BNUMBER:  B-262254.3; B-262254.4; B-262254.5
DATE:  December 21, 1995
TITLE:  Human Resource Systems, Inc.; Health Staffers, Inc.

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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:Human Resource Systems, Inc.; Health Staffers, Inc.

File:     B-262254.3; B-262254.4; B-262254.5

Date:     December 21, 1995   

William A. Roberts III, Esq., Lee P. Curtis, Esq., Brian A. Darst, 
Esq., and Marcia L. Stuart, Esq., Howrey & Simon, for Human Resource 
Systems, Inc; and James D. Bachman, Esq., and Todd R. Metz, Esq., 
Doyle & Bachman, for Health Staffers, Inc., the protesters.
Jeffrey M. Cameron, for Nurse Works, Inc., an interested party.
John R. Osing, Jr., Esq., Department of the Navy, for the agency.
Mary G. Curcio, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Where solicitation for registered nurses (RN) listed experience as 
an evaluation factor and specifically requested information concerning 
the numbers and types of personnel previously provided, agency 
reasonably evaluated whether offerors had specific experience 
providing RNs in the numbers contemplated by the solicitation.

2.  The concept of unbalancing is not applicable in a negotiated 
procurement in which price is not the primary factor in the award 
decision.  

3.  Protest against award without discussions is denied where 
solicitation advised offerors of the agency's intent to award the 
contract without discussions, and agency reasonably determined that 
awardee's proposal was realistically priced and represented the best 
value to the government.

4.  Agency properly may accept from the offeror already selected for 
award a post-closing modification to its proposed price.

DECISION

Human Resource Systems, Inc. (HRSI) and Health Staffers, Inc. protest 
the Naval Medical Logistics Command's award of a contract to Nurse 
Works, Inc., under request for proposals (RFP) No. N62645-95-R-0022, 
for registered nurse (RN) and operating room (OR) technician services.  
HRSI primarily challenges the evaluation of its technical and price 
proposals.  Health Staffers challenges the evaluation of its technical 
proposal and the agency's determination to make award on the basis of 
initial proposals.

We deny the protests in part and dismiss them in part.

The RFP contemplated the award of a firm, fixed-price contract for a 
base year with four 1-year option periods, to provide shifts of RN and 
OR technicians.  Each contract year was divided into 10 base and 
option lots specifying the department or unit in which the personnel 
would be required; the lots were further divided into contract line 
items which specified when the services would be required and the 
number of shifts to be provided.  For example, Lot 2 was for emergency 
department RNs, and within Lot 2, line item No. 0034AA specified 365 
12-hour day shifts.

The RFP provided for award to be made to the responsible offeror whose 
offer provided the best value to the government, with technical 
factors considered slightly more important than price.  The 
solicitation set forth three equally weighted technical evaluation 
factors:  (1) implementation plan, (2) management policies and (3) 
experience.  With respect to price, offerors were required to propose 
a firm, fixed price per shift for each contract line item, and to 
provide a supporting cost breakdown for each shift which included the 
average compensation rate, fringe benefit rate, fringe benefits, total 
personnel costs, management expenses, profit, and total price.  Price 
was to be evaluated for reasonableness, realism, and completeness.  
The RFP stated that the Navy intended to award the contract on the 
basis of initial proposals.

The Navy received 24 offers.  The technical evaluation team assigned 
to each evaluation factor and overall technical proposal one of four 
color/adjectival ratings:  (1) blue (exceeds requirements/high 
probability of success); (2) green (satisfactory/good probability of 
success); (3) yellow (less than satisfactory/low probability of 
success); or (4) red (unacceptable).  The cost evaluation team (CET) 
used each offeror's cost breakdown structure to calculate the 
offeror's weighted average for each component of the breakdown; the 
weighted average then was compared to the independent government cost 
estimate for the component and to the average price/cost of all 
offerors for the component to determine price realism and 
reasonableness.  

Nurse Works, an incumbent contractor, submitted the fourth low price 
($52,188,732); its technical proposal was rated green for 
implementation and management plans, blue for experience and green 
overall.  Health Staffers, another incumbent contractor, submitted the 
thirteenth low price ($56,632,865); its technical proposal was rated 
green for each evaluation factor and green overall.  Although HRSI 
submitted the [deleted] low price [deleted], its price was found to be 
unrealistic; its technical proposal was rated green for implementation 
and management plans, yellow for experience and yellow overall.  

The source selection advisory council (SSAC) recommended Nurse Works 
for award on the basis that its proposal was technically superior to 
the other proposals and that this technical superiority was worth the 
additional cost.  The source selection authority (SSA) concurred and 
the agency was in the process of preparing the paperwork to award the 
contract to Nurse Works when Nurse Works submitted a modification to 
its proposal which lowered its price.  The Navy reviewed the price 
modification and determined that Nurse Works' price proposal remained 
reasonable and realistic.  The Navy awarded the contract to Nurse 
Works at the modified price and these protests followed.

HRSI PROTEST

Technical Evaluation

HRSI protests that the Navy used unstated evaluation criteria to 
evaluate its technical proposal.  Specifically, HRSI argues that its 
proposal improperly was downgraded under the experience factor on the 
basis that HRSI did not have specific experience providing RNs in the 
numbers called for by the solicitation; the protester contends that 
the agency could not reasonably consider its lack of specific 
experience a weakness because the solicitation stated the agency would 
evaluate whether an offeror had the same "or similar" experience. 

We disagree.  First, there was nothing improper in the agency's 
evaluation approach under the experience factor.  Generally, where a 
solicitation indicates that experience will be evaluated, the 
procuring agency properly may consider an offeror's specific 
experience with the subject matter of the procurement.  See FMS Corp., 
B-255191, Feb. 8, 1994, 94-1 CPD  para.  182; AWD Technologies, Inc., 
B-250081.2; B-250081.3, Feb. 1, 1993, 93-1 CPD  para.  83.  Here, section M 
of the solicitation, "Evaluation Factors For Award," provided for the 
evaluation of "directly related or similar experience in providing 
nursing services," and required offerors to specify, among other 
information, the "numbers and types of personnel provided under the 
contract[s]" listed in their proposals.  The solicitation thus clearly 
contemplated that in evaluating proposals under the experience factor, 
the agency would consider whether an offeror had experience providing 
RNs in the numbers requested by the solicitation.  It is implicit in 
an experience evaluation that a proposal may be downgraded depending 
on the agency's assessment of the relevance and amount of an offeror's 
experience in relation to the experience it reasonably determines is 
necessary for successfull performance; in other words, the agency is 
not precluded from rating a proposal less than acceptable (green) just 
because a proposal shows some similar experience.

Further, the Navy's rating of HRSI's proposal under the experience 
factor was reasonable.  (The evaluation of technical proposals is 
primarily within the discretion of the procuring agency.  We will 
review a technical evaluation only to determine whether it was 
reasonable and consistent with the stated evaluation criteria.  LJC 
Mechanical Contractors, Inc., B-250792, Feb. 1, 1993, 93-1 CPD  para.  85.)  
The record shows that the agency determined that HRSI's prior 
experience was so dissimilar to the work under the contemplated 
contract as to represent a significant weakness.  The solicitation 
contemplated award of a contract to provide up to 185 RNs.  HRSI had 
previously provided nursing services under only one contract, which 
called for only one nurse.  The other contracts listed in its proposal 
required HRSI to provide different health care professionals (such as 
dieticians and pharmacists) in very small numbers--one or a few.  The 
only contract which required HRSI to provide a substantial number of 
personnel was a contract for the U.S. Postal Service, but this 
contract required the services of engineers, not medical 
professionals, and also called for only 80 personnel to be provided.  
We conclude that, given HRSI's lack of experience providing similar 
numbers of medical professionals, the agency reasonably rated its 
proposal yellow for experience.  Further, in light of the critical 
importance to patient health care of assuring an adequate supply of 
qualified nursing staff, we think the agency could reasonably 
determine that the weakness in this area was sufficient to offset 
HRSI's green ratings under the other two factors, and justify a yellow 
rating for its proposal overall.    

Price Realism Evaluation

HRSI challenges the Navy's determination that its price was 
unrealistic.  To evaluate price realism, the Navy developed its own 
independent estimate for each component of the proposed price, 
including direct compensation, fringe benefit rate, salary escalation 
rate, management effort, and profit.  Using the supporting cost 
breakdown provided by each offeror, the CET then calculated a weighted 
average of the offeror's costs across all of the line items for each 
component of each labor category and compared that average to the 
government estimate.  A low direct compensation rate could be offset 
by a higher fringe benefit rate and a low fringe benefit rate could be 
offset by a higher direct compensation rate.  The Navy found that 
HRSI's price proposal was unrealistic based on:  a proposed direct 
compensation of [deleted] for OR technicians, compared to the 
government estimate of $13.49 and an average of $14.23 for all 
offerors; a fringe benefit rate of [deleted] percent, compared to a 
government estimate of 22.39 percent and an average of 21.17 percent 
for all offerors; and an annual escalation rate of [deleted] percent, 
compared to a government estimate of 3 percent and an average of 2.67 
percent for all offerors.  HRSI contends that the Navy estimate was 
based on erroneous and outdated information.  

Realism ordinarily is not considered in the evaluation of proposals 
for the award of a fixed-price contract because these contracts place 
the risk of loss upon the contractor.  However, an agency may provide, 
as here, for the use of a price realism analysis in a solicitation for 
the award of a fixed-price contract for the purpose of measuring an 
offeror's understanding of the solicitation's requirements or to 
assess the risk inherent in an offeror's proposal.  PHP Healthcare 
Corp., B-251933, May 13, 1993, 93-1 CPD  para.  381.  In this regard, the 
risk of poor performance when a contractor is forced to provide 
services with an undercompensated workforce is a legitimate concern in 
the evaluation of proposals.  Trauma Serv. Group, B-242902.2, June 17, 
1991, 91-1 CPD  para.  573.  Comparison of offerors' prices with each other 
and with a government estimate may provide a basis for a price realism 
determination in the absence of evidence that either the estimate or 
its application to a particular offeror is unreasonable.  PHP 
Healthcare Corp., supra.  

The agency's realism analysis was based on information from the United 
Nurse's Association of California and the University of California at 
San Diego Hospital, showing an hourly compensation range of $12.16 to 
$13.95 for OR technicians.  HRSI argues that its proposed rate for 
staff OR technicians was realistic because it was higher than the rate 
($8.19) which the solicitation indicated would be paid to OR 
technicians directly employed by the contracting agency, and was 
consistent with the compensation for Medical Assistants listed in the 
United States Department of Labor (DOL), Bureau of Labor Statistics's 
Occupational Compensation Survey for the San Diego Metropolitan Area 
(between $6 and $13.50 per hour).  However, there is no basis for 
concluding that the rate to be paid federal employees hired as OR 
technicians is a valid benchmark against which to measure compensation 
rates of  private companies, given the absence of equivalent job 
security and retirement benefits at such companies.  Rather, in light 
of these differences, compensation at government-equivalent levels 
reasonably could be deemed insufficient to recruit and retain quality 
OR technicians meeting the specific requirements of the solicitation.  
As for the lower rates in DOL's survey, it is not clear that the 
Medical Assistant category under that survey is equivalent to the OR 
technician category in the solicitation.  While some of the duties are 
the same, the solicitation requires OR technicians who can assist the 
anesthesiologist, supervise and assist OR technician students, and 
prepare a patient for surgery, duties not listed for the Medical 
Assistants in the DOL survey.  Indeed, the fact that the average rate 
of compensation proposed by all offerors exceeded the survey range for 
the Medical Assistant category tends to support the conclusion that 
the categories are not comparable.  We conclude that the rates used in 
the agency's analysis were reasonable. 

HRSI argues that the government's fringe benefit rate estimate was 
high compared to its own, because the government rate included holiday 
and vacation pay, which HRSI instead included in its direct 
compensation rate.  This argument is without merit.  Whether vacation 
and holiday pay was properly included under direct compensation or 
fringe benefits, HRSI's price was substantially below the government's 
estimates for direct and fringe rates.  Thus, evaluating HRSI's price 
with vacation and holiday pay under its direct compensation rate 
instead of under its fringe benefits rate at best would have improved 
the realism of its fringe rate, while rendering its direct rate even 
more unrealistic.  Consequently, there is no basis to conclude that 
this would have affected the realism analysis.

HRSI argues that a 3-percent escalation rate was unrealistic and did 
not reflect current market conditions.  However, the agency's 
estimated 3-percent annual labor escalation rate was based on the 
Hospital Salary and Benefits Report published by the Hospital and 
Healthcare Compensation Service and Modern Health Care, an industry 
magazine.  The protester has furnished no evidence in support of its 
position, and its mere disagreement does not establish that the Navy's 
rate was unreasonable.

Given the significant disparity between the agency's reasonable 
estimate of the current and future compensation for qualified staff 
and HRSI's lower proposed compensation, we find that the Navy 
reasonably determined HRSI's prices to be unrealistic and present a 
risk that HRSI will be unable to recruit and retain qualified 
personnel.[1]

Price/Technical Tradeoff

HRSI argues that, given its price advantage and the fact that the 
technical factors were weighted only slightly more important than the 
cost factor, a reasonable price/technical tradeoff would have resulted 
in an award to HRSI.

The extent to which price and technical considerations may be offset 
against each other in a tradeoff is governed by the test of 
rationality and consistency with the stated evaluation criteria.  
Award may be made to a higher-priced/higher technically rated offeror 
where the decision is consistent with the evaluation factors and the 
agency reasonably determines that the technical superiority of the 
higher-priced proposal is worth the additional expense.  Information 
Spectrum, Inc., B-256609.3; B-256609.5, Sept. 1, 1994, 94-2 CPD  para.  251.

The SSA relied on the recommendation of the SSAC, which determined 
that Nurse Works's proposal was technically superior because it 
offered strengths not found in the other proposals and showed an 
exemplary record of past performance (as an incumbent contractor and 
elsewhere) under difficult conditions.  In contrast, the SSAC did not 
believe that HRSI, which had never furnished more than one RN, had the 
breadth and depth of experience that would ensure successful 
performance.  Further, the fact that the SSAC considered HRSI's price 
unrealistic and indicative of potential staffing problems negated much 
or all of any advantage HRSI would have enjoyed in the tradeoff by 
virtue of its nominally lower price; the SSAC did not believe the 
risks inherent in HRSI's proposal were offset by its lower cost.  
Given the superiority of Nurse Works's proposal relative to HRSI's 
under the more important technical evaluation factors--in particular 
the contrast between Nurse Works's record of exemplary past 
performance of contracts for similar services and HRSI's lack of 
relevant experience, and the risk of staffing problems from HRSI's 
unrealistically low proposed compensation--there is no basis to 
question the agency's determination that Nurse Works's proposal 
represented a better value to the government than HRSI's.

Unbalanced Offer

HRSI contends that Nurse Works's proposal was impermissibly 
unbalanced, and could not form the basis for award, because its prices 
for the option quantities of services in each of the contract years 
were higher than its prices for the base quantities in each year. 

The concept of unbalancing generally applies where bids are solicited 
and concerns whether an award to the bidder offering the lowest price 
to the government will in fact result in the lowest price to the 
government.  See Residential Refuse Removal, Inc., 72 Comp. Gen. 68 
(1992), 92-2 CPD  para.  444.  Since the government's primary concern in a 
negotiated procurement is not with obtaining a contract at the lowest 
overall cost, we will apply the concept of unbalancing only where 
price is the primary basis for the source selection decision.  See 
Ogden Gov't Servs., B-253350, Sept. 14, 1993, 93-2 CPD  para.  161; Signal 
Corp., B-241849 et al., Feb. 26, 1991, 91-1 CPD  para.  218.  The award 
decision here was not based primarily on price.  To the contrary, and 
as discussed above, technical considerations were more important than 
price in the evaluation, and the record establishes that in the final 
analysis the agency was primarily concerned with the strengths of the 
awardee's technical proposal and the fundamental weakness of HRSI's 
proposal, rather than the differences in price.  In light of the 
agency's concerns, there simply is no reason to believe that the 
possibility of a somewhat higher cost if all of the option quantities 
were not exercised would have affected the award decision.

HEALTH STAFFERS PROTEST

Technical Evaluation

Health Staffers primarily protests the Navy's evaluation of its 
proposal under the experience factor.  Health Staffers argues that, as 
an incumbent contractor for more than 7 years, and as the only 
contractor with experience in providing at one time the number of 
nurses required by the solicitation (185), it should have received a 
blue (superior), rather than a green (satisfactory), rating under 
experience.

The evaluation of Health Staffers's proposal was reasonable and 
consistent with the stated evaluation criteria.  The solicitation 
provided for a green rating to be given to a proposal which was 
satisfactory and evidenced a good probability of successful 
performance; a blue rating was to be given to a proposal that exceeded 
the performance requirements of the solicitation in a way beneficial 
to the Navy and indicated a high probability of successful contract 
performance.  In evaluating Health Staffers's proposal under the 
experience factor, the agency found that while Health Staffers had 
experience providing the same numbers and types of RNs required under 
the contemplated contract and was capable of successfully performing 
the contract, Health Staffers's performance as an incumbent did not 
indicate that Health Staffers's performance under the contemplated 
contract would exceed the requirements of the solicitation in a way 
that would be beneficial to the Navy.  (In contrast, the agency 
reports that Nurse Works's blue rating under the experience factor 
reflected its exemplary performance under difficult conditions, 
including commencing full performance 3 days after award and quickly 
providing additional staffing in response to the assignment of 
numerous members of the nursing staff to duty on a deploying hospital 
ship.)  Based on the record before us, we have no basis to question 
the reasonableness of the agency's determination that Health 
Staffers's prior performance was satisfactory, but not exceptional.  
We thus have no basis to question the green rating assigned Health 
Staffers's proposal under the experience factor.[2]

Discussions

The solicitation stated that the Navy would seek clarification of 
suspected unrealistic pricing during discussions.  Health Staffers 
asserts that because Nurse Works's proposed prices for the option 
items were lower than its prices for the base items, Nurse Works's 
proposal was based on unrealistic pricing which the agency was 
required to clarify and resolve during discussions.

This argument is based on the flawed premise that Nurse Works's price 
was unrealistic.  The Navy determined Nurse Works's pricing to be 
realistic.  Again, in evaluating price realism, the agency did not 
evaluate offers on a line item-by-line item basis, an approach that 
would have taken the lower option prices into account; rather, the 
agency used an offeror's cost breakdown structure to determine a 
weighted average of the offeror's costs across all of the line items 
for each component of each labor category and compared that average to 
the government estimate for that component for that labor category.  
The agency therefore had no reason to discuss price realism with Nurse 
Works.  It follows that, since the solicitation advised offerors of 
the agency's intent to award the contract without discussions, and in 
view of our conclusion that the Navy reasonably determined that Nurse 
Works's proposal represented the best value to the government, the 
agency  properly could award the contract to Nurse Works without 
holding discussions.  See JWK Int'l, B-256609.4, Sept. 1, 1994, 95-1 
CPD  para.  166.[3]  

Health Staffers argues that the agency could only perform an adequate 
price realism analysis by comparing Nurse Works's proposed price for 
each line item against the government estimate.  This is an untimely 
challenge to the methodology used to determine price realism.  Health 
Staffers learned that the Navy used an average of proposed prices to 
assess realism from the agency report which it received on September 
12.  Since Health Staffers did not protest the agency's approach until 
October 3, more than 10 working days later, this aspect of Health 
Staffers's protest is untimely.  See 4 C.F.R.  sec.  21.2(c); Management 
Technology, Inc., supra.  

The protests are denied in part and dismissed in part.

Comptroller General
of the United States

1. HRSI also argues that in performing the price realism analysis, the 
Navy treated HRSI and Nurse Works inconsistently because the agency 
did not find Nurse Works's price proposal unrealistic even though the 
proposed prices for a number of individual line items were below the 
benchmark set by the Navy for a realistic price.  As noted above, 
however, in performing the price realism analysis, the Navy did not 
compare the components of each line item against the corresponding 
component of the government estimate; instead, it used an offeror's 
cost breakdown structure to determine a weighted average of the 
offeror's costs across all of the line items for each component of 
each labor category and compared that average to the government 
estimate for that component for that labor category.  The record 
indicates that, contrary to HRSI's assertion, HRSI and Nurse Works 
were treated consistently in this regard.   

2. In comments submitted on October 3, Health Staffers raised 
additional arguments with respect to the agency's evaluation under the 
experience factor.  Since these arguments were raised more than 10 
working days after September 12, the date on which Health Staffers 
received the agency report containing the information which formed the 
basis of these protest issues, the new arguments are untimely.  See       
4 C.F.R.  sec.  21.2(c) (1995); Management Technology, Inc., B-257269.2, 
Nov. 8, 1994, 95-1 CPD  para.  248.

3. Health Staffers also argues that the Navy was required to hold 
discussions before it accepted Nurse Works's modified price proposal.  
Under FAR  sec.  52.215-10, a procuring agency may accept a late 
modification of an otherwise successful proposal where that 
modification results in terms more favorable to the government.  Here, 
the Navy had already determined that Nurse Works was the successful 
offeror and was in the process of preparing the contract when Nurse 
Works submitted its price modification.  Consequently, the Navy could 
accept Nurse Works's modified price proposal, which reduced the 
contract price, without holding discussions and requesting best and 
final offers.  Asgard Technology, Inc., B-215706, Aug. 13, 1984, 84-2 
CPD  para.  171.