BNUMBER:  B-281948 
DATE:  May 10, 1999
TITLE: K.G., Inc., B-281948, May 10, 1999
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Matter of:K.G., Inc.

File:     B-281948

Date:May 10, 1999

Kevin P. Connelly, Esq., John C. Lavorato, Esq., and Michael D. 
Garson, Esq., Seyfarth, Shaw, Fairweather & Geraldson, for the 
protester.
Gena E. Cadieux, Esq., and Joseph Lenhard, Esq., Department of Energy, 
for the agency.
Robert C. Arsenoff, Esq., and Paul I. Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest that awardee's bid should have been rejected as nonresponsive 
for alleged failure to comply with a solicitation requirement that 
bids for first 2 performance years be priced in accordance with an 
applicable wage determination is denied where the bid satisfied the 
requirement.

DECISION

K.G., Inc. (KGI) protests the award of a contract to Miracle Services, 
Inc. under invitation for bids (IFB) No. DE-FB01-99AD66850, issued by 
the Department of Energy (DOE) as a small business set-aside for 
certain janitorial and maintenance services to be performed at the 
agency's Forrestal Building headquarters in Washington, DC and at an 
adjacent child development center.  The protester principally alleges 
that Miracle's bid should have been rejected as nonresponsive for 
failure to comply with an IFB pricing requirement, and that the bid is 
unbalanced.

We deny the protest.

The IFB was issued on November 10, 1998, and bids were opened on 
December 10.  Bidders were required to submit all-inclusive prices for 
a base year (year 1) and four 1-year option periods (years 2 through 
5).  The bid schedule provided that, for each year, the bidder was to 
submit separate pricing for:  (1) a "DOE Unilateral Option for 
Cleaning of Forrestal Cafeteria"; (2) a "DOE Unilateral Option for 
Cleaning of the Forrestal Child Development Center," which is adjacent 
to the Forrestal Building; and (3) "[a]ll remaining cleaning services 
in accordance with the Statement of Work [SOW]."  IFB amend. 3,  sec.  B.5; 
IFB  sec.  B.6.  The IFB notified bidders that the contract awarded would 
be subject to the Service Contract Act (SCA).  IFB  sec.  B.9(c).  A 
Collective Bargaining Agreement (CBA) between the Service Employees 
International Union and the current contractor was to serve as the SCA 
wage determination for the first 2 years of the contract.  IFB attach. 
3.  The IFB further provided that price adjustments would be applied 
to subsequent contract years once a new wage determination had been 
incorporated into the contract.  IFB  sec.  B.9(c).  The CBA established 
$13.74 per hour as the minimum labor rate for year 1 and $ 14.62 per 
hour as the minimum labor rate for year 2.  See CBA art. XVI and  sec.  
24.2, 25.1 and 26.3(a).

Bid prices were to include "all direct and indirect expenses 
associated with the performance of the contract."  IFB  sec.  E.1(i).  The 
IFB set forth an agency minimum estimate of 325 hours per work day for 
SCA personnel to adequately perform the work set forth in the SOW.  
Id.  Contractors were required to perform approximately 251 days per 
year (i.e., weekdays exclusive of 10 regular government holidays).  
IFB  sec.  B.10.3.C.

In addition to providing personnel subject to the SCA wage rates, 
bidders were responsible for providing supervisory personnel, 
specified supplies, equipment and uniforms, as well as telephone 
service for external calls.  IFB  sec.  B.10.5.C, 6.B.  The IFB did not 
call for bidders to break down the labor costs to separately identify 
profit and labor costs, or to specify associated overhead, materials, 
administrative and other costs incorporated into their bid prices.[1] 

Section E.1(i) of the IFB provided as follows:

     This is an all or nothing solicitation, bidders will provide 
prices
     for all items in Clauses B.5 and Clause B.6. FAILURE TO 
     PROVIDE ALL PRICES WILL RENDER THE BID
     NONRESPONSIVE AND IT WILL BE REJECTED.
     Additionally, the bidder should provide total prices 
     by year and the total cumulative price in Clause B.7
     "Summary."  The evaluation of price will include all 60
     months .  .  .  .  The bid prices are to include all direct and
     indirect expenses associated with the performance of the 
contract.

     Bidders will price year one and two in accordance with the
     [SOW] and Wage Determination.  The Wage Determination is 
applicable through January 31, 2001.  Years Three, Four and Five will 
be bid the same as year two.  Afterward and once the new wage 
determination is incorporated into the contract, the price(s) for the 
remaining years will be adjusted in accordance with clause B.9.

Eleven bids were received.  The apparent low bidder was permitted to 
withdraw its bid for reasons not pertinent to this protest.  The next 
two low bidders were the eventual awardee and the protester.  Their 
bids were as follows:

                           Miracle          KGI

              Year 1  $1,630,086.00  $1,594,104.34   

              Year 2  $1,633,013.88  $1,668,574.17   

              Year 3  $1,636,050.24  $1,668,574.17   

              Year 4  $1,639,154.28  $1,668,574.17   

              Year 5  $1,642,353.36  $1,668,574.17   

               TOTAL  $8,180,657.76  $8,268,401.02   
Agency Report at 3.  The agency made award to Miracle on January 20, 
1999, and KGI filed this protest  on January 28.

Stating that the $74,469.83 increase in its own bid price from year 1 
to year 2 solely reflected the $0.88 per hour increase in the wage 
determination from year 1 to year 2, KGI asserts that the minimal 
$2,927.88 increase in Miracle's bid price for the same time frame 
shows that Miracle did not price year 1 and year 2 "in accordance with 
the [SOW] and Wage Determination," as required by section E.1(i), and 
concludes that the agency was required to reject the bid as 
nonresponsive.

As a general matter, even where an offeror bases its price on rates 
below those specified in a wage determination, that firm is eligible 
for award if the offeror does not take exception to the SCA wage 
determination requirements.  McDonald-Bradley, B-270126, Feb. 8, 1996, 
96-1 CPD  para.  54 at 2.  Here, nothing in its bid indicates that Miracle 
took exception to the wage determination requirements.  Further, there 
is no indication that Miracle somehow failed to price the first 2 
years "in accordance with" the SOW and the applicable wage 
determination.  As indicated above, bidders were required to provide a 
minimum of 325 SCA labor hours per day for 251 days per year for a 
total of 81,575 SCA labor hours per year; when the specified wage rate 
for year 1 ($13.74 per hour) is multiplied by the minimum number of 
SCA hours required by the IFB per year, the required yearly SCA wages 
add up to $1,120,840.50; using the specified wage rate for year 2, the 
amount is
$1,192,626.50.  In each case, Miracle's all-inclusive price 
substantially exceeds the relevant minimum yearly total.  Thus, as the 
agency points out, since Miracle's total bid for each year is more 
than sufficient to pay the applicable SCA rates for each year, there 
is no basis to conclude that Miracle did not bid "in accordance with" 
the SOW and the CBA.

Other non-wage rate elements required to be included by the IFB into 
the all-inclusive bid prices (e.g., profit, overhead, supervisory 
costs, supply and equipment costs, uniform costs and the cost of 
telephones for external calls) may have caused the structure of 
Miracle's bid for the first 2 years to differ from that of KGI's bid. 
However, even if this were not the case, and it appeared that Miracle 
had bid below its cost, there is simply no prohibition on such 
below-cost bidding.  Bollinger Mach. Shop & Shipyard, Inc., 
B-261135.2, Sept. 1, 1995, 96-1 CPD  para.  123 at 3.  Accordingly, this 
aspect of the protest is denied.

Noting that Miracle's bid prices for years 3, 4 and 5 contain 
progressive (although minimal) increases through time, KGI further 
alleges that Miracle failed to comply with the requirement in section 
E.1(i) that "Years Three, Four and Five will be bid the same as year 
two."  However, the section pertains only to the SCA-derived wages for 
which there is a uniform escalation, and does not, as the protester 
suggests, prohibit any increases in prices throughout the remainder of 
the contract for non-SCA-wage items.

KGI also maintains that Miracle's bid was materially unbalanced.  KGI 
asserts that Miracle's bid does not become low until year 3 at the 
earliest, noting that if the government does not exercise at least two 
options, or if the next CBA results in wage reductions, KGI's price 
would be low.  KGI argues, therefore, that Miracle's bid should have 
been rejected as unbalanced since the agency is not reasonably assured 
that an award to Miracle will result in the lowest price to the 
government.

Federal Acquisition Regulation (FAR)  sec.  14.404-2(g) provides that 
materially unbalanced bids may be rejected and references FAR  sec.  
15.404-1(g), which provides that unbalanced pricing arises where the 
prices of one or more contract line items are significantly over- or 
understated.  KGI's unbalancing allegation is entirely premised on the 
assertion that Miracle's year 2 prices fail to rise enough to reflect 
the CBA wage increase between years 1 and 2; KGI has not provided any 
other support for the proposition that Miracle's year 1 prices are 
overstated and its year 2 prices are understated.  Since we reject, 
for the reasons explained above, KGI's argument that Miracle's prices 
fail to conform to the required year 2 CBA wage increase, we similarly 
find without merit KGI's assertion that Miracle's prices are 
understated or overstated.  Accordingly, the factual predicate for a 
finding of unbalanced pricing does not exist.   

The protest is denied.

Comptroller General
of the United States 

1. Section E.1(o) of the IFB required the contractor to submit a 
certified list of personnel who would be staffing the contract within 
5 working days after award.  It further provided that all proposed 
rates of pay must, at a minimum, conform to the CBA; failure to so 
conform would result in the contractor being ineligible for an 
adjustment in contract price following the adoption of a new wage 
determination after the expiration of the current CBA.