BNUMBER:  B-274992.2; B-274993.2
DATE:  February 26, 1997
TITLE:  HSG-Holzmann Technischer Services GmbH; HSG-GeBe

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Matter of:HSG-Holzmann Technischer Services GmbH; HSG-GeBe 
       
File:     B-274992.2; B-274993.2

Date:February 26, 1997

John S. Pachter, Esq., and Jonathan Shaffer, Esq., Smith, Pachter, 
McWhorter & D'Ambrosio P.L.C.; and Otto K. Weixler, for the protester.
Reed L. von Maur, Esq., and J. Casey Fos, Esq., von Maur & Partners, 
and Kevin P. Mullen, Esq., Piper & Marbury, for Pacific Architects and 
Engineers GmbH Planning and Construction, an intervenor.
Nancy van Noortwijk-Sommer, Esq., Department of the Army, for the 
agency.
Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Price realism analysis of awardee's proposal for fixed-price 
contract was reasonable where agency compared proposal to government 
estimate and other price proposals; although certain proposed labor 
rates were low, there was no reason to question awardee's 
understanding of the requirements or to assume increased performance 
risk, given agency's awareness of labor surplus due to current state 
of German construction industry. 

2.  Agency was not required to downgrade awardee's proposal for lack 
of extensive experience performing contracts in fully operational 
hospitals, where solicitation did not require such experience and 
awardee was found to have required experience based on performance of 
maintenance contract at a contingency hospital, as well as numerous 
base maintenance contracts that the agency determined involved work 
similar to the current requirement. 

DECISION

HSG-Holzmann Technischer Services GmbH protests the award of a 
contract to Pacific Architects and Engineers GmbH Planning and 
Construction (PAE) for total maintenance and minor construction at the 
U.S. Army Hospital in Heidelberg, Germany, and its outlying clinics, 
under request for proposals (RFP) No. DACA90-96-R-0075, issued by the 
Army Corps of Engineers.  HSG-GeBe, a joint venture of HSG-Holzmann 
Technischer Services GmbH and GeBe Gebaude-und Betriebstechnik GmbH, 
protests the award of a contract to PAE under RFP No. 
DACA90-96-R-0076, for total maintenance and minor construction at the 
Landstuhl Hospital at Landstuhl, Germany, and its outlying clinics, 
also issued by the Corps.[1]

We deny the protests.

BACKGROUND

Both solicitations were comprised of a number of line items for which 
offerors were to submit prices.  Line items AA (management), AB 
(preventative maintenance-hospital), and AC (preventative 
maintenance-clinics and repair and new work) called for fixed prices.  
Line items AF through CM called for offerors to provide fixed hourly 
rates for different types of workers (e.g., plumbers and electricians) 
to perform demand maintenance, minor construction and emergency work; 
when the services are required, the Corps will negotiate a work order 
with the contractor based on the proposed labor rates.  The 
solicitations set forth four equally weighted evaluation factors:  
management; technical; past performance/experience; and price, and 
provided that the contract would be awarded on the basis of the 
proposal representing the best value to the government.  
The agency received and evaluated three proposals under each RFP.  
While in each case the protester's score out of 450 under the nonprice 
factors was higher than PAE's (393 versus 387 for Heidelberg, and 417 
versus 365 for Landstuhl), PAE's proposed prices under both 
solicitations were low (DM 6,461,908.50 versus DM 7,230,194.42 for 
Heidelberg, and DM 11,149,323 versus DM 13,620,118.38 for Landstuhl).  
The agency determined in both cases that the protesters' higher 
technical scores were not worth the higher prices and awarded the 
contracts to PAE.

PRICE EVALUATION

The protesters argue that the agency did not properly evaluate PAE's 
proposal for price realism and failed to downgrade the proposal based 
on unrealistically low labor rates under line items AF through CM.  
The protesters assert that these low rates should have resulted in a 
finding of increased performance risk and a lack of understanding of 
the requirements. 

Where, as here, the award of a fixed-price contract is contemplated, a 
proposal's "cost realism" is not ordinarily considered, since a 
fixed-price contract places the risk and responsibility for contract 
costs and resulting profit or loss on the contractor.[2]  PHP 
Healthcare Corp.; Sisters of Charity of the Incarnate Word, B-251799 
et al., May 4, 1993, 93-1 CPD  para.  366.  However, an agency may, as here, 
provide for the use of a price realism analysis in a solicitation for 
the award of a fixed-price contract for the limited purpose of 
measuring an offeror's understanding of the solicitation's 
requirements, or to assess the risk inherent in an offeror's approach.  
PHP Healthcare Corp., B-251933, May 13, 1993, 93-1 CPD  para.  381. 

There is no basis for objecting to the price realism analysis.  While 
the protesters are correct that PAE's proposed rates for line items AF 
through CM appear low, the record establishes that the agency 
reasonably concluded that these rates evidenced neither a lack of 
understanding nor increased risk.  In this regard, we note that the 
identical issue was raised in a protest by HSG-SKE, a joint venture of 
HSG-Holzmann Technischer Service GmbH and SKE Maintenance GmbH & Co. 
KG, with regard to an award to PAE under an RFP for similar services 
at the 67th Combat Support Hospital in Wurzburg, Germany.  We denied 
the protest based on the Corps' having found there that PAE's low 
hourly rates were acceptable "given the present situation in the 
German construction industry."  In other words, the Corps found no 
basis for assuming that PAE's rates were unrealistic given that the 
labor categories in question were in surplus.  See HSG-SKE, B-274769; 
B-274769.3, Jan. 6, 1997, 97-1 CPD  para.  20, recon. dismissed, B-274769.4, 
Jan. 31, 1997.  While it is not apparent whether the Corps reexamined 
the German labor market and arrived at the same conclusion for 
purposes of the current procurement, we do not think it was required 
to do so; given the recency of its prior determination in connection 
with a similar procurement involving the same labor categories, the 
Corps' prior determination supports its conclusion that PAE's rates 
were realistic such that downgrading of PAE's proposal based on risk 
or lack of understanding was not warranted.  

TECHNICAL EVALUATION

Non-Critical Equipment Plan

The protesters complain that PAE's technical score should have been 
reduced because PAE did not provide a draft of its preventative 
maintenance plan for noncritical equipment with its proposal, as 
required by the RFP's statement of work. 
We will review a proposal evaluation only to determine whether it was 
consistent with the solicitation and reasonable.  HSG-Intelcom, 
B-254750.2; B-254750.3, Feb. 7, 1994, 94-1 CPD  para.  74.

We addressed this identical issue in our decision, HSG-SKE, supra.  
RFP section L delineated the information to be included in the 
offerors' proposals with respect to the evaluation under Preventative 
Maintenance Program (the first subfactor under the Technical 
evaluation factor, and the only subfactor concerning preventative 
maintenance).  It stated that proposals should include an outline of a 
management plan to set up and administer a preventive program.  PAE's 
proposal included the required plan outline, which included a draft 
annual work schedule of recurring inspections and work, including 
preventative maintenance for non-critical equipment and facility 
components.  We held in our prior decision that this information was 
responsive to the noncritical equipment maintenance plan requirement.  
There is no basis for reaching a different conclusion here.

Experience In Fully Operational Hospitals

The protesters maintain that the evaluation under the technical factor 
(subfactor B, ability to organize and perform hospital facilities) and 
past performance factor improperly failed to take into account PAE's 
lack of experience performing operation and maintenance contracts at 
fully operational hospitals.

There was no requirement that offerors demonstrate experience in fully 
operational hospitals.  Rather, the focus was solely on specified 
capabilities.  Under subfactor B, offerors were to provide evidence of 
their capabilities in each of the following areas:  facilities 
maintenance; heat, ventilation, air conditioning, and refrigeration 
equipment; elevators, dumbwaiters, carlifts, docklifts, levelers, and 
conveyors; natural gas, medical gas and petroleum products storage and 
distribution systems; food service equipment; and communications 
systems and equipment.  The agency found that PAE had submitted 
sufficient evidence of these capabilities, and the protesters have not 
shown otherwise.

The past performance factor also did not require offerors to 
demonstrate experience performing operation and maintenance contracts 
at a fully operational hospital.  Rather, offerors were merely 
required to list two or more contracts for similar projects they had 
performed in the past 3 years.  The evaluators recognized that the 
protesters had widely diversified hospital experience and assigned 
their proposals 15 points, the highest possible score, under both 
solicitations.[3]  PAE's past performance, which received scores of 13 
and 15 points under the two RFPs, included an operation and 
maintenance contract at a contingency hospital (i.e., one that would 
be used only in the event that the fully operational hospitals reached 
capacity), as well as several base maintenance contracts.  The agency 
determined that these contracts involved skills and tasks similar to 
the current requirement, and concluded that PAE had experience 
performing all tasks that would be required under the solicitation, as 
well as working experience with the specific applicable medical 
standards.  In this regard, the agency explains that PAE's experience 
at the contingency hospital was valuable because a contingency 
hospital must be maintained at the same level as an operational 
hospital, and the work to be performed, and standards applied to that 
work, thus are the same as in a fully operational hospital.  The base 
maintenance contracts were deemed relevant because they generally 
involved the same types of work performed under a hospital maintenance 
contract, except for the specific medical standards to be applied.  
Because the record shows that PAE, like the protesters, has experience 
performing all the tasks that will be required under the RFP, and 
experience with the specific hospital standards required, there is no 
basis for objecting to the evaluation in this area.

Proposed Staffing

With respect to the Landstuhl contract, HSG-GeBe argues that PAE's 
technical score should have been reduced to reflect inadequate 
staffing--PAE proposed a 5-person staff--to perform preventative 
maintenance under CLIN AB.  The protester notes that the government 
estimate for this work was 6 persons, and that its own staffing called 
for 7.2 persons.  

The government estimate to which the protester refers was developed 
for purposes of the cost estimate, and was not made available to the 
evaluators for purposes of the technical evaluation.  The solicitation 
itself did not require a specific number of persons to perform 
preventative maintenance, and the evaluators specifically determined 
that PAE's staffing of five persons for this work was sufficient to 
perform properly.  As the protester has not explained why PAE could 
not perform adequately with its proposed staffing, its argument 
amounts to no more than disagreement with the evaluators' conclusion; 
such disagreement is not sufficient to demonstrate that the evaluation 
was unreasonable.  Atlantic Coast Contracting, Inc., B-259082.3, July 
17, 1995, 95-2 CPD  para.  21.

GERMAN LAW   

The protesters argue that PAE's proposed labor rates are too low to 
allow PAE to comply with a German labor law which requires a 
contractor on a follow-on contract to hire the incumbent personnel at 
the same rates those workers are currently being paid.  The Army 
states that it is unclear whether these are follow-on contracts and 
therefore unclear whether this law will apply.  In any case, the 
record here shows that PAE is aware of the law and it has not 
indicated in its proposal or otherwise that it will not comply with it 
if required to do so.  In this regard, we point out that the labor 
rates offered in PAE's proposal are fixed, so that even if PAE 
ultimately is required by German law to pay higher labor rates than 
those on which its proposal is based, the increased costs will be 
borne by PAE, not the government.  Accordingly, this argument does not 
provide a basis to object to the award.

The protests are denied.

Comptroller General
of the United States

1. We have consolidated these protests in a single decision because 
the solicitations and protest issues are virtually identical.

2. Where, as here, future work orders will be negotiated based on 
fixed labor rates, the contract is fixed-price in nature.  See ASI 
Personnel Serv., Inc., B-258537.7, June 14, 1995, 95-2 CPD  para.  44.

3. We note that the protesters' past performance proposals do not 
demonstrate performance of numerous operation and maintenance 
contracts in fully operational hospitals.  Rather, the record shows 
that the protesters have performed one operations and maintenance 
contract for an operational hospital and two contracts for part of a 
hospital.  The protesters only list one of these 
contracts--Maintenance and Repair of U.S. Hospital Wurzburg Facilities 
and Equipment--as similar to the instant solicitations.