TITLE:  	ACS Government Solutions Group, Inc., B-282098; B-282098.2; B-282098.3, June 2, 1999
BNUMBER:  B-282098; B-282098.2; B-282098.3
DATE:  June 2, 1999
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ACS Government Solutions Group, Inc., B-282098; B-282098.2; B-282098.3, June
2, 1999

Decision

Matter of: ACS Government Solutions Group, Inc.

File: B-282098; B-282098.2; B-282098.3

Date: June 2, 1999

Timothy B. Harris, Esq., for the protester.

Frances Cox Lively, Esq., Department of Housing and Urban Development, for
the agency.

Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest that agency improperly failed to evaluate offers consistent with
instructions to offerors in solicitation for comprehensive loan servicing
services is sustained where offerors were prohibited from proposing a
solution that assumed that the agency would permit an electronic interface
between the agency's and the successful offeror's data systems, and the
record shows that the awardee's technical approach and price relied
significantly on the existence of such an interface for performing the
requirement.

2. Allegation that agency improperly evaluated the awardee's proposal under
the prior experience evaluation factor is sustained where the solicitation
contemplated the evaluation of corporate and key personnel experience
separately, and the record contains no basis upon which the agency could
reasonably have determined that the awardee's demonstrated corporate
performance was, in accordance with the terms of the solicitation, the
"same" as or "similar" to the solicitation requirements.

3. Allegation that discussions with protester were not meaningful is
sustained where the record shows that the evaluators were concerned over the
protester's pricing methodology and the source selection official shared
that concern, but the protester was not afforded an opportunity during
discussions to explain its pricing strategy.

DECISION

ACS Government Solutions Group, Inc. (ACS) protests the issuance of a task
order to Deloitte & Touche (D&T) under request for proposals (RFP) No.
R-DEN-00614, issued by the Department of Housing and Urban Development (HUD)
for comprehensive loan servicing services. ACS argues that HUD failed to
adhere to the instructions to offerors; improperly evaluated the awardee's
proposal; failed to conduct meaningful discussions with ACS and held
improper discussions with the awardee; and based its selection on a flawed
price/technical tradeoff analysis.

We sustain the protest.

Background

The RFP, issued on November 19, 1998, contemplated the issuance of a task
order for a base period with up to three 1-year option years. RFP sect. B, para.
1.3, at B-1, B-2 and sect. E para. 1.3(f)(1). The contractor is to perform a full
range of comprehensive servicing of HUD's Secretary-held single family
mortgage portfolio. Id. sect. C-1, para. 1.1. The required services include initial
loan set-up, servicing the loan, and accounting-related functions. Id. The
RFP specifically limited proposals to those firms included on a General
Services Administration Federal Supply Schedule (FSS), for Loan and Other
Asset Servicing/Management services. Id. sect. E, para. 1.2.

The RFP provided for a two-phase procurement cycle. In the first phase,
offerors were required to submit a statement of qualifications and past
performance, which was to be reviewed by an evaluation panel to determine
which firms would be invited to participate in the second phase of the
procurement. Id. sect. E, para. 1.2(b). In the second phase, offerors were required
to submit a written business proposal and provide an oral presentation for
their technical and management proposals. Id. Upon completion of the oral
presentations, a technical evaluation panel (TEP) was to conduct discussions
and obtain clarifications from the offerors. The RFP stated that upon
conclusion of all oral presentations, the TEP would perform a final
technical evaluation of the presentations and offerors would be afforded an
opportunity to submit written final proposal revisions (FPR) based upon the
discussions. Id.

The RFP listed the following technical evaluation factors in descending
order of importance (respective weights, which were not disclosed in the
RFP, are shown in parentheses): quality control (50 points), plan of
accomplishment (40 points), management capability (35 points), and prior
experience (25 points), for a maximum possible score of 150 points. Id. sect. E,
para. 1.7(a)(2); Contracting Officer's (CO) Statement, Mar. 30, 1999 at 3. Price
was not to be numerically scored. [1] RFP sect. E, para. 1.8(a). The RFP stated that
combined relative merit under the technical evaluation factors was to be
considered more significant than price. Id. para. 1.8(a). HUD would issue a task
order to the responsible offeror whose offer conformed to the solicitation
and was deemed more advantageous to the government. Id.

Of the four firms invited to participate in the second phase of the
procurement, three firms, including ACS and D&T, responded by the November
30, 1998 closing date. CO Statement at 3. Oral presentations were limited to
1 hour for each firm; discussions were held immediately following each oral
presentation; and the TEP then convened to arrive at initial consensus
ratings. The agency then requested FPRs, and the TEP reevaluated proposals
based on the FPRs, with the following final consensus results for the
protester and the awardee:

 Firm   Score  Risk   Total Price

 D&T    146    Low    $36,634,084.20

 ACS    141    Low    20,183,094.32

Agency Report (AR), exh. 50, Memorandum from the CO to the Source Selection
Official (SSO) at 2nd and 3rd unnumbered pages (Dec. 31, 1998).

Based on the results of the evaluation, the TEP recommended to the CO that
D&T be issued the order as the firm offering the best overall value to the
government. AR, exh. 51, Memorandum from TEP to CO at 5 (Jan. 4, 1999). [2]
That recommendation was then forwarded to the SSO for a final decision. The
SSO accepted the TEP's recommendation, concluding that D&T offered a higher
level of experience, technical ability and additional benefits to HUD,
especially in the areas of tax and due diligence services, which justified
paying a premium for D&T's proposal. AR, exh. 56, Memorandum from the SSO to
the CO at 3rd unnumbered page (Jan. 19, 1999). By letter dated February 10,
HUD informed ACS that the task order had been issued to D&T. This protest to
our Office followed a written debriefing. [3]

Protester's Contentions

ACS primarily argues that in issuing the order to D&T, HUD improperly
disregarded the solicitation's instructions that offerors were required to
use HUD's loan servicing software system, referred to in the record as
"Strategy," and because, in further disregard of HUD's instructions to
offerors, D&T's approach assumed that HUD would permit an electronic
interface between Strategy and D&T's data systems.

ACS also argues that HUD improperly evaluated D&T's proposal under the prior
experience factor. In this connection, ACS maintains that the evaluators
improperly awarded D&T's proposal a nearly perfect score in this area
despite the fact that neither D&T nor its teaming partner demonstrated
corporate experience in performing loan servicing that was the "same" as or
"similar" to the solicitation requirements.

The protester also argues that HUD conducted improper discussions with D&T
and failed to conduct meaningful discussions with ACS, and that the agency's
price/technical tradeoff decision was flawed.

Discussion

Instructions to Offerors

ACS's primary ground of protest is that HUD provided specific instructions
to offerors which were designed to permit the agency to evaluate proposals
on an equal basis, and that in accepting D&T's proposal, HUD improperly
disregarded those instructions. Specifically, ACS contends that the
solicitation required offerors to use HUD's software system, Strategy, which
HUD was developing specifically for this loan portfolio. In addition, ACS
argues that HUD instructed offerors not to propose the use of an electronic
interface between their system and Strategy, and to reserve proposing
additional services and capabilities until after award. According to ACS,
D&T disregarded the agency's specific instructions that offerors were to use
HUD's Strategy system and proposed an electronic interface between its data
systems and HUD.

HUD takes the position that this is a "performance-based" solicitation,
where the RFP explained HUD's objectives and left it up to the offerors to
determine how to accomplish the tasks. Memorandum of Law, Mar. 30, 1999, at
16-17. The agency states that while offerors were instructed to use HUD's
Strategy system, they were not prohibited from proposing their own data
system to augment Strategy; they could not, however, use their own data
system in place of Strategy. The agency states that offerors were also
instructed that their computer system could not interface with HUD's system.
Id. at 19-21. HUD maintains that, consistent with the instructions to
offerors, D&T proposed its own system to augment Strategy, and that D&T's
approach does not assume an electronic interface between Strategy and D&T's
systems.

It is thus undisputed that offerors were expected to use HUD's Strategy
system, and were further instructed not to assume that HUD would permit an
electronic interface between Strategy and their own system. The issue
presented for our resolution, therefore, is whether in issuing the order to
D&T, HUD disregarded these instructions and effectively waived the
requirement that offerors use Strategy, or relaxed the prohibition against
assuming an electronic interface between HUD's system and D&T's systems.

In response to phase I of the competition, D&T provided a statement of its
qualifications and past performance in which the firm explained that it
would be teaming with The Clayton Group, Inc. to perform the required
services. AR, exh. 4, D&T's Nov. 30, 1998 response to RFP, at 4. In this
connection, D&T explained that it would use its experience to develop and
manage a comprehensive quality control program tailored to the
solicitation's requirements, while personnel from its teaming partner would
perform all other servicing and asset sale support functions. Id. Regarding
Clayton's loan servicing capabilities, D&T's response stated as follows:

Clayton's performing loan servicing and administration units operate from a
[DELETED], which is electronically wrapped by ARSENAL, an industry-leading,
proprietary, default management operating system.

Id.

In its business proposal, under a section entitled "Equipment," D&T
describes its proposed systems as follows:

Systems - The Deloitte/Clayton Team utilizes a [DELETED] servicing platform
for Loan Administration functions. The system is year 2000 compliant and
fully capable of accepting the 12,673 loans contemplated under this
contract. As required by HUD, Deloitte/Clayton is prepared to utilize the
new Strategy loan servicing system. However, we strongly recommend an
interface that would allow Strategy and [DELETED] to run concurrently. This
interface will significantly reduce the unit cost of servicing each loan, by
automating critical servicing functions including escrow analysis,
collection letters and reporting. Our pricing is based on this system
interface. The per-unit price will increase if servicing functions that are
normally automated have to be performed manually.

[DELETED] is electronically wrapped by ARSENAL, an industry leading,
proprietary, default management operating system. ARSENAL . . . is one tool
in the Clayton Technologies suite . . . that utilized together, provide
unequaled loan analysis, management and reporting capabilities.

AR, exh. 12, D&T Business Proposal, Dec. 11, 1998, at 5 (emphasis added).

Under a section entitled "ROUTINE SERVICING," D&T's proposal further
explained that "[DELETED] has the built-in capabilities to track escrow,
complete escrow analysis and [produce] year-end statements." Id. at 8. D&T's
proposal further states that "[i]t is our intent, with the approval of the
GTR and the GTM to build a bridge between our servicing system, our default
system and Strategy, to enable HUD to receive both their own reports and
take advantage of the robust reporting capabilities of our proprietary
software." Id. Under a section entitled "REPORTING," the proposal explains
the various reporting capabilities and benefits to HUD, and specifically
states that "ARSENAL will seamlessly interface with the HUD systems." Id. at
23. D&T further explained during discussions that if [DELETED] cannot be
electronically linked with HUD's Strategy system, the value of ARSENAL to
HUD would decrease dramatically. AR, exh. 15, Video Recording of D&T's
Discussions.

The agency's argument that D&T's approach did not involve an electronic
interface is further undermined by the following exchange between HUD's
Director of Denver Field Contracting Operations (DDFCO) and D&T during oral
discussions:

DDFCO: I still have one question on the interface that you have that you're
going to need--it's not . . . I don't know how much of that is integral to
your proposal but we don't know yet whether there actually can be an
interface at our headquarters which will allow an interface to a HUD system
to be developed. . . . So, I don't know how critical that is to your
proposal.

. . . . .

D&T: And I think the challenge that you're giving me that I want to make
sure I measure ourselves against is we may have priced this to be overly
efficient on the assumption that we could do an electronic bridge. So I
think we need to make sure that what happens to our pricing if we can't,
because I think we've been operating on the assumption that that's
imminently do-able and it may be a bad assumption.

  1. HUD's Post-Hearing Comments, May 6, 1999, attach. 3, transcript of
     portions of Dec. 15, 1998 discussions with D&T, at 2.

The record is thus clear that based on HUD's review of D&T's proposal, as
shown by the exchange during oral discussions quoted above, HUD understood
that D&T proposed an electronic interface between its data systems and HUD's
Strategy. Further, D&T made it clear both in its proposal and during
discussions that its pricing assumed that the agency would permit an
electronic interface between the agency's and D&T's system. HUD's assertion,
therefore, that there is "no electronic connection shown between [D&T's]
system and HUD's Strategy system," HUD's Post-Hearing Comments, May 6, 1999,
at 12, not only disregards the facts in the record, but is inconsistent with
D&T's own explanation that its systems will "seamlessly" interface with
HUD's system, and that its pricing was based on the existence of that
electronic interface.

It is a fundamental principle of government procurement that offerors must
be provided with a common basis for the preparation of their proposals.
Meridian Management Corp.; Consolidated Eng'g Servs., Inc., B-271557 et al.,
July 29, 1996, 96-2 CPD para. 64 at 5. Thus, award must be based on the
requirements stated in the solicitation, and offerors notified of the
government's changed or relaxed requirements. Id. We will sustain a protest
where an agency, without issuing a written amendment, fails to notify all
offerors of its changed requirements or relaxes an RFP specification to the
protester's possible prejudice (e.g., where the protester would have altered
its proposal to its competitive advantage had it been given the opportunity
to respond to the altered requirements). Container Prods. Corp., B-255883,
Apr. 13, 1994, 94-1 CPD para. 255 at 4.

The record shows that HUD wanted to ensure that the offerors used Strategy,
and made this clear during the preproposal conference. Further, while
offerors could propose to use their own data systems, they were specifically
instructed not to assume that HUD would permit an electronic interface
between their own systems and Strategy. Based on our review of the entire
record, including D&T's statement of qualifications and experience submitted
during phase I of the competition, its business proposal, and the transcript
of the video recording of its discussions, we conclude that by issuing D&T
the order, HUD essentially waived the instructions given offerors concerning
the interface, and improperly accepted a proposal which relied significantly
on the existence of that interface. Although D&T's proposal states that the
firm is prepared to use HUD's Strategy system, it is clear that the firm's
entire approach to loan servicing and reporting significantly relies on, and
assumes, the existence of an electronic interface between HUD's Strategy
system and Clayton's servicing software to perform the contract. Indeed, the
awardee specifically stated that D&T's pricing is based on such an
assumption; that, without the interface, the value of D&T's ARSENAL system
to HUD would decrease dramatically; and that, without the interface, D&T's
price would increase because critical servicing functions that are normally
automated (e.g., escrow analysis, collection letters, and reporting) will
have to be performed manually. The agency's action prejudiced the protester
because ACS was not notified of the waiver and its approach was premised on
using HUD's Strategy system and its own data system concurrently, without
assuming an electronic interface between its own systems and Strategy. Given
the significant difference between the vendors' prices--and in light of the
fact that without an interface, D&T's total price is likely to increase--and
the closeness of the final technical scores, we think that there is a
reasonable possibility that ACS was prejudiced by the agency's waiver of the
stated instructions. Accordingly, we sustain this aspect of the protest.

Evaluation of D&T's Prior Experience

ACS argues that HUD improperly evaluated D&T's proposal under the prior
experience evaluation factor. Specifically, ACS contends that HUD
unreasonably rewarded D&T for having corporate experience "the same as or
substantially similar to" that required by the solicitation, which D&T did
not demonstrate in its proposal.

The agency takes the position that this evaluation factor did not require
that corporate experience and key personnel be separately evaluated. As
such, the agency contends that the evaluation of D&T's proposal was
reasonable because the evaluators considered the experience of its key
personnel to satisfy the criterion.

Under the FSS program, agencies are not required to request proposals or to
conduct a competition before using their business judgment in determining
whether ordering supplies or services from an FSS vendor represents the best
value and meets the agency's needs at the lowest overall cost. FAR sect.sect. 8.401,
8.404(a); Amdahl Corp., B-281255, Dec. 28, 1998, 98-2 CPD para. 161 at 3. Where,
as here, an agency conducts a competition, however, we will review the
agency's actions to ensure that the evaluation was reasonable and consistent
with the terms of the solicitation. Information Sys. Tech. Corp.,
B-280013.2, Aug. 6, 1998, 98-2 CPD para. 36 at 3; COMARK Fed. Sys., B-278343,
B-278343.2, Jan. 20, 1998, 98-1 CPD para. 34 at 4-5. We have reviewed the
individual evaluators' worksheets, the TEP's consensus evaluation reports,
and the award recommendation memorandum, and find that the evaluation of
D&T's proposal under the prior experience factor was unreasonable.

The RFP explains the purpose of the contemplated contract, in part, as
follows:

The purpose of this contract is to engage a loan servicing organization to
perform a full range of comprehensive servicing of the Department's
Secretary-held Single Family mortgage portfolio. These services will range
from the initial loan set-up, to the servicing of the loan, to the
accounting related functions (perform disbursement data review and entry
functions, print and mail checks, accounts receivable and payable, and
financial adjustments), to the satisfaction of the mortgage or to ensure
completion of legal actions, if appropriate.

In addition, the contractor shall also be responsible for servicing the
Department's Loss Mitigation Partial Claims Mortgages and their legal
instruments.

RFP sect. C-1, para. 1.1.

The RFP estimated that the successful contractor would provide comprehensive
servicing for more than 12,000 Secretary-held single family mortgages, and
more than 1,000 partial claim subordinate mortgages. Id. sect. C, Technical Exh.
2. The CO states that the majority of the mortgages currently in the loan
servicing portfolio are considered delinquent. CO's Statement, Mar. 30,
1999, at 1.

In order to evaluate the offerors' prior experience, firms were required to
provide "evidence of [their] corporate and staff experience in servicing a
large portfolio of delinquent loans" during the 5 years immediately
preceding the solicitation. RFP sect. E, para. 1.7(a)(2)(iv). [4] In addition to the
information required by the RFP, by letter dated November 19, 1998, HUD
requested the following specific information from each offeror:

Provide evidence of your corporate and staff experience in performing work
and providing deliverables the same as, or substantially the same as the
primary services required [by the RFP] during the five (5) years immediately
preceding this solicitation. This includes any key personnel,
subcontractors, partnerships, etc. necessary to perform the primary services
required.

Provide a list of all clients including Federal, state and local governments
and commercial customers for whom you performed the same or similar services
as those required during the five (5) years immediately prior to this
solicitation which includes the following: Name of the contracting office,
contract number, total contract value, contracting officer name and
telephone number, program manager name and telephone and list of major
subcontractors.

Provide evidence of your successful performance of work-including meeting
delivery dates and schedules the same as or substantially similar to that
required during the five (5) years immediately preceding this solicitation.

AR, exh. 2, HUD letters to offerors, Nov. 19, 1998, at 1.

Here, the solicitation and the agency's request for information quoted above
clearly indicated that HUD considered a firm's experience to be different
from its employees' individual experience. The RFP specifically requested
offerors to provide evidence of their corporate and staff experience in
servicing a large portfolio of delinquent loans. RFP sect. E, para. 1.7(a)(2)(iv).
Offerors were also instructed to provide evidence of their corporate and
staff experience pertinent to performing work the same as, or substantially
similar to, the primary services required by the RFP during the past 5
years. Although the RFP stated that both corporate and personnel experience
were to be evaluated under the prior experience factor, given the reference
in the RFP to corporate and staff experience, id., and the type of
information HUD specifically requested in its November 19 letter, we
conclude that, contrary to the agency's position, under this evaluation
factor, the RFP clearly contemplated a separate evaluation of corporate and
key personnel experience. [5]

Our review of the record, including testimony at the hearing, shows that the
TEP's conclusion was based almost entirely on its evaluation of D&T's
proposed key personnel, and that the TEP did not conduct a separate
evaluation of the firm's corporate experience. The TEP awarded D&T's
proposal 23 out of 25 points under the prior experience factor. AR, exh. 46,
TEP Final Consensus Score Sheet, at 6th unnumbered page. The TEP found that
as a company, including its key personnel, D&T "has been performing the
primary services required under this contract for a large portfolio of
delinquent loans for a significant portion of the five years immediately
preceding the solicitation." Id. The TEP further noted that D&T had
demonstrated "extensive experience servicing large portfolios of delinquent
loans both in the private and public sector," id., and concluded that D&T
"has clearly demonstrated extensive ability in delinquent loan servicing
both in the public and private sector." Id. at 7th unnumbered page. We have
reviewed the evaluation record, including the individual evaluators' score
sheets, D&T's proposal, and the video recording of D&T's oral presentation,
and conclude that the TEP's conclusions are not supported by the record.
Below we discuss some examples of the projects the TEP relied on in its
evaluation in support of our conclusion.

In its proposal, D&T described a project in support of the Government
National Mortgage Association (Ginnie Mae). According to the proposal, D&T
"was awarded a multi-year task order contract to support Ginnie Mae's Office
of Finance in evaluating, developing and implementing information and risk
management systems." AR, exh. 4, at 29. The proposal further explains that
D&T was "awarded several tasks to address the operational procedures and
information systems of Ginnie Mae's Office of Asset Management." Id. One TEP
member, who awarded D&T's proposal the maximum number of points available in
this area, testified that while this particular experience is in developing
a desk guide for loan servicing, it is not loan servicing. Tr. 68, 69. With
respect to D&T's corporate experience generally, one evaluator testified
that D&T has experience in performing loan servicing reviews, which is
different from actually performing loan servicing. Tr. at 65, 66. This
evaluator simply could not point to any project where D&T had demonstrated
in its proposal having extensive experience in performing loan servicing on
large delinquent portfolios in the private sector. Tr. 73, 74. Further, this
evaluator could not point to anything in the record to show that D&T had
experience in direct loan servicing in either the private or public sector
because, according to the witness, D&T does not service loans. Tr. 68-70.
Another evaluator who awarded D&T's proposal 17 points in this area also
testified that D&T, as a company, does not have any experience servicing a
large portfolio. Tr. 166. In our view, the corporate experience D&T
described in its proposal, particularly its work with Ginnie Mae, clearly
did not demonstrate that the firm had provided comprehensive servicing of a
large portfolio of delinquent single family mortgages as contemplated by
HUD's solicitation.

D&T also relied on work performed by its teaming partner, The Clayton Group,
and included six projects to satisfy the corporate experience requirement.
D&T described the first project, with [DELETED] Bank, as related to
delinquency problems with various consumer loan portfolios secured by auto
leases and loans, unsecured line of credit portfolios, and mortgage
portfolios. The period of performance for this contract was from January to
April 1998. AR, exh. 4, D&T's proposal, Nov. 30, 1998, at 38. Although the
proposal states that this portfolio consisted of 40,000 loans and references
"mortgages," there is nothing in the record to indicate how many loans
within this portfolio were single family mortgages. Tr. 79, 80. Further, it
is clear that the contract was primarily for the collection of delinquent
auto loans and leases. Specifically, D&T's proposal states that The Clayton
Group was retained to resolve an "unacceptably high delinquency rate in
[DELETED] automobile loan and lease portfolio." AR, exh. 4, D&T's proposal,
Nov. 30, 1998, at 32, 40. Resolving delinquent auto loans and leases,
however, is not the same as servicing single family mortgages. For instance,
one evaluator testified at the hearing that servicing mortgages is much more
complex than servicing auto loans, in that servicing a delinquent first
mortgage loan requires "much more intensive labor" and generally involves
relatively complex functions (e.g., escrows, paying taxes), which are not
usually involved in servicing auto loans. Tr. 59-60. In our view, this
contract to resolve delinquent auto loans and leases, clearly does not
demonstrate corporate experience the "same as or similar to" providing
comprehensive servicing to more than 12,000 delinquent single family
mortgages as contemplated by HUD's solicitation.

The Clayton Group describes another project, with [DELETED], as "servicing
transfer" of a non-performing loan portfolio. AR, exh. 4, D&T's proposal,
Nov. 30, 1998, at 33. Based on the information in D&T's proposal, one
evaluator testified that this entire portfolio consisted of approximately
200 to 250 loans. Tr. 77, 78. According to D&T's proposal, this portfolio
initially consisted of non-performing loans secured by real estate and some
unsecured loans. D&T states in its proposal that [DELETED] employed Clayton
to initialize customer contact and counsel the borrowers regarding their
loan status to resolve delinquencies. AR, exh. 4, D&T's proposal, Nov. 30,
1998, at 41. This relatively small contract, however, does not appear to
involve services that are the "same" as or "similar" to the full range of
comprehensive loan servicing contemplated by HUD's solicitation.

Consistent with our conclusion that the contracts cited in D&T's proposal
fail to show the required corporate experience, the agency's evaluation
record similarly lacks any support to show that D&T's corporate experience
is relevant to the contemplated contract. For example, one evaluator, who
awarded D&T's proposal a perfect score of 25 points in this area, generally
noted D&T's experience of approximately 25 years; that reference checks were
excellent; and that D&T had provided an "extensive organizational chart
demonstrating knowledge of servicing." AR, exh. 29, Individual Score Sheet,
at 6th unnumbered page. However, except for those cursory comments, that
document contains no description or discussion of how D&T's experience is
relevant to or is the same as or substantially similar to the work
contemplated under HUD's solicitation, especially since the record shows
that the firm does not perform loan servicing. Likewise, in its
recommendation, with which the SSO concurred, the TEP specifically noted
that D&T had demonstrated "extensive experience conducting full servicing of
seriously delinquent loan portfolios in the public and private sector," and
cited as examples [DELETED]." AR, Tab 50, Memorandum from the CO to the SSO
at 7 (Dec. 31, 1998). Our review of D&T's proposal reveals no description of
a [DELETED] [6] contract, however, and, as discussed above, The Clayton
Group's [DELETED] contract involved collection of delinquent auto loans and
leases, which, in our view, is not "the same as or similar to" providing
comprehensive servicing to a large portfolio of single family mortgages as
contemplated by HUD's solicitation.

Agencies are required to document their selection decisions so as to show
the relative differences among proposals, their weaknesses and risks, and
the basis and reasons for the selection decision. FAR sect.sect. 15.305(a), 15.308;
Department of the Army--Recon., B-240647.2, Feb. 26, 1991, 91-1 CPD para. 211 at
2. Where there is inadequate supporting rationale in the record for the
source selection decision, we cannot conclude that the agency had a
reasonable basis for its decision. See American President Lines, Ltd.,
B-236834.3, July 20, 1990, 90-2 CPD para. 53 at 6. Based on our review, we think
that the TEP's conclusion that D&T demonstrated "extensive experience" in
providing the full range of loan servicing to a large portfolio of
delinquent mortgage loans is not supported by the record. Accordingly, we
think that the evaluation of D&T's proposal under the prior experience
factor was flawed, and we sustain this aspect of ACS's protest as well.

Discussions

ACS argues that the agency did not conduct meaningful discussions with the
firm. In support of its argument, ACS points out that in its report to the
CO, the TEP expressed concern that between the base and option years, ACS's
proposal reflected an increase in price per account serviced, and that ACS
had not adequately explained this increase. ACS maintains that since its
price was of material concern to the TEP in its recommendation, and was also
a concern expressed by the SSO, HUD should have given the firm an
opportunity to address this during discussions.

The FAR requires that contracting officers discuss with each offeror being
considered for award "significant weaknesses, deficiencies, and other
aspects of its proposal . . . that could, in the opinion of the contracting
officer, be altered or explained to enhance materially the proposal's
potential for award." FAR sect. 15.306(d)(3). The statutory and regulatory
requirement for discussions with all competitive range offerors (41 U.S.C. sect.
253b(d)(1)(A) (1994); FAR sect. 15.306(d)(1)) means that such discussions must
be meaningful, equitable, and not misleading. Du and Assocs., Inc.,
B-280283.3, Dec. 22, 1998, 98-2 CPD para. 156 at 7. Discussions cannot be
meaningful unless they lead an offeror into those weaknesses, excesses or
deficiencies of its proposal that must be addressed in order for it to have
a reasonable chance of being selected for award. Eldyne, Inc., B-250158 et
al., Jan. 14, 1993, 93-1 CPD para. 430 at 6, recon. denied, Department of the
Navy--Recon., B-250158.4, May 28, 1993, 93-1 CPD para. 422.

Here, the record shows that in its recommendation to the CO, the TEP
expressed concern that ACS's proposal reflected a "large increase between
the price per account from ACS for the first year versus the following
option years." AR, exh. 51, Memorandum from the Chairperson, TEP, to the CO
at 6 (Jan. 4, 1999). The TEP further stated that ACS had not adequately
explained this increase, and that it assumed that ACS was "counting on
getting the award with [its] lower bid and then HUD would have a note sale
and [ACS] would actually make a large amount of money." Id. In other words,
the TEP believed that ACS's price was an attempt at "buying into" the
contract and assumed that HUD would conduct a note sale during the option
years, thus resulting in an unreasonable increase in price per account
serviced. The record further shows that the SSO concurred with this
assessment and also expressed this concern in his selection decision. AR,
exh. 56, Memorandum from the SSO to the CO at 3rd unnumbered page (Jan. 19,
1999). While the record is not clear as to what impact ACS's pricing
methodology had on the TEP's recommendation or on the SSO's selection
decision, it is clear that, at a minimum, it was of sufficient concern for
the evaluators to raise it in the TEP's report to the CO, and that the SSO
agreed with the TEP's view that ACS had not adequately explained its pricing
strategy. Despite this stated concern, however, there is no evidence in the
record that HUD raised this issue during its discussions with ACS. We
therefore agree with ACS that discussions with the firm regarding its price
were not meaningful. [7]

Recommendation

We recommend that the agency reopen discussions with ACS and D&T, and
request FPRs from these two firms, including business proposals. Since it is
clear from the record that the agency has not changed its position that
offerors are prohibited from proposing to use an electronic interface, the
proposals should be evaluated accordingly. During discussions, HUD should
afford ACS an opportunity to explain its pricing methodology. We also
recommend that the agency reevaluate D&T's proposal under the prior
experience evaluation factor in accordance with this decision. If upon
reevaluation, the agency determines that D&T's proposal does not represent
the best value to the government, HUD should terminate the order issued to
D&T and issue the order to ACS. We also recommend that ACS be reimbursed its
costs of filing and pursuing the protest, including attorneys' fees. Bid
Protest Regulations, 4 C.F.R. sect. 21.8(d)(1) (1999). The protester should
submit its certified claim for such costs, detailing the time expended and
costs incurred, directly to the contracting agency within 60 days of
receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

The protest is sustained.

Comptroller General

of the United States

Notes

1. In addition to requiring a total price for start-up costs, for each of
the base and option years, offerors were required to submit unit prices per
month for servicing estimated quantities of loans and partial claims. RFP
amend. 3, sect. B.

2. During the course of these proceedings, the agency discovered that there
are two slightly different versions of this document in the record, both
dated January 4 and signed by the TEP Chairperson. Our comparison of these
two documents, however, reveals no material differences that affect the
TEP's recommendation or our analysis of the issues presented in this
protest.

3. Pursuant to Federal Acquisition Regulation (FAR) sect. 33.104(c)(2)(i) and
(ii), the head of the contracting activity authorized D&T to continue
performance of the contract notwithstanding the protest.

4. Testimony at the hearing shows that at least two members of the TEP did
not consider the 5 years to be a "minimum requirement," Hearing Transcript
(Tr). at 56, 156, while the TEP Chairperson testified that offerors were
required to have a minimum of 5 years experience immediately prior to the
solicitation in servicing a large portfolio of delinquent loans. Tr. at 224.
It thus appears that the 5 year requirement for servicing loans was not
consistently applied by the evaluators. The record further shows that, in
its report to the CO, the TEP concluded that ACS "meets the 5 year minimum
requirement of for loan servicing . . . ." AR, exh. 51, Memorandum from the
Chairperson, TEP, to the CO at 3 (Jan. 4, 1999). However, the TEP report
makes no similar assessment with respect to D&T.

5. In further support of our conclusion, we note that in the individual
evaluator score sheets and the consensus score sheets, in order for a
proposal to earn a "high" score (17-25 points) under the prior experience
evaluation factor, the offeror had to clearly demonstrate that both as a
company and its key personnel had been performing the primary services
required under the RFP for a significant portion of the 5 years immediately
preceding the solicitation. If the offeror was lacking either in corporate
or key personnel experience, the proposal could earn only a "medium" score
(8-16 points). AR, exhibits 28, 29, at 6th unnumbered page.

6. We note that during its oral presentation, a D&T senior partner briefly
mentioned D&T's experience with "large contracts," citing [DELETED] as an
example. Except for naming that company, however, D&T did not explain the
nature of the [DELETED] contract or provide any details that could
reasonably support the TEP's conclusion that D&T had demonstrated "extensive
experience conducting full servicing of seriously delinquent loan portfolios
in the public and private sector." In fact, the record shows that D&T does
not perform loan servicing.

7. Because our recommendation that the agency reopen discussions and request
another round of FPRs renders the remaining protest issues academic, we need
not address them here.