BNUMBER:  B-281350; B-281350.2 
DATE:  January 27, 1999
TITLE: Saratoga Medical Center, Inc., B-281350; B-281350.2, January
27, 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:Saratoga Medical Center, Inc.

File:     B-281350; B-281350.2

Date:January 27, 1999

Norman J. Philion, Esq., Peter A. Greene, Esq., Edward V. Hickey III, 
Esq., and Danielle E. Berry, Esq., Thompson Hine & Flory, for the 
protester.
Gary S. Pitchlynn, Esq., Pitchlynn, Morse, Ritter & Morse, for Choctaw 
Management/Services Enterprise, an intervenor.
Clarence D. Long III, Esq., and Captain David A. Whiteford, Department 
of the Air Force, 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 reasonably evaluated awardee's proposal as posing a low 
performance risk based upon favorable reference information received 
concerning performance under relevant contracts.

2.  Allegation that agency misevaluated awardee's proposal with 
respect to past performance is denied where the record shows that the 
evaluation was reasonable and in accordance with the applicable stated 
evaluation factors.

3.  Determination to select lowest-priced, technically acceptable 
proposal for award of contract, and determination that the awardee's 
prices were realistic are unobjectionable where both determinations 
were made in a manner consistent with the evaluation criteria, and the 
awardee's professional compensation plan and base salaries (which were 
higher than the protester's) reasonably were deemed adequate to 
recruit and retain employees.  

DECISION

Saratoga Medical Center, Inc. protests the award of a contract to 
Choctaw Management/Services Enterprise under request for proposals 
(RFP) No. F41622-98-R-0014, a competitive small disadvantaged business 
set-aside, issued by the Department of the Air Force to acquire 
clinical social services under the Family Advocacy Program (FAP) for 
Air Force personnel and their families at various locations in Europe, 
the Azores and Turkey.  Saratoga principally asserts that the agency 
misevaluated Choctaw's past performance as warranting a low 
performance risk rating and also questions the agency's determination 
that the awardee's proposed price is realistic.

We deny the protests.

The RFP, issued on May 6, 1998, called for offerors to provide Family 
Advocacy Clinical Directors, Family Advocacy Treatment Managers, 
Family Advocacy Outreach Managers, Family Advocacy Nurse Specialists, 
and Family Advocacy Program Assistants, as needed, specifying 
estimated quantities and locations for military bases in Europe, the 
Azores and Turkey.  RFP  sec.  B.  The RFP contemplated the award of a 
fixed-price, indefinite-quantity contract for a base year with four 
1-year ordering period options and stated that the agency would employ 
performance/price tradeoff techniques to make a best value award 
decision.  RFP  sec.  M.4.a.  The RFP went on to state that, if the 
technically acceptable offeror submitting the proposal with the lowest 
evaluated price received a low performance risk rating and was found 
responsible, that proposal would represent the "best value."  RFP  sec.  
M.4.b.4.  The RFP provided that award could be made to other than the 
offeror that submitted the low-priced, technically acceptable proposal 
if that offeror was "judged to have a moderate, high or not applicable 
performance risk rating."  RFP  sec.  M.4.b.5.  Concerning past 
performance, the RFP stated that a performance risk assessment would 
be conducted and required offerors to submit information on relevant 
contracts performed within the last 3 years which demonstrate their 
ability to perform the proposed effort.[1]  RFP  sec.  L.901, Vol. IIIa.  
The RFP further provided for an evaluation of the price proposals for 
realism.  RFP  sec.  M.2.  

On June 8, 1998, the agency received six proposals.  Between June 11 
and 15, offerors gave oral presentations of their technical proposals.  
The proposal of one offeror did not address the minimum technical 
requirements and was rejected.  All other proposals were determined to 
be technically acceptable.  Clarification requests were issued to the 
offerors that had submitted acceptable proposals and they were 
instructed to address the clarification requests along with amendment 
No. 0005, issued August 12, which added a contract line item for the 
travel lodging allowance and for overseas employee taxes.  Final 
proposal revisions were received on August 21.  The final evaluation 
of offers was as follows:

     OFFEROR        TECHNICAL      PRICE     PERFORMANCE RISK

     Choctaw        Acceptable     [deleted]      Low
        A           Acceptable     [deleted]      Low          
     Saratoga       Acceptable     [deleted]      Low
        B           Acceptable     [deleted]      Low
        C           Acceptable     [deleted]      Low

Contracting Officer's Statement of Facts at 2.

The final proposals submitted by offerors A and C were subsequently 
rejected.  On September 15, award was made to Choctaw on the basis 
that it submitted the lowest priced technically acceptable proposal 
with a low performance risk, and these protests followed.

Saratoga's first complaint is that the agency unreasonably assigned 
Choctaw a low past performance risk rating despite Choctaw's being a 
new company with only 6 months of experience in providing services 
comparable to those being sought here.  Saratoga also maintains that 
the information the agency relied on was contradictory and questions 
the relevance of the awardee's references.

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.

Here, Choctaw's proposal was assigned a low performance risk rating 
based on its performance on two contracts that the agency concluded 
were relevant, including a current Air Force Family Advocacy Program 
contract.  The references contacted for Choctaw responded to the 
agency's questionnaire and provided information which the agency found 
sufficient to conclude that Choctaw was capable of performing this 
requirement.  Both references unequivocally stated that given what was 
known about Choctaw's ability to execute what it promised in its 
proposal, they definitely would award to Choctaw again if given the 
choice.  Agency Report, Tab 8.  Saratoga was assigned a low 
performance risk rating based on its performance on three relevant 
contracts, including a current Air Force Family Advocacy Program 
contract.  [Deleted].

Notwithstanding Saratoga's assertions to the contrary, we see nothing 
unreasonable in the Air Force's manner of assessing the past 
performance history of the offerors, nor do we see any reason to 
question the agency's conclusion, based on that investigation, that 
both offerors presented a low risk of nonperformance.  While Saratoga 
challenges the agency's past performance evaluation because the agency 
did not contact every reference listed by Choctaw, there is no 
requirement that an agency contact all of an offeror's references, 
Dragon Servs., Inc., B-255354, Feb. 25, 1994, 94-1 CPD  para.  151 at 8, nor 
is there any requirement that an agency contact the same number of 
references for each offeror.  IGIT, Inc., B-275299.2, June 23, 1997, 
97-2 CPD  para.  7 at 6.  

While Saratoga believes that its references were more relevant than 
Choctaw's, and better demonstrated its ability to perform, the RFP 
stated that the purpose of performing the past performance risk 
assessment was to identify and review relevant present and past 
performance and then to make an overall risk assessment of an 
offeror's ability to perform the requirement.  RFP  sec.  M.3.c.  The RFP 
did not place any premium on the possession of a greater number of the 
kinds of references that Choctaw points to, and the record provides a 
basis for the evaluators reasonably to conclude that both offerors' 
past performance records warranted the conclusion that each 
demonstrated an ability to successfully perform the requirement.

Saratoga next argues that the agency conducted an improper 
performance/price tradeoff by changing the basis for award from best 
value to one based on low price.  In this regard, Saratoga also 
essentially contends that the agency's failure to properly evaluate 
the realism of Choctaw's proposed prices resulted in a flawed source 
selection decision.

With respect to Saratoga's argument that the agency changed the basis 
for award from best value to one based on low price, the RFP, as 
outlined above, stated that the agency would make a "best value 
award," which the RFP went on to specify meant selection of the 
offeror submitting the lowest-priced, technically acceptable proposal 
if it also received a low performance risk rating.  The RFP provided 
for a performance/price tradeoff only if the offeror submitting the 
lowest-priced, technically acceptable proposal was judged to have a 
moderate, high or inapplicable performance risk rating.  Here, the 
lowest-priced, technically acceptable proposal also received a low 
performance risk rating and in accordance with the RFP represented the 
best value to the government.  Accordingly, the award to Choctaw was 
consistent with the RFP award criteria.  

With respect to Saratoga's argument that the agency did not perform a 
proper price realism analysis, 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.  HSG-SKE, B-274769, B-274769.3, Jan. 6, 1997, 
97-1 CPD  para.  20 at 5.  However, since the risk of poor performance when 
a contractor is forced to provide services at little or no profit is a 
legitimate concern in evaluating proposals, an agency in its 
discretion may, as here, provide for a price realism analysis in the 
solicitation of fixed-price proposals.  Volmar Constr., Inc., 
B-272188.2, Sept. 18, 1996, 96-2 CPD  para.  119 at 5.  The Federal 
Acquisition Regulation (FAR) provides a number of price analysis 
techniques that may be used to determine whether prices are reasonable 
and realistic, including a comparison of the prices received with each 
other, FAR  sec.  15.404-1(b)(2)(i); with previous contract prices for the 
same or similar services; FAR  sec.  15.404-1(b)(2)(ii); and with an 
independent government cost estimate, FAR  sec.  15.404-1(b)(2)(v).  The 
depth of an agency's price analysis is a matter within the sound 
exercise of the agency's discretion.  Ameriko-OMSERV, B-252879.5, Dec. 
5, 1994, 94-2 CPD  para.  219 at 4; Ogden Gov't Servs., B-253794.2, Dec. 27, 
1993, 93-2 CPD  para.  339 at 7.

Here, the RFP stated that price proposals would be evaluated for 
realism, reasonableness and completeness, and provided that the 
evaluators would consider the reasonableness of the proposed price 
versus proposed staffing.  RFP  sec.  M.2.  The RFP further stated that 
there should be a clear and concise correlation between the offeror's 
ability to meet the requirements and the offeror's technical 
information to support a positive determination as to the realism, 
reasonableness, and completeness of the offeror's price.  Id.  For the 
price realism analysis, the RFP stated that evaluators would assess 
the compatibility of the proposed price with the proposal scope and 
efforts, the list of estimating ground rules and assumptions, and the 
schedule duration.  To determine reasonableness, evaluators were to 
determine that (1) the offeror's estimates are based on factual, 
verifiable data and the estimating methodology employed is sound under 
current market conditions, (2) the estimated costs are most likely to 
be incurred by the offeror in the performance of the contract, and (3) 
the estimated total cost and profit are reasonable to the seller and 
reasonable to the buyer.  For an offer to be determined complete, the 
RFP stated that the offeror must provide all the data necessary to 
support the offer.  Id.

The record in this case shows that to assess realism, the offerors' 
prices were compared against the RFP requirements to ensure that all 
areas of the acquisition were reflected in the proposal.  Agency 
Report, Tab 10a.  For completeness, each proposal was compared against 
the RFP to ensure compliance and the proposals were also compared 
against the requirements in the RFP to verify that all areas were 
addressed.  For reasonableness, offerors' assumptions, proposed profit 
rates, contract summary information, and explanations of plans to 
handle foreign taxes were evaluated.[2]

Choctaw initially provided a primary proposal that included an 
allowance for foreign taxes and an alternate proposal that assumed the 
labor categories in question would receive exemption from taxes.  A 
clarification request (CR) was issued which required Choctaw to submit 
a single proposal conforming to amendment No. 0005.  Choctaw also made 
certain assumptions the evaluators determined had to be resolved 
before price realism could be determined.  Choctaw, in its revised 
proposal, addressed the CRs pertaining to its assumptions that the Air 
Force would continue to provide the same level of support to the 
Program Management Office as provided in the current contract by 
withdrawing the assumption and including the costs for housing the 
office and providing support to conduct all required business in the 
Program Management Contract Line Item or Overhead at no further cost 
to the government.  The evaluators concluded that Choctaw's revised 
proposal adequately addressed the evaluators' concerns and adequately 
addressed amendment No. 0005.  In its revised proposal, Choctaw's 
employee compensation remained the same as the original proposal, 
overhead was reduced from 11 percent to 10 percent and the profit rate 
was reduced from 7.5 percent to 7 percent due to an expanded business 
base.  The evaluators concluded that Choctaw's employee compensation 
plan and base salaries were adequate to recruit and retain employees 
and therefore met the price realism criteria.  A comparison of the 
proposed professional compensation of Saratoga and Choctaw showed that 
the Choctaw's professional compensation and total compensation were 
actually higher than Saratoga's.

Saratoga objects to the price realism analysis arguing that it did not 
follow the RFP stated evaluation plan and objects to the fact that the 
base salary comparison was allegedly made after contract award.  
However, as explained above, the agency performed a detailed price 
evaluation consistent with the RFP plan, as a result of which the 
agency concluded that Choctaw's prices were reasonable.  Based on the 
record before us, we have no basis to object to the reasonableness of 
this determination.  As noted above, in a fixed-price solicitation the 
extent of a price realism analysis is left to the discretion of the 
agency.  In response to Saratoga's allegation that the base salary 
comparisons were made after award, the Air Force reports that the 
November 4, 1998 memorandum (Agency Report, Tab 9a) was prepared to 
explain how the standards for minimum salaries were determined, but 
that the spreadsheet was prepared concurrently with the evaluation of 
proposals.  Contracting Officer Statement of Facts in Response to 
Protester's Comments.  The record shows that Choctaw's proposed 
compensation was consistent with prior contracts.  Moreover, the 
record also shows that Choctaw's professional compensation plan is 
actually higher than Saratoga's.  In sum, there is no merit to 
Saratoga's allegation that the agency failed to properly evaluate 
Choctaw's employee compensation plan.  

Saratoga also argues that Choctaw's proposal contains assumptions and 
qualifications that are inconsistent with the solicitation.  
Specifically, Saratoga states that Choctaw in its proposal assumed 
that:  (1) the agency would not object to relocation of the Program 
Management Office to another country in order to obtain more 
beneficial tax treatment for Choctaw; (2) the agency would continue 
providing office space and utilities, telephone access, and incidental 
support to Choctaw employees managing the program; (3) the incumbent 
contractor would have the responsibility of recruiting for vacant 
positions between the date of contract award and the beginning of 
performance by the awardee; (4) pending hires would be identified to 
Choctaw for final hiring determinations; (5) the incumbent contractor 
would cooperate with Choctaw in providing certain information 
allegedly known only to the incumbent; (6) the successful offeror 
would not be required to provide replacement staffing; and (7) certain 
preferences would be afforded in the credentialing process.  Saratoga 
also contends that Choctaw further qualified its response to the RFP 
by offering a reduced price proposal, conditioned upon the elimination 
of Choctaw's liability for taxes in Germany, as well as Choctaw's 
right to request equitable adjustments from the agency to cover the 
costs of establishing an office in Europe and any tax liabilities 
incurred by Choctaw employees that were not foreseen at the time it 
submitted its proposal.

In fact, the only assumptions Choctaw made in its initial proposal 
that were not consistent with the RFP and that affected its proposed 
price related to the tax issue and the continued government support of 
the Program Management Office.  These concerns were brought to 
Choctaw's attention and, in its revised proposal, Choctaw adequately 
responded to the tax issue and withdrew its assumptions concerning the 
government's level of support to the Program Management Office, 
stating that the costs for housing the office and providing support to 
conduct all required business were included and itemized in the 
Program Management contract line item or would be provided from 
overhead at no further cost to the government.  The record shows that 
the other assumptions were either required by the existing contract or 
simply restated what was required under this solicitation and did not 
affect the price, quantity, quality or delivery of the services.  For 
example, the requirement that the incumbent contractor provide 
credential files on privileged employee to the new contractor and 
provide proof in writing of the primary source of verification of 
employee credentials appears in the solicitation at RFP  sec.  C.1.8.6.  
Similarly, the solicitation contains a requirement that the contractor 
shall ensure sufficient staffing for full coverage throughout the term 
of the contract.  RFP  sec.  C.1.6.  In short, Choctaw's final proposal did 
not contain any material qualifications and Saratoga's allegations in 
this regard are factually misplaced.

The protests are denied.

Comptroller General 
of the United States 

1. Section M of the RFP stated that the purpose of the past 
performance evaluation was to identify and review relevant present and 
past performance and provided that past and present performance 
information would be obtained through the use of simplified 
questionnaires or telephone interviews and using data independently 
obtained from other government and commercial sources.  RFP  sec.  M.3.

2. The agency reports that award would have been made on initial 
proposals had it not been for a change in the Status of Force 
Agreement which involved a tax issue for certain labor categories 
whose incomes may be subject to taxation by German tax authorities.  
Consequently, an amendment was issued that added a cost reimbursable 
line item for the taxes, and revised proposals were requested.