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