BNUMBER:  B-276912; B-276912.2 
DATE:  August 11, 1997
TITLE: CardioMetrix, B-276912; B-276912.2, August 11, 1997
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Matter of:CardioMetrix

File:     B-276912; B-276912.2

Date:August 11, 1997

Robert J. Loring, Ph.D. for the protester.
Jan Rich, for CorVel Corp., an intervenor.
Ann L. Chaney, Esq., and Henry Valiulis, Railroad Retirement Board, 
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.  Contracting agency's determination not to set aside procurement 
for small business concerns was proper where, based on the procurement 
history for the solicited services, agency concluded that it could not 
reasonably expect to receive bids from at least two responsible small 
business concerns offering a fair market price.

2.  Solicitation requirement that contractor provide additional 
medical examiners in cases where a claimant must travel more than 50 
miles to an appointment is not improper where requirement reflects the 
agency's legitimate needs, even though costing the requirement for 
proposal purposes may be difficult for offerors, resulting in 
significant contractor risk.

DECISION

CardioMetrix protests certain terms of solicitation No. 97-B-2, issued 
by the Railroad Retirement Board (RRB) for disability examination 
services on a fixed-price, indefinite-quantity basis.  CardioMetrix 
principally asserts that the solicitation should have been set aside 
for exclusive small business participation. 

We deny the protest.

SET-ASIDE DECISION

An acquisition of services over $100,000, such as the one at issue 
here, is required to be set aside for small business concerns where 
the contracting officer determines that there is a reasonable 
expectation that offers will be obtained from at least two responsible 
small business concerns and that award will be made at fair market 
prices.  Federal Acquisition Regulation (FAR)  sec.  19.502-2(b).  Here, 
the contracting officer's decision not to set the solicitation aside 
was based on the procurement history for the same services which, he 
concluded, showed that it was unlikely that at least two small 
businesses would submit offers at a fair market price.  Specifically, 
this information showed that three small businesses remained in the 
competitive range after best and final offers were submitted under the 
prior procurement, but that only one of those firms' offers was at a 
fair market price (the price was slightly higher than the government 
estimate).  The remaining two offers were more than 50 percent higher 
than the low small-business offer and the government estimate.  The 
contracting officer also considered that the current solicitation 
includes greater requirements for electronic data interchange (EDI)[1] 
and a lower guaranteed minimum dollar award than under the prior 
solicitation, and, unlike the prior solicitation, provided for award 
possibly on a regional rather than nationwide basis.  Since these 
factors would require firms to incur the costs of implementing (or 
upgrading) EDI, and at the same time provide a smaller contract base 
over which to spread their costs, the contracting officer believed 
these factors would make it even more difficult for small businesses 
to offer fair market prices than under the prior solicitation. 
  
CardioMetrix takes issue with the agency's investigation into the 
feasibility of a set-aside.  Specifically, it maintains that the 
agency should have taken additional steps, including attempting to 
procure a list of potential small businesses from the PASS database, 
contacting the three small businesses that responded to the earlier 
solicitation, and conferring with the Small Business Administration 
(SBA), which has agreed with CardioMetrix that the procurement should 
be set aside.[2] CardioMetrix also asserts that EDI in fact is cost 
effective, and that the inclusion of the supposedly too high-priced 
small business proposals in the competitive range (under the prior 
solicitation) suggests that they in fact were considered to offer fair 
market prices.  

The agency's determination was adequately supported.  In determining 
whether to set aside a procurement for small business concerns, 
procuring agencies are permitted to rely on any of several types of 
relevant information, including past procurement history; agencies are 
not required to use any particular method in making their 
determination.  CardioMetrix, B-256407, May 27, 1994, 94-1 CPD  para.  334 
at 2-3.  This being the case, and since there is nothing in the record 
suggesting that the historical information was somehow flawed, there 
simply is no basis to conclude that the RRB's determination was 
rendered improper by its failure to obtain and consider the additional 
information specified by CardioMetrix.

As for CardioMetrix's specific points, first, the fact that the SBA 
believes a set-aside is appropriate does not render the agency's 
determination improper; as noted above, it is the agency's, not the 
SBA's, responsibility to make the set-aside determination.  We note, 
furthermore, that the SBA's position did not turn on alleged errors in 
the agency's rationale but, rather, was based on a difference in 
judgment.  For example, while the RRB's determination was based in 
part on the two high-priced small business proposals' failure to offer 
fair market prices, it was the SBA's view that this concern could be 
mitigated by stressing to offerors the importance of both price and 
technical factors.  This disagreement with the agency's judgment does 
not render it unreasonable or otherwise improper.  Second, with 
respect to EDI, the agency's focus was not on its cost effectiveness, 
but on the fact that implementing or upgrading EDI capability 
(programming and software costs) would involve added cost compared to 
the prior contract, while the guaranteed dollar value of the contract 
would be lower than under the prior contract.  The agency essentially 
concluded that this had the effect of increasing the risk under the 
contract and likely would lead to even higher proposed prices than the 
already too high prices from the unsuccessful small business offerors 
under the prior solicitation.  Finally, the fact that those two 
high-priced proposals were included in the competitive range in no way 
contradicts the agency's position that they did not offer fair market 
prices.  Rather, those proposals were included despite their high 
prices, apparently to provide the offerors an opportunity to lower 
their prices.  As their final prices remained significantly higher 
than the awardee's and the estimate, the agency reasonably viewed the 
proposals as not offering a fair market price.

RISK

CardioMetrix challenges a provision of the solicitation requiring the 
contractor to make every effort, including recruiting additional 
providers, to assure that claimants need travel no further than 50 
miles from their residence to attend their disability examination 
appointments.  CardioMetrix argues that the provision imposes undue 
risk on the contractor, since the lack of information as to how many 
ultimate clients live outside the 50-mile radius makes it difficult 
for the contractor to estimate the cost of performance.  CardioMetrix 
acknowledges that the agency cannot provide more detailed information, 
and thus suggests that the solicitation be amended to allow the 
contractor to bill the agency a surcharge for the costs it incurs in 
recruiting new providers to meet this requirement. 

This argument is without merit.  The solicitation was intended to 
result in a cost-effective contract under which the contractor would 
furnish an established network of providers that covers the greatest 
geographic area (within the service area) possible.  The agency 
asserts that permitting the contractor to bill a surcharge would 
defeat this intent by providing offerors an incentive to offer a more 
limited network with the intention of recruiting more providers on an 
as-needed basis; this potentially would result in a less extensive 
established network, and a higher cost to the agency.  We find this to 
be a legitimate concern; we agree with the agency that the change 
proposed by the protester could result in a contract which both 
operates differently than the agency desires, and increases the 
contract cost.  Risk is inherent in most types of contracts, 
especially in fixed-price contracts such as the one here, and there is 
nothing improper in an agency's designing a solicitation to meet its 
needs and cost objectives in the manner it deems most effective, even 
where doing so results in the imposition of significant risk on the 
contractor.  See National Customer Eng'g, B-254950, Jan. 27, 1994, 
94-1 CPD  para.  44 at 5; Tracor Jitco, Inc., B-220139, Dec. 24, 1985, 85-2 
CPD  para.  710 at 4-5.  

MEDICAL REPORT

CardioMetrix also objects to the solicitation requirement that the 
contractor include a completed residual functional capacity form with 
its basic medical report for each claimant receiving a physician 
examination.[3]  CardioMetrix asserts that this form generally is 
based on a functional capacity evaluation assessment, a lengthy exam 
performed by a physical or occupational therapist, and that it 
therefore is unreasonable to require a physician to complete the form 
based on a normal physical exam.

Procuring agencies are responsible for defining their needs and 
determining how best to meet those needs.  See CardioMetrix, B-270701, 
Mar. 13, 1996, 96-1 CPD  para.  149 at 3.  The RRB states that the form it 
included in the solicitation is designed to obtain a report of the 
functional capacity of the claimant to the extent that the physician 
is capable of assessing it based on his or her examination of the 
claimed impairments, however limited that examination may be.  While 
it may be true, as CardioMetrix states, that the form generally is 
completed following a functional capacity evaluation assessment, we 
see no reason why the agency should not be permitted to rely on the 
opinion of a physician, based on a more limited physical examination.  

The protest is denied.

Comptroller General 
of the United States

1. This was required to allow the exchange of certain information 
between the computer systems of the agency and the contractor.

2. The SBA also filed an appeal with the agency pursuant to FAR  sec.  
19.505(c)(2).  By decision dated July 14, the agency denied the appeal 
on essentially the same grounds it asserts here.

3. Residual functional capacity is a measure of exertional limitations 
on a patient over the course of a typical 8-hour day.