TITLE:  Valenzuela Engineering, Inc., B-283889, January 13, 2000
BNUMBER:  B-283889
DATE:  January 13, 2000
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Valenzuela Engineering, Inc., B-283889, January 13, 2000

Decision

Matter of: Valenzuela Engineering, Inc.

File: B-283889

Date: January 13, 2000

Jerry H. Valenzuela for the protester.

Daniel J. Dykstra, Jr., Esq., Department of the Army, Corps of Engineers,
for the agency.

Linda C. Glass, Esq., and Paul I. Lieberman, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Selection of technically superior, higher-priced proposal is unobjectionable
where the solicitation made technical considerations more important than
price and the agency reasonably concluded that the technical superiority of
the awardee warranted payment of the associated price premium.

DECISION

Valenzuela Engineering, Inc. protests the award of a contract to Clayton
Environmental Consultants (CEC) under request for proposals (RFP) No.
DACA05-99-R-0041, issued by the Army Corps of Engineers for the operation
and maintenance of certain groundwater treatment systems located at the Los
Alamitos Air Force Reserve Center in Orange County, California. Valenzuela
principally challenges the source selection decision.

We deny the protest.

The solicitation, issued April 29, 1999, contemplated the award of a
fixed-price contract to provide preventive maintenance, calibration,
servicing, corrective repairs, sampling and analysis, and engineering
services for the groundwater treatment systems at Los Alamitos Air Force
Reserve Center. RFP sect. B. The solicitation provided for award to the offeror
whose proposal represented the best value to the government based on
technical merit, price/cost and other pertinent factors. RFP sect. M.2. The RFP
technical evaluation criteria, listed in descending order of importance,
consisted of operation and maintenance, engineering services, key personnel
and organizational structure, past performance, and small/disadvantaged/
women owned/minority business partnership compliance. RFP sect. M.10. The RFP
provided that the technical evaluation factors were significantly more
important than price and indicated that the government was concerned with
striking the most advantageous balance between technical management,
quality, and past performance features and price. RFP sect. M.6. With respect to
price, the RFP provided that it would be "evaluated in accordance with FAR
[Federal Acquisition Regulation sect.] 15.608 which states, ‘The
Contracting Officer shall use cost or price analysis to evaluate the cost
estimate or price, not only to determine whether it is reasonable, but also
to determine the offeror's understanding of the work and ability to perform
the contract.'" RFP sect. M.7.

Valenzuela and CEC submitted the only proposals. The initial technical
evaluation resulted in the following ratings:

 Offeror       Technical      Overall
               Score          Technical
                              Acceptability

 CEC           72.4           Very Good

 Valenzuela    46.5           Satisfactory

Agency Report, Tab 6, at 1. While the source selection evaluation board
(SSEB) rated the CEC and Valenzuela proposals as technically very good and
satisfactory, respectively, the evaluators were concerned that the number of
personnel both offerors proposed to perform the services was excessive.

The initial price proposals were as follows:

               Government      CEC          Valenzuela
               Estimate

 Total Price   $18,483,362     $8,825,070   $2,211,540

The evaluators found CEC's price proposal to be reasonable and acceptable;
the evaluators determined that Valenzuela's proposed prices did not reflect
an accurate understanding of the work requirements because the line item
prices were unrealistically low in key areas and, as a result, the
evaluators determined that the proposal represented a risk of
nonperformance. Agency Report, Tab 7.

By letters dated August 30, 1999, both offerors were advised that they were
included in the competitive range. This letter also included amendment No.
0006, issued by the agency to resolve solicitation specifications that may
have been ambiguous. Amendment No. 0006 also included the following change
to the statement of work: "The proposal shall assume a maximum of 2 Full
time equivalents (for example, 25% Chemist and 75% Geologist equals one full
time equivalent). The persons that satisfy those equivalents shall have a
combination of the skills listed in the subsections below." As a result of
amendment No. 0006, the government estimate was revised to a total estimated
cost of $8,613,395.

Discussions were held with Valenzuela and CEC on September 7 and 8,
respectively, and revised proposals were submitted by the September 13
closing date. The results of the evaluation of the revised proposals were as
follows:

 Offeror       Technical Score   Overall
                                 Technical
                                 Acceptability

 CEC           76.3              Very Good

 Valenzuela    49.1              Satisfactory

The evaluators concluded that CEC addressed each factor thoroughly and
provided specific examples regarding knowledge of the requirement and
experience with the requirement. On the other hand, the evaluators concluded
that Valenzuela's proposal was merely adequate mainly because Valenzuela did
not always provide relevant or complete examples or references addressing
each factor. Both offerors were rated very good with respect to past
performance. Agency Report, Tab 11.

By letters dated September 20, both offerors were notified of the
opportunity to submit final proposal revisions. Agency Report, Tab 12. Each
letter included a copy of the evaluation of the respective offeror's
September 13 proposal revisions. The final proposal prices were as follows:

                    Government   CEC          Valenzuela

                    Estimate

 Total Price        $8,613,395   $6,539,120   $2,208,076

Agency Report, Tab 14, at 1.

The final proposals were evaluated and the agency determined that CEC's
proposal represented the best value to the government. In making the award
determination, the contracting officer concluded that despite Valenzuela's
satisfactory rating, it appeared that Valenzuela only nominally understood
the requirement because its proposed price was so low. Agency Report, Tab
16, at 2-3. The contracting officer determined that Valenzuela's extremely
low price placed doubt on Valenzuela's ability to perform the work in
accordance with the requirements and represented a high risk of
nonperformance. The contracting officer concluded that CEC's technical
superiority warranted its additional price. Subsequently, on September 30,
award was made to CEC.

Valenzuela essentially challenges the agency's evaluation of the proposals
and the award decision.

The evaluation of technical proposals is primarily the responsibility of the
contracting agency, since the agency is responsible for defining its needs
and the best method of accommodating them, and it must bear the burden of
any difficulties resulting from a defective evaluation. Federal Envtl.
Servs., Inc., B-260289, B-260490, May 24, 1995, 95-1 CPD para. 261 at 3. In
reviewing protests challenging an agency's evaluation of proposals, we will
not substitute our judgment for that of the agency regarding the merits of
proposals; rather, we will examine the agency's evaluation only to ensure
that it was reasonable and consistent with the solicitation's evaluation
criteria, and with procurement statutes and regulations. Honolulu Marine,
Inc., B-245329, Dec. 27, 1991, 91-2 CPD para. 586 at 3. A protester's mere
disagreement with the agency's evaluation does not render it unreasonable.
CORVAC, Inc., B-244766, Nov. 13, 1991, 91-2 CPD para. 454 at 5.

The protester's primary challenge to the proposal evaluation is based on its
conclusion that the awardee must have been noncompliant with what the
protester characterizes as the solicitation requirement of a maximum of two
full time equivalent employees. The agency maintains that the amendment No.
0006 provision that an offeror should assume a maximum of two full time
equivalents merely served to identify the agency's opinion as to what the
probable staffing requirements for the requirement would entail. The agency
states that this was not an award requirement but was merely an attempt to
help the offerors to better understand how to prepare their proposals. The
record shows that the agency did not evaluate whether either offeror
proposed a maximum of two full time equivalent employees, but rather, the
evaluation centered around whether the offeror demonstrated understanding of
all the evaluation factors. In this regard, the evaluators concluded that
CEC submitted the most comprehensive technical presentation that represented
the best value to the government. Even if the awardee proposed in excess of
two full time equivalents, we do not see how this prejudiced the protester,
since Valenzuela does not assert that its proposal stayed within the limit
of two full time equivalents, and neither offeror was downgraded during the
evaluation for noncompliance in this regard.

The protester also contends that the agency did not perform a proper price
realism analysis. The RFP provided that the contracting officer would use a
price analysis to evaluate the cost estimate or price, not only to determine
whether it was reasonable, but also to determine the offeror's understanding
of the work and ability to perform the contract. RFP sect. M.7. The depth of an
agency's price realism analysis when a fixed-price contract is to be awarded
is a matter within the sound exercise of the agency's discretion. Family
Realty, B-247772, July 6, 1992, 92-2 CPD para. 6 at 4.

Here, in evaluating price proposals for realism the agency compared the two
proposals with each other and with the government estimate. The evaluators
concluded that CEC submitted a proposal that demonstrated clear
understanding of the requirement and priced it accordingly. While the
evaluators recognized that CEC's price was approximately 25 percent lower
than the government estimate, it was not considered unreasonably low and
consequently CEC was considered a low risk for contract performance. With
respect to Valenzuela, the evaluators concluded that its prices did not
reflect a clear understanding of the requirements. Agency Report, Tab 16, at
2. The evaluators found Valenzuela's prices risky for successful contract
performance because it proposed unreasonably low prices in key areas such as
work plans, safety plans, and monthly reporting. Agency Report, Tab 7, at 4.

We see nothing objectionable about the price analysis performed by the
agency. As explained above, under a fixed-price solicitation, even when the
agency provides that it will perform a price realism analysis, the depth of
that analysis is a matter within the sound exercise of the agency's
discretion. The protester's primary disagreement with the agency's
conclusions is based on its erroneous belief that no price realism analysis
was performed on the awardee's price proposal. As noted above, the agency
did perform a price realism analysis of both proposals consistent with the
solicitation requirement and concluded that CEC proposed price demonstrated
a clear understanding of and sound approach to satisfying the requirement.

Finally, the protester contends that there is insufficient evidence to
support the agency's decision that award to CEC represents the best value to
the government. The agency position is that it properly awarded the contract
to CEC on the basis of an appropriate technical/price tradeoff. In a
negotiated procurement, agency officials have broad discretion in
determining the manner and extent to which they will make use of technical
and price evaluation results. Price/technical tradeoffs may be made; the
extent to which one may be sacrificed for the other is governed by the test
of rationality and consistency with the established evaluation factors.
General Servs. Eng'g, Inc., B-245458, Jan. 9, 1992, 92-1 CPD para. 44 at 9.
Where, as here, the RFP indicates that technical considerations are more
important than price considerations, selection of a technically superior,
higher-priced proposal is proper where the agency reasonably concludes that
the price premium was justified in light of the proposal's technical
superiority. Dynamics Research Corp., B-240809, Dec. 10, 1990, 90-2 CPD para.
471 at 2. Here, the record supports the contracting officer's decision to
award the contract to CEC on the basis of its technically superior offer,
notwithstanding CEC's higher proposed price. After reviewing the proposals
submitted by the offerors, the agency determined that CEC was the more
qualified contractor for the project. CEC demonstrated extensive
knowledge/experience in design as well as operation and maintenance of the
applicable treatment system, and knowledge of the emergency response
procedures and state requirements for spill control. Although Valenzuela's
overall price was lower, the proposal did not demonstrate that Valenzuela
was capable of operating and maintaining the treatment

system and the offeror had limited experience. Moreover, Valenzuela's
extremely low price raised doubt as to its ability to perform the
requirements. Consequently, we see no basis to question the reasonableness
of the award determination.

The protest is denied.

Comptroller General
of the United States