BNUMBER:  B-280573.2 
DATE:  December 1, 1998
TITLE: Environmental Tectonics Corporation, B-280573.2, December 1,
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:Environmental Tectonics Corporation

File:     B-280573.2

Date:December 1, 1998

Cliff G. Russell, Esq., for the protester.
John A. Evans, Esq., Department of the Navy, for the agency.
Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel,
GAO, participated in the preparation of the decision.

DIGEST

Agency reasonably assigned a high risk rating to the protester, the 
low-priced vendor, for past performance and reasonably made a 
price/past performance tradeoff resulting in the issuance of a 
purchase order to a higher-priced vendor with a higher past 
performance rating where the agency determined that it was worth 
paying a price premium to a firm with a superior past performance 
history and a minimal performance risk.

DECISION

Environmental Tectonics Corporation (ETC) protests the issuance of a 
purchase order to USA Models, Inc. under request for quotations (RFQ) 
No. N61339-98-Q-2010, issued by the Naval Air Warfare Center Training 
Systems Division (NAWCTSD), Department of the Navy, for acrylic 
replacement windows for hypobaric low pressure chambers.[1]  ETC 
challenges the agency's evaluation of its past performance and the 
agency's decision to issue a purchase order to a higher-priced vendor.

We deny the protest.

The RFQ, issued in April 1998 as a combined synopsis/solicitation for 
commercial items, provided that the agency intended to issue a 
purchase order to the responsible vendor whose quotation was most 
advantageous to the government, price and other factors considered.  
The RFQ provided that the best value award factors, in descending 
order of importance, were pricing, delivery schedule, risk, and past 
performance.  Combined synopsis/solicitation, Apr. 8, 1998; CO 
Statement at 1.  The RFQ stated that simplified acquisition procedures 
applied to this procurement.  See Federal Acquisition Regulation (FAR) 
Part 13.

Three firms, including ETC and USA Models, submitted quotations which 
were rated as follows:[2]

                            ETC      USA Models

      Delivery Schedule Acceptable   Acceptable

            Risk        Acceptable   Acceptable

      Past Performance   High Risk    Low Risk
ETC's quotation was approximately 46 percent lower than the quotation 
from USA Models.  SSD at 2.

With respect to past performance, for ETC, the agency checked the 
firm's performance under eight contracts for various training 
equipment.  Three contracts were with the British government.  The 
British references (a contracting director and a technical person) 
reported that ETC's performance under a contract for a fire service 
trainer had deficiencies which took the firm a long time to correct; 
ETC's performance under a contract for a maintenance trainer had 
delivery delays; and ETC's performance under a contract for a critical 
design review for a human-carrying centrifuge had delivery delays and, 
over the objections of the British government, ETC ordered long 
lead-time items prior to design approval.  The British references 
further reported that [deleted].  Past Performance Questionnaire 
(PPQ), July 20, 1998.  In addition, the British references reported 
[deleted]; the British references reported that they [deleted].  Id.; 
see also Memo to the File, July 20, 1998.  Another contract (the one 
listed by ETC in its quotation as a past performance reference) was 
for two unique high altitude chambers for the Federal Aviation 
Administration (FAA).  The FAA reference (the contracting officer), 
noting that "ETC had very good people and a very good product," 
reported that ETC had delayed delivery of the product and was "slow in 
delivering," but eventually had resolved technical and software 
problems.  Memo to the File, Oct. 1, 1998; PPQ, July 21, 1998.  
Finally, NAWCTSD had a contract with ETC to provide a centrifuge-based 
flight environment trainer (CFET).  The agency reported late, 
unacceptable delivery by ETC; agency acceptance of the trainer as 
nonconforming; and difficulty in engaging in discussions with ETC to 
settle a substantial monetary claim filed by the firm under the CFET 
contract.  PPQ, Aug. 13, 1998.[3]

For USA Models, the agency checked the firm's performance under four 
contracts.[4]  The reference for a contract for a prototype of a smoke 
control model to be used as a teaching tool reported that USA Models 
was ahead of schedule and was an outstanding performer, delivering the 
highest quality product.  PPQ, Aug. 5, 1998.  The reference for an 
acrylic windows contract reported timely and very good performance by 
USA Models.  PPQ, Aug. 5, 1998.  The reference for a contract for 
plastic acrylic models of rockets and mines reported early delivery by 
USA Models, with the firm doing extra work under the contract.  PPQ, 
Aug. 3, 1998.  Finally, the reference for a contract for various 
trainers, including a cockpit simulator, reported on-schedule delivery 
and correction of a deficiency by USA Models.  PPQ, Aug. 3, 1998.

The contracting officer, who served as the source selection authority, 
selected USA Models as the most advantageous vendor.  In this regard, 
the contracting officer determined that ETC's low-priced quotation did 
not offset the unacceptably high risk of ETC not meeting the critical 
terms and conditions of the contract, based on ETC's past performance 
history showing that its corporate management had not committed to 
timely delivery of quality products, to correcting deficiencies, and 
to settling disputes.  The contracting officer concluded that the 
performance risk associated with ETC outweighed the value to the 
agency of the firm's low-priced quotation.  Therefore, given USA 
Models' record of superior past performance history and its minimal 
performance risk, the contracting officer determined that it was worth 
paying a price premium to that firm.  Accordingly, the agency issued a 
purchase order to USA Models as the most advantageous vendor.  SSD at 
3-5.

ETC challenges the agency's evaluation of its past performance, 
objecting to the agency's consideration of its performance under the 
CFET contract and the British contracts, which were not listed in 
ETC's quotation for past performance references.  ETC maintains that 
its performance under these contracts is not relevant because the 
deliverables were for sophisticated design/build, as opposed to 
commercial, items.  ETC believes only the FAA contract (listed in its 
quotation for a past performance reference) and the China Lake 
contracts should have been considered by the agency in evaluating the 
firm's past performance.

When using simplified acquisition procedures, an agency must conduct 
the procurement consistent with a concern for fair and equitable 
competition, and must evaluate quotations in accordance with the terms 
of the solicitation.  M3 Corp., B-278906, Apr. 1, 1998, 98-1 CPD  para.  95 
at 3.  In reviewing protests against an allegedly improper evaluation, 
we will examine the record to determine whether the agency met this 
standard and reasonably exercised its discretion.  Id.

Contrary to ETC's assertion, in evaluating quotations, an agency may 
properly consider evidence of a vendor's past performance from sources 
that are not listed in the vendor's quotation.  See, e.g., TEAM 
Support Servs., Inc., B-279379.2, June 22, 1998, 98-1 CPD  para.  167 at 6.  
Here, the agency had direct knowledge of ETC's performance and 
associated problems under the Navy's CFET contract, and the agency 
sought specific information addressing ETC's performance under the 
British contracts.  In response to ETC's primary contention, while the 
design/build technology for the deliverables under the Navy CFET and 
British contracts may have been distinguishable from the commercial 
item technology for the acrylic windows being procured under this RFQ, 
the record shows that for the most part, the negative past performance 
information conveyed to the agency by the various references related 
not so much to the technical aspects of ETC's performance, but to 
broader aspects of ETC's performance--ETC's corporate management's 
effectiveness in ensuring timely delivery of products and timely 
correction of deficiencies, and its receptiveness to engaging in 
claims settlement discussions.  In fact, consistent with what was 
reported by the Navy and the British references, the FAA contracting 
officer also reported that ETC was slow to deliver.  Because 
timeliness of delivery, timeliness of resolving deficiencies, and 
corporate attitude and responsiveness are considerations which are 
common to all contracts regardless of the technology involved, we 
believe the information reported concerning ETC's corporate 
management's working relationship with its customers is clearly 
relevant to the agency's evaluation of ETC's past performance.  Id.; 
see also SDA Inc., B-256075, B-256206, May 2, 1994, 94-2 CPD  para.  71 at 
6-7.  Accordingly, based on reports of ETC's past performance and the 
agency's own experience with ETC, we believe the agency could 
reasonably conclude that ETC presented a high performance risk.

ETC also argues that the agency was required to conduct discussions 
with the firm regarding the referenced negative past performance 
information.  However, ETC confuses the requirements applicable to 
negotiated procurements with those applicable to procurements using 
simplified acquisition procedures.  Specifically, the provisions of 
FAR Part 15, see FAR  sec.  15.306 (FAC 97-02), governing exchanges with 
offerors in a negotiated procurement about their past performance are 
not applicable in a procurement, like this one, conducted using 
simplified acquisition procedures.  See M3 Corp., supra, at 4-5.  
While FAR Part 13, see FAR  sec.  13.106-2(b)(1), affords an agency the 
discretion to use the provisions of FAR Part 15 in conducting a 
simplified acquisition procurement, the agency, here, exercised its 
discretion and chose not to conduct exchanges concerning vendors' past 
performance during the reevaluation of quotations.[5]  We have no 
basis to object to the agency's action in this regard.

Finally, ETC, the low-priced vendor, challenges the agency's best 
value determination resulting in the issuance of a purchase order to 
USA Models, a higher-priced vendor.

In a best value procurement, price is not necessarily controlling in 
determining the quotation that represents the best value to the 
government.  Rather, that determination is made on the basis of 
whatever evaluation factors are set forth in the solicitation, with 
the source selection official often required to make a price/technical 
tradeoff to determine if one quotation's technical superiority is 
worth the higher price that may be associated with that quotation.  In 
this regard, price/past performance tradeoffs are permitted when such 
tradeoffs are consistent with the solicitation's evaluation scheme.  
See Rotair Indus., Inc., B-276435.2, July 15, 1997, 97-2 CPD  para.  17 at 
3.  In this case, where the RFQ does not expressly specify that price 
will be the determinative factor for award, the agency retains the 
discretion to select a vendor with a higher-priced quotation and 
higher past performance rating, if doing so is in the government's 
best interest and is consistent with the solicitation's stated 
evaluation and source selection scheme.  See University of Kansas Med. 
Ctr., B-278400, Jan. 26, 1998, 98-1 CPD  para.  120 at 6.

While ETC's quotation was approximately 46 percent lower than the 
quotation of USA Models, we conclude that the contracting officer 
reasonably determined that the performance risk associated with ETC, 
based on past performance information, outweighed the value to the 
agency of the firm's low price.  More specifically, five of the eight 
past performance references for ETC reported poor timeliness and 
quality of performance and provided an overall negative past 
performance assessment.  SSD at 3.  The contracting officer noted that 
at the time of his selection decision, only the Navy CFET trainer and 
the British fire trainer had been delivered, inspected, and accepted; 
both of these contracts were delivered late and with major 
deficiencies.  Id.  The contracting officer noted that meeting the 
schedule under this RFQ is a critical factor, and based on ETC's past 
performance history, concluded that ETC's inability to timely deliver 
quality products made ETC an unacceptably high performance risk.  Id. 
at 4.  In addition, the contracting officer expressed a concern with 
ETC's lack of willingness to resolve disputes in a cooperative and 
businesslike manner, as evidenced by the Navy's experience with ETC in 
attempting to resolve the claim under the CFET contract.  Id.

Therefore, based on this record, the contracting officer concluded 
there was an unacceptably high risk of ETC not performing in 
accordance with the terms of the RFQ because its corporate management 
failed to demonstrate on other contracts a firm commitment to timely 
delivery of acceptable products, to correcting deficiencies, and to 
settling disputes.  Id.  The contracting officer believed the 
performance risk associated with ETC outweighed any price savings 
associated with its low-priced quotation.  Id.

In contrast, USA Models had a superior past performance history, 
delivering products on time or ahead of schedule, performing in a 
highly satisfactory manner, doing extra work, and correcting 
deficiencies.  The contracting officer believed USA Models would 
satisfy the RFQ requirements in a timely manner, and that the firm's 
superior past performance history justified the payment of a price 
premium and outweighed the price differential between ETC and USA 
Models.  Id. at 5.

Under these circumstances, we have no basis to question the 
reasonableness of the agency's price/past performance tradeoff and its 
decision to issue a purchase order to USA Models as the most 
advantageous vendor.[6]

The protest is denied.[7]

Comptroller General
of the United States

1. The acrylic windows, which represent a safety upgrade, will replace 
existing glass windows which may implode into the chambers when 
internal pressures are lowered, causing injury or death to government 
personnel.  The window replacement has been ranked a top priority 
modification for aviation physiology trainers.  Contracting Officer's 
(CO) Statement at 1; Source Selection Decision (SSD), Sept. 4, 1998, 
at 1.

2. These ratings reflect the agency's assessment after taking 
corrective action in response to an earlier protest filed by ETC 
challenging, among other things, the agency's evaluation of the firm's 
past performance.

3. The agency also checked references for an Air Force contract for 
centrifuge maintenance, PPQ, July 28, 1998, and two Navy contracts for 
environmental chambers at China Lake.  PPQ, July 21, 1998.  These 
references, which reported satisfactory performance by ETC, were also 
considered by the agency.

4. ETC does not challenge the agency's evaluation of USA Models' 
quotation.

5. Although the agency held discussions with vendors, including ETC, 
prior to taking corrective action, during the reevaluation process, 
the agency did not conduct discussions.  Since the reevaluation 
process superseded and mooted the initial evaluation process, 
consistent with the terms of the RFQ, the agency could properly issue 
the purchase order to USA Models on the basis of initial quotations 
without conducting discussions.  See Combined synopsis/solicitation, 
supra.

6. The record shows that the agency did not evaluate past performance 
on a pass/fail basis and did not reject ETC as nonresponsible, which 
would have necessitated a referral to the Small Business 
Administration for the possible issuance of a certificate of 
competency.  See, e.g., Nomura Enter., Inc., B-277768, Nov. 19, 1997, 
97-2 CPD  para.  148 at 3.

7. Since we conclude that the agency's evaluation of ETC's past 
performance was reasonable, there is no credible basis to find that 
the agency acted in bad faith in performing this evaluation.  
Moreover, contrary to ETC's assertion, the agency chose not to issue 
the purchase order to the firm as a result of the price/past 
performance tradeoff based on the underlying evaluation, not because 
the agency had de facto debarred the firm.