BNUMBER:  B-259571.3
DATE:  December 8, 1995
TITLE:  Battelle Memorial Institute

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REDACTED DECISION
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release.

Matter of:Battelle Memorial Institute

File:     B-259571.3

Date:     December 8, 1995

Michael T. Janik, Esq., Melvina Ford, Esq., and Alison L. Doyle, Esq., 
McKenna & Cuneo, for the protester.
William A. Roberts III, Esq., Lee Curtis, Esq., and Karen L. Manos, 
Esq., Howrey & Simon, for Fibertek, Inc., an interested party.
Jeffrey I. Kessler, Esq., and Phillip B. Hunter, Esq., Department of 
the Army, for the agency.
Scott H. Riback, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that agency engaged in prohibited technical leveling is 
denied where record shows that agency needed to conduct an additional 
round of technical/management discussions in order to clarify 
uncertainties either still existing or created by firms' responses to 
initial discussion questions. 

2.  Protest that agency failed to perform an adequate cost realism 
evaluation is denied where record shows that each prime and 
subcontractor proposal was reviewed for reasonableness and realism by 
either the contracting agency or the Defense Contract Audit Agency, 
proposed costs were adjusted to account for any shortfall or 
overstatement in the number of proposed labor hours, and none of the 
protester's challenges to the cost realism evaluation bears on cost 
elements that could have significantly affected the competitive 
standing of the offerors or the agency's source selection decision 
since the amounts in question are insignificant or the record 
indicates that any error did not otherwise prejudice the protester.

3.  Protest that agency improperly elevated the importance of cost in 
its source selection decision is denied where record shows that agency 
reasonably found proposals from protester and awardee relatively equal 
under the technical and management evaluation factors and, consistent 
with the solicitation's evaluation scheme, made award to the firm 
submitting the proposal reflecting a significant cost advantage. 

DECISION

Battelle Memorial Institute protests the Department of the Army's 
award of a contract to Fibertek, Inc., under request for proposals 
(RFP) No. DAAA15-93-R-0156,  for the design and fabrication of two 
prototype short range biological standoff detection systems (BSDS).  
Battelle contends that the Army engaged in technical leveling during 
its conduct of discussions and improperly evaluated proposals in 
numerous respects.

We dismiss the protest in part and deny it in part.

The RFP contemplated the award of a cost-plus-award-fee contract to 
the offeror submitting the proposal offering the best overall value to 
the government.  The solicitation provided for the evaluation of 
proposals based on the following four evaluation factors, in 
descending order of importance:   (1) technical merit; (2) management, 
including related experience, management plan and tools, personnel, 
facilities and socioeconomic commitment; (3) cost, including an 
evaluation of the offerors' proposed costs for realism and 
reasonableness; and (4) performance risk, evaluated on the basis of a 
review of prior contracts.  The RFP stated that the agency was most 
concerned with technical and management merit, but would consider 
cost, followed by performance risk, as dispositive for source 
selection purposes where proposals were found to offer comparable 
merit in the other two areas.

The Army received four proposals, including those of Battelle and 
Fibertek.  Following discussions with all offerors, the Army solicited 
best and final offers (BAFO).  Based on the evaluation of BAFOs, the 
Army found that Battelle and Fibertek both had submitted proposals 
meriting a perfect technical/management score of 100 points.  The Army 
then made award to Fibertek on the basis that, given the perfect 
technical/management scores for Battelle and Fibertek, Fibertek's 
lower evaluated cost of [deleted] offered the best overall value to 
the government when compared to the Battelle proposal (with an 
evaluated cost of [deleted]).  While both firms were assigned low 
performance risk ratings, these were not considered a discriminator in 
the Army's source selection given Fibertek's significantly lower 
evaluated cost.  Battelle thereupon filed this protest with our 
Office.

ABANDONED ISSUES

Battelle's initial protest raised a number of allegations which it 
abandoned after receiving the agency report.  Battelle alleged that 
the Army had conducted improper post-BAFO discussions with Fibertek 
and improperly permitted the firm to submit a second BAFO; the Army's 
report, however, showed that no post-BAFO communication had occurred 
between the Army and Fibertek, and Fibertek did not further comment on 
this issue.  Battelle also initially speculated that the cost 
disparity between Fibertek and the protester was such that Fibertek's 
proposal must have been based on a significant understatement of the 
level of effort required to perform the contract; the Army's report, 
however, showed that both Fibertek's and Battelle's cost proposals 
were evaluated based on similar levels of effort, and Battelle did not 
reiterate its contention in this regard.  Likewise, while Battelle's 
initial protest focused on the allegedly unproven nature of Fibertek's 
offered technology, maintaining that the firm could not reasonably 
have been given a perfect score in light of its proposed approach, 
Battelle's comments focus on the allegedly unresolved deficiencies in 
Fibertek's proposal without reference to its earlier broad allegation 
concerning the unproven nature of Fibertek's technology.  Given 
Battelle's failure to respond to the report in these areas, we 
consider the issues in question to have been abandoned by Battelle.  
Birch & Davis Assocs., Inc.--Protest and Request for Recon., 
B-246120.3; B-246120.4, Apr. 20, 1992, 92-1 CPD  372.  

UNTIMELY ISSUES

Battelle first protested to our Office on June 2, 1995, and then 
supplemented its protest on July 31, 12 working days after its receipt 
of the agency's administrative report.  The allegations first raised 
in Battelle's July 31 supplemental letter of protest fail to 
independently satisfy the timeliness requirements of our Bid Protest 
Regulations, 4 C.F.R.  21.2(a)(2) (1995), because they were not 
raised within        10 working days of the protester's receipt of the 
Army's administrative report.  Where a firm files a timely initial 
protest, and later supplements that protest with new allegations, each 
new allegation must independently satisfy our timeliness requirements.  
QualMed, Inc., B-257184.2, Jan. 27, 1995, 95-1 CPD  94.  Even where 
the new bases for protest may be considered merely examples supporting 
an earlier general allegation, these examples must independently 
satisfy our timeliness requirements where they involve different 
factual circumstances and require a separate explanation from the 
contracting agency.  Id. 

For example, Battelle's initial protest letter states that Fibertek's 
proposal "is based upon technology that is unproven . . . [and 
therefore] Fibertek's proposal did not satisfy the solicitation, or at 
best should have been substantially downgraded in comparison to the 
proven technology offered by Battelle."  Battelle's initial letter of 
protest also contended that Fibertek was improperly given a perfect 
score in the management area because the firm allegedly lacked the 
financial resources and personnel necessary to perform the contract.  
In contrast, Battelle in its comments contends that the Army increased 
Fibertek's scoring without stating its rationale for the increase, and 
without stating whether the originally identified deficiencies and 
disadvantages had been resolved; Battelle maintains that there were 
"at least        37 occasions where the Army did not document at all 
its evaluation of Fibertek's responses to government questions."[1] 

These new allegations are distinct from Battelle's original basis for 
protest.   Battelle's new contentions make no mention of the allegedly 
unproven nature of Fibertek's proposed technology or its alleged lack 
of financial or personnel resources.  The allegations focus instead on 
the alleged inadequacy of the Army's evaluation documentation,[2] and 
refer to specific deficiencies and disadvantages--not related to the 
unproven nature of Fibertek's product or its lack of resources--that 
Battelle contends were not resolved by Fibertek's proposal revisions.  
As these contentions involve different facts from those surrounding 
the original allegations and require a separate explanation by the 
Army, they must independently satisfy our timeliness requirements.  
QualMed, Inc., supra.  Since these allegations were filed more than 10 
working days after receipt of the report which provided the basis for 
these contentions, we therefore dismiss the allegations as untimely.  
TRW, Inc.,      B-243450.2, Aug. 16, 1991, 91-2 CPD  160.[3]

TECHNICAL LEVELING

Battelle maintains that the Army engaged in technical leveling during 
its discussions with Fibertek.  According to the protester, the Army's 
questions to Fibertek were designed to obtain information missing from 
Fibertek's proposal as a result of that firm's lack of diligence, 
competence, and inventiveness in preparing its offer.  

Technical leveling occurs where an agency, through successive rounds 
of discussions, helps to bring a proposal up to the level of another 
proposal by pointing out weaknesses that remain in a proposal due to 
an offeror's lack of diligence, competence, or inventiveness after 
having been given an opportunity to correct them.  Federal Acquisition 
Regulation (FAR)  15.610(d); SAIC Computer Sys., B-258431.2, Mar. 13, 
1995, 95-1 CPD  156.  We have reviewed the record of discussions here 
and conclude that, rather than amounting to technical leveling, the 
Army's negotiations were consistent with its obligation to conduct 
meaningful discussions.  FAR  15.610(c); SAIC Computer Sys., supra.

All of the initial proposals submitted were found technically 
unacceptable but susceptible to being made acceptable.  The Army then 
conducted two rounds of technical and management discussions and one 
round of cost discussions with the offerors.  After the first round of 
technical/management discussions, the agency determined that, while 
some deficiencies and disadvantages had been resolved by the offerors' 
responses, some of the original deficiencies/disadvantages remained 
and some new ones had been created by the responses. 

For example, both Battelle and Fibertek had difficulty conforming 
their respective designs to [deleted] the specifications.  Battelle 
was initially questioned about the [deleted] for its [deleted] (one of 
the components of the overall system); the agency was concerned that 
the firm's proposed [deleted] might be insufficient to [deleted] and 
also all necessary peripheral hardware associated with this component 
such as disc drives and data acquisition cards.  (Failure of the 
[deleted] would result in overall system failure.)  Battelle's 
response to the agency's first discussion question resolved the 
original deficiency but gave rise to numerous additional concerns such 
as whether there was [deleted] and other components (such as the 
[deleted]) that were being [deleted] by the same source, and whether 
Battelle's design had an adequate safety margin of [deleted] to 
preclude system failure.  The Army therefore asked Battelle additional 
questions in this area during the second round of discussions and, 
ultimately, Battelle was able to resolve these issues to the agency's 
satisfaction.  

Likewise, although the Army initially found no deficiencies or 
disadvantages with the Fibertek design from a power consumption 
standpoint, after reviewing Fibertek's first proposal revisions, the 
agency noted a new disadvantage in the Fibertek design with respect to 
power consumption.   As with the Battelle design, the Army was 
concerned that Fibertek's [deleted] was such that if problems were 
encountered in the development of other system components, the 
available [deleted] could be insufficient to meet total system 
requirements, thus degrading performance.  Accordingly, the Army 
pointed out to Fibertek during the second round of discussions that 
while Fibertek's design nominally allowed [deleted]for its chosen 
[deleted], the design did not provide for a margin of [deoleted] 
sufficient to reduce overall program risk. Fibertek's response 
adequately met the agency's concerns.
 
In other instances, the agency was simply not satisfied with the 
offerors' responses presented in the first round of proposal 
revisions.  For example, the Army initially noted Battelle's lack of 
direct experience in the area of [deleted].  Battelle responded that 
[deleted] responsibility would be borne primarily by [deleted] and one 
of its [deleted].  The agency simply expressed continued concern 
during the second round of discussions about the allocation of 
[deleted]for the [deleted].   

 In our view, the agency's discussions did not amount to "coaching" 
one or another of the offerors, and did not solicit information that 
was missing as a result of a lack of diligence, competence, or 
inventiveness on the part of the competing firms.  Rather, the record 
shows simply that it was necessary for the agency to engage in more 
than one round of discussions in order to resolve all of the technical 
issues and informational deficiencies in the offerors' proposals.   
There is nothing legally objectionable in conducting more than one 
round of discussions where it is necessary to eliminate all 
deficiencies and disadvantages, provided that the agency does not 
convey information relating to another firm's approach or otherwise 
provide a firm with a technical approach not originally contemplated 
by its proposal.  SAIC Computer Sys., supra.  We view the agency's 
actions here as no more than a reasonable attempt to lead offerors, 
through specific questions, into the areas of their proposals needing 
clarification, amplification or correction, and thereby afford them an 
opportunity to completely satisfy the government's requirements.  
Since this is precisely what discussions are designed to accomplish,  
FAR  15.610, we have no basis to object to the Army's actions.  See 
American Dev. Corp., B-251876.4, July 12, 1993, 93-2 CPD  49. 

COST REALISM EVALUATION

Battelle challenges the adequacy of the agency's cost realism 
evaluation in numerous particular respects, but principally contends 
that the agency's cost realism evaluation is not sufficiently 
detailed.

When an agency evaluates proposals for the award of a cost 
reimbursement contract, an offeror's proposed costs are not 
dispositive because, regardless of the costs proposed, the government 
is bound to pay the contractor its actual, allowable costs.  FAR  
15.605(d).  Consequently, a cost realism evaluation must be performed 
by the agency to determine the extent to which an offeror's proposed 
costs represent what the contract should cost, assuming reasonable 
economy and efficiency.  CACI, Inc--Fed., 64 Comp. Gen. 71 (1984), 
84-2 CPD  542.  Contracting agencies are required to adequately 
document this evaluation, and when properly documented, our review is 
limited to determining whether the agency's evaluation was reasonably 
based and not arbitrary.  Ogden Logistics Servs., B-257731.5,   Apr. 
13, 1995, 95-1 CPD  194.

We have reviewed all of Battelle's challenges to the Army's cost 
realism evaluation  and find no basis to question the agency's overall 
conclusions regarding the probable cost of contracting with one versus 
another of the competing offerors.  The record indicates that each 
proposal was subject to a detailed review by the Defence Contract 
Audit Agency (DCAA), which found no basis to question either the 
compensation rates or the indirect rates presented for the prime 
contractors and their subcontractors.  Those cost elements not 
reviewed by DCAA were reviewed by the Army, which generally found the 
costs reasonable.  To the extent that the agency did make adjustments 
to offerors' proposed costs, these occurred where an offeror's 
proposed labor hours differed from the agency's estimate of the number 
of hours necessary for performance; the agency adjusted the firm's 
cost to reflect the cost of performance using the agency's estimate of 
the number of labor hours required for the firm's technical approach.  
Overall, the Army adjusted Fibertek's proposed costs [deleted] and 
Battelle's proposed costs [deleted] to account for a difference 
between the agency's estimate of the labor hours necessary and the 
proposed hours in each firm's offer.

None of Battelle's specific challenges to the agency's cost realism 
evaluation bears on cost elements that could have significantly 
affected the competitive standing of the offerors or the agency's 
source selection decision since the amounts in question are 
insignificant or the record indicates that any error did not otherwise 
prejudice Battelle.  For example, the Army found that one of 
Fibertek's subcontractors had understated the number of hours 
necessary to perform the contract.  In order to arrive at the probable 
cost for this shortfall, the Army ascertained the average rate of 
compensation for the subcontractor's employees, multiplied this rate 
by the shortfall in the number of hours, and then added this amount to 
the Fibertek offer for purposes of evaluation.  Although Battelle 
contends that the Army's calculations in this regard were erroneous 
because the Army arrived at the average rate of compensation through 
the use of a simple average rather than a weighted average that 
accounted for differing levels of effort from differently-compensated 
employees, when the agency (in response to this allegation) 
recalculated the adjustment to Fibertek's proposal in this area using 
a weighted average, the results showed that the agency had originally 
overstated the probable cost of the required adjustment by [deleted].  
Based on our review of the record, we have no basis to conclude that 
the Army's cost realism evaluation was unreasonable in any 

significant way that was prejudicial to Battelle.  See IT Corp., 
B-258636 et al., Feb. 10, 1995, 95-1 CPD  78.

PERFORMANCE RISK ASSESSMENT

Battelle argues that the agency's performance risk assessment was 
flawed because it failed to take into consideration Fibertek's 
performance under one of the prior contracts listed in its proposal.  
The Army considered this contract, but did not include the rating for 
this contract in its overall performance risk rating calculation 
because it concluded that  it was not relevant to an assessment of 
Fibertek's performance risk for this acquisition.  Battelle 
essentially disputes the Army's conclusion in this regard.

The RFP provided that the offerors would be evaluated for performance 
risk (based on past performance) to determine each firm's "likelihood 
of success in performing the solicitation requirements. . . ."  
Essentially the object of this assessment was to judge each firm's 
ability to meet the developmental challenges associated with building 
these prototype devices based on prior contracts.  Thus, the agency's 
primary concern here was the offerors' performance on contracts 
requiring similar developmental efforts.  (For example, the agency was 
interested in Fibertek's performance on a previous Air Force contract 
for the construction of a different developmental laser.)

We find that the agency had a reasonable basis for concluding that 
Fibertek's performance on the contract at issue did not warrant 
downgrading its overall performance risk rating because the contract 
was for the production of a device that was not relevant to the work 
requirements of this contract.  In particular, the contract was for 
the fabrication of [deleted].  The Army found this contract irrelevant 
because the current requirement is for lasers operating in the 
ultraviolet portion of the spectrum rather than the visible portion of 
the spectrum; radiation in the ultraviolet portion of the spectrum can 
be successfully blocked using transparent plastics.  Accordingly, 
resort to [deleted] was not necessary for this requirement, and 
Fibertek's ability to successfully fabricate the [deleted] components 
thus was irrelevant to its performance here.  

RELATIVE WEIGHT OF THE EVALUATION FACTORS

Battelle contends that the Army improperly gave undue weight to cost 
in its source selection decision, and correspondingly failed to give 
adequate weight to the technical/management considerations, which the 
RFP stated would be more important in the evaluation and source 
selection.  According to Battelle, the RFP required the agency to 
consider any perceived advantages associated with a particular offer, 
but the Army, rather than assign a higher score where it found a 
proposal to be particularly advantageous, instead improperly assigned 
perfect technical scores to proposals that were merely without any 
deficiencies or disadvantages.  Battelle concludes that, because of 
this error, both its proposal and Fibertek's proposal received perfect 
scores even though the agency considered Battelle's proposal to be 
more advantageous; as a consequence, according to Battelle, the Army 
made an improper award to Fibertek based solely on that firm's cost 
advantage.

Battelle's argument amounts to a challenge to the agency's 
cost/technical trade-off.  Agency officials have broad discretion in 
determining the manner in which cost and technical evaluation results 
will be used in making an award decision; agencies are permitted to 
make cost/technical trade-offs, and the extent to which one may be 
sacrificed in favor of the other is governed only by the test of 
rationality and consistency with the RFP's stated evaluation criteria.  
BMAR & Assocs., Inc.,        B-252273, June 16, 1993, 93-1 CPD  465.

While Battelle contends that its proposal was found superior to 
Fibertek's, the record shows that, in fact, the agency considered both 
offers to be compliant with the RFP requirements and to offer 
comparable, albeit different, advantages with respect to configuration 
and design, software and hardware development capabilities, and 
performance capabilities.  For example, the agency found Fibertek's 
[deleted] advantageous because it offered [deleted] greater than 
required under the terms of the RFP, whereas Battelle's [deleted] was 
viewed as preferable to the other designs offered.  In our view, the 
record shows that the agency did precisely what the RFP stated it 
would do; because it found the two proposals essentially equal with 
respect to the technical and management criteria (although offering 
different benefits), it considered cost to be the discriminating 
factor for source selection purposes.  Because Fibertek's evaluated 
cost was approximately [deleted] less than Battelle's, it made award 
to Fibertek as the firm submitting the most advantageous proposal 
overall.  Given Battelle's failure to establish that the Army 
improperly evaluated proposals, and given Fibertek's clear cost 
advantage, we have no basis to object to the agency's source selection 
decision.

The protest is dismissed in part and denied in part. 

Comptroller General
of the United States

1. The record shows that, in documenting its evaluation, the Army 
consistently did not discuss earlier deficiencies that were resolved 
by proposal revisions, but instead only discussed the effect of the 
proposal revisions as they related to deficiencies or disadvantages 
that had been reduced but not eliminated.  For example, the agency 
identified a total of [deleted] deficiencies and 
[deleted]disadvantages in the initial Battelle offer; after the first 
round of discussions, the evaluators only discussed [deleted] of 
Battelle's disadvantages/deficiencies, and as to these [deleted], only 
the effect that Battelle's proposal revisions had on the originally 
identified concern (for example, that Battelle's response reduced a 
deficiency to a disadvantage).

2. Battelle asserts that its arguments relating to the rescoring of 
Fibertek's proposal were timely because it was unable to ascertain the 
initial evaluation scores from the first agency report (which did not 
include the agency's initial scoring sheet).  The  report did however 
contain a memorandum from the contracting officer to the technical 
evaluation committee dated June 16, 1994, from which Fibertek's 
original scores can be ascertained.

3. Battelle also alleged in its comments filed 12 working days after 
receipt of the agency report that the contracting officer had 
improperly directed the technical evaluation committee to rescore 
proposals after its review of the offerors' first proposal revisions, 
and that the agency improperly gave consideration to an offer by 
Fibertek to reduce its price for this requirement in the event that it 
becomes a successful subcontractor under a related procurement for a 
[deleted] system.  For the reasons discussed above, we also dismiss 
these aspects of Battelle's protest as untimely.