BNUMBER: B-276111.4
DATE: December 29, 1997
TITLE: Consolidated Services, Inc., B-276111.4, December 29, 1997
**********************************************************************
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Matter of:Consolidated Services, Inc.
File: B-276111.4
Date:December 29, 1997
Jesse W. Rigby, Esq., Clark, Partington, Hart, Larry, Bond, Stackhouse
& Stone, for the protester.
Joan K. Fiorino, Esq., and Donald E. Barnhill, Esq., East & Barnhill,
for American Service Contractors, an intervenor.
Maj. Philip T. McCaffrey, Department of the Army, for the agency.
Marie Penny Ahearn, Esq. and John M. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Where request for proposals stated that cost realism analysis would be
performed to aid in evaluating offerors' understanding of requirements
under fixed-price contract, agency reasonably concluded that awardee's
price was realistic, and did not evidence lack of understanding, based
on finding that adequate price competition existed, and that awardee's
total price did not deviate significantly from average price.
DECISION
Consolidated Services, Inc. (CSI) protests the award of a contract to
American Service Contractors (ASC) under Department of the Army
request for proposals (RFP) No. DABT10-95-R--0010, for dining facility
operations at Fort Benning, Georgia and two other locations. The
award followed a reevaluation undertaken by the Army in response to an
earlier protest by CSI against the award to ASC (B-276111.2,
which we dismissed as academic by decision dated August 4, 1997).
Based on the reevaluation, the agency affirmed its original decision
and made award to ASC on September 5. CSI challenges the adequacy of
the price evaluation.
We deny the protest.
The RFP contemplated the award of a fixed-price, indefinite quantity,
award fee type contract for a base year, with 4 option years. It
sought unit and extended prices for estimated days of food service or
number of feedings, by building or field area, for a total of more
than 250 line items. The RFP listed various technical evaluation
factors, including comprehension of the RFP requirements, which
included the subfactor staffing/methodology, and provided that award
would be made to the offeror whose proposal was technically acceptable
and whose aggregate price for all items (base and option years) was
low.
Offerors were to submit separate technical and cost proposals. Cost
and pricing data were not required, but offerors were to "submit
information other than cost and pricing data to help establish price
reasonableness or price realism." This information--including price
breakdowns for each performance period showing cost elements such as
direct and indirect labor rates/salaries, fringe benefits, overhead
and total cost per position--was to be submitted on standard form (SF)
1448, "Proposal Cover Sheet (Cost and Pricing Data Not Required)."
The RFP required that cost proposals "present a clear audit trail to
all elements of cost" and that "all cost elements [be] fully explained
and justified." The RFP further advised as follows:
Cost realism will be used as an aid to determine the offeror's
comprehension of the requirements of the RFP as well as to assess
the validity of the offeror's approach. Proposals will be
evaluated to assess the degree to which proposed price accurately
reflect[s] proposed performance. A price which is found to be
either unreasonably high or unrealistically low in relation to
the proposed work will result in the overall proposal being
considered unacceptable, and further evaluation will be
discontinued.
The agency reevaluated the five proposals at issue and confirmed their
technical acceptability. In its price evaluation, the agency used the
average total price of the five low proposals--[deleted]--as a
baseline for comparison purposes.[1] ASC's total price of [deleted]
was [deleted] percent under the average price, while CSI's price of
[deleted] was [deleted] percent above the average. The difference in
the two prices was [deleted] or [deleted] percent. The remaining
three offers [deleted] and [deleted] ranged from [deleted] percent
under to [deleted] percent above the average price. In light of the
competition received--12 proposals, 8 of which were technically
acceptable--the agency concluded that the price differences among the
proposals and the average price "supported cost realism," and that a
detailed analysis of the individual cost elements was not necessary.
Nonetheless, the agency reports it did proceed to use a "[c]ost
analysis . . . to compare various individual cost elements (productive
man-hours, wage rates including benefits, profit and [general and
administrative])." While the agency noted a few areas of "pricing
fluctuations," it considered them to be "based on the unique
composition of an offeror's organization and how the offeror
propose[d] to accomplish the work," and concluded that "none of the
prices were found to be either unreasonably high or unrealistically
low to the degree where the overall proposal was considered
unacceptable and further evaluation was discontinued."[2]
CSI argues that the Army improperly failed to perform a detailed line
item cost analysis of offered pricing, which it maintains was required
by the RFP.[3] According to the protester, a proper cost analysis
would have revealed that ASC's proposed prices for certain line items
were unrealistically low, indicating inadequate staffing and/or
inadequate fringe benefit rates to support the estimated work load,
and therefore demonstrating a lack of comprehension of the
requirements.
Specifically, CSI alleges that ASC's line item pricing was understated
in [deleted] for a total of [deleted] (including options) and at least
four dining facility attendant line items (which facilities the
protester alleges [deleted] for a total of [deleted]. CSI reaches its
conclusion by comparing ASC's line item prices with the IGE, the
protester's own prices, and the prices of the three other offerors
submitting total prices lower than CSI's. The protester specifically
contends that in the area of the greatest alleged
underpricing--[deleted]--ASC's productive hours indicates that the
firm did not base its unit prices on the estimated requirements.[4]
Additionally, CSI contends that ASC's proposed fringe benefit rate was
understated because it was based on an erroneous assumption of an
average of [deleted] annual vacation days per employee rather than
[deleted] days, which the protester contends is more realistic (given
that the work force likely will consist largely of the incumbent's
employees, and the existence of a collective bargaining agreement
(CBA)).[5] The protester maintains that [deleted] should have been
added to ASC's proposal in order to arrive at the most probable cost
for the vacation rate.[6] According to CSI, the alleged total
underpricing of ASC's offer amounts to [deleted].[7]
Cost realism refers to the likely cost of performance, and ordinarily
is not a factor in the evaluation of proposals where a fixed-price
contract is to be awarded, since the government's liability is fixed
and the risk of cost escalation is borne by the contractor. PHP
Healthcare Corp.; Sisters of Charity of the Incarnate Word,
B-251799 et al., May 4, 1993, 93-1 CPD para. 366 at 5. However, since the
risk of poor performance when a contractor is forced to provide
services at little or no profit or with an underestimated work force
is a legitimate concern even where a fixed-price contract is to be
awarded, an agency in its discretion may, as it did here, provide for
a realism analysis as part of the evaluation. Id.
Based on our review of the record here, we conclude that the protest
is without merit. While the RFP called for detailed cost information,
it did not specify that a detailed cost analysis would be performed,
or that the cost/price evaluation would be the sole or primary means
of assessing offeror understanding or, in the final analysis,
technical acceptability. Rather, the stated purpose of the "cost
realism" analysis was solely to aid in determining offerors'
"comprehension of the requirements" and "the degree to which proposed
price reflect[s] proposed performance."[8] In light of the language
of the RFP and the fixed-price nature of the contract, we see no basis
to find that the agency was required to perform an in-depth cost
analysis here.
The record shows that the agency evaluated cost/price in accordance
with this stated purpose. The agency initially determined, in the
technical evaluation, that ASC's proposal was technically acceptable
under all elements, including the subfactor staffing/methodology,
under the comprehension of the requirements factor. Specifically, the
agency determined that ASC's proposal reflected sufficient direct and
indirect staffing for the proposed work load in terms of the proposed
mix of personnel and productive hours and further contained wages in
compliance with the minimum required by the Department of Labor wage
determination or the CBA.[9] The protester does not challenge the
evaluation of ASC's technical proposal in this area. The agency then
undertook its cost/price evaluation for purposes of further assessing
understanding. As discussed, the agency's approach consisted, in the
first instance, of examining total prices, based on its view that an
understated price could reflect a lack of understanding of the
requirement. As indicated above, the agency concluded that since
competition was adequate, and ASC's price was only [deleted] percent
below the average of the five lowest prices, it did not reflect any
lack of understanding. There simply is no basis for objecting to this
conclusion--the facts that adequate price competition was received,
the five low prices were within a narrow range, and ASC's price was
only [deleted] percent lower than the protester's, all support the
agency's conclusion that there was no basis for rejecting ASC's
proposal for lack of understanding.[10]
Further, the mere presence of some low line item prices would not
necessarily reflect a lack of understanding of the overall
requirements, such that ASC's proposal should have been found
unacceptable. In this regard, there was considerable line item
deviation in unit prices among offerors for the [deleted] at issue
[deleted]. The prices ranged on the first item from ASC's low of
[deleted] to a high of [deleted] and on the second item from ASC's low
of [deleted] to the high of [deleted]. CSI's price for both items was
[deleted], that is, toward the low end of the range. Although the
record does not include a detailed explanation as to how the agency
found these disparate prices related to offerors' approaches, whatever
the reason for the pricing, the agency reasonably could conclude that
ASC's low pricing of these two line items was not significant
enough--given the closeness of the total prices and the technical
evaluation finding of acceptability--to warrant rejecting ASC's
proposal for lack of understanding. We reach the same conclusion
regarding CSI's argument that ASC's vacation rate is understated.
That is, whether or not the item is underpriced relative to the other
offers, the protester has not established why this pricing equates
with a lack of understanding in light of the close total prices and
the technical evaluation conclusions. In any case, CSI has not shown
that its assumption--that the seniority of the work force ASC
ultimately will employ dictates a higher vacation rate--applies to
ASC's approach or was otherwise reasonable.
Finally, since this was a fixed-price requirement and the RFP did not
provide any mechanism for upward adjustment of prices in the event the
agency found item prices too low, the agency could not properly have
made upward price adjustments, as suggested by the protester. PHP
Healthcare Corp; Sisters of Charity of the Incarnate Word, supra, at
6. We note, however, that such an upward adjustment, even in the full
amount urged by CSI--[deleted]--would not be sufficient to eliminate
ASC's [deleted] price advantage; ASC's price would remain [deleted]
lower than CSI's.
The protest is denied.
Comptroller General
of the United States
1. The agency considered a price analysis based on a comparison with
the [deleted] independent government estimate (IGE). However, since
all five low competitive range offerors were below the IGE and the
agency determined that a number of adjustments would be necessary to
the IGE to make it useful for comparison purposes, the agency
concluded that the average price was the most meaningful basis for
comparison.
2. In this regard, the agency has submitted a graph (prepared by the
contracting officer in response to the protest) of the acceptable
offerors' line item prices for the dining facility attendants, which
comprise the majority of the line items at issue here, showing "a
close trend for all [five low] offerors which follows the same general
path for increases and decreases."
3."Price analysis" is a process of examining and evaluating a proposed
price without evaluating its separate cost elements; "cost analysis"
involves the examination and evaluation of an offeror's separate cost
elements and proposed profit. FAR sec. 15.801 (June 1997).
4. In this regard, for the [deleted] the protester contends that ASC's
cost breakdown of productive hours includes only [deleted] percent of
the IGE's estimated productive hours necessary to perform the
estimated work load.
5. Under the Service Contract Act of 1965 and its implementing
regulations, successor contractors are required to pay wage rates and
fringe benefits to service employees they hire in accordance with the
predecessor contractor's CBA. 41 U.S.C. sec. 353(c) (1994); 29 C.F.R. sec.
4.1b (1997). Here, the predecessor contractor's CBA required 1 to 4
weeks of vacation depending on the years of service.
6. CSI also initially complained that ASC underpriced its offer with
regard to state (Georgia) unemployment tax compensation. The
protester contended that a realistic rate was the [deleted] percent it
experienced as the incumbent. However, after review of the agency
report and ASC's comments to the report, as well as discussion with
the Georgia Department of Labor, the protester agrees that the
[deleted] percent rate offered by ASC would apply (since ASC does not
currently conduct business in Georgia) and that rate would remain in
effect for at least 36 months. In light of this concession and in the
absence of any indication by the protester of any remaining concern in
this area regarding ASC, we deem this basis of protest abandoned. See
Allied Tech. Group, Inc., B-271302, B-271302.2, July 3, 1996, 96-2 CPD para.
4 at 6 n.5.
7. We note that, although CSI initially submitted a list of 12 ASC
line items which were allegedly underpriced, the protester's argument
as initially submitted and as contained in its comments on the agency
report discusses only the six line items indicated above and the
vacation rate. Additionally, since the protester's argument is
specific only with regard to the [deleted]--it asserts only generally
that the remaining items are underpriced--our discussion focuses on
those two items.
8. The protester further maintains that the source selection
evaluation plan called for [deleted]. However, because allegations of
deviations from a source selection plan do not constitute a basis for
questioning the validity of an award selection, we need not consider
this aspect of the protester's argument. EG&G Team, B-259917.2, July
5, 1995, 95-2 CPD para. 138 at 5 n.2.
9. These findings are set out in individual evaluator and compilation
work sheets with adjectival ratings of [deleted]. For all elements
under staffing/methodology, ASC's proposal received either [deleted]
or [deleted] ratings. These ratings were then rolled into an overall
technically acceptable rating.
10. Further, while we have found that the agency was not bound to do
so, it is evident from the discussion letters sent to offerors that
the agency in fact assessed the adequacy of individual cost elements
during the original evaluation and requested responses from offerors
where cost elements appeared unrealistic or otherwise inadequate. For
example, prior to receipt of best and final offers (BAFO), the agency
notified ASC that the firm's revised cost proposal appeared to reflect
the cost of [deleted]. Additionally, the agency notified ASC that its
revised proposal's [deleted] appeared [deleted] in comparison to the
requirements.