BNUMBER: B-278584
DATE: February 17, 1998
TITLE: U.S. Technology Corporation, B-278584, February 17, 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:U.S. Technology Corporation
File: B-278584
Date:February 17, 1998
Richard L. Moorhouse, Esq., Dorn C. McGrath III, Esq., and Frank K.
Peterson, Esq., Holland & Knight L.L.P., for the protester.
G. Alan Perkins, Esq., and Matthew H.P. Warner, Esq., Hill Gilstrap
Perkins & Warner, for Composite Leasing Corporation, an intervenor.
Lori S. Chofnas, Esq., Department of the Navy, for the agency.
Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest challenging agency's evaluation of awardee's past
performance is denied where the record shows that the evaluation was
reasonable and consistent with the evaluation criteria set forth in
the solicitation.
2. Award in best value procurement to firm whose lower-price proposal
was rated lower than protester's proposal for past performance is
unobjectionable, despite solicitation provision that past performance
was to be considered more important than price, where solicitation did
not provide for award on the basis of highest past performance rating,
and agency reasonably concluded that paying the approximate
[deleted]-percent price premium for the protester's higher-rated past
performance was not warranted in light of the satisfactory past
performance of the awardee and the awardee's substantially
lower-proposed price.
DECISION
U.S. Technology Corporation (UST) protests the award of a contract to
Composite Leasing Corporation (CLC) under request for proposals (RFP)
No. N00140-97-R-1472, issued by the Department of the Navy, Fleet and
Industrial Supply Center--Norfolk, Detachment Philadelphia, on behalf
of the Naval Aviation Depot, Cherry Point, North Carolina, for the
lease and recycling of plastic media blasting mesh, and the recycling
of abrasive glass bead dust products, used in the removal of paint
from Navy aircraft. UST, the incumbent contractor, protests the
propriety of the agency's evaluation of the awardee's past
performance, and the source selection authority's determination that
the protester's higher past performance rating was not worth the
associated price premium.[1]
We deny the protest.
The RFP provided that plastic media and glass bead dust products
(containing residue plastic media or glass bead dust, and paint chips
containing heavy metals including chromium, lead, and cadmium) are
considered hazardous material which must be recycled in accordance
with stated regulatory requirements, pursuant to 40 C.F.R. sec. 261.2(e)
(1997). RFP Amendment No. 6 at 3, sec. C.1. The RFP stated that, in
addition to the lease of plastic media meeting stated military
specifications (id. at 4, sec. C.5.1), the government expected the
contractor to eliminate hazardous waste from the paint removal site by
recycling generated dust products. Id., sec. C.2. The recycling of the
dust products was to involve using those products as ingredients in an
industrial process to make a new product (rendering inert the
hazardous material)--which would exempt the dust products from
characterization as hazardous waste. Id. at 7, sec. C.6.3.1. In order
to be eligible for award, each offeror was required to submit with its
proposal written approval from the cognizant environmental authority
for the state of North Carolina (where the blasting media are to be
used) and the state in which the recycling will be performed,
demonstrating that the states had approved the offeror's recycling
process as meeting requisite regulatory qualifications. Id. at 7
(definitive responsibility criteria).
The award of a firm, fixed-price, requirements-type contract, for a
base year plus 2 option years, was contemplated. RFP at 33; RFP
Amendment No. 6 at 2-3, sec. B. The RFP, as amended, provided that award
would be made to the offeror determined to have submitted the most
advantageous proposal, price and past performance considered, with
past performance being "more important" than price. RFP Amendment No.
5 at 10, sec. M. Each offeror was to "describe its past performance on
similar contracts it has held within the last five (5) years which are
of similar scope, magnitude and complexity to that which is detailed
in the
RFP . . . ." Id. at 9, sec. L. Offerors were also advised of the
following: that the agency would consider the quality of the past
performance to assess the relative capability of the offeror to meet
the requirements of the RFP; that the agency could obtain information
about the offeror's prior contracts from any source; and that greater
consideration was to be given to contracts which "the Government feels
are most relevant to the RFP." Id. at 10-11, sec. M.
The contracting officer's representative surveyed six of CLC's past
performance references regarding some of the firm's other plastic
media lease and recycling contracts. Hearing Transcript (Tr.) at 24.
Each reference contacted recommended CLC for award. Although three of
those references noted a minor performance concern, they also reported
that the problem was promptly cured by CLC, and that the firm's
performance was in accordance with contract requirements. See
Contract Review Board Presentation (Post-negotiation), Oct. 16, 1997
at 13. CLC's overall contract performance was rated as "satisfactory"
or "acceptable" on five of the contracts, and "outstanding" on the
sixth. Id.
In evaluating CLC's past performance, the contracting officer
considered the six reference reports; the discussion of past
performance in CLC's proposal; UST's earlier agency-level protest
challenges to CLC's past performance; and CLC's attorney's detailed
response to those allegations. Tr. at 24-27. With respect to UST's
agency-level protest challenging the initial award to CLC, UST had
provided letters from the U.S. Environmental Protection Agency (EPA)
and a state of Utah environmental authority regarding the dust product
processing portion of a blast media contract awarded in 1991 to CLC by
Hill Air Force Base (AFB) based on a recycling process approved, at
the time, by the state of Utah. These letters (dated in 1994, after
completion of CLC's base contract, but prior to the remaining option
period under the contract) explained that the EPA, which had recently
reviewed the "recycling" process utilized under the Hill contract
(which involved exportation of dust products to India for processing),
had notified the Utah authority that the EPA considered the processing
performed by CLC under the Hill contract to be reclamation, and not
approved recycling.[2] The letter from the state of Utah to Hill AFB
explained that due to this new interpretation of the process, Utah
could no longer approve the process as recycling, as it had done
several years earlier. CLC had addressed this Hill contract
information in its proposal, and in its response to UST's agency-level
protest, by explaining that, contrary to UST's contention, the
contract had not been terminated; rather, CLC explained that the
remaining option on that contract was not exercised after 2 years of
"excellent performance," due solely to the subsequent EPA/Utah
interpretation. See CLC proposal at 42; CLC's response to
agency-level protest, Aug. 20, 1997 at 2-3.
The contracting officer took note of the age and scope of the Hill
contract and concluded that less relevance would be attributed to that
contract compared to more recent CLC contracts for similar services.
The Hill contract was considered by the contracting officer to be
materially distinguishable in scope from the current requirement
because CLC's current recycling process, approved by the states of New
York and North Carolina, does not involve the process used in the Hill
contract--export of dust products to India for media recovery
processing. Tr. at 27, 89, 99.[3] In giving the contract less
weight, the contracting officer, without contacting the Hill reference
listed in the CLC proposal, chose to discount both the alleged
strengths (as asserted by CLC in its proposal), and the alleged
weaknesses (as asserted by UST) related to that contract in his
evaluation of CLC's past performance. Tr. at 27-28.
The contracting officer, noting the quality of CLC's performance on
the six contracts surveyed, while recognizing the lower dollar amount
of those contracts, rated the CLC proposal satisfactory under the past
performance criterion.[4] UST's proposal received a rating of
exceptional for past performance.[5] Of the four proposals received
under the RFP, CLC's proposal offered the lowest total price:
$1,110,550. UST's proposal offered the [deleted] total price:
[deleted]. Finding that the [deleted]-percent price differential
between the two proposals was "so great," given CLC's satisfactory
past performance ratings and the limited risk related to offeror
capability and performance in light of the states' approvals of CLC's
recycling efforts, the contracting officer (the source selection
authority for the procurement) determined that the protester's higher
past performance rating was not worth the substantial price premium
associated with it.[6] Contract Review Board Presentation
(Post-negotiation) at 16. CLC was determined to have submitted the
most advantageous offer, and the agency awarded a contract to the firm
on October 29, 1997. After a post-award debriefing, UST filed this
protest.
UST contends that the agency unreasonably rated CLC's past performance
as satisfactory; UST contends that CLC's past performance should have
been found unacceptable and that the award should have been made to
UST. UST specifically protests the agency's evaluation of CLC's past
performance proposal regarding two prior CLC contracts: one at North
Island Naval Air Station; and the one at Hill AFB, discussed in detail
above.
In reviewing whether a proposal was properly evaluated, our Office
will not reevaluate the proposal, as the determination of whether a
proposal meets the contracting agency's needs is a matter within the
agency's discretion. We will examine the record to determine whether
the evaluators' judgments were reasonable and consistent with the
stated evaluation criteria. Crown Clothing Corp., B-277505.2, Oct.
31, 1997, 97-2 CPD para. 127 at 3-4.
Regarding the North Island contract, UST alleges that the contract had
been "terminated for cause" for CLC's failure to provide plastic media
conforming to certain size and attrition rate specifications
(allegedly resulting in additional cost to the agency). UST contends
that, even though the contracting officer for the North Island
contract reported that the contract had been terminated for the
convenience of the government due to a change in specifications, the
interview was incomplete and inadequate since that contracting
officer, according to UST, should have been questioned about the
actions being a no-cost termination. UST contends that the
contracting officer here should have concluded that a no-cost
termination suggested that a basis for terminating that contract for
default could have existed, and that such a default basis (if present)
could have served as a basis to lower CLC's past performance rating.
Our review of the record shows that UST's speculation in this regard
provides insufficient basis to question the reasonableness of the
challenged survey of the past performance reference for the North
Island contract. The record shows that the North Island contracting
officer reported that the termination for convenience was based upon a
change in the agency's needs. That reference was specifically asked
about any performance problems under that contract, and absolutely no
performance problem or concern was mentioned by the reference. In
fact, the contracting officer on that contract attested that CLC met
all contractual requirements and recommended CLC for the current
award. Given the North Island contracting officer's clear explanation
that the termination was a contract administration matter based on a
change in requirements, without any suggestion that the contractor's
performance of the contract had been in issue, as well as his
unconditional positive recommendation of CLC, we do not find
persuasive the protester's contention that the past performance survey
of this reference was unreasonable or deficient for failure to ask
about the no-cost terms of that termination.[7]
With regard to CLC's contract at Hill AFB, the protester contends that
the evaluation of CLC's past performance was flawed because the
contracting officer had a duty to contact the Hill contract reference
listed in the CLC proposal to further investigate CLC's performance on
that contract, since CLC emphasized that contract and its high dollar
amount in its proposal. UST principally contends that because the
contracting officer did not contact the Hill reference, even though
the contracting officer knew that UST had previously challenged CLC's
performance on that contract, the past performance evaluation was
improper and the award determination cannot stand.
There is no legal requirement that all past performance references
listed in an offeror's proposal be checked or included in a valid
review of past performance.[8] See Dragon Servs., Inc., B-255354,
Feb. 25, 1994, 94-1 CPD para. 151 at 8; Questech, Inc., B-236028, Nov. 1,
1989, 89-2 CPD para. 407 at 3. Rather, what is critical is whether the
evaluation is conducted fairly, reasonably, and in accordance with the
stated evaluation criteria, and whether it is based upon relevant
information sufficient to make a reasonable determination of the
offeror's overall past performance rating, including relevant
information close at hand or known by the contracting personnel
awarding the contract. See, e.g., International Bus. Sys., Inc.,
B-275554, Mar. 3, 1997, 97-1 CPD para. 114 at 5. Given the circumstances
here, discussed further below, especially in light of the substantial
information already known to the contracting officer about the
challenged Hill contract, and his reasonable analysis of material
differences between that contract and the current contract's dust
product processing, we cannot find that the contracting officer acted
unreasonably in not contacting the Hill reference.
First, the protester itself had provided to the contracting officer
substantial substantive information (from the federal and state
environmental authorities involved) regarding the facts surrounding
the authorities' subsequent interpretation of the dust product
processing method used under that contract. As stated above, those
letters, which UST had alleged in its agency-level protest should
serve as a basis to find its competitor's past performance
unacceptable, convey that the EPA had recently found the material
processing in India conducted under the Hill contract to be
reclamation rather than recycling. Neither the letters nor UST's
agency-level protest reasonably suggests (as UST now contends) that
CLC had misrepresented the propriety of its proposed processing at the
time it submitted its Hill proposal or performed that contract.
Rather, in our view, the letters reasonably informed the contracting
officer here that, although CLC had been approved to perform the Hill
contract in a certain way, and had performed that contract as
approved, the approving authority several years later changed its
approval decision. We cannot see how this alone should have advised
the contracting officer, as UST contends, that additional
investigation of the matter was required.
Moreover, the RFP specifically provided that the contracting officer
had the discretion to determine the degree of relevance of past
performance information and to assign less weight to those contracts
less relevant to the current contract. RFP Amendment No. 5 at 11, sec.
M. Here, the contracting officer determined that the Hill contract
warranted less weight in the CLC past performance evaluation because
it was less relevant than other past performance information for CLC.
The contracting officer's reasoning was based upon the time that had
passed since that contract (where more recent contract information was
available), as well as the fact that the Hill contract utilized a
completely different process from that which has been used by CLC
since 1995, and which was proposed and fully approved here. The
contracting officer, in our opinion, acted reasonably in considering
the substantial information he already had regarding the Hill
contract, from which, we believe, he reasonably determined that the
Hill contract was less relevant and worth less weight in the overall
past performance evaluation. Given these circumstances, and in light
of the unanimous recommendation of CLC by all six of the more recent
contract references surveyed, we cannot find that the contracting
officer acted unreasonably in determining not to contact the Hill
reference for additional information.[9] Tr. at 33. Our review of
the record supports the reasonableness of the contracting officer's
evaluation of CLC's past performance; the protest provides no basis to
question the reasonableness of the satisfactory rating assigned.[10]
UST next protests the contracting officer's price/technical trade off
that resulted in the selection of CLC for award.[11] Source selection
officials have broad discretion to determine the manner and extent to
which they will make use of the technical and price evaluation results
in negotiated procurements. Grey Advertising, Inc., 55 Comp. Gen.
1111, 1119 (1976), 76-1 CPD para. 325 at 9. Price/past performance trade
offs are permitted provided they are rational and consistent with the
stated evaluation criteria. Dragon Servs. Inc., supra, at 12. Here,
the source selection decision documentation notes that the CLC
proposal received a satisfactory past performance rating, that UST's
proposal received an exceptional past performance rating, and that
past performance was more important than price. The source selection
authority specifically determined that:
it is most advantageous to the Government to award this contract
to [CLC]. [CLC] has performed satisfactorily on previous
contracts and has offered a lower price than [UST]. Further,
although [UST] has been rated higher on past performance, the
price differential is so great ([deleted] %) that it would not be
in the Government's best interest to displace the low offeror.
Contract Review Board Presentation (Post-negotiation) at 16. UST
contends that the source selection decision language (particularly the
use of the term "displace," which UST believes shows a predilection to
award on the basis of low price) indicates that the agency failed to
follow the stated evaluation scheme, which gave more importance to
past performance, and did not conduct a proper price/technical trade
off.
We cannot agree with the protester that the use of the term "displace"
shows an improper application of the stated evaluation scheme or an
improper trade off analysis. The contracting officer has explained
that, despite his adoption of the contract negotiator's use of the
"displace" language, the award was made on the basis of the
contracting officer's determination of the proposal determined to
offer the best overall value.[12] Tr. at 7, 77. Our review of the
record supports the reasonableness of the contracting officer's
position that, given the satisfactory past performance rating assigned
to the CLC proposal, and a reasonable expectation of less performance
risk in light of the RFP's requirements for state approval of the
proposed recycling process, the agency could not justify spending
approximately [deleted] percent more for UST's exceptional past
performance rating.[13] Tr. at 32-33, 62. The protester's
disagreement with the award determination does not show it to be
unreasonable.
The protest is denied.
Comptroller General
of the United States
1. An earlier contract awarded to CLC under the RFP was canceled, and
the procurement reopened, after the agency amended the terms of the
solicitation to provide for the recycling of glass bead dust products.
That cancellation followed an agency-level protest filed by UST
challenging the initial award to CLC on the basis of the awardee's
alleged unfavorable contract performance history. Although CLC had
responded in detail to UST's allegations, in light of the cancellation
of the award on other grounds, the agency did not resolve UST's
agency-level protest challenges to CLC's past performance. CLC's
current protest relates to the agency's subsequent award to CLC under
the RFP.
2. Although "recycled" material is generally defined, at 40 C.F.R. sec.
261.1(c)(7), as including "reclaimed" material, the recycling here is
to involve the use of the dust product hazardous materials as
ingredients in an industrial process to make a product, so that the
resulting materials are not solid waste, pursuant to 40 C.F.R. sec.
261.2(e)(1)(i). The protester points out that reclamation (processing
of the hazardous material to recover a usable product (40 C.F.R. sec.
261.1(c)(4)) may not eliminate all hazardous waste, since hazardous
process residues may remain.
3. CLC's current recycling process, initiated in 1995, involves a
teaming arrangement with a tabletop manufacturer in New York State;
the dust products are used for pigmentation in the production of
tabletops.
4. The following adjectival ratings were used in the evaluation of
past performance: exceptional (little or no potential exists for
disruption of schedule, increases in cost, or degradation of
performance based on the offeror's past performance), satisfactory
(some potential exists for disruption of schedule, increases in cost,
or degradation of performance based on the offeror's past performance;
marginal (significant potential exists for disruption of schedule,
increases in cost, or degradation of performance based on the
offeror's past performance); and neutral (no relevant past performance
available for evaluation--proposal receives no merit or demerit for
this factor). Contract Review Board Presentation (Post-negotiation)
at 11-12.
5. The contracting officer states that the difference in adjectival
ratings between the two offers relates to the breadth and depth of
experience shown by UST's proposal on larger dollar amount contracts,
rather than any overall comparative quality of the performance by the
contractors. Tr. at 33, 68.
6. While the contracting officer used the [deleted]-percent figure,
which converts the approximately [deleted] difference as a percentage
of UST's price, it is true, as CLC notes, that UST's price is
approximately [deleted] percent higher than CLC's.
7. The contracting officer points out that the fact that the
termination was at no cost to the government does not necessarily
indicate that there was any performance problem, since the North
Island contract was an indefinite quantity contract, and it is
reasonable that, under such a contract, there would be no costs to be
paid upon termination, since the agency would have already paid for
the work performed to date. Tr. at 93-94, 101-102.
8. As the agency points out, there is nothing in the current RFP that
required the contracting officer to contact all references identified
by the offerors in their past performance proposals. Tr. at 37.
9. We are not persuaded by UST's argument that the past performance
surveys fail to support the contracting officer's evaluation because
no reference specifically mentioned the recycling portion of each of
the contracts. Each reference was specifically asked about the
contractor's performance on each lease/recycling contract--the fact
that no recycling problems were reported during the surveys, we
believe, was reasonably interpreted by the contracting officer as
indicative of satisfactory performance of the recycling portion of the
contract, as well as the product lease portion of the contract.
10. UST also protests that the contracting officer improperly failed
to lower CLC's past performance rating based upon the [deleted]. UST,
however, does not rebut the following reasonable bases put forth by
the agency supporting the contracting officer's decision not to
downgrade the CLC proposal in this area: two positive pre-award
surveys had been conducted for CLC and its subcontractor since that
time; and the [deleted] should not have an adverse effect on the award
of other contracts to the firm.
11. In its protest, UST also challenges the adequacy of the agency's
price analysis of the CLC proposal. Specifically, UST contends that,
since the contracting officer knew that CLC is currently [deleted],
the agency was required to adjust CLC's evaluated price to reflect a
more realistic cost to the agency. CLC, however, did not take
exception to the RFP specifications (including required product size
and attrition rate), and the RFP did not require the type of cost
realism analysis sought by UST. Rather, as appropriate for award of
the fixed-price contract here, CLC's proposed price was determined to
be reasonable after a comparison with the other offers received; two
other offerors' prices were closer to CLC's low price than to UST's
[deleted] price. See PHP Healthcare Corp.; Sisters of Charity of the
Incarnate Word, B-251799 et al., May 4, 1993, 93-1 CPD para. 366 at 6.
[deleted] Tr. at 70-71, 81.
12. The contracting officer correctly points out that the RFP only
provided that past performance was "more important" (rather than
substantially or significantly more important). Tr. at 40. Here,
given the large price difference and the contracting officer's
determination of CLC's satisfactory past performance and demonstrated
capability, the contracting officer chose not to award on the basis of
the protester's higher past performance rating. For purposes of
comparison, the contracting officer testified that on a recent
procurement for similar services, where past performance was more
important than price, the agency in fact awarded the contract to UST
on the basis of its higher past performance rating, since in that
case, the price differential between UST and CLC was only
approximately [deleted] percent, much less than the significant price
premium involved here. Tr. at 14-15.
13. We recognize, as the protester points out, that CLC's prior
"recycling" process under the Hill contract was also "state-approved,"
and that the state approval was withdrawn several years after it was
granted. We agree that this indicates that state approval at the time
of award may not eliminate all performance risk. However, as with
licensing requirements, in general, we believe it is reasonable to
conclude, as the contracting officer has done here, that the state
approval requirements of the RFP are directly related to lessening the
performance risk associated with an award to the state-approved
contractor.