TITLE:  MG Industries, B-283010.3, January 24, 2000
BNUMBER:  B-283010.3
DATE:  January 24, 2000
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MG Industries, B-283010.3, January 24, 2000

Decision

Matter of: MG Industries

File: B-283010.3

Date: January 24, 2000

Cyrus E. Phillips IV, Esq., Kilcullen, Wilson and Kilcullen, for the
protester.

Bernard J. Roan, Esq., National Aeronautics & Space Administration, for the
agency.

Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest challenging source selection official's determination that offers
were essentially technically equal is denied where evaluation record
supports that judgment and source selection official reasonably made awards
on basis of lower evaluated prices, notwithstanding solicitation's emphasis
on technical merit over price.

2. Awardee's prices are not unbalanced where there is no evidence that
prices are significantly understated or overstated.

3. Protest that agency improperly failed to evaluate spot pricing discounts
is denied where solicitation did not provide for evaluation of spot pricing
discounts, and neither awardee nor protester proposed any spot discounts;
rather, spot pricing provision simply permits such discounts during contract
performance.

4. Communication with awardee requesting awardee to clarify statement in
alternate proposal involves clarifications, not discussions, where record
shows that communication with awardee provided no opportunity to revise its
offer and was not intended to permit submission of revised offer.

DECISION

MG Industries (MGI) protests the award of contracts to BOC Gases and
Praxair, Inc. by the National Aeronautics and Space Administration (NASA)
under request for quotations (RFQ) No. 10-99-0017, for commercially
available liquid oxygen (LO2) and liquid nitrogen (LN2). [1] MGI essentially
contends that NASA did not evaluate offers and select the awardees in
accordance with the RFQ's stated evaluation scheme. MGI also alleges that
BOC's offer was unbalanced and should have been rejected.

We deny the protest.

The RFQ was issued under the commercial item procedures of FAR Part 12, for
delivery of LO2 and LN2 to the Stennis Space Center (SSC) in Mississippi,
and delivery of LN2 only to NASA's Michoud Assembly Facility (MAF) in
Louisiana.
RFP art. 1.B, at 3. LO2 is used at SSC as a propellant oxidizer during
rocket
engine testing; LN2 is used at SSC and MAF for pressurizing tanks, cold
shock
and purge gas operations. The agency intended to award two fixed-price,
indefinite-delivery/indefinite-quantity (ID/IQ) contracts for LO2, with
annual minimum quantities of 10,000 tons and annual maximum quantities of
60,000 tons. RFQ art. 1.D, at 3-4, and amend. No. 1. For delivery of LN2 to
SSC and MAF, the agency intended to award a single contract, with annual
minimum and maximum quantities of 13,000 tons and 38,000 tons, respectively.
Id. The contracts are to be performed over a 2-year base period, with 3
additional option years. RFQ art. 2, at 4.

Awards were to be made to the offerors whose offers were determined to be
most advantageous to the government, price and other factors considered. The
solicitation set forth three evaluation factors in descending order of
importance: technical capability, price, and past performance. RFQ art. 27,
at 20. As relevant to this protest, offerors were instructed to provide
specific technical information, not to exceed five pages, such as production
facilities, delivery equipment, storage capacity, and quality management
systems; prices per ton for LO2 and LN2 for each base and option year; and
relevant past performance data. RFQ art. 30, at 26.

Under the technical capability factor, the agency would assess the offeror's
ability to produce and deliver products that conform to the solicitation
requirements, quality management system, peak production capacity, peak
distribution capacity, storage capacity, and the distance to the delivery
points. RFQ art. 27, at 20. The past performance factor involved a review of
data received from references for three current or former contracts with
similar requirements. Id. As to price, offers for LN2 would be evaluated by
multiplying the proposed price per ton times the best estimated quantity
(BEQ) as set forth in the solicitation. [2] For LO2 only, the proposed price
would be multiplied by 75 percent of the BEQ to adjust for the dual
contracting approach. In addition, the agency would evaluate offers for
award purposes by adding the total price for all options to the total price
for the basic requirement. RFQ art. 27, at 20.

NASA received six offers in response to the RFQ by the May 6 closing date.
BOC submitted an alternate offer which reduced its price per ton for LO2 if
the firm was awarded a combined LO2/LN2 contract. A three-member evaluation
board evaluated the offers using an adjectival rating of technically capable
or not technically capable to meet the solicitation requirements. Written
requests for technical clarifications were issued to each offeror, and the
written responses were evaluated. Agency Report, Tabs 6-8. Under the
technical capability evaluation factor, the awardees were rated technically
capable. The evaluators found that each firm was capable of producing and
delivering quantities of LO2 and LN2 that exceeded the agency's maximum
requirements of these products. MGI was evaluated as technically capable;
however, the evaluators noted that by itself, MGI's alternate plant did not
have enough capacity to provide the maximum daily LO2 requirements for SSC.
Agency Report, Tab 9, Technical and Past Performance Evaluation, at 2. Under
the past performance evaluation factor, the evaluators rated each offer
acceptable based on favorable past performance information. Id.

The contracting officer, who served as the source selection official (SSO),
reviewed the evaluation report and concluded that there were no significant
discriminators between the competing offers under the non-price evaluation
factors. On that basis, he determined that the offers were essentially
technically equal under the non-price factors and made his selection
decision on the basis of low evaluated prices for each

requirement. [3] Using various award scenarios, the SSO determined that
awarding a combined LO2/LN2 contract to BOC and a LO2 contract to Praxair
for a total estimated price of $31,700,915, including all options, was more
advantageous to the government than awarding the LO2 contracts to BOC and
Praxair and the LN2 contract to MGI for a total estimated cost of
$31,717,408. Agency Report, Tab 11, Source Selection Decision, at 2.

Following notice of the awards and a debriefing, MGI filed an agency-level
protest, which was denied by the agency. MGI subsequently protested to our
Office (B-283010), challenging the evaluation of proposals and the
determination that a combined LO2/LN2 award to BOC was more advantageous to
the government. After reviewing that protest, NASA advised our Office on
July 13 that it intended to take corrective action by reevaluating the
previously submitted initial offers. Our Office dismissed MGI's protest as
academic in light of the agency's corrective action.

The agency's evaluation team reevaluated the technical and price offers as
initially submitted, that is, none of the offerors was permitted to revise
its offer. However, the contracting officer asked BOC to clarify its
alternate offer to ascertain whether the firm had proposed a change in the
contract type. In response, BOC confirmed that its alternate proposal was
based on the ID/IQ terms in the solicitation. Agency Report, Tab 19, Letter
from Contracting Officer to BOC (July 28,1999), and Letter from BOC to
Contracting Officer (Aug. 1, 1999).

The agency's technical reevaluation focused on each offeror's ability to
meet the solicitation requirements, including their proposed primary
production plant, alternate plant, and available delivery equipment. All
offers again were determined technically acceptable, although certain
weaknesses were noted for some of the offerors including MGI, but none were
identified for BOC or Praxair. The evaluators then reviewed the past
performance information provided by references listed in each offer and the
competing firms were found to have acceptable past performance histories
with no advantages noted for any firm. Agency Report, Tab 22, Technical
Capability and Past Performance Reevaluation.

A technical reevaluation report, which summarized the evaluation findings
for each offer, was presented to the SSO for consideration in his source
selection decision. The following table summarizes these findings:

               LO2           LN2           LO2 & LN2
 Offeror       Capability    Capability    Concurrent

 Offeror A     Yes           Yes           Yes

 Offeror B     Yes           No Bid        No

 BOC           Yes           Yes           Yes

 Praxair       Yes           Yes           Yes

 MGI           Yes           Yes           No

Agency Report, Tab 24, Source Selection Decision Reevaluation Report,
Sept. 29, 1999, at 3.

In his source selection decision document, the SSO expressly considered the
results of the reevaluation under the non-price factors and concluded:

All offerors are judged technically capable of providing LO2 alone, and are
essentially equal in that regard. All offerors, except [Offeror B], are
judged technically capable of providing LN2 alone, and are essentially equal
in that regard. Only [Offeror A], BOC Gases, and Praxair are judged
technically capable of providing both LO2 and LN2 concurrently. These three
offerors are essentially equal in their ability to provide both products
concurrently, with a probable price adjustment applied to [Offeror A].

Id.

The SSO next reviewed the results of the price reevaluation and potential
award combination scenarios to determine the most advantageous prices for
dual LO2 contracts and a single source of LN2. From his review of these
pricing scenarios, the SSO determined that a combined award to BOC at its
contingent price for LO2 coupled with its price for LN2 was more
advantageous to the government than a separate stand-alone award for LN2 to
MGI at its lower price. The SSO decided to award a combination contract to
BOC for LO2/LN2, and another contract to Praxair to supply LO2. Id. at 6.

After receiving a debriefing, MGI filed this protest on October 15 objecting
to the result of the reevaluation, which was the same as the initial
selection decision. MGI raises four arguments: that the SSO ignored the
stated evaluation scheme by failing to make a qualitative assessment of
competing offers under the non-price factors; that BOC's alternate offer is
mathematically and materially unbalanced and should have been rejected; that
the agency failed to apply spot pricing discounts in evaluating competing
price offers; and that the agency conducted improper discussions with BOC.
We have examined each contention raised by MGI and find them to be without
merit.

ANALYSIS

Technical Equivalence of Offers

MGI asserts that by failing to consider qualitative differences between
offerors, the agency impermissibly converted the basis for award from a
"most advantageous" or "best value" scheme as set forth in the RFQ, to a
lowest-priced, technically acceptable scheme. Supplemental Protest at 5-6;
Protester's Comments at 14-18. MGI argues that the offerors do not have
equal capabilities in terms of peak production and distribution capacity,
and distance to the delivery points. Initially, because the RFQ specified a
commercial item and required only a minimal technical proposal, there is a
question whether the RFQ contemplated a qualitative assessment of offers;
thus, it is not clear that the agency was required to do more than it did.
In any event, the record shows that the SSO had a reasonable basis to view
the offers as essentially technically equal, making price the basis for his
selection decision.

MGI provides no basis to question the agency's conclusion that the offerors
were technically equal with regard to production and distribution capacity;
it is only with regard to the other two areas--plant location and delivery
turnaround time--that MGI provides any specifics. As noted by MGI, the
technical reevaluation report indicates that in assessing the offerors'
primary and alternate manufacturing plant sources that will produce and
deliver the products, MGI's primary plant source is in fact the closest
plant to both delivery points (SSC and MAF). It is also true that the
turnaround time for MGI and BOC to deliver six tankers of LO2 to SSC was 4
hours, and the turnaround time for Praxair to deliver the same quantity of
LO2 to SSC was 5 hours. Protester's Comments at 18. As previously stated,
the reevaluation report was presented to the SSO for his consideration. The
SSO found that each offeror was "technically capable of producing and
delivering products that conform to the specification and in sufficient
quantities, and the offers are . . . essentially equal" and that there was
"no Technical Capability or Past Performance advantages" to support award to
MGI at a higher price. Agency Report, Tab 24, Source Selection Decision
Reevaluation Report, at 5, 6. Thus, the SSO concluded MGI did not have an
advantage over BOC and Praxair simply because its primary plant was closer
to the delivery points, and that as between MGI and BOC, neither firm's
turnaround time for LO2 delivery to SSC was a significant advantage over
Praxair's turnaround delivery time. While MGI clearly disagrees with the
SSO's judgment in this regard, the protester does not explain why the SSO
was unreasonable in finding that these discriminators, as discussed above,
did not warrant paying a price premium.

Price Evaluation

MGI protests that BOC's alternate offer was unbalanced, and could not be
accepted for award, because its prices for LO2 were understated and its LN2
prices were substantially enhanced. Protester's Comments at 10. The concept
of unbalancing may apply in negotiated procurements where, as here, price
constitutes the basis for the source selection. Laidlaw Envtl. Servs. (GS),
Inc., B-261603, Oct. 11, 1995, 95-2 CPD para. 171 at 2.

Unbalanced pricing exists when, despite an acceptable total evaluated price,
the price of one or more line items is significantly overstated or
understated, as indicated by the application of cost or price analysis. FAR
sect. 15.404-1(g)(1). While unbalanced pricing may increase the risk to the
government, agencies are not required to reject an offer solely because it
is unbalanced. Id. Rather, where the contracting agency receives an
unbalanced offer, the contracting officer is required to consider the risks
to the government associated with the unbalanced pricing in making the
source selection decision, and consider whether a contract will result in
unreasonably high prices for contract performance. FAR sect. 15.404-1(g)(2).

As relevant to this protest, BOC and MGI submitted the following unit
prices:

[DELETED]

Agency Report, Tab 3, MGI's Proposal, at 29, and Tab 5, BOC's Proposal, at
27.

The agency performed a price analysis and reviewed the unit pricing in BOC's
alternate proposal for LO2 and LN2 in each of the contract years. The
evaluator noted that BOC escalated its LO2 and LN2 unit prices after the
2-year base periods, but that for the last 2 option years (option Nos. 2 and
3), the firm maintained its prior year pricing for both products. There was
no indication that BOC's prices were significantly overstated or
understated. Based on its evaluation of prices, the agency concluded that
BOC's pricing was fair and reasonable and consistent with the prices
received from the other firms. Contracting Officer's Statement at 7; Agency
Report, Tab 12, Price Analysis.

The protester alleges that BOC's alternate offer contains understated LO2
prices and enhanced LN2 prices; the protester also implies that there is
chronological unbalancing, i.e., that BOC's prices are overstated for the
earlier periods of performance and understated for the later ones. We see no
indication of either understated or overstated prices in BOC's unit pricing.
The difference among offerors' prices and among the various periods of
performance in BOC's offer were minor; they certainly were not so
significant as to require a finding of unbalanced pricing. Accordingly,
there is no support for the contention that NASA should have concluded that
BOC's pricing posed an unacceptable risk to the government.

Next, MGI complains that the agency's price evaluation was arbitrary and
unreasonable because spot pricing discounts for LO2 offered by the competing
firms were not evaluated. [4] Protester's Comments at 19-23. This argument
is without merit. As stated previously, the RFQ called for prices to be
determined by multiplying the BEQs by the price per ton quoted. There was no
provision for evaluating spot pricing discounts for award. In any event,
neither the awardees nor the protester offered any spot pricing discounts in
their offers. To the extent MGI argues that spot prices should have been
evaluated by the agency, this argument is untimely and will not be
considered when filed subsequent to the closing time for receipt of
proposals. See Bid Protest Regulations, 4 C.F.R. sect.21.2(a)(1) (1999).

Finally, MGI's allegation that NASA held improper discussions with BOC
centers around an exchange of correspondence between the agency and BOC
during the period in which proposals were reevaluated. The agency letter to
BOC provides, in relevant part, as follows:

Reference your May 3, 1999 offer, Appendix 2, "BOC Alternate Bid Proposal."
Please clarify the intent and scope of the following statement:

BOC Gases proposes that it will reduce the price of oxygen proposed on its
enclosed RFO Bid Sheet dated May 3, 1999 by $3.62 per ton should NASA award
BOC Gases a combination award for the total supply of [liquid nitrogen] to
SSC and MAF and for [liquid oxygen], either as "A" or "B" supplier under the
dual supplier award system being bid in this solicitation.

Specifically, you should clarify whether the foregoing statement either
accepts the fixed price, indefinite delivery, indefinite quantity contract
terms stated in the RFQ with respect to liquid nitrogen . . . .

Agency Report, Tab 19, Letter from Contracting Officer to BOC (July 28,
1999).

BOC responded as follows:

The BOC Gases proposal with respect to the supply of liquid nitrogen was/is
based on the terms shown in the contract. This means that BOC Gases accepts
the fixed price, indefinite delivery, indefinite quantity contract terms and
does not propose any modification of those terms.

Agency Report, Tab 19, Letter from BOC to Contracting Officer (Aug. 1,
1999). The agency's question apparently sought confirmation that BOC's
reference to the "total supply" of liquid nitrogen was not intended to
convert the award into a requirements contract.

FAR sect.15.306(d) defines "negotiations" or discussions as "exchanges . . .
between the Government and offerors, that are undertaken with the intent of
allowing the offeror to revise its proposal." The record here clearly shows
that the agency's communication offered BOC no opportunity to revise its
offer and was not intended to permit submission of a revised offer. The
agency's letter merely requested clarification of information already
presented in BOC's offer, and did not constitute discussions. See FAR
15.306(a)(1). Therefore, the award decision was made without discussions,
consistent with the RFQ, which indicated that the agency intended to make
award without discussions. RFQ art. 25(A), at 19.

The protest is denied.

Comptroller General
of the United States

Notes

1. Although the solicitation is denominated as an RFQ, the agency appears to
have treated it as a negotiated procurement in accordance with Federal
Acquisition Regulation (FAR) Part 15, and the entire record, including the
RFQ provisions, refer to the submission and evaluation of proposals/offers
and the resulting award of multiple contracts. In order to avoid confusion,
this decision will use negotiated procurement terminology throughout.

2. Article 3 of the solicitation provided BEQs for LO2 quantities to be
delivered to SSC as 75,000 tons for the first base year, 56,000 tons in the
second base year, and 56,000 tons in each of the 3 option years. For LN2
delivered to SSC, the BEQs are 24,000 tons in each base year, and 24,000
tons in each option year. The BEQs for LN2 delivered to MAF are 6,800 tons
in the first base year, 6,900 tons in the second base year, 6,800 tons in
the first option year, 6,600 tons in the second option year, and 6,500 tons
in the third option year. RFQ art. 3, at 5.

3. The evaluated prices were as follows:

LO2

LN2



BOC (alt) $11,951,205*

$7,546,985



Praxair 12,202,725

 7,458,396



BOC 12,762,990

 7,546,985



MGI 13,026,480

 6,751,693



Offeror A 13,923,465

 8,394,126



Offeror B 14,840,865

 No bid





*BOC's lower LO2 price was contingent on receipt of a combination LO2/LN2
contract.

Agency Report, Tab 10, Price Analysis, May 12, 1999, and Tab 23, Price
Analysis,
July 21, 1999.

4. The spot pricing discount provision in the RFQ specified that, during
contract performance, either supplier of LO2 "may offer spot prices that are
less than the contract price . . . to increase their share of orders." RFQ
art. 3, at 5.