BNUMBER:  B-267715
DATE:  December 20, 1995
TITLE:  American Lawn Service, Inc.

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Matter of:American Lawn Service, Inc.

File:     B-267715

Date:     December 20, 1995

Eric Erickson for the protester.
Timothy H. Power, Esq., for Maintenance Engineers, an interested 
party.
Cynthia S. Guill, Esq., Diane D. Hayden, Esq., and Jan E. Takamine, 
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

Agency improperly made award to an offeror submitting the 
lowest-priced, technically acceptable offer where the solicitation 
stated that award would be made on a best value basis and the agency, 
in lieu of considering the value to the government of higher-rated, 
higher-priced offers, awarded the contract based on the lowest-priced, 
technically acceptable offer.

DECISION

American Lawn Service, Inc., protests an award to Maintenance 
Engineers under request for proposals (RFP) No. N62755-94-R-2826, 
issued by the Department of the Navy, Naval Facilities Engineering 
Command, for grounds maintenance and tree trimming services for 
Central and West Oahu, Hawaii.  American Lawn protests that the Navy's 
source selection decision deviated from the stated evaluation plan.

We sustain the protest.

The RFP, issued on December 19, 1994, was restricted to small business 
concerns and contemplated the award of a combination fixed-price (lump 
sum) and indefinite quantity (fixed unit prices) contract for 1 year 
with an option for up to 6 additional months.  The RFP stated a best 
value evaluation plan with the price and technical proposals being of 
equal importance.  The RFP listed five technical evaluation factors 
and their relative importance to each other.  The RFP also stated the 
following evaluation consideration:

     "[p]roposals unrealistic in price or in terms of technical or 
     schedule commitments will be considered lacking in technical 
     competence or comprehension of the complexity and risks of the 
     contract requirements and their ratings lowered accordingly."

The Navy received initial proposals by January 31, 1995.  Technical 
proposals were evaluated by the technical advisor on an adjectival 
scale of exceptional, acceptable, marginal, and unacceptable.  The 
technical proposals of American Lawn and one other offeror were rated 
"exceptional" overall.  Maintenance Engineers's initial technical 
proposal was rated "marginal" overall.  The proposed prices of 
American Lawn and Maintenance Engineers, and the government estimate, 
were:

Offeror        Fixed Price    Indef. Qty.    Total

American Lawn  $1,313,520     $384,050       $1,697,570

Maint. Eng.      1,114,800       56,015        1,170,815

Govt. Est.       1,788,653      210,930        1,999,583
By letter dated May 19, the Navy conducted discussions with all the 
offerors whose proposals were included in the competitive range, and 
amended the RFP requirements.  The letter included technical concerns 
to be addressed by each offeror, as well as a list of those contract 
line item numbers (CLIN) for the indefinite quantity work where the 
proposed CLIN prices varied significantly from the government 
estimate; the list specifically identified whether the CLINs were high 
or low in comparison to the government estimate.  In this letter, most 
offerors, including American Lawn and Maintenance Engineers, were also 
told that the lump sum fixed-price portion of their proposals 
"appear[ed] low in relation to the cost of the work required by the 
contract" and were advised to reevaluate their pricing.  The Navy 
requested each offeror to provide a breakdown of the price for the 
fixed-price portion of its proposal "so [the agency could] confirm and 
analyze [the offeror's] understanding of the specification 
requirements."

Revised proposals were submitted by June 2.  American Lawn's technical 
rating remained "exceptional."  Maintenance Engineers's rating was 
upgraded to "acceptable," although it was still rated "marginal" on 
one technical factor--equipment--because the proposal did not 
demonstrate that the offeror could perform the contract requirements 
with the equipment proposed.  The revised prices and revised 
government estimate were:

Offeror        Fixed Price    Indef. Qty.    Total

American Lawn  $1,496,970     $330,470       $1,827,440

Maint. Eng.      1,254,000       56,015        1,310,015

Govt. Est.       1,745,728      210,930        1,956,659
American Lawn provided the requested breakdown of the lump sum 
fixed-price portion of its price and responded to the agency's 
concerns about its prices with an explanation for each CLIN in 
question.  American Lawn changed some of its CLIN prices in response 
to the agency's price discussions and verified the prices of CLINs 
that were not revised.  For the lump sum fixed-price portion of the 
proposal, American Lawn stated that it increased its price as a result 
of the amended requirements, and responded to the agency's concern 
about its low price with an explanation that the price was justified 
due to efficiencies based on its experience as the incumbent and its 
use of technologically advanced equipment.

Maintenance Engineers provided only the requested breakdown for the 
lump sum fixed-price portion of its price.  It did not comment on the 
agency's concerns about its low lump sum fixed-price or its low 
indefinite quantity prices.

By letter of July 17, the Navy held additional discussions with 
Maintenance Engineers and one other offeror.  The letter to 
Maintenance Engineers was primarily concerned with Maintenance 
Engineers's low prices and stated:

     "[p]er our letter of 19 May 1995, we advised you we considered 
     your prices for the items [on the enclosed list of indefinite 
     quantity CLINs] low.  Please explain how you will accomplish the 
     work, if ordered, per the specification requirements, at the 
     price proposed.  Include a breakdown of your prices.  Also advise 
     us of any overall strategy that may explain how you will 
     accomplish the work at the price proposed."

By letter of July 20, Maintenance Engineers provided a breakdown for 
the CLIN prices requested and the following explanation:

     "[w]e have made a review of our prices for the work you indicated 
     as low.  Maintenance Engineers is confident we can do the job at 
     our prices.  Our pricing is in keeping with our normal price 
     structure.

     "Due to the contractual requirement for prompt response it is 
     necessary for us to have personnel, supplies and equipment 
     available.  A portion of this cost is included in our fixed 
     price."

By letter of July 25, the Navy requested best and final offers (BAFO) 
from the competitive range offerors.  The letter to Maintenance 
Engineers referenced the offeror's breakdown of prices recently 
submitted, advised Maintenance Engineers to consider that "Hawaii's 
cost of living and labor market differ substantially from other 
areas," and identified specific local costs of concern.  The letter 
also stated:

     "[w]e noticed you did not attend the pre-proposal site visit.  If 
     you have not done so, you should verify the conditions, 
     locations, and accessibility of project sites since they may 
     affect your production time."

The Navy received BAFOs by the due date of July 31.  The technical 
ratings for American Lawn and Maintenance Engineers did not change.  
American Lawn revised its lump sum fixed-price to $1,398,960 for a 
total BAFO price of $1,729,430.  Maintenance Engineers made no change 
to its previously proposed total price of $1,310,015, which was the 
lowest BAFO price received, and did not comment further on the 
agency's price concerns.

In a Business Clearance Memorandum containing the award decision, the 
Navy compared the BAFO prices submitted and determined that 
Maintenance Engineers's price was "fair and reasonable."  In this 
Memorandum, the agency concluded:

     "[s]ince [Maintenance Engineers] offered the lowest price and 
     received an overall [a]cceptable technical rating, this 
     represents the best value to the [g]overnment.  We will award the 
     contract to [Maintenance Engineers]."

The Navy awarded the contract to Maintenance Engineers on August 2.  
This protest followed.  

American Lawn alleges that, contrary to the stated best value 
evaluation plan, the Navy awarded this contract on a lowest-priced, 
technically acceptable basis.  We agree.  Although the RFP stated that 
the technical and price proposals were of equal importance and that 
this was a best value procurement, the Navy did not consider in its 
selection decision the higher-rated, higher-priced BAFOs, such as the 
protester's "exceptional" rated BAFO.  The agency did not conduct a 
price/technical tradeoff analysis, 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.   Agencies 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.  Thus, the agency 
improperly departed from the stated best value evaluation plan and we 
sustain the protest on this basis.  See Colonial Storage Co.; Paxton 
Van Lines, Inc., B-253501.5 et al., Oct. 19, 1993, 93-2 CPD  234.

Moreover, it is not clear from the record that the Navy evaluated 
price realism in accordance with the RFP provision stating that 
"[p]roposals unrealistic in price . . . will be considered lacking in 
technical competence or comprehension of the complexity and risks of 
the contract requirements and their ratings lowered accordingly."[1] 
(Emphasis added.)  During discussions, the Navy specifically 
identified for each offeror, including Maintenance Engineers, the 
prices it considered to be too low and requested justification.  Most 
offerors either provided justification for their low prices or revised 
them.  Maintenance Engineers, however, while asserting confidence in 
its pricing, never provided the Navy with justification for that 
pricing, even though the Navy, throughout discussions, continued to 
consider the pricing questionably low.  

Notwithstanding the Navy's expressed concerns, the agency nevertheless 
determined that Maintenance Engineers's price was "fair and 
reasonable," and made award to that firm.  The record does not 
evidence why the Navy's repeated concerns about the lowness of 
Maintenance Engineers's price were assuaged, nor discuss how this low 
price reflected on that firm's understanding of the scope and 
complexity of the requirements.[2]  For example, although the agency 
noted that Maintenance Engineers's price for indefinite quantity work 
was only 27 percent of the government estimate and the next lowest 
price was 112 percent of the government estimate, the agency did not 
reasonably account for this discrepancy.[3]

Our concern in this area is two-fold:  1) the Navy may have failed to 
adhere to the RFP's price realism provision in its evaluation of 
proposals, and 2) the Navy's apparent disregard of price realism, 
together with the agency's negotiation approach to what it viewed as 
questionably low prices, may have inhibited price competition in the 
revised proposals and BAFOs, which would have been particularly 
prejudicial to those offerors, such as the protester, whose initial 
prices, although higher than Maintenance Engineers's prices, were 
identified by the agency as being low, and who heeded the agency's 
suggestion in this regard.[4]  See Ameriko/Omserv--Recon., B-252879.4, 
May 25, 1994, 94-1 CPD  341.[5]

We recommend that the Navy either evaluate proposals based on the best 
value plan stated in the RFP, including the price realism provision, 
or, if the Navy determines that its needs require award to the 
lowest-priced, technically acceptable offeror, obtain revised 
proposals and make a new source selection decision.  The agency should 
terminate the contract award to Maintenance Engineers if it is not the 
successful offeror.  We also find that the protester is entitled to 
recover the reasonable costs of filing and pursuing the protest, 
including reasonable attorneys' fees.  4 C.F.R.  21.6(d)(1).  The 
protester should submit its certified claim for protest costs directly 
to the agency within 60 days of receipt of this decision.  4 C.F.R.  
21.6(d)(1).

The protest is sustained.

Comptroller General
of the United States

1. Where the RFP provides for the assessment of price in order to 
evaluate an offeror's understanding of solicitation requirements, the 
agency must consider it in evaluating proposals.  See PHP Healthcare 
Corp., B-251933, May 13, 1993, 93-1 CPD  381; Binghamton Simulator 
Co., Inc., B-244839, Nov. 5, 1991, 91-2 CPD  429.

2. Neither the agency nor Maintenance Engineers points to any aspect 
of the awardee's proposal that indicates any special technical 
approach that accounts for Maintenance Engineers's low price.  
Moreover, the agency's evaluation of Maintenance Engineers's technical 
proposal included a marginal rating for the equipment factor because 
of concerns about the offeror's ability to perform with the equipment 
indicated in its proposal.

3. While in its report on this protest the Navy states that 
Maintenance Engineers may have included a portion of its costs for 
prompt response capability in its lump sum fixed price, this does not 
explain why Maintenance Engineers's extremely low indefinite quantity 
price, much less its total price is realistic or reasonable.  At best, 
this only explains Maintenance Engineers's allocation of some of the 
offeror's cost of performing indefinite quantity work from that 
portion of the price to the lump sum fixed price--a price which itself 
was of concern to the agency.  It seems logical that this allocation 
should only increase that existing concern about the realism of the 
lump sum fixed price, rather than resolve price realism concerns about 
either the indefinite quantity or total prices.

4. Although it is typical for offerors to lower their prices with the 
submission of BAFOs, see National Sys. Management Corp., 70 Comp. Gen. 
443 (1991), 91-1 CPD  408; DTH Management Group, B-252879.2; 
B-252879.3, Oct. 15, 1993, 93-2 CPD  227, the agency's actions here 
induced price increases almost without exception.  In comparing 
changes in the lump sum fixed price, all of the competitive range 
offerors receiving a "low price" advisement increased their lump sum 
prices.  American Lawn credibly states that the circumstances here 
inhibited it from lowering its price in its BAFO.

5. For these reasons, we disagree with the agency's contention that 
American Lawn is not an interested party to protest the agency's 
failure to follow the best value evaluation scheme because there was 
an intervening, lower-priced "exceptional offeror.  See 
Rolen-Rolen-Roberts Int'l; Rathe Prods., Inc./Design Prod., Inc., 
B-218424 et al., Aug. 1, 1985, 85-2 CPD  113.