BNUMBER: B-261996
DATE: November 16, 1995
TITLE: Akal Security, Inc.
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Matter of:Akal Security, Inc.
File: B-261996
Date: November 16, 1995
Daya S. Khalsa for the protester.
Cynthia S. Guill, Esq., and Kenneth M. Homick, Esq., Department of the
Navy, for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of
the General Counsel, GAO, participated in the preparation of the
decision.
DIGEST
1. An award to an offeror submitting an unreasonably low or
below-cost offer on a fixed-price contract is not legally
objectionable.
2. Where a protester would not have been awarded contract under
either a best value or a low cost, technically acceptable evaluation
scheme in a negotiated procurement, the protester has not been
prejudiced by the agency's unannounced change to its evaluation
scheme.
DECISION
Akal Security, Inc. protests the award of a contract to Nation Wide
Security, Inc. under request for proposals (RFP) No. N62472-93-R-3613,
issued by the Department of the Navy for security guard services at
the Naval Undersea Warfare Center Division and Detachments in Newport,
Rhode Island; New London, Connecticut; and Dresden, New York. Akal
protests that the agency's source selection decision was inconsistent
with the stated evaluation scheme.
We deny the protest.
The RFP, issued on September 21, 1994, contemplated award of a firm,
fixed-price contract (a portion of which included indefinite quantity
work) for 1 year with 4 option years. The RFP designated technical
subfactors and corresponding criteria with their relative weights, and
stated that award would be made on a best value basis with price and
technical factors being of equal weight.
The Navy received 19 proposals, which were evaluated by a technical
evaluation board (TEB) and a price evaluation board (PEB). After the
TEB and PEB evaluations were reviewed by a source selection board
(SSB), 15 proposals were included in the competitive range; of these
15 proposals, one was rated exceptional, two were rated acceptable,
and the remainder, including the proposals of Akal and Nation Wide,
were rated unacceptable but capable of being made acceptable.[1]
In February 1995, the Navy conducted written discussions with the
competitive range offerors, and requested revised proposals which were
evaluated by the TEB and PEB. Although some of the revised proposals
corrected some of the initial proposal deficiencies, the ratings
remained the same. After a second round of written discussions, the
TEB determined that three of the previously unacceptable proposals,
including Akal's and Nation Wide's, were acceptable; the rest of the
previously unacceptable competitive range proposals remained
unacceptable but capable of being made acceptable. A third round of
written discussions and revised technical proposals followed, but the
technical ratings did not change. By letter of May 7, the Navy
requested best and final offers (BAFO). The BAFOs rated at least
acceptable were as follows:
Offeror Rating Price
A Exceptional $12,438,375
B Acceptable ++ 11,400,566
C Acceptable + 12,840,427
Akal Acceptable 10,965,926
Nation Wide Acceptable 9,778,036
D Acceptable 11,145,095
As requested in the RFP, offerors broke their prices into the
following components: labor rate, equipment and material, training,
burdened hourly rate, and "other" (costs for management, supervision,
quality assurance, overhead, and profit). The PEB found that Nation
Wide's price might be unreasonably low compared to the other BAFO
prices and the government estimate.[2] Nearly all of Nation Wide's
price advantage was attributed to its extremely low costs and a
reduced profit margin in the "other" category. The PEB determined
that Nation Wide may not be able to effectively provide management,
supervision, and quality control, and still be able to cover its
overhead and realize a reasonable profit under its stated cost
breakdown. The PEB thus considered Nation Wide's price to be
unreasonably low, and recommended that award be made to Akal, which
had submitted the next lowest priced, technically acceptable BAFO.
The source selection authority (SSA) reviewed the PEB report and was
concerned that the PEB, in concluding that Nation Wide's price may be
unreasonably low, placed undue weight on the historical contract
prices for this requirement without realizing why those prices may
have been higher than what now could reasonably be expected. In this
regard, the prior solicitations were restricted to section 8(a) small
disadvantaged business contractors, whereas this RFP was not.
Moreover, one of those contracts was terminated for default, and the
current incumbent contractor, receiving award on a sole source basis
to replace the defaulted contractor, had to mobilize under an
expedited time frame of 48 hours, while 2 months are available for
mobilization under the current RFP. Because of this concern, the SSA
requested the PEB to reconvene and review whether Nation Wide could
perform acceptably at its proposed price considering all of its costs,
notwithstanding its proposed costs under the "other" category, and
requested that the PEB review the government estimate. The SSA also
instructed the SSB to consider whether Akal's BAFO would be the best
value to the government considering that its price was more than $1
million higher than Nation Wide's BAFO.
The PEB telephoned Nation Wide for a price verification. Nation Wide
stated that the price submitted was its intended price. It stated
that it submitted this proposal with the intent of being extremely
competitive, and that it had intentionally reduced its profit margin
and excluded general overhead costs from its BAFO. Nation Wide stated
that it did not intend for this contract to be a "money maker" for the
firm. The PEB also determined that the preparation of the government
estimate and its prior price unreasonableness determination were
unduly influenced by the prior procurement history in that it had
failed to consider that the higher costs and the difficulties
encountered under the prior 8(a) contracts were unique to those
contracts. Moreover, the PEB reviewed its prior price analysis and
determined that, except for the "other" category, Nation Wide's costs
were comparable to the costs of the other technically acceptable
offerors. Based on this review, the PEB determined that Nation Wide's
proposed price was reasonable.
Considering that Nation Wide's BAFO price--now deemed reasonable--was
more than $1 million lower than Akal's similarly rated BAFO, the SEB
recommended award to Nation Wide. The SSA concurred in this
recommendation and the Navy awarded the contract to Nation Wide on
June 30. This protest followed.
During the course of this protest, the Navy stated that the
documentation supporting the source selection decision was incomplete.
The SSA stated that since she requested the PEB and the SSB to
reconsider their initial findings in mid-June, she accepted the
incomplete written documentation supplemented by oral reports from the
PEB, TEB, and SSB in order to meet a June 30 projected award date.[3]
The SSA subsequently required the boards to submit amended written
reports documenting the oral information upon which the source
selection decision was based.
The protest record contains the written documentation as of the time
of the award, the amended reports, and the SSA's explanatory
statement. The amended reports specifically stated that the TEB
determined that the BAFOs submitted by Nation Wide and Akal were
"technically equivalent." In her accompanying statement, the SSA
states that the contract was awarded to Nation Wide as the "low,
technically acceptable offeror." The record contains no evidence that
the Navy considered any of the higher rated, higher priced BAFOs in
making its source selection decision.
Akal first alleges that the award to Nation Wide was improper because
Nation Wide's price is unreasonably low, specifically, that Nation
Wide's price does not provide for payment of wages in compliance with
the Service Contract Act wage rate determination incorporated in the
RFP. However, an offer for a fixed-price contract submitted at a
price that appears lower than the cost of wage rates applicable
pursuant to the Service Contract Act is nonetheless acceptable where
the offer does not take exception to, or otherwise evidence an intent
by the offeror to violate, the requirements of the Service Contract
Act. Advanced Management, Inc., B-258942, Feb. 23, 1995, 95-1 CPD
114. Our review of Nation Wide's BAFO shows that, not only did
Nation Wide not take exception to the wage rate requirement, it
specifically stated in its BAFO that it would comply with the
applicable Service Contract Act wage rates.[4]
Akal also alleges that the technical evaluation was unreasonable for
failing to consider the effect of Nation Wide's low price on the
technical quality of its BAFO.[5] However, where, as here, the stated
technical evaluation criteria do not provide for consideration of
price in the technical evaluation, a protester's claim that an offered
price is so low as to render a proposal technically unacceptable is
not a valid basis for protest. See SAIC Computer Sys., B-258431.2,
Mar. 13, 1995, 95-1 CPD 156.
Akal alleges that the agency's source selection decision was not based
on the best value evaluation scheme stated in the RFP. We agree.
Although the RFP stated that technical factors were equal to price,
the Navy did not consider the higher rated, higher priced BAFOs in its
selection decision, but rather awarded the contract on the basis of
the lowest priced, technically acceptable BAFO and did not inform
offerors of this changed evaluation scheme. While source selection
officials in negotiated procurements have broad discretion in
determining the manner and extent to which they will make use of the
technical and cost evaluation results, see Grey Advertising, Inc. 55
Comp. Gen. 1111 (1976), 76-1 CPD 325, they do not have the
discretion to announce in the solicitation that they will use one
evaluation plan and then follow another without informing all offerors
of any significant changes in the evaluation scheme. DynCorp, 71
Comp. Gen. 129 (1991), 91-2 CPD 575; Colonial Storage Co.; Paxton
Van Lines, Inc., B-253501.5 et al., Oct. 19, 1993, 93-2 CPD 234,
aff'd, Colonial Storage Co.--Recon., B-253501.8, May 31, 1994, 94-1
CPD 335.
Nevertheless, Akal was not prejudiced by the agency's actions. In
this regard, prejudice is an element of a viable protest, and we will
not sustain a protest where no reasonable possibility of prejudice is
evident from the record. Lithos Restoration, Ltd., 71 Comp. Gen. 367
(1992), 92-1 CPD 379; Colonial Storage Co.; Paxton Van Lines, Inc.,
supra. Akal's price is more than $1 million higher than Nation Wide's
and its BAFO was rated technically equal to Nation Wide's, an
evaluation result which Akal has not successfully challenged.[6]
Moreover, Akal has not alleged that it could or would have
significantly lowered its price had the Navy informed it of the change
in the evaluation scheme.[7] Accordingly, since Akal would not
therefore be entitled to award under either evaluation approach, Akal
was not prejudiced by the Navy's actions here. See Colonial Storage
Co.; Paxton Van Lines, Inc., supra. See id.
Akal finally alleges that, due to the incomplete pre-protest
evaluation and source selection reports and the agency's post-protest
amending of these reports, the SSA must have directed award and then
had the various boards fabricate the amended reports to support the
SSA's decision. The record does not support this allegation.
Although documentation developed after award may warrant less weight
than other evidence in the record, we do consider such information
together with the entire record, where, as here, the protester has had
an opportunity to comment on the documentation. See Computer One,
Inc., B-249352.2, Feb. 23,1993, 93-1 CPD 252. The protester has
presented no evidence which contradicts the post-protest documents,
and these documents themselves do not contradict the pre-award record
or otherwise suggest improper agency motives in their preparation.
Rather, the amended evaluation board reports and the post-protest
statement of the SSA further clarify the pre-award documents. For
example, the amended TEB report stated that Akal's and Nation Wide's
BAFOs were determined to be technically equal, which is entirely
consistent with the pre-award TEB reports. Similarly, although the
pre-award PEB report does not document its revised determination that
Nation Wide's price was reasonable, the record confirms that the
initial determination was revised and documents the reasons advanced
for this revised determination.
The protest is denied.
Comptroller General
of the United States
1. The Navy's source selection plan stated that technical proposals
would be rated using the following adjectival scale:
Exceptional--proposal exceeds requirements in a way that
is beneficial to the government.
Acceptable--proposal meets minimum requirements.
Unacceptable/susceptible of being made
acceptable--proposal contains deficiencies which are
susceptible to correction through reasonable discussions.
Unacceptable--proposal contains deficiencies which are so
major and extensive as to require major revision and
should be eliminated from further consideration.
The Navy evaluators also employed plus or minus signs to further
differentiate the technical ratings.
2. The government estimate was $12,728,122.
3. The agency wanted to make award by June 30 so that the awardee
would be able to mobilize in time to assume contract responsibilities
when the current contract expired at the end of August.
4. In fact, the wage rates which Nation Wide proposed in its BAFO meet
or exceed all of the requirements of the DOL wage rate determinations
required pursuant to the Service Contract Act. Akal also seems to
allege that Nation Wide's price is insufficient for contract
performance. This essentially is a challenge to the agency's
acceptance of an alleged below cost offer. There is no prohibition
against a procuring agency's accepting an unreasonably low or
below-cost offer on a fixed-price contract. Id.; Intown Properties,
Inc., B-256742, July 11, 1994, 94-2 CPD 18. By awarding a
fixed-price contract to such an offeror, the contracting agency has
necessarily determined the offeror to be responsible, a determination
which our Office will not review absent a showing of possible fraud or
bad faith or that definitive responsibility criteria in the
solicitation have been misapplied. Intown Properties, Inc., supra.; 4
C.F.R. 21.3(m)(5) (1995). Akal has made no such showing.
5. In its initial protest letter, Akal alleged that, during
discussions, the Navy asked it only one "very minor question," and
asserted that it thus must have submitted a technically superior
proposal. In fact, the letter from the agency to Akal, which served
as written discussions, identified several areas of agency concern
regarding Akal's technical and price proposals, including three
technical issues where Akal's proposal was considered technically
unacceptable. During this round of discussions, as well as the second
round, the agency clearly stated that Akal's proposal was
"unacceptable but capable of being made acceptable." After the agency
submitted its report supporting the evaluations, Akal did not
challenge the agency's evaluation of its proposal. Thus, to the
extent Akal may have initially protested the evaluation of its
proposal, it abandoned this protest basis by not rebutting the agency
report on this matter in its subsequent protest filings. See D & M
General Contracting, Inc., B-259995; B-259995.2, May 8, 1995, 95-1 CPD
235.
6. Akal alleges that the use of the adjectival rating "acceptable" is
too broad to allow for evaluating differences in technical
superiority. This assertion is contrary to the well established
principle that adjectival ratings and point scores are only a guide to
assist contracting agencies in evaluating proposals. Grey
Advertising, Inc. supra; Harris Corp.; PRC Inc., B-247440.5;
B-247440.6, Aug. 13, 1992, 92-2 CPD 171. An agency may consider the
relative technical merits of two proposals receiving the same
adjectival rating and, if otherwise reasonable and consistent with the
stated evaluation criteria, may properly find that one proposal is
technically superior to another. A & W Maint. Servs., Inc., B-255711,
Mar. 25, 1994, 94-1 CPD 214, aff'd, A & W Maint. Servs.,
Inc.--Recon, . B-255711.2, Jan. 17, 1995, 95-1 CPD 24. An agency
also may reasonably determine that two similarly rated proposals are
technically equal. Astro Pak Corp., B-256345, June 6, 1994, 94-1 CPD
352. Thus, broad adjectival ratings, as used here, do allow agencies
to reasonably conduct adequate relative technical evaluations of
competing proposals.
7. Indeed, Akal alleges that its cost to operate under this contract,
without overhead and profit, is $10.5 million--still almost $750,000
higher than Nation Wide's price.