BNUMBER:  B-270185; B-270185.2
DATE:  January 25, 1996
TITLE:  Health Management Resources, Inc.

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Matter of:Health Management Resources, Inc.

File:     B-270185; B-270185.2

Date:     January 25, 1996

Terrence M. O'Connor, Esq., for the protester.
Terrence J. Tychan and Mike Colvin, Department of Health and Human 
Services, for the agency.
Paul E. Jordan, Esq., and Paul Lieberman, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Agency conducted meaningful discussions regarding the protester's 
proposed approach to a particular task through discussion questions 
which reasonably led the protester into the areas of concern.

2.  Agency's decision not to rescore proposals is unobjectionable 
where record establishes that agency considered all matters contained 
in offerors' best and final offer proposal revisions, and reasonably 
determined that relative standing of offerors' proposals did not 
change as a result. 

3.  Award to offeror who submitted higher-cost, higher technically 
rated proposal is reasonable where solicitation evaluation scheme 
gives greater weight to technical merit than to cost, and record 
supports selection official's determination that the relatively slight 
cost savings associated with the protester's proposal did not outweigh 
technical superiority of awardee's proposal.  

DECISION

Health Management Resources, Inc. (HMRI) protests the award of a 
contract to 
J&E Associates under request for proposals (RFP) No. HRSA 
240-BPHC-38(5) 
NAB, a small business set-aside, issued by the Health Resources and 
Services Administration, Department of Health and Human Services for 
furnishing travel and logistical support services.  HMRI contends that 
the agency failed to conduct meaningful discussions and lacked a 
rational basis for its award decision.  

We deny the protest. 

The RFP, which was issued on March 6, 1995, sought proposals to 
furnish conference and travel support for National Health Service 
Corps activities and coordinate with other federal, state, and 
regional agencies in providing logistics for recruitment and retention 
conferences, management development/training conferences, and other 
meetings.  The RFP contemplated award of a cost-plus-fixed-fee 
contract for a base year with 4 option years.  

Award was to be made to the offeror whose proposal was most 
advantageous to the government with greater consideration given to the 
evaluation of technical proposals than to cost.  Proposals were 
evaluated on the basis of cost and four technical factors:  problem 
and approach; personnel and organization structure; facilities; and 
demonstrated capability of offeror.  

Eleven offers, including HMRI's and J&E's, were received by the April 
20 closing time for receipt of proposals.  Based upon an initial 
evaluation, the agency found three proposals, including those of HMRI 
and J&E, to be in the competitive range.  Prior to discussions, HMRI's 
proposal was scored at 79.2 points and J&E's proposal was scored at 84 
points.  The agency conducted written and oral discussions with each 
competitive range offeror.  At the close of discussions, the agency 
requested best and final offers (BAFO) from the three offerors.  The 
agency reviewed the BAFOs and found that the offerors had responded to 
all questions asked by the technical review committee (TRC).  The TRC 
determined that it was not necessary to rescore the proposals in light 
of the BAFOs.  In reviewing HMRI's cost proposal, the evaluators 
determined that HMRI had understated the costs of tasks related to 
change of station travel and orientation conferences.  Accordingly, 
the agency added more than $5 million to HMRI's evaluated total cost.  
The final scores and evaluated BAFOs are as follows:

          Offeror             J&E         HMRI

          Problem-Approach (35)30.6       24.6

          Personnel/Org. (30) 26          24.6

          Facilities (5)      4.8         3.4

          Capability (30)     22.6        26.6

          Total Score (100)   84          79.2

          Evaluated BAFO Cost $27,591,534 $26,219,386
The third offeror, Casals & Associates, with a proposal score of 86.2 
points and the lowest evaluated cost, was selected for award, but the 
Small Business Administration (SBA) determined that Casals did not 
qualify as a small business for purposes of this procurement.[1]  The 
contracting officer, finding that the relatively small cost difference 
between the remaining proposals ($1.37 million) was not sufficient to 
warrant award to the technically lower rated offeror, determined to 
award the contract to J&E.  Upon learning of the award, HMRI requested 
a debriefing and filed a protest with our Office.  After receiving its 
debriefing, HMRI amended its protest.

HMRI contends that the agency failed to provide it with meaningful 
discussions with regard to its proposed costs for the change of 
station travel task and for the orientation conference tasks.  In 
HMRI's view, had the agency properly discussed these matters with it, 
there would have been no need to adjust its costs so far upward.

Agencies are required to conduct meaningful discussions with all 
competitive range offerors.  Stone & Webster Eng'g Corp., B-255286.2, 
Apr. 12, 1994, 94-1 CPD  para.  306.  In order for discussions to be 
meaningful, contracting officials must advise offerors of deficiencies 
in their proposals and afford offerors an opportunity to revise their 
proposals to satisfy the government's requirements.  Id.  This does 
not mean that offerors are entitled to all-encompassing discussions.  
Agencies are only required to lead offerors into areas of their 
proposals that require amplification.  Caldwell Consulting Assocs., 
B-242767; B-242767.2, June 5, 1991, 91-1 CPD  para.  530.  The degree of 
specificity required in conducting discussions is not constant and is 
primarily a matter for the procuring agency to determine.  JCI Envtl. 
Servs., B-250752.3, Apr. 7, 1993, 93-1 CPD  para.  299.  

Here, during the conduct of discussions, the agency raised the issue 
of HMRI's treatment of the change of station task a number of times, 
and provided HMRI with a summary of the narrative comments of the 
evaluators.  For example, the comments advised that the change of 
station travel was "weak" and would require further clarification, and 
that the proposal did not address how movement of household goods 
would occur or the reimbursement process.  The agency also addressed 
this task in a general information statement, provided to all 
offerors, which explained how offerors should base their costs.  While 
the protester states that the agency made no oral representations 
about this task, the agency's summary of negotiation states that all 
offerors were advised that the cost of this task would be high and 
should be reevaluated before submission of BAFOs.  The agency also 
raised questions concerning HMRI's travel vendor and the costs 
associated with it.  While these references did not specifically state 
that the protester's costs were too low, they did apprise the 
protester that the agency was concerned with the protester's proposal 
for these tasks.  Implicit in the agency's identification of these 
areas was the need for the protester to reevaluate the costs 
associated with them.  Thus, they were sufficient to lead the 
protester into this area of its proposal and provide it the 
opportunity to review and revise its cost proposal.

With regard to the orientation conference tasks, in reviewing the 
protester's BAFO the agency found that HMRI had proposed only the 
minimum number of conferences each year.  Since the number of 
scholarship conferences was already anticipated to exceed the minimum, 
the agency increased the costs, using the protester's own figures.  
Similarly, the agency found that HMRI's BAFO had decreased certain 
conference costs associated with its subcontractor, without apparent 
explanation.  Since the RFP advised, and HMRI acknowledged in its 
proposal, that the number of certain conference attendees would 
increase by 100 persons each year, the agency determined that an 
increase in costs was warranted.  These matters were not the subject 
of discussions.  However, since they were first introduced in HMRI's 
BAFO, the agency was not required to reopen discussions to obtain 
HMRI's input.  See Potomac Research, Inc., B-250152.8; B-250152.11, 
July 22, 1993, 93-2 CPD  para.  109.  

HMRI next argues that the agency should have rescored the proposals 
after reviewing the offerors' BAFOs.  Generally, there is no 
requirement that an agency formally rescore BAFOs; rather, all that is 
required is that the contracting officer consider the effect on 
proposals of any changes contained in the BAFOs.  University of Dayton 
Research Inst., B-245431, Jan. 2, 1992, 92-1 CPD  para.  6.  Here, in the 
course of its evaluations, the agency scored the initial proposals on 
the basis of strengths and weaknesses it identified in each proposal.  
The agency then provided each offeror with the narrative comments of 
the evaluators.  Both J&E and HMRI responded to the initial 
identification of weaknesses and questions.  These responses resulted 
in additional questions and comments from the evaluators, which were 
provided to the offerors prior to the conduct of oral discussions.  At 
the close of discussions, both offerors provided technical and cost 
BAFOs.  After reviewing the BAFOs, the agency determined that the 
offerors had responded to all questions asked, identified the 
remaining concerns, and determined that rescoring was not necessary.  
While the offerors had responded to all outstanding questions, the 
record does not indicate that the responses rendered the proposals 
perfect.  Rather, since both offerors provided satisfactory responses, 
the agency in effect found that each had improved to the same degree.  
It is apparently for this reason that no rescoring was done, since any 
rescoring would have left HMRI and J&E in the same relative positions.  
While the protester argues that its improvements were not considered, 
the record makes it clear that the contracting officer reviewed the 
final evaluations and considered the relative strengths and weaknesses 
under the final evaluation in making his award determination.  
Accordingly, we agree with the agency that there was no need to 
rescore the BAFOs.

HMRI also argues that the award was flawed because the record does not 
establish that it had any rational basis.  In the protester's view, 
the source selection statement does not support the award 
determination. 

In a negotiated procurement, the government is not required to make 
award to the lowest-cost, technically acceptable offeror unless the 
RFP specifies that cost will be the determinative factor for award.  
General Servs. Eng'g, Inc., B-245458, Jan. 9, 1992, 92-1 CPD  para.  44.  
Agency officials have broad discretion in determining the manner and 
extent to which they will make use of technical and cost evaluation 
results.  Cost/technical tradeoffs may be made; the extent to which 
one may be sacrificed for the other is governed by the test of 
rationality and consistency with the established evaluation factors.  
Id.  Even where a source selection official does not specifically 
discuss the technical/cost tradeoff in the selection decision 
document, this does not affect the validity of the decision if the 
record shows that the agency, in consideration of the relative 
technical merit of the awardee's and the lower-cost protester's 
proposals, reasonably decided that the higher-cost awardee's proposal 
was worth the additional cost.  McShade Gov't Contracting Servs., 
B-232977, Feb. 6, 1989, 89-1 CPD  para.  118.  In this case, the record 
supports the contracting officer's decision to award the contract to 
J&E as the technically superior offeror, even though J&E proposed a 
higher cost.

The contracting officer's source selection statement details the 
chronology of the procurement and contains the scores and adjusted 
costs for each offeror's proposal.  In it, the contracting officer 
concludes that award to J&E is in the best interests of the 
government, noting that J&E's proposal is higher rated technically 
than HMRI's, and that HMRI's costs were understated.  This selection 
statement alone does not contain sufficient detail to demonstrate that 
the contracting officer's decision is rationally based.  However, 
other documents in the record, including the evaluations and the 
contracting officer's statement filed with the agency report, provide 
sufficient information to support the award decision.  

According to the contracting officer's statement, he reviewed the 
TRC's evaluation narratives in determining the original competitive 
range and in reviewing the award recommendations of the TRC and 
contract specialist.  Based on these reviews, he concluded that J&E 
had submitted a technically superior proposal.  We have reviewed the 
TRC's narrative comments on the evaluations and they support the 
contracting officer's conclusion.

For example, the evaluations show that J&E's proposal received higher 
scores than HMRI's under three of the four evaluation factors.  Under 
the most important factor, problem and approach, the evaluators found 
that J&E had a very positive approach to recruiting and that it had 
demonstrated a true understanding of the contract's scope, while 
HMRI's proposal was evaluated simply as showing a thorough knowledge 
and understanding of the problem.  Further, J&E proposed to provide 
all services itself, while HMRI proposed the use of subcontractors.  
Throughout this factor evaluation, the evaluators praised J&E's 
excellence in organization, proposal of experienced staff, and 
proposal detail including the narrative on the change of station task.  
Conversely, the agency identified twice as many weaknesses in HMRI's 
proposal and found its handling of the change of station task to be 
very weak.  As discussions progressed, the agency had some 21 
questions for the protester compared with 14 for J&E.  In reviewing 
the BAFOs, the agency had only two concerns with J&E's proposal, an 
ambiguity regarding the identity of one regional coordinator and the 
high cost proposed for that contract activity.  Conversely, the agency 
identified four concerns with HMRI's proposal, regarding HMRI's 
significant understatement of costs for three tasks (including the 
change of station task), and the project officer's assessment that it 
could not perform the contract at the proposed BAFO costs.  Though it 
appeared that the remaining concerns with HMRI's proposal could be 
"corrected" by increasing the relevant costs, the contracting officer 
considered the concerns to be significantly greater than those 
identified in J&E's proposal.  As a result, notwithstanding the 
evaluators' initial conclusion that HMRI had a thorough understanding 
of the problem, the contracting officer concluded that the concerns 
raised in HMRI's BAFO called into question the protester's overall 
understanding and technical capability.

As discussed above, even though HMRI's responses to the discussion 
questions improved its proposal, the same conclusion can be made with 
regard to J&E's proposal.  Implicit in the evaluators' decision not to 
rescore the proposals is their finding that both offerors improved 
their proposals to the same relative degree.  Taking the evaluations, 
including the relative strengths and remaining concerns into 
consideration, the contracting officer reasonably concluded that J&E's 
proposal was technically superior to HMRI's proposal.  After 
considering the adjustment to HMRI's costs to reflect the more likely 
costs involved, he found that J&E's proposal was only $1.37 million 
higher than HMRI's for a more than $27 million contract effort.  Since 
the cost difference only represents about 5 percent of the contract 
award over 5 years, we think the contracting officer could reasonably 
conclude that this difference was not sufficient to outweigh the 
significance of J&E's technical superiority.  Accordingly, we have no 
basis to object to the source selection decision.[2]

The protest is denied.

Comptroller General 
of the United States

1. Casals has appealed the SBA's determination.

2. HMRI also argues that the agency failed to follow the evaluation 
criteria because it made technical considerations the sole, rather 
than paramount, basis for award without consideration of cost.  While 
HMRI disagrees with the contracting officer's conclusions regarding 
the importance of the cost difference here, it is plain from the 
record that the contracting officer did consider cost in making his 
source selection.