BNUMBER: B-266246
DATE: January 18, 1996
TITLE: Holmes & Narver, Inc.
**********************************************************************
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:Holmes & Narver, Inc.
File: B-266246
Date: January 18, 1996
William A. Roberts III, Esq., Lee Curtis, Esq., and Karen L. Manos,
Esq., Howrey & Simon, for the protester.
Capt. Robert L. Ballenger, and Richard P. Castiglia, Jr., Esq.,
Department of the Air Force, for the agency.
Adam Vodraska, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Under a negotiated procurement for the design and construction of
military family housing, the agency was not required to raise during
discussions that an offeror's price exceeded the solicitation's stated
cost objective, which was not an absolute limit, where the offeror's
price was evaluated as realistic, reasonable, complete, and low risk.
2. Under a solicitation for the design and construction of military
family housing, which encouraged offerors to propose enhancements to
the specifications as part of their offer to obtain additional
technical credit, the agency was not required to advise an offeror
during discussions of those enhancements evaluated as only marginally
beneficial so that the offeror could delete those enhancements and
lower its price, since those enhancements, which contributed to the
offeror's high technical rating, were neither deficiencies,
weaknesses, nor excesses.
DECISION
Holmes and Narver, Inc. protests the award of a contract to
Harper/Nielsen-Dillingham under request for proposals (RFP) No.
F04684-94-R-0027, issued by the Department of the Air Force for the
second phase of a military family housing construction project at
Vandenberg Air Force Base, California.
We deny the protest.
The RFP sought offers to raze 128 units of existing military family
housing, prepare the site for new construction, and design and build
128 units of replacement single-family homes as well as common areas
for family and community recreation.
As issued, the RFP's schedule contained a basic contract line item
number (CLIN) 0001 for a lump-sum price to design and construct the
housing development, a deductive line item, CLIN 0002, for the amount
to be paid to the Air Force by the contractor to dispose of debris at
the base's landfill, and a number of option CLINs for various upgrades
of materials and features.
The RFP informed offerors that proposals would be evaluated in two
areas: technical/management and price. The technical/management area
was most important, although "cost was still significant and would be
a substantial factor in determining the proposal most advantageous to
the government." The evaluation factors in the technical/management
area were (1) design experience, (2) construction experience, (3)
construction methodology/materials, (4) management approach, and (5)
design/construction schedule. The first three evaluation factors were
equally weighted and of greatest importance, followed by management
approach and then design/construction schedule. Technical/management
proposals were to be evaluated under a color/adjectival rating
scheme,[1] as well as for proposal risk to assess the risk associated
with an offeror's proposed approach and for performance risk to assess
the probability of successful performance based on the offeror's past
and present performance.[2]
Under the design experience and construction experience factors,
corporate experience and personnel experience, which had the same
weight, were to be separately assessed. Under the construction
methodology/materials factor, offerors were encouraged to propose
enhancements to the materials and methods of construction specified by
the RFP, which would be evaluated to "determine the offeror's
understanding of the requirement and compared to the specifications
and drawings to determine the value added"; the CLIN 0001 price was to
include the proposed enhancements, which could be incorporated into
the contract by the government. The management approach factor
contained four equally weighted subfactors: team organization,
internal controls, quality control approach, and safety approach.
Price proposals were to be evaluated for realism, reasonableness,
completeness, and risk. The RFP stated that "[t]he government had
budgeted $14,859,000 for the basic contract award; this amount is
expected to cover contract line item 0001 and some but perhaps not all
of the options." Regarding the price evaluation, the RFP stated that:
"The Government will evaluate the total price for the basic
requirement CLIN 0001, less the reduction proposed in CLIN 0002.
The Government will then consider how many of the option upgrade
features CLINS . . . can be purchased within the stated basic
contract cost objective. For purposes of evaluation and
contractor selection, the Government will hold its basic contract
cost objectives fixed, and will consider how many, if any,
options an offeror proposes to perform within the cost objective.
However, after Contractor selection on this basis, the Government
reserves the right to award or not to award options causing the
contract price to be greater or lesser than the contract cost
objective."
Holmes, Harper, and a third offeror submitted proposals.[3] Holmes
priced the basic design and build item, CLIN 0001, at $[DELETED] and
the deductive landfill item, CLIN 0002, at $[DELETED]. Harper priced
CLIN 0001 at $[DELETED] and CLIN 0002 at $[DELETED]. Both offerors
included enhancements in their initial evaluated prices (CLIN 0001
less CLIN 0002), which were still below the government's cost
objective.
After the source selection evaluation team (SSET) evaluated the
technical and price proposals, it conducted written and oral
discussions with each offeror. In addition, the Air Force issued
amendment 0005 to the RFP to redesignate the basic design and build
item, CLIN 0001, as SubCLIN 0001AA, and to add SubCLINs 0001AB through
0001AF to the schedule for the removal of underground storage tanks,
soil remediation, and the removal and mitigation of asbestos coated
pipes and contaminated soil discovered at the site.[4] The amended
schedule requested a total dollar amount for CLIN 0001, which now
encompassed SubCLINs 0001AA through 0001AF. In amendment 0006,
offerors were requested to complete all sections of the schedule as
revised by amendment 0005.[5]
Holmes in its revised proposal included prices only for the added
environmental remediation SubCLINs 0001AB through 0001AF, totaling
$[DELETED], and left blank the spaces for the prices for SubCLIN
0001AA (formerly CLIN 0001) and the option upgrade CLINs priced in its
initial proposal. Harper's revised proposal separately priced the new
SubCLINs for a total of $[DELETED] and significantly increased the
$[DELETED] lump-sum price it had initially proposed for CLIN 0001 to
$[DELETED] for SubCLIN 0001AA. With the additional pricing, both
Holmes's and Harper's evaluated prices apparently exceeded the
government's cost objective.
In requesting best and final offers (BAFO), the Air Force
"reiterate[d] that the Government's cost [objective] is $14,859,000
for CLIN 0001." (Emphasis in original.) Just before BAFOs were due,
in response to a request to clarify how the revised schedule should be
completed, the Air Force discovered that Harper's revised pricing for
CLIN 0001 had double-counted the environmental remediation SubCLINs.
Thus, the Air Force verbally requested both Holmes and Harper to
"transfer the amounts from the proposal worksheet for SubCLINs
0001AB through 0001AF to the SubCLIN blanks in [the schedule].
The rest of the cost of the worksheet, which would be the cost
excluding the environmental SubCLINs, would be inserted in the
blank for SubCLIN 0001AA at the top. [Offerors] were then to
total the SubCLINs 0001AA through 0001AF and insert the total in
the blank at the bottom of the CLIN 0001 portion. After that,
they were to complete [the schedule] by inserting the amount for
the deductive credit (CLIN 0002) and also the upgrade options."
The agency states that, as a result of the telephone clarification,
Holmes "said they . . . understood how to fill out [the schedule] from
the revised cost proposal worksheet."
Holmes's BAFO included the same prices for the environmental
remediation SubCLINs and the landfill deductive item, CLIN 0002, as
earlier proposed. The BAFO also reduced the price previously offered
for CLIN 0001 from $[DELETED] to $[DELETED] for SubCLIN 0001AA to
account for the deletion of three proposed enhancements, which the
SSET had previously advised Holmes were unacceptable. Holmes's
evaluated BAFO price (CLIN 0001 less CLIN 0002) of $[DELETED] was
evaluated as realistic, reasonable, complete, and low risk; however,
it exceeded the stated $14,859,000 cost objective, which in turn would
not allow for the exercise of any of the option upgrades within the
cost objective.
Although Harper's BAFO also included the same prices for the
environmental remediation SubCLINs and landfill deductive item, it
significantly decreased the revised price offered for SubCLIN 0001AA
from $[DELETED] to $[DELETED] by deleting the double-counted
environmental remediation items. Harper's BAFO price of $[DELETED]
was evaluated as realistic, reasonable, complete, and low risk, and
was sufficiently below the stated cost objective to allow the Air
Force to exercise six of the option upgrades within the cost
objective.
The final technical ratings were
EVALUATION FACTOR HOLMES HARPER
Design Experience:
Corporate
Personnel Green
Blue
Blue
Blue
Construction Experience:
Corporate
Personnel Green
Green
Blue
Green
Construction Methods/Materials Blue
Blue
Management Approach: Team Organization
Internal Control
Quality Control
Safety Approach Blue
Green
Green
Green
Green
Green
Green
Green
Schedule Green Green
Both Holmes's and Harper's proposals received low performance risk and
low proposal risk ratings in all relevant factors.
Based on its evaluation of the BAFOs, the SSET presented the source
selection authority (SSA) with an evaluation briefing and a proposal
analysis report summarizing the strengths, weaknesses, and proposal
risks of each proposal as well as the performance risks and prices.
Based on an integrated assessment of the findings of the SSET, the SSA
determined that Harper's superior technical proposal and lower price
was more advantageous to the government.
Holmes first contends that the Air Force failed to conduct meaningful
discussions because the Air Force must have known that Holmes's prices
for the environmental remediation SubCLINs submitted in response to
amendment 0006 resulted in a price exceeding the government's cost
objective, but failed to inform Holmes of this problem during
discussions. Holmes also argues that it was misled by the Air Force
during discussions because although the SSET advised Holmes that
[DELETED] of Holmes's [DELETED] proposed enhancements were
unacceptable under the construction methodology/material factor, only
[DELETED] of Holmes's remaining [DELETED] enhancements were rated as
beneficial to the Air Force, with the remaining rated as "neutral."
Holmes alleges that had it been given the opportunity to delete these
[DELETED] "neutral" enhancements from its proposal, it could have
reduced its price accordingly, making it the low priced offeror.
Agencies are required to conduct meaningful discussions with all
competitive range offerors. Microeconomic Applications, Inc.,
B-258633.2, Feb. 14, 1995, 95-1 CPD para. 82. In order for discussions to
be meaningful, contracting officials must advise offerors of
weaknesses, excesses or deficiencies in their proposals that require
amplification or correction and afford offerors an opportunity to
revise their proposals to satisfy the government's requirements.
Miltope Corp.; Aydin Corp., B-258554.4 et al., June 6, 1995, 95-1 CPD para.
285. This does not mean that offerors are entitled to
all-encompassing discussions or that an agency must "spoon-feed" an
offeror as to each and every item that must be revised, added,
deleted, or otherwise addressed to improve a proposal; rather, an
agency must only lead offerors into the areas of their proposals
considered deficient. Id. Additionally, an agency may not mislead an
offeror during discussions into responding in a manner that does not
address the agency's concerns. Price Waterhouse, B-254492.2, Feb. 16,
1994, 94-1 CPD para. 168.
Here, the agency was not required to specifically mention to Holmes
during discussions that its revised price exceeded the government's
cost objective because this was not a deficiency, weakness, or excess.
In this regard, the RFP expressly informed offerors that the cost
objective, which was clearly stated in the RFP and repeated in the
BAFO request,[6] was not an absolute limit and, given the relative
importance of technical merit over price, "[a]n award higher than the
cost objective is possible if the offeror is most advantageous to the
government." Moreover, Holmes's total price for CLIN 0001, proposed
in response to the added environmental remediation SubCLINs, was
determined by the Air Force to be reasonable, realistic, complete, low
risk, and below the government estimate.
In addition, contrary to Holmes's contention, the oral clarification
given the two offerors to prevent double-counting of the environmental
remediation SubCLINs in the BAFO prices should not have misled Holmes.
Offerors were not instructed to simply add their prices for the
environmental remediation SubCLINs to their initial price for CLIN
0001 as Holmes implies, but rather were instructed to take their
prices from their revised price proposal worksheets. Given that the
request for BAFOs reiterated that the government's cost objective
remained at $14,859,000, Holmes, like Harper, could have adjusted its
CLIN 0001AA price to compensate for the increase in price associated
with the added environmental remediation SubCLINs, so that its BAFO
would not exceed the government's cost objective.
Moreover, the Air Force was not required to advise Holmes of the
enhancements rated as "neutral" since those enhancements also were not
considered deficiencies, weaknesses, or excesses. To the contrary,
the proposal analysis report prepared for the SSA shows that Holmes
was rated blue/exceptional for the construction methods/materials
factor specifically due to its extensive list of enhancements, and the
Air Force explains that, although the [DELETED] enhancements were
rated as "neutral" because their value was negligible, the SSET still
considered these enhancements desirable.
Holmes next protests that the evaluation of the price proposals by the
agency did not properly account for the significant enhancements
included in its price, as compared to the "trivial" enhancements
included in Harper's price, and that the agency only mechanically
compared Holmes's price against the government's cost objective.
However, the RFP contemplated that offerors, in their business
judgment, would choose whether to include enhancements within their
CLIN 0001 price to improve their technical evaluation. Contrary to
Holmes's contention, there was no mechanical comparison of Holmes's
price, which included a variety of enhancements, to the government
cost objective (although this was certainly considered as was
specifically contemplated by the RFP); instead, the SSET, in
evaluating Holmes's and Harper's price proposals, estimated the cost
of the respective proposed enhancements and assessed the enhancements'
relative value. The SSA was advised of the government's estimate of
Holmes's beneficial enhancements before he made his award decision.
Thus, the evaluation of the price proposals with respect to the
offerors's proposed enhancements was reasonable and consistent with
the RFP evaluation scheme.[7]
Holmes also objects that the SSET gave Harper's proposal, containing
[DELETED] assertedly "trivial" enhancements, the same blue/exceptional
rating under the construction methods/materials evaluation factor as
Holmes's proposal, which contained [DELETED] enhancements, [DELETED]
of which were considered beneficial. While Holmes's proposal
contained more enhancements than did Harper's proposal, the record
does not indicate that the SSET underrated Holmes's proposal or
overrated Harper's proposal. Rather, both offerors were rated
blue/exceptional for the construction methodology/material factor
because the proposed enhancements of both offerors exceeded the
specification in a manner beneficial to the Air Force with no
significant weaknesses--which was the standard for a blue/exceptional
rating under the RFP. While Harper only proposed [DELETED]
enhancements, the SSET considered these enhancements [DELETED] to be
of particular value to the Air Force. Moreover, the record shows that
the SSA was informed in the SSET briefing of the number and nature of
the beneficial enhancements proposed by both offerors, and the SSA
reached his own conclusions regarding the value of the enhancements.
We see nothing unreasonable with the SSET's action.
Holmes also objects to the green/acceptable rating for its proposal,
as compared to Harper's proposal's blue/exceptional rating, under the
corporate experience assessment criterion of the design experience
factor, since Holmes's design team member, [DELETED], has more design
experience than Harper's team member, [DELETED]. However, according
to this evaluation criterion, "lack of experience on projects where
the proposed design team and the proposed construction team worked
together will be considered weaknesses unless the offeror submits an
approach which can be expected to overcome or mitigate weakness or
deficiencies in its experience." Although the SSET recognized
[DELETED] extensive housing design experience, the SSET also found
that Holmes had not previously teamed with [DELETED]. In contrast,
the SSET noted that Harper had successfully worked with [DELETED] on
six similar family housing projects over the past 10 years. Based on
this evaluation, the SSET reasonably found that Harper's proposal
warranted a higher blue/exceptional rating and Holmes's newly formed
team only a green/acceptable rating.
Holmes also complains that the SSET, in rating corporate experience
under the construction experience factor, improperly noted that Holmes
had never previously teamed with [DELETED] (Holmes's subcontractor for
the construction aspect of the project) in assigning Holmes's proposal
a green/acceptable rating, as compared to Harper's proposal's
blue/exceptional rating. While Holmes claims that this consideration
represented an unstated evaluation criterion, the RFP stated with
regard to this evaluation consideration that experience demonstrating
sufficient corporate knowledge to successfully complete the
"construction team's" portion of the contract was to be evaluated, and
we find that the agency could therefore consider Holmes's failure to
have previously worked with [DELETED] under this factor. See Marine
Animal Prods. Int'l, Inc., B-247150.2, July 13, 1992, 92-2 CPD para. 16.
In contrast, Harper and its construction team member were responsible
for six fast-track housing design/build projects of similar scope over
10 years, which the SSET reasonably found warranted a blue/exceptional
rating.
In sum, the Air Force reasonably determined that Harper's higher-rated
and lower-priced proposal represented the best value to the
government.
The protest is denied.
Comptroller General
of the United States
1. The color/adjectival ratings were blue/exceptional,
green/acceptable, yellow/marginal, and red/unacceptable.
2. The evaluation ratings for proposal risk and performance risk were
high, moderate, and low.
3. The third offeror later withdrew from the competition.
4. Amendment 0005 also made corresponding changes to the price
proposal worksheets and the specifications/drawings.
5. Neither amendment 0005, adding the environmental remediation
SubCLINs, nor amendment 0006, requesting the revised schedule, changed
the government's cost objective or the evaluation factors for award.
6. Holmes's contention that the Air Force's stated cost objective was
unreasonable since it was not increased to account for the
environmental remediation work is untimely under section 21.2(a)(1) of
our Bid Protest Regulations. Protests based on alleged improprieties
in the solicitation, incorporated, as here, after the initial
submission of offers, must be filed prior to the next closing date
after the change was made to the solicitation. 4 C.F.R. sec. 21.2(a)(1)
(1995); ASAP Serv., a div. of ACM, Inc., B-260803, July 18, 1995, 95-2
CPD para. 36.
7. Although Holmes also contends that it was disadvantaged by
"absorbing" some of the costs for its option CLIN upgrades in its CLIN
0001 price, the Air Force raised this issue with Holmes during
discussions, and the record evidences that Holmes's underpricing of
option upgrades was the result of its own business decision to make
its proposal more attractive, which advantage was considered by the
Air Force in evaluating Holmes's price.