BNUMBER:  B-277068 
DATE:  August 29, 1997
TITLE: Ameriko, Inc., B-277068, August 29, 1997
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DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release.
Matter of:Ameriko, Inc.

File:     B-277068

Date:     August 29, 1997

B. Michael Schestopol, Esq., and James F. Nagle, Esq., Oles Morrison & 
Rinker, for the protester.
Timothy H. Power, Esq., for State Management Services, Inc., an 
intervenor.
Darryl Bardusch, Esq., Capt. Philip T. McCaffrey, and Col. Nicholas P. 
Retson, Department of the Army, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that contracting agency improperly failed to conduct price 
realism evaluation of awardee's proposal is denied where the record 
shows that the agency reviewed each contract line item number (CLIN) 
of the awardee's price proposal to assess its reasonableness and 
realism in comparison with historical pricing and the offeror's own 
cost data, and subjected subsequent revisions to similar review.

2.  Protest that contracting agency improperly failed to downgrade 
offeror's technical proposal for its inadequate understanding of the 
solicitation's requirements based upon its allegedly unrealistic 
pricing is denied where the allegation of unrealistic pricing is not 
generally supported by the record, and where the awardee's proposal as 
a whole supports the agency's evaluation.  

DECISION

Ameriko, Inc. protests the award of a contract to State Management 
Services, Inc. under request for proposals (RFP) No. DAHC77-96-R-0034, 
issued by the Department of the Army to obtain preventive maintenance 
services at military housing on various military installations on the 
island of Oahu, Hawaii.  Ameriko contends that the Army improperly 
evaluated State's proposal.

We deny the protest.

The successful offeror was to be awarded a fixed-price requirements 
contract to perform these services over one 6-month base period, with 
up to two 6-month option periods.[1]  Offerors were to provide unit 
and extended pricing for most of the solicitation's 356 CLINs, 
including those for basic preventive maintenance services for 
individual dwelling units of varying sizes; supplemental preventive 
maintenance; electrical, carpentry, plumbing, and pest control service 
order work; and standing operating order work such as sewer line and 
water system maintenance.  In this regard, offerors were required to 
document each cost element to show the basis and rationale used in 
arriving at the amounts proposed.   

Award was to be made to the offeror whose proposal was most 
advantageous to the government, price and technical factors 
considered.  The solicitation clearly defined the scope of the 
evaluation for each technical factor, including the most important 
one, comprehension of requirements.  Each offeror's proposed price was 
to be evaluated to determine whether it reflected the offeror's 
understanding of the project and ability to successfully organize and 
perform the contract; was based on adequate estimating procedures; and 
was reasonable--each price proposal would be evaluated using price 
analysis to determine the extent to which it was reasonable, realistic 
and consistent with the technical proposal.  Price was to be evaluated 
by adding the total price for all options to the total price for the 
basic requirement.  The RFP stated that, although price would not be 
formally scored, its importance could not be ignored; the importance 
of price in the selection would increase as the quality difference 
between proposals decreased.  

Four offerors submitted proposals in response to the solicitation, 
including State and Ameriko, the incumbent.  The Army evaluated 
initial proposals and included all four in the competitive range; 
conducted discussions and evaluated revised proposals; and requested 
and evaluated best and final offers (BAFO).  The final evaluation 
results were as follows:[2]

                       Technical     Price

Ameriko                  72.47    $6,422,596

State                    68.48    $5,642,518

Firm A                 [DELETED]  $[DELETED]

Firm B                 [DELETED]  $[DELETED]

Independent Government Estimate (IGE)$[DELETED]
The price negotiation memorandum summarized various technical and 
price findings for each offeror, and noted that State's proposal 
received the highest rating under the comprehension of requirements 
factor.  The contracting officer stated that the technical differences 
between the proposals submitted by Ameriko and State were not worth 
the additional $780,078 associated with Ameriko's proposal, and 
determined that State's proposal represented the best value to the 
government.  Award was then made to State, and this protest followed.

Ameriko argues that the Army improperly failed to assess the cost 
realism of State's pricing proposal, relying only on the "bottom-line 
prices" without considering "anomalies or aberrations" in State's 
pricing of certain individual CLINs.  Ameriko also cites this 
allegedly aberrant pricing to argue that the Army improperly failed to 
downgrade State's technical proposal for its inadequate understanding 
of the solicitation's requirements.  

Cost realism--a measurement of the likely cost of performance in a 
cost reimbursement contract--is generally not a factor in the 
evaluation of proposals where, as here, a fixed-price contract is to 
be awarded, because the government's liability is fixed, and the risk 
of cost escalation is borne by the contractor.  Volmar Constr., Inc., 
B-272188.2, Sept. 18, 1996, 96-2 CPD  para.  119 at 5.  However, since the 
risk of poor performance when a contractor is forced to provide 
services at little or no profit is a legitimate concern in evaluating 
proposals, an agency may, as it did here, provide for a price realism 
analysis in the solicitation of fixed-price proposals.  Id.  The 
Federal Acquisition Regulation (FAR) provides a number of price 
analysis techniques that may be used to determine whether prices are 
reasonable and realistic, including comparison of proposed prices with 
prior proposed prices for the same or similar services, FAR  sec.  
15.805-2(b); comparison of proposed prices with each other, FAR  sec.  
15.805-2(a); and comparison of proposed prices with an IGE.  FAR  sec.  
15.805-2(e).  The depth of an agency's price realism analysis is a 
matter within the sound exercise of the agency's discretion.  Cardinal 
Scientific, Inc., B-270309, Feb. 12, 1996, 96-1 CPD  para.  70 at 4.

In order to assess price reasonableness and realism here, the Army 
reviewed each offeror's initial proposal, CLIN by CLIN, making 
notations as to whether the pricing was reasonable or realistic in 
comparison with historical pricing and/or whether it was consistent 
with the cost data provided by the offeror.  Areas of concern to the 
Army were raised with each offeror during discussions, and each 
offeror's proposal revisions were similarly reviewed.  In its price 
negotiation memorandum, the Army discussed various specific aspects of 
each offeror's price and technical proposal, as revised by its BAFO, 
prior to making the award determination.  Hence, the record shows that 
the Army did conduct a price realism evaluation, utilizing the 
analysis techniques provided under the FAR.  

The record also shows that the individual CLINs of concern to Ameriko 
were the subject of discussions with State, to the ultimate 
satisfaction of the Army.  Although the price realism evaluation was 
not as well documented as it might have been, we see no basis on the 
record here to conclude that the Army's determination was improper.  

With regard to specific CLINs, Ameriko first argues that State's 
pricing for the basic preventive maintenance services CLINs was 
unrealistic because the firm proposed the same flat rates without 
regard for the size of the dwelling units, which ranged from a minimum 
of 915 square feet to a maximum of 4,020 square feet.[3]  The Army 
points out, however, that Ameriko's assumption that increased square 
footage is directly correlated with increased services and higher 
costs is not supported by its own BAFO pricing.  [DELETED]  The fact 
that both other offerors also proposed flat prices for these CLINs 
buttresses the Army's claim that State's pricing strategy is neither 
uncommon nor unreasonable.  

Ameriko next argues that State's pricing for the supplemental 
maintenance and service order CLINs is unrealistic because it is 
consistently higher than Ameriko's.  The record shows, however, that 
the two offerors' pricing under these CLINs is not actually far 
apart--the difference is between [DELETED] and [DELETED] percent.  
Moreover, Ameriko does not challenge the legitimacy of the cost data 
provided in State's proposal, which supports its pricing.  

Ameriko also argues that State's prices for the sewer line and water 
system maintenance CLINs are unrealistic since they are much 
higher--in some cases by nearly 1,000 percent--than its own prices.  
Given the absence of any explanation for this pricing in State's 
proposal, the significant differences between State's prices for these 
CLINs and the prices proposed by the other offerors, and the Army's 
silence in the matter, we agree with Ameriko that these prices appear 
to be unrealistic.  However, since no more than 16 of the 356 
solicitation CLINs are at issue, at a total value of approximately 
$41,000, we cannot conclude that State's entire price proposal should 
have been rejected as unrealistically priced based on these CLINs 
alone.  In any event, we note that reducing State's prices for these 
CLINs, as Ameriko presumably believes should have happened, would only 
have increased State's BAFO pricing advantage over Ameriko.

Finally, the fact that State's total price was 10.5 percent below the 
government estimate is not, as Ameriko suggests, a basis for finding 
the price realism evaluation inadequate.  EC Corp., B-266165.2, Feb. 
20, 1996, 96-1 CPD  para.  153 at 4 n.2, citing Birch & Davis Assocs., 
Inc.--Protest and Request for Recon., B-246120.3, B-246120.4, Apr. 20, 
1992, 92-1 CPD  para.  372 at 6-7 (price realism evaluation adequate even 
though award price was 24 percent below government estimate).

Ameriko next argues that, in view of these alleged pricing 
aberrations, the Army improperly failed to downgrade State's technical 
proposal under the comprehension of requirements factor and the cost 
estimating subfactor of another technical factor.  
Section L of the RFP does not contemplate the consideration of price 
under either the comprehension of requirements factor or the cost 
estimating subfactor.  Section L advised offerors that the evaluation 
of their proposals under the comprehension of requirements factor, for 
example, would consider their service plans, procedures for material 
control, start-up schedule, man-loading charts, housekeeping and 
storage procedures, and plan for accomplishing recurring exterior 
maintenance.  Since the evaluation of proposals must be based on the 
factors set forth in the solicitation, FAR  sec.  15.608(a), the Army could 
not have properly downgraded State's technical proposal in the manner 
Ameriko suggests.

The solicitation did anticipate, however, that the price realism 
analysis might be used as a means to assess an offeror's understanding 
of the project.  In such cases, the evaluation must be based on 
consideration of the proposal as a whole.  EC Corp., supra, at 3.  As 
noted above, State's proposal received the highest technical rating 
under the comprehension of requirements factor, the same high rating 
as Ameriko under the cost estimating subfactor, and the second highest 
technical rating overall.  Ameriko has raised no specific challenges 
to State's technical evaluation, but merely expresses its general 
dissatisfaction with the minimal comments made on the evaluation 
rating sheets.  Further, save for the sewer line and water system 
maintenance CLINs, State's pricing is not aberrational or unrealistic.  
Accordingly, the record provides us with no basis to conclude that 
State's proposal should have been downgraded based upon its pricing, 
or any other reason.  Id. at 4.

As a final matter, Ameriko argues that the Army's best value 
determination improperly failed to consider the cost savings 
represented by its lower proposed coefficients for replacement item 
CLINs,[4] as well as other CLINS discussed above.  Ameriko is 
mistaken.  As the price negotiation memorandum makes clear, technical 
scores, as well as the price variance among proposals--which took into 
account the coefficients proposed by all offerors, including 
Ameriko--were used to determine which offer provided the best overall 
value to the government.

The protest is denied.

Comptroller General
of the United States

1. The contract resulting from this solicitation is to serve as an 
interim contract until a contract for consolidated family housing 
maintenance services is awarded.

2. After Ameriko filed this protest, the Army realized that it had 
misevaluated the offerors' BAFO revisions.  The Army's reevaluation of 
proposals resulted in a slightly higher technical score for each 
offeror (Ameriko's score increased from 72.47 to 72.83; State's from 
68.48 to 70.38; Firm A's from [DELETED] to [DELETED]; and Firm B's 
from [DELETED] to [DELETED]), but the revised price negotiation 
memorandum indicates that these revisions would not have affected the 
award decision.

3. It should be noted that only 8 of more than 3,500 dwelling units to 
be maintained per contract period have a maximum square footage of 
4,020 square feet; most of the units have a maximum square footage of 
approximately 2,500 square feet.

4. Offerors were to price several CLINs for the replacement of 
defective items by referring to government-provided price lists for 
the parts and offering coefficient percentages to be applied to the 
government estimates--the coefficients multiplied by the government 
estimates were to be the offered prices for those CLINs.