BNUMBER:  B-278727 
DATE:  March 6, 1998
TITLE: U.S. Property Management Service Corporation, B-278727, March
6, 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:U.S. Property Management Service Corporation

File:     B-278727

Date:March 6, 1998

Barbara A. Duncombe, Esq., and Richard A. Maresca, Esq., Porter, 
Wright, Morris & Arthur, for the protester.
Thomas P. Cassidy, Esq., Duane, Morris & Heckscher LLP, for Ernie 
Stefkovic Associates, Inc., an intervenor.
Shari Weaver, Esq., Department of Housing and Urban Development, for 
the agency.
Christine F. Davis, Esq., and James A. Spangenberg, Esq., Office of 
the General Counsel, GAO, participated in the preparation of the 
decision.

DIGEST

Agency unequally evaluated the experience of the protester and the 
awardee, where both firms were newly formed corporations, yet the 
agency did not downgrade the awardee's proposal, as it did the 
protester's, for not evidencing significant corporate experience, but 
considered the experience of the awardee's proposed key personnel to 
determine the awardee's proposal to be superior in experience, but did 
not do so with regard to the protester's proposed personnel.

DECISION

U.S. Property Management Service Corporation protests the award of a 
contract to Ernie Stefkovic Associates, Inc. (ESA) under request for 
proposals (RFP) No. H03R96015600000, issued by the Department of 
Housing and Urban Development (HUD), for real estate asset management 
(REAM) services for single-family properties owned by HUD in its 
District of Columbia Office jurisdiction.

We sustain the protest.

HUD issued the RFP on July 24, 1996, as a total small business 
set-aside for the acquisition of management and other related 
services.  The RFP contemplated a fixed-price, indefinite quantity 
contract for a base year with 2 option years.  RFP  sec.  B.2, B.3.  The 
RFP stated that HUD anticipated an inventory on the effective date of 
award to include approximately 850 to 900 properties.  RFP  sec.  L at 182.

The RFP provided for award based on a cost/technical tradeoff and 
stated that the combined weight of the technical evaluation factors 
was more significant than price (including options).  RFP  sec.  M(a) at 
191.  The RFP listed the following technical evaluation factors, with 
their relative weights, to be scored on a 100-point scale:  prior 
management experience (30 points); past performance (25 points); 
office location(s) (20 points); and management capability (25 points).  
RFP  sec.  L at 184-85, M at 192.

Proposed staffing was stated to be a consideration under the office 
location(s) factor, which required "evidence of an adequately staffed 
and equipped office (or offices)," and the management capability 
factor, which required a description of the offeror's "proposed 
staffing" and information "to support the qualifications, including 
relevant experience, specialized training and education, of all 
proposed key personnel."  RFP  sec.  L at 185.  The qualifications of the 
"offeror" were to be evaluated under the prior management experience 
factor, which required "evidence of the offeror's experience in the 
management of single family properties similar to the type of 
inventory covered by this solicitation," and the past performance 
factor, which required "evidence of the offeror's past performance" in 
accomplishing substantially similar work as required by the RFP.  RFP  sec.  
L at 184-85.  Offerors were asked to supply references for recent, 
relevant contract work under the prior management experience and past 
performance factors.  Id.

The agency received 17 proposals, including U.S. Property's and ESA's, 
by the August 23 due date.  The incumbent contractor for these 
services, Intown Properties, Inc., did not submit a proposal because 
it is not a small business.  The president of U.S. Property and the 
president of ESA are former Intown managers, who, in 1994, began their 
own property management company, Asset Management Specialists, Inc. 
(AMS).  AMS did not submit a proposal in response to the RFP because a 
business dispute arose between the principals shortly before the 
August 23 proposal due date.  As a result of this dispute, AMS's 
president formed ESA and AMS's vice president formed U.S. Property, 
for the purpose of submitting independent proposals in response to the 
RFP.[1]

Because they were newly formed corporations, both ESA and U.S. 
Property used their presidents' shared experience with AMS and Intown 
to establish their qualifications under the prior management 
experience and past performance factors.  Both proposals identified 
six REAM contracts awarded to AMS, which were jointly managed by ESA's 
and U.S. Property's presidents.  The major difference between the two 
proposals was in the personnel proposed.  ESA proposed to retain the 
incumbent's key personnel and staff, and its proposal emphasized the 
qualifications and experience of the [deleted] proposed Intown 
[deleted], including a past performance reference to the incumbent 
contract.  In comparison, U.S. Property's proposal included no 
incumbent employees.

On February 4, 1997, the technical evaluation panel (TEP) completed 
its initial evaluation and recommended a competitive range of 12 
proposals, including ESA's and U.S. Property's.  ESA's proposal 
received [deleted] points and tied for the second-highest score, while 
U.S. Property's proposal received [deleted] points, the fifth-highest 
score. 

The point spread between the two proposals was primarily due to the 
prior management experience factor, where the awardee's proposal 
earned [deleted] points and the protester's proposal earned [deleted] 
points.  The TEP downgraded the protester's proposal because, although 
its president possessed relevant REAM experience through AMS, the 
protester was a newly formed corporation which lacked independent 
corporate experience.  The TEP did not similarly question ESA's lack 
of independent corporate experience.  Rather, the record, including 
testimony given by the TEP Chairperson at a hearing conducted by our 
Office, shows that ESA's prior management experience was considered 
better than U.S. Property's because the TEP was impressed with the 
management experience of the Intown employees proposed by ESA.  
Hearing Transcript (Tr.) at 12-13, 25-26, 60.
 
HUD conducted written discussions with the 12 offerors whose proposals 
were in the competitive range.  HUD asked U.S. Property and ESA to 
solicit information from their past performance references (both 
initial proposals earned [deleted] points under the past performance 
factor); ESA was specifically asked for reference information 
verifying how it had handled emergency situations.  With respect to 
the prior management experience factor, HUD questioned U.S. Property 
about its lack of independent corporate experience, as follows:  "TEP 
discussed that this firm recently split from AMS.  Proposal indicates 
this firm has managed 6 REAM contracts, probably as part of AMS.  Does 
this firm have single family property management experience in its own 
right?"  HUD did not direct a similar question to ESA.

In its February 25 revised proposal, U.S. Property advised HUD that it 
had acquired independent corporate experience, having been awarded a 
September 27, 1996, contract for single-family property inspection 
services and an October 11, 1996, contract for REAM monitoring 
services; the protester also furnished favorable reference letters 
from the clients under these contracts.  The TEP increased the 
protester's prior management experience score from [deleted] to 
[deleted] points and past performance score from [deleted] to 
[deleted] points based upon this information.  The modest increase in 
the protester's scores reflected the TEP's assessment that U.S. 
Property's recent contracts did not establish "significant REAM 
[experience] as an entity."

The TEP did not consider whether ESA demonstrated successful past 
performance as an entity, Tr. at 39, but significantly increased the 
awardee's past performance score from [deleted] to [deleted] points.  
In its revised proposal, ESA described three emergency situations 
handled, respectively, by ESA's president and the [deleted] proposed 
Intown [deleted].  The TEP chairperson, who is a government technical 
representative for the incumbent contract, testified that she was 
personally familiar with the Intown employees' successful management 
of the emergencies described.  Tr. at 30, 60.  Her testimony and the 
contemporaneous evaluation documentation reflect that the past 
performance of these employees significantly contributed to the 
increase in the awardee's past performance score.

On May 21, the TEP recommended that the competitive range be narrowed 
to include five proposals, including ESA's and U.S. Property's.  One 
firm withdrew from the competition, and the agency received two rounds 
of best and final offers (BAFO) from the remaining four firms.  
Although ESA's and U.S. Property's final consensus scores were within 
the "excellent" range under all factors, ESA's proposal significantly 
outscored U.S. Property's proposal under the prior management 
experience factor ([deleted] points versus [deleted] points) and the 
past performance factor ([deleted] points versus [deleted] points), 
and slightly outscored U.S. Property's proposal under the management 
capability factor ([deleted] points versus [deleted] points).  Both 
proposals earned a [deleted] score ([deleted] points) under the office 
location(s) factor.[2]

The following evaluation results were reported to the source selection 
official (SSO) to assist in her selection decision:

                          Technical ScorePrice

               Offeror A  92         $2,420,050

               ESA        91         $2,233,575

               Offeror B  85         $3,071,565

               U.S. Property82       $1,862,550
Based upon these evaluation results, the SSO determined that ESA's 
proposal was technically equivalent to Offeror A's higher-priced 
proposal and so technically superior to U.S. Property's proposal as to 
offset the protester's price advantage.

The SSO documented her rationale for selecting ESA's proposal in an 
October 23 source selection memorandum.  The October 23 memorandum was 
written by the contracting officer, and the SSO testified that she did 
not review, and was unaware of, proposal information and evaluation 
documentation not described in the memorandum.  Tr. at 68, 73-75, 77, 
88, 93.  The SSO testified, and the source selection memorandum 
reflects, that award to ESA stemmed from two major discriminators:  
U.S. Property's perceived lack of corporate experience, Tr. at 70-71, 
and ESA's proposed use of incumbent staff.  Tr. at 71-72, 90.  
Regarding U.S. Property's perceived lack of corporate experience, the 
source selection memorandum reports that the protester's proposal did 
"not provide evidence of the firm handling this large of a workload in 
the past," that "no direct past performance information for company 
performance as a REAM was received," and that U.S. Property Management 
"lacked corporate experience as a REAM."  The SSO testified that, in 
making these findings, she was not aware that U.S. Property's and 
ESA's proposals reflected the same prior corporate experience owing to 
their principals' experience with AMS, or that, of the two proposals, 
only U.S. Property's proposal reflected corporate experience gained 
independently of AMS.  Tr. at 77.  The SSO testified that she did not 
consider ESA's corporate experience, but nevertheless considered the 
firm more experienced and better equipped to perform the contract 
based upon its proposed staff of Intown employees.[3]  Tr. at 92-93.  
Based upon this analysis, the SSO determined that the technical merit 
of ESA's proposal outweighed the price advantage of U.S. Property's 
proposal.  Tr. at 100, 104.

U.S. Property protests that the agency conducted an unequal evaluation 
with respect to its own and ESA's corporate experience.  The protester 
claims that the agency ignored the fact that ESA was a new corporation 
lacking independent corporate experience and allowed ESA to substitute 
the qualifications of its proposed incumbent personnel for corporate 
experience.  The protester argues that, had the agency evaluated ESA's 
proposal for evidence of corporate experience, as it did U.S. 
Property's proposal, it would have considered U.S. Property's proposal 
technically superior to ESA's, since both offerors legitimately 
claimed AMS's favorable corporate experience, but only U.S. Property 
had acquired positive, independent corporate experience following its 
incorporation.[4]

The evaluation of proposals is a matter within the discretion of the 
contracting agency.  Our Office will question the agency's evaluation 
only where it lacks a reasonable basis or conflicts with the stated 
evaluation criteria for award.  SC&A, Inc., B-270160.2, Apr. 10, 1996, 
96-1 CPD  para.  197 at 7.  The record must reasonably support the 
evaluation of the proposals, Intown Properties, Inc., B-262236.2, 
B-262237.2, Jan. 18, 1996, 96-1 CPD  para.  89 at 5, and it is fundamental 
that the contracting agency must treat all offerors equally; it must 
evaluate offers evenhandedly against common requirements and 
evaluation criteria.  Tidewater Homes Realty, Inc., B-274689, Dec. 26, 
1996, 96-2 CPD  para.  241 at 3.

Our review of the record confirms that HUD did not evaluate proposals 
equally under the prior management experience and past performance 
factors.  The source selection memorandum and underlying evaluation 
documentation reflect that HUD consistently downgraded U.S. Property's 
proposal under the prior management experience and past performance 
factors because the firm was a new corporation with little corporate 
experience independent of its principal's prior experience with AMS.  
The record, including the hearing testimony in this case, offers no 
convincing explanation as to why this same judgment did not apply to 
ESA's proposal with even greater force, inasmuch as ESA's proposal 
reflected no corporate experience beyond its principal's prior 
experience with AMS.

The agency argues that it was not required to evaluate ESA's corporate 
experience and past performance because it was fully satisfied with 
the experience of ESA's proposed key personnel. While, based on the 
language of the RFP, the agency had discretion to emphasize the prior 
experience of the offerors' employees in evaluating the prior 
management experience and past performance factors, when the agency 
chose to emphasize U.S. Property's lack of corporate experience, it 
could not then ignore ESA's similar lack of corporate experience.  HUD 
stressed the absence of corporate credentials on the part of U.S. 
Property; for other offerors as well, the agency evaluated those 
firms' experience under the prior management experience and past 
performance factors (rather than evaluating the experience of proposed 
employees).  Indeed, our Office previously upheld HUD's decision to 
reject two proposals from the competitive range in this procurement 
because, among other reasons, the agency found that the offerors did 
not possess comparable or satisfactory experience under the prior 
management experience and past performance factors (employees' 
experience was evaluated under another factor).  See Shel-Ken 
Properties, Inc., B-277250, Sept. 18, 1997, 97-2 CPD  para.  79 at 4 (volume 
of properties managed by firm under prior management experience 
factor; firm had only one past performance respondent under past 
performance factor); Pearl Properties, Inc., B-277250.2, Sept. 18, 
1997, 97-2 CPD  para.  80 at 4 (type of inventory managed by firm under 
prior management experience factor; firm had a negative past 
performance report under past performance factor).

While the agency required a showing of corporate experience on the 
part of U.S. Property and the other offerors in this procurement, HUD 
appears to have carved an exception for ESA because of the agency's 
satisfaction with the firm's proposed incumbent personnel.  ESA's high 
scores under the prior management experience and past performance 
factors thus stemmed from the agency's evaluation of its proposed 
incumbent staff, not from its corporate experience, which was the 
standard by which all other proposals were judged under these factors.  
Tr. at 26, 47-48, 60.  By treating ESA as a proxy for the incumbent 
contractor and accepting incumbent personnel experience in lieu of 
ESA's corporate experience, HUD conducted an unequal evaluation that 
prejudiced U.S. Property and the other competitors in this case.

As noted, the agency evaluated ESA's personnel and personnel 
experience under all four evaluation factors.  While this may have 
exaggerated the importance of personnel experience in the overall 
evaluation scheme, see J.A. Jones Management Servs., Inc., B-254941.2, 
Mar. 16, 1994, 94-1 CPD  para.  244 at 6, it might have been permissible, if 
the record showed that the agency evaluated proposals equally in this 
respect.  This appears not to have been the case.  U.S. Property's 
proposal received credit for its proposed personnel under the 
management capability factor, where it was noted that the protester's 
"[s]taff appears good," contributing to a management capability score 
that nearly matched ESA's.  However, the record does not evidence that 
the TEP considered the "good" qualifications of U.S. Property's 
proposed personnel under the prior management experience and past 
performance factors, even though ESA received the benefit of its 
proposed (incumbent) personnel under these factors; instead the record 
evidences that the TEP focused on the fact that U.S. Property was a 
new corporate entity, even though ESA was also a new entity, which was 
not noted as a concern.  While the evaluation scheme may have allowed 
the agency to consider personnel experience (including credit for 
incumbent experience) under the prior management experience and past 
performance factors, both offerors, rather than only ESA, should have 
received credit for staffing strengths in their proposals under those 
factors.

Accordingly, we sustain the protest.[5]  We recommend that the agency 
reevaluate BAFOs.  If ESA is not the successful offeror after the 
reevaluation, its contract should be terminated.  We also recommend 
that U.S. Property be reimbursed its costs of filing and pursuing its 
protest, including reasonable attorneys' fees.  Bid Protest 
Regulations, 4 C.F.R.  sec.  21.8(d)(1) (1997).  U.S. Property should 
submit its certified claim for costs, detailing the time spent and 
costs incurred, to the contracting agency within 60 days of receiving 
this decision.  4 C.F.R.  sec.  21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

1. In November 1996, U.S. Property's president sold his ownership 
interest in AMS to ESA's president.

2. Both the protester's and awardee's [deleted] scores under the 
office location(s) factor are the product of a mistake that went 
undetected until the hearing conducted by our Office.  Specifically, 
the agency used a 22-point score from one evaluator on a 20-point 
scale in deriving the protester's and awardee's consensus scores under 
this factor.  Tr. at 42-44.

3. The SSO testified that she was in charge of administering the 
incumbent contract, had met the incumbent employees, and had reason to 
know that their performance was satisfactory.  Tr. at 88-89.

4. HUD argues that U.S. Property is not an interested party to raise 
this issue because Offerors A and B are allegedly next in line for 
award.  This contention lacks merit.  A protester is an interested 
party where, as here, it contests its own evaluation or if it protests 
that it was treated disparately as compared to the awardee.  
International Data Prods., Corp. et al., B-274654 et al., Dec. 26, 
1996, 97-1 CPD  para.  34 at 5; Maintenance and Repair, B-251223, Mar. 19, 
1993, 93-1 CPD  para.  247 at 5.

5. We do not address U.S. Property's contention that ESA did not 
satisfy the general standards of responsibility contained in Federal 
Acquisition Regulation  sec.  9.104-1(a), (d).  An agency's affirmative 
determination of a contractor's responsibility will not be reviewed by 
our Office absent a showing of possible bad faith on the part of 
procurement officials, or that definitive responsibility criteria in 
the solicitation may not have been met.  4 C.F.R.  sec.  21.5(c) (1997).  
Neither exception applies here.