BNUMBER: B-271673
DATE: July 15, 1996
TITLE: KPMG Peat Marwick, L.L.P.
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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:KPMG Peat Marwick, L.L.P.
File: B-271673
Date:July 15, 1996
William A. Roberts III, Esq., Lee Curtis, Esq., Jerone C. Cecelic,
Esq., and Gayle Girod, Esq., Howrey & Simon, for the protester.
Ronald A. Schechter, Esq., and Rosemary Maxwell, Esq., Arnold &
Porter, for Hay Management Consultants, an intervenor.
Michael P. Chiffolo, Esq., Defense Commissary Agency, for the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that agency failed to give adequate weight to performance
risk in its source selection decision is denied where record shows
that agency evaluated and considered performance risk in accordance
with the requirements of the solicitation.
2. Protest that agency failed to consider cost in tradeoff decision
is denied where the record shows that the source selection official
was aware of the cost differences among the competing offerors and
reasonably chose to select for award the higher priced, technically
superior proposals.
DECISION
KPMG Peat Marwick protests the award of two contracts under request
for proposals (RFP) No. DECA01-95-R-0036, issued by the Defense
Commissary Agency (DCA) for advisory and assistance services. KPMG
contends that the agency failed to give adequate consideration to past
performance and cost in its award decision.
We deny the protest.
The RFP contemplated the award of multiple indefinite delivery,
indefinite quantity fixed-price-per-labor-hour contracts on a best
value basis. For evaluation purposes, the RFP provided that offers
would be reviewed under three broad criteria, Technical Merit,
Management, and Cost; the Technical Merit and Management areas (which
each included numerous subfactors) were of equal weight. Cost,
described in the solicitation as a "substantial consideration" but
deemed less important than Technical Merit or Management, was to be
evaluated for realism, reasonableness and completeness.
In connection with the evaluation, the RFP advised that
"Each of the areas and factors (except cost) will be rated in
three ways: an adjectival rating [of either exceptional,
acceptable, marginal or unacceptable], a proposal risk rating and
a performance risk rating. The adjectival rating depicts how well
the offeror's proposal meets the evaluation standards and
solicitation requirements. Proposal risk assesses the risk
associated with the offeror's proposed approach as it relates to
accomplishment of the requirements of the solicitation.
Performance risk assesses the probability of each offeror's
successfully accomplishing the proposed effort based on each
offeror's demonstrated present and past performance. Within each
area and/or factor, each of the three ratings shall be given
equal consideration in making an award decision. The cost area .
. . will also receive a performance risk rating which shall be
given equal consideration with the evaluated cost."
Finally, as part of their proposals, offerors were required to
prepare responses to two sample tasks. These responses were to be
evaluated for both technical merit and cost purposes.
DCA received five initial offers, four of which were found to be
within the competitive range. After engaging in discussions and
obtaining best and final offers (BAFO), the agency determined--with
the advice and assistance of the Defense Contract Audit Agency--that
all four firms' proposed costs were reasonable, realistic and
complete. Overall, DCA rated the four offers as follows:
OFFEROR KPMG PEAT MARWICKSRA CORP.HAY MGMT. CON- SULTANTSBOOZE,
ALLEN & HAMILTON
TECH. MERIT/PRO-POSAL RISKMarginal/ ModerateAccept./LowAccept./LowMarg
inal/
Moderate
MGMT./PRO-POSAL RISKAccept./LowAccept./LowAccept./LowAccept./ Moderate
PERF. RISK Low Moderate Low Moderate
EVALUATED COST FOR TWO SAMPLE TASKS$397,782$503,459$761,215$363,316
On the basis of these evaluation results, DCA awarded contracts to Hay
Management Consultants and SRA, finding that their offers represented
the best value to the government.
KPMG initially protested on the grounds that the agency had failed to
engage in meaningful discussions, failed to perform a cost realism
evaluation, performed a flawed technical evaluation of KPMG's offer,
failed to evaluate risk in accordance with the terms of the RFP, and
made an arbitrary cost/technical tradeoff. After receiving the
agency's report in response to its protest, KPMG withdrew all of its
initial contentions except its allegation relating to the agency's
risk evaluation, and raised the additional argument that the agency
had failed to consider cost.
RISK EVALUATION
KPMG maintains that the agency erred in conducting the performance
risk evaluation. As illustrated by the evaluation results outlined
above, the agency assigned a single overall performance risk rating to
each proposal rather than a performance risk rating for each of the
three evaluation areas (technical, management and cost). The
protester contends that, by failing to assign a performance risk
rating in each of the evaluation areas, the agency failed to give
performance risk the weight assigned to that factor under the
evaluation scheme; according to KPMG, each offer should have received
three separate evaluation ratings under each of the RFP's two non-cost
evaluation areas--an adjectival rating, a proposal risk rating and a
performance risk rating--and also a performance risk rating in the
cost area. KPMG surmises that it would have received one of the
awards had the agency properly evaluated performance risk.[1]
We find no merit to this contention. Although the RFP provided that
the agency would consider performance risk under each of the
evaluation areas (Technical, Management and Cost)--and give that
consideration equal weight with the adjectival and proposal risk
ratings--there is nothing in the RFP that dictated the form in which
those evaluation results were to be presented; nothing in the
solicitation required the agency to assign a discrete performance risk
rating for each of the evaluation areas.
The record shows both that the agency in fact did consider performance
risk as it related to each of the evaluation areas--describing in the
evaluation documents in detail the perceived weaknesses of each firm's
proposal--and that the performance risk ratings were given adequate
consideration in the integrated award decisions.
For example, the RFP required the agency to consider the adequacy of
each offeror's personnel management under the Management evaluation
criterion. In evaluating Booze Hamilton's performance risk, the
agency specifically noted that the firm's proposal had been assigned a
Moderate rating based on the fact that its past performance indicated
a problem with the turnover of management and technical personnel.
Similarly, under the Technical evaluation criterion, the agency was
required to consider the offerors' ability to conduct adequate studies
and analysis, its adherence to sound practices and its ability to
accomplish assigned tasks. In assigning SRA's proposal a Moderate
performance risk rating, the agency found that, on occasion, SRA had
problems being concise, coming to "closure" and delivering final
reports and products in a timely fashion; and that its subcontractor
also had difficulty accomplishing qualitative services, conducting
focus groups and writing "style" reports. Finally, in evaluating
Hay's past performance, the agency noted that the firm had experienced
minor difficulty in performing within its proposed cost, and had on
occasion made requests for cost increases. The evaluation results
thus show that in conducting its performance risk evaluation, DCA gave
consideration to the offerors' performance record as it related to all
three evaluation areas. Again, this is all the RFP required.
The record also shows that these evaluation conclusions were presented
in detail to the Source Selection Official (SSO) for consideration in
the award decisions, and the source selection decision document (SSDD)
specifically discusses the offerors' performance risk ratings.
Accordingly, there is no basis to find that the agency failed to
consider performance risk in its integrated award decisions, or that
it was somehow given inadequate weight.
CONSIDERATION OF RELATIVE COST
KPMG maintains that the agency never considered the relative total
cost of the offers in making its award decision. The protester
maintains that this is evidenced by the absence from the SSDD of any
discussion of the offerors' evaluated costs, or any rationale for
making award to the two highest cost firms. According to the
protester, the awardees' costs were so much higher than its own that
the source selection was irrational in light of KPMG's technical
acceptability.
In a best value acquisition, agencies are not required to make award
on the basis of low cost or price; agencies may make cost/technical
tradeoffs, and the extent to which one is sacrificed for the other is
governed only by the test of rationality and consistency with the
stated evaluation criteria. Science and Technology Corp.,
B-254405 et al., Dec. 14, 1993, 93-2 CPD para. 318. We conducted a
hearing in connection with this issue because, in our view, the SSDD
did not adequately present the bases for the agency's award decisions.
We find, based on the entire record, that the award decisions were
reasonable.[2]
At the outset, we note that the agency assigned a marginal rating to
KPMG's proposal under the Technical criterion. This rating was based
on the evaluators' opinion that KPMG's proposal reflected certain
deficiencies even after discussions, in particular, the fact that its
proposed study approaches lacked specific details regarding various
standards. As neither of the awardees' proposals received such a low
score under any of the non-cost evaluation criteria (and KPMG does not
challenge the evaluation of their proposals), KPMG's proposal was the
lowest technically rated among the three (i.e., KPMG's and the
awardees' proposal); as discussed below, this consideration was
significant in the final award decisions.
The SSO was provided adequate information to be fully aware of the
difference in KPMG's and the awardees' proposed costs. In this
regard, the agency's contract specialist responsible for evaluating
the proposed costs testified that, after reviewing the BAFOs, she was
concerned because Hay's proposed cost was higher than the other
offerors', and conveyed her concerns to the SSO during numerous
informal briefings, as well as during the official source selection
briefing. Hearing Transcript (HT), pp. 5-6, 21-22, 44-45. The
contract specialist also presented the SSO with detailed written
information relating to the offerors' proposed costs for each of the
sample tasks. HT, pp. 9-10. After becoming aware of the contract
specialist's concerns, the SSO took time to review the offerors' cost
proposals himself. HT, pp. 66, 68.
The record also shows that the SSO was aware of the cost premium
associated with the awardees' proposals, HT, pp. 61, 71-72, 79, and
decided to award them the contracts based on their technical
superiority as compared to KPMG. The SSO specifically testified in
this regard that the evaluators advised him that both Hay's and SRA's
proposal had a number of technical advantages over KPMG's including,
for example, SRA's innovative quality assurance program and the
quality of its personnel, and the quality of Hay's personnel. HT, pp.
49-52. The SSO also was aware that the evaluators had continuing
concerns about KPMG's offer from a technical standpoint, and that they
were further concerned by KPMG's inability to cure these deficiencies
during discussions. Id., HT, pp. 55, 73. Finally, the SSDD states
that the SSO was somewhat less concerned about the cost premium
associated with the awardees' proposals because any delivery orders
would be competed between the two firms prior to award; this
mitigating factor also led the SSO to select for award the two
higher-priced, technically superior proposals. See also, HT, pp.
83-84, 87-88.
In view of the evidence outlined above, and considering that cost was
less important than technical merit, we have no basis to object to the
agency's source selection decisions. The record shows that the SSO
was aware of the relative costs associated with making award to one
firm versus another, and decided that the technical superiority
offered by the awardees' proposals merited the additional cost.
The protest is denied.
Comptroller General
of the United States
1. According to the protester, the ratings should have been as
follows:
KPMG SRA
Technical Rating Marginal Acceptable
Tech. Proposal Risk Moderate Low
Tech. Performance RiskLow Moderate
Management Rating Acceptable Acceptable
Mgmt. Proposal Risk Low Low
Mgmt. Performance RiskLow Moderate
Cost Performance RiskLow Low/
Moderate
2. KPMG contends that the best evidence of the agency's award
rationale is contained in the SSDD. However, we review the entire
record, including materials submitted in connection with specific
protest arguments and oral testimony, in assessing the reasonableness
of an agency's cost/technical tradeoff. Science and Technology Corp.,
supra.