BNUMBER:  B-270456; B-270456.2
DATE:  March 7, 1996
TITLE:  Sutron Corporation

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Matter of:Sutron Corporation

File:     B-270456; B-270456.2

Date:March 7, 1996

Ross W. Dembling, Esq., Craig A. Holman, Esq., and Richard L. 
Moorhouse, Esq., Holland & Knight, for the protester.
Sherry Kinland Kaswell, Esq., and Justin P. Patterson, Esq., 
Department of the Interior, for the agency.
Henry J. Gorczycki, Esq., and Guy R. Pietrovito, Esq., , Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency reasonably found protester's proposal unacceptable where it 
offered inexperienced field maintenance technicians with insufficient 
hours and significantly lowered its price in its best and final offer 
without explanation, despite being advised during discussions that the 
offered technicians were considered inexperienced, that too few hours 
were being proposed, and that its price was considered questionably 
low, given the other concerns.

DECISION

Sutron Corporation protests the award of a contract to Vitel, Inc. 
under request for proposals (RFP) No. 14252-5-SP-10-13670, issued by 
the Department of the Interior, Bureau of Reclamation, for preventive 
and remedial maintenance service of the hydrological and 
meteorological data acquisition (hydromet) system[1] in California, 
Idaho, Nevada, Oregon, Washington, and Wyoming.  Sutron protests the 
agency's conduct of discussions, evaluation of proposals, and source 
selection decision.

We deny the protests.

The hydromet system consists of 164 remote sites at which a data 
collection platform (manufactured by either Sutron or Vitel) collects 
hydrological and meteorological data from sensors and sends that data 
via satellite to the agency's Direct Readout Ground Station (DRGS) in 
Boise, Idaho.  The DRGS is hardwired into the agency's central 
computer facility.  Each remote site platform transmits data 
consisting of 16 quarter-hour interval readings every 4 hours, as well 
as whenever the sensors detect significant changes in data.  The data 
are monitored on a real-time basis, providing the basis for various 
critical operational decisions, such as adjusting reservoir releases 
to prevent or reduce flooding.  The data are also used for statistical 
analyses, projections, and forecasts.  In order to avoid loss of 
real-time data due to equipment failure, the agency has a back-up 
system for all components of the hydromet system except for the remote 
site equipment.  Both Sutron and Vitel are incumbent contractors on 
portions of the maintenance requirements for this system, and have a 
history of installing and maintaining the system.

The RFP requested that offerors propose fixed monthly and unit prices 
for the maintenance services for a contract for the 1996 fiscal year 
with 4 option years.  The RFP required minimum level of service rates 
of 95 percent for the DRGS and for all remote sites combined, and 93 
percent for each individual remote site.  A level of service rate of 
95 or 93 percent means that the site or sites can be out of service up 
to 5 or 7 percent of the time, respectively, and still satisfy the 
minimum level of service requirements.  For example, a 30-day month 
has 720 (30 x 24) possible service hours.  The 164 remote sites 
combined have 118,080 possible service hours per month.  Thus, the 
maximum hours that a site or sites may be out of service each month 
are 36 hours for the DRGS (720 x 5 percent), 50.4 hours for each 
remote site (720 x 7 percent), and 5,904 total for all remote sites 
(118,080 x 5 percent).  The RFP allowed offerors to propose service 
rates above the minimum requirements and stated that if an offeror 
proposed a higher level of service than required, that higher level 
would become the minimum standard of performance under a contract 
awarded to that offeror.

A detailed statement of work was provided, describing the required 
services.  The contractor was required to provide all labor, 
"regardless of length of time, time of day, day of the week," 
necessary to perform the contract and to furnish all required hardware 
and spare parts.  Among other things, the contractor would provide all 
preventative maintenance services for remote hydromet sites and to 
restore any remote hydromet site to service within 24 hours of 
notification of a problem.  The contractor was also required to 
provide at least four qualified field maintenance technicians and one 
qualified back-up maintenance person at all times during the contract 
period.

A best value basis for award was stated.  The RFP listed the following 
evaluation factors in descending order of importance:[2]

     Risk
     Field Maintenance Personnel
     Maintenance Plan
     Level of Service
     Cost/Price
     References
     Program Management
     Other Information
     Exceptions and/or Alternate Proposals.

Under the risk factor, the RFP, as amended, stated:

     "[e]ach proposal shall be evaluated in terms of risks that may 
     [a]ffect the Contractor's ability to sustain the required, 
     minimum availability rates.  These risk[s] to real-time data 
     collection may be caused by such elements as, but not limited to:  
     insufficient number, and/or training, and/or experience of field 
     technicians; field office locations that are too far from some 
     sites; marginal quantities of working spares available to each 
     field technician on a day to day basis; marginal repair 
     turnaround interval for remedial maintenance of hardware taken 
     out of service; insufficient equipment; or any other factor that 
     is evaluated as increasing the likelihood that real-time data is 
     lost.  The anticipated amount of Government oversight shall be 
     evaluated."

Under the cost/price factor, a note stated that data collection on a 
real-time basis "is extremely valuable" and instructed offerors that 
availability of system components "is more important than cutting 
corners that could reduce maintenance prices."

The agency received initial proposals from Vitel and Sutron.  Sutron 
proposed the minimum required level of service rates and the lowest 
initial price of $1.9 million.  Vitel proposed a 99-percent level of 
service for both the DRGS and the remote sites as a whole (and at 
least the minimum required level of service rate for each individual 
site) at a price of $2.3 million.

The agency found that Sutron's initial proposal contained a number of 
weaknesses and deficiencies, including a high percentage of 
inexperienced field maintenance technicians;[3] an unrealistically low 
allocation of labor hours for field maintenance technicians 
considering their inexperience; a poor performance record of repair 
services; an unrealistically low allocation of labor hours for 
repairs; and insufficient backup staff.  The agency's concerns with 
Sutron's inexperienced field maintenance technicians were exacerbated 
by the fact that the contracting officer's technical representative 
(COTR) intended to retire 3 months into contract performance to be 
replaced by an inexperienced COTR, who could not provide the contract 
assistance afforded by the previous COTR.  The agency also questioned 
Sutron's low price, which represented a significant reduction from its 
1990 contract price, even though the RFP reflected greater contract 
requirements.  The agency concluded that Sutron's proposal represented 
an overall high risk; that Sutron's proposal presented risks of 
increased government oversight and equipment downtime and 
corresponding loss of real-time data.

Vitel's proposal, on the other hand, was determined to be low risk, 
given Vitel's proposal of experienced field maintenance technicians, 
realistic labor hours for its proposed level of service, a large pool 
of experienced back-up personnel, and a higher level of service than 
required, which represented a reduction in possible downtime by 80 
percent.

By letter of May 26, 1995, the agency opened discussions.  The agency 
provided Sutron with detailed written explanations of its evaluation 
concerns, including that Sutron had proposed inexperienced field 
maintenance technicians and had estimated inadequate labor hours.  The 
agency requested detailed cost/price information, advising Sutron that 
the agency needed such information to determine the technical 
tradeoffs made by Sutron which could "exacerbate the risk of greater 
real-time data losses. . . ."

Successive rounds of discussions and proposal revisions followed, 
which resulted in Sutron's revising its price upward to $2,381,991.  
This price revision included supporting cost/price data.  Although 
Sutron had not increased its allocation of labor hours or addressed 
the agency's concern that the inexperience of its proposed field 
maintenance technicians would require more labor hours to perform than 
Sutron had estimated, the agency determined that Sutron's proposed 
fixed price included sufficient profit to cover the additional labor 
hours which the agency believed Sutron's inexperienced field 
maintenance technicians would require during the first part of the 
contract.

Best and final offers (BAFO) were received from both offerors.  Sutron 
reduced its price to $2,170,231; Vitel proposed price was $2,448,811.  
In its final technical evaluation of Sutron's BAFO, the agency found, 
among other things, that the number of labor hours allocated by Sutron 
for the inexperienced field maintenance technicians was "grossly 
inadequate" and that the labor hours allocated to repairs was also 
inadequate, particularly considering Sutron's poor past repair record.  
Although the agency's concerns with Sutron's labor allocation and 
inexperienced field maintenance technicians had been identified during 
discussions, Sutron had failed to address these concerns.  In the 
agency's view, Sutron's offer of inadequate hours for its 
inexperienced field maintenance technicians and to perform repairs 
demonstrated that Sutron did not understand the problem involved in 
meeting the requirements of this solicitation, particularly 
considering that the level of available government assistance would be 
lower given the experienced COTR's retirement.  

The agency was also troubled by Sutron's reduction of its BAFO price 
by more than $200,000 from its previously revised price and Sutron's 
failure to provide corresponding cost/price data explaining these 
reductions.  The agency concluded that Sutron's reduced price included 
insufficient profit to cover the additional labor hours that the 
agency was convinced Sutron would be required to perform because of 
the inexperience of its field maintenance technicians.  The agency 
determined that Sutron's BAFO was technically unacceptable.

Vitel's proposal, on the other hand, was found to be technically 
acceptable and low risk, and its price to be fair and reasonable.  In 
selecting Vitel's proposal for award, the contracting officer found 
that even if Sutron's proposal were considered acceptable, Vitel's 
vastly superior BAFO represented the best value to the government.  
Specifically, the contracting officer found that Vitel continued to 
propose higher levels of service and submitted a detailed proposal 
demonstrating that it included the additional resources necessary to 
provide the high level of service.  In fact, Vitel successfully 
provided this same high level of service in the past.  The difference 
in levels of service proposed under these two BAFOs meant that Vitel 
was proposing 80 percent less downtime during which real-time data 
would be lost, which the agency determined was worth the 12-percent 
higher price proposed by Vitel.  The contracting officer also 
determined that Vitel's proposal presented low risk of excessive loss 
of data and that government oversight of Vitel's performance would be 
relatively low.  Award was made to Vitel, and this protest followed.  

Sutron complains that the agency failed to conduct meaningful 
discussions because the agency did not adequately state its concerns 
with Sutron's insufficient labor hours and did not state the agency's 
concerns with Sutron's profit; that the agency's evaluation of profit 
was unreasonable; and that the unacceptability determination was in 
fact a determination of nonresponsibility that the agency should have 
referred to the Small Business Administration (SBA) for consideration 
under Certificate of Competency (COC) procedures.

Our review of the record shows that discussions with Sutron were quite 
detailed, during which Sutron was advised of the agency's labor hour 
estimates and its concerns arising from Sutron's inadequate labor 
hours and low price.  For example, the agency informed Sutron in a 
detailed written question that, in the agency's judgment, Sutron's 
inexperienced field maintenance technicians would require 25 to 50 
percent more labor hours to perform during their first 2 contract 
years than would experienced field maintenance technicians and that 
this learning curve would be exacerbated by the COTR's pending 
retirement.  Similarly, the agency questioned Sutron as to how the 
firm would be able to provide the required level of service, 
considering its offer of inexperienced field maintenance technicians 
and reduced prices from those billed under the firm's prior contract.  
We find that the agency's discussions with Sutron adequately 
identified the evaluated weaknesses and deficiencies in Sutron's 
proposal and were therefore meaningful.

We also find that the agency did not fail to provide meaningful 
discussions with regard to the agency's concern that Sutron's low 
profit margin posed serious risk given its proposed personnel.  
Specifically, the agency's final risk assessment that concluded that 
Sutron's estimated profit would be too low to cover the higher 
anticipated labor hour costs due to the firm's inexperienced field 
maintenance technicians only arose as a result of Sutron's reduction 
of its proposed price in its BAFO without providing supporting data to 
clearly show where the reductions occurred.  The agency was not 
required to reopen discussions to provide Sutron with an opportunity 
to address concerns that only arose as the result of the protester's 
BAFO revisions.  See Cubic Field Servs., Inc., B-252526, June 2, 1993, 
93-1 CPD  para.  419.     

Despite being apprised of the evaluated weaknesses and deficiencies in 
its proposal during discussions, Sutron did not take the opportunity 
provided during discussions to either increase its labor hours or 
demonstrate that the agency's labor hour estimates were unreasonable.  
Sutron also did not address the agency's concerns with its low price 
in light of Sutron's offer of inexperienced field maintenance 
technicians; rather, Sutron merely asserted that its low price was 
attributable to an increased number of sites, to the creation of a 
separate field services overhead pool, and to the creation of a repair 
center that lowered general and administrative costs per site.  This 
response did not, however, address how Sutron's low price could be 
maintained in the face of the anticipated far greater labor hours that 
would be needed as a result of the use of inexperienced field 
maintenance technicians.  Moreover, as noted above, Sutron introduced 
a significant price reduction in its BAFO without explanation, even 
though the agency had specifically advised Sutron during discussions 
of its concerns about Sutron's price and that Sutron must provide 
cost/price data to support its price proposal.  We find from our 
review of the record that the agency was reasonably concerned that 
Sutron's proposal of inexperienced field maintenance technicians in 
connection with its low estimated labor hours and unexplained BAFO 
price reduction posed a high performance risk that rendered its 
proposal unacceptable.  

Even if we assume that Sutron's BAFO is acceptable, none of Sutron's 
protest issues provides a basis upon which the source selection 
decision would be disturbed.  The RFP stated that an offeror's 
proposed level of service was more important than price in the 
evaluation of proposals, and it is undisputed that Vitel proposed a 
higher level of service than Sutron.  In fact, the difference in level 
of service proposed by Vitel and Sutron is considerable.  The 
80-percent greater level of service means that the maximum allowable 
hours of downtime per month for the remote sites combined would be 
more than 4,700 hours less for Vitel.  Moreover, as indicated by the 
foregoing discussion, Sutorn's proposal is clearly more risky than 
Vitel's.  Even if Vitel's and Sutron's proposals were considered equal 
in all other respects, the contracting officer determined that the 
additional level of service proposed by Vitel in itself was worth the 
higher price of that proposal.  Considering the stated importance of 
avoiding system downtime vis-a-vis price in the RFP evaluation scheme 
and that risk was the most important evaluation factor, the agency's 
selection of Vitel's offer is consistent with the stated evaluation 
plan and reasonable. 

Sutron finally complains that the agency's concerns with its low BAFO 
price and low profit margin actually constituted a determination of 
nonresponsibility of a small business that the agency was required to 
refer to the SBA for consideration under that agency's COC procedures.  
We disagree.  An agency may in its discretion provide for the use of a 
cost realism analysis in a solicitation for the award of a fixed-price 
contract for the limited purposes of measuring an offeror's 
understanding of the solicitation's technical requirements or to 
assess the risk inherent in an offeror's approach.  See PHP Healthcare 
Corp., B-251933, May 13, 1993, 93-1 CPD  para.  381.  Here, the RFP informed 
offerors that each proposal would be evaluated in terms of risks that 
may affect the contractor's ability to sustain the required, minimum 
availability rates.  Offerors were also informed that the agency would 
perform "a cost or price evaluation . . . to determine the 
reasonableness of costs or prices proposed and the offeror's 
understanding of, and ability to perform, the prospective contract."  
Contrary to the protester's arguments, the agency's concerns with 
Sutron's price and profit margin reflected the agency's assessment of 
Sutron's understanding of the RFP requirements and of the risk 
inherent in Sutron's proposed approach, consistent with the RFP 
evaluation scheme.

The protests are denied.

Comptroller General
of the United States

1. The contract also includes an option for maintenance of remote 
sites in the "agrimet system," which collects data for agricultural 
purposes.

2. The RFP also stated subfactors under some of the evaluation 
factors.

3. Two of Sutron's proposed field maintenance technicians had no 
experience in actually performing field maintenance services.