BNUMBER: B-271385.4; B-271385.5; B-271385.6; B-271385.7; B-271385.8
DATE: September 23, 1996
TITLE: Am-Pro Protective Agency, Inc.; MVM, Inc.
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DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a
GAO Protective Order. This version has been redacted or approved by
the parties involved for public release.
Matter of:Am-Pro Protective Agency, Inc.; MVM, Inc.
File: B-271385.4; B-271385.5; B-271385.6; B-271385.7; B-271385.8
Date:September 23, 1996
John E. McCarthy, Jr., Esq., James J. Regan, Esq., and Paul Shnitzer,
Esq.,
Crowell & Moring, for Am-Pro Protective Agency, Inc.; Barbara S.
Kinosky, Esq., Bean, Kinney & Korman, and James S. Phillips, Esq., for
MVM, Inc., the protesters.
Neil H. O'Donnell, Esq., and Patricia A. Meagher, Esq., Rogers,
Joseph, O'Donnell & Quinn, for Inter-Con Security Systems, Inc., an
intervenor.
Kathleen D. Martin, Esq., Department of State, for the agency.
Katherine I. Riback, Esq., and Paul Lieberman, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Allegation that agency improperly evaluated the awardee's proposal
is denied where evaluation documentation shows that the ratings
assigned to the proposal were reasonable and reflected the
solicitation's stated evaluation criteria.
2. Protest that awardee's proposal was unbalanced is denied where
there is no doubt that the awardee's proposal will result in the
lowest ultimate cost to the government because the solicitation's
estimates reasonably reflect the government's anticipated
requirements.
3. "Cost realism" ordinarily is not considered in the evaluation
regarding the award of a fixed-price contract, since the contract
places upon the contractor the risk and responsibility for loss.
Moreover, the fact that an offer may not include any profit or may be
an attempted buy-in (below cost) does not, in itself, render an
otherwise responsible firm ineligible for award.
4. Protest that the agency failed to adequately analyze the awardee's
low price in making the award selection is denied where (1) the
agency's price analysis was reasonably based on comparing the
awardee's price with the other prices that it received in response to
the solicitation and performing a crosswalk analysis to ensure that
the awardee's proposed methodology for meeting certain technical
requirements was supported by the awardee's proposed prices, and (2)
the awardee's price remains low under any adjustment scenario.
DECISION
Am-Pro Protective Agency, Inc. and MVM, Inc. protest the Department of
State's (DOS) award of a contract to Inter-Con Security Systems, Inc.
to provide uniformed armed and unarmed guard services at various State
Department facilities under request for proposals (RFP) No.
S-OPRAQ-94-R-0434.
We deny the protest.
The RFP sought proposals to provide qualified professional security
and managerial personnel to perform uniformed guard services, such as
access control, security for special events, and security inspections,
at various State Department facilities. The RFP contemplated the
award of an indefinite delivery, indefinite quantity labor hours
contract with firm, fixed hourly rates for a base year, with 4 option
years. The solicitation advised offerors of the various specified
management and security officer positions and the labor hour estimates
for each facility. Offerors were required to provide a base hourly
rate and a loaded hourly rate for each year for each of the various
positions specified in the RFP. The RFP provided that this contract
was subject to the Service Contract Act (SCA), 41 U.S.C. sec. 351-358
(1994), which requires the contractor to pay its covered employees
minimum wages and fringe benefits, as determined by the Department of
Labor. Amendment
No. 10 stated that:
"The only CLIN labor category in this solicitation covered by the
Service Contract Act is the position of Uniformed Security
Technician (Unarmed), CLIN 12. This position is covered by the
Department of Labor (DOL) category of 'Guard II', and is subject
to the minimum wage determination attached thereto."
The RFP designated technical factors and their relative weights, and
stated that award would be made on a best value basis with technical
factors more important than price.
The agency received 10 proposals. Following evaluation of initial
proposals, the technical evaluation panel (TEP) established a
competitive range of six proposals, including those of MVM, Am-Pro,
and Inter-Con. The agency conducted written discussions with each
competitive range offeror and requested revised proposals. The agency
evaluated the revised proposals, conducted further discussions with
each competitive range offeror, and received a second round of revised
proposals. After eliminating another three proposals from the
competitive range,[1] the agency requested that the three remaining
offerors, MVM, Am-Pro, and Inter-Con, submit best and final offers
(BAFO). The BAFOs were evaluated as follows:
Offeror Technical Score (500 points maximum)
Price
MVM [DELETED] $[DELETED]
Inter-Con [DELETED] $[DELETED]
Am-Pro [DELETED] $[DELETED]
The TEP concluded that there were no significant technical differences
between the three proposals. Since the three proposals were
essentially technically equal, the source selection advisory council
(SSAC) recommended that the contract be awarded to Inter-Con because
it had submitted the lowest-priced offer. The contracting officer
concurred and awarded the contract to Inter-Con. These protests
followed.
TECHNICAL EVALUATION OF INTER-CON'S PROPOSAL
Am-Pro and MVM raise numerous arguments to the effect that the
technical evaluation of Inter-Con's proposal was improper. The
evaluation of technical proposals is primarily the responsibility of
the contracting agency. Our Office will not make an independent
determination of the merits of technical proposals; rather, we will
examine the record to ensure that the agency's evaluation was
reasonable and consistent with the stated evaluation criteria. Litton
Sys., Inc., B-237596.3, Aug. 8, 1990, 90-2 CPD para. 115. Here, as set
forth below, we find the agency's technical evaluation
unobjectionable.
Protective Security Personnel
This evaluation factor assessed the offeror's ability to provide
personnel as specified. Inter-Con's proposal received the maximum
[DELETED] points available under this factor. Inter-Con proposed to
retain a significant number of the incumbent's staff, and to pay its
armed and unarmed guards the same base wage rate [DELETED] for the
base year. Am-Pro, the incumbent contractor, argues that the agency
improperly failed to assess the technical risk inherent in Inter-Con's
low wages for armed guards. Am-Pro contends that Inter-Con will have
difficulty retaining armed guards because these guards will receive
the same base wage as unarmed guards and less than they were receiving
from Am-Pro.[2]
[DELETED] The SSAC determined that Am-Pro's proposed rate for armed
guard positions at most locations was [DELETED] higher than that of
Inter-Con and recognized that this might have some impact on
Inter-Con's ability to attract employees from the incumbent's labor
force. However, the SSAC concluded that the competitive market for
jobs of this nature and Inter-Con's clear commitment to staffing with
qualified employees was sufficient to offset this possible impact. In
short, the rate difference was not considered significant enough by
the SSAC or the source selection authority (SSA) to result in a
performance risk for Inter-Con. Rather, the SSA and the SSAC
concluded that Inter-Con would be able to attract appropriate
staffing, and that in a full and open competitive environment market
forces produced more competitive prices than experienced under
Am-Pro's existing contract, which had been awarded on a sole-source
basis. We find nothing unreasonable in that view.
Corporate Experience
Under this evaluation factor, offerors were to list similar contracts
that they have performed in the past 3 years. Am-Pro, which received
the maximum possible score [DELETED], contends that this contract is
unique and that the agency improperly also awarded Inter-Con the
maximum score under this evaluation factor even though Inter-Con
lacked the unique experience that Am-Pro alone possessed as the
incumbent contractor.
The TEP noted that Inter-Con currently provides security for the DOS'
diplomatic communities in Mexico, Jamaica, Thailand, Barbados, the
Dominican Republic, Colombia, Liberia, and the Turkish Consulate in
California. These contracts require more than 1,500 people and amount
to approximately 3 million man-hours per year. In all, Inter-Con has
provided approximately 15 million man-hours of security services to
DOS facilities throughout the world. The TEP also noted that
Inter-Con has successfully managed several contracts of the size of
this contract (approximately 350 personnel) or significantly larger.
For example, Inter-Con is currently providing security services for
all Kaiser Permanente Foundation facilities, which includes an 850
person guard force. In light of this experience, we see no basis to
object to the agency's awarding Inter-Con's proposal the maximum score
under this evaluation factor, which pertains to similar, and not to
identical, contract experience. The fact that a protester disagrees
with the contracting agency's judgment does not establish that the
evaluation was unreasonable. Ionsep Corp., Inc., B-255122, Feb. 10,
1994, 94-1 CPD para. 97.
PRICE EVALUATION
MVM and Am-Pro raise various arguments concerning Inter-Con's price.
MVM argues that Inter-Con's proposal is unbalanced, while Am-Pro
argues that, in view of what Am-Pro considers faulty solicitation
estimates, Inter-Con's prices present "unacceptable cost risks" to the
agency. The protesters also argue that the agency performed a faulty
analysis of Inter-Con's price and, as a result, improperly determined
that the awardee's price was reasonable.
Unbalanced Pricing
The concept of unbalanced pricing may apply in negotiated procurements
where, as here, price constitutes the primary basis for the source
selection. Stocker & Yale, Inc., B-249466.2, Jan. 29, 1993, 93-1 CPD para.
88. Unbalanced pricing has two aspects. First, the offer must be
evaluated to determine whether each item carries its share of the cost
of the work specified for that item as well as overhead and profit.
If the offer is based on nominal prices for some of the work and
enhanced prices for other work, it is mathematically unbalanced. The
second part of the test is to ascertain whether a mathematically
unbalanced offer is materially unbalanced by determining whether there
is a reasonable doubt that award on the basis of that offer will
result in the lowest overall cost to the government. Id. With
respect to a requirements contract, determination of the materiality
of unbalancing usually turns on the accuracy of the solicitation's
estimate of the agency's anticipated needs, since the mathematically
unbalanced offer will only become less advantageous than it appears if
the government ultimately requires a greater quantity of the
overpriced items and/or a lesser quantity of the underpriced items.
Duramed Homecare, 71 Comp. Gen. 193 (1992), 92-1 CPD para. 126.
Here, Inter-Con's proposal differentially allocates indirect costs to
various positions with the result that its loaded rates are
substantially higher in some cases and lower in others than those of
its competitors. While Inter-Con explains that these cost allocations
are accurate and reflect a pricing strategy based on a realistic
assessment of indirect cost allocation, the firm does not explain the
basis for the differential allocation. On this record, however, it is
not clear that these price differences are sufficiently large and
unrelated to cost share to be considered nominal and enhanced, and
thus to be mathematically unbalanced.[3]
In any case, we see no basis to object to the accuracy of the
solicitation's estimates.
The agency reported and confirmed that its estimates for the labor
hours were based on the current year requirements of the incumbent
(Am-Pro) at the time that the RFP was issued. Notwithstanding MVM's
contrary assertion, the agency reasonably fashioned the solicitation's
estimates on the current contract performance data, and its best
assessment of likely future changes to these requirements. MVM simply
has not provided any credible basis to call into question the
reliability or validity of the agency's estimates.[4] Thus, even if
Inter-Con's low proposal were mathematically unbalanced, the
solicitation's estimates reasonably accurately represent the agency's
anticipated needs, and the proposal is not materially unbalanced as
there would be no reasonable basis for viewing the proposal as
representing other than the lowest cost to the government. Earth
Eng'g and Sciences, Inc., B-248219, July 30, 1992, 92-2 CPD para. 72.
Price Analysis
Am-Pro and MVM both contend that the agency should have rejected
Inter-Con's proposal because its price was below cost. In this
regard, Am-Pro argues that Inter-Con's low price shows that Inter-Con
does not understand the solicitation requirements and that the firm's
proposal should have been rejected because the firm's income from the
contract will be insufficient to cover the cost of providing the
required level of service. Am-Pro and MVM both style their
allegations in the form of a protest that the agency did not
adequately evaluate the "cost realism" of Inter-Con's price.
"Cost realism" ordinarily is not considered in the evaluation
regarding the award of a fixed-price contract, since the contract
places upon the contractor the risk and responsibility for loss. See
Culver Health Corp., B-242902, June 10, 1991, 91-1 CPD para. 556.[5] (An
agency does, however, review price reasonableness prior to the award
of a fixed-price contract, focusing primarily on whether the offered
prices are higher than warranted based on the offeror's costs, and
using the evaluation in negotiating reasonable prices. See Ebonex,
Inc., B-213023, May 2, 1984, 84-1 CPD
para. 495.) Moreover, the fact that an offer may not include any profit
or may be an attempted buy-in (below cost) does not, in itself, render
an otherwise responsible firm ineligible for award. Ebonex, Inc.,
supra; Norden Sys., Inc., B-227106.9,
Aug. 11, 1988, 88-2 CPD para. 131.
Specifically regarding the relationship of Inter-Con's price to the
solicitation's requirements, the RFP required each offeror to provide
a total loaded price for each line item and a breakout of each
discrete cost element in a cost derivation table. The cost evaluation
team performed a price analysis of Inter-Con's proposal by comparing
Inter-Con's price proposal to the other price proposals received in
response to the solicitation, and by performing a technical/price
crosswalk analysis, which entailed comparing information provided in
Inter-Con's technical proposal to the cost information found in its
price proposal. The agency performed the crosswalk analysis to ensure
that Inter-Con's proposed methodology for meeting certain technical
requirements was supported by its proposed price.
Although Am-Pro and MVM question the quality of the price analysis,
the protesters' allegations establish, at best, the agency's
recognition that while Inter-Con may have submitted a below-cost
offer, this low price did not reflect a defective technical approach
or lack of understanding on Inter-Con's part. Indeed, the agency
concluded that Inter-Con's low price resulted from its particular
pricing strategy, which included lower support costs, lower general
and administrative costs, and lower profit. From our review, we have
determined that there is no reason to question the agency's price
analysis methods.
Moreover, we note that regardless of the precision of the agency's
assessment of Inter-Con's price,[6] neither protester argues that an
accurate assessment would result in a price higher than its own offer.
This is because even if Inter-Con's proposed prices were upwardly
adjusted as argued, Inter-Con still proposed a significantly lower
profit margin and to absorb gear-up/gear-down costs--that proposal,
under any adjustment scenario, would result in Inter-Con's fixed price
remaining significantly lower than Am-Pro's or MVM's. Since all three
offers were evaluated as technically equal, and the award decision
turned, as a result, on price, the plain fact is that none of the
price analyses to which the protesters object could have had any
material impact on the ultimate award determination here.
MVM next argues that award to Inter-Con was improper because the
agency knew that Inter-Con intended to violate the contract cost
principles and procedures of FAR Part 31 and the cost accounting
standards (CAS) as set forth at 48 C.F.R. Chapter 99 (1995).
Specifically, MVM argues that during discussions Inter-Con informed
the agency that it would treat the costs of staff training, training
facilities and support facilities as indirect costs. MVM argues that
under the FAR Part 31 cost principles, a direct cost, such as staff
training, cannot be treated as an indirect cost. MVM also alleges
that Inter-Con is a CAS-covered contractor and that Inter-Con's
proposed accounting treatment of these costs also violates CAS.
The CAS requirements and contract accounting principles establish
rules for the consistent accumulation and reporting of cost data, and
do not require that a contractor base its fixed prices upon any
particular allocation of costs. MVM, Inc.; Burns Int'l Sec. Servs.,
73 Comp. Gen. 124 (1994), 94-1 CPD para. 279. Further, to the extent that
MVM suggests that Inter-Con may attempt to recoup direct costs of this
contract indirectly from the government under other contracts, this
concerns a matter of contract administration that our Office does not
review under our bid protest function. 4 C.F.R. sec. 21.5(a).
AWARD DECISION
Finally, Am-Pro contends that the contracting officer improperly
awarded the contract to Inter-Con on the basis of Inter-Con's low
price. Am-Pro asserts that the contracting officer improperly
converted the RFP's evaluation scheme from one in which technical
merit was considered more important than price to one based upon award
to the offeror that submitted the lowest-priced, technically
acceptable offer.
This allegation is simply without merit. Where, as here, selection
officials reasonably regard proposals as being essentially technically
equal, price may properly become the determining factor in making
award even if the solicitation accords price less importance than
technical factors. Burco Sys. Dev., Inc.,
B-256267.2, Dec. 5, 1994, 94-2 CPD para. 220. On this record, we have no
basis to find the award determination unreasonable or inconsistent
with the evaluation criteria set forth in the RFP.
The protest is denied.
Comptroller General
of the United States
1. Two of these offerors filed protests in our Office concerning the
elimination of their proposals from the competitive range. One
protest was withdrawn, and one was denied (Akal Sec., Inc., B-271385;
B-271385.3, July 10, 1996, 96-2 CPD para. 77).
2. Am-Pro also alleged in a supplemental protest that Inter-Con's
proposed assistant manager lacked the supervisory experience necessary
for the position. Am-Pro subsequently withdrew this issue.
3.[DELETED]
4. Am-Pro, based on its own experience as the incumbent contractor,
knew or should have known of defects it alleges were in the
government's estimate, which form the basis for Am-Pro's argument that
Inter-Con's proposal presented "unacceptable cost risks" to the
government, before submitting a proposal. Accordingly, we consider
this argument to be untimely under our Bid Protest Regulations, which
require that a protest based upon alleged improprieties apparent on
the face of a solicitation be filed prior to the time set for receipt
of initial proposals. 4 C.F.R. sec. 21.2(a)(1) (1996); see Allstate Van
& Storage, Inc., B-247463, May 22, 1992, 92-1 CPD para. 465.
5. An agency nonetheless may provide in a solicitation for a realism
analysis of fixed price proposals essentially to avoid the risk of
poor performance by a contractor "forced" to provide services at
little or no profit or with an undercompensated workforce. See Culver
Health Corp., supra.
6. The protests challenge the assessment's accuracy principally with
respect to gear up/gear down (the time spent by guards getting into
and out of uniform, drawing and returning weapons, and going to and
returning from assignments); Inter-Con's wage rates; and the
escalation of labor rates.