BNUMBER:  B-278278 
DATE:  January 14, 1998
TITLE: Biospherics, Inc., B-278278, January 14, 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:Biospherics, Inc.

File:     B-278278

Date:January 14, 1998

Eric J. Marcotte, Esq., Carl J. Peckinpaugh, Esq., and Jason I. 
Hewitt, Esq., Winston & Strawn, for the protester.
Richard P. Rector, Esq., Carl L. Vacketta, Esq., and William J. 
Crowley, Esq., Piper & Marbury, for Park.Net, Inc., an intervenor.
Alan D. Grosbeck, Esq., Department of Agriculture, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

The contracting agency did not conduct meaningful discussions with the 
protester, where the agency failed to inform the firm that its 
cost/pricing was considered unrealistically low, but instead twice 
encouraged the firm to reduce its proposed price, and where the firm 
was not given the opportunity to comment on adverse past performance 
information considered during the evaluation.

DECISION

Biospherics, Inc. protests the award of a contract to Park.Net, Inc. 
under request for proposals (RFP) No. FS-WO-97-07, issued by the U.S. 
Forest Service for the development, implementation, and operation of 
the National Recreation Reservation Service (NRRS).  Biospherics 
challenges the evaluation of proposals, conduct of discussions, and 
cost/technical trade-off decision.

We sustain the protest on the basis that the Forest Service conducted 
prejudicially inadequate and misleading discussions with Biospherics.

The RFP provides for the award of a fixed-price, requirements contract 
for a 9.5-year contract period to develop and operate a 
"state-of-the-art reservation service, complete with facilities, 
personnel, marketing, materials, equipment, communications, 
information distribution, and transaction record processing."  The 
NRRS will allow the public to make reservations via telephone or 
internet, or at field locations, for federal recreation facilities; 
these facilities include campgrounds, picnic areas, group use areas, 
caves, cabins, lookouts, and wilderness access, and are located on 
various federal lands, national recreation areas, wildernesses, water 
resource development projects, and historic sites.

As amended, the RFP sought pricing for five contract line items 
(CLIN):  (1) operation of the national call center; (2) operation of 
the internet sales channel; (3) support for field location sales; (4) 
recording and tracking for field locations; and (5) support for future 
sales channels.  An independent government estimate (IGE) was prepared 
that consisted only of unit prices for the CLINs.

Offerors were informed that award would be based on a cost/technical 
trade-off, and that technical evaluation factors were more important 
than price.  The following technical evaluation factors were stated in 
descending order of importance:  (1) soundness of approach, (2) 
technical experience, and (3) past performance.[1]  The RFP also 
provided that price proposals would be evaluated in terms of "cost 
allowability, allocability, reasonableness, and realism, and by 
comparing prices proposed to other prices offered in terms of 
competitiveness."

Proposal preparation instructions informed offerors of the information 
required under each evaluation factor.  Detailed cost and pricing data 
was required to support offerors' price offers.  Among other things, 
offerors were to provide direct labor cost information, including 
hourly labor rates and escalation rates, cost breakdown of materials, 
equipment, and other direct costs, and automated data processing 
system costs.

Proposals were received from three offerors, including Biospherics and 
Park.Net.  After an initial evaluation of technical and price 
proposals, all three offers were included in the competitive range.  
Biospherics' and Park.Net's proposals were determined to be "above 
average and demonstrated the ability to carry out the duties described 
in the solicitation."  Written and oral discussions were conducted.  
Because all three offerors' CLIN unit pricing was higher than that of 
the IGE, the agency informed the offerors as follows:

     Your pricing is rather high.  We request that you review your 
     cost elements to determine the best pricing scheme your firm can 
     present under this proposal.

Revised technical and price proposals were received.  Although the 
revised proposals were not scored, the agency evaluated these 
proposals "to identify issues for negotiation and to prepare for the 
site visits."  Site visits with the offerors and another round of 
technical and price discussions were conducted.  Also, the agency 
amended the solicitation to, among other things, provide for pricing 
against three estimates (high, most probable, and low) of the number 
of possible transactions under the CLINs.  Among the questions 
accompanying the request for best and final offers (BAFO), the agency 
asked Biospherics (as well as the other offerors) to "[p]lease review 
your entire price structure for any additional savings."  BAFOs were 
received and technically evaluated as follows:[2]

                                  Biospherics  Park.Net

    Soundness of Approach  (45 pts.)31         43.8

    Technical Experience      (32 pts.)24.2    23.8

    Past Performance           (24 pts.)14.2   18.8

    TOTAL                         (101 pts.)69.486.4
Biospherics' BAFO, which was scored substantially the same as its 
initial "above average" proposal, was not determined to be 
unacceptable.  Its technical score, which was significantly lower than 
Park.Net's, reflected the evaluators' view that there were a number of 
weaknesses in Biospherics's proposed methodology.  Among other things, 
the evaluators determined that Biospherics had proposed to [DELETED]; 
that Biospherics had provided little detail as to how the firm 
intended to implement its proposed plan; that Biospherics had failed 
to commit sufficient personnel to "develop, test, and implement their 
ambitious solution to this solicitation," particularly in relation to 
[DELETED]; and that Biospherics had a "serious customer service 
problem" in its performance of a Forest Service information-based call 
center contract and of another contract.  

Park.Net's higher technical score reflected the evaluators' view that 
Park.Net, while having less than 1 year of technical experience 
operating a call center, offered a number of proposal strengths.  
Among other things, Park.Net, which had a long history of software 
development for call center management, offered [DELETED] and provided 
a detailed implementation plan.

The firms' BAFO price proposals were evaluated as follows:

                        Biospherics  Park.Net     IGE

  Most probable estimate
  (10 year projection)  $24,802,924  $36,828,672  $[DELETED]
The agency determined that Biospherics's BAFO price was 
unrealistically low, and indicated a lack of understanding of the 
magnitude and complexity of the contract effort.  Among other things, 
the agency's cost/price analyst questioned Biospherics's estimated 
costs for computer equipment and software/hardware maintenance, 
estimated staff-hours of effort and associated labor rates, and 
proposed profit margin.  For example, the cost/price analyst noted 
that Biospherics had only estimated $[DELETED] for its computer 
equipment and software/hardware maintenance costs, while Park.Net had 
estimated costs of approximately $[DELETED] for these items.  The 
cost/price analyst also expressed concern that Biospherics's proposed 
profit margin of [DELETED] percent was insufficient because the firm 
appeared to be in a "loss contract" situation.

Overall, the Forest Service determined that Park.Net's higher-rated, 
higher-priced proposal represented the best value to the government.  
In the source selection documentation, the agency expressly noted that 
Biospherics's BAFO was priced so unrealistically low as to evidence a 
lack of understanding and that the negative past performance reports 
on Biospherics were a concern to the agency.[3]  In concluding that 
Park.Net should be selected for award, the agency determined:

     The Government gains several advantages by awarding to Park.Net.  
     First, a demonstrated software solution with only minimal 
     development required.  There is absolutely minimal risk that 
     Park.Net would not be fully functional as required on January 15, 
     1998, which is less than four months after award.  Award to 
     Biospherics poses high unacceptable risk that Biospherics would 
     not be functional on the deadline date as they are [DELETED].  
     Second, to compound the risk of not meeting deadline dates, 
     Biospherics prices were determined to be unrealistically low.  
     With less revenue from low prices, Biospherics cannot afford 
     [DELETED].  Third, the superior approach and superior technical 
     and management abilities of Park.Net ensure success over the life 
     of the contract even if confronted with unexpected contingencies.  
     The most important evaluation factor is the Soundness of Approach 
     and most of the point difference in the evaluation between 
     Park.Net and Biospherics is in this factor.  The price of the 
     contract will be approximately $3.6 million per year.  For the 
     difference in the price between Biospherics and Park.Net of 
     approximately $1.2 million [per year] the government receives 
     superior technical and management ability and services that will 
     assure a fully functioning campground reservation system will be 
     in place by January 15, 1998.  The cost to the agencies of not 
     having the service in place January, 1998, cannot be quantified, 
     but is very significant.

                    .     .     .     .     .

     In summary, Biospherics program is [DELETED] whereas Park.Net has 
     [DELETED].  Biospherics pricing is questionable as to cost 
     realism, whereas, Park.Net's pricing has proven, known costs.  
     This firm offers an operational, proven solution to providing 
     recreation reservation services at a known, reasonable cost.  

Award was made to Park.Net.  Biospherics received a debriefing and 
filed this protest.  

Biospherics challenges the agency's cost evaluation, asserting that 
"Biospherics proposed pricing for over 70 [percent] of the anticipated 
transactions was squarely within the parameters of the Government 
estimate . . . .  With regard to the remainder of the transactions, 
the Forest Service had no basis to reject Biospherics's explanation of 
its pricing."  Biospherics also complains that the agency's 
discussions with Biospherics regarding its proposed pricing were 
inadequate and misleading.  In this regard, not only did the agency 
not inform Biospherics during discussions that it viewed the firm's 
pricing as unrealistically low, but the agency informed Biospherics 
that its "pricing is rather high" and that the firm should review its 
proposal "for any additional savings."  Moreover, Biospherics asserts 
that it was not provided an opportunity to respond to certain negative 
comments regarding its past performance that the agency considered in 
making the award selection.

The Forest Service argues that Biospherics's BAFO pricing was 
unrealistically low for the reasons documented in its report, that it 
was only after receipt of BAFOs that the agency concluded that 
Biospherics's proposed pricing was unrealistically low, and that 
Biospherics's pre-BAFO price proposals were not considered 
unrealistically low.[4]  The agency admits, however, that it "did not 
perform a complete cost realism analysis on the interim proposals."  
Also, the agency admits that it did not conduct discussions regarding 
Biospherics's past performance, but asserts that this contention is 
untimely and that Biospherics was not prejudiced by this failure.

In negotiated procurements, contracting agencies generally must 
conduct discussions with all offerors whose proposals are within the 
competitive range.  41 U.S.C.  sec.  253b(d) (1994); Federal Acquisition 
Regulation (FAR)  sec.  15.610(b) and (c)(2) (June 1997).  Although 
discussions need not be all-encompassing, discussions are required to 
be meaningful; that is, an agency is required to point out weaknesses, 
excesses, or deficiencies in a proposal unless doing so would result 
in technical transfusion or technical leveling.  E.L. Hamm & Assocs., 
Inc., B-250932, Feb. 19, 1993, 93-1 CPD  para.  156 at 3.  In general, 
agencies must lead offerors into areas of their proposals that require 
amplification or correction, Son's Quality Food Co., B-244528.2, Nov. 
4, 1991, 91-2 CPD  para.  424 at 7-8, and discussions should be as specific 
as practical considerations will permit.  E.L. Hamm & Assocs., Inc., 
supra, at 4; Data Preparation, Inc., B-233569, Mar. 24, 1989, 89-1 CPD  para.  
300 at 6.  The government has not satisfied its obligation to conduct 
meaningful discussions if it misleads an offeror or conducts 
prejudicially unequal discussions.  Pan Am World Servs., Inc., et al., 
B-231840 et al., Nov. 7, 1988, 88-2 CPD  para.  446 at 11.

Here, the record establishes that the Forest Service did not conduct 
meaningful discussions with Biospherics regarding pricing or past 
performance.  As more fully described below, the agency did not inform 
Biospherics during discussions that the agency considered its 
cost/pricing to be unrealistically low, but instead encouraged 
Biospherics to reduce its pricing to what the agency ultimately found 
was an unrealistic level.  Also, the Forest Service admittedly did not 
inform Biospherics during discussions of the negative comments 
regarding that firm's past performance.

With regard to Biospherics's unrealistic BAFO pricing, the agency's 
source selection documentation reflects that the Forest Service had 
"grave doubts" concerning whether Biospherics could accomplish the 
[DELETED] necessary to support the contract at its price.  
Specifically, the agency questioned Biospherics's proposed labor 
rates, contract staffing, hardware/software costs, and profit.  The 
agency concluded that "Biospherics's prices are unrealistically low 
and that the company will not be able to develop or sustain the level 
of services required by this solicitation."

The Forest Service does not contend that it informed Biospherics of 
these concerns with the firm's proposed cost/pricing.  Rather, the 
agency argues it had no reason to be concerned with Biospherics's 
pricing until the protester lowered its price in its BAFO.[5]  In this 
regard, the agency contends that Biospherics's pricing in its initial 
and revised proposals was realistic.  

However, the particular cost elements in Biospherics's BAFO cited by 
the agency's cost/price analyst and evaluation board as indicating 
Biospherics's lack of understanding or performance risk--that is, 
Biospherics's proposed labor rates, hardware/software costs, and 
profit--did not materially change from its initial and revised 
proposals.[6]  For example, Biospherics estimated $[DELETED] in 
computer equipment and software/hardware maintenance costs in its 
initial price proposal, $[DELETED] for these costs in its revised 
price proposal, and $[DELETED] for these costs in its BAFO price 
proposal.  Similarly, Biospherics proposed a [DELETED]-percent profit 
rate in its revised and BAFO price proposals.  Also, Biospherics's 
labor rates were identical in its initial, revised, and BAFO price 
proposals.  Moreover, according to the protester, using the agency's 
most probable transaction estimates to calculate Biospherics's total 
probable price, Biospherics's revised proposal price was already 
$[DELETED] million below the IGE at the point that the agency 
requested that Biospherics, in preparing its BAFO, review its pricing 
proposal for additional savings.[7]

The apparent explanation for the agency's failure to raise any concern 
it had with how low the protester's pre-BAFO proposals were for any of 
these cost elements is that the Forest Service did not evaluate the 
cost elements of the offerors' price proposals until after receipt of 
BAFOs.  Thus, during the conduct of discussions, the agency had little 
basis on which to judge the realism of the unit pricing it received 
under each CLIN (except in comparison to the IGE, which estimated only 
CLIN unit prices without supporting cost estimates).  Nevertheless, as 
noted above, the agency twice encouraged Biospherics to reduce its 
pricing.[8]  

Discussions cannot be meaningful where, as here, the agency fails to 
advise the offeror, in some way, of material proposal deficiencies.  
See CitiWest Properties, Inc., B-274689.4, Nov. 26, 1997, 98-1 CPD  para.  
__ at 5; Price Waterhouse, B-254492.2, Feb. 16, 1994, 94-1 CPD  para.  168 
at 9.  Additionally, an agency may not mislead an offeror during 
discussions into responding in a manner that does not address the 
agency's concerns.  Price Waterhouse, supra.  We find that the Forest 
Service conducted inadequate and misleading discussions regarding 
Biospherics's pricing.

Biospherics also complains that the Forest Service failed to inform it 
of adverse past performance information during discussions.  
Specifically, Biospherics states that, although it is an experienced 
call center operator, it received only 14.2 points of a maximum 
possible 24 points under the past performance factor.  The agency's 
source selection documentation states:

     [DELETED] 

Biospherics argues that it was not informed of the agency's concerns 
regarding its past performance, disagrees with the agency's assessment 
of its past performance, and offers information that it states would 
have materially influenced the agency's assessment of its performance.  
For example, Biospherics argues that its difficulties in the 
performance of the Forest Service contract were the result of "data 
problems traceable to the previous contractor in combination with call 
volumes that exceeded the estimates" and that Biospherics ultimately 
received "an equitable adjustment in its contract price that, in part, 
compensated it for the cost of fixing the problems inherited from the 
prior contractor."  

Under FAR  sec.  15.610(c)(6) (June 1997), competitive range offerors must 
be provided with "an opportunity to discuss past performance 
information obtained from references on which the offeror had not had 
a previous opportunity to comment."  An agency does not satisfy its 
obligation to conduct meaningful discussions with competitive range 
offerors, where the agency fails to inform an offeror of adverse past 
performance information.  McHugh/Calumet, a Joint Venture, B-276472, 
June 23, 1997, 97-1 CPD  para.  226 at 6-7.

Here, the Forest Service admits that it did not inform Biospherics 
during discussions of negative past performance information considered 
in the agency's evaluation as required by FAR  sec.  15.610(c)(6).  The 
agency and intervenor argue, however, that this protest issue is 
untimely because Biospherics was informed during its debriefing that 
it had been ranked lower than Park.Net under the past performance 
factor and that Biospherics had not received a perfect score under 
this factor.  The agency and intervenor contend that, once Biospherics 
knew that it had not received all the possible points under the past 
performance factor and had not received discussions concerning its 
past performance, this provided the protester with the basis of its 
allegation that it had not received meaningful discussions concerning 
its past performance. 

We disagree.  Even accepting the agency's account of the debriefing, 
Biospherics was not informed of its technical score under this factor, 
did not know the degree to which its proposal was downgraded, and did 
not know the specific adverse past performance information being 
considered by the agency.  Biospherics has also provided us with 
affidavits from company officials who attended the debriefing, as well 
as contemporaneous notes of the debriefing, and this information 
indicates that Biospherics was not informed of the agency's ranking 
under this factor and was told by the agency that the firm had scored 
well and had no problems under the past performance factor.  The 
record shows that it was not until Biospherics receipt of the agency's 
report on the protest that Biospherics was aware of the specific 
adverse past performance information considered by the agency and 
disputed by the protester.  Biospherics's protest of this issue, which 
was filed within 10 days of its receipt of the report, is therefore 
timely.  4 C.F.R.  sec.  21.2(a)(2) (1997).

In sum, the Forest Service did not conduct meaningful discussions with 
Biospherics, because the agency failed to inform the firm of 
deficiencies in its proposal.  These deficiencies were specifically 
considered by the agency in its cost/technical trade-off analysis that 
resulted in the selection of Park.Net's proposal for award.  That is, 
while it is true that the Forest Service was concerned about 
Biospherics' riskier approach involving the [DELETED] and 
appropriately penalized Biospherics' proposal in the technical 
evaluation, the record shows that the agency did not consider 
Biospherics' low-priced proposal to be unacceptable, but discounted it 
based upon the agency's view of the realism of Biospherics' low price 
and Biospherics' past performance.  We cannot conclude from this 
record that Biospherics would not have had a reasonable possibility of 
receiving award but for the agency's failure to conduct meaningful 
discussions.  See McHugh/Calumet, a Joint Venture, supra, at 8.  
Rather, we think that it is reasonably possible that Biospherics could 
have improved the standing of its proposal vis-ï¿½-vis Park.Net's 
proposal, by improving its past performance score and either 
demonstrating the realism of its proposed price or offering a more 
realistic price.  Accordingly, we conclude that the agency's actions 
prejudiced the protester.  McDonald-Bradley, B-270126, Feb. 8, 1996, 
96-1 CPD  para.  54 at 3; see Statistica, Inc. v. Christopher, 102 F.3d 1577 
(Fed. Cir. 1996).

We recommend that the agency reopen discussions with Biospherics and 
Park.Net, request new BAFOs, and reevaluate proposals.[9]  If, as a 
result of this reevaluation, Biospherics's proposal is selected for 
award, the agency should terminate Park.Net's contract for the 
convenience of the government and make award to Biospherics.  We also 
recommend that the protester be reimbursed the reasonable costs of 
filing and pursuing the protest, including attorneys' fees.  4 C.F.R.  sec.  
21.8(d)(1).  The protester should submit its certified claim for such 
costs, detailing the time expended and the costs incurred, directly to 
the contracting agency within 60 days after receipt of this decision.

The protest is sustained.

Comptroller General
of the United States

1. Subfactors were stated for each of the technical evaluation 
factors.

2. The third offeror's proposal is not relevant to the protest and 
therefore will not be addressed further in this decision.  

3. In its reply to the protester's comments, the agency claims that 
past performance was immaterial to its award decision.  These 
post-protest arguments are not consistent with the evaluation record 
and are entitled to little weight.  See Boeing Sikorsky Aircraft 
Support, B-277263.2, B-277263.3, Sept. 29, 1997, 97-2 CPD  para.  91 at 15.

4. In fact, according to the agency, the CLIN unit pricing in 
Biospherics's initial proposal was considered too high.

5. The agency did conduct meaningful discussions with regard to 
Biospherics's very low unit price for CLIN [DELETED].  These 
discussions, however, did not suggest that Biospherics's other CLIN 
pricing was considered too low, and in fact the agency's question 
encouraging "additional savings" suggested the opposite.

6. The agency also questioned the realism of Biospherics' estimated 
labor hours in its BAFO.  The record shows that, while it is true that 
Biospherics reduced these hours in its BAFO, these hours had also been 
reduced in the firm's revised proposal.

7. The protester states that, using the agency's most probable 
transaction model, Biospherics's revised evaluated price was 
$[DELETED] and the IGE was $[DELETED].  This calculation is not 
rebutted by the agency.

8. Park.Net contends that Biospherics could not reasonably have been 
misled by the Forest Service's instructions to Biospherics (as well as 
the other offerors) to examine their price proposals for additional 
savings; the intervenor contends, citing Jacobs Serv. Co.; 
International Tech. Corp., B-262088.3, B-262088.4, Jan. 29, 1996, 97-1 
CPD  para.  220 at 6, that this was a "cautionary reminder" and "not a 
directive to lower prices."  We disagree.  In Jacobs, the agency 
merely informed offerors that technical changes to BAFOs could render 
the proposal unacceptable.  Here, the Forest Service's direction to 
examine price proposals for additional savings, viewed in the context 
of the agency's earlier warning that Biospherics's price was too high, 
was reasonably understood by Biospherics to mean that the agency 
continued to be concerned with the high level of Biospherics's 
pricing.

9. Given our recommendation to reopen negotiations, which will result 
in a new evaluation and source selection decision, we need not address 
Biospherics's remaining protest allegations.