TITLE:  Citywide Managing Services of Port Washington, Inc., B-281287.12; B-281287.13, November 15, 2000
BNUMBER:  B-281287.12; B-281287.13
DATE:  November 15, 2000
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Citywide Managing Services of Port Washington, Inc., B-281287.12;
B-281287.13, November 15, 2000

Decision

Matter of: Citywide Managing Services of Port Washington, Inc.

File: B-281287.12; B-281287.13

Date: November 15, 2000

John A. Ordway, Esq., Berliner, Corcoran & Rowe, and Jacqueline B. Gayner,
Esq., Ross, Suchoff, Hankin, Maidenbaum, Handwerker & Mazel, for the
protester.

Michael A. Gordon, Esq., and Fran Baskin, Esq., Holmes, Schwartz & Gordon,
for Meridian Management Corporation, the intervenor.

Joseph J. Cox, Esq., and Michael Ryba, Esq., U.S. Army Corps of Engineers,
for the agency.

Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Agency satisfied its obligations to perform a price analysis by comparing
the widely variant line item prices proposed by the offerors under vigorous
price competition for a fixed-priced contract and the government estimate;
the agency was not required to downgrade awardee's highest-rated technical
proposal because of its low price where the awardee verified its price and
the agency reasonably determined that the awardee understood and could
perform the contract at that price.

2. Protest alleging that the awardee's proposal has unbalanced item prices
and that the agency failed to assess whether the unbalancing posed an
unacceptable risk to the government is denied, where, despite the agency's
erroneous determination that prices were not unbalanced, there is no
evidence of significant risk to the government arising from unbalanced
prices and the agency's action therefore did not prejudice the protester.

3. Protest of technical evaluation is denied where protest merely disagrees
with the agency's evaluation and does not provide evidence of an
unreasonable evaluation.

DECISION

Citywide Managing Services of Port Washington, Inc. protests an award to
Meridian Management Corporation under request for proposals (RFP) No.
DACA51-98-R-0007, issued by the U.S. Army Corps of Engineers, Philadelphia
District, for base operations and maintenance services at Fort Hamilton, New
York.

We deny the protest.

The RFP was initially issued on March 5, 1998 by the Corps's New York
District. A contract was awarded under this RFP to Citywide on two prior
occasions. Those awards were the subject of a number of protests by the
other offerors, Meridian and Johnson Controls World Services, Inc. Our
office twice sustained such protests, [1] in response to which the agency
reevaluated proposals and made new source selections. The most recent
reevaluation followed reassignment of the RFP to the Philadelphia District,
which appointed new evaluation and source selection personnel and, by
amendment, reissued the RFP.

The RFP, as reissued, contemplated the award of a fixed-price contract (with
provision for some cost reimbursable work) for 1 year with 4 option years.
For contract line item numbers (CLIN) under heading 001, monthly unit prices
were requested for recurring and cyclic maintenance, repair and preventative
maintenance work, and specific support and administration services. For
CLINs under heading 002, monthly unit prices were requested for maintenance
and repair service orders. For CLINs under heading 003, hourly and square
foot unit prices were requested for all maintenance and repair outside the
scope of CLIN 002 service orders. For CLINs under heading 004, hourly unit
prices were requested for "New Work," that is, minor construction incidental
to the execution of base operations. For CLINs under heading 005, monthly
and hourly prices were requested for logistics support functions. Estimated
quantities for price evaluation purposes are designated for each CLIN; the
estimated quantities for CLINs requesting hourly unit prices are also "not
to exceed" figures. [2]

The RFP stated a best value evaluation plan with technical and price being
of approximately equal importance. Under the technical area, the RFP listed,
in descending order of importance, the factors of technical approach,
management and quality control. Each factor had various subfactors.

Under price, the RFP stated that the government was interested in "proposals
that offer value in meeting the management necessary in the performance of
this contract while insuring quality performance with appropriate technical
skills and quality control at a reasonable price." RFP amend. 7, at M-6. The
RFP required each offeror to "submit sufficient data to determine
reasonableness of each element (labor, material, overhead, [general and
administrative], and profit) of the Offeror's proposed price for each item."
Id. at M-6 to M-7. The total price of each proposal for evaluation purposes
was the extended total of all CLIN prices, including those in the option
years.

The RFP stated that the "Government may reject an offer as nonresponsive if
it is materially unbalanced as to prices for the basic requirement and the
option quantities." Id. at M-1. The RFP also stated:

Proposals which are unrealistic in terms of technical approach, management,
quality control, or have unrealistic prices may be deemed reflective of lack
of technical understanding or indicative of failure to fully comprehend the
complexity and risks of the proposed contractual requirements and may result
in a reduction in technical scoring.

RFP amend. 21, at M-1.

The agency received proposals from the three offerors who previously
submitted proposals under the RFP by April 17, 2000. After an initial
evaluation of the newly revised proposals, the agency conducted discussions.
In pertinent part, the discussions with all offerors identified CLIN prices
in their proposals that appeared "substantially higher" and others that
appeared "substantially below" the government estimate and/or prices of
other offerors, and requested offerors to verify their prices and
understanding of the scope of work.

On July 7, the agency requested final proposal revisions. The final
evaluation results were as follows:

 Offeror                   Technical (900 points)    Price

 Government Estimate       --                        $50,655,000

 Meridian                  660                       $33,031,750

 Johnson Controls          655                       $[DELETED]

 Citywide                  539                       $40,622,509

The technical evaluation committee (TEC) determined that the technical
proposals of Meridian and Johnson Controls were essentially equal and stated
the following in its final report:

In reaching our conclusion, we very carefully considered Meridian's and
Johnson Controls' proposals taken as a whole. We cannot conclude that the
difference between the scores would represent any real difference in
contract performance. In contrast the proposal submitted by Citywide taken
as a whole is not in the league with the other two proposals. Citywide's
deficiencies/weaknesses diminish its strong points. Citywide fails to
address technical capability and operation procedures in a meaningful way.
Citywide's final proposal does not adequately address issues raised during
discussions. In relation to Meridian and Johnson Controls, Citywide's
proposal does not reflect as high a level of past performance/experience.

Agency Report, tab P-3, TEC Report, July 20, 2000, at 9.

The price evaluation committee (PEC) analyzed the offerors' pricing and
responses to the discussions and determined that all offerors' prices were
fair and reasonable. All were found to have responded satisfactorily to the
discussion questions about price. Meridian verified its prices in response
to the written discussion questions and did not revise its initial proposed
price. Citywide increased its price (from its initial price of $35,577,209)
in response to the discussion letters, although it verified and left
unchanged many of the item prices that the agency had identified as
significantly high and low.

The source selection authority (SSA) concurred with the TEC and PEC reports,
and selected the highest-rated and lowest-priced proposal submitted by
Meridian as representing the best value to the government. On July 25, the
agency awarded the contract to Meridian. Citywide requested and received a
debriefing. This protest followed.

Citywide first protests that the agency failed to conduct an adequate price
realism analysis.

While agencies are required to perform some sort of price analysis or cost
analysis on negotiated contracts to ensure that the agreed-price is fair and
reasonable, where, as here, the award of a fixed-price contract is
contemplated, a proposal's price realism is not ordinarily considered, since
a fixed-price contract places the risk and responsibility for contract costs
and resulting profit or loss on the contractor. OMV Med., Inc.; Saratoga
Med. Ctr., Inc., B-281387 et al., Feb. 3, 1999, 99-1 CPD para. 52 at 5. However,
an agency may provide for price realism analysis in the solicitation for
such purposes as measuring an offeror's understanding of the solicitation
requirements, The Cube Corp., B-277353, Oct. 2, 1997, 97-2 CPD para. 92 at 4, or
to avoid the risk of poor performance from a contractor who is forced to
provide services at little or no profit. Ameriko, Inc., B-277068, Aug. 29,
1997, 97-2 CPD para. 76 at 3. The depth of an agency's price realism analysis is
a matter within the sound exercise of the agency's discretion. Volmar
Constr., Inc., B-272188.2, Sept. 18, 1996, 96-2 CPD para. 119 at 6.

Given the several iterations of competition that occurred here with all
three offerors participating, this procurement was conducted under vigorous
price competition. The PEC compared each offeror's prices to the government
estimate and to the prices of competitors, and also determined on an
item-by-item basis whether item prices appeared significantly high or low
for the work requirements. The offerors were then requested to verify these
prices and also asked whether they could perform the proposed work at the
low prices. The offerors did so. [3] The agency then determined that the
offerors' prices were fair and reasonable, and that the work could be
performed at the respective prices. In our view, this is a sufficient price
analysis. See Federal Acquisition Regulation (FAR) sect. 15.404-1(a)(1), (b);
Valenzuela Eng'g, Inc., B-283889, Jan. 13, 2000, 2000 CPD para. 1 at 4-5.

Citywide challenges the depth of the price analysis, essentially alleging
that anything short of evaluating the cost elements for each CLIN price is
an unreasonable price analysis. However, even where some elements of cost
are obtained from offerors to support proposed prices, a detailed cost
realism analysis is not required for evaluating proposals for fixed-price
contracts, where, as here, adequate price competition exists. See FAR
sect. 15.404-1(a), (c), (d)(2), (3); Newport News Shipbuilding and Dry Dock Co.
et al., B-261244.2 et al., Sept. 11, 1995, 95-2 CPD para. 192 at 7-8.

While Citywide does not challenge the evaluated quality or approach of
Meridian's highest-rated technical proposal, it contends that Meridian's low
prices alone, particularly for some of the CLINs, should have had an adverse
impact on the evaluation of Meridian's technical proposal, since the RFP
stated that proposals which have unrealistic prices may reflect a lack of
technical understanding or indicate a failure to fully comprehend the
complexity and risks of the proposed contractual requirements and may result
in a reduction of a proposal's technical score.

We disagree. Here, although the RFP vested the agency with discretion to
reduce technical scores based on concerns about unrealistic prices, it did
not require such downgrading. Cf. America Lawn Servs., Inc., B-267715, Dec.
20, 1995, 95-2 CPD para. 278 at 4-6 (where the RFP mandated such downgrading
where prices were found unrealistically low). While it is true that the
agency had concerns about the low (and high) prices of many of the CLINs, in
our view, it handled its concerns reasonably. As noted above, during
discussions, the PEC identified for each offeror specific item prices that
appeared significantly high or low and asked all offerors to verify the
price and, for low prices, "[v]erify the work can be performed in accordance
with the scope of work for the price proposed." Agency Report, Tab L-3,
Agency Discussions Letter to Meridian (June 13, 2000) and attach.; Tab M-3,
Agency Discussions Letter to Citywide (June 13, 2000) and attach. As stated
above, each offeror responded with price revisions and/or price
verification. [4] Although the lack of uniformity of CLIN prices among the
offerors, including apparent below-cost prices for some CLINs, caused the
PEC some continuing concerns about all offerors' prices, the agency
determined that, judging from the technical proposals and each offeror's
proposed staffing level, each offeror, including Meridian, understood and
could perform the contract requirements at their proposed prices. Id., Tab
J-3, PEC Report (June 21, 2000); Agency Supplemental Report, at 6-7;
Tab S-1, Declaration of PEC Chairperson.

Given the undisputed quality of Meridian's highest-rated technical proposal,
its verification of its CLIN prices, and the agency's discretion in
determining the depth of price realism analyses, we find no basis to
question the agency's determination not to lower Meridian's technical scores
because of its low price. See EC Corp., B-266165.2, Feb. 20, 1996, 96-1 CPD
para. 153 at 3-4 (agency not required to downgrade technical proposal for lack
of technical understanding because its price is substantially below the
government estimate); Birch & Davis Assocs., Inc.--Protest and Recon.,
B-246120.3, B-246120.4, Apr. 20, 1992, 92-1 CPD para. 372 at 7 (fixed-price
contract may be awarded at price substantially below government estimate,
even where discrepancies existed in the awardee's cost elements, where the
awardee submitted the best technical proposal, that proposal reflected an
understanding of the contract requirements, a vigorous competition was
conducted, and agency knew of and considered the disparity between awardee's
price and the government estimate).

Citywide next argues that Meridian's proposed CLIN pricing was unbalanced,
but was not analyzed by the agency to determine whether this posed an
unacceptable risk to the government.

Unbalanced pricing exists when, despite an acceptable total evaluated price,
the price of one or more contract line items is significantly over or
understated as indicated by the application of cost or price analysis
techniques. [5] FAR sect. 15.404-1(g)(1). An agency's acceptance of a proposal
with unbalanced pricing is not, in and of itself, improper. An agency may
lawfully award a contract on the basis of a proposal with unbalanced
pricing, provided it has concluded that the pricing does not pose an
unacceptable level of risk, and the prices the agency is likely to pay under
the contract are not unreasonably high. FAR sect. 15.404-1(g)(2), (3); Red River
Serv. Corp., B-282634, B-282634.2, July 15, 1999, 99-2 CPD para. 31 at 3; J&D
Maintenance and Serv., B-282249, June 18, 1999, 99-2 CPD para. 28 at 7.

Although the agency does not concede the point, [6] we believe that the
protester has presented persuasive evidence that Meridian's CLIN prices were
unbalanced, in that some CLIN prices were significantly understated because
[DELETED], and other CLIN prices were significantly overstated [DELETED].
Indeed, as noted above, the record shows that the evaluators regarded a
number of CLIN prices in Meridian's proposal to be either substantially low
or high, and noticed that some of Meridian's CLIN prices did not include
[DELETED] whereas other CLINs [DELETED]. Agency Report, Tab J-1, PEC Report
(May 12, 2000), at 2; Tab J-2, PEC Report (June 12, 2000), at 3-5; Tab J-3,
PEC Report (June 21, 2000), at 2-3; Agency Supplemental Report, Tab S-2,
Declaration of PEC Chairperson, at 2. Thus, the record evidences that a
number of Meridian's CLIN prices are significantly understated or
overstated, and are therefore unbalanced under FAR sect. 15.404-2(g). [7]

Where, as here, a price analysis or cost analysis indicates that prices are
unbalanced, the contracting officer "shall" consider risks to the government
associated with the unbalanced pricing and whether award will result in
paying unreasonably high prices for contract performance; an offer may be
rejected if it is determined that the lack of balance poses an unacceptable
risk to the government. FAR sect. 15.404-1(g)(2), (3). Here, since the agency
concluded that the price analysis did not indicate that Meridian's prices
were unbalanced, it did not specifically consider the risks associated with
unbalanced prices. Agency Supplemental Report at 3-4, 6; Tab S-2,
Declaration of PEC Chairperson, at 2. In light of our conclusion that the
pricing in Meridian's proposal appears unbalanced, it was improper for the
agency not to have considered the risk posed by that unbalancing (even if,
having considered that risk, the agency could have proceeded to award the
contract to Meridian). Our review of the record, however, shows no
reasonable possibility that the protester was prejudiced by the failure of
the agency to specifically analyze the risks of Meridian's unbalancing
because no material risk to the government from this unbalancing is apparent
from the record.

The majority of the work under this contract for base maintenance services
is work priced on a monthly basis. While there are various other CLINs
priced on either an hourly or square footage basis, there is no indication
(or even an allegation from the protester to this effect) that the estimated
amounts contained in the RFP for these CLINs are not accurate or do not
represent the most probable estimate of these services that the government
will order under the contract. Thus, there is no basis to believe that the
actual quantities ordered will deviate from those estimates, and
particularly that they will deviate from the estimates in a way that would
mean that Meridian's pricing structure will cost the government
significantly more than was calculated using the RFP estimates. [8] Neals
Janitorial Serv., B-279633, June 3, 1998, 98-1 CPD para. 156 at 4 (unbalanced
prices for indefinite-quantity work not a basis for sustaining protest where
the estimates stated in solicitation are reasonably accurate).

The protester alleges that the risks to the agency from Meridian's
unbalanced pricing are significant because the RFP states that the agency
may delete or rescope work requirements and thus not reap the savings from
Meridian's understated CLIN prices if the work covered by those items is
deleted or reduced. In this regard, the RFP states that the government is
pursuing an Energy Saving Performance Contract (ESPC) "across the Military
District of Washington, which includes Fort Hamilton," and reserves the
option to modify the Fort Hamilton base operations contract in the context
of such an award; the RFP also states that the government is considering
other privatization efforts. RFP amend. 7, at B-1. The agency states that
any possibility of these government efforts affecting the work requirements
of this RFP during the potential term of this contract remains speculative
and in fact deleted work could come from either high-priced line items or
low-priced ones. Agency Response to Interrogatory, Oct. 16, 2000, at 3-4.
Therefore, any risk to the government from this potential deletion or
rescoping of the contract work seems too speculative to be considered
significant.

Moreover, the agency's report on this protest issue asserted that Meridian's
proposal would remain low even considering the protester's allegations.
Agency Supplemental Report at 7. Citywide has not identified a single
scenario, regardless of the likelihood of it occurring, that illustrates how
Meridian's highest-rated and lowest-priced proposal would not remain so.
Absent showing credible evidence of risk of some significance providing
possible grounds for rejecting an unbalanced offer under the regulation, the
protest does not establish an adequate basis to disturb the agency's award.
[9] See Kellie W. Tipton Constr. Co., B-281331.3, Mar. 22, 1999, 99-1 CPD
para. 73 at 6 (where alleged unbalanced price remains low under most order
scenarios, the price risk from alleged unbalanced pricing is not
unacceptable).

Citywide also alleges that RFP amendment 0013 stated a requirement that
management overhead costs be included as part of each item price, and that
the agency improperly relaxed this requirement for Meridian only. The
portion of amendment 0013 referenced by the protester states a question by
an offeror as to whether management overhead costs should be included "as
part of each CLIN" or "submitted as a separate item," and the agency's
answer that such costs should be included "as part of each CLIN," rather
than be separately priced. RFP amend. 0013, at 2. The agency persuasively
states that, given the context of the question, the amendment did not create
a requirement for equitable overhead allocation to each CLIN price, but
rather provided guidance that such costs were not to be separately priced
outside the CLINs. Supplemental Agency Report at 4-5. In any case, even if
the amendment did create the alleged pricing requirement, the record does
not show that the competition was in any way compromised by the agency's
acceptance of Meridian's proposal or that Citywide was otherwise prejudiced.
There is no evidence, and it is not otherwise apparent, that the waiver of
the alleged requirement would in any way affect any offeror's proposed
overall price (Citywide does not claim, for example, that this would allow
it to significantly lower its overall price), and, as discussed above, there
is no significant risk to the government from unbalancing if this were a
requirement that Meridian's proposal violated. See Input/Output Tech., Inc.,
B-280585, B-280585.2, Oct. 21, 1998, 98-2 CPD para. 131 at 7-8 (alleged waiver
or violation of solicitation requirement does not provide basis to sustain
protest where there is no prejudice).

Citywide also alleges that the agency unreasonably evaluated Citywide's
technical proposal under a number of subfactors.

In reviewing protests challenging an agency's evaluation of proposals, we
will not substitute our judgment for that of the agency regarding the merits
of proposals; rather, we will examine the agency's evaluation and selection
decision to ensure that they are reasonable and consistent with the terms of
the solicitation. Sarasota Measurements & Controls, Inc., B-252406.3, July
15, 1994, 94-2 CPD para. 32 at 4. A protester's disagreement with the agency
does not render the evaluation unreasonable. Valenzuela Eng'g, Inc., supra.
As illustrated by the following example, we think Citywide's protest
allegations regarding the evaluation of its technical proposal constitute
mere disagreements with the agency's evaluation judgments and fail to
demonstrate that the evaluation was unreasonable. [10]

For example, under technical capability, Citywide's technical proposal
consisted primarily of general statements that it "knows how to" do
something, that it "understands" specific work processes identified in the
RFP, and that it "acknowledges" RFP requirements restated in the proposal.
See, e.g., Agency Report, tab O-3, Citywide's Final Proposal Revisions, at
6-7. The TEC evaluation noted that Citywide's proposal used such vague
description for each of the 11 technical task areas identified in the RFP
performance work statement (PWS), and determined that the proposal thus did
not demonstrate an understanding of the technical functions of the PWS.
Agency Report, Tab I-1c, TEC Final Consensus Evaluation of Citywide's
Proposal, at 1-3. The protester disagrees with this evaluation essentially
because its proposal restates the PWS requirements, and thus, in its view,
adequately demonstrates an understanding of those requirements. We view it
as reasonable for the agency to evaluate Citywide's simple restatement of
the solicitation requirements in its proposal as not adequately
demonstrating an understanding of the work requirements. See Joseph L.
DeClerk and Assocs., Inc., B-220142, Nov. 19, 1985, 85-2 CPD para. 567 at 4.

Citywide also contends that it should have received higher point scores
under various technical factors. Although we do not think that the protester
has demonstrated that the point scores assigned by the TEC were
unreasonable, even if the scores themselves should be different, the
protester has not shown that the evaluated strengths, weaknesses and
deficiencies of the respective proposals were unreasonable. It is well
established that ratings, be they numerical, color or adjectival, are merely
guides for intelligent decision-making in the procurement process. RGII
Techs., Inc.--Recon. and Protest, B-278352.2, B-278352.3, Apr. 14, 1998,
98-1 CPD para. 130 at 10; Grey Adver., Inc., B-184825, May 14, 1976, 76-1 CPD
para. 325 at 9. Here, the agency's evaluation and selection decision went beyond
technical scores and considered the specifics of the proposals to determine
that Meridian's and Johnson Controls' technical proposals were essentially
equivalent and substantially superior to Citywide's. Agency Report, Tab P-3,
Final TEC Report, at 9; Tab R, Source Selection Decision, at 1. The
protester simply has not shown that the agency was unreasonable in finding
Citywide's proposal inferior to Meridian's.

Citywide finally alleges that Meridian misrepresented its experience in the
personal property shipping office (PPSO) function during the prior
competitions and should have been disqualified. As noted in our prior
decisions concerning an earlier stage of this procurement, Meridian
identified "informal" PPSO experience while performing a management and
operations contract at another military installation. Johnson Controls World
Servs., Inc.; Meridian Management Corp., supra, at 7; see Meridian
Management Corp.; Johnson Controls World Servs., Inc., supra, at 8. At that
time, the agency determined that Meridian did not previously perform a
"contract" for PPSO services and downgraded, but did not disqualify,
Meridian. [11] In the latest round of competition, Meridian abandoned its
claims of informal experience and proposed a subcontractor with formal PPSO
experience. Agency Report at 8. Other than statements of unidentified
employees of the incumbent contractor overheard by a Citywide employee in a
shop, Declaration of Citywide's Vice President (Aug. 29, 2000), Citywide
presents no new information on this matter. The record simply provides no
basis to find that Meridian made a material misrepresentation in this
matter.

The protest is denied.

Anthony H. Gamboa

Acting General Counsel

Notes

1. Johnson Controls World Servs., Inc.; Meridian Management Corp.,
B-281287.5 et al., June 21, 1999, 2000 CPD para. __; Meridian Management Corp.;
Johnson Controls World Servs., Inc., B-281287.10, B-281287.11, Feb. 8, 2000,
2000 CPD para. __.

2. As indicated, there are also some cost reimbursable CLINs under each
group with designated "not to exceed" dollar figures for "bidding purposes
only."

3. Meridian made no price revisions. For both high and low CLIN prices
identified by the agency, Meridian stated that the agency's evaluated price
variances may be attributable to Meridian's "[DELETED]" and stated that
Meridian could perform the work at its proposed prices. Agency Report, tab
N-2, Meridian's Response to Discussions (June 15, 2000). Although Citywide
revised some of its CLIN prices resulting in a total price increase, it
verified many of its low CLIN prices, as identified by the agency, by
stating each of these CLIN prices "remains unchanged" with no explanation;
additionally, Citywide stated for high CLIN prices, as identified by the
agency, that the prices were "verified" and that the agency's evaluated
price variance may be due to Citywide's distribution of "[DELETED]." Agency
Report, tab O-2, Citywide's Response to Discussions (June 15, 2000), at 2-3.

4. Citywide alleges that the agency's discussions misled Citywide into
raising its prices. Protester's Comments at 7. We find this allegation
unpersuasive because the agency's request for price verification did not ask
Citywide to raise its prices, or otherwise imply it, and Citywide evidently
did not perceive this as the case, since it verified many of its low prices
without change or explanation. See Agency Report, Tab J-3, PEC Report (June
21, 2000), at 2; Tab O-2, Citywide Response to Discussions (June 15, 2000),
at 2.

5. The solicitation incorporated the unbalanced pricing provision under FAR
sect. 52.217 Evaluation of Options (JUL 1990), which stated:

(b) The Government may reject an offer as nonresponsive if it is materially
unbalanced as to prices for the basic requirement and the option quantities.
An offer is unbalanced when it is based on prices significantly less than
cost for some work and prices which are significantly overstated for other
work.

RFP amend. 7, at M-1. The regulatory language governing the treatment of
unbalanced pricing was changed when FAR Part 15 was revised in 1997. The
current FAR definition of unbalancing applies to solicitations, such as the
present RFP, issued after January 1, 1998.

6. The agency asserts there was no unbalancing because all of the proposals,
including Meridian's and Citywide's, contained CLIN prices that
substantially varied from each other's and the government estimate, and
because there was no "attempt [by Meridian] to front load the costs and
unbalance the bid." Supplemental Agency Report at 3-4; Tab S-2, Declaration
of PEB Chairperson, at 2.

7. Citywide also alleges that the agency's acceptance of Meridian's method
of allocating costs violates FAR sect. 15.404-1(f). Although this regulation
does require that unit prices reflect the intrinsic value of an item and
prohibits the use of any method of distributing costs to line items that
distorts unit price, the regulation expressly does not apply where, as here,
adequate price competition exists. FAR sect. 15.404-1(f)(1).

8. We note that the hourly CLINs request unit prices for up to a "not to
exceed" hourly figure equal to the estimated amount that was the basis for
the evaluation, so any risk that the government will pay too much for
high-priced hourly work is minimized. Citywide contends, however, that a
significant portion of Meridians' understated prices are on hourly CLINs, so
that the agency will not receive the savings of these low prices if the
actual level or performance comes in below the not-to-exceed level. Given
that there is no suggestion the estimates for these CLINs are inaccurate, we
think that this risk is too remote to be considered significant.

9. Citywide also contends that the agency did not consider the performance
risks associated with Meridian's low prices on some CLINs (particularly the
per hour CLINs) that Meridian will have the incentive not to perform the
corresponding work requirements, or to perform poorly because its prices for
these CLINs are below cost. However, as discussed above, there seems to be
no unconsidered risk here because the agency, based on its analysis of the
Meridian's prices, technical approach, and staffing, determined that
Meridian understood and could perform the contract requirements at its
proposed prices.

10. Although we do not here specifically discuss all of Citywide's
complaints about its technical evaluation, we have reviewed them and
concluded that they provide no basis to find the agency's evaluation
unreasonable.

11. The agency describes the situation as one of misunderstanding between
the prior evaluators and Meridian (rather than one of misrepresentation by
Meridian), in that Meridian was seeking credit for services that it
allegedly performed outside the requirements of a contract, whereas the
agency evaluated proposals for performance under contract requirements and
thus determined that Meridian did not have the claimed PPSO experience.
Agency Report at 8-9.