TITLE:  AJT & Associates, Inc., B-284305; B-284305.2, March 27, 2000
BNUMBER:  B-284305; B-284305.2
DATE:  March 27, 2000
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AJT & Associates, Inc., B-284305; B-284305.2, March 27, 2000

Decision

Matter of: AJT & Associates, Inc.

File: B-284305; B-284305.2

Date: March 27, 2000

Rodney A. Grandon, Esq., and Richard M. Stolbach, Esq., Patton Boggs, for
the protester.

Donald J. Kinlin, Esq., and John H. Beasley, Esq., Thompson Hine & Flory,
for Quantum Technology Services, Inc., an intervenor.

John E. Lariccia, Esq., and Martin F. McAlwee, Esq., Department of the Air
Force, for the agency.

C. Douglas McArthur, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Agency's consideration of the resources and experience of large business
subcontractor, in a solicitation restricting competition to socially and
economically disadvantaged small business concerns in accordance with
section 8(a) of the Small Business Act, as amended, 15 U.S.C. sect. 637(a)
(1994), was reasonable and consistent with the terms of the solicitation.

2. Solicitation provisions requiring contractor to furnish, among other
personnel, a project manager qualified to sit for professional engineer
examination do not constitute definitive responsibility criteria--since they
neither set out specific, objective standards for determining an offeror's
capability to perform or require offerors to demonstrate compliance prior to
award--but are performance obligations, compliance with which is a matter of
contract administration.

3. Agency did not mislead high-priced offeror during discussions by advising
it only of Defense Contract Audit Agency (DCAA) opinion that the offeror's
overhead rate was understated; the agency advised offeror of its concerns
based on DCAA opinion, and there was no obligation to advise the protester
that its cost/price was higher than that of other offerors, where the agency
determined that the cost/price was reasonable for the approach taken.

DECISION

AJT & Associates, Inc. protests the award of a contract to Quantum
Technology Services, Inc. (QTSI) under request for proposals (RFP)
No. F08650-99-R-0101, issued by the Department of the Air Force for
engineering services. AJT asserts that the evaluation of QTSI's proposal and
the selection decision were flawed primarily because the agency improperly
considered the resources of QTSI's large business subcontractor, General
Physics Corporation, in its evaluation.

We deny the protest.

On August 18, 1999, the agency issued the solicitation for a 1-year
multitype contract (fixed-price, labor hour, cost-reimbursement, and
fixed-price delivery orders) for technical engineering and spacelift
services (TESS), with seven 1-year option periods. RFP amend. 4, sect. L, at 1,
and amend. 4, sect. B, at 1-8. Each performance period included fixed-price line
items for project management services and data, an indefinite-quantity line
item for on-call engineering and inspection services, and a line item for
subcontract management. RFP sect. B, at 1-8. [1]

The successful offeror, whom the agency would select on a best value basis,
would provide services including project management, engineering design and
analysis, environmental compliance support, and subcontract management. RFP
amend. 4, attach. 1, at 1. These services would support repair,
modification, and construction of launch facilities at Cape Canaveral,
Patrick Air Force Base, and the Jonathan Dickinson and Malabar missile
tracking annexes in Florida, Antigua Air Station in the West Indies,
Ascension Auxiliary Airfield in the South Atlantic, and Ramey Solar
Observatory, Puerto Rico. Id.

The RFP provided for conducting the procurement competitively pursuant to
section 8(a) of the Small Business Act, as amended, 15 U.S.C. sect. 637(a)
(1994), restricting competition to Small Business Administration (SBA)
sect. 8(a) firms in the north and south Florida Districts. RFP Cover Letter. It
provided for evaluation against four factors--mission capability, past
performance, proposal risk, and price. RFP amend. 5, sect. M, at 1. Price would
be approximately equal to the other evaluation factors in the selection
decision but nonprice factors, when combined, would be significantly more
important than price. RFP amend. 5, sect. M, at 1, amend. 4, sect. M, at 5.

Factor one, mission capability, contained five subfactors as follows:
project management plan, technical support staff, quality control and safety
plan, subcontract management, and model project development/execution. [2]
RFP amend. 4, sect. M, at 2-4. The RFP provided for assigning each proposal a
color/adjectival rating for the mission capability subfactor ratings, and a
proposal risk rating based on the "potential for disruption of schedule,
increased cost, degradation of performance and the need for increased
government oversight as well as the likelihood of unsuccessful contract
performance." Id. at 6. Under the cost/price factor, the "cost/price
proposal [would] be evaluated . . . to determine if it [was] realistic and
reasonable. Id. at 5.

The agency received three proposals by the due date of October 13 and
referred them to a team of evaluators. The agency eliminated one offeror
from the competitive range and conducted discussions with the remaining two
offerors, through evaluation notices (ENs) tailored to each proposal,
followed by oral discussions. The protester and the awardee received an
"acceptable/low risk" rating for each of the mission capability subfactors,
except for an "exceptional" rating for the protester under the model problem
subfactor, and a marginal risk rating for the awardee under the technical
staff subfactor. QTSI's Initial Evaluation at 1; AJT and Associates's
Initial Evaluation at 1. The awardee had failed to identify personnel for
the support staff, and, although QTSI's hiring criteria were acceptable, the
local job market created a risk that QTSI might not be fully staffed by the
start date. QTSI's Initial Evaluation at 1. Both offerors received "very
good/significant confidence" ratings for past performance. QTSI's Initial
Evaluation at 1; AJT and Associates's Initial Evaluation at 1. The
protester's evaluated price, $31,976,085, was significantly higher than
QTSI's proposed price of $25,722,331. QTSI's Initial Evaluation at 3; AJT
and Associates's Initial Evaluation at 3.

During discussions, QTSI identified additional personnel to serve on the
contract and referred to its expectation of retaining some of the incumbent
inspectors. Offeror Response to EN T-QTSI-2, at 1. QTSI also noted its use
of General Physics, a large business subcontractor, to expand its
capabilities.

Our approach for obtaining, training, and maintaining sufficient qualified
staffing to meet the On-Call Engineering and Inspection requirements . . .
is to use the local corporate resources of QTSI and General Physics . . . .
Since QTSI is corporately based in the local area

and General Physics has maintained a local office here since 1986, both
firms employ personnel who have relevant . . . experience. . . .

Id. at 2.

Based on the discussions, the evaluators revised QTSI's risk rating from
marginal to low risk for the subfactor of technical staff. QTSI's Final
Evaluation at 1.

The Defense Contract Audit Agency (DCAA) had advised the agency that QTSI's
general and administrative (G&A) rate and AJT's direct labor overhead rate
appeared low. QTSI's Initial Evaluation at 3; AJT and Associates's Initial
Evaluation at 3. The agency provided EN's to the two offerors, both of whom
essentially explained the low rates by anticipated increases in their cost
bases. Id. Although evaluators initially considered QTSI's price/cost to
present a moderate risk, they subsequently determined after discussions that
the risk was low. QTSI's Initial Evaluation at 3.

The two offerors submitted final proposal revisions, and evaluators briefed
the source selection authority (SSA) on their findings. The only significant
difference that evaluators found between the two proposals, apart from
QTSI's price advantage, was AJT's "exceptional" rating for the model project
subfactor, versus QTSI's "acceptable" rating. SSA Decision Briefing at 9-13.
The SSA selected QTSI for the award, concluding that AJT's "exceptional"
rating for the model problem alone did not justify a 24.3 percent difference
in price/cost. Source Selection Decision at 2. This protest to our Office
followed.

AJT contends that evaluators gave improper consideration and weight to the
resources and capabilities of QTSI's large business subcontractor, General
Physics. AJT asserts that it reasonably understood the RFP as limiting
offerors to their own in-house resources, experience, and past performance;
if the agency intended otherwise, AJT argues, the RFP contained a latent
ambiguity. Either the evaluation was inconsistent with the solicitation, AJT
asserts, or it was prevented from competing with QTSI on a common basis.

We find without merit the protester's argument that the solicitation did not
permit offerors to propose, and the agency to evaluate, subcontractors to
perform the work. AJT identifies no language in the solicitation that can
reasonably be construed as prohibiting use of subcontractors. To the
contrary, the solicitation specifically provides for consideration of
subcontractor management, to include the "qualifications, experience, and
performance history of subcontractors specifically proposed to support the
TESS contract" and "[a]ny joint venture or teaming arrangements." RFP
amend. 4, sect. M, at 4. It required offerors to describe any joint venture or
teaming arrangements, and subcontractor relationships. RFP sect. L, at 9.
Further, for past performance, the RFP provided that, "[the] government will
evaluate the contractor's and their subcontractor's ability to successfully
complete multi-discipline A-E efforts and subcontract management, based on .
. . past performance." RFP amend. 4, sect. M, at 4. We think the agency's
consideration of QTSI's proposal to use General Physics was permissible
under the RFP. Further, in its own proposal, AJT states, "we are a single
entity and are not proposing a teaming arrangement [or] joint venture
because of the potential for increased costs, schedule delays due to prime,
subcontractor, and construction subcontractor coordination and management
inconsistencies." AJT Proposal, vol. 1, at 8. AJT also stated that it
"proposes no on-site subcontractors on the primary [line items] . . . which
will reduce performance risk." Id., vol. 3, at 23. AJT's own proposal shows
that AJT did not propose subcontractors not because it believed the RFP
prohibited their use, but because it believed its proposal of in-house
resources had more merit. Clearly, AJT understood the RFP permitted use of
subcontractors.

The protester also alleges that certain portions of the SOW are definitive
responsibility criteria, with which QTSI failed to comply. The protester
points out that the SOW generally requires "the contractor" to provide the
personnel and resources required. RFP amend. 4, attach. 1, at 5-6. The
protester notes specifically that SOW sect.sect. 3.1.5.1 through 3.1.5.5 require a
project manager with "the education, experience and knowledge to qualify to
sit for the Professional Engineer examination," and argues that QTSI's
proposed project manager does not have the required education to sit for the
examination in Florida, where at least some of the work will be performed.
The SOW requires that the contractor be experienced in military and
aerospace design and construction practices, provide an experienced and
knowledgeable staff capable of performing various engineering tasks, and
ensure that a sufficient number of personnel with required professional
registration are retained for work oversight. RFP amend. 4, attach. 1, at 5.
It requires a licensed mechanical engineer, electrical engineer,
civil/structural engineer, and architect. RFP amend. 4, attach. 1, at 5-6.
It also requires that documentation (plans, specifications, design analysis,
cost estimates, environmental permit applications and certificates of
completion, reports, and studies) be signed "by licensed professionals with
experience in the relevant disciplines" and that professional licenses be
maintained as required by the states and possessions where services are
performed. RFP amend. 4, attach. 1, at 6. The protester essentially argues
that QTSI does not have the required experience and cannot supply personnel
with the qualifications required by the SOW.

Definitive responsibility criteria are specific and objective standards,
qualitative or quantitative that are established by a contracting agency in
a solicitation to measure an offeror's ability to perform a contract. AT&T
Corp., B-260447.4, Mar. 4, 1996, 96-1 CPD para. 200 at 5. In order to be a
definitive responsibility criterion, the solicitation provision must
reasonably inform offerors that they must demonstrate compliance with the
standard as a precondition to receiving award. Id. Here, the provisions
pointed to by the protester are not sufficiently specific to establish
definitive responsibility criteria; rather the provisions essentially
require in general terms that each offeror have the appropriate expertise,
training and licenses in order to successfully perform the contract
requirement. The cited provisions do not specify any particular experience
level or specify any particular time, prior to award, by which an offeror
must demonstrate the necessary experience or meet the licensing requirement.
Accordingly, the cited provisions do not represent preconditions to award,
but rather performance obligations, enforceable by the agency as a matter of
contract administration. Compro Computer Servs., Inc., B-278651, Feb. 23,
1998, 98-1 CPD para. 58 at 4.

The solicitation requires offerors to demonstrate their understanding of the
requirements and their "approach" to obtaining, training, and retaining
qualified personnel. RFP sect. L, at 9, and sect. M, at 2. Here, evaluators were
concerned that QTSI's recruiting plans were optimistic, given the job
market, but they ultimately determined that the availability of General
Physics personnel at the outset of performance would result in a low
performance risk for the technical support staff subfactor. QTSI's Final
Evaluation at 1. We find the evaluation of the mission capability factor,
which considered QTSI's reliance on General Physics' resources, was
reasonable and consistent with the solicitation. [3]

AJT also questions the agency's evaluation of General Physics' experience
and past performance. As a general rule, the experience of a proposed large
business subcontractor properly may be considered in evaluating a proposal
submitted in response to a solicitation set-aside for small business
concerns, where the RFP allows it. Hago-Cantu Joint Venture, B-279637.2,
July 20, 1998, 98-2 CPD para. 99 at 11. In fact, FAR sect. 15.305(a)(2)(iii) states
that evaluations of past performance should take into account information
regarding subcontractors who will perform major or critical aspects of the
requirement. Here, as noted above and quoted more fully below, the RFP
specifically provided for consideration of such experience, as well as past
performance, as follows:

The government will evaluate the contractor's and their subcontractor's
ability to successfully complete multi-discipline A-E efforts and
subcontract management, based on demonstrated past experience . . . .

The government will evaluate performance using the following criteria:
. . .  (d) Does offeror's proposal describe relevant and recent performance
history for proposed subcontractors? (e) Does the proposal provide evidence
of subcontractor success for recent and relevant projects?

RFP amend. 4, sect. M, at 4-5.

The evaluators recognized that, apart from certain of the non-key personnel,
QTSI had no relevant contract experience. QTSI's Initial Evaluation at 2-3.
They ultimately rated the awardee's past performance as "very
good/significant confidence" primarily based on General Physics' experience
and past performance. QTSI's Final Evaluation at 1. Specifically, the
evaluators noted that QTSI received good references, although the contracts
involved were not directly relevant to the TESS SOW. QTSI's Initial
Evaluation at 2-3. They also noted that, under the proposed arrangement with
General Physics, QTSI would be responsible primarily for management of the
overall effort and business management aspects of the project, while General
Physics would be responsible for technical and construction management
aspects of the statement of work. Id. at 2. General Physics had a "history
of success in managing large multi-discipline projects"; evaluators
concluded that, by staffing engineering and construction management
positions with General Physics personnel, QTSI would have the necessary
relevant past performance experience. Id.; QTSI's Final Evaluation at 2. The
agency's evaluation of past performance, which considered General Physics'
experience with relevant contracts in rating QTSI's proposal as "very
good/significant confidence" notwithstanding QTSI's own lack of relevant
experience, was consistent with the RFP.

AJT also asserts that the agency failed to consider the risk associated with
QTSI's cost/price, which, the protester contends, is unreasonably low. DCAA
noted that the awardee's subcontract management coefficient did not provide
for a profit; also, as noted above, DCAA advised the agency that QTSI's G&A
rate (as well as AJT's direct labor overhead rate) appeared understated.
DCAA Audit Report No. 1301-2000M28000004, Nov. 15, 1999, at 1-3; QTSI's
Initial Evaluation at 3. AJT argues that the agency essentially ignored
these warnings.

Initially, we note that QTSI recognized, in communications with DCAA, that
its markup (subcontract management coefficient) would not allow the awardee
to recover its cost as well as profit. DCAA Audit Report No.
1301-2000M28000004, Nov. 15, 1999, at 1-3. We have consistently held that an
offeror, in its business judgment, properly may decide to submit a fixed
price that is extremely low. Brewer-Taylor Assocs., B-277845, Oct. 30, 1997,
97-2 CPD para. 124 at 4. We will not consider a claim that an offeror submitted
an unreasonably low price, since the issue of whether a contractor can
perform at the offered price is part of the contracting officer's
affirmative determination of responsibility, which we will not review absent
factors not present here. 4 C.F.R. sect. 21.5(c) (1999). We think this reasoning
applies here to QTSI's markup rate.

With regard to QTSI's G&A rate, while the protester contends that the Air
Force ignored DCAA's advice, we disagree. The record shows that the agency
initially considered the awardee's proposal to present a moderate risk in
the area of price. QTSI's Initial Evaluation at 3. The agency questioned the
awardee's estimated future total cost base, which QTSI used to justify its
G&A rate, and the agency sought in discussions an explanation from QTSI.
QTSI EN Control No. C2. It was ultimately determined that QTSI's business
plan, which anticipated a shift to multiyear contracts such as TESS, could
reasonably be expected to result in the projected G&A rate. QTSI's Initial
Evaluation at 3. The agency raised the issue of the low G&A rate during
discussions and received an explanation that it believed was reasonable. The
protester's disagreement with the agency's business judgment provides no
basis to find the agency's conclusions objectionable. Moreover, even if the
awardee understated its markup and G&A rate, AJT has not established that it
was prejudiced in view of the significant difference in overall price/cost
between the two proposals.

The protester argues that, if the agency intended to use price as the
ultimate discriminator in its selection decision, it was obligated to inform
AJT, during discussions, that it considered the protester's price too high.
Instead, the protester contends, the contracting officer misled it by urging
it to increase its overhead rates. This, the protester claims, violated FAR
sect. 15.306(d)(3), which requires a contracting officer to discuss, with each
offeror still being considered for award, significant weaknesses,
deficiencies, and other aspects of its proposal such as price that could be
altered or explained to enhance materially the proposal's potential for
award.

The record does not support AJT's allegations that the contracting officer
urged AJT to raise its overhead rates. The agency's questions in this regard
were based on the DCAA report, as noted above, and the protester's response,
like QTSI's response to questions about its G&A rate, was that an
anticipated greater volume of business would lower the rate by increasing
the base upon which it was calculated. The agency accepted this explanation
in both cases.

With respect to AJT's price overall, the agency notes that, given the
protester's strategy, discussed above, of using its own personnel instead of
partnering with a large business, AJT's costs appeared reasonable for the
approach taken. In other words, the protester would essentially have had to
rewrite its proposal to achieve any significant cost reduction. Contracting
Officer's Statement at 5.

As noted above, the agency issued the solicitation here on August 18, 1999,
after the January 1, 1998 effective date of the revised discussion rules of
Part 15 of the FAR. Those revised rules, at sect. 15.306(e)(3), provide that
"the contracting officer may inform an offeror that its price is considered
by the Government to be too high, or too low, and reveal the results of the
analysis supporting that conclusion." This language clearly gives the
contracting officer discretion to inform the offeror that its cost/price is
too high, but does not require that the contracting officer do so,
especially where, as here, the agency does not consider the cost/price a
significant weakness or deficiency that the offeror could alter or explain
to enhance the

proposal's potential for award. See National Projects, Inc., B-283887,
Jan. 19, 2000, 2000 CPD para. ___ at 5. See also KBM Group, Inc., B-281919,
B-281919.2, May 3, 1999, 2000 CPD para. ___ (agency did not mislead protester
during discussions, even though award was ultimately made based on price and
agency did not inform protester that its price was higher than awardee's
price, where agency did not believe that protester's price was too high for
the approach taken).

The protest is denied.

Comptroller General
of the United States

Notes

1. For cost/price evaluation purposes, the RFP provided that offerors
furnish fixed prices for certain line items such as phase-in and technical
engineering services. The RFP also provided estimated hours and overall
ceilings for those estimated hours of the cost reimbursable on-call
engineering/inspection services in each performance period, as well as a
list of anticipated labor classifications for those services. Offerors
proposed rates for the anticipated labor classifications. Those rates were
then multiplied by the estimate of hours for each labor classification for
cost evaluation purposes. RFP amend. 4, sect. B, at 10-18. Offerors were asked
to propose a coefficient, or markup for subcontract management.

2. Section L-907 and attachment 4 to the solicitation contained two model
problems for offerors to address in their proposals. RFP amend. 4, sect. L,
at 10; RFP attach. 4, at 1-6.

3. The protester also asserts that QTSI's dependence on General Physics
could violate the subcontracting limitation at Federal Acquisition
Regulation (FAR) sect. 52.219-14. We note that the clause was not in the
solicitation. In any event, QTSI committed to comply with the substance of
the clause, and we do not believe that the contracting officer had a basis
for concern that QTSI would not do so.