TITLE:  B. Diaz Sanitation, Inc., B-283827; B-283828, December 27, 1999
BNUMBER:  B-283827; B-283828
DATE:  December 27, 1999
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B. Diaz Sanitation, Inc., B-283827; B-283828, December 27, 1999

Decision

Matter of: B. Diaz Sanitation, Inc.

File: B-283827; B-283828

Date: December 27, 1999

Michael A. Gordon, Esq., Holmes, Schwartz & Gordon, for the protester.

Joshua A. Kranzberg, Esq., and Janet E. Sloan, Esq., Department of the Army,
for the agency.

Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protests are denied where the agency's evaluations of proposals were
reasonable and consistent with the solicitations' evaluation schemes, which
provided that an offeror's capability was more important than price, and
where the contracting officer reasonably selected for award higher priced
proposals of incumbent contractors based on the higher capability ratings
given to these contractors.

DECISION

B. Diaz Sanitation, Inc. protests the award of a contract to Donato Marangi,
Inc. (DMI) under request for proposals (RFP) No. DAAG60-99-R-0042
(RFP-0042), issued by the United States Military Academy (USMA), West Point,
New York, for the collection, transportation, and disposal of solid waste
and recyclable materials. [1] Diaz also protests the award of a contract to
Waste Management, Inc. (WMI) under RFP No. DAAG60-99-R-0047 (RFP-0047),
issued by the USMA for the collection, transportation, and disposal of solid
waste at the former Stewart Army Subpost (STAS), New Windsor, Orange County,
New York. Diaz essentially challenges the agency's best value determinations
resulting in awards to higher priced incumbent contractors.

We deny the protests.

BACKGROUND

Each RFP contemplated the award of a fixed-price contract. RFP-0042
(contract value--over $3 million) was for a 1-year base period and four
1-year option periods and RFP-0047 (contract value--over $140,000) was for a
1-year base period only. CO Statement-0042 at 2, 6; CO Statement-0047 at 1,
6. The RFPs contained the same evaluation and award methodologies. More
specifically, each RFP provided that the award would be made to the offeror
whose proposal provided the best value on the basis of (1) the merits of the
proposal (technical acceptability and price reasonableness) [2] and (2) the
offeror's capability. RFP-0042 at 712; RFP-0047 at 36.

As relevant here, an offeror's capability would be determined based on the
firm's organizational experience and its organizational past performance in
providing refuse and recycling services of "similar cost and complexity."
RFP-0042 at 712; RFP-0047 at 37. For experience, each RFP provided that the
agency would evaluate the "breadth," "depth," and "relevance" of an
offeror's experience to the refuse and recycling services required by the
respective solicitations. RFP-0042 at 713; RFP-0047 at 37. For past
performance, each RFP provided that the agency would "contact some" of each
offeror's customer references. Id. [3] Each RFP provided that in determining
the best value, an offeror's capability was more important than price, and
in making comparisons between offerors, if one offeror had the better
capability and higher price, then the agency would determine whether the
marginal difference in capability was worth the marginal difference in
price. If the agency considered the better capability to be worth the higher
price, then the higher priced proposal of the more capable offeror would be
determined to represent the best value and that offeror would receive the
award. RFP-0042 at 713; RFP-0047 at 37.

For each RFP, Diaz submitted a "Partial List of Pertinent Contract
Experience," in which the firm listed 15 clients (10 condominiums/other
multi-unit residential complexes, a mobile home park, 3 school complexes,
and a residential community with 400 separate units) for which it has
provided "container" or "curbside" service from 1980 through the current
time. Agency Report (AR)-0042, Tab IV.B; AR-0047, Tab IV.B. Diaz's three
most current contracts were for "container" service at three condominium
complexes and ranged in annual value from approximately $10,000 to $40,000.
Id.

Under RFP-0042, the source selection evaluation board (SSEB) contacted three
of the references listed by Diaz. AR-0042, Tab IV.B; AR-0042, Tab IV.F.1.
[4] The first reference was for a current contract being performed by Diaz
(annual value--approximately $10,000) for container service at an 80-unit
condominium complex; this reference rated the firm's overall performance as
exceptional and stated that he would pay a price premium to contract again
with Diaz. The second reference was for a contract performed by Diaz from
1992 through 1997 (annual value--approximately $42,000) for container
service at a 340-unit residential complex; this reference rated Diaz's
overall performance as satisfactory. The third reference was for a contract
performed by Diaz from 1992 through 1995 (annual value--approximately
$16,000) for curbside service at a 475-unit mobile home park; this reference
rated Diaz as an above-average contractor whom she would not hesitate to
contract with again. AR-0042, Tab IV.F.1. Based on these references, the
SSEB concluded that Diaz performed acceptably, but on much smaller scale
projects, specifically noting that the firm provided no references for
projects as detailed or as large as the West Point requirements. AR-0042,
Tab IV.F. [5]

Under RFP-0042, the SSEB contacted five of DMI's 14 listed references.
AR-0042, Tab IV.C; AR-0042, Tab IV.H.1. Most relevant here is the reference
provided for DMI as the incumbent contractor at West Point. The reference
rated DMI's overall performance as exceptional, noting that the firm's
personnel maintained the West Point site at the highest possible standard.
AR-0042, Tab IV.H.1. The reference pointed out that DMI management addressed
all concerns immediately and resolved all issues; that DMI ensured that an
adequate number of qualified personnel were on-site daily and were properly
trained; that DMI completed all required tasks on or ahead of schedule; and
that DMI was an above-average contractor whom the reference would not
hesitate to contract with again. Id. The reference noted that DMI did damage
several government-owned solid waste collection containers, but that the
firm reimbursed the government at the full replacement value. Id. In
addition, in August 1999, DMI received a letter of appreciation from the
Office of the Commandant of Cadets at West Point commending the firm for
"perform[ing] far above . . . expectations" during the past year, and noting
that the firm's "performance has far exceeded the last three trash removal
contractors." AR-0042, Tab IV.P.1. Based on the West Point reference and
four other relevant references, [6] the SSEB concluded that DMI performed
similar collection contracts with exceptional results; that DMI achieved a
high level of customer satisfaction in terms of contract management and
execution; and that DMI exceeded contract requirements and customer
expectations. RFP-0042, Tab IV.H.

The contracting officer reviewed the results of the SSEB's evaluation and
rated Diaz and DMI as follows:

                    Diaz                     DMI

 Past Experience    Marginal                 Satisfactory

 Past Performance   Satisfactory             Exceptional

 Capability         Marginal+                Satisfactory+

Diaz's price was approximately 6 percent lower than DMI's price. AR-0042,
Tab IV.I.

In making her source selection decision, the contracting officer was
concerned that while Diaz proposed a lower price, it had only three current
residential contracts ranging in annual value from approximately $10,000 to
$40,000. She noted that while Diaz is satisfactorily performing these
contracts, none of them is near the magnitude nor complexity of the RFP
requirements for West Point which, as a national historical landmark, has
millions of visitors every year and supports, among other things, residences
for more than 1,300 military personnel assigned to the USMA, military
buildings and facilities, an elementary and a middle school, a child
development center, the cadet mess, and several other food facilities. The
contracting officer determined that despite its low price, Diaz presented
too high of a performance risk. Consistent with the terms of the RFP, which
provided that an offeror's capability was more important than price, the
contracting officer concluded that it was worth paying an approximate 6
percent price premium to DMI, the incumbent contractor, which had a higher
capability rating. Id.

Under RFP-0047, the SSEB used the references provided for Diaz under
RFP-0042. In addition, the SSEB considered references for each of Diaz's
three current residential contracts; each reference reported that Diaz
performed "container," but not "curbside," service. AR-0047, Tab IV.E.

Under RFP-0047, the SSEB contacted six references for WMI. AR-0047, Tab
IV.C; AR-0047, Tab IV.G.1-6. Most relevant here is the reference provided
for WMI as the incumbent contractor at STAS. The reference rated WMI's
overall performance for the 4-1/2 year contract period as exceptional
(noting that during the first 3 months of the contract, a deduction was
assessed and a cure notice was issued for unsatisfactory performance, but
since that time, no deductions have been taken and service has been
excellent). AR-0047, Tab IV.G.2. The reference pointed out that WMI's
management was excellent and responsive to the RFP requirements; that during
heavy pick-up days, WMI added extra personnel to ensure that all contract
requirements were met; and that WMI was an above-average contractor whom the
reference would pay a premium to contract with again. Id. Based on the STAS
reference and two other relevant references, [7] the SSEB concluded that WMI
had acceptable and satisfactory experience and past performance. AR-0047,
Tab IV.G.

The contracting officer reviewed the results of the SSEB's evaluation and
rated Diaz and WMI as follows:

                    Diaz                     WMI

 Past Experience    Marginal                 Satisfactory

 Past Performance   Satisfactory             Satisfactory+

 Capability         Marginal+                Satisfactory

Diaz's price was approximately 10 percent lower than WMI's price. AR-0047,
Tab IV.H.

As under RFP-0042, the contracting officer was concerned that while Diaz
proposed a lower price, it had only three current, low dollar value
residential contracts for container, but not curbside, service as required
by RFP-0047. The contracting officer determined that despite its lower
price, Diaz presented a performance risk that did not exist with WMI, the
incumbent contractor (after taking over this contract as a
successor-in-interest from the original awardee), which did an excellent job
in performing the STAS requirements. The contracting officer noted that
WMI's contract representative has established an excellent working
relationship with the agency and that the firm has established an
above-average performance record notwithstanding the successive corporate
mergers which ultimately resulted in WMI performing the STAS (and some West
Point) requirements. Consistent with the terms of the RFP, which provided
that an offeror's capability was more important than price, the contracting
officer concluded that it was worth paying an approximate 10 percent price
premium to WMI, which had a higher capability rating. Id.

ISSUES AND ANALYSES

Diaz objects to the contracting officer's assignment of a lower capability
(experience and past performance) rating (marginal+, as opposed to
satisfactory or exceptional) on the basis that it had not performed
contracts of a "similar cost and complexity" to the requirements of these
RFPs.

In reviewing an agency's evaluation of proposals, our Office will question
the agency's evaluation only where it violates a procurement statute or
regulation, lacks a reasonable basis, or is inconsistent with the stated
evaluation criteria for award. See Suddath Van Lines, Inc.; The Pasha Group,
B-274285.2, B-274285.3, May 19, 1997, 97-1 CPD para. 204 at 5. Here, while the
protester alleges that the agency's evaluations of its proposals were not
reasonable or consistent with the evaluation criteria in the RFPs, our
review of the record leads us to conclude that the protests are without
merit.

The record shows that while Diaz has provided container and curbside
service, Diaz has not performed contracts of a "similar cost and complexity"
as compared to the requirements of these RFPs. With respect to the "similar
cost" requirement, under RFP-0042, the government estimate for the base year
was approximately $778,000, and under RFP-0047, the government estimate for
the entire 1-year contract term was approximately $144,000. CO
Statement-0042 at 6; CO Statement-0047 at 6. For both procurements, the
contracting officer primarily focused on Diaz's three current contracts as
being the most relevant indicators of the firm's overall capability. These
contracts, for which Diaz received outstanding and satisfactory past
performance reviews, ranged in annual value from approximately $10,000 to
$40,000. Based on the values of these current contracts, we believe the
contracting officer reasonably concluded that Diaz had not performed
contracts similar in terms of cost to the requirements of these RFPs. [8]

With respect to the "similar complexity" requirement, the RFPs required the
collection, transportation, and disposal of all solid waste and/or
recyclable materials from the 15,000 acre West Point site and from the STAS.
Among other things, RFP-0042 required twice weekly residential container and
curbside pickups at 900 stations; refuse can collection service from 77
government installation buildings one to six times per week; refuse
compactor/roll-off collection service; and refuse collection for off-post
ranges, training areas, buildings, and camps. RFP-0042 also required
biweekly on- and off-site recycling (transportation and disposal) from
residences and from installation and government buildings. CO Statement-0042
at 1. In addition, RFP-0047 required the collection of contractor-provided
containers and residential curbside pickup of government-provided containers
(900 trash cans behind 301 pick-up points two times per week). CO
Statement-0047 at 1.

According to Diaz's "Partial List of Pertinent Contract Experience," the
firm has three current, low dollar value residential contracts under which
it is providing "container," but not "curbside" or "recycling," service. [9]
Moreover, over the past 10 years, Diaz has provided container or curbside
service limited to residential complexes ranging from 80 to 650 units; the
firm listed no commercial, and very limited institutional (three 50-acre
school complexes), experience. Since the RFPs required a significant amount
(i.e., buildings and acreage) of residential and institutional container,
curbside, and recycling service, we believe the contracting officer
reasonably concluded that Diaz had not performed requirements similar in
complexity to the requirements for either West Point or STAS.

For the above-discussed reasons, we have no basis to object to the agency's
conclusions that Diaz had not performed contracts similar in terms of cost
and complexity to the requirements of these RFPs and that the firm,
therefore, merited a lower overall capability rating. [10]

Diaz further objects to the contracting officer's conclusions in her
tradeoff decisions that there was a greater performance risk associated with
Diaz, as opposed to DMI and WMI, the successfully performing incumbent
contractors at West Point and STAS. Diaz believes that as the low priced
offeror, it should have received both awards and that the price premiums to
DMI and WMI were not justified.

In a negotiated procurement, where the solicitation does not provide for
award on the basis of the lowest priced, technically acceptable proposal, an
agency has the discretion to make an award to an offeror with a higher
technical score and a higher price where it reasonably determines that the
price premium is justified and the result is consistent with the evaluation
criteria. Allied Tech. Group, Inc., B-282739, Aug. 19, 1999, 99-2 CPD para. 45
at 8-9.

In the determination of which proposals represented the best values, the
RFPs provided that an offeror's capability was more important than price,
and that if one offeror had the better capability and higher price, then the
agency would determine whether the marginal difference in capability was
worth the marginal difference in price. As explained above, we believe that
the agency had a reasonable basis for its conclusion that DMI and WMI
merited higher capability ratings than Diaz based on their successful
performance as the incumbent contractors at West Point and STAS as well as
their successful performance of other comparable institutional and
commercial contracts. [11] Under RFP-0042, DMI's price was approximately 6
percent higher than Diaz's price, and under RFP-0047, WMI's price was
approximately 10 percent higher than Diaz's price. The contracting officer
concluded that despite Diaz's lower prices and its history of satisfactory
performance, Diaz presented a greater performance risk because, as addressed
above, its experience was basically in providing service to relatively small
residential complexes, compared to the large-scale requirements contemplated
by these RFPs. Accordingly, we have no basis to

question the contracting officer's decisions, consistent with the terms of
the RFPs, to pay price premiums to DMI and WMI in order to retain
successfully performing incumbent contractors.

The protests are denied.

Comptroller General
of the United States

Notes

1. RFP-0042 consolidated requirements previously provided under three
separate contracts at West Point. Contracting Officer's (CO) Statement-0042
at 1.

2. The proposals of Diaz, DMI, and WMI were determined technically
acceptable and their respective prices were considered reasonable.

3. The RFPs required an offeror to submit descriptions of its prior
contracts (government, private institutional, and commercial) within the
past 10 years (i.e., relevance/similarity of prior contracts to current
requirements, contract dollar values, and technical performance problems
encountered and corrective actions taken). The RFPs advised that both
independent data and data provided in proposals could be used to evaluate an
offeror's past performance; the RFPs specifically advised that not all
offeror-provided references would necessarily be interviewed. RFP-0042 at
711; RFP-0047 at 53.

4. References were asked to complete past performance surveys by answering
various questions in which they could rate aspects of an offeror's
performance as exceptional, satisfactory, marginal, or unsatisfactory.

5. The SSEB also expressed concern that Diaz did not have adequate
equipment. However, the record shows that the contracting officer, who
served as the source selection authority in both procurements, rejected this
concern because having adequate equipment was not a stated capability
consideration. AR-0042, Tab IV.I.

6. Three of the other DMI references (a paint store, a
rehabilitation/nursing center, and a nursing home) rated the firm's overall
performance as exceptional and the other reference (a school district) rated
the firm's overall performance as satisfactory. AR-0042, Tab IV.H.1.

7. Two of these references apparently were for contracts awarded to
corporate entities other than the WMI corporate entity which submitted a
proposal here, AR-0047, Tab IV.G.3, 4, and another reference was for DMI,
not WMI. AR-0047, Tab IV.G.6. The other two appropriate WMI references (a
school district and a shopping mall) rated the firm's overall performance as
satisfactory, stating that they would not hesitate to award again to WMI.
AR-0047, Tab IV.G.1, 5.

8. We point out that from 1987 through 1990, Diaz performed a container
service contract at a 650-unit apartment complex for approximately $90,000
per year, and from 1987 through 1991, Diaz performed a curbside service
contract for 400 single-family residential clients for $100,000 per year.
AR-0042, Tab IV.B; AR-0047, Tab IV.B. These were Diaz's two highest dollar
contracts, and they were still significantly less in value than the
requirements covered by these RFPs. Moreover, although Diaz argues that from
1990 through 1993, its cumulative contracts were valued from $266,000 to
$344,000 per year, Protester's Comments, Nov. 23, 1999, at 3, it was not
unreasonable, pursuant to the terms of the RFPs, for the agency to consider
individual, as opposed to cumulative, contract values under the capability
factor.

9. Diaz states that from 1987 through 1991, it had a contract for $100,000
per year to provide curbside service for 400 single-family residential
clients. The contracting officer did not consider this contract because it
was not current (it was at least 8 years old) and in any event, Diaz did not
list a contract reference, instead inserting "Not Applicable" for a
reference name. AR-0042, Tab IV.B; AR-0047, Tab IV.B.

10. Contrary to Diaz's position, the record shows that the agency did not
evaluate the firm's capability (experience and past performance) on a
pass/fail basis, which would have constituted a nonresponsibility
determination requiring a referral to the Small Business Administration for
the possible issuance of a certificate of competency. See, e.g., Docusort,
Inc., B-254852, Jan. 25, 1994, 94-1 CPD para. 38 at 6. While the capability
evaluation factor encompassed traditional responsibility considerations, the
RFPs provided for a comparative/best value, rather than a pass/fail,
evaluation scheme, and Diaz's proposals were evaluated accordingly.

11. Diaz, which acknowledges that DMI's incumbent contract was valued at
$300,000 per year for each of two years, complains that DMI did not comply
with the RFP instructions to list contract dollar values in its proposal for
its prior contracts. However, we believe that DMI's failure in this regard
is of no consequence since there was no requirement for the agency to
consider all offeror-provided references and since the information
concerning DMI's performance as the incumbent contractor at West Point was
so "close at hand." See International Bus. Sys., Inc., B-275554, Mar. 3,
1997, 97-1 CPD para. 114 at 5. DMI's successful performance of the West Point
contract reasonably provided the primary basis for the contracting officer's
selection of DMI for award under RFP-0042.