BNUMBER:  B-277266 
DATE:  September 12, 1997
TITLE: Property Analysts, Inc., B-277266, September 12, 1997
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DOCUMENT FOR PUBLIC RELEASE
This version has been redacted or approved by the parties involved for 
public release.
Matter of:Property Analysts, Inc.

File:     B-277266

Date:September 12, 1997

James L. Babb, Jr., for the protester.
Lewis M. Nixon, Esq., and Elisa J. Yochim, Esq., Department of Housing 
& Urban Development, for the agency.
Paula A. Williams, Esq., Office of the General Counsel, GAO, 
participated in the preparation of the decision.

DIGEST

1.  Firm which submitted the highest priced of three technically equal 
proposals is not an interested party to protest an award since price 
properly was the determinative factor for award and protester would 
not be in line for award if the protest were sustained. 

2.  General Accounting Office will not consider challenges to 
contracting officer's affirmative determination of awardee's 
responsibility absent evidence of bad faith; protester's 
unsubstantiated allegations that contracting officer ignored awardee's 
noncompliance under prior contracts do not meet this standard.

DECISION

Property Analysts, Inc. (PAI) protests the award of a contract to MT 
Mullen Corporation under request for proposals (RFP) No. 
HO5R96010800000, issued by the Department of Housing & Urban 
Development (HUD) for field review of appraisals for single family 
homes in the Northern Indiana geographic area.  PAI protests the 
technical acceptability of Mullen's proposal and contends that the 
contracting officer otherwise improperly determined Mullen to be a 
responsible contractor.
 
We dismiss the protest.

The RFP, issued as a total small business set-aside, contemplated the 
award of a fixed-price requirements contract for a base period and two 
1-year options, not to exceed 36 months in total.  The contractor will 
perform on-site field reviews of appraisals to determine the accuracy 
and quality of the appraisals completed by authorized appraisers.  

Offerors were advised that field review appraisers must be licensed by 
the State of Indiana and that this licensing requirement could be 
satisfied through reciprocity or temporary practice provisions to the 
extent permitted by state law.

The RFP provided that award would be made to the offeror whose 
proposal was determined most advantageous to the government, price and 
other factors considered.  The RFP stated that technical merit would 
be more significant than price in the award selection, and listed the 
following technical evaluation factors to be scored on a 100-point 
scale:  work accomplishment (25 points), ability to perform (25 
points), capacity (20 points), appraisal knowledge (20 points), and 
management plan (10 points).  Price was not rated or scored but would 
be evaluated for reasonableness.  The RFP further advised offerors 
that total evaluated price could be the determining factor for award 
if there were no significant technical or management differences among 
proposals.  

Proposals were received from five firms, including PAI and Mullen, by 
the
July 1, 1996, closing date.[1]  The proposals were evaluated by a 
three-member  technical evaluation panel (TEP) and four proposals, 
including those submitted by PAI and Mullen, were determined to be 
technically acceptable and within the competitive range.  On August 
21, discussions were held, best and final offers (BAFOs) were 
requested, and three BAFOs were timely received and evaluated.  
Because the TEP considered the three competing proposals technically 
equivalent, the TEP recommended Mullen for award, noting that the firm 
has successfully performed under prior FRA contracts and offered the 
lowest evaluated price.  

However, the contracting officer was aware of a June 25, 1996, Small 
Business Administration (SBA) determination that MTB Investments, Inc. 
(the incumbent contractor) was other than a small business.  Since 
this determination indicated that Mullen was affiliated with MTB 
Investments, the contracting officer questioned Mullen's 
self-certification as a small business concern.  On September 13, the 
contracting officer filed a size status protest with the SBA regarding 
the business size standard representation of Mullen.  After various 
appeals to the SBA's Office of Hearings and Appeals and the submission 
of additional information by MTB Investments, the SBA ultimately 
determined that MTB, and its affiliate Mullen, was small under the 
size standard in this procurement and, as of February 19, 1997, 
recertified the firm as small and therefore eligible to participate in 
this procurement.

Thereafter, on February 28, the contracting officer sent discussion 
letters to the three offerors who had submitted BAFOs.  Each was asked 
to update/supplement its prior BAFO submission, including any changes 
to proposed key personnel and the use of subcontractors/appraisers, 
and to provide the names and current appraisal licenses for each 
proposed appraiser.  A two-member TEP reconvened to evaluate the three 
offerors' responses to the contracting officer's discussion request.  
A second round of oral discussions was conducted and a second round of 
BAFOs was requested for evaluation.[2]  While the TEP concluded that 
all three proposals still remained technically acceptable, it 
increased the technical scores of PAI and the second offeror and 
decreased Mullen's technical score with the following results:

     Offeror    Consensus Score      Rating       Total Price

       PAI             99          Acceptable      $215,600

        A           [deleted]      Acceptable      [deleted]

     Mullen            80          Acceptable      $166,180
In its final evaluation report, the TEP recommended award to either 
PAI or the second offeror, stating that selecting either firm (both 
are located within the state)  would save the agency time in packaging 
and mailing assigned reviews and noting that the evaluated prices of 
both firms were about equal and considered adequate to ensure either 
firm's ability to hire quality appraisers.

However, the contract specialist disagreed with the award 
recommendation of the TEP because the final evaluation report did not 
document the reasons for the increase or decrease in technical point 
scores assigned to the second BAFO submissions nor, in her judgment, 
did the evaluators adequately justify their award recommendation.  
Therefore, the contract specialist prepared an analysis of the 
evaluators' technical findings of the strengths and weaknesses of each 
offerors' proposal under each evaluation factor and a price 
reasonableness determination, as contemplated by the RFP.  The 
contract specialist concluded that the technical evaluations did not 
support a price/technical tradeoff based on the technical superiority 
of one offeror over another and essentially considered all three 
proposals--which were each rated technically acceptable--to be 
technically equivalent.  Consequently, the contract specialist 
recommended Mullen's low-priced, technically acceptable proposal for 
award.

The contracting officer, who served as the source selection official 
(SSO), reviewed the TEP report and the factor-by-factor analysis of 
the technical and price evaluations prepared by the contract 
specialist, and concurred with the contract specialist's finding that 
the [deleted] point difference in the point scores did not represent 
technical superiority under the solicitation terms which would warrant 
paying the price premium associated with PAI's proposal.  For example, 
with regard to the technical differences between the proposals of PAI 
and Mullen, the TEP report indicated that the evaluators considered 
PAI's in-state location to be an advantage for the program office 
while Mullen's out-of-state location and proposed method for pick-up 
and return of assigned reviews was considered time consuming and 
offered no benefits to the program office (the program office staff 
would, as it has done under Mullen's two prior FRA contracts, package 
and prepare the cases for pick-up by an overnight carrier).  In this 
regard, the TEP's narrative evaluation noted that under Mullen's 
earlier contract, the "last batch of cases took more than 15 days."  
However, the contract specialist pointed out that the TEP did not 
indicate whether this was a one time occurrence or a documented 
pattern of late delivery.  An additional weakness noted in the TEP 
report was that some of PAI's and Mullen's appraisers did not have 
experience in performing FHA appraisals or reviews; however, in her 
analysis of the TEP's evaluations, the contract specialist pointed out 
that there was no evidence in the proposals themselves which supported 
this technical finding.  The TEP report further indicated that because 
Mullen's principal was not a licensed appraiser, the evaluators 
considered this a weakness in Mullen's ability to recruit and train 
its appraisers; however, Mullen's proposal identified one of its 
employees as the manager who would supervise and train the field 
review appraisers.

In short, the SSO concurred with the contract specialist's conclusion 
that there were no competitive strengths in PAI's proposal that 
outweighed those in the proposal of Mullen, the low-priced offeror, 
and considered the reasons memorialized in the TEP report for Mullen's 
lower point score as minor with little significant impact on contract 
performance.  Accordingly, the SSO selected Mullen's proposal for 
award.  This protest followed. 

In its protest, PAI challenges the agency's determination that 
Mullen's proposal was technically acceptable.  These allegations are 
based on the premise that Mullen "has never met [its] contractual 
obligations in Northern or Southern Indiana, and [this] noncompliance 
has been ignored [by the agency]."  The protester states that these 
alleged contract performance irregularities and violations by Mullen 
were known by other third parties as well as agency officials.

In related arguments, PAI contends that the contracting officer 
otherwise improperly determined Mullen to be a responsible contractor 
claiming, in essence, that the agency has inadequate assurance that 
Mullen will meet the performance requirements of this contract given 
its alleged noncompliance with the terms of its previous FRA 
contracts.  Alternatively, PAI contends that Mullen submitted a 
below-cost offer.

We dismiss PAI's protest against the award to Mullen.

Under the bid protest provisions of the Competition in Contracting Act 
of 1984, 31 U.S.C.  sec.  3551-3556 (1994), only an "interested party" may 
protest a federal procurement.  That is, a protester must be an actual 
or prospective supplier whose direct economic interest would be 
affected by the award of a contract or the failure to award a 
contract.  Bid Protest Regulations, 4 C.F.R.  sec.  21.0(a) (1997).  Here, 
the record shows that three firms--Mullen, offeror A, and PAI--were 
found technically equal and that the protester submitted the 
highest-priced proposal.  If the protester is correct that Mullen 
should not have been awarded the contract, offeror A, not PAI, is next 
in line for award.  Thus, PAI is not an interested party to protest 
the award to Mullen.  See Watkins Sec. Agency, Inc., B-248309, Aug. 
14, 1992, 92-2 CPD  para.  108 at 4.  See also Premier Nurse Staffing, 
Inc.--Recon., B-258288.3, Apr. 3, 1995, 95-1 CPD  para.  174.  In its 
comments, PAI asserts that offeror A is "an independent fee appraiser 
who works alone out of his home . . . and could not possibly compete 
with [the protester] with respect to a technical evaluation."  
However, this unsubstantiated challenge to the capability of offeror A 
provides no basis to object to HUD's evaluation and rankings under 
which PAI is third-ranked based on its higher price. 

Regarding PAI's challenge to Mullen's responsibility, before awarding 
a contract, the contracting officer must make an affirmative 
determination that the prospective contractor is responsible.  FAR  sec.  
9.103(b).  The determination of a prospective contractor's 
responsibility rests principally within the broad discretion of the 
contracting officer, who, in making that determination, must of 
necessity rely on his or her business judgment.  Mine Safety 
Appliances Co., B-266025, Jan. 17, 1996, 96-1 CPD  para.  86 at 2.  While we 
review an affirmative responsibility determination where it is shown 
that it may have been made in bad faith, see 4 C.F.R.  sec.  21.5(c), there 
has been no such showing here.   

In any event, with regard to PAI's protest of the award to Mullen, we 
note that PAI provides no factual support for its assertions that 
Mullen has not met its contractual obligations under its HUD contract.  
The record shows that the TEP chairperson, who is the government 
technical representative for Mullen's current Southern Indiana 
contract, noted in the evaluation record that "[Mullen] is doing a 
satisfactory job," and noted as a strength that "[Mullen] has been 
handling the appraisals that we have been sending."  Further, the 
contract specialist found no evidence of poor contract performance, 
although she did find an instance where Mullen had taken longer than 
the allotted time frame for one batch of appraisals which she 
concluded was a "one time occurrence."  The contract specialist also 
noted that Mullen had made mistakes on some appraisal review forms 
which, when pointed out to Mullen, Mullen responded, resulting in 
improvement.  Further, Mullen furnished a list of other HUD appraisal 
contracts which demonstrated its prior appraisal experience.  The 
evaluation record contains no evidence that Mullen's acceptable rating 
and the agency's determination that Mullen was technically equal to 
the other two firms were erroneous. 

Moreover, while the principal of Mullen is not licensed or certified 
as an appraiser, the agency cites Article H-1 which provides that 
"[t]he contractor including any of its employees, subcontractors, or 
consultants performing Field Review of Appraisals under the contract 
shall be state of Indiana [licensed] or [certified]."  Mullen proposed 
several licensed employees (not the principal) who would be performing 
the work, and the TEP reasonably found these individuals met the 
license requirement.

PAI's alternative claim that Mullen's proposed price is unreasonably 
low to ensure quality contract performance because, in the protester's 
view, "three field review appraisers [cannot] review all of Northern 
Indiana" within the time required, is not a valid basis for protest.  
An offeror, for various reasons, in its business judgment, may decide 
to submit a below-cost offer, and there is no prohibition against a 
procuring agency's accepting an unreasonably low or below-cost offer 
on a fixed-price contract.  Intown Properties, Inc., B-256742, July 
11, 1994, 94-2 CPD  para.  18 at 4.  Again, whether an awardee can perform 
the contract at the price offered is a matter of responsibility, which 
as discussed above, we will not review absent a showing of possible 
bad faith or that definitive responsibility criteria have not been 
met, exceptions that do not apply here.  Id.; see also ENCORP Int'l, 
Inc., B-258829, 
Feb. 21, 1995, 95-1 CPD  para.  100 at 5.  

To the extent PAI is arguing that the SSO improperly emphasized price 
in the source selection decision, where, as here, the RFP provides 
that technical considerations will be more important than price, 
agency selection officials have broad discretion in determining the 
manner and extent to which they will make use of the technical and 
price evaluation results in making price/technical tradeoffs.  Red 
River Serv. Corp.; Mark Dunning Indus., Inc., B-253671.2 et al., Apr. 
22, 1994, 94-1 CPD  para.  385 at 6.  A contracting agency may properly 
award a contract to a lower-priced, lower technically scored offeror 
if it decides that the price premium involved in awarding to a 
higher-rated, higher-priced offeror is not justified given the 
acceptable level of technical competence available at the lower cost.  
See Dayton T. Brown, Inc., B-229664, Mar. 30, 1988, 88-1 CPD  para.  321 at 
4.  Evaluation scores are merely guides for the selection official, 
who must use his judgment to determine what the technical difference 
between competing proposals might mean to contract performance, and 
who must consider what it would cost to take advantage of it.  Grey 
Advertising, Inc., 55 Comp Gen 1111 (1976), 76-1 CPD  para.  325.

The protest is dismissed.[3]

Comptroller General
of the United States

1. PAI is the current field review appraisal (FRA) contractor for the 
Central Indiana area; Mullen is the current contractor for the 
Northern Indiana area (under the name MTB Investments, Inc.) and the 
Southern Indiana area.

2. The proposed prices for each firm remained unchanged.  

3. PAI argues in its comments on the agency report that the agency 
acted in bad faith in order to assure award to Mullen.  For example, 
PAI asserts that HUD improperly delayed its award decision until the 
contracting officer's size determination protest was resolved by the 
SBA.  However, to show bad faith there must be a showing that the 
agency intended to harm the protester; PAI's arguments do not meet 
this burden.  Complere Inc., B-257946, Nov. 23, 1994, 94-2 CPD  para.  207 
at 4.