BNUMBER:  B-261879
DATE:  October 31, 1995
TITLE:  DGS Contract Services, Inc.

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

Matter of:DGS Contract Services, Inc.

File:     B-261879

Date:     October 31, 1995

Richard D. Lieberman, Esq., Sullivan & Worcester, for the protester.
Sharon K. Gipson, Esq., Department of the Treasury, for the agency.
M. Penny Ahearn, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that firm, fixed-price contract format imposes undue risk 
on the contractor is denied where protester has not shown that choice 
of format was unreasonable; the majority of the required contract 
effort consisted of requirements for services of certain quantities 
and delivery times, and the solicitation provided a mechanism for 
adjusting the contract price to reflect any changes in actual  
requirements.

2.  Solicitation provision for single price to be used in pricing both 
permanent increases and decreases in guard service hours of up to 25 
percent is not improper; the provision affects all potential offerors 
equally and offerors are expected to determine their prices taking 
into consideration amount of risk involved.

DECISION

DGS Contract Services, Inc. protests the terms of request for 
proposals (RFP) No. IRS-95-SE-17, issued by the Department of 
Treasury, Internal Revenue Service (IRS), for security guard services.  
The protester objects to the contract format and argues that the 
solicitation's method of pricing changed requirements imposes undue 
risk on the contractor.  

We deny the protest.

BACKGROUND

The solicitation provides that award will be made on the basis of the 
best value.  The RFP requests firm, fixed prices for basic services, 
additional services and changed requirements for a base and 4 option 
years.  (A total contract price is to be calculated from the sum of 
the extended offered prices for all contract periods.)  
For basic services, the solicitation furnishes an estimate of the 
overall yearly productive (i.e., guard) staff-hour requirements 
(26,684.57 hours), as well as estimates of guard post hours for 
designated locations and other additional required supervisory and 
management hours; the solicitation requests monthly and 12-month 
extended prices.  For the additional services, described as temporary 
increased guard services ordered for a period of less than 30 
consecutive days, the RFP requests per staff-hour and 2,000-hour 
(estimated quantity) extended prices.

The RFP also includes provisions for changed requirements, which are 
described as permanent increased or decreased guard services ordered 
for a period of more than 30 consecutive days.  The solicitation 
explains that "[t]he government anticipates that during the term of 
the contract, guard post orders may be amended, modified, or reissued 
on a permanent basis."  The RFP requests per staff-hour and 6,000-hour 
(estimated quantity) extended prices for the changed requirements, and 
provides that in the event of up to a 25-percent increase or decrease 
in the contract's total productive staff-hour requirements, the 
contract price for the basic services shall be adjusted "by using the 
applicable hourly rate set forth in the price schedule for changed 
requirements. . . ."

Although DGS's protest was filed prior to the closing time for receipt 
of proposals,  the agency did not delay the closing.  The agency 
reports that it received multiple offers. 

CONTRACT FORMAT

DGS objects to use of a firm, fixed-price contract format on the basis 
that, given the potential for up to a 25-percent reduction in contract 
productive hours, the agency has improperly shifted the risk of 
uncertain requirements to the offeror.   The protester asserts that an 
indefinite delivery requirements contract would more appropriately 
reflect the agency's minimum needs, or that changed requirements could 
be better handled during contract administration by termination for 
the convenience of the government.[1] 

The IRS reports that it based its selection of a firm, fixed-price 
contract format on its determination that:  (1) adequate competition 
and fair and reasonable prices were received on the agency's prior 
security guard services contracts (which did not, however, contain the 
specific changed requirements provisions used here); and   (2) the 
small number of changes made to the fixed annual productive staff-hour 
requirements specified in the prior contracts did not warrant the use 
of an indefinite delivery contract, nor the costs associated with 
administering it (such as issuance of separate delivery orders and 
tracking hours and contract billings).  In this latter regard, the 
agency explains that its rationale for the changed requirements 
provision was to allow the government to unilaterally change 
productive hours and adjust contract pricing based on the awarded 
contract price for changed requirements, without the administrative 
cost and burden of renegotiating contract pricing.  

The contracting agency has the primary responsibility for determining 
its minimum needs and the method of accommodating them, including the 
choice of the appropriate contracting format.  Jewett-Cameron Lumber 
Corp. et al., B-229582 et al., Mar. 15, 1988, 88-1 CPD  265.  We will 
not question the agency's choice of contract format absent clear 
evidence that its decision is arbitrary or unreasonable, id., or in 
violation of statute or regulation.  A mere difference of opinion 
between the protester and the agency concerning which format will best 
suit the agency does not establish that the agency's choice was 
improper.  Id.

IRS's decision to use a firm, fixed-price contract format was not 
unreasonable or in violation of statute or regulation.  While the 
Federal Acquisition Regulation (FAR) provides that an indefinite 
delivery requirements contract may be used when the government 
anticipates recurring requirements, but cannot predetermine the 
precise quantities of supplies or services needed, FAR  16.503(b), it 
also provides that a firm, fixed-price contract is suitable for 
acquiring supplies or services on the basis of reasonably definite 
specifications where the contracting officer can establish fair and 
reasonable prices, such as when there is adequate price competition.  
FAR  16.202-2.  (Indeed, where the risks involved are minimal or can 
be predicted with an acceptable degree of certainty, FAR  16.103(b) 
generally requires the use of a firm, fixed-price contract.)  While 
the contemplated contract effort here involves some degree of 
uncertainty as to the extent of the guard services that will be 
needed, the uncertainties appear no greater than those which exist in 
other circumstances where the agency's requirements must be expressed 
in terms of an estimate rather than a fixed amount.  The uncertainty 
here is mitigated by the fact that the majority of the required effort 
consists of requirements for services of certain quantities and 
delivery times; the solicitation provides a mechanism for adjusting 
the contract price to reflect changes in requirements; and there is no 
indication in the record that any uncertainty cannot be accounted for 
in offerors' pricing.

The mere fact that the solicitation provides for the possibility of 
limited staff-hour reductions and as a result may impose risk on 
offerors does not make it improper.  See Jewett-Cameron Lumber Corp. 
et al., supra.  It is within the ambit of an agency's administrative 
discretion to solicit a proposed contract imposing maximum risk upon 
the contractor and minimum administrative burdens upon the government.  
Id.  That is precisely what the IRS has done here, and there is no 
basis for finding it improper.

CHANGED REQUIREMENTS RATE

DGS objects to the RFP provision for pricing permanent reductions in 
guard services hours at the same rate as increases; given the 
potential for up to a 25-percent reduction in quantity, DGS argues 
this imposes an unreasonable burden on offerors.  In this regard, DGS 
argues, that "it is more costly (on a per hour basis) for offerors to 
decrease permanent hours than for an offeror to increase permanent 
hours."  This presumably is because reducing the number of units of 
work performed generally may be expected to result in an increase in 
the fixed overhead costs incurred per unit of work performed.  See Old 
Atlantic Servs., Inc., ASBCA No. 18108, Feb. 21, 1974, 74-1 BCA  
10,494.

The provision is legally unobjectionable.  While there may be some 
risk that DGS will incur increased unit costs as a result of decreases 
in requirements, this would seem to be a contingency that all offerors 
can readily account for in preparing their proposals; DGS has not 
shown why offerors could not account for this risk and, again, the 
mere presence of risk in a solicitation does not render the 
solicitation legally flawed.  We note that we previously have found 
unobjectionable a solicitation applying a single unit price (rather 
than an equitable adjustment) to quantify increases of up to 30 
percent and decreases of as much as 25 percent.  See AMERICORP, Inc., 
B-222119, May 12, 1986, 86-1 CPD  451.  The pricing provision here 
affects all potential offerors equally; the fact that offerors may 
respond to the risk differently in calculating their prices is a 
matter of business judgment that does not preclude a fair 
competition.[2]

The protest is denied.

Comptroller General
of the United States

1. The protester also suggests that the agency's needs could be met by 
eliminating the RFP provision for possible reductions in requirements 
and instead requesting offers for a base requirement of 20,013.4 
hours, plus options for increases in requirements.  We see nothing 
improper, however, in the agency's soliciting offers for a base 
quantity of 26,684.57 hours, since this was its best estimate of its 
likely requirement for guard services.

2. DGS contends that the solicitation was also defective because it 
failed to specify the relative importance of the technical and cost 
factors in the evaluation.  However, as DGS itself apparently 
recognized when it protested (by citing the relevant caselaw), it is 
well established that where an RFP does not explicitly indicate the 
relevant weights of price and technical considerations, they are to be 
accorded weight and importance in the evaluation.  See Meridian Corp., 
B-246330.3, July 19, 1993, 93-2 CPD  29.