BNUMBER:  B-281331.3 
DATE:  March 22, 1999
TITLE: Kellie W. Tipton Construction Company, B-281331.3, March 22,
1999
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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:Kellie W. Tipton Construction Company

File:     B-281331.3

Date:March 22, 1999

Sam Z. Gdanski, Esq., and Jeffrey I. Gdanski, Esq., for the protester.
Thomas J. Keuler, Esq., Denton & Keuler for Terry Land Development, 
Inc., an intervenor.
Col. Nicholas P. Retson, LTC Richard B. O'Keefe, Jr., and Fredrick M. 
Lewis, Esq., Department of the Army, 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.  Agency termination of contract for the convenience of the 
government is unobjectionable where, shortly after award, the agency 
reasonably determined that  the award had been predicated on an 
obviously mistaken evaluation of another offeror's past performance 
and that the corrected evaluation resulted in that other offeror 
becoming in line for award.

2.  Allegation that agency misevaluated proposals with respect to past 
performance is denied where the record shows the agency evaluation was 
reasonable and did not conflict with the solicitation evaluation 
criteria.  While the solicitation called for offerors to submit at 
least 10 references, and the awardee did so, the solicitation did not 
state that all 10 references would be evaluated, and the agency's 
decision to evaluate only 5 references for all offerors did not 
prejudice the protester and was otherwise unobjectionable.

3. Agency determination that allegedly enhanced hourly rates for two 
line items did not represent a risk that the government would pay 
unreasonably high prices is reasonable where award to offeror 
proposing those labor rates results in lower price because the rates 
apply only to two contingent labor categories which affect only a 
small percentage of the total price.

DECISION

Kellie W. Tipton Construction Company (Tipton) protests the 
termination for convenience of its contract for installation and 
replacement of water and sewer lines at Fort Campbell, Kentucky 
awarded by the Department of the Army, under request for proposals 
(RFP) No. DAKF23-98-R-0219, and the Army's decision to award a 
contract for these services to Terry Land Development, Inc. (TLD).

We deny the protest.

The RFP, issued on August 17, 1998, contemplated the award of a 
fixed-price, indefinite-delivery, indefinite quantity (IDIQ) contract 
for a base period with two
12-month option periods.  RFP  sec.  00100,  para.  8.  The RFP contained a price 
list for the specific tasks to be performed which included cost for 
labor, materials, and equipment.  RFP amend. No. 0001,  sec.  00010, at 
00010-4.  Additionally the schedule required prices to be submitted 
for contract line items (CLIN) Nos. 0004 and 0005 for labor costs for 
work to be performed in Kentucky and Tennessee, respectively, to be 
used when required work was not included in the price list.  RFP 
amend. No. 0005,  sec.  00010, at 00010-3.  The RFP provided for award to 
the offeror whose offer represents the best value after evaluation in 
accordance with the factors and subfactors in the solicitation.  RFP  sec.  
00100,  para.  19.c(1).  The RFP stated that the technical evaluation factor 
was past performance, consisting of the two subfactors of customer 
satisfaction (CS) and experience modification factor (EMF).[1]  Id.  para.  
19.c(2).  Technical (i.e., past performance) was significantly more 
important than price, and of the technical subfactors, CS was 
significantly more important than EMF.  Id. 

CS was to be evaluated based on information obtained from customer 
references provided by offerors.[2]  Id.  para.  19.b.(1)(a)(1).  Offerors 
were required to identify a minimum of 10 contracts and subcontracts 
performed within the last 3 years and similar to the current 
requirement.  Id.  Specifically, the agency sent PPQs to firms 
identified by the offerors as references regarding prior construction 
work.  Agency Report (AR), Tab 4, Source Selection Plan, at 1.  The 
PPQ consisted of a series of 10 questions regarding the quality of 
work performed by the offeror for the firm responding to the 
questionnaire.  The questions were answered by circling a number from 
1 through 5, with 5 denoting "EXCELLENT" and 1 denoting 
"UNSATISFACTORY."  Id. at 5th unnumbered page.  The PPQ total was 
calculated by adding the numerical results selected for each of the 10 
questions.  This result in turn was averaged with other PPQ and CS 
results to arrive at a total CS score.  AR, Cover Letter at 3.

The Army received seven proposals in response to the RFP.  As a result 
of the initial evaluation, Tipton's proposal was ranked first and 
TLD's was ranked third.  AR, Tab 7, Price Negotiation Memorandum, at 
13th unnumbered page.  The results of the initial evaluation were as 
follows:

Offeror   EMR/pts.[3]CS   Total  Tech. Score[4]Price ScoreTotal Score

Tipton    (.81)/40  45.6  85.6   300      204.59   504.69

Offeror A (.87)/40  50.9  90.9   400      74.08    474.08

TLD       (.82)/40  38.8  78.8   200      266.67   466.67
AR, Cover Letter at 3.

Tipton's proposal received the high total score of 504.69 and was 
determined to represent the best value; award was made to Tipton on 
September 30.  AR, Tab 7, Price Negotiation Memorandum, at 3d 
unnumbered page.

On October 14, TLD was debriefed by the agency.  On October 19, TLD 
filed a protest with our Office alleging that it had submitted the 
lowest-priced offer and was qualified to perform the work and 
complaining that it had been advised that the selection of an awardee 
was based on considerations other than price.  On 
October 20, we dismissed that protest for failure to state a valid 
protest basis.  On October 23, TLD filed another protest which we 
subsequently dismissed as academic on November 25 because the agency 
determined that it would reevaluate the proposals.  

The agency reports that the procurement files had been forwarded to 
the Army Contract Appeals Division (CAD) on November 10, to facilitate 
presentation of the agency's position before our Office.  AR, Tab 2, 
Memorandum of Law, at 2d unnumbered page.  In reviewing the file, the 
CAD attorney noted that TLD had received an unusually low score (12 
out of a possible 50 points) on a PPQ submitted by the Paducah & 
Louisville Railway Company (P&L).  On 8 out of 10 questions, a P&L 
engineer had graded TLD as a 1 or "unsatisfactory"; on the remaining 2 
questions, he had graded TLD as 2, or "below average."  Because this 
score seemed unusual, the CAD attorney contacted the P&L engineer to 
verify the accuracy of the ratings.  Id.  At approximately the same 
time, the contracting officer in her review also noted the 
unsatisfactory rating and contacted the P&L engineer to determine if 
TLD had been informed about the unsatisfactory evaluation submitted by 
P&L.  AR, Tab 1, Contracting Officer's Statement, at 2d unnumbered 
page.  The P&L engineer stated that he had misread the evaluation 
criteria/instructions, and mistakenly thought that 1 was the highest 
score and 5 was the lowest score, and subsequently provided an 
affidavit to the same effect.  The result of this transposition error 
was that TLD received a score of 12 when the P&L engineer's intended 
replies would have resulted in TLD receiving a score of 48 based on 
the outstanding performance of its contracts with P&L.  AR, Tab 16, 
Affidavit of Chief Engineer, P&L, at 1.  

The CAD attorney and the contracting officer then re-evaluated the TLD 
score based on the P&L engineer's statement, which resulted in TLD's 
proposal receiving an overall CS score of 47.5 instead of the 38.8 as 
originally computed.  As a result of the re-evaluation, TLD's proposal 
was, not only lower priced, but also higher technically scored than 
Tipton's; overall, TLD's proposal was highest ranked with a total 
score of 566.67.  Subsequently, on November 19, a suspension of work 
order was issued to Tipton.  AR, Tab 18.  On November 23, the 
contracting officer issued a corrective action report stating that the 
award to Tipton was improper and that in order to protect the 
integrity of the procurement system, she was terminating Tipton's 
contract for convenience and would make an award to TLD.  AR, Tab 19, 
Memorandum from the Contracting Officer to the Commander, U.S. Army 
Legal Services Agency (Nov. 23, 1998).  On December 3, the contract 
with Tipton was terminated for convenience and, on December 11, Tipton 
filed this protest with our Office. 

Tipton contends that the agency's decision to terminate its contract 
based on the discovery of the P&L's engineer's erroneous completion of 
the PPQ was improper, that the evaluation of past performance was 
improper because some offerors submitted fewer than the required 
number of references, and that TLD's offer should be rejected as 
unbalanced.

Contracting officials in negotiated procurements have broad discretion 
to take corrective action where the agency determines that such action 
is necessary to ensure fair and impartial competition.  Patriot 
Contract Servs., LLC et al., 
B-278276.11 et al., Sept. 22, 1998, 98-2 CPD  para.  77 at 4; Rockville 
Mailing Serv., Inc., B-270161.2, Apr. 10, 1996, 96-1 CPD  para.  184 at 4.  
We will not object to an agency's proposed corrective action where the 
agency reasonably concludes that the award was tainted by a flaw in 
the procurement process, so long as the corrective action taken is 
appropriate to remedy the flaw.  See Rockville Mailing Serv., Inc., 
supra.

Here, shortly after award had been made, the agency discovered that an 
obvious error had been made in its evaluation of TLD's proposal.  Once 
the agency learned of this error, it was appropriate for the agency to 
correct it and reassess the proposal.  The record demonstrates that 
before determining to take corrective action, the contracting officer 
carefully analyzed the record before her, which included numerous 
letters of references submitted by TLD that documented its excellent 
record of performance, in addition to the P&L engineer's statement and 
affidavit, and reasonably concluded that the P&L engineer had 
mistakenly transposed his score of TLD's past performance.  On that 
record, the contracting officer reasonably credited the engineer's 
explanation at face value, in part because she found it implausible 
that TLD would have intentionally submitted a reference that provided 
such an anomalous unsatisfactory rating.  Once the contracting officer 
properly concluded that there was an essentially clerical error in the 
agency's assessment of TLD's past performance, we see nothing 
unreasonable in the decision to reassess TLD's proposal using 
corrected, accurate reference information.  Because the award to 
Tipton was predicated on an erroneous evaluation of TLD's proposal, we 
see no basis to object to the agency's decision to take corrective 
action by terminating Tipton's contract and making an award to TLD, 
whose proposal was the lowest-priced offer and whose correctly 
evaluated technical proposal was equal to Tipton's. 

Tipton also challenges the agency's proposed award to TLD on the 
grounds that TLD's offer is unbalanced because it allegedly proposed 
an unreasonably high per-hour labor rate for the line items covering 
certain work in Kentucky and Tennessee.

Federal Acquisition Regulation (FAR)  sec.  15.404-1(g) (FAC 97-02) 
provides that unbalanced prices arise where the prices of one or more 
contract line items are significantly over- or understated as 
indicated by the application of cost or price analysis techniques.  
FAR  sec.  15.404-1(g)(2) requires that offers with separately priced line 
items or sub-line items be analyzed, using cost or price analysis 
techniques, to determine if the prices are unbalanced and, if an offer 
is found to be unbalanced, the contracting officer should consider the 
risks to the government associated with the unbalanced pricing in 
making the source selection decision in order to determine whether 
award of the contract will result in paying unreasonably high prices 
for contract performance.  An offer may be rejected if the contracting 
officer determines that the lack of balance poses an unacceptable risk 
to the government.  FAR  sec.  15.404-1(g)(3).

Here, the agency concluded that TLD's apparently high labor rates for 
work to be performed in Kentucky and Tennessee merely reflected TLD's 
erroneous entry of a sum totaling the applicable rates for all trades 
rather than averaging the rates for all trades, as called for by the 
RFP.  AR, Cover Letter at 11.  However, based on its price analysis, 
the agency determined that the risk of paying unreasonable prices for 
TLD's performance was very low because these hourly rates, which will 
be used only when the required work is not included in the price list, 
apply only to approximately 10 percent of the total contract price, 
thus, application of TLD's stated rates results in the lowest total 
price.  AR, Tab 1, Contracting Officer's Statement, at 7th unnumbered 
page.  The agency's comparison of Tipton's proposed prices with the 
prices for the first nine delivery orders issued to TLD shows that in 
all but one instance, even applying TLD's allegedly overstated labor 
rates, TLD's prices were lower than Tipton's would have been.  AR, Tab 
31.   Accordingly, we see no basis to question the reasonableness of 
the agency's conclusion that whatever unbalancing may exist in the 
labor rates proposed by TLD, it does not pose an unacceptable price 
risk.  Neals Janitorial Serv., B-279633, June 3, 1998, 98-1 CPD  para.  156 
at 4.

Finally, Tipton challenges the agency's evaluation of TLD's past 
performance on the grounds that the RFP required offerors to submit a 
minimum of 10 references, and that TLD was evaluated on only three 
prior government jobs.

We review an agency's evaluation of proposals to ensure that it is 
fair, reasonable, and consistent with the evaluation criteria stated 
in the solicitation.  Wind Gap Knitwear, Inc., B-261045, June 20, 
1995, 95-2 CPD  para.  124 at 3.  Where a solicitation requires the 
evaluation of offerors' past performance, an agency has discretion to 
determine the scope of the offerors' performance histories to be 
considered, provided all proposals are evaluated on the same basis and 
consistent with the solicitation requirements.  Federal Envtl. Servs., 
Inc., B-250135.4, May 24, 1993, 93-1 CPD  para.  398 at 12.

The RFP provided that past performance would be evaluated using the 
information obtained from offerors' references provided with the 
proposals and from any other sources and/or records available to the 
government.  RFP  sec.  00100,  para.  19.c.3.  Here, the agency reports that 
while it requested and would have preferred to obtain completed 
questionnaires from 10 of the contractor's job references, not all 
offerors submitted 10 references and the agency determined that five 
past performance records were sufficient to evaluate an offeror.  AR, 
Tab 28, Memorandum from the Source Selection Team to the Director of 
Contracting (Dec. 17, 1998).  In evaluating Tipton's past performance 
the agency reviewed three government projects ratings and two customer 
performance surveys and concluded that there was a high probability 
that Tipton would perform well.  AR, Tab 6A, Evaluation Factor 
Calculations - Tipton.  Likewise, the agency reviewed three government 
projects and two customer performance surveys in its review of TLD's 
past performance.  AR, Tab 6B, Evaluation Factor Calculations - TLD.  
Using P&L's corrected past performance questionnaire, Tipton and TLD 
were rated as equal under past performance.  

Notwithstanding Tipton's assertions to the contrary, we see nothing 
unreasonable in the Army's manner of assessing TLD's and Tipton's the 
past performance.  While the RFP requested a minimum of 10 references, 
it did not specify the number of references that the agency would 
contact for purposes of evaluation.  Tipton objects to the agency's 
past performance evaluation because not all offerors submitted the 
required 10 references.  However, TLD submitted 33 references, 15 of 
which were for jobs the agency determined were similar in scope to the 
current requirement--more than the 10 that were called for by the 
solicitation.  There is no requirement that an agency contact all of 
an offeror's references.  IGIT, Inc., B-275299.2, June 23, 1997, 97-2 
CPD  para.  7 at 6.  Since both Tipton and TLD submitted more than the 
required number of references, and the past performance of each was 
evaluated on the basis of the same number of references, we see no 
basis to conclude that either Tipton or TLD was improperly evaluated, 
or that Tipton was otherwise prejudiced, as a result of the past 
performance evaluation methodology applied here by the agency.[5]

The protest is denied.

Comptroller General
of the United States  

1. EMF measures an offeror's safety record and insurance experience.  
Agency Report (AR), Cover Letter at 2 n.2.  Each offeror's insurance 
carrier supplies the EMF rating.  Id.  The lower the EMF, the better 
the safety record.  Id.  

2. Other CS input was received from governmental agencies with whom 
offerors had done business.  Each offeror was evaluated on the basis 
of input from five entities.  If an offeror received past performance 
questionnaires (PPQs) from five commercial entities, no input from 
governmental agencies was used.  If fewer than five PPQS were 
received, governmental inputs were used.  AR, Cover Letter at 2 n.3.

3. Under the Source Selection Plan, an EMF of 1.0 or less received the 
          maximum score of 40 points.  AR, Tab 4, Source Selection 
          Plan, at 1.   

4. Each offeror's raw technical score was converted into a multiplier 
                                 between 0 and 4 (0 being 
                                 unsatisfactory and 4 being 
                                 excellent), which was then multiplied 
                                 by 100 to yield the technical score.  
                                 AR, Tab 7, Price Negotiation 
                                 Memorandum, Evaluation Matrix.  For 
                                 example, a score between 60 and 79 
                                 was considered average (and therefore 
                                 assigned a multiplier of 2), which 
                                 would result in a score of 200 (100 
                                 multiplied by 2). 

5. In its comments on the agency report, Tipton asserted for the first 
time that (1) the agency improperly evaluated TLD's past performance 
based on only three prior government projects; and (2) the past 
performance evaluations were improper because the agency did not use 
the same evaluation questionnaire for all competitors.  Tipton was 
aware of these bases of protest, at the latest, upon its receipt of 
the agency report, but did not assert them within 10 days after its 
receipt of the report.  In this regard, Tipton's comments were not 
received within the normal 10-day period, see 4 C.F.R.  sec.  21.3(i) 
(1998), because our Office granted an extension requested by Tipton.  
Since a time extension for purposes of filing comments does not waive 
the timeliness rules with regard to new grounds of protest, Anchorage 
Enters., Inc., B-261922, Nov. 7, 1995, 95-2 CPD  para.  211 at 3 n.2, we 
dismiss these bases of protest as untimely.