BNUMBER: B-277353
DATE: October 2, 1997
TITLE: The Cube Corporation, B-277353, October 2, 1997
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Matter of:The Cube Corporation
File: B-277353
Date:October 2, 1997
Katherine S. Nucci, Esq., Timothy Sullivan Esq., and Martin R.
Fischer, Esq., Adduci, Mastriani & Schaumberg L.L.P., for the
protester.
Vera Meza, Esq., Department of the Army, for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of
the General Counsel, GAO, participated in the preparation of the
decision.
DIGEST
Agency reasonably determined that the awardee's price was reasonable
and realistic based on a price analysis, and properly based its award
selection on price where the competing proposals were otherwise
reasonably determined to be equal.
DECISION
The Cube Corporation protests an award of a fixed-price-with-award-fee
contract to ORI Services Corporation (ORI) under request for proposals
(RFP) No. DAAD01-97-R-0011, set aside for section 8(a) concerns,
issued by the Department of the Army for installation support
management services at Yuma Proving Ground, Arizona, for a base period
with 7 option years.
We deny the protest.
The RFP stated a best value evaluation scheme with the
management/technical factor being significantly more important than
performance risk, and performance risk being slightly more important
than cost. Under the management/technical factor, the RFP stated four
subfactors; of particular relevance here are subfactors 1 and 3 which
concern staffing and skill levels (journeyman to sub-journeyman),
respectively. The subfactors were to be rated on a color scale of red
(the lowest rating), yellow, blue, and green (the highest rating).[1]
Under the cost factor, the RFP stated:
The limited cost data will be evaluated by Government Cost/Price
Analysts for completeness and cost realism in narrative format.
It is a common practice for all offerors to include in their
proposals certain potential cost reducing factors, i.e.,
attrition rates and insurance dividends. These cost reductions
may or may not materialize during the contract, and the factors
would be applicable to all offerors. Therefore, during the cost
realism evaluation for this contract, no cost reduction factors
will be allowed unless the offeror has accepted the risk and has
included a guaranteed minimum for the proposed reduction. As
with Performance Risk analysis, Management/Technical merit is
significantly more important than cost for evaluation purposes
for this requirement. The Government is willing to pay more if
the management/technical advantages so warrant. However, as
management/technical merit and performance risk tend to equalize,
cost will become more important.
The RFP elsewhere stated that the "cost analyses will receive
narrative ratings."
Three offerors, including Cube and ORI, submitted proposals. ORI's
proposal received green ratings on all four management/technical
subfactors and a low performance risk rating. Cube's proposal
received yellow ratings on subfactors 1 and 3, blue ratings on
subfactors 2 and 4, and a negligible performance risk rating. The
reasons for Cube's proposal's yellow ratings were that it proposed
fewer staff-years than the agency considered necessary, and it was
contradictory and/or unclear regarding employment of sub-journeymen
workers. The third offeror did not submit sufficient information to
permit evaluation and was eliminated from the competitive range.
ORI's $21.6 million price was 7 percent above the government estimate
and Cube's $19.5 million price was 3.2 percent below the government
estimate. Based on its analysis of the limited cost data submitted,
the agency determined that both prices were fair and reasonable for
their proposals, although it identified questions regarding specific
costs of each proposal which were to be addressed during discussions.
In response to the discussions, Cube increased its staffing by 1
staff-year. The agency determined that, based on historical staffing
requirements, Cube's revised staffing level was still inadequate.
Assuming that Cube's lower price was attributable to its low staffing
level, the Army eliminated Cube's proposal from the competitive range,
and requested a best and final offer (BAFO) from ORI.
Cube requested and received a debriefing with regard to its proposal's
elimination from the competitive range. During the debriefing, the
contracting officer learned that the historical staffing level used by
the agency to evaluate proposed staffing levels was incorrect, and was
persuaded that Cube's evaluation ratings might be unreasonable. The
contracting officer therefore conducted a neutral reevaluation of
Cube's proposal. Based on this reevaluation, Cube's proposal's
ratings for all management/technical subfactors were changed to green,
except for the third subfactor which was changed from yellow to blue.
Cube's proposal was readmitted to the competitive range and BAFOs were
requested from Cube and ORI. Cube's and ORI's total BAFO prices were
$16,092,299 and $15,666,417, respectively.
Based on its analysis of the proposals, the agency determined that the
BAFO prices were fair and reasonable. The agency also determined that
ORI's BAFO represented the best value because it was rated technically
superior to Cube's proposal with a low performance risk and offered
the lowest price. On June 16, the agency awarded the contract to ORI.
Cube requested and received a debriefing. This protest followed.
Cube first alleges that its BAFO should have been rated superior, or
at least equal, to ORI's BAFO, given its asserted superiority under
the third management/technical subfactor, where its proposal was rated
lower than ORI's by the agency.
In reviewing an agency's evaluation of proposals and source selection
decision, our review is confined to a determination of whether the
agency acted reasonably and consistent with the stated evaluation
factors. PRC, Inc., B-274698.2, B-274698.3, Jan. 23, 1997, 97-1 CPD para.
115 at 4. We will not question an agency's evaluation of proposals
unless the agency deviated from the solicitation evaluation criteria
or the evaluation was otherwise unreasonable. HSG-SKE, B-274769,
B-274769.3, Jan. 6, 1997, 97-1 CPD para. 20 at 3.
Subfactor 3 under the management/technical factor concerns proposed
plans for qualifying journeyman workers and for ensuring a qualified
and balanced (journeyman to sub-journeyman) work force. This was the
only subfactor after the reevaluation of Cube's proposal for which
Cube was rated lower than ORI. In response to the protest, the agency
states that, given the evaluation significance of the third subfactor,
Cube's and ORI's BAFOs are actually considered "basically equal" under
both the management/technical and performance risk factors, and
therefore price was the determining factor for award. The agency
states that the source selection decision was proper because award was
made to the offeror with the lowest price.
Notwithstanding that the Contracting Officer revised her technical
evaluation in documents prepared in defense of this protest, from ORI
having a technical superiority in the contemporaneous source selection
documents to "basically equal technically" in the Contracting
Officer's Statement, the contemporaneous record supports this revised
conclusion. Our review of the technical proposals shows no
significant difference exists between the two technical/management
proposals. Although Cube essentially contends that the section in its
proposal discussing the training and use of its work force was longer
than ORI's, and thus should be considered superior under subfactor 3,
it does not identify anything which it proposed that was not also
proposed by ORI. Since the stated evaluation plan contemplated that
price would increase in importance as proposals become more equal
under the other evaluation factors, and the record does not evidence
any technical differences in the proposals to justify award based on a
higher price, the agency's award selection based on lower price is
reasonable and consistent with the terms of the RFP. See PRC, Inc.,
supra, at 12-14.
Cube also contends that ORI's low BAFO price is not realistic and
that, if the Army had conducted a proper cost analysis of ORI's BAFO
price as allegedly required, it could not have reasonably determined
that ORI's BAFO price is reasonable, but rather should have recognized
that ORI had submitted a below-cost BAFO.
Where, as here, a fixed-price contract is solicited, "cost realism"
ordinarily is not considered in the evaluation since a firm,
fixed-price contract provides for a definite price which places the
risk and responsibility for all contract costs and resulting profit or
loss upon the contractor. Sperry Corp., B-225492, B-225492.2, Mar.
25, 1987, 87-1 CPD para. 341 at 3. In this regard, a below-cost offer is
legally unobjectionable and, in the case of a fixed-price offer, it
cannot be rated lower or downgraded in the price evaluation for source
selection by virtue of its low price. Id. at 4; Milcon Sys. Corp.,
B-255448.2, May 3, 1994, 94-1 CPD para. 339 at 9-10. However, agencies,
in their discretion, may provide for a cost realism analysis in the
solicitation of firm, fixed-priced proposals for such purposes as
measuring an offeror's understanding of the solicitation requirements.
Sperry Corp., supra, at 3; see American Lawn Serv., Inc., B-267715,
Dec. 20, 1995, 95-2 CPD para. 278 at 4-5 (specifically stated intention to
apply price realism analysis to technical evaluation ratings created
requirement to do so).
Here, notwithstanding the RFP's use of the term "cost" to identify the
evaluation factor and the statement that a cost or cost realism
analysis would be performed, this does not mean that the evaluation
factor was other than price, nor does it commit the agency to perform
a cost analysis in accordance with Federal Acquisition Regulation
(FAR) sec. 15.805-3. See ASI Personnel Serv., Inc., B-258537.7, June 14,
1995, 95-2 CPD para. 44 at 2 n.1, 5; Sperry Corp., supra, at 4. Instead,
we think that the "cost" factor here contemplated that the agency
would evaluate the relative prices after performing a price analysis
in accordance with FAR sec. 15.805-2 to ascertain whether the offered
prices were reasonable and realistic.[2] Sperry Corp., supra, at 4;
see Computer Sys. Int'l, Inc., B-276955, B-276955.2, Aug. 13, 1997,
97-2 CPD para. 49 at 3.
Price analysis techniques that may be used to determine whether prices
are reasonable and realistic include a comparison of the prices
received with each other, FAR sec. 15.805-2(a); with prior contract
prices for the same or similar services, FAR sec. 15.805-2(b); and with
an independent government cost estimate, FAR sec. 15.805-2(e). The depth
of an agency's price analysis is a matter within the sound exercise of
the agency's discretion. Ameriko-OMSERV, B-252879.5, Dec. 5, 1994,
94-2 CPD para. 219 at 4; Ogden Gov't Servs., B-253794.2, Dec. 27, 1993,
93-2 CPD para. 339 at 7.
The Army's BAFO price analysis was based on a comparison of prices to
each other and to the government estimate, as well as its evaluation
of the limited cost information provided with initial proposals and
during discussions. The record shows that both BAFO prices and the
government estimate were significantly reduced to account for a
reduction of the services required through RFP amendments, and that
the final government estimate was 17 percent higher than ORI's BAFO
price and 15 percent higher than Cube's BAFO price. The agency
identified the difference between the estimate and the prices as
resulting from an unnecessary escalation of wage rates used in the
government estimate.[3] Considering this adjustment, the agency
determined that both BAFO prices were reasonable in comparison to the
government estimate. The agency also determined that ORI's price was
within 3 percent of Cube's price and was reasonable. Moreover, based
on the limited cost information submitted, the agency had determined
that both Cube's and ORI's identified costs were complete and
reasonable. The Army accordingly determined that ORI's BAFO price was
fair, reasonable, and realistic. Based on our review, we have no
basis to disturb the agency's determination.[4] See Computer Sys.
Int'l, Inc., supra, at 4-5; Pearl Properties; DNL Properties, Inc.,
B-253614.6, B-253614.7, May 23, 1994, 94-1 CPD para. 357 at 11-12.
Cube also alleges that ORI's cost data and low BAFO price evidence
that ORI may not intend to provide the required level of effort under
the contract. ORI's technical proposal offered to provide an
acceptable level of effort to fully perform the contract requirements.
ORI did not propose any revisions to its initial technical proposal.
Therefore, since this is a fixed-price contract, even assuming the
cost data and low price indicate that ORI's BAFO is below cost, the
issue such evidence raises is whether ORI will be able to perform the
contract requirements at the price proposed, not whether the offeror
has taken exception to the contract requirements. See Milcon Sys.
Corp., supra, at 9; Oshkosh Truck Corp., B-252708.2, Aug. 24, 1993,
93-2 CPD para. 115 at 6 n.3. The allegation thus concerns a matter of
affirmative responsibility which our Office will not review absent a
showing of possible fraud or bad faith by government officials, or the
misapplication of definitive responsibility criteria, none of which
are present here. 4 C.F.R. sec. 21.5(c) (1997); Oshkosh Truck Corp.,
supra.
In sum, the Army acted properly and reasonably in determining that
ORI's BAFO price was fair, reasonable, and realistic based on a price
analysis, and reasonably based its selection on price where the
competing proposals were otherwise reasonably determined to be equal.
The protest is denied.
Comptroller General
of the United States
1. The RFP described each color rating as follows:
Red - Fails to meet the requirements of the statement
of work [(SOW)].
Yellow - Weak, however, with clarifications may be able
to meet the requirements of the [SOW].
Blue - Meets the minimum requirements of the [SOW].
Green - Significantly exceeds the requirements of the
[SOW].
2."Price analysis" is a process of examining and evaluating a proposed
price without evaluating its separate cost elements and proposed
profit; "cost analysis" involves the review and evaluation of an
offeror's separate cost elements and proposed profit. FAR sec. 15.801.
3. The wage rates in question are governed by Department of Labor
(DOL) wage determinations. Changes in DOL wage determinations will
result in price modifications under this contract, and thus escalation
of these costs is not applicable to evaluating price reasonableness.
4. In response to Cube's contention that ORI's use of 2,080 hours in
its proposal, instead of 2,088 hours, shows that ORI's costs are
understated and/or that it did not understand the level of effort
required, the agency responds that the point is not a concern because
2,080 hours is the generally accepted standard workyear for
calculating labor costs (2,080 hours is the product of multiplying 52
weeks per year by 40 work-hours per week). Accordingly, we agree with
the agency that ORI's use of 2,080 hours per staff-year does not
indicate that ORI did not understand the level of effort required.
Moreover, to the extent that 2,080 hours does not represent the actual
number of work hours in any given staff-year, the difference is not
material.