BNUMBER:  B-281285 
DATE:  January 21, 1999
TITLE: Browning Ferris Industries of Hawaii, Inc., B-281285, January
21, 1999
**********************************************************************

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:Browning Ferris Industries of Hawaii, Inc.

File:     B-281285

Date:January 21, 1999

Kenneth D. Brody, Esq., McMahon, David & Brody, for the protester. 
Vernon F.L. Char, Esq., Char, Sakamoto, Ishii, Lum & Ching, for 
Honolulu Disposal Services, Inc., an intervenor. 
Richard G. Welsh, Esq., and Jan E. Takamine, Esq., Naval Facilities 
Engineering Command, for the agency. 
Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that contracting agency's evaluation of awardee's proposal 
was flawed and otherwise improper is denied where the evaluation was 
reasonable and consistent with the solicitation's stated evaluation 
factors.  Agency was not required to conduct a more extensive 
investigation of the awardee's past performance as a result of False 
Claims Act litigation involving the awardee, where the litigation had 
been resolved through a settlement agreement. 

2.  Evaluation of protester's proposal was reasonable where it was 
performed in accordance with stated evaluation factors and reflected 
valid criticisms of protester's past performance and proposed 
subcontracting commitments.

3.  Agency reasonably may evaluate an offer as posing a higher past 
performance risk where the offeror's performance history as stated in 
its proposal is less relevant to the solicited requirements than that 
of offerors rated as having a low performance risk.

DECISION

Browning Ferris Industries of Hawaii, Inc. (BFI) protests the award of 
a contract to Honolulu Disposal Services, Inc. (HDS) under request for 
proposals (RFP) No. N62755-98-R-7014, issued by the Department of the 
Navy, to obtain refuse collection services at various military 
installations on Oahu, Hawaii.  BFI contends that the agency's past 
performance and small business evaluations were flawed and that, as a 
consequence, the agency failed to award the contract on the basis of 
the best value to the government, as required by the RFP.

We deny the protest.

The RFP, which consolidates two existing refuse service contracts, was 
issued on an unrestricted basis and contemplated award of a contract 
for a base period and four 1-year options.  The solicitation provided 
a best value basis for award and identified the following evaluation 
factors:  past performance, small business, and price.  Past 
performance was of greater importance than the small business factor, 
and the past performance and small business factors combined were of 
equal importance to price.  RFP, Amend. No. 0002,  sec.  M.2, M.5.

As relevant here, past performance was to be evaluated on similar 
contracts completed within the past 3 years or currently in progress 
using a past performance survey to determine the quality of work 
previously performed and to assess the relative capability of the 
offeror to effectively accomplish the solicitation requirements.  In 
addition, the solicitation advised that the agency would obtain past 
information from other sources.  The past performance factor was 
comprised of the following equally weighted past performance elements:  
(1) quality of service, (2) schedule, (3) business relations, and (4) 
management of key personnel.[1]  Id.

Under the small business evaluation factor, large business offerors 
were to submit (1) a subcontracting plan in which the offeror 
identifies and commits to utilizing small business (SB), small 
disadvantaged business (SDB), women-owned small business (WOSB), and 
historically black college and university or minority institution 
(HBCU/MI), and (2) a past performance report on five most recently 
completed contracts showing compliance with the firm's plan for the 
utilization of SB, SDB, WOSB, and/or HBCU/MI; any ratings obtained on 
implementation of subcontracting plans on five recently completed 
Department of Defense (DOD) contracts; and information on existing or 
pending mentor-protege agreements.  RFP, Amend. 0002,  sec.  M.5.2.  

Five firms, including BFI and HDS, submitted initial proposals.[2]  
The agency included the proposals of the protester and HDS in the 
competitive range; conducted discussions and evaluated revised 
proposals; and requested and evaluated final proposal revisions.  The 
final evaluation results for the three remaining competitive range 
offerors were as follows: 

CRITERIA        HDS            BFI              [DELETED]

Past PerformanceSatisfactory   Satisfactory  Satisfactory

Past Perf. Risk[3]Low          Moderate      Low

Small Business  Acceptable     Acceptable    Acceptable

Total Price     $10,887,956.57    [DELETED]     [DELETED]
Post-Negotiation Business Clearance Memorandum, Sept. 30, 1998, at 5.  

Based on the final evaluation results, the contracting officer, who 
served as the source selection authority (SSA), selected HDS for award 
as providing the best value to the government.  In this regard, the 
Post-Negotiation Business Clearance Memorandum, approved by the SSA, 
noted that:

     HDS and [DELETED] received overall Satisfactory ratings with low 
     risk.  BFI received an overall Satisfactory rating with moderate 
     risk since the projects listed in their references were smaller 
     in size to the subject solicitation, and some doubt exists that 
     they can perform satisfactorily.  None of the proposals contained 
     anything exceeding the requirements, so there are no tradeoffs to 
     consider or benefits associated with a higher price.  Since all 
     offerors are equal for past performance, HDS's lower price 
     provides the best value to the Government. 

Id. 

Accordingly, on October 2, the agency awarded the contract to HDS.  
After receiving notice of the award and a debriefing, BFI filed this 
protest.

BFI challenges nearly every aspect of the agency's evaluation that led 
to the selection of HDS for award.  BFI argues that its ratings under 
the past performance and small business factors, in every instance, 
should have been higher, while HDS's corresponding ratings should have 
been lower.  In addition, it argues that its past performance risk 
rating should have been better than the rating given to the awardee; 
and that the SSA's selection decision was flawed.  The overarching 
focus of BFI's protest is its allegation that the Navy failed to 
properly consider fraud charges brought against HDS under several of 
its government contracts.

Where there is a challenge to the evaluation of proposals in a 
negotiated procurement, it is not the function of our Office to 
evaluate the proposals de novo.  Rather, we will examine an agency's 
evaluation only to ensure that it was reasonable and consistent with 
the stated evaluation criteria and applicable  statutes and 
regulations, since determining the relative merits of competing 
proposals is primarily a matter within the contracting agency's 
discretion.  Alcan Env't, Inc., B-275859.2, Apr. 11, 1997, 97-1 CPD  para.  
139 at 3.  We have examined the evaluation here and conclude that it 
was both reasonable and consistent with the evaluation scheme.  We 
discuss some key areas of the evaluation below.  

PAST PERFORMANCE

As noted above, offerors were to provide references for similar 
projects within the past 3 years.  For purposes of rating proposals 
under this factor, the RFP designated the following adjectival rating 
system:  exceptional, very good, satisfactory, marginal, and 
unsatisfactory.  RFP, Amend. 0002,  sec.  M.5.B.1a(3).

Past performance information for each offeror was obtained by the 
agency through the use of past performance surveys.  Although BFI's 
proposal identified four references, the agency sent past performance 
surveys only to the three references with the largest contract value 
(i.e., (1) a 5-year contract with an average yearly value of $483,433, 
to be completed in September 2002; (2) a contract valued at $425,153 
per year, to be completed in July 1999; and (3) a contract valued at 
$195,000 per year, completed in June 1998).  Based on responses from 
each of the three references, BFI was rated "very good" under quality 
of service and "satisfactory" under the schedule, business relations, 
and management of key personnel areas of the past performance factor.  
Since the four areas are equally weighted, BFI's proposal received an 
overall past performance rating of "satisfactory."  BFI received a 
"moderate" performance risk rating because the agency concluded that 
some doubt exists that the firm could perform the requirements of this 
solicitation, since its past and present contracts were much smaller 
in size than the anticipated contract. 
 
In contrast, HDS submitted references for three contracts which are 
similar in size and complexity to this solicitation.  Based on the 
survey responses, HDS received a "satisfactory" rating for each of the 
four areas under the past performance factor  although some minor 
problems were noted, for which the corrective actions taken were 
satisfactory.  For example, under quality of service, one reference 
responded that a "few [deficiency reports] were issued throughout the 
course of this contract due to nonperformance of services and 
unsatisfactory condition of containers.  Contractor [HDS] took 
corrective action and provided measures to prevent recurrence."  
Contractor Performance Survey for Contract No. N62755-93-D-2982, July 
8, 1998, at 2.  HDS's proposal received an overall past performance 
rating of "satisfactory" with "low" risk since the agency concluded 
that little doubt exists that HDS--the incumbent--can satisfactorily 
perform the required services.

BFI takes issue with the agency's conclusions regarding HDS's past 
performance.  The protester insists that the agency improperly failed 
to consider information concerning allegations of fraud against HDS 
under 20 government contracts.  The protester states that on May 20, 
1997, the United States Attorney for the District of Hawaii decided to 
take over two separate qui tam relator suits filed under the False 
Claims Act, 31 U.S.C.  sec.  3729-33 (1994), in connection with HDS's 
performance of its Army, Navy, and Coast Guard contracts for refuse 
collection and disposal services.  See 31 U.S.C.  sec.  3730(b)(4)(A).  
According to the protester, the government's decision to take over the 
litigation was the result of an investigation by Army, Navy and other 
agency investigators into HDS's alleged practice of commingling 
government and commercial waste in violation of its government 
contracts, resulting in an alleged overstatement of the monthly refuse 
tonnage used to bill the government for reimbursement of landfill 
fees.  Subsequent to the government's decision to take over the 
litigation, HDS entered into a settlement agreement on May 21, 1997.  
Under the terms of the agreement, HDS denied any wrongdoing but agreed 
to pay double damages in connection with the disputed overcharges 
under these 20 contracts, and the cases were dismissed with prejudice.

In the context of the broad discretion afforded contracting officials 
in the evaluation of past performance, the agency's determination that 
the past performance of HDS was satisfactory and posed a low 
performance risk is unobjectionable, notwithstanding the False Claims 
Act litigation.  See University of Dayton Research Inst., B-260709, 
July 10, 1995, 95-2 CPD  para.  17 at 7.  As the protester points out, the 
contracts listed in HDS's proposal for purposes of evaluating its past 
performance were included in the qui tam litigation.  As discussed 
above, the agency obtained and reviewed performance survey responses 
regarding the firm's work under these contracts with the government.  
Even though the survey responses included some negative comments 
concerning HDS's performance, the responses were consistently positive 
regarding the firm's past performance in spite of the False Claims Act 
litigation.  When the Navy subsequently requested a past performance 
survey from the Army activity that was primarily involved with the 
False Claims Act litigation, the survey responses (which included a 
copy of the settlement contract modification resolving the False 
Claims Act suits) were generally positive.  After considering all of 
the information in the past performance survey response, the agency 
concluded that HDS's past performance under this Army contract was 
satisfactory overall, and that the survey comments were consistent 
with those received from the three references listed by HDS, i.e., the 
local Navy and Coast Guard activities which also had contracts 
included in the False Claims Act suits. 

Moreover, we do not think the agency was required to do a more 
extensive investigation of HDS's past performance than it did here, 
notwithstanding BFI's contentions that the False Claims Act litigation 
warranted a more in-depth review than that obtained through the use of 
past performance surveys.  On the basis of the record before us, it 
appears that the contract references were aware of the  False Claims 
Act litigation when they prepared their survey responses; likewise, 
the contracting officer/SSA was also aware of the litigation, given 
the information provided by the references and a Dun & Bradstreet 
report that was obtained by the agency in August 1998.  Thus, our 
review shows that the Navy's evaluation of past performance was 
reasonable.

Similarly, the agency's past performance evaluation supported the 
determination of a "low" past performance risk rating for HDS.  In our 
view, it is reasonable to give a better evaluation rating to offerors 
with successful performance on more relevant contracts.  See, e.g., 
Ogden Support Servs., Inc., B-270012.4, Oct. 3, 1996, 96-2 CPD  para.  137 
at 3; University of Dayton Research Inst., supra, at 7.  Since HDS 
reported more relevant successful experience than BFI, the better 
performance risk rating assigned to its proposal was reasonable.      

SMALL BUSINESS

Section L of the RFP stated that large business offerors such as BFI 
and HDS should submit a subcontracting plan as described in FAR  sec.  
52.219-9, "Small, Small Disadvantaged and Women-Owned Small Business 
Subcontracting Plan."[4]  RFP, Amend. 0005,  sec.  L.10c(2)(a).  As 
previously stated, the RFP supplied offerors with specific guidance as 
to what should be included in these plans and the source selection 
plan, which was not disclosed to offerors, described how proposals 
would be rated.  In evaluating proposals, the Small Business 
Specialist would assign ratings, of which the two that are relevant to 
this protest are as follows:

[DELETED]

BFI objects to the agency's evaluation of its own and the awardee's 
revised proposals under this evaluation factor.  According to the 
protester, the agency "unfairly minimized or simply ignored the 
unassailable fact that BFI demonstrated a commitment to small business 
subcontracting that was nine times greater than the virtual 
noncommitment of HDS"; as such, the protester claims that the agency's 
rating of "acceptable" for both firms was "flawed and irrational."  
Protester's Additional Comments, Dec. 10, 1998, at 1.  In its view, 
had the agency properly evaluated its revised subcontracting plan, 
which demonstrated firm commitments to utilize certain small 
businesses, its proposal would have received the higher rating of 
"exceptional."  Protester's Comments, Nov. 23, 1998, at 21. 

The record shows that the protester's and the awardee's initial 
subcontracting plans were rated "marginal" under this factor.  BFI was 
assigned a "marginal" rating because its proposal did not address the 
solicitation's SDB and WOSB participation goal of 5 percent of the 
value of the contract.  Following discussions, the protester's 
proposal was rated "acceptable" based on its revised subcontracting 
plan which satisfied the statutory goal for SDBs and WOSBs and 
included firm commitments with named subcontractors. 

Our review of the record indicates that the Navy did not consider that 
the small business subcontractors proposed or the firm commitments of 
these subcontractors included in BFI's revised subcontracting plan was 
a sufficient basis to rate BFI's revised proposal "exceptional" rather 
than "acceptable."  We note that nothing in the protester's revised 
subcontracting plan evidences "extensive efforts and commitments in 
subcontracting" as contemplated by the rating scheme quoted above.  
Offerors also were required to meet a past performance 
requirement--the extent to which the prime has historically been 
successful in establishing realistic yet challenging goals and 
evidences ability to achieve them.  In its revised subcontracting 
plan, however, the protester noted that since it had not been awarded 
a large military refuse contract it could not provide a record of past 
performance on DOD contracts to demonstrate its ability to meet the 
subcontracting goals.  Nonetheless, the protester's proposal was rated 
"acceptable" under the past performance subfactor based on its 
approval to participate as a mentor in DOD's pilot mentor-protege 
program.  However, the Small Business Specialist noted that one of the 
conditions for approving a mentor-protege agreement is that the 
contractor has demonstrated its ability to meet its subcontracting 
goals, which BFI could not show.  Thus, contrary to BFI's assertions, 
while its subcontracting plan was properly credited for the 
subcontracting goals, firm commitments with subcontractors, and 
participation in the mentor-protege program mentioned here, nothing in 
the evaluation record or BFI's revised proposal suggests that a higher 
rating under this factor was justified. 

With regard to the evaluation of HDS's proposal under this factor, the 
record shows that HDS was advised during discussions that it had not 
provided any information under the past performance small business 
subfactor, and that its proposed plan to subcontract a minimal amount 
of the maximum dollars awarded was below the agency's 20-percent goal.  
As a result, HDS revised its proposal and increased the percentage of 
the total contract price to be subcontracted and specifically 
identified the subcontractors with which it has firm commitments.  
With regard to the historical rate of subcontracting under prior 
agency contracts, HDS disclosed that it had no subcontracting plan 
under its previous Navy contract because its policy under that 
contract was to perform the services in-house; therefore, its 
subcontracting goal for that contract was zero.  The record indicates 
that the Small Business Specialist reviewed the documentation provided 
by HDS and the explanation contained therein regarding the firm's 
prior policy on subcontracting and assigned a rating of "acceptable."  

While the protester asserts that the Small Business Specialist's 
rating of "acceptable" under the past performance small business 
subfactor is not supported by HDS's response to discussions, the 
record shows that HDS's revised subcontracting plan fully disclosed 
its lack of a subcontracting plan under that prior Navy contract, and 
provided an explanation for the lack of subcontracting.  The record 
shows that the agency clearly considered HDS's response to the 
discussion questions and decided not to penalize HDS because the firm 
did not use subcontractors under the prior contract and performed all 
work in-house.  Thus, the Small Business Specialist simply rated HDS 
acceptable primarily based on its subcontracting plan submitted for 
this contract.  In short, this is a matter the agency clearly 
considered, and our review of the record, and of the protester's 
contentions, does not lead us to conclude that the agency's assessment 
was unreasonable or inconsistent with the RFP.    

Nonetheless, even if, as BFI argues, its rating should have been 
higher than HDS under the small business factor, we do not believe 
that this change could have reasonably affected the selection 
decision.  Nothing in the record supports the reasonableness of the 
agency paying approximately [DELETED] more for a 
somewhat better subcontracting plan, especially where price was the 
most 
important factor, and the small business factor, the least important. 

The protest is denied.

Comptroller General
of the United States
   
1. The RFP contained an example of the past performance survey which 
would be sent to the references identified by each offeror; the survey 
included the past performance elements listed above.

2. BFI and HDS are large business offerors; HDS is the incumbent 
contractor for one of the contracts which this protested solicitation 
will replace. 

3.[DELETED]

4. The solicitation contained a sample subcontracting plan.