BNUMBER:  B-270323.3
DATE:  August 16, 1996
TITLE:  Bionetics Corporation--Entitlement to Costs

**********************************************************************

Matter of:Bionetics Corporation--Entitlement to Costs

File:     B-270323.3

Date:August 16, 1996

Del Stiltner Dameron, Esq., and Thomas F. Burke, Esq., McKenna & 
Cuneo, for the protester.
Richard P. Castiglia, Jr., Esq., Department of the Air Force, for the 
agency.
Peter A. Iannicelli, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

The General Accounting Office does not recommend payment of the costs 
of filing and pursuing protests where the Air Force amended the 
request for proposals (RFP) evaluation scheme after determining that 
the original evaluation scheme was flawed and that the requirements 
had changed due to planned closure of an Air Force base (i.e., the 
user activity) rather than in response to the protest allegations.  
Moreover, to the extent that the amendment may have been in response 
to the protester's belated request (i.e., made in its comments on the 
Air Force reports) that, the Air Force cancel the RFP if it doubted 
the accuracy of the RFP's quantity estimates, and resolicit on the 
basis of revised estimates, the Air Force acted promptly after the 
protester made the request and did not unduly delay taking corrective 
action.   

DECISION

Bionetics Corporation requests that our Office recommend that the Air 
Force pay it the reasonable costs of filing and pursuing two protests.  
We deny the request.

On June 7, 1995, the Air Force issued request for technical proposals 
No. F04699-95-R-0084, initiating the first phase of a two-step, 
negotiated procurement to obtain preventive/remedial maintenance and 
calibration services for test measurement and diagnostic support 
equipment at McClellan Air Force Base; the solicitation contemplated 
award of a requirements contract for a 1-year base period with options 
for three additional 1-year periods.  The technical proposals of 
Bionetics and four other offerors were evaluated and deemed 
technically acceptable.  

During the second phase of the procurement, request for proposals 
(RFP) 
No. F04699-95-R-0084 was issued to the five offerors that had 
submitted technically acceptable proposals.  The RFP required prices 
for servicing various quantity ranges of equipment.  For example, line 
item No. 0002 called for the contractor to staff, manage, and operate 
(including preventive and remedial maintenance and calibration) the 
test measurement and diagnostic support equipment at McClellan Air 
Force Base, required fixed prices for eight possible quantity ranges 
of units to be serviced each month (designated as sub-line items), and 
indicated the quantity range that was the government's best estimate 
of the most likely number of units to be serviced each month.[1]  The 
RFP stated that the average of the eight quantity-range prices would 
be used for evaluation purposes, and the contract would be awarded to 
the offeror with the lowest overall price for the basic and all option 
periods.[2]  

After evaluating price proposals, the contracting officer rejected 
Bionetics's proposal as both mathematically and materially unbalanced 
and awarded the contract to the next lowest-priced offeror, Kay and 
Associates, Inc. (Kay).  After a debriefing was conducted, Bionetics 
filed its initial protest in our Office on 
October 26, 1995, alleging that the contracting officer improperly 
rejected its proposal as unbalanced.  Bionetics asserted that the Air 
Force should terminate the contract with Kay and award Bionetics the 
contract under the RFP evaluation scheme.  

In a December 4, 1995 report, the Air Force defended its rejection of 
Bionetics's offer.  The agency's detailed analysis showed that 
Bionetics's offer was internally inconsistent with high prices for the 
basic and option years for a number of quantity ranges and extremely 
low prices for others.  Likewise, Bionetics's prices were higher than 
Kay's (and other offerors) for the basic and option years for a number 
of quantity ranges and drastically lower for others.  For example, for 
the basic contract period,[3] the monthly prices of Bionetics and Kay 
for line item 
No. 0002 and its sub-line items were as follows:  

  LINE ITEM  QUANTITY        RANGE             PRICE[4]
               Low         High         Bionetics    Kay           

  0002AA       2301        2450         $147,788  $112,386
  0002AB       2451        2600         $151,893  $119,483
  0002AC       2601        2750         $155,977  $126,579
  0002AD       2751        2900         $160,150  $133,676
  0002AE[5]    2901        3050         $155,997  $140,772
  0002AF       3051        3200         $134,805  $147,869
  0002AG       3201        3350         $ 99,254  $154,966
  0002AH       3351        3500         $ 46,225  $162,062

Based upon its review of Bionetics's offer and cost data Bionetics had 
given it[6] regarding some of the line items and sub-line items, the 
Air Force reported, among other things, that: 

  (1)  Bionetics's monthly price to service 2,301 units was $147,788 
  while its monthly price for servicing 3,500 units was only $46,225; 
  thus, it would cost the Air Force almost 350 percent more to have 
  Bionetics service roughly 1,200 fewer units per month.

  (2)  Bionetics's unit price was $60.32 for servicing 2,450 units and 
  only $13.21 for servicing 3,500 units; thus, the unit price for the 
  lower quantity was more than 450 percent higher than the unit price 
  for the higher quantity.

  (3)  If the actual number of units serviced each month is at or 
  below the government's best estimate, acceptance of Bionetics's 
  offer will result in the Air Force's paying hundreds of thousands of 
  dollars more to have the work done.

  (4)  If the Air Force consistently orders work in the best estimate 
  range, then Bionetics's offer will represent a lower total cost than 
  Kay's only if the basic contract and all three options are fully 
  performed.

  (5)  Cost data provided by Bionetics showed the same number of 
  management, quality, and support service employees to perform work 
  in each of the five lowest quantity ranges.  Since it should take 
  fewer employees to service fewer units, the Air Force concluded that 
  Bionetics had inflated its labor costs for the lowest quantity 
  ranges and, therefore, Bionetics had overstated some of its prices 
  in these quantity ranges.  

After reviewing the agency's report on its initial protest, Bionetics 
filed a supplemental protest on December 13, 1995, alleging that the 
Air Force's price evaluation deviated from the evaluation scheme set 
forth in the RFP.  Essentially, Bionetics argued that the Air Force's 
conclusion that award to Bionetics might cost significantly more than 
award to Kay were based upon assumptions that one or more of the 
options might not be exercised and that the Air Force most likely 
would order work at or below the "best estimate" quantity range.  
Bionetics argued that the assumptions were contrary to the RFP's 
evaluation scheme which indicated that the evaluated price would be 
computed using the average price for all quantity ranges rather than 
the "best estimate" price and would include the basic plus all 
option-year prices.  

On December 14, the Air Force asked us to dismiss the supplemental 
protest as "frivolous."  By letter of December 22, the protester 
responded to the dismissal request[7] and complained that the Air 
Force had, in effect, evaluated the offers under several different 
hypothetical scenarios, none of which was set forth in the RFP.  The 
protester also stated for the first time that, if the Air Force had 
doubts regarding the accuracy of the RFP's best estimates of the 
quantity of services that would be ordered during the base and all 
option periods of the contract, the Air Force should cancel the RFP 
and resolicit using revised estimates.  

By letter of January 29, 1996, the Air Force restated its position 
that award of a contract to Bionetics would not likely result in the 
government's paying the lowest overall price for contract performance.  
The Air Force also asked us to dismiss the protests, stating:

  "Because the Air Force has identified a flaw in the evaluation 
  scheme used for this acquisition, we have decided to amend the 
  solicitation to include a new evaluation methodology and will 
  provide each competitor which previously had submitted an acceptable 
  technical proposal the opportunity to submit a revised Best and 
  Final Offer."    

Because the agency proposed to amend the RFP's evaluation scheme and 
to allow offerors to submit revised best and final 
offers--essentially, the relief requested by the protester in its 
December 22, 1995 comments--we dismissed the protests as academic on 
January 30, 1996.  Shortly thereafter, Bionetics requested that we 
recommend that the Air Force pay Bionetics its costs of filing and 
pursuing the protests.

Our Bid Protest Regulations provide that a protester may be entitled 
to reimbursement of protest costs where, prior to our issuing a 
decision on the merits of the protest, the procuring agency takes 
corrective action in response to a clearly meritorious protest.  See 4 
C.F.R.  sec.  21.8(e) (1996); M.E.E., Inc., B-265605.3; B-265605.4, Feb. 
22, 1996, 96-1 CPD  para.  109.  Where the agency's actions do not 
constitute corrective action in response to a protest, the protester 
is not entitled to reimbursement.  Id.  Moreover, we will determine 
the protester entitled to its protest costs only where the agency 
unduly delayed taking corrective action in the face of a clearly 
meritorious protest.  See LORS Medical Corp.--Entitlement to Costs, 
B-270269.2, Apr. 2, 1996, 96-1 CPD  para.  171.

The Air Force's amending of the RFP's evaluation scheme was not 
corrective action taken in response to either Bionetics's original or 
supplemental protest.  Bionetics asserted in both its initial and 
supplemental protests that the contracting officer improperly had 
determined that Bionetics's offer was unbalanced and that the Air 
Force should award it the contract in strict accord with the RFP's 
evaluation scheme.  In defending the protests, the Air Force rejected 
Bionetics's allegation that Bionetics's offer was not unbalanced.  
Likewise, the Air Force rejected the assertion that Bionetics should 
be awarded the contract under the RFP's original evaluation scheme.  
However, during the course of investigating the allegations, the Air 
Force recognized that the evaluation scheme was defective because the 
contract probably would not be awarded to the offeror proposing the 
lowest cost for the performance levels that would actually be 
required.  In addition, the Air Force  reported that McClellan Air 
Force Base will be closed and, therefore, it is likely that not all of 
the options will be exercised; as noted above, Bionetics's proposal is 
the least costly alternative only if all options are exercised.  Thus, 
it is clear that the Air Force took corrective action not in response 
to Bionetics's original protests but for reasons that arose and became 
apparent during its investigation and defense of Bionetics's protests.  
As the Air Force's corrective action was not in response to a clearly 
meritorious protest, Bionetics is not entitled to reimbursement of its 
protest costs.  See 4 C.F.R.  sec.  21.8(e); M.E.E., Inc., supra. 

Bionetics's belated modification of its protests to include as a 
proposed remedy a request that the Air Force cancel the RFP and 
resolicit using its best estimates of its actual needs does not 
entitle Bionetics to reimbursement of the costs of filing and pursuing 
its protests.  As noted above, this suggested remedy was first made by 
Bionetics in its comments filed on December 22, 1995, and the agency 
notified our Office that it was taking corrective action on January 
29, 1996.  To the extent that the agency's corrective action may have 
been the result of the protester's suggestion rather than the Air 
Force's own investigation and changed circumstances, we believe that 
the Air Force's reaction to the suggested remedy was sufficiently 
prompt, especially considering the end of year holidays, and that 
there was no undue delay requiring further expense to the protester.  
See LORS Medical Corp.--Entitlement to Costs, supra.

The request for costs is denied.

Comptroller General
of the United States

1. Line items Nos. 14, 26, and 38 requested prices for the same 
services on eight quantity ranges of equipment to be serviced during 
the three option periods.

2. Payment under the contract would be based upon the actual number of 
units serviced each month at the price quoted for that number of 
units.

3. Similar pricing patterns were shown for the option years.

4. All prices are rounded to the nearest dollar.

5. The RFP stated that this was the government's best estimate of the 
most likely number of units to be serviced each month.

6. After receiving Bionetics's initial protest, the Air Force 
requested that the protester supply it with cost data to support its 
prices for each of the quantity ranges for each year of the contract.  
In response, Bionetics submitted cost data only for those line 
items/sub-line items that it stated were priced below cost. 

7. Several rounds of comments were received from each of the 
interested parties.