proposal be justified through 
an exact quantification of the dollar value to the agency of the 
proposal's technical superiority.  Picker Int'l, Inc., B-249699.3, 
Mar. 30, 1993, 93-1 CPD  275.  Further, even where a selection 
official does not specifically discuss the cost/technical tradeoff in 
the selection decision document, we will not object to the tradeoff if 
it is clearly supported by the record.  Maytag Aircraft Corp., 
B-237068.3, Apr. 26, 1990, 90-1 CPD  430.

The record supports the agency's cost/technical tradeoff.  Although 
EER's proposal received the same overall rating as UIE's under the 
technical evaluation factor, which was significantly more important 
than the remaining evaluation factors, the SSA determined that as a 
result of superiority with respect to command, control, communications 
and intelligence engineering and interoperability testing, software 
quality assurance, and special level software engineering, EER's 
proposal in fact was superior to UIE's under the overall technical 
factor.  At the same time, UIE's past performance record was viewed as 
casting serious doubt on whether it could successfully perform the 
required contract effort.  Further, although the evaluated cost of 
UIE's proposal was somewhat lower than EER's, the agency determined 
that there was some risk that UIE's actual cost of performance would 
exceed its evaluated cost, thereby diminishing UIE's advantage in this 
regard.  In light of these considerations, we think the agency 
reasonably determined that, notwithstanding the higher management 
rating and lower evaluated cost of UIE's proposal, EER's proposal was 
most advantageous under the stated evaluation criteria.

The protest is denied.

 /s/ Ronald Berger
 for Robert P. Murphy
     General Counsel