TITLE:  Kathpal Technologies, Inc.; Computer & Hi-Tech Management, Inc., B-283137.3; B-283137.4; B-283137.5; B-283137.6, December 30, 1999
BNUMBER:  B-283137.3; B-283137.4; B-283137.5; B-283137.6
DATE:  December 30, 1999
**********************************************************************
Kathpal Technologies, Inc.; Computer & Hi-Tech Management, Inc., B-283137.3;
B-283137.4; B-283137.5; B-283137.6, December 30, 1999

Decision

Matter of: Kathpal Technologies, Inc.; Computer & Hi-Tech Management, Inc.

File: B-283137.3; B-283137.4; B-283137.5; B-283137.6

Date: December 30, 1999

Robert M. Nutt, Esq., for Kathpal Technologies, Inc., and Edward J. Tolchin,
Esq., Fettman, Tolchin & Majors, for Computer & Hi-Tech Management, Inc.,
the protesters.

Terry Hart Lee, Esq., Department of Commerce, for the agency.

Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Under a solicitation for the award of multiple indefinite-delivery,
indefinite-quantity, government-wide acquisition contracts for information
technology services and products, the procuring agency improperly excluded
the protesters' technically acceptable offers from consideration for award
based upon the ratings of a single technical subfactor without considering
price or evaluating the complete proposals under all of the solicitation
factors.

2. In not allowing technically acceptable offerors to make oral
presentations as part of their technical proposals, agency acted
inconsistently with the solicitation provision that all offerors would be
afforded the opportunity to make oral presentations.

DECISION

Kathpal Technologies, Inc. and Computer & Hi-Tech Management, Inc. (CHM)
protest the rejection of their proposals under request for proposals (RFP)
No. 52-SAAA-9-00010, issued by the Department of Commerce for the award of
government-wide acquisition contracts, referred to as the Commerce
Information Technology Solutions (COMMITS) program. Kathpal and CHM contend
that Commerce did not evaluate their complete technical and price proposals
before eliminating their proposals from the competition.

We sustain the protests.

The RFP, issued as a total small business set-aside, provided for the award
of multiple indefinite-delivery, indefinite-quantity contracts to provide a
"full range of information technology" resources (services and products).
The RFP contemplated awards in three functional areas: information systems
engineering (ISE); information systems security (ISS); and systems
operations and management (SOM). RFP sect. C.1. The statement of work described
generally the resources that could be ordered under each of the functional
areas. RFP sect. C.2. Offerors were informed that they could offer services in
one or more of the functional areas, but that each offer for a functional
area must be a separate proposal. RFP sect. L.6.

The RFP also provided that a maximum number of contracts to be awarded had
not been established, but that the agency would award a reasonable number of
contracts considering such factors as maintaining a sufficient number of
contractors to allow for adequate task order competition; avoiding
unecessary and burdensome contract administration; and ensuring that all
contractors have an opportunity to receive a meaningful level of task order
work. [1] RFP sect. M.1. The RFP also stated that the maximum cumulative value
that could be awarded to all contractors combined was $1.5 billion. RFP sect.
B.2.

The RFP provided for award, without discussions, on a cost/technical
tradeoff basis, and stated the following evaluation criteria for award:

 Non-Price Factors

 1. Past Performance

 a. Quality Recognition/Certifications (QRC) b.
 Past Performance Management (PPM)

 2. Team Composition

 Price Factors

 1. Realism

 2. Reasonableness

RFP sect.sect. M.2.b, M.2.f, M.3.a. The past performance factor was stated to be
significantly more important than the team composition factor. Within the
past performance factor, the QRC subfactor was stated to be significantly
more important than the PPM subfactor. Each of the non-price factors was
stated to be more important than the price factor, and together the
non-price factors were stated to be significantly more important than the
price factor. RFP sect. M.3.b.

Regarding the QRC subfactor, the RFP stated that the agency would evaluate
the quality, relevance and currency of the offerors' recognition or
certification. In this respect, the RFP informed offerors that more
evaluation weight would be given for international or national quality
performance awards, such as the Malcolm Baldridge National Quality Award or
the President's Quality Award, and for international and national quality
certifications, such as ISO 9000 or Carnegie Mellon University's Software
Engineering Institutes Capability Maturity Level certifications. The RFP
also provided that "[w]hile important, less evaluation weight will be given
for local and regional awards." Id. Offerors were instructed to identify the
award or certification and date received, to provide the criteria used by
the issuing organization for the award or certification, and to provide a
copy of the actual award or certification. RFP sect. L.8.

Regarding the PPM subfactor, the RFP stated that the agency would evaluate
an offeror's past performance in the management of complex information
technology service efforts in the functional area proposed, and that:

[t]he evaluation will focus on the management tools and techniques applied
to previous efforts and the results achieved. Special emphasis will be
placed on the application and use of performance and customer satisfaction
metrics.

RFP sect. M.3.b.

Offerors were requested to complete an Oral Past Performance Reference List
(RFP attach. J-8); "[t]his reference asks the offeror in the oral
presentation to focus on the management tools and techniques applied to
previous efforts and the results achieved, including the application and use
of performance and customer satisfaction metrics." RFP sect. L.8. For this part
of the offerors' proposals, the RFP also requested that the offeror prepare
a two-page executive summary of the content of the offeror's planned oral
presentation, attach a copy of intended oral presentation slides, and
complete a team composition form. [2]

Detailed instructions were provided for the oral presentation, which was to
be limited to 1 hour. Offerors were informed that "[t]he COMMITS evaluation
will make maximum use of oral presentations in the evaluation for award of
the COMMITS contracts." Id. Although offerors were not restricted as to what
they could present, the RFP "strongly encouraged" offerors to address a
number of "recommended presentation topics," including the QRC subfactor
("[t]he presentation should provide the Government with a clear
understanding of the significance of the award or quality certification")
and the PPM subfactor ("the government is interested in understanding both
the selected quality metric as well as actual performance against the
metrics"). Id. The RFP further provided that it would not engage in
discussions, as defined by Federal Acquisition Regulation (FAR) Part 15, at
the oral presentations.

The RFP stated that it was the agency's "intention" to provide each offeror
with an opportunity to participate in oral presentations. In addition, the
RFP stated that the government reserved the right to conduct a "voluntary
down-select," whereby the agency would "suggest to Offerors that they should
drop out of the competition" and "[t]he Offeror must make the business
decision as to whether to continue in the competition." RFP sect. M.1.

With respect to the basis for award, offerors were informed as follows:

Award will be made to the responsible and technically acceptable Offeror(s)
whose proposal (including information from the oral presentation) provides
the greatest overall value to the Government, price and technical factors
considered. Best value for the purpose of COMMITS, means the expected
outcome of an acquisition that, in the Government's estimation, provides the
greatest overall benefit in response to the requirement. In making this
evaluation, the Government is more concerned with obtaining superior
management and technical skills than with making an award to the Offeror
with the lowest labor prices.

RFP sect. M.2.b. The RFP also stated that:

contract award decisions in each functional area's category will be
determined based on the Government's evaluation of each Offeror's complete
proposal submission and oral presentation with respect to the following:

  1. Offerors not responding to any one or more of the factors or
     sub-factors identified in this solicitation shall be disqualified from
     futher consideration.
  2. The Government's evaluation of the first two selection factors (i.e.,
     Past Performance and Team Composition) shall be accomplished separately
     from the evaluation of the Offeror's pricing.

RFP sect. M.2.a.

Although Commerce anticipated receiving only 40 to 60 proposals in response
to the RFP, it actually received over 200 proposals, including those of
Kathpal and CHM. [3] Agency Report, exh. 4A, Memorandum for Source Selection
Authority (SSA) concerning Clarification and Streamlining of Proposal
Evaluation Guide and Processes 1 (May 28, 1999) and exh. 8, Source Selection
Report, para. 1.0. Because the agency believed that it would be impossible to
invite all offerors to make oral presentations, it decided to limit oral
presentations to only the "most competitive offerors." Agency Report at 4.
The co-chairs of the source selection evaluation board (SSEB) then
"screened" all proposals against the evaluation criteria to determine the
"greatest number of proposals that [would] permit an efficient competition
among the most highly rated proposals." Agency Report at 5; Declaration of
SSEB Co-Chair, Oct. 21, 1999, at 4.

In performing this review, the SSEB chairs assigned letter ratings (from A+
to C-) under the two past performance subfactors and either a "+" or "-"
under the team composition factor. Agency Report, exh. 4A, Memorandum for
SSA concerning Clarification and Streamlining of Proposal Evaluation Guide
and Processes 1 (May 28, 1999). No narrative explanations for these ratings
were prepared, as was originally contemplated by the proposal evaluation
guide. Id.; Agency's Post-Hearing Comments at 2. [4] An initial screening
matrix was prepared for each functional area that ranked offerors according
to their relative ratings under the QRC subfactor; this document also noted
each offeror's rating under the PPM subfactor and team composition factor
and each offeror's average loaded hourly labor rate. [5] Hearing exh. 1,
Initial Screening Evaluation. The contracting officer reviewed the offerors'
average loaded labor rates for realism and reasonableness; all of the
offerors' average rates were determined to be reasonable. Declaration of
Contracting Officer, Oct. 25, 1999, at 7; Agency's Post-Hearing Comments at
5.

For each functional area, the SSEB chairs recommended, based only upon the
offerors' QRC subfactor ratings, a cut-off that would provide for a
"sufficient, high-quality competition." [6] Agency Report, exh. 8, Source
Selection Report, para. 4.0.
As an example, for the ISE functional area, the agency received 125
proposals and 25 proposals were rated as B+ or better under the QRC
subfactor. Hearing exh. 1, Initial Screening Evaluation. The SSEB chairs
briefed the two SSAs (who were acting jointly) concerning the results of the
initial screening and recommended to the SSAs that only those offerors that
received a B+ or higher under the QRC subfactor be permitted to make an oral
presentation. Although the SSEB chairs informed the SSAs of the significance
of the letter ratings, there was no discussion of the specifics underlying
each firm's rating. Hearing Testimony of SSEB Co-Chair. The SSAs agreed with
the SSEB's recommendations. [7] Id. No documentation was prepared
memorializing the SSAs' consideration of, or decision to, limit the
competition to those offers that were highest rated under the QRC subfactor.
Id. Price was not considered in determining which offerors would be invited
to make an oral presentation. Id.; Declaration of Contracting Officer, Oct.
25, 1999, at 5; Declaration of SSEB Co-Chair, Oct. 21, 1999, at 5.

Kathpal's and CHM's proposals under the ISE area received B ratings under
the QRC subfactor, and, on that basis, the protesters were not invited to
make oral presentations. The following chart shows the three lowest ranked
offers (based upon the QRC subfactor ratings) that were within the group
selected to make an oral presentation and Kathpal's and CHM's proposals
under the ISE area:

 Offeror    QRC         PPM          Offeror        Average
            subfactor   subfactor    composition    labor rate

 Offeror    B+          C            +              $[DELETED]
 A

 Offeror    B+          C            +              $[DELETED]
 B

 Offeror    B+          C            +              $[DELETED]
 C

 CHM        B           B            +              $[DELETED]

 Kathpal    B           B            -              $[DELETED]

Hearing exh. 1, Initial Screening Evaluation, at 1. [8]

The proposals of those offerors that were selected to provide an oral
presentation then received a de novo evaluation by the complete SSEB, which,
as a group, did not have access to the earlier screening evaluation. Agency
Report, exh. 8, Source Selection Report, para. 4.0. Upon completion of each oral
presentation, the SSEB contacted the offeror's past performance references
to confirm proposal claims concerning past performance management. Id.
Evaluation worksheets were prepared that summarized the significant aspects
of these proposals and identified any notable strengths or weaknesses. [9]
Id. The SSEB prepared an evaluation report that was presented to the SSAs
for their consideration.

In reviewing the evaluations of the respective proposals, the SSAs
considered for award only those offerors whose proposals were considered
highly competitive, that is, those offerors that were selected to make oral
presentations. Source Selection Documentation for the ISE Functional Area at
12-13. [10] For example, in the ISE area, out of the 25 proposals considered
for award, the SSAs selected for award 22 proposals as representing the
"best value" to the government. Id. Price was not a discriminator in this
source selection process. Specifically, the SSAs stated that:

[o]fferors' prices were evaluated simultaneously with their technical
proposals, for price reasonableness and realism. Even though all offerors'
prices were evaluated, the SSA(s) considered only prices for the offerors
that were deemed highly competitive (i.e., attended oral presentations).
Prices with an average labor rate between $50-$100 range were generally
considered equal and not a discriminator for this analysis. The prices of
the contract awardees are within this range. The SSA believes that all of
the plusses associated with the QRCs, performance metrics and team
composition far outweigh the lower hourly average rates of other offerors.

Id. at 13. [11]

Award selections were announced, and agency-level protests were filed. After
the agency-level protests were denied, these protests to our Office
followed.

The crux of the protesters' objections to the agency's conduct of this
procurement is that Commerce failed to consider the protesters' entire
proposals in determining that Kathpal and CHM should be removed from the
competition without making oral presentations, that is, Commerce did not
consider the offerors' proposed pricing and complete technical proposals.

Commerce responds that the agency evaluated the offerors' complete proposals
in determining which offerors were "highly competitive" and would be allowed
to make oral presentations. Agency's Post-Hearing Comments at 3. The agency
acknowledges, however, that only the offerors' ratings under the QRC
subfactor were a factor in determining which offerors were "highly
competitive" and that:

[p]rice did not become a discriminator at the point at which the most highly
rated offerors were determined. Consequently, at the initial screening
phase, there was not the traditional price/technical trade-off.

Id. The agency argues that it was not required to consider price in its
initial screening of proposals because at this stage the agency was only
establishing which offerors would make an oral presentation. Id. at 4. In
this regard, the agency contends that because Kathpal's and CHM's proposals
were not considered "highly competitive," the protesters could not have been
prejudiced by the agency's failure to provide the protesters with an
opportunity to make an oral presentation.

At the outset, we appreciate the difficulty faced by Commerce in needing to
evaluate more than 200 proposals, particularly given the RFP requirement for
oral presentations. The agency may well have believed that the way it
conducted this procurement showed that it was implementing recent reforms in
the procurement system. It is true that government-wide acquisition
contracts, such as the COMMITS program, are largely the creatures of recent
procurement reform. See Clinger-Cohen Act of 1996, Pub. L. No. 104-106, sect.
5124, 110 Stat. 642, 684 (1996). It is also true that recent reforms have
given contracting agencies greater discretion to more effectively and
efficiently conduct procurements. For example (and of some relevance here,
as discussed below), Congress has given agencies the authority to limit the
number of offers included in a competitive range to the greatest number that
would permit an efficient competition. See 41 U.S.C. sect. 253b(d)(2); FAR
sect. 15.306(c). Our Office believes that the government procurement system can
benefit substantially from the increased flexibility inherent in recent
procurement reform. In this procurement, however, we are persuaded, as
explained below, that the agency's conduct violated applicable law and
regulations in several significant ways.

First, we disagree with the agency that it could ignore price in its initial
screening evaluation. Cost or price to the government must be included in
every RFP as an evaluation factor, and agencies must consider cost or price
to the government in evaluating competitive proposals. [12] 41 U.S.C.
sect. 253a(c)(1)(B) (1994); FAR sect. 15-304(c)(1); S.J. Thomas Co., Inc., B-283192,
Oct. 20, 1999, 99-2 CPD para. at 3.

This requirement means that an agency cannot eliminate a technically
acceptable proposal from consideration for award without taking into account
the relative cost of that proposal to the government. SCIENTECH, Inc.,
B-277805.2, Jan. 20, 1998, 98-1 CPD para. 33 at 7.

Here, despite the agency's attempts to portray the initial screening
evaluation as only establishing which offerors would make oral
presentations, the record shows that the initial screening resulted in
technically acceptable offers, including those of Kathpal and CHM, being
eliminated from any consideration for award. That is, the SSAs considered
for award only those offerors that were deemed "highly competitive" as a
result of the initial screening, which included only offerors that were
allowed to make oral presentations. Source Selection Documentation for the
ISE Area; Source Selection Documentation for the ISS Area; Source Selection
Documentation for the SOM Area. Indeed, the agency acknowledges in its
report on Kathpal's protest that "it was reasonable for the agency to
eliminate protester from the competition" on the basis of its B rating under
the QRC subfactor. Agency Report at 8; see also Agency Report on CHM Protest
at 8 (CHM's proposal excluded from further consideration because the
proposal was not evaluated as highly competitive). Accordingly, it is clear
that the agency's determination in the initial screening evaluation that an
offeror was not highly competitive and would not be invited to make an oral
presentation actually meant that those proposals were eliminated from
consideration for award.

It is also unrebutted, as described above, that, apart from assessing the
realism and reasonableness of the offerors' loaded labor rates, the agency
did not meaningfully consider price in its decision to eliminate the
protesters and others from the competition. Rather, the only consideration
in determining which offers were highly competitive was the rating that
offers received under the QRC subfactor. Although agencies have considerable
discretion in determining the appropriate method for evaluation of cost or
price, they do not have the discretion to eliminate technically acceptable
offers from competition without meaningful consideration of price.
SCIENTECH, Inc, supra, at 7. In this regard, we have found that merely
assessing the reasonableness of proposed pricing does not satisfy this
obligation to consider price in evaluating proposals. [13] Id.

Next, we find, consistent with the protesters' arguments, that Commerce
failed to evaluate the protesters' technical proposals in accordance with
all of the stated evaluation criteria. As described above, the RFP provided
that technical proposals would be evaluated under two evaluation
factors--past performance and team composition--and that the past
performance factor consisted of two subfactors--QRC and PPM. RFP sect. M.3.
Here, however, Commerce considered only the proposals' ratings under the QRC
subfactor in determining which offers would be further considered for award.
The failure to consider offerors' proposal ratings under all the stated
evaluation criteria in eliminating technically acceptable proposals from the
competition is not reasonable and violates the statutory requirement that
proposals be evaluated under the factors stated in the solicitation. 41
U.S.C. sect. 253b(a); Foundation Health Fed. Servs., Inc.; QualMed, Inc.,
B-254397.4 et. al., Dec. 20, 1993, 94-1 CPD para. 3 at 37, 41.

We recognize that Commerce believed that limiting competition to only those
offers that were considered "highly competitive" was justified because "of
the number of highly qualified proposals received" and because it "had
sufficient competition in each of the functional areas." See Agency Report
at 7. Given the large number of proposals received, limiting the burden of
proposal evaluation was a sensible approach. Once it realized how many firms
were interested in competing, the agency could have elected to amend the
solicitation to eliminate the oral presentation (and perhaps even one of the
evaluation factors or subfactors) from the initial evaluation. If Commerce
had decided to conduct discussions, it could have (after evaluation of the
proposals under all factors, including price) limited the competitive range
for purposes of those discussions more strictly than in the past.
Specifically, pursuant to 41 U.S.C. sect. 253b(d)(2), as implemented in FAR
sect. 15.306(c), the agency could have limited the competitive range (otherwise
comprised of all the most highly rated proposals) for purposes of
efficiency, which could have been a sensible way to handle the large number
of proposals received here. [14]

Commerce could not, however, properly limit the competition as it did here.
It could not eliminate proposals from consideration without evaluating them
under all of the solicitation's evaluation criteria, including price.
Moreover, since the agency did not establish a competitive range, it never
had occasion to take advantage of the possibility of limiting the
competitive range for the sake of efficiency. See Source Selection
Documentation for the ISE Area at 13.

Another concern that we have with the agency's evaluation is that the agency
did not document its evaluation results in detail sufficient to allow for
review of the reasonableness of its decision. FAR sect. 15.305(a) requires the
agency to document the relative strengths, deficiencies, significant
weaknesses, and risks supporting the proposal evaluation. Here, however,
Commerce in its initial screening evaluation did not document the relative
strengths and weaknesses of proposals, but only assigned letter ratings and
either a "+" or "-" rating without narrative explanation. [15] Where an
agency fails to document or retain evaluation materials, it bears the risk
that there will be inadequate supporting rationale in the record for the
evaluation and source selection decision and that we will not conclude that
the agency had a reasonable basis for the decision. Southwest Marine, Inc.;
American Sys. Eng'g Corp., B-265865.3, B-265865.4, Jan. 23, 1996, 96-1 CPD para.
56 at 10.

The protesters also protest that the RFP effectively promised offerors that
they would be permitted to make an oral presentation as part of their
technical proposals. We agree. The RFP clearly contemplated that oral
presentations would be an important part of the technical proposals. [16]
Offerors were encouraged to address the past performance subfactors in their
oral presentations and limited the information that offerors could provide
in their written proposal regarding the PPM subfactor. RFP sect. L.8. Offerors
were also informed that the agency would make maximum use of oral
presentations in the agency's evaluation of proposals, id., and that the
agency's source selection decisions would be based upon offerors' complete
proposals, including oral presentations. RFP sect. M.2. While the RFP provided
for a "voluntary down-select" under which offerors would be encouraged not
to make oral presentations, it left the final decision as to whether to make
the oral presentation within the business judgment of the offerors. [17] The
failure to allow offerors with technically acceptable proposals to make an
oral presentation is significant because the RFP indicated that it was an
important part of the technical proposal, the technical proposals of those
offerors which made oral presentations were evaluated de novo to determine
which would receive awards, and none of the offerors which did not give oral
presentations was selected for award.

Despite its many errors in this procurement, Commerce contends that the
protesters were not prejudiced because the protesters' offers were found not
to be "highly competitive" and were thus, in Commerce's view, not in line
for award. As explained above, however, the determination as to which offers
were considered "highly competitive," was made without consideration of
offerors' complete proposals, including oral presentations and price, and
therefore the agency does not have a reasonable basis to conclude that
Kathpal's or CHM's proposals would not be in line for award. [18] Moreover,
we note that both protesters' proposed average loaded hourly labor rates
were lower than those of most of the offers that were considered "highly
competitive." We find that, but for the agency's actions, Kathpal and CHM
would have had a substantial chance of receiving an award. See SCIENTECH,
Inc., supra, at 8.

In sum, we find that Commerce, contrary to applicable statutes and
regulations, eliminated the protesters' technically acceptable proposals
from consideration for award without considering price and without
considering the protesters' complete technical proposals. [19]

We recommend that Commerce either afford all technically acceptable
offerors, including Kathpal and CHM, an opportunity to make an oral
presentation or amend the RFP to properly inform offerors that oral
presentations will not be considered as part of offerors' proposals. If
Commerce so amends the RFP, revised proposals should be solicited from all
offerors. In either event, Commerce should reevaluate all proposals against
the solicitation criteria, adequately document the relative strengths and
weaknesses of the proposals, and select awardees through written source
selection decisions that meaningfully consider all of the evaluation
criteria, including price. If as a result of this new evaluation and source
selections, offerors that previously received contracts are not selected for
award, those contracts should be terminated. We also recommend that the
protesters be reimbursed the reasonable costs of filing and pursuing the
protests, including attorneys' fees.

4 C.F.R. sect. 21.8(d)(1) (1999). The protesters certified claim for costs,
detailing the time spent and costs incurred, must be submitted to the agency
within 60 days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

The protests are sustained.

Comptroller General
of the United States

Notes

1. While a maximum number of contracts to be awarded was not established,
the agency's "goal" was to award 36 contracts--12 contracts in each
functional area. Declaration of Contracting Officer, Oct. 25, 1999, at 5.

2. Offerors were informed that only those slides that were actually
presented at the oral presentation would be evaluated by the agency. RFP sect.
L.8.

3. Kathpal submitted an offer only under the ISE functional area, while CHM
submitted proposals under all three functional areas. Because of the
similarity of the issues raised by Kathpal and CHM and given our disposition
of the protests, we refer only to the agency report and exhibits submitted
in the Kathpal protest, except as where otherwise noted.

4. At the agency's request, an informal hearing was conducted to hear
argument from counsel concerning the protest record. Testimony was also
received from one of the SSEB chairs and the contracting officer.

5. The agency originally redacted the pricing information from the Initial
Screening Evaluation document provided to the protesters and the General
Accounting Office. Agency Report, exh. 6, Initial Screening Evaluation
(redacted). The agency believed the information was not relevant, because
price was not considered in determining which offerors would be allowed to
make an oral presentation. Agency's List of Documents to be Produced, Oct.
20, 1999, at 2; Hearing Testimony of SSEB Co-Chair. The unredacted copy of
the document was provided, at our request, under the protective order at the
hearing.

6. For the ISE and SOM areas, the cut-off point was those offers that were
rated B+ or higher under the QRC subfactor, and for the ISS area, it was
those offers that were rated B+ or higher or that were found to contain at
least two recognitions or certifications that each merited a B rating.
Declaration of SSEB Co-Chair, Oct. 21, 1999, at 5.

7. The agency states that, prior to the final determination to exclude an
offeror from an opportunity to provide an oral presentation, the SSEB chairs
reviewed the entire technical proposals of the offerors that were not
selected to make oral presentations to ensure that the initial screening
evaluation results were correct. The SSEB chairs concluded that the
screening results for the QRC subfactor were correct, and this was reported
to the SSAs. Hearing Testimony of SSEB Co-Chair; Source Selection
Documentation for the ISE Functional Area at 2-3.

8. CHM's proposals in the ISS and SOM areas similarly have higher ratings
under the other technical factor and subfactor and lower pricing than those
of many of the offerors that received the opportunity to make oral
presentations. Hearing exh. 1, Initial Screening Evaluation, at 4-6.

9. The agency destroyed these documents and other evaluation records around
the time Kathpal's protest was filed. Letter from Agency to GAO (Nov. 1,
1999).

10. This was also true for the other two functional areas. Source Selection
Documentation for the ISS Functional Area at 6-7; Source Selection
Documentation for the SOM Functional Area at 10.

11. A statement identical to this one appears in the source selection
documentation for the other two functional areas. See Source Selection
Documentation for the ISS Area at 6-7; Source Selection Documentation for
the SOM Area at 10. Of the 33 proposals received in the ISS area, only 8
were considered "highly competitive" and all received awards; although labor
rates ranged from about $50 to $96 per hour, the offered prices were
considered equal. Source Selection Documentation for the ISS Area; Hearing
exh. 1, Initial Screening Evaluation, at 4. Similarly, of the 78 proposals
received in the SOM area, 18 were considered "highly competitive" and 17
were selected for awards; price again had no apparent impact in the best
value determination. Source Selection Documentation for the SOM Area;
Hearing exh. 1, Initial Screening Evaluation, at 5-6.

12. Commerce apparently believes that the use of the term "competitive
proposal" in FAR sect. 15.305(a), which implements 41 U.S.C. sect. 253b(a), means
that the agency need only consider the price and technical evaluation
rankings of "highly competitive" proposals. See Agency Report on CHM Protest
at 7-8. However, the term was added by the Competition in Contracting Act of
1984 (CICA), in place of "negotiation" simply to "eliminate the . . .
noncompetitive connotations associated . . . with past terminology." See
1984 U.S.C.C.A.N. 2109, 2110. Thus, in the context of these CICA and FAR
provisions, we view the term "competitive proposals" to mean all proposals
submitted in response to an RFP that provides for competition.

13. Not only did Commerce fail to consider price in its elimination of
technically acceptable offers from the competition, but it also improperly
did not consider price in its ultimate source selection decisions. Rather,
the SSAs' consideration of price in their source selection decision was
limited to merely noting that all offerors' proposed pricing was considered
fair and reasonable. See, e.g., Source Selection Documentation for ISE Area
at 2. The SSAs then determined, without supporting explanation, that
"[p]rices with an average labor rate between $50-$100 range were generally .
. . equal and not a discriminator [in the source selection] analysis." See
id. at 13. We fail to see from our review of the record any reasonable basis
upon which the SSAs could conclude that offerors' proposed rates were
essentially equal and entitled to no further consideration given the huge
variation in rates. In this regard, we note that the effect of the agency's
decision to treat all the rates as essentially "equal," despite the fact
that some rates were nearly twice as high as others, resulted in a source
selection that so minimized the potential impact of price as to make it a
nominal evaluation factor. This, too, violates the statutory requirement
that agencies give significant consideration of cost or price in their
evaluation and source selection decisions. 41 U.S.C. sect. 253a(c)(1)(B);
Electronic Design, Inc., B-279662.2 et al., Aug. 31, 1998, 98-2 CPD para. 69 at
8.

14. FAR sect.15.306(c)(2) provides that the limitation of the number of offers
contained in the competitive range for purposes of efficiency is not
permitted unless the solicitation advises offerors that this might be the
case (which this RFP did not do).

15. Commerce did have internal guidance for how evaluators were to assign
these ratings. See Agency Report, exh. 4A, Memorandum for SSA concerning
Clarification and Streamlining of Proposal Evaluation Guide and Processes,
at 4-5.

16. Commerce contends that, after proposals were submitted and prior to
announcing its source selection decision, offerors were on notice (from the
agency's computerized milestone schedule) that the agency would not be
providing all offerors an opportunity to make oral presentations, so that
the protests should be dismissed as untimely. Specifically, the agency sent
the following notice to all offerors:

It was our intent to allow each Offeror an opportunity to participate in
oral presentations. In accordance with Section M.1, we have decided not to
exercise the right to conduct a "voluntary down-select" based on such
factors as the number of proposals submitted, the quality of those
proposals, adherence to Sections L and M, and the likelihood that the
Offeror's proposal has a reasonable chance for award. We also note that we
may not award a contract to everyone who made an oral presentation. We
anticipate that the Source Selection Authority will decide to begin the
award process or continue with oral presentations by the end of May.

Agency Report, exh. 7, COMMITS Milestone Schedule. Contrary to Commerce's
arguments, this notice did not provide the protesters with a basis for
protest. The notice itself states that the agency may continue with oral
presentations, and in fact the record establishes that additional oral
presentations were scheduled after the date of the notice. Supplemental
Declaration of SSEB Co-Chair, Nov. 18, 1999, at 8. We therefore conclude
that the protesters did not have a basis to complain about the agency's
actions until they learned that their proposals had been rejected without
their having been given the opportunity to make oral presentations, which
was the date they learned of the agency's source selection (which they did
timely protest).

17. Commerce effectively abandoned the voluntary down-select provision in
the RFP, eliminating the proposals from consideration for award rather than
allowing the offerors the option of continuing in the
competition--essentially, the agency made the down-select involuntary. We
note that a voluntary down-select procedure can be used in evaluating
responses to a presolicitation notice in an advisory multi-step process; in
that process, an agency advises a potential offeror, after evaluation of its
response to a presoliticitation notice, that it is unlikely to be a viable
competitor, but the offeror retains the right to participate in the
resultant acquisition. FAR sect. 15.202.

18. Commerce also suggests that Kathpal's ratings under QRC should have been
lower than evaluated. See Supplemental Declaration of SSEB Co-Chair, Nov.
18, 1999, at 2. We are unwilling to give much weight to this late
reevaluation, which was prepared in the heat of the adversarial process. See
Boeing Sikorsky Aircraft Support, B-277263.2, B-277263.3, Sept. 29, 1997,
97-2 CPD para. 91 at 15. In any event, the agency continues to ignore Kathpal's
lower price and other technical evaluation ratings.

19. Kathpal and CHM also contend that the agency unreasonably evaluated
their proposals under the QRC subfactor. In addition, after the hearing in
this protest and based upon documents first made available by Commerce after
the hearing, the protesters complained that their proposals had been
unequally evaluated by the agency, that is, that similarly situated offerors
were treated more favorably under the QRC subfactor. Given our determination
that the proposals were not evaluated in accordance with the evaluation
criteria and our recommendation to re-open the competition, we do not
consider these issues here. In performing a new evaluation, the agency
should ensure that it creates and preserves documentation adequate to permit
meaningful review of the evaluation.