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.