TITLE:  The Communities Group, B-283147, October 12, 1999
BNUMBER:  B-283147
DATE:  October 12, 1999
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The Communities Group, B-283147, October 12, 1999

Decision

Matter of: The Communities Group

File: B-283147

Date: October 12, 1999

Kenneth Martin, Esq., Martin & Rylander, for the protester.

Bruce Kasson, Esq., Department of Housing & Urban Development, for the
agency.

Charles W. Morrow, Esq., and James Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest that procuring agency failed to conduct meaningful discussions is
denied where protester was generally led into area of its proposal that
required amplification.

2. Protest that agency did not consider recent performance problems of
subcontractor of awardee in evaluating past performance is denied where the
problems were under investigation at time of past performance evaluation and
record shows that the agency was favorably impressed by the subcontractor's
prompt and appropriate response to the problems.

DECISION

The Communities Group (TCG) protests the award of a contract to Management
Solutions of America, Inc. under request for proposals (RFP) No.
R-OPC-21303, issued by the Department of Housing and Urban Development
(HUD), for real property inspections. TCG contends that HUD failed to
conduct meaningful discussions and properly evaluate proposals.

We deny the protest.

The RFP is to procure real property inspections in three geographic areas
for the HUD Real Estate Assessment Center. [1] The RFP contemplated the
award for each area of an indefinite-quantity contract for 1-year with two
1-year options. RFP Cover Letter, sect. B. The inspections will be performed on
HUD-insured and HUD rental assisted multifamily properties using a data
collection device with special HUD software. Agency Report at 1-2. Among
other things, the contractor was required to provide a contract manager,
available during normal duty hours, that would be responsible for the
performance of the work, with full authority to act for the contractor on
all contract matters relating to daily operations of the contract. RFP
amend. 3, sect. C.1.3.

Offerors were requested to submit separate proposals for each geographic
area for which they were interested in being considered for award. RFP Cover
Letter. The RFP provided for award on a best-value basis and technical
factors were said to be more important than price. RFP sect. M.4.A. The
following technical evaluation factors and their weights were listed:

1. PRIOR EXPERIENCE - Demonstrated experience of the offeror's staff and
proposed subcontractors in performing physical inspections of multifamily
housing. (20 points)

2. PAST PERFORMANCE - Documented evidence of the offeror and subcontractors
in successfully performing physical inspections within established
schedules. (20 points)

3. MANAGEMENT CAPABILITY - Demonstration of the offeror's capability to
adequately staff and execute the contract and managing the performance of
staff and subcontractor over geographically disbursed areas. (30 points)

4. TRAINING AND QUALITY CONTROL - Documented evidence of the offeror's
ability to establish and maintain initial and ongoing training and quality
control programs. (30 points)

RFP sect. M.5A. In addition, the RFP provided that proposals could also receive
up to 10 points for proposing an acceptable small business subcontracting
plan. RFP sect. M.5.B. Offerors' prices were not to be separately scored, but
were to be evaluated for reasonableness and unbalancing. RFP sect.sect. M.4.A,
M.6.B.

In response to the RFP, 45 proposals from 25 offerors were submitted,
including proposals from TCG and Management Solutions for Area 2. A
technical evaluation panel (TEP) performed an initial evaluation of
proposals, which resulted in the proposals of TCG and Management Solutions
and two other firms being placed in the competitive range for Area 2. Both
written and oral discussions were conducted with the competitive range
offerors, after which HUD received final proposal revisions (FPR).
Management Solutions' FPR priced at $10,772,056 received the highest
technical score for Area 2 of 106 points. TCG's FPR priced at $9,652,745
received the third highest score of 82.2 points. One of the other
competitive range offerors submitted an FPR priced at $10,084,192 with a
point score of 90.1 points and the remaining competitive range offeror
submitted the lowest-priced FPR, which was, however, rated substantially
inferior to the other FPRs. Agency Report, exh. 11E, Final Technical
Evaluation Report, at 51.

HUD concluded that Management Solutions' highest-rated proposal represented
the best value for Area 2 and that the significant technical advantages
reflected by its point score were worth the price premium over accepting one
of the lower-rated proposals. Id. at 51-53.

For example, HUD found that, while TCG's proposal was significantly lower in
price, it was significantly inferior to Management Solutions' proposal
because TCG's proposal contained "several confusing and unresolved issues
regarding its subcontracting arrangements and questions regarding its
management capability and commitment of its contract manager." Id. at 51.
Specifically, HUD was concerned about the lack of information in TCG's
proposal regarding the role of Sverdrup Facilities, one of TCG's identified
subcontractors, and about TCG's project manager devoting only 70 percent of
his time to this contract while devoting the rest of his time to two
subcontracts to offerors in the other areas encompassed by this RFP, which
HUD believed did "not demonstrate a clear understanding of the magnitude of
the contract requirements." Id. at 18-21.

In contrast, HUD found that Management Solutions' proposal "demonstrated
little or no risk to successful contract performance" because of its
"extensive corporate and subcontractor experience performing the same
inspections as that required by the RFP, its demonstrated successful past
performance of the same type of inspections required by the RFP, its clear
ability to staff and execute the mechanics of the contract, its strong
organization and understanding of the magnitude of the contract tasks for
area 2, and its strong initial and ongoing training and [quality control]
programs," as well as its stronger commitment to small business
subcontracting. Id. at 52. Based on the foregoing, HUD made award to
Management Solutions for Area 2. This protest followed.

TCG first contends that HUD failed to conduct meaningful discussions with
TCG. It asserts that during the agency debriefing HUD for the first time
identified that TCG's proposal was downgraded because it failed to provide
sufficient information regarding a relationship with Sverdrup and was only
dedicating 70 percent of its contract manager's time to the contract, and
that these alleged weaknesses were not mentioned to TCG during discussions.

The Federal Acquisition Regulation (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. For discussions to be meaningful, they must lead offerors
into the areas of their proposals requiring amplification or revision; the
agency is not, however, required to "spoon-feed" an offeror as to each and
every item that could be revised so as to improve its proposal. LB&B
Assocs., Inc., B-281706, Mar. 24, 1999, 99-1 CPD para. 74 at 7.

The record here confirms that HUD conducted legally sufficient discussions
with TCG. With regard to TCG's subcontractors, HUD advised all competitive
range offerors, including TCG, to "assure that all required information had
been provided on [proposed] subcontractors" and specifically advised TCG
that its proposal was "not clear on the role and responsibilities between
[TCG] and its subcontractors." Agency Report, exh. 8. TCG argues that the
discussions were insufficient because HUD did not specifically identify the
Sverdrup subcontract arrangement as an area of concern. This argument has no
merit. Since HUD did not specifically exclude any of TCG's three proposed
subcontractors from its concern with TCG's proposal, the onus was on TCG to
examine each subcontracting arrangement presented in its proposal, including
its subcontract with Sverdrup to determine if supplementation was
appropriate. Thus, TCG's failure to clearly identify Sverdrup's role was not
the result of a lack of meaningful discussions. [2]

TCG also argues that the discussions were not meaningful because the agency
did not identify the allocation of its contract manager's time as a
weakness. However, the record shows that this weakness was first introduced
by TCG's FPR and was not in TCG's initial proposal. [3] HUD was not required
to reopen discussions to permit TCG to address this weakness. Ouachita
Mowing, Inc, B-276075, B-276075.2, May 8, 1997, 97-1 CPD para. 167 at 4.

TCG also questions the agency's downgrading of its proposal because the
contract manager was only dedicated to this contract 70 percent of the time.
TCG argues that the downgrading was unreasonable because it proposed to make
the contract manager available as necessary for the other 30 percent of the
time, other TCG management personnel were available for this purpose, and
TCG stated that it was capable of providing additional management resources
as necessary at no additional cost. HUD responds that the agency did not
consider TCG's proposal of devoting 70 percent of the contract manager's
time to the contract to be sufficient to manage the Area 2 contract, given
TCG's role as a subcontractor under the other contracts on which the
contract manager had responsibility. We note that the evaluation of
proposals is within the discretion of the agency, since it is responsible
for defining its needs and the best method of accommodating them, and must
bear the burden arising from a defective evaluation. See LB&B Assocs., Inc.,
supra, at 5. In light of the requirement to make the contract manager
available during normal duty hours, the agency could reasonably view TCG's
proposed splitting of the contract manager's time as posing a possible
performance risk. Thus, we find that the agency's evaluation is reasonable.

Next, TCG contends that HUD, in rating Management Solutions' past
performance, improperly failed to consider the negative past performance of
the firm's subcontractor, MTB Investments, Inc., on a current HUD contract
for similar services. [4] TCG asserts that MTB, which had been proposed to
perform a substantial portion of Management Solutions' contract, had to
replace 20 of 100 inspectors for poor performance under a current HUD
contract for similar services; that as a result of this performance the MTB
had to reinspect approximately 89 sites; and that MTB's rejection rate was
three to six times higher than TCG's under its current contract.

As with proposals in general, it is not the function of our Office to
evaluate offerors' past performance de novo. Rather, we examine the agency's
evaluation only to ensure that it was reasonable and consistent with the
stated evaluation criteria and applicable statutes and regulations, since
assessing the relative merit of competing offerors' past performance (and of
their proposals overall) is primarily a matter of administrative discretion.
A protester's mere disagreement with the agency's judgment does not
establish that the evaluation was unreasonable. See BFI Waste Sys. of
Nebraska, Inc., B-278223, Jan. 8, 1998, 98-1 CPD para. 8 at 2.

HUD reports that MTB's past performance information was viewed favorably
because the company had a significant amount of direct experience conducting
HUD-certified inspections of HUD properties and that the performance
problems alleged by the protester were not before the agency at the time
past performance was evaluated because this matter was being investigated.
Further, HUD advises that the protester's characterization of the alleged
problems is inaccurate and that consideration of the matter would not have
resulted in a negative past performance rating because MTB undertook prompt
and appropriate remedial action. In this regard, HUD advises that it was
discovered that a non-licensed individual was conducting inspections on
properties using the credentials of a HUD-certified inspector employed by
MTB, and that when apprised of the problem MTB took the prompt corrective
action of reinspecting 83 properties, terminating the MTB employee involved,
and reporting this matter to the relevant state authorities for appropriate
disciplinary action. Agency Report at 18-20, exh. 16, Affidavit of Chairman
of TEP.

We have reviewed the protester's allegations, as well as the agency's
detailed response, and cannot say that Management Solutions' past
performance rating was unreasonably high in light of MTB's past performance.
As indicated, the incident had not been investigated when the past
performance evaluation was done; in any event, the record indicates that
TCG's version of MTB's problems is inaccurate and that HUD was favorably
impressed with MTB's prompt and appropriate response when the problem was
discovered. We note that under the technical evaluation plan employed to
evaluate proposals under this RFP an offeror could still receive a high
rating for past performance so long as problems identified during
performance were handled to the satisfaction of the client. Agency Report,
exh. 3, Technical Evaluation Plan, Individual Score Sheet for Past
Performance.

Finally, TCG challenges the propriety of the best-value decision that
Management Solutions' proposal was technically superior and argues that HUD
failed to consider price. However, as discussed above, the agency did
consider price under the evaluation scheme that gave more weight to the
technical factors, and determined and documented why the strengths in
Management Solutions' proposal were worth the associated cost premium.

The protest is denied.

Comptroller General
of the United States

Notes

1. The center is responsible for obtaining physical inspections and
financial information of HUD-insured and assisted housing as part of HUD's
2020 Management Reform Plan. RFP amend. 3, sect. C-1.1.1.

2. TCG argues that it was treated unequally because the agency identified a
specific subcontractor to Management Solutions during its discussions.
However, the agency was concerned about the role of all of TCG's proposed
subcontractors, but had concern only about the one identified subcontractor
in Management Solutions' proposal.

3. The record shows that HUD raised questions with TCG regarding "individual
accountability/responsibility," given that TCG was proposed as a
subcontractor in Areas 1 and 3. Agency Report, exh. 8. TCG's initial
proposal did not indicate whether the project manager for this contract (who
TCG stated would be the contract manager) would be devoting time to the
subcontracts in the two other areas, nor did it indicate that there would be
less than a full allocation of time for the Area 2 contract. Agency Report
at 10-11. TCG's FPR then indicated that the contract manager would be
dedicated to this contract 70 percent of the time. Agency Report, exh. 10A,
TCG FPR, at 8.

4. The RFP stated that the past performance evaluation would consider the
performance of the offeror, as well as any proposed subcontractors who would
perform a major portion of the work. RFP sect. M.2.A.