BNUMBER:  B-280645 
DATE:  September 17, 1998
TITLE: Phillips Industries, Inc., B-280645, September 17, 1998
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Matter of:Phillips Industries, Inc.

File:     B-280645

Date:September 17, 1998

Marshall L. Phillips III for the protester.
Philip F. Eckert, Jr., Esq., Defense Logistics Agency, for the agency.
Michael Golden, Esq., Office of the General Counsel, GAO, participated 
in the preparation of the decision.

DIGEST

Agency selection of slightly higher-priced offeror with excellent 
performance history instead of lower-priced offeror with no 
performance history is reasonable and consistent with solicitation's 
evaluation scheme, which weighed past performance and price equally, 
and where the item was in backlog status, anticipated demand was high, 
and agency concluded that the awardee's established excellent record 
for timely delivery was worth the slightly higher price.

DECISION

Phillips Industries, Inc. protests the Defense Supply Center 
Richmond's (DSCR) award of a contract for "Combat Quick Kill" 
insecticide, a commercial item manufactured by Clorox Company, to 
Amjay Chemicals under request for proposals (RFP) No. 
SP0450-98-R-0989.  The item is a "bait station," commonly referred to 
as a "roach motel."  Contracting Officer (CO) Report, Aug. 12, 1998, 
at 2.  Phillips, the low-priced offeror, alleges that DSCR misapplied 
the evaluation factor for past performance and made an improper 
tradeoff decision to award the contract to Amjay, the third 
lowest-priced offeror.

We deny the protest.

The RFP required delivery of 3,000 packages of this product within 45 
days after award.  RFP section B, at 2; RFP, DSCR clause 52.211-9G52, 
at 8.  The RFP provided: 

     The Government will award a contract . . . to the responsible 
     offeror whose offer conforming to the solicitation will be most 
     advantageous to the Government, price and other factors 
     considered.  The following factors shall be used to evaluate 
     offers:

     See Section M of the solicitation

     Technical and past performance, when combined, are equal.

RFP, Federal Acquisition Regulation (FAR) clause 52.212-2, "Evaluation 
- Commercial Items (Oct. 1997)," at 4.

Section M of the RFP contained a DSCR clause, 52.215-9G05,"Automated 
Best Value Model (Nov 1996)," at 13, which provided that: 

     (a) Award.  The award against this solicitation shall be made 
     based on a comparative assessment of offerors' prices and past 
     quality and delivery performance.  Price and past performance are 
     the primary evaluation factors.  The award may be made to other 
     than the low-priced, technically acceptable responsible offeror.  
     For this award, price and performance factors will be evaluated 
     equally unless a different order of precedence is indicated 
     below:

        [ ] Performance is of greater importance than price.
        [ ] Price is of greater importance than performance.

        For this award, the performance factor considers quality 
        performance and delivery performance to be of equal value 
        unless otherwise indicated below:

        [ ] Quality performance is of greater importance than delivery 
        performance.
        [ ] Delivery performance is of greater importance than quality 
        performance.

     (b) The Automated Best Value Model (ABVM) Score.

          (1) To evaluate each offeror's past performance, each 
          offeror will be assigned an ABVM score based on the 
          offeror's past performance. . . .  The ABVM score . . . is a 
          combination of an offeror's delivery and quality scores.  
          The quality score will be comprised of validated contractor 
          caused product and packaging nonconformances and negative 
          lab tests during the rating period . . . .  The delivery 
          score will be comprised of all lines reflected delinquent 
          during the rating period . . . .[1]

Subsection (d) of this clause provided that:

          The lack of performance history is not grounds for 
          disqualification for award but may cause the offeror to be 
          considered less favorably than an offeror with favorable 
          performance history.  Conversely, new offerors may be 
          considered more favorably than scored offerors with poor 
          performance history.  The contracting officer also may 
          consider the need to expand the supplier base and the 
          possibility of enhancing future competition when new 
          offerors are present.

Finally, subsection (f) stated the following:

     General Basis for Award.  Award will be made to the offeror whose 
     proposal conforms to the terms and conditions of the solicitation 
     and which represents the best value to the Government.  In making 
     the best value determination, the Government will make a 
     comparative assessment of the proposals.  Where the offeror with 
     the best performance history has not also offered the lowest 
     price, the Government will determine the appropriate trade-off of 
     price for past performance.  The following considerations may 
     affect the trade-off determination:

        --Weapons system application/item criticality.
        --Delivery schedule/inventory status.
        --Historical delivery/quality problems.
        --Limitation of supply sources/industrial base concerns.
        --Benefits from obtaining new sources.
     
Nine firms, including Phillips, Amjay, and Landscapers Supply, 
submitted offers.  The contracting officer initiated negotiations with 
the firms.  CO Memorandum for Record, July 21, 1998, at 1-2.  The 
contracting officer then prepared an ABVM evaluation sheet which 
listed an offeror's unit and total price and ABVM rating.  ABVM sheet, 
July 15, 1998, and CO Report, at 4.  Phillips and Landscapers Supply 
had no performance histories for this product, and therefore no ABVM 
ratings.  Specifically, Phillips was denoted as "unscored."  Amjay 
received an ABVM score of 97.8.  Amjay's total price was $5,820 higher 
than the Phillips total price, and $5,760 higher than Landscapers 
Supply's total price.  CO Memorandum for Record, at 2-3. The 
contracting officer also reviewed the inventory position for the item.  
She found that there was no current stock, that 52 packages were on 
"back order," and that anticipated demand was 542 packages per 
quarter.  CO Memorandum for Record, at 2; CO Report, at 4.

The contracting officer awarded the contract on the following basis:  

     Based on a comparative assessment of all prices offered, Amjay 
     Chemicals [was] not the lowest offer received nor the highest 
     scored, but [had] a very good ABVM score . . . .  The low offers 
     from Phillips Ind. & Landscapers Supply reveal that they have 
     never furnished items to DSCR and therefore would be a great risk 
     if an award were finalized with either of these firms considering 
     that this item is already in a backorder situation.  It is in the 
     Government's best interest to pay $5820.00 or 4.5% (Phillips) and 
     $5760.00 or 3.1% (Landscapers Supply) more for the product to a 
     supplier, to be assured of timely delivery.  

CO Memorandum for Record, at 3; Award Justification document, July 21, 
1998.

In the agency report, the contracting officer elaborates further on 
her decision stating: 

     Consistent with the ABVM Clause, [she] considered the presence of 
     backorders and high demand for the item represented a higher than 
     normal risk of non-performance.  The lowest priced offerors, 
     Phillips and [Landscapers Supply], had neutral performance 
     ratings.  The third lowest offeror, Amjay, had excellent 
     performance history, rating a 97.8 out [of] 100 ABVM score.  Yet, 
     Amjay's price was only around 3% higher than Phillips and 
     [Landscapers Supply].  She concluded that Amjay's price was worth 
     the reduced risk of non-performance, in light of the high-demand 
     for items already in a back-ordered inventory position.  Thus, 
     Amjay represented the best value to the Government.  

CO Report, at 7.  

Phillips argues that it should have been awarded the contract under 
the evaluation scheme which provided that an "unscored" vendor--one 
with no performance history--would be given a neutral rating for past 
performance.  Phillips argues that it was penalized for its lack of 
past performance history based on the contracting officer's statements 
in the Memorandum for Record (and the Award Justification document) 
that there would be a "great risk" if an award was made to either of 
the firms with no contract performance history with DSCR.  Phillips 
asserts that the solicited item is a dealer-supplied item shipped 
directly from Clorox to the agency warehouse and that Phillips, Amjay 
or any other dealer could essentially perform the contract by placing 
an order and invoicing the government.  Protester comments, Aug. 21, 
1998, at 2-3.

We think the agency's decision to award to Amjay was reasonable and 
consistent with the RFP.  Here, the RFP established that price and 
past performance would be the factors for award among the technically 
acceptable firms.  The ABVM clause stated how past performance would 
be rated based on ABVM scores, that a lack of performance history 
would not disqualify a firm, but that, among other things, the offeror 
could be considered less favorably than an offeror with a favorable 
performance history.  The clause further provided for a comparative 
assessment of offers and stated that "[w]here the offeror with the 
best performance history has not also offered the lowest price, the 
Government will determine the appropriate trade-off of price for past 
performance."  RFP, DSCR clause 52.215-9G05(f), at 13. 

The RFP listed certain factors, including delivery schedule/inventory 
status, which could affect the tradeoff determination.  Here, the 
contracting officer decided, given the high demand and the backlog 
status for the item, that award to a slightly higher-priced firm which 
had an excellent performance history was justified to ensure timely 
delivery and represented the best value to the government.  This was 
entirely consistent with the RFP evaluation scheme and the discretion 
afforded the contracting officer in making the tradeoff decision.  See 
Excalibur Sys., Inc., 
B-272017, July 12, 1996, 96-2 CPD  para.  13 at 3.  

As we stated in Excalibur, supra, at 3, the use of a neutral rating 
approach, to avoid penalizing a vendor without prior experience and 
thereby enhance competition, does not preclude, in a best value 
procurement, a determination to award to a higher-priced offeror with 
a good past performance record over a lower-cost vendor with a neutral 
past performance rating.  Indeed, such a determination is inherent in 
the concept of best value.  

We share the protester's concern with the language in the selection 
decision documentation that Phillips and Landscapers Supply, vendors 
with no performance histories, pose a "performance risk" or a "great 
risk" for award.  As the protester argues, a company like Phillips 
which may be new to government contracting should not be disqualified 
from award merely because it lacks a performance history.  As the 
agency recognizes, such an approach would be inconsistent with the FAR 
and the RFP.  FAR  sec.  15.305(a)(2)(iv) provides that, for past 
performance evaluations, in the case of an offeror without a record of 
relevant past performance or for whom information on past performance 
is not available, the offeror may not be evaluated favorably or 
unfavorably on past performance.  The RFP ABVM clause also states that 
lack of performance history is not grounds for disqualification for 
award.  RFP, DSCR clause, 52.215-9G05(d), at 13; CO Report, at 6-7.  
Nonetheless, as explained above, the contracting officer's decision to 
award to the slightly higher-priced firm with an established excellent 
performance history, rather than a lower-priced vendor with no 
performance history with the agency, was permissible and reasonable.

We deny the protest.

Comptroller General
of the United States

1. Although not pertinent here, the clause also provides how vendors 
can obtain their scores and challenge any negative data.  RFP, DSCR 
clause 52.215-9G05(b)(2) and (3), at 13.