BNUMBER:  B-276111.4 
DATE:  December 29, 1997
TITLE: Consolidated Services, Inc., B-276111.4, December 29, 1997
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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.