BNUMBER:  B-277805.2 
DATE:  January 20, 1998
TITLE: SCIENTECH, Inc., B-277805.2, January 20, 1998
**********************************************************************

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:SCIENTECH, Inc.

File:     B-277805.2

Date:January 20, 1998

Joseph P. Hornyak, Esq., Sonnenschein, Nath & Rosenthal, for the 
protester.
Scott Van Lente, Esq., and Gena E. Cadieux, Esq., Department of 
Energy, for the agency.
Peter A. Iannicelli, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency's exclusion of the protester's proposal from the competitive 
range was unreasonable where:  (1) the protester's proposal was 
considered technically acceptable overall and on each evaluation 
factor, and it had no perceived deficiencies; (2) the past 
performance/customer satisfaction evaluation did not consider the fact 
that the protester and its proposed subcontractor were incumbent 
contractors, performing the same or very similar work for the same 
contracting activity and the protester had received excellent 
performance ratings; and (3) the agency did not consider price or cost 
in determining the competitive range.

DECISION

SCIENTECH, Inc., protests the Department of Energy's (DOE) decision to 
exclude it from the competitive range established under request for 
proposals (RFP) No. DE-RP07-97ID13485 for advisory and assistance 
support services in support of DOE's Idaho Operations Office (DOE-ID).  
The protester contends that DOE's evaluation of proposals was 
unreasonable and that its proposal was improperly excluded from the 
competitive range. 

We sustain the protest because DOE, in making its competitive range 
determination, unreasonably failed to consider cost or price as well 
as significant relevant past performance information that was 
highlighted in SCIENTECH's proposal.

Issued on March 31, 1997, the RFP contemplated award of three to five 
indefinite delivery, indefinite quantity, cost reimbursement contracts 
to replace several expiring advisory and assistance support services 
contracts.[1]  Each contract would be for a period of 5 years, would 
include cost-plus-fixed-fee and cost-plus-incentive-fee pricing 
provisions, and would have a ceiling price of $25 million.  The work 
would be performed in response to task orders issued by the 
contracting officer.    The RFP required offers for services in two 
general areas--engineering/technical services and 
management/professional services.  The RFP required offers to include 
ceiling rates for the proposed fees as well as ceilings for burdened 
labor rates for a large number of labor categories that might be used 
in performing the work.  

Under the RFP's evaluation scheme, contracts were to be awarded to 
those offerors whose proposals were determined to be most advantageous 
after evaluation of proposals on performance approach and cost/rate 
criteria.  The performance approach criteria and their relative 
weights (in percentage terms) were:  management approach (55 percent), 
past performance/experience (25 percent); and subcontracting approach 
(20 percent).  The RFP stated that performance approach criteria would 
be given point scores and assigned adjectival ratings but the 
cost/rate criterion would not be point scored or adjectivally rated; 
instead, cost/rate proposals were to be evaluated for reasonableness 
and appropriateness of proposed rates.  The RFP also stated that the 
performance approach criteria were considered significantly more 
important than the cost/rate criterion, but provided that, if the 
proposed rates of a higher-scored proposal were higher than other 
proposals being considered for award, the government would determine 
if the advantages of the higher-scored proposal were worth the 
additional rate costs.
 
Twenty proposals were received by the May 28, 1997, due date for 
receipt of initial proposals.  The source evaluation panel (SEP) 
evaluated initial proposals; overall technical scores ranged from a 
low of just [deleted] percent to a high of [deleted] percent.  The SEP 
determined that 17 of the 20 initial proposals were acceptable.  
SCIENTECH's proposal was rated as acceptable overall, as well as on 
each of the three technical evaluation criteria, and was ranked 
[deleted] with an overall score of [deleted] percent.[2]  The SEP was 
briefed by the DOE financial advisor, who evaluated cost/rate 
proposals for reasonableness, but did not compare or rank the 
offerors' proposed prices or labor rates.  The SEP decided that there 
was a "natural, logical scoring break" between the seventh [deleted] 
and eighth [deleted] highest-rated offers and that offers rated at 
less than [deleted] did not have a reasonable chance for selection.  
Accordingly, the SEP, with the concurrence of the source selection 
official, included only the seven top-rated proposals in the 
competitive range and excluded SCIENTECH's lower-rated proposal.  By 
letter of August 11, the contracting officer notified SCIENTECH of 
this determination.

After discussions were held with the competitive range offerors and 
best and final offers (BAFO) received and evaluated, by letter of 
September 26, 1997, DOE notified SCIENTECH that it had awarded four 
contracts pursuant to the RFP.[3]  Shortly thereafter, on October 7, 
DOE debriefed SCIENTECH.  This protest was filed within 5 days of the 
debriefing.

Basically, the protester contends that DOE's evaluation of its 
proposal was unreasonable, and, therefore, the competitive range 
determination, which was based upon that evaluation, was flawed.  The 
protester contends that DOE's evaluation of SCIENTECH's and its 
proposed subcontractors' past performance and experience was 
unreasonable because DOE selected for evaluation only 4 of the 10 
references that SCIENTECH included in its proposal.  In this regard, 
SCIENTECH asserts that DOE unreasonably failed to consider SCIENTECH's 
performance as an incumbent contractor for DOE-ID for the exact same 
work that is being procured here and instead selected contracts that 
were smaller and less relevant to the present requirement than its 
incumbent contract.   SCIENTECH also asserts that DOE unreasonably 
selected for evaluation a reference for only one of SCIENTECH's 
proposed subcontractors--a firm that had relatively little experience 
working for DOE-ID--and did not evaluate any of the references 
submitted for SCIENTECH's other proposed subcontractors, all of which 
have extensive relevant experience with DOE-ID.  The protester also 
asserts that DOE failed to consider the relative proposed prices of 
the offers in making its competitive range determination.  In this 
connection, SCIENTECH contends that, if DOE had considered relative 
proposed prices, then DOE could not reasonably have eliminated 
SCIENTECH's proposal, which included labor rates that were 
substantially lower than those of some of the competitive range 
offers, from the competitive range.

Our examination of an agency's decision to exclude a proposal from the 
competitive range begins with the agency's evaluation of proposals.  
Techniarts Eng'g, B-271509, July 1, 1996, 96-2 CPD  para.  1 at 3.  In 
reviewing an agency's technical evaluation, we will not reevaluate the 
proposals but will examine the record of the agency's evaluation to 
ensure that it was reasonable and in accord with stated evaluation 
criteria, and not in violation of procurement laws and regulations.  
Id.  The competitive range consists of all proposals that have a 
reasonable chance of being selected for award.  See Federal 
Acquisition Regulation (FAR)  sec.  15.609(a) (June 1997).

The past performance/experience criterion was worth 25 percent of the 
total evaluation.  Within past performance/experience, the RFP listed 
two subcriteria:  relevant past performance (worth [deleted] 
evaluation points or [deleted] percent) and customer satisfaction 
(worth [deleted] evaluation points or [deleted] percent).  For 
evaluation purposes, the RFP allowed offerors to submit no more than 
10 references for the offeror and its subcontractors and to include 
specified information concerning current contracts and contracts 
completed in the last 3 years.[4]  In evaluating proposals on the 
relevant past performance subcriterion, DOE reports that it evaluated 
all references contained in the proposal.  However, in evaluating 
proposals on the customer satisfaction subcriterion, DOE sent 
questionnaires to some, but not all, of the references.  In most 
cases, DOE evaluated responses (i.e., completed questionnaires) from 
cognizant contracting personnel concerning three previous contracts 
performed by the offeror and just one response concerning a previous 
contract performed by a proposed teaming subcontractor.  
  
Examination of SCIENTECH's proposal shows that SCIENTECH's incumbent 
DOE-ID contract was the focal point of the past performance/experience 
section of SCIENTECH's technical proposal.  The proposal highlighted 
the incumbent contract in several ways.  For example, whenever the 
proposal listed previous projects, the incumbent contract was listed 
first.  SCIENTECH's proposal also included one entire page that 
consisted of a table dedicated exclusively to showing that the work 
performed by SCIENTECH under its incumbent DOE-ID contract encompassed 
the work required under the present RFP's statement of work.  Most 
importantly, when SCIENTECH described its previous experience, the 
description of the incumbent contract was by far the most 
comprehensive, taking up a full 15 pages of the proposal, and the 
description began with the following statement:

     This project is the key project that demonstrates SCIENTECH's 
     capabilities and experience for DOE's Idaho Operations Office.  
     SCIENTECH will build on its experience and successful performance 
     of this project to provide a seamless continuation of superior 
     quality, cost-effective support and services to DOE-ID.  
     [Emphasis added.]

Thus, it should have been clear to DOE that SCIENTECH was relying 
heavily on its work as an incumbent DOE-ID contractor as the primary 
source to be used in the evaluation of its past performance.  

DOE has provided no detailed explanation for its failure to solicit 
and evaluate a customer satisfaction questionnaire regarding 
SCIENTECH's incumbent contract.  In its report on the protest, DOE 
offered only a general explanation stating that some references 
provided by offerors created a potential for unreliable evaluation of 
past performance and some were older contracts or were less relevant.  
DOE also argued that there is no requirement that all references 
listed in a proposal be checked by the agency. 

While there is no legal requirement that all past performance 
references be included in a valid review of past performance, some 
information is simply too close at hand to require offerors to 
shoulder the inequities that spring from an agency's failure to obtain 
and consider the information.  International Bus. Sys., Inc., 
B-275554, Mar. 3, 1997, 97-1 CPD  para.  114 at 5-6.  In our opinion, the 
agency's failure to evaluate SCIENTECH's work as incumbent in the 
current case was patently unfair to the protester.  Not only did 
SCIENTECH emphasize the importance of its experience as incumbent in 
its proposal, but our review of the statements of work for the 
incumbent contract and the current RFP confirms that the work required 
under the new contract is strikingly similar to the work required 
under the old contract.  Apparently, DOE also believed that 
SCIENTECH's incumbent contract and the current RFP contained very 
similar statements of work, because the RFP specifically listed 
SCIENTECH's incumbent DOE-ID contract as "a representative sample of 
the broad scope of work included in the incumbent contracts."  
Additionally, the record shows that SCIENTECH's incumbent contract and 
the new contracts are indefinite quantity contracts, the incumbent 
contract has incurred roughly $15 million in work so far while the new 
contracts are capped at $25 million, and SCIENTECH is still performing 
work under the incumbent contract.  It is difficult to imagine a prior 
contract experience that is more relevant to the current procurement 
in terms of the same contracting activity, similarity of the scope of 
work, similarity of contract size and type, and recent performance.  
Id. at 4-6.  Accordingly, we think it was unreasonable for DOE not to 
evaluate SCIENTECH's incumbent contract when evaluating the customer 
satisfaction subcriterion.

SCIENTECH also contends that DOE unreasonably selected for customer 
satisfaction evaluation the only subcontractor listed in SCIENTECH's 
proposal that had relatively little experience with DOE-ID instead of 
one of its other proposed subcontractors, all of which have had 
extensive experience with DOE-ID.  Since DOE's report contained only a 
general statement about how some references were considered more 
relevant than others and did not specifically respond to the protest 
allegation, we do not know how or why the SEP selected the one 
subcontractor reference for evaluation.  We note, however, that one of 
SCIENTECH's proposed subcontractors, Halliburton NUS Corporation, was 
an incumbent contractor performing this same work under its 
contract--valued at roughly $7 million--with DOE-ID.  Notwithstanding 
the fact that SCIENTECH's proposal listed this subcontractor as one of 
its references and that the RFP also listed this contractor's 
incumbent contract as a representative sample of the scope of work 
performed by the incumbent contractors, the SEP chose not to evaluate 
this subcontractor reference.  Because this reference was an incumbent 
contractor providing technical and management support services to 
DOE-ID under a contract that was considerably more than RFP's $2 
million threshold for purposes of inclusion in the evaluation, we 
think that DOE also should have evaluated the clearly relevant 
contract.  Id.  

SCIENTECH states that it has consistently received "excellent" ratings 
from DOE-ID contracting personnel for its work under the incumbent 
contract and has submitted a contractor performance report showing an 
excellent overall rating for the 1-year period ending on April 30, 
1997.  DOE has not refuted SCIENTECH's statement or provided any 
evidence to the contrary.  Therefore, we think it likely that 
SCIENTECH would have received very good or even excellent ratings from 
cognizant contracting personnel if a customer satisfaction 
questionnaire were solicited and evaluated.  

Additionally, SCIENTECH's initial proposal received an overall 
acceptable rating of  [deleted] percent while the lowest-rated 
competitive range proposal received an acceptable rating of [deleted] 
percent.  If SCIENTECH's proposal were to receive a perfect score on 
customer satisfaction, SCIENTECH's overall rating would increase to 
[deleted] percent, just [deleted] percent less than the lowest-rated 
competitive range proposal, and would be ranked {deleted] out of 20 
proposals, instead of [deleted] as originally ranked.  SCIENTECH's 
proposal did not have to displace the seventh ranked offer in the 
evaluation ranking in order to be included in the competitive range; 
instead, the competitive range, which was established based on a break 
or gap in scores, could have been determined to include SCIENTECH's 
proposal, whose score, as adjusted, would have fallen within what had 
been a gap.  In view of the fact that SCIENTECH's proposal was rated 
as acceptable on every evaluation factor, and because the record shows 
that SCIENTECH's proposal had no deficiencies and received the same 
overall "acceptable" rating as the proposals that were included in the 
competitive range, we have no reason to believe that the SEP would not 
have included SCIENTECH's [deleted]-ranked proposal in the competitive 
range.  This is especially so since the RFP contemplated that as many 
as five contracts would be awarded.

The likelihood that SCIENTECH would have been included in the 
competitive range is strengthened by the fact that the SEP failed to 
consider the offers' relative costs when making the competitive range 
determination.[5]  While a technically acceptable proposal may be 
eliminated where it does not have a reasonable chance for award, 
Techniarts Eng'g, supra, at 3-4, FAR  sec.  15.609(a) requires that the 
competitive range be determined on the basis of cost or price as well 
as other factors that were stated in the solicitation and that, when 
there is doubt as to whether a proposal has a reasonable chance of 
being selected for award, the proposal should be included in the 
competitive range.  Cost or price must be considered as a factor; it 
is improper to exclude an offeror from the competitive range solely on 
the basis of technical considerations, unless the proposal is 
technically unacceptable.  S&M Property Management, B-243051, June 28, 
1991, 91-1 CPD  para.  615 at 4; HCA Gov't Servs., Inc., B-224434, Nov. 25, 
1986, 86-2 CPD  para.  611 at 3-4.

The failure to consider cost in competitive range and award decisions 
is improper.  Agencies must consider cost to the government in 
evaluating competing proposals.  41 U.S.C.  sec.  253a(b)(1) (1994).  
Agencies have considerable discretion in determining the appropriate 
method for taking cost into account; they do not have discretion, 
however, not to consider cost at all, as happened here.  Health Servs. 
Int'l, Inc.; Apex Envtl., Inc., B-247433, B-247433.2, June 5, 1992, 
92-1 CPD  para.  493 at 4.

The record shows that cost/rate proposals were evaluated for 
reasonableness, but no comparison of the offers' costs was made as 
part of the competitive range determination.  This was apparently 
because the SEP was unable to develop most probable cost estimates for 
the competing proposals, since, as the SEP noted, the RFP did not 
include what the SEP referred to as "artificial methods" such as 
sample tasks or estimates of the quantities of labor hours to be 
ordered under each labor category.

While we understand that it is somewhat artificial to use hypothetical 
sample tasks in a solicitation for an indefinite delivery, indefinite 
quantity contract, where the actual work will be competed through task 
orders, sample tasks permit the government to assess the probable cost 
of competing offerors in light of both the offerors' differing 
technical approaches and their labor rates and fees.  As an 
alternative, an agency may simply multiply offerors' proposed labor 
rates by estimated quantities of labor hours for each labor category 
(such estimates may be based, for example, on the agency's recent 
experience); that method, while simpler, does not take into account 
differences in offerors' technical approaches.  See id.

DOE argues that SCIENTECH suffered no competitive prejudice from the 
agency's failure to consider cost in the competitive range 
determination.  In support of this argument, DOE points to a summary 
document, created in response to the protest, which compares 
SCIENTECH's labor rates and fee ceiling to the labor rates and fee 
ceiling of the seven competitive range proposals.  DOE contends that 
this comparison shows that SCIENTECH's proposed labor rates and fee 
ceiling are at best comparable to those contained in the competitive 
range offers and that in many cases the competitive range offers' 
labor rates and fee ceilings are lower than SCIENTECH's.  In light of 
this, and since SCIENTECH's overall technical rating was lower than 
those of the competitive range offers, the agency contends that 
SCIENTECH's proposal would not have been included in the competitive 
range even if cost had been considered.

The agency's summary document, which is limited to comparing labor 
rates and fees, is not helpful, since it fails to take into account 
the different quantities of the various labor categories that the 
agency expects to use.  See Temps & Co., 65 Comp. Gen. 640, 642 
(1986), 86-1 CPD  para.  535 at 4.  Moreover, the agency's labor rate/fee 
ceiling summary supports our conclusion that SCIENTECH did in fact 
suffer prejudice from the agency's failure to take cost or price into 
account in the competitive range determination.  Specifically, DOE's 
summary shows that the competitive range offers' proposed fee ceilings 
ranged from [deleted] percent, while SCIENTECH proposed a sliding fee 
scale ranging from [deleted] percent depending on the complexity of 
the work.  Thus, it appears that SCIENTECH's fee ceiling was low 
relative to the range of fee ceilings in the competitive range offers.  
Furthermore, while DOE points out that SCIENTECH's average labor rates 
are not the lowest for any particular labor category, the agency's 
summary reveals that, SCIENTECH's labor rates are lower than the 
[deleted]-ranked competitive range proposal's rates in the great 
majority of labor categories (19 of the 24 categories represented).  
While these comparisons cannot substitute for an adequate cost 
analysis, they undercut the agency's contention that the lack of such 
an analysis did not prejudice the protester.

For the reasons set forth above, we sustain the protest.  Since DOE 
has suspended performance under the contracts, we recommend that DOE 
include SCIENTECH's proposal in the competitive range, hold 
discussions with SCIENTECH concerning the various weaknesses perceived 
by the SEP in SCIENTECH's proposal, and solicit a BAFO from SCIENTECH.  
After SCIENTECH's BAFO is evaluated, DOE should make a new source 
selection decision consistent with this decision.[6]  Because we are 
sustaining the protest, it is not necessary for us to address 
SCIENTECH's protest grounds concerning the SEP's downgrading of 
SCIENTECH's proposal, as those issues can be addressed by the agency 
during discussions.  We also recommend that SCIENTECH be reimbursed 
its costs of filing and pursuing the protest, including reasonable 
attorneys' fees.  Bid Protest Regulations, 4 C.F.R.  sec.  21.8(d)(1) 
(1997).  SCIENTECH should submit its certified claim for costs, 
detailing the time expended and costs incurred, directly to the 
contracting agency within 60 days after receipt of this decision.  4 
C.F.R.  sec.  21.8(f)(1).

Comptroller General
of the United States 

1. The agency reports that the procurement was conducted to replace 
five expiring incumbent contracts.  The RFP, however, listed seven 
incumbent contracts, including a contract between DOE and SCIENTECH 
(contract No. DE-AM07-92ID13143).

2. In accord with the agency's source selection plan, ratings in the 
[deleted] percent range were considered satisfactory.

3. Contracts were awarded to Ecology & Environmental, Inc.; Global 
Technologies, Inc.; Los Alamos Technical Associates, Inc.; and 
Systematic Management Services, Inc.  Performance under all four 
contracts has been stayed pending our resolution of this protest.

4. As used in this RFP, a reference actually included a brief 
description of the contractor's or its proposed teaming 
subcontractor's prior contract (including, among other things, the 
dollar value, the type of work performed, and performance 
difficulties), as well as points of contact to whom DOE could send 
customer satisfaction questionnaires.

5. We note that most of the other perceived weaknesses in the 
protester's proposal were informational in nature and could have 
easily been remedied through discussions.  This applies to the 
weaknesses upon which the protest was based, namely, that:  [deleted].  
We thus find unreasonable the agency's conclusions that the weaknesses 
the SEP perceived in SCIENTECH's proposal were so extensive that the 
proposal would have to be rewritten or that discussions about those 
weaknesses would necessarily lead to technical leveling.

6. Instead of including the protester's proposal in the competitive 
range and soliciting a BAFO from that firm, the agency may decide, in 
the alternative, to amend the RFP to add an explanation of the cost 
evaluation and then to solicit revised proposals from all offerors.  
However, since no offeror has contested the lack of such an 
explanation in the solicitation, the agency may elect to proceed with 
its cost analysis based on its internal calculations of the estimated 
quantities of labor hours to be ordered.