BNUMBER:  B-266165.2
DATE:  February 20, 1996
TITLE:  EC Corporation

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DECISION FOR PUBLIC RELEASE
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:EC Corporation

File:     B-266165.2

Date:February 20, 1996

Paul F. Khoury, Esq., David A. Vogel, Esq., Philip J. Davis., Esq., 
and Phillip H. Harrington, Esq., Wiley, Rein & Fielding, for the 
protester.
Donna Lee Yesner, Esq., Carl L. Vacketta, Esq., and Chandra Emery, 
Esq., Piper & Marbury, for Tate Facilities Services, Inc., an 
interested party.
Christopher M. Bellomy, Esq., Robert M. Roylance, Esq., and Cynthia S. 
Guill, Esq., Dept. of the Navy, for the agency.
Jeanne W. Isrin, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency's failure to downgrade awardee's proposal for lack of 
understanding based on price realism analysis that initially found 
unrealistically low item prices was reasonable where agency determined 
that awardee's technical proposal, together with its responses to 
discussion questions concerning the low prices, demonstrated an 
acceptable level of understanding.

DECISION

EC Corporation protests the award of a contract to Tate Facilities 
Services, Inc. under request for proposals (RFP) No. N62470-95-R-1151, 
issued by the Navy for base operating services at the Naval Security 
Group Activity, Northwest, and its military family housing complex, in 
Chesapeake, Virginia.

We deny the protest.

The RFP contemplated award of a fixed-price, indefinite quantity (with 
award fee) contract for a base period with 4 option years.  The work 
to be performed was specified in approximately 224 sub-contract line 
items (CLIN); 167 were described as fixed-price and 57 were described 
as indefinite quantity.  Section B of the RFP contained a pricing 
schedule that required, for the base and each option year, a single 
price for the fixed-price work, and unit and extended prices for each 
line item of indefinite quantity work.  Estimated requirements were 
provided for the indefinite quantity items, so that total prices could 
be computed.

Offerors were to submit both technical and price proposals (in 
addition to the section B pricing schedule).  Technical proposals were 
to be evaluated based on three equally weighted factors:  
organizational experience and past performance; work accomplishment 
and methodology; and financial capability.  Price proposals were to be 
evaluated for reasonableness and realism.  Price was equal in weight 
to the technical rating and award was to be made to the responsible 
offeror whose offer, conforming to the solicitation, would be most 
advantageous to the agency, price and other factors considered.

Three proposals were received, including Tate's and EC's (the third 
proposal is not relevant here).  The evaluators assigned all proposals 
adjectival ratings of unacceptable but susceptible to being made 
acceptable, and included all in the competitive range.  In the ensuing 
discussions, which encompassed specific questions and notification of 
deficiencies, each offeror was advised of sub-CLIN prices having 
"significant variances" from the government estimate, i.e., prices 
judged to be either unreasonably high or unrealistically low, and was 
asked either to reevaluate those prices or to explain the variances in 
its revised proposal.  EC's and Tate's revised proposals were rated 
acceptable, although the Navy continued to have concerns about 
excessive pricing by EC.  Best and final offers (BAFO) then were 
requested and submitted; both firms' BAFOs were rated acceptable.  
Since Tate's BAFO price was [deleted], substantially lower than EC's 
price of [deleted], and was judged reasonable and realistic based on 
the government estimate, [deleted], and the third offeror's price, 
[deleted], the agency concluded that Tate's offer represented the best 
value to the government, and thus made award to Tate.

LOW ITEM PRICES

EC maintains that Tate's technical proposal should have been 
downgraded, based on the price realism analysis, for lack of 
understanding under the work accomplishment and methodology factor 
because of "excessive" underpricing of numerous items; EC notes that 
its own proposal was downgraded for high prices.  EC concludes that a 
proper evaluation would have resulted in a higher rating for EC's 
proposal than for Tate's and an award to EC based on its superior 
technical rating.[1]

EC's argument is without merit.  First, there is no evidence 
supporting EC's implicit position that its evaluation was negatively 
affected by the agency's concerns with its overpricing of certain 
items, and that its proposal therefore was not evaluated on the same 
basis as Tate's.  EC's proposal was rated acceptable (after it 
responded to the initial discussion questions)--it was not denied a 
superior rating based on its pricing (and, as indicated above, EC 
abandoned its specific argument that its proposal should have received 
a superior rating)--and the record shows that Tate's high prices for 
certain items similarly were viewed as a weakness in its proposal.  
The proposals thus were treated equally in this regard.

The agency was not required to downgrade Tate's proposal for lack of 
understanding based on its low pricing.  More specifically, providing 
in a solicitation for a fixed-price contract that a price realism 
analysis will be conducted does not require the agency mechanically to 
downgrade an offeror's technical proposal if it is found to contain 
low prices.  See generally Birch & Davis Assocs.,Inc.--Protest and 
Request for Recon., B-246120.3; B-246120.4, Apr. 20, 1992, 92-1 CPD  para.  
372.  While a price realism analysis may be used in fixed-price 
procurements as a means of assessing an offeror's understanding of the 
solicitation's technical requirements,  Birch & Davis Assocs., 
Inc.--Protest and Request for Recon., supra; PHP Healthcare Corp., 
B-251933, May 13, 1993, 93-1 CPD  para.  381, the evaluation must be based 
on consideration of the proposal as a whole.  See Allied Cleaning 
Servs., Inc., 69 Comp. Gen. 248 (1990), 90-1 CPD  para.  275; KCA Corp., 
B-255115, Feb. 9, 1994, 94-1 CPD  para.  94.

Here, the evaluators determined that Tate's technical proposal 
demonstrated an acceptable level of understanding under the work 
accomplishment and methodology factor.  As discussed, in evaluating 
the initial proposals the agency brought unrealistic/unreasonable item 
prices to each offeror's attention and requested that the offeror 
either adjust the prices or explain them.  In response, Tate raised 
several of the prices and explained to the agency why it left other 
prices unchanged.  For example, in addressing a list of prices 
identified as "low to unrealistically low," Tate responded that:

     "We have reviewed the [items] identified, as well as others not 
     identified, and revised our projected manpower requirements to 
     more accurately reflect the requirements.  In most cases, 
     significant increases were made.  We did not increase [certain 
     items] due to our review leading to an assessment that we can 
     accomplish the work with the hours proposed."

The record shows that, rather than automatically conclude that low 
item prices reflected a lack of understanding--notwithstanding the 
acceptable level of understanding demonstrated in the technical 
proposal--the agency considered high item prices in both offerors' 
proposals as offsetting low prices; in other words, the agency viewed 
any low item prices in the context of the entire pricing scheme, not 
individually, in determining whether low item prices reflected a lack 
of understanding.[2]  Based on Tate's technical proposal, its revised 
prices, and its explanation for not changing certain prices, the 
agency determined that its revised proposal (and BAFO) was acceptable 
under the work accomplishment and methodology factor.  Given these 
conclusions and the agency's discretion in the price realism area, the 
mere fact that Tate's item prices remained low compared to the 
estimate did not require the agency to downgrade Tate's proposal.  See 
Birch & Davis Assocs., Inc.--Protest and Request for Recon., supra.

In any case,  it is clear that EC's and Tate's proposals were treated 
equally regarding low item prices.  In this regard, while EC's total 
price was substantially higher than Tate's (and the estimate), and 
most of its item prices were higher than the estimate, many of its 
prices were also significantly below the estimate, and many were lower 
than Tate's.  Following are several examples:

      Item          Tate        Estimate            EC

C5-02          [deleted]    [deleted]        [deleted]

C8-05          [deleted]    [deleted]        [deleted]

C8-09          [deleted]    [deleted]        [deleted]

C8-10          [deleted]    [deleted]        [deleted]

C10-04         [deleted]    [deleted]        [deleted]

C15-03         [deleted]    [deleted]        [deleted]

C16-03         [deleted]    [deleted]        [deleted]

C16-25         [deleted]    [deleted]        [deleted]

C17-01         [deleted]    [deleted]        [deleted]
The agency did not determine that EC's low prices for these numerous 
items showed a lack of understanding of the work covered by the items; 
it obviously concluded that low item prices by themselves did not show 
a lack of understanding.  EC has not demonstrated, and it is not 
apparent, why the same rationale would not apply to the evaluation of 
Tate's proposal.[3]

ESTIMATE  

EC also maintains that the government estimate should have been higher 
which, it concludes, would make Tate's prices even more unrealistic 
than they appeared.   More specifically, EC maintains that the RFP 
significantly increased the scope of work, relative to the current 
contract (the basis for the estimate), and added a number of 
requirements, all of which should result in a significant increase 
over the current contract price. 

This argument is without merit.  The Navy concedes that some work 
items were increased in both the fixed-price and indefinite quantity 
portions of the RFP, but also states that other work was decreased.  
The Navy estimates that the monetary impact of the deletions and 
additions to the fixed-price portion of the contract is only 
approximately $10,700.  For the indefinite quantity portion of the 
contract, the Navy states, the most significant increase in work is 
under item 0014AJ, Installation of Carpeting.  The government estimate 
for this work was [deleted], however, and EC's price for this item was 
only [deleted]; these figures obviously do not support a claim that 
the estimate was too low.  EC has provided little information in 
support of its position and has not indicated what it believes the 
estimate should have been.  As EC has not otherwise demonstrated that 
the Navy's position is incorrect, we have no basis for questioning the 
accuracy of the estimate.  

The protest is denied.

Comptroller General
of the United States

1. EC also initially argued that:  (1) its technical proposal should 
have been rated superior based on its experience, technical 
capability, and performance as the incumbent; and (2) the Navy failed 
to conduct meaningful discussions with EC.  The Navy refuted both of 
these allegations in its report, and EC failed to address them in its 
comments.  We thus consider these issues abandoned and will not 
consider them.  PHP Healthcare Corp.; Sisters of Charity of the 
Incarnate Word, B-251799     et al., May 4, 1993, 93-1 CPD  para.  366.

2. The mere fact that Tate's total price was [deleted] below the 
government estimate is not a basis for finding the price realism 
evaluation inadequate.  See, e.g., Birch & Davis Assocs., 
Inc.--Protest and Request for Recon., supra (price realism evaluation 
adequate even though award price was 24 percent below government 
estimate); J&J Maintenance, Inc., B-244366.2, Mar. 7, 1994, 94-1 CPD  para.  
177 (award price was 16 percent below government estimate). 

3. EC argues that Tate cannot perform all the required services for 
its award price, and that the Navy therefore must have improperly 
relaxed the requirements for Tate.  There is no evidence, however, 
that the award was based on any relaxed or waived requirements.