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