BNUMBER:  B-280521.3 
DATE:  October 21, 1998
TITLE: RMS Information Systems, Inc., B-280521.3, October 21, 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:RMS Information Systems, Inc.

File:     B-280521.3

Date:October 21, 1998

Philip M. Dearborn, Esq., Antonio R. Franco, Esq., Pamela J. Mazza, 
Esq., and Andrew P. Hallowell, Esq., Piliero, Mazza & Pargament, for 
the protester.
David R. Johnson, Esq., Kathleen C. Little, Esq., and Robert J. 
Rothwell, Esq., McDermott, Will & Emery, for Johnson Controls World 
Services, Inc., an intervenor.
John E. Lariccia, Esq., Martin F. McAlwee, Esq., and Marian E. 
Sullivan, Esq., Department of the Air Force, for the agency.
Linda C. Glass, Esq., and Paul I. Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that awardee's proposal was unbalanced is denied where 
there is no evidence of mathematical unbalancing and, in any event, 
there is no question that the awardee's proposal will result in the 
lowest ultimate cost to the government because the solicitation price 
evaluation formula was structured to assign more weight to the most 
requested items to minimize the likelihood of offerors being able to 
gain any advantage through unbalanced pricing. 

2.  Protest that the agency failed to perform an adequate price 
realism analysis is denied where the price analysis was reasonably 
based on audit reports; comparison to commercial prices, other 
offerors' proposals and government estimates; and an assessment of the 
completeness and feasibility of the offeror's technical solutions.

3.  Protest challenging the evaluation of technical proposals is 
denied where evaluation record shows that evaluation was reasonable 
and consistent with solicitation evaluation criteria.

4.  Protest that source selection decision was improperly based on a 
$9 million mistake in protester's evaluated price is denied where 
agency awarded to offeror with technically equal, but significantly 
lower priced proposal, and protester's actual evaluated price remains 
significantly higher than the awardee's after correction of the 
mistake.

DECISION

RMS Information Systems, Inc. (RMS) protests the award of a contract 
to Johnson Controls World Services, Inc. (JCWS) under request for 
proposals (RFP) No. F08650-98-R-0013, issued by the Department of the 
Air Force for visual information end products and technical services 
in support of pre-launch, launch, post-launch, and non-launch 
operations, known as the Visual Information Technical Contract (VITC).  
RMS asserts that JCWS's proposal was unbalanced, and that the Air 
Force failed to perform an adequate price realism analysis, improperly 
evaluated JCWS's technical proposal, and improperly awarded the 
contract to JCWS on the basis of its lower price because the agency 
had overstated RMS's evaluated price by approximately $9 million.

We deny the protest.

The RFP, issued on May 20, 1997, contemplated the award of a 
fixed-price, indefinite-delivery, indefinite-quantity, labor-hour 
contract for a base period with four 1-year options.  The contract is 
to obtain visual imaging end products for launch and non-launch events 
for the 45th Space Wing and NASA's Kennedy Space Center.  Offerors 
were to propose a fixed price per event for basic launch image 
acquisition packages (camera/equipment setups and operations for 
missile launches and shuttle launches and landings), and launch image 
acquisition services (covering launches landings, slips and scrubs).  
Additionally, offerors were to propose a price per hour for over and 
above image acquisition requirements (requested still, motion picture, 
and video coverage for non-launch activities and government equipment 
maintenance support).  Film, digital images, and video processing and 
print products were to be proposed on a schedule identifying 
additional products with prices for each product.  RFP  sec.  B.  The VITC 
also contained five separately priced contract data requirements lists 
(CDRL).  Id.  

The RFP provided for a best value award to be determined by an 
integrated assessment of the cost criterion, the specific criteria, 
assessment criteria, proposal risk, performance risk, and general 
considerations.  RFP  sec.  M-2.a.  The RFP listed the following criteria:

          (1)  Technical/Management

             (a)  Project Management
             (b)  Image Acquisition/Processing/End Products

          (2)  Cost

             (a)  Completeness
             (b)  Reasonableness
             (c)  Realism

          (3)  General Considerations

All technical evaluation factors, when combined, were approximately 
equal in value to cost.  General considerations were of lesser 
importance but were to be an important consideration in the award 
decision.  Id.  The RFP also provided that proposals would be 
evaluated for proposal risk, which would involve an assessment of the 
risk associated with the offeror's proposed approach to accomplish the 
requirements.  RFP  sec.  M-2.d.  Proposals were also to be evaluated for 
performance risk, which would involve an assessment of the probability 
of the offeror successfully accomplishing the proposed effort based on 
the offeror's demonstrated relevant present and past performance.[1]  
RFP  sec.  M.e.  The RFP further provided that for evaluation purposes, 
rental charges for the use of non-mandatory government-owned 
facilities and equipment which the contractor proposed to use would be 
added to the proposal price.  RFP  sec.  M-900.  The monthly rental rates 
to be applied to non-mandatory government-furnished equipment were set 
forth as follows:

            Age of Equipment   Monthly Rental Rate

            Under 2 years old               3%

            Over 2 to 6 years old             2%

            Over 6 years old             1.0%
The RFP stated that the age of each item of equipment would be based 
on the year in which the item was acquired by the government and that 
the rental period would not be less than 1 month.  RFP  sec.  M-900.b, c.

While the RFP stressed that the government was seeking innovative 
approaches for performance of the VITC, it also recognized that 
offerors who propose significant capital investment in new technology 
and updated equipment would accept the greatest risk in performance of 
the contract, hence the evaluation criteria were structured so that 
offerors proposing to perform the VITC in substantially the same 
manner as the existing contract were considered to meet the evaluation 
standards.  To exceed the standards, a proposal had to offer contract 
performance which would provide superior customer support while 
providing technical solutions which would reduce overall VITC support 
costs (contract costs plus other support costs such as maintenance of 
facilities and equipment).  RFP  sec.  M-2.b.

Five initial proposals were received by the June 20, 1997 closing 
date.  After evaluation of the initial proposals, the Air Force 
determined that all proposals contained informational deficiencies and 
format errors.  Amendment No. 0003 was issued to clarify common 
problem areas and allow offerors an opportunity to revise their 
proposals.  Amendment No. 0003 also added clause M-901, which 
established a revised methodology for computing the total evaluated 
price for award purposes.  This evaluation methodology was based upon 
a weighted average formula for the products described in exhibit C to 
the RFP and placed extra emphasis on the pricing for the most 
requested items.  Under this formula, the evaluated cost of additional 
products was to be based on two average unit prices calculated for 
each category of product (still, motion picture, video), consisting of 
one average unit price for all products in the category and a second 
average unit price for the "most requested items" in the category.  
The total evaluated price formula assigned more weight to those items 
most requested based on best estimates of  quantity determined by 
historical production reports provided by the RVITS (Range Visual 
Information Technical Services) contractor under the predecessor RVITS 
contract.  Contracting Officer's Statement at 11.  Under this formula, 
offerors proposing low prices for items seldom ordered and higher 
prices for items frequently ordered would receive an amplified total 
evaluated price for the end products.     

Each offeror submitted a revised proposal by the September 19 closing 
date.  Each revised proposal was evaluated for performance and 
proposal risk in addition to being evaluated under a color/adjectival 
rating scheme for each of the evaluation factors.[2]  After evaluation 
of the revised proposals, a competitive range determination was made.  
Discussions were held with competitive range offerors and numerous 
clarification requests and points for negotiations (PFN) were issued.  
On May 29, 1998, a request for best and final offers (BAFO) was issued 
to the four competitive range offerors.  BAFOs were received from all 
four offerors and were evaluated.  Three of the competitive range 
proposals, including those of RMS and JCWS, were considered to 
represent significant technical strengths because of their mix of 
commercial management practices and innovative technical solutions and 
low proposal risks; however, JCWS's price was significantly lower than 
the other offerors'.  The source selection authority (SSA) concluded 
that these three offerors provided exceptional approaches to Project 
Management and Imaging Acquisition, Processing and End Products.  The 
three offerors' proposals exceeded the requirements for four of the 
eight subfactors under the project management evaluation factor and 
met the requirements for the remaining four subfactors.  Thus, they 
were evaluated as substantially technically equal.  The evaluated 
ratings and costs of these proposals were as follows:

    OFFEROR    PROJECT MANAGEMENTIMAGE ACQUISITIONCOST

    JCWS       Blue          Blue          $134M

    RMS        Blue          Blue          deleted

    Offeror B  Blue          Blue          deleted
Because JCWS's proposals thus offered the lowest cost of the three 
technically equal proposals, on June 19, the SSA determined that JCWS 
offered the best overall value to the government and contract award 
was made to JCWS on June 26.  RMS was provided a debriefing on July 1 
and this protest followed.

UNBALANCED PRICING

RMS alleges that JCWS's proposal is mathematically unbalanced because 
some items are significantly underpriced, while other items are 
significantly overpriced.  RMS maintains that JCWS underpriced items 
that it determined, based on historical information, the Air Force 
would purchase only in minimal quantities and proposed unrealistically 
high prices for commercial products which have had a high historic 
volume.  RMS contends that JCWS's pricing scheme will likely result in 
the payment of unreasonably high prices for some items. 

The concept of unbalancing may apply in negotiated procurements where, 
as here, price constitutes the primary basis for the source selection.  
Laidlaw Envtl. Servs. (GS), Inc., B-261603, Oct. 11, 1995, 95-2 CPD  para.  
171 at 2.  Unbalanced pricing has two aspects:  first, the offer must 
be assessed to determine whether it is based on nominal prices for 
some items and inflated prices for others, in which case it is 
mathematically unbalanced.  The second consideration is whether award 
on the basis of a mathematically unbalanced offer will result in the 
lowest overall cost to the government--if there is reasonable doubt 
that it will, the offer is materially unbalanced and cannot be 
accepted.  Astrosystems, Inc., B-260399.2, July 11, 1995, 95-2 CPD  para.  
18 at 4.  With regard to estimated quantities in requirements-type 
solicitations, consideration of the materiality of unbalancing begins 
with a determination of the accuracy of the solicitation's estimates 
of the agency's anticipated needs--unreliable estimates can raise 
doubts as to whether a low mathematically unbalanced offer would 
actually result in the lowest cost to the government.  Id. at 4-5.

In support of its allegation that JCWS's pricing is mathematically 
unbalanced, RMS essentially compares JCWS's prices for certain items 
with its own.  However, this difference in prices does not by itself 
establish that JCWS's offer is mathematically unbalanced.  See Laidlaw 
Envtl. Servs. (GS), Inc., supra, at 3.  The record reflects that there 
are large variations in pricing among all the offerors, which appears 
to be related to the different approaches proposed for performing the 
requirement.  

Essentially what is at issue here is the pricing of 154 end products.  
Of these 154 items, under the "still" items, 17 line items were given 
extra weight to arrive at a unit price for evaluation purposes.  A 
review of all the high volume still products (Items 1-9 of CLIN 
0005AA) in the total evaluated price formula with prices proposed by 
all offerors demonstrates that JCWS's prices for 7 of the 17 high 
volume still products are higher than those proposed by other 
offerors.  However, in those instances, JCWS's prices are within the 
range of the most highly rated offerors.  Following are examples of 
the unit pricing on the 17 high volume still products for all four 
competitive range offerors: 

       ITEM#       OFFEROR A   JCSW     RMS     OFFEROR B

       G41                deleted   3.03deleted deleted

       G42                deleted   2.48 deleted   deleted

       G43                deleted   4.24 deleteddeleted

       G44                deleted   4.24 deleted   deleted

       G45                deleted 14.32  deleted   deleted

       G46                deleted   8.81 deleted   deleted

       G47                deleted 26.45  deleted   deleted

       G48                deleted 14.32  deleted   deleted

       G49                deleted   8.71 deleted   deleted

       G50                deleted   4.95 deleted   deleted

       G51                deleted   6.62 deleted   deleted

       G52                deleted 13.23  deleted   deleted

       G53                deleted 14.32  deleted   deletedG54       
                   deleted      10.25    deleted   deleted

       G55                deleted   7.16 deleted   deleted

       G56                deleted   7.16 deleted   deleted

       G57                deleted   7.71 deleted   deleted
Contracting Officer's Supplemental Statement at 5.

As indicated above, the record shows that there is little consistency 
in pricing among any of the offerors with respect to the items at 
issue and the prices do not   evidence gaming of the prices or 
indicate any pattern of inflated prices in JCWS's offer.  There is 
therefore no basis to conclude that the offer is mathematically 
unbalanced. 

Even if there were mathematical unbalancing, the price evaluation 
formula, as previously stated, was intentionally structured to 
discourage unbalancing by imposing extra weight on items frequently 
ordered.  The effect of that weighting is to ensure that high prices 
in heavily used items (determined based on historical data) will be 
reflected in the overall evaluated price--thus countering any effort 
to game pricing by proposing inflated prices for items that will be 
ordered in quantities greater than the solicitation's estimates.  The 
protester now argues that the solicitation's weighting formula does 
not completely eliminate unbalanced pricing because the heavily 
weighted items were all weighted equally, while the protester contends 
that some should have been weighted more heavily than others to 
reflect greater use.  RMS did not challenge the solicitation's 
weighting scheme prior to submission of its proposal, however, and 
even now RMS presents no evidence establishing that this 
scheme--essentially a quantity estimate formula--is inaccurate.  Under 
the circumstances, RMS has not provided any credible basis to call in 
question the agency's determination that award to JCWS will result in 
the lowest overall cost to the government.[3] 

PRICE ANALYSIS

RMS next argues that the agency did not perform a proper price realism 
analysis.  RMS contends that the agency should have rejected JCWS's 
prices as unreasonable and unrealistic because JCWS proposed prices 
that were significantly higher or lower than "customary charges for 
[similar] cost elements in the marketplace."  Protest at 11.  For 
example, RMS contends that JCWS's price for processing and mounting a 
36 exposure roll of 35mm slide film was significantly greater than 
"customary charges" for similar items.  RMS also maintains that JCWS's 
prices for the launch packages were unrealistically low and did not 
represent the true cost of performing the work.  Lastly, RMS contends 
that another example of JCWS unrealistic pricing is the proposed price 
for the Photographic Acquisition and Definition Document (PADD), which 
is a critical report that documents all operational parameters and 
laboratory processes for each launch.

Generally, cost realism (a measurement of the likely cost of 
performance in a cost reimbursement contract) is not a factor in the 
evaluation of proposals when a fixed-price contract is to be awarded, 
since the government's liability is fixed, and the risk of cost 
escalation is borne by the contractor.  PHP Healthcare Corp.; Sisters 
of Charity of the Incarnate Word, B-251799 et al., May 4, 1993, 93-1 
CPD  para.  366 at 5.  However, since the risk of poor performance when a 
contractor is forced to provide services at little or no profit is a 
legitimate concern in evaluating proposals, an agency in its 
discretion may, as it did here, provide for a price realism analysis 
in the solicitation of fixed-price proposals.  Id.  The depth of an 
agency's price realism analysis is a matter within the sound exercise 
of the agency's discretion.  Family Realty, B-247772, July 6, 1992, 
92-2 CPD  para.  6 at 4.

Here, in evaluating price proposals for realism the agency considered 
the proposed technical approaches proposed by each offeror.  The 
agency also considered the prices in the market, the prices of the 
other offerors, and risk.  Initially, the cost team evaluated each 
cost volume and computed the total evaluated price in accordance with 
amendment No. 0003.  The source selection evaluation board (SSEB) 
Chair then performed a realism check on a sampling of the proposed 
prices in the 154-item end-products price list.  Costs identified as 
"questionable" by the SSEB Chair were included in the cost PFNs 
provided to all offerors.  The record shows that JCWS's total 
evaluated price in response to amendment No. 0003 was initially 
determined to be incomplete, unreasonable, and unrealistic.  Proposal 
Analysis Report at 21.  Nine PFNs were provided JCWS with respect to 
its proposed price.  The agency's major price concerns included 
questionable end product and CDRL prices and JCWS's failure to 
complete the CDRL and end-products price list properly.  In response 
to the PFNs, JCWS revised its price proposal by submitting a revised 
end-products price list and revised CDRLs.  The agency still 
considered JCWS's revised prices to be incomplete and unrealistic and 
discussed their concerns with JCWS during oral discussions.  JCWS 
indicated that its end-product price list would be corrected in its 
BAFO and that it regarded all CDRLs as administrative reports not 
requiring specialized or highly technical inputs to complete, and that 
it felt comfortable with its proposed CDRL costs.  The agency reports 
that JCWS's BAFO reflected the changes discussed and after a price 
analysis and a technical assessment that the proposed staffing, 
materials, equipment, and facilities were sufficient to accomplish 
VITC requirements, JCWS's total evaluated price was determined to be 
complete, reasonable, and realistic.  Id.

We see nothing objectionable about the price analysis performed by the 
agency.  Under a fixed-price solicitation, even when the agency 
provides that it will perform a price realism analysis the depth of a 
price analysis is a matter within the sound exercise of the agency's 
discretion.  Family Realty, supra.  While the protester disagrees with 
the agency's conclusions, there is nothing in the record to indicate 
that the price analysis or its conclusions were erroneous.  As noted 
above, the RFP provided for a price realism analysis and listed 
several comparisons that could be made in performing that analysis.  
The record shows that while the agency did not perform the particular 
comparisons proposed by RMS, it did perform a detailed price analysis 
consistent with the RFP criteria and reasonably concluded that JCWS's 
proposed price was reasonable and realistic. 

TECHNICAL EVALUATION OF JCWS's PROPOSAL

RMS argues that the agency's technical evaluation of JCWS's proposal 
was improper.  Specifically, RMS maintains that the RFP made clear 
that in order to obtain an exceptional (blue) rating an offeror must 
propose innovative approaches with minimal use of government-furnished 
facilities (GFF) or government-furnished equipment (GFE).  RMS 
contends that the agency should not have given JCWS's proposal 
exceptional technical ratings for proposing innovative approaches 
because JCWS did not make any significant reductions in GFF/GFE.

Evaluating the relative merits of competing proposals is a matter 
within the discretion of the contracting agency since the agency is 
responsible for defining its needs and the best method of 
accommodating them, and it must bear the burden resulting from a 
defective evaluation.  Advanced Tech. and Research Corp., B-257451.2, 
Dec. 9, 1994, 94-2 CPD  para.  230 at 3; Marine Animal Prods. Int'l Inc., 
B-247150.2, July 13, 1992, 92-2 CPD  para.  16 at 5.  Consequently, we will 
not reevaluate proposals but instead will examine the agency's 
evaluation to ensure that it was reasonable and consistent with the 
solicitation's stated evaluation factors.  MAR Inc., B-246889, Apr. 
14, 1992, 92-1 CPD  para.  367 at 4.  An offeror's mere disagreement with 
the agency does not render the evaluation unreasonable.  Medland 
Controls, Inc., B-255204, B-255204.3, Feb. 17, 1994, 94-1 CPD  para.  260 at 
3.  Our review of the record provides no basis for objecting to the 
agency's evaluation.

The record shows that for the project management evaluation criteria, 
the agency evaluators rated JCWS's proposal exceptional (blue) with a 
low proposal risk because it contained significant strengths with no 
significant weaknesses.  For example, the evaluators found that JCWS's 
use of [deleted], as well as a commitment to [deleted] provided 
benefits to the government.  Agency Report, Tab 7 at 10.  For the 
imaging acquisition evaluation criteria, the agency evaluators rated 
JCWS's proposal exceptional (blue) with a low proposal risk because 
its proposal exceeded the processing/end products/image files 
standards by providing a virtually unlimited digital file storage and 
retrieval system, which reduces physical storage requirements and 
allows customers to quickly research and select images for visual 
information support.  Id. at 11.  The evaluators determined that JCWS 
proposed an efficient mix of GFE and GFF and proposed to reduce 
optional GFF by 84 percent after the first year of contract 
performance, resulting in a reduction of government ancillary support.  

RMS argues that rating JCWS exceptional was improper because the 
solicitation evaluation criteria provided that benefits resulting from 
innovative approaches, including reductions in the use of GFE and GFF, 
would be considered in rating proposals as exceptional.  According to 
RMS, JCWS's proposal had a heavy reliance on GFE and GFF, which 
accounted for approximately 18 percent of JCWS's total price.  RMS 
maintains that based on JCWS's heavy reliance on GFE and GFF, under 
the stated evaluation criteria, JCWS should have received no more than 
an acceptable (green) rating.

We find nothing unreasonable here in the agency's evaluation of JCWS's 
technical proposal.  The RFP specifically provided that "[i]n 
determining that a proposed technical solution exceeds the standards 
and merits a rating of exceptional (blue), the Government will 
consider all significant benefits of the approach, whether or not 
specifically identified in the proposal, which will provide superior 
customer support and technical solutions which will reduce 
government-furnished VITC support in the form of facilities and 
equipment."  RFP  sec.  M-2.b.  The record demonstrate that the SSA viewed 
the many strengths, with no significant weaknesses, in JCWS's proposal 
as well as its 84 percent reduction in GFF as offering contract 
performance which will provide superior customer support with a 
reduction in overall VITC support costs as deserving an exceptional 
rating.  The agency's evaluation was unobjectionable and RMS's 
contentions to the contrary merely reflect disagreement with the 
agency's evaluation, which does not render the evaluation 
unreasonable.  Litton Sys., Inc., B-237596.3, Aug. 8, 1990, 90-2 CPD  para.  
115 at 8.[4]

AWARD DECISION

Finally, RMS objects that the award decision was based on a $9 million 
mistake in RMS's total evaluated price.  The agency admits that an 
error was made and that the SSA's decision was based on the higher 
total evaluated price of RMS, but maintains that since the SSA 
determined that the proposals of three offerors, including JCWS, were 
technically comparable with all receiving blue (exceptional) ratings 
for both technical/management evaluation factors because of their mix 
of commercial management practices and innovative technical solutions, 
the SSA's basis for award remains unchanged since JCWS's total 
evaluated price is significantly lower than RMS's corrected total 
evaluated price.  We agree.  The record shows that the evaluators and 
SSA essentially determined that the three highest-rated proposals were 
technically equal.  None of the three had any significant weaknesses 
and all either met or exceeded the evaluation subfactors.  Once the 
SSA determined the proposals to be essentially technically equal, 
price properly became the determinative factor.  Oglivy, Adams & 
Rinehart, B-246172.2, Apr. 1, 1992, 92-1 CPD  para.  332 at 5.  JCWS's price 
represented the lowest total evaluated price, even after correction of 
the error, and the selection was properly made on that basis.  

The protest is denied.

Comptroller General
of the United States 

1. The possible evaluation ratings for proposal risk and performance 
risk were high, moderate, and low.

2. The color/adjectival ratings were:  blue/exceptional, 
green/acceptable, yellow/marginal, and red/unacceptable.

3. RMS also argues that it appeared that JCWS was trying to "buy-in" 
by proposing unrealistically low prices for the launch packages.  The 
fact that a firm's offer may be an attempted buy-in does not render 
the firm ineligible for award.  This is so because below-cost pricing 
is not prohibited and the government cannot withhold award from a 
responsible offeror merely because its low offer is below cost.  
Norden Sys., Inc., B-227106.9, Aug. 11, l988, 88-2 CPD  para.  131 at 5.

4. RMS also argues that the agency allowed JCWS to manipulate its 
calculations of the rental factor applied to GFE.  However, RMS, in 
its comments to the agency report, states that had it known it could 
have discounted the rental use of GFE, as did JCWS, its price would 
have been lower by approximately [deleted].  Since there was a 
[deleted] difference between the correct total evaluated prices of 
JCWS and RMS, RMS was not prejudiced by the allegedly improper 
calculation of the rental factor by JCWS.