BNUMBER:  B-272017
DATE:  July 12, 1996
TITLE:  Excalibur Systems, Inc.

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Matter of:Excalibur Systems, Inc.

File:     B-272017

Date:July 12, 1996

Robert F. Reklaitis, Esq., Nixon, Hargrave, Devans & Doyle, for the 
protester.
Bill Weil, Condor Engineering, Inc., the intervenor.
Melissa K. Erny, Esq., Department of the Navy, for the agency.
Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Although the solicitation provided that an offeror's past quality 
performance was more important than price in determining the offeror 
representing the best value to the government, the agency nevertheless 
could properly award the contract to a lower-priced offeror with no 
past quality performance history where the solicitation also provided 
that price alone would be considered in evaluating first-time offerors 
or offerors for whom current past quality performance information was 
not available.

DECISION

Excalibur Systems, Inc. (ESI) protests the award of a contract to 
Condor 
Engineering, Inc. under request for proposals (RFP) No. 
N00163-95-R-0044, issued by the Naval Air Warfare Center, Aircraft 
Division, Department of the Navy, for items for the Sensor System 
Improvement Program.  ESI challenges the award to Condor, a 
lower-priced offeror.

We deny the protest.[1]

The RFP contemplated the award of a firm, fixed-price contract for 
basic and option quantities.  The RFP stated that the procurement was 
subject to the Navy's Contractor Evaluation System Red/Yellow/Green 
(R/Y/G) Program which is used to assist contracting officials in 
determining the best value to the government, price, past quality 
performance, and other factors considered.  Under this program, 
accumulated contractor quality performance data is used to classify a 
contractor's performance in terms of the degree of risk to the 
government of receiving poor quality items.  In this regard, an 
offeror's performance could be classified as either green/low risk, 
yellow/moderate risk, or red/high risk.  First-time offerors or 
offerors for whom current, up-to-date quality performance history was 
unavailable are classified as "insufficient data" offerors.

The RFP also described the formula for determining the lowest-priced 
offeror.  The RFP included a hypothetical example in which the formula 
was applied.

The RFP stated that although price would be significant in determining 
the successful offeror, past quality performance on the proposed item, 
as classified under the R/Y/G program, would be considered 
"essentially more important."  In defining the individual R/Y/G 
classifications, the RFP provided that a green/low risk rating would 
be given greater weight or value in the evaluation than a red/high 
risk or yellow/moderate risk rating, and that a yellow rating would be 
given less weight or value than a green rating and greater weight or 
value than a red rating.  The RFP further provided that offerors 
receiving insufficient data classifications "shall be evaluated solely 
on the basis of price [and that] [p]ast quality performance shall not 
be a consideration in their evaluation."  (Emphasis in original.)

ESI, the incumbent contractor, and Condor submitted price 
proposals.[2]  Both offerors received green/low risk past quality 
performance ratings.  For this reason, the agency considered the 
offerors equal in terms of past quality performance.  Since Condor's 
price was lower than ESI's price (by less than 1 percent), the agency 
awarded the contract to Condor.

ESI challenges the agency's assignment of a green/low risk rating to 
Condor for its past quality performance.  ESI maintains that since 
Condor has never produced the required items, i.e., it is offering new 
items, it should have been assigned no more than an insufficient data 
rating.  ESI further maintains that in light of its green/low risk 
rating for its past quality performance and the de minimis difference 
between its price and Condor's price, the agency should have awarded 
the contract to ESI.

The agency maintains that ESI was not prejudiced by Condor's green/low 
risk rating because even if Condor should have received an 
insufficient data classification, under the terms of the RFP the 
agency could not penalize Condor for the lack of a quality performance 
history and could properly make its best value determination based on 
a comparison of Condor's lower price vis-a-vis ESI's slightly higher 
price.  In such circumstances, the agency states that it would still 
have selected Condor, the lower-priced offeror, for award.

In a best value procurement, price is not necessarily controlling in 
determining the offer that represents the best value to the 
government.  Rather, that determination is made on the basis of 
whatever evaluation factors are set forth in the RFP, with the source 
selection official often required to make a cost/technical tradeoff to 
determine if one proposal's technical superiority is worth the higher 
cost that may be associated with that proposal.  In this regard, 
price/past performance tradeoffs are permitted when such tradeoffs are 
consistent with the RFP evaluation scheme.  Dragon Servs., Inc., 
B-255354, Feb. 25, 1994, 94-1 CPD  para.  151.  Thus, where an RFP 
identifies past performance and price as the evaluation criteria and 
indicates that an offeror with good past performance can expect a 
higher rating than an offeror without such a record of performance, 
proposals must be evaluated on that basis, and ultimately the 
selection official must decide, if the offeror with the better past 
performance rating is not the low-cost offeror, whether the more 
costly offeror represents the best value to the government in light of 
the better past performance rating.

In general, we do not view RFP evaluation schemes that specify a 
"neutral" rating for vendors with no past performance record, see, 
e.g., Quality Fabricators, Inc., B-271431; B-271431.3, June 25, 1996, 
96-2 CPD  para.      ; Caltech Serv. Corp., B-261044.4, Dec. 14, 1995, 95-2 
CPD  para.  285, as precluding this same type of source selection 
decision-making.  That is, we think that the use of a neutral rating 
approach, to avoid penalizing a vendor without prior experience and 
thereby enhance competition, does not preclude, in a best value 
procurement, a determination to award to a higher-priced offeror with 
a good past performance record over a lower-cost vendor with a neutral 
past performance rating.[3]  Indeed such a determination is inherent 
in the concept of best value.

Here, however, the Navy explains that its evaluation scheme does not 
call for rewarding a vendor with good past performance over a vendor 
with no relevant past performance.  Rather, the Navy further explains, 
its evaluation scheme is intended to differentiate between those with 
good past performance and those with differing degrees of less than 
good performance.  In other words, the Navy's position is that under 
the RFP an offeror with a green rating is superior to an offeror with 
a red or yellow rating but not to an offeror with the neutral 
insufficient data rating.

We have no basis to disagree with the Navy.  In fact, we have 
previously recognized that this very evaluation scheme contemplates 
that "a green rating [is] to be given greater weight in the evaluation 
only when compared to a red or a yellow rating," and that an offeror's 
green rating is "not to be given greater weight in the evaluation when 
compared to an offeror['s] . . . insufficient data rating," so that in 
the circumstances here the agency is to compare the competing 
proposals "based on price."  Espey Mfg. & Elecs. Corp., B-254738.3, 
Mar. 8, 1994, 94-1 CPD  para.  180.

Accordingly, we conclude that even if Condor's green rating is changed 
to an insufficient data rating the award decision would not change.

The protest is denied.

Comptroller General 
of the United States

1. This protest was resolved using an accelerated schedule.  Bid 
Protest Regulations, 4 C.F.R.  sec.  21.10(e) (1996).  In addition, after 
reviewing various submissions from the protester and the agency, 
several conference calls were held at which time we advised the 
parties that we viewed two of the protester's issues as abandoned and 
two issues as having no merit.  The substance of the conference calls 
partially dismissing the protest was confirmed in writing.

2. Technical proposals were not requested.

3. It does, however, preclude evaluation scoring that penalizes an 
offeror for receiving neutral ratings.  See Inlingua Schools of 
Languages, B-229784, Apr. 5, 1988, 88-1 CPD  para.  340.