BNUMBER:  B-274269
DATE:  December 2, 1996
TITLE:  The Research Foundation of State University of New York

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Matter of:The Research Foundation of State University of New York

File:     B-274269

Date:December 2, 1996

Benjamin J. Luft, M.D., James R. Dennehey, Esq., and Concetta 
Angilella, Esq., for the protester.
Theodore M. Hess-Mahan, Esq., Ropes & Gray, for New England Medical 
Center, an intervenor.
Richard Brown, Esq. and Michael Colvin, for the Department of Health 
and Human Services, for the agency.
Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency reasonably accepted in its cost evaluation the proposed costs 
of proposals offering significantly different technical approaches to 
performing clinical studies where the solicitation contemplated 
proposals based upon the offerors' creativity in developing and 
designing their own protocols for the study and the agency reviewed 
the cost elements of each proposal and found each proposal's cost 
reasonable and realistic for the particular study proposed.

DECISION

The Research Foundation of State University of New York (SUNY) 
protests the award of a contract to New England Medical Center (NEMC), 
by the Department of Health and Human Services, National Institute of 
Allergy and Infectious Diseases (NIAID), under request for proposals 
(RFP) No. NIH-NIAID-DMID-96-09, for clinical studies of chronic lyme 
disease.  

We deny the protest.[1]

The RFP, issued June 15, 1995, contemplated a cost reimbursement, 
level-of-effort, contract for a 5-year term.  The contractor is to 
develop the research infrastructure for NIAID to address two essential 
issues--the evaluation of therapeutic approaches to treat patients 
with chronic lyme disease and the pathological basis/bases of the 
condition.[2]  The statement of work requires the contractor to 
conduct clinical studies in patients with documented and well-defined 
chronic lyme disease, and advises that the major focus of the studies 
will be on the therapeutic effects of antimicrobial agents; that 
assessments of the pharmacological properties of drugs used singly or 
in combination with other therapeutic medications shall be part of the 
studies when necessary and appropriate; and that pilot studies of 
treatments for other manifestations or infections associated with lyme 
disease may also be proposed.

The RFP required that each offeror, as part of its proposal, would 
develop and design protocol(s) for conducting clinical studies of lyme 
disease.  The protocol is the offeror's technical approach to 
conducting the clinical study of the disease and includes such things 
as the drugs that the offeror proposed to utilize in studying 
treatment of the disease, the duration of the treatment, and the 
number of patients to be included in the study.  The RFP required 
offerors to submit a detailed protocol for a controlled phase III 
study and also advised that they could submit up to two pilot studies 
as well if appropriate.  The RFP advised offerors that "it is 
anticipated that a phase III study would require 150-300 patients, a 
phase II study would require 30-60 patients."  The RFP contemplated 
that the offerors would rely upon their own creativity and expertise 
in developing and designing the offered protocol, and that the 
selected firm's protocol(s) likely would be modified after award based 
upon the recommendations of the project officer; to this effect, the 
RFP advised offerors that the award of the contract did not commit the 
government to approve any of the studies presented in the offeror's 
proposal--that the project officer would determine the actual studies 
to be undertaken.  

The RFP advised that the technical evaluation would receive paramount 
consideration over cost, but that in the event of technically equal 
proposals, cost would become more important.  The technical criteria 
were "Scientific and Technical Approach" worth 50 percent, "Personnel" 
worth 25 percent, and "Facilities/Resources" worth 25 percent.  

NIAID received proposals from SUNY and NEMC by the October 15 initial 
closing date.  Both proposals were included in the competitive range; 
NEMC's proposal received a score of 58 points and SUNY's proposal 
received a score of 55 points.  Following technical and cost 
discussions, the offerors submitted best and final offers (BAFO) by 
May 1, 1996.  

The offerors' proposed protocols were significantly different from 
each other.  Specifically, SUNY's proposed protocol involved studying 
a larger number of patients under a combination therapy, four-arm 
study, whereas NEMC's proposed protocol involved a monotherapy, 
two-arm study with fewer patients.[3]  

NIAID rated the BAFOs with equal technical scores of 79.  NEMC's BAFO 
cost was $4,194,968 and SUNY's BAFO cost was $5,323,058.  NIAID 
evaluated the realism of the cost proposals and determined that each 
offeror's estimate was realistic based upon its technical approach.  
On May 28, NIAID made award to NEMC based upon its lower-cost, 
technically equal proposal. 
 
The agency has indicated that the project officer is currently 
considering modifications to NEMC's protocol based upon 
recommendations received from an Advisory Review Panel.  These 
modifications involve increasing the duration of treatment, the 
addition of more patients, and incorporating a second drug.  VT at 
11:38:11-11:39:10, 13:15:07-13:15:41.  When the project officer 
decides what modifications should be made, the agency will require the 
protocol to be amended and will authorize the study to commence.

SUNY's primary basis for protest is that NIAID failed to conduct a 
proper cost evaluation and merely accepted, and compared as the basis 
for award selection, the offerors' bottom-line proposed costs without 
further analysis.  SUNY notes in this regard that since each offeror's 
proposed protocol differed significantly in size and complexity, the 
proposed costs should be somehow normalized to properly evaluate cost.  
SUNY suggests in this regard that each proposal's per patient cost 
could be calculated (dividing the total offered costs by the number of 
patients studied) as a basis to compare the proposal costs, in which 
case SUNY's proposal would have been found to be a better buy because 
of its lower per patient costs resulting in more scientific 
information per dollar.  SUNY also contends that the agency should 
have evaluated the offerors' costs based upon the clinical study 
currently being considered by the project office rather than their 
proposed bottom-line costs, inasmuch as this study significantly 
modifies NEMC's proposed protocol from a monotherapy study to a 
combination therapy study that SUNY alleges more closely resembles 
SUNY's proposed protocol.  

Where an agency evaluates proposals for the award of a cost 
reimbursement contract, an offeror's proposed costs are not 
dispositive, because regardless of the costs proposed, the government 
is bound to pay the contractor its actual and allowable costs.  
Federal Acquisition Regulation  sec.  15.605(c).  Consequently, a cost 
realism analysis must be performed by the agency to determine the 
extent to which an offeror's proposed costs represent what should be 
reasonably incurred, assuming reasonable economy and efficiency, if 
that offeror's proposal were accepted for award.  CACI, Inc.-Fed., 64 
Comp. Gen. 71 (1984), 84-2 CPD  para.  542.  Because the contracting agency 
is in the best position to make this cost realism determination, our 
review is limited to determining whether the agency's cost evaluation 
was reasonably based and not arbitrary.  General Research Corp., 70 
Comp. Gen. 279 (1991), 91-1 CPD  para.  183, aff'd, American Management 
Sys., Inc.; Dept. of Army--Recon., 70 Comp. Gen. 510 (1991), 91-1 CPD  para.  
492; Grey Advertising, Inc., 55 Comp. Gen. 1111 (1976), 76-1 CPD  para.  
325.
  
As noted above, NIAID determined both NEMC's and SUNY's proposed 
estimated costs to be reasonable and realistic for the technical 
approaches that each had proposed.  The contracting officer testified 
that this determination was made after a comprehensive evaluation of 
the various cost elements contained in each offeror's proposal.  For 
example, the agency examined each offeror's labor rates, travel 
expenses, salaries, levels of effort, fringe benefits, overhead rates, 
subcontractor costs, and material costs, and conducted cost 
discussions addressing the agency's cost concerns.[4]  VT at 
14:10:34-14:12:07.  

The contracting officer testified that it was not feasible to 
normalize costs, as suggested by the protester, because the agency was 
totally dependent upon each offerors' unique protocol design as a 
basis for determining costs.  He stated that the agency did not have a 
predetermined preferred protocol design--since the RFP sought 
offerors' proposals for this purpose--and that the RFP contemplated 
that the offeror would design a protocol and that after award the 
project officer would determine the ultimate design of the clinical 
study by revising, as necessary, the contractor's proposed protocol.  
VT at 14:58:38-15:03:44.  Agency representatives further testified 
that the contents of the revised protocol currently under 
consideration were not known at the time of award, but were the result 
of the recommendations of the Advisory Review Panel, and is being 
developed based upon NEMC's two-arm study, and that, even though the 
study being contemplated will take a combination instead of a 
monotherapy approach, the fundamental distinguishing features of 
NEMC's protocol remain.  VT at 11:32:45-11:32:55, 11:35:38-11:37:58, 
13:13:10-13:13:49, 13:18:01-13:18:10, 14:27:39-14:27:43.  Furthermore, 
the contracting officer testified that evaluating and comparing the 
offerors' costs on a cost per-patient basis, as suggested by the 
protester, would not have been valid or meaningful because the 
proposed protocols contained more variables than patient numbers, for 
example, duration and types of treatment; such an evaluation would 
have been unjustifiably biased in favor of studies involving higher 
numbers of patients regardless of the technical quality of the study; 
and the RFP did not advise offerors that such an evaluation would be 
considered.  VT at 14:07:36-14:09:36.  

Based on our review, we agree with the agency that it could not 
normalize the costs as suggested by the protester.  Cost normalization 
involves the measurement of offerors against the same baseline where 
there is no logical basis for the differences in approach or where 
there is insufficient information provided with the proposals, leading 
to the establishment of common "should have bid" estimates by the 
agency.  The purpose of such an analysis is to segregate cost factors 
which are "company unique"--dependent on variables resulting from 
dissimilar company policies--from those which are generally applicable 
to all offerors and therefore subject to normalization.  Bendix Field 
Eng'g Corp., B-246236, Feb. 25, 1992, 92-1 CPD  para.  227.  Here, the 
agency properly did not normalize costs, since the record shows that 
it had no predetermined basis upon which to measure similar costs.  
Dynalectron Corp.; Lockheed Elecs. Co., Inc., 54 Comp. Gen. 562 
(1975), 75-1 CPD  para.  17, aff'd, 54 Comp. Gen. 1009 (1975), 75-1 CPD  para.  
341 (normalization improper where varying costs between competing 
proposals results from innovative technical approaches).  

With regard to the revised protocol currently being considered for 
placement under NEMC's contract, the agency had no basis, much less 
obligation, to project from each offeror's proposal and compare the 
agency's assessment of what it believed would be each offeror's cost 
of performing under this revised protocol.[5]  In this regard, the 
agency did not, at the time of award, know what clinical studies would 
be authorized by the project officer because they were not to be 
developed until after the award based on the awardee's protocol.  Nor 
does the record support SUNY's assertion that the two-arm study under 
consideration more closely resembles SUNY's proposed four-arm protocol 
than NEMC's two-arm protocol.   

Finally, the record confirms that the proposed costs of both proposals 
were analyzed and the subject of discussions and proposal revisions.  
SUNY has not shown NEMC's proposed costs for its technical approach 
were understated or that SUNY's were overstated.  In sum, given that 
the cost realism analysis considered the best cost information 
available, we cannot conclude that NIAID acted unreasonably in 
comparing the estimated costs of the two proposals as the basis for 
award.  Hager Sharp, Inc., B-258812, Feb. 17, 1995, 95-1 CPD  para.  93.  

SUNY also argues that NEMC's phase III protocol failed to meet the 
RFP's "minimum" guideline for numbers of patients because NEMC 
proposed protocol was not within the 150- to 300-patient parameter 
that the RFP stated was "anticipated" for such a study.  We disagree.  
As indicated, the RFP contemplated creativity on the part of offerors 
in designing a protocol, such that the "anticipation" announced in the 
RFP cannot reasonably be interpreted as precluding an offeror from 
designing a phase III protocol with patient numbers outside the 
anticipated parameters.  Here, NIAID found that NEMC's protocol, which 
involved 110 patients in two studies and 50 patients in one study and 
270 patients overall, was an acceptable phase III study, VT at 
12:59:20-13:05:22, and we see no basis to question this determination.

SUNY finally argues that the technical evaluation improperly gave more 
weight to the personnel and facilities over scientific approach than 
was announced in the RFP evaluation scheme.  In support of this 
contention, SUNY only points to the source selection document, which 
recognized that NEMC's proposal received a higher score than SUNY's 
under personnel and facilities (as compared to SUNY's higher score 
under scientific approach).   This contention has no merit.  The 
source selection document only points out the differences between the 
two equally scored technical proposals.  As indicated, NIAID made 
award to NEMC solely because of its lower cost, not due to any 
technical advantage relating to personnel and facilities.  

The protest is denied.

Comptroller General
of the United States

1. A hearing was conducted to obtain testimony regarding the protest 
issues.

2. Lyme disease is the most common tick-borne disease in the United 
States.  The term "Post-Lyme Disease Syndrome" is a condition of 
chronic or intermittent symptoms related to lyme disease that may be 
caused by either active infection that has escaped control with the 
use of conventional antibiotic regimens; and/or permanent damage 
caused by the original infectious process. 

3. A four-arm study compares four treatment groups to each other and a 
two-arm study compares two groups.  Combination therapy employs 
several drugs and monotherapy employs a single drug.  Video Transcript 
(VT) at 11:36:50

4. The record contains documentation evidencing that such an analysis 
was performed.

5. The contracting officer testified that while no exact cost figures 
have been developed regarding the proposed modification to NEMC's 
protocol because the  actual study to be ordered has not been 
finalized, it was reasonable to assume from the information contained 
in NEMC's BAFO that the cost increase would be approximately $300,000.  
VT at 14:02:21-14:03:14, 14:17:47-14:18:12, 14:21:55-14:23:07, 
15:05:14-15:08:09.