TITLE:  Computer Products, Inc., B-284702, May 24, 2000
BNUMBER:  B-284702
DATE:  May 24, 2000
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Computer Products, Inc., B-284702, May 24, 2000

Decision

Matter of: Computer Products, Inc.

File: B-284702

Date: May 24, 2000

Ira E. Hoffman, Esq., Alan M. Grayson, Esq., and Brian T. Scher, Esq.,

Grayson & Kubli, for the protester.

Pamela J. Mazza, Esq., Philip M. Dearborn III, Esq., and Antonio R. Franco,
Esq.,

Piliero, Mazza & Pargament, for Tessada & Associates, Inc., an intervenor.

Joseph Boggs, Esq., Department of the Navy, 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

In a competitive procurement under the Federal Supply Schedule program in
which the solicitation announced that award would be made on a best value
basis and that technical factors were more important than price, the agency
improperly selected the awardee to receive the order based upon the
awardee's technically acceptable, lowest-priced quote.

DECISION

Computer Products, Inc. (CPI) protests the award of an order to Tessada &
Associates, Inc. under its Federal Supply Schedule (FSS) contract, pursuant
to request for quotations (RFQ) No. 3-GR-2553, issued by the Naval Air
Warfare Center. CPI complains that the Navy selected Tessada for award as
the lowest-priced, technically acceptable quote, but that the RFQ stated
that technical merit was more important than price and the Navy did not
credit CPI for its technically superior quote.

We sustain the protest.

The Navy issued the RFQ on January 13, 2000 to [DELETED] FSS vendors,
including CPI and Tessada, seeking quotes for financial reconciliation and
prevalidation of obligations services. RFQ Cover Letters. The vendors were
informed that 11,955 staff hours were required to perform the RFQ
requirement and that they should quote a mix of labor categories from their
FSS schedule contracts. Id. A statement of work was provided that described
the services to be provided, including that the contractor would be required
to use "the Computer Optimized Batch Reconciliation Application (COBRA) in
order to efficiently perform the required work." RFQ at 2.

The RFQ stated that award would be made to the "responsible GSA [General
Services Administration] vendor who proposes the best value to the
Government, cost and other factors considered" and listed the following
evaluation factors in descending order of importance: past performance,
personnel, and cost. RFQ at 3.

Quoters were informed that the evaluation of past performance factor would
be based upon the vendor's "experience and past performance on contracts and
subcontracts currently on-going or completed within the last five years that
are directly similar in scope, magnitude, and complexity to the requirements
in the [RFQ's statement of work]." Id. The evaluation would include
assessing the vendor's knowledge and ability to perform the statement of
work tasks, including mechanization of contract administration services,
standard accounting and reporting systems, negative unliquidated
obligations, unmatched disbursements, official undistributed disbursements,
COBRA, and Defense Finance and Accounting Service working relationships. Id.

With respect to personnel, the RFQ stated that the evaluation would be based
on the availability of personnel to perform the requirements and on the
vendor's hiring plan to meet the government's immediate needs. The RFQ did
not provide for any consideration of quoters' offered labor skill mix.

Vendors were also informed in the RFQ's cover letter that the Navy would
follow the "new procedures established by GSA." Although not provided with
the RFQ, the "new procedures" are "ordering procedures for services" that
GSA has published on its Internet site. [1] See Agency Report, Tab 2, GSA
Ordering Procedures for Services.

Among other things, this guidance provides that agencies when ordering
services should prepare RFQs that "notify contractors what basis will be
used for selecting the contractor to receive the order." Id. at 1. It also
provides as follows:

After responses have been evaluated against the factors identified in the
request for quotes, the order shall be placed with the schedule contractor
that represents the best value and results in the lowest overall cost
alternative (considering price, special qualifications, administrative
costs, etc.) to meet the Government's needs.

Id. at 2. For requirements that exceed micro-purchase threshold ($2,500),
agencies are directed to document the evaluation of quotes that formed the
basis for the selection of the vendor receiving the order and to document
the rationale for any tradeoffs made in making the selection. Id. at 3.

The Navy received and evaluated quotes from the [DELETED] vendors. Agency
Report, Tab 11, Technical Evaluation.

With respect to the evaluation of CPI's quote under the past performance
factor, the evaluator found, among other things, that the protester had
numerous contracts with the [DELETED] performing the work sought by the RFQ
and that [DELETED]. With respect to the personnel factor, the evaluator
noted that CPI already had a trained staff ready to perform, that no hiring
or realignment would be required, and that CPI owned the COBRA software. [2]
Id. at 3.

With respect to the evaluation of Tessada's quote under the past performance
factor, the evaluator found that Tessada had extensive experience in
[DELETED], but that Tessada had [DELETED]. Agency Report, Tab 11, Technical
Evaluation, at 2. The evaluator also noted that Tessada [DELETED]. With
respect to the personnel factor, Tessada [DELETED]. Id.

The evaluator concluded that "[a]ll quotes were found to be technically
acceptable." The firm's quoted prices (Tessada quoted $350,686, and CPI
quoted $[DELETED]) were then reviewed by the evaluator who "recommended that
award be issued to Tessada Associates who offers the technically acceptable
quote with the lowest price." Agency Report, Tab 11, Evaluation Document, at
1. Tessada's lower quoted price is attributable to [DELETED]. Compare Agency
Report, Tab 10, Tessada's Quote, at 8, with Agency Report, Tab 8, CPI's
Quote, at 4. The evaluator did not evaluate the firms' labor skill mix.

The contracting officer accepted the evaluator's recommendation as follows:

It was determined that all quotes satisfied the stated evaluation criteria
and were essentially equivalent. There were no qualitative advantages that
would warrant a cost/technical tradeoff. Therefore, in accordance with the
RFQ which stated that the degree of importance of price/cost would increase
commensurably with the degree of equality among technical quotes, it is
determined that it is in the best interest of the Government to award to the
low price quote.

Agency Report, Tab 12, Contracting Officer's Memorandum For File, at 3.

Award was made to Tessada on February 8, 2000, and CPI protested to our
Office after receiving a debriefing from the Navy. Performance of Tessada's
order has been stayed pending our decision in this matter.

CPI protests that the Navy selected Tessada to receive award based upon its
low price even though the RFQ provided that the technical evaluation factors
were more important than price. Protest at 4-5; Comments at 15-20. In this
regard, CPI complains that the evaluation record demonstrates that CPI
offered material advantages under the past performance and personnel factors
that the Navy ignored in selecting Tessada's lower-priced quote. Comments at
19.

The Navy states that the RFQ did not provide for a cost/technical tradeoff
or qualitative ranking of quotes in determining which firm would be selected
to receive the order. Agency Report at 7-10. Rather, the Navy argues that,
as the RFQ informed quoters, GSA's special ordering procedures were
applicable and that this meant that award would be made to the lowest cost
alternative and not based upon a cost/technical tradeoff. Agency Report at
7-8. The Navy also cites the decision of the U.S. Court of Federal Claims in
Ellsworth Assocs., Inc. v. United States,

45 Fed. Cl. 388 (1999), for the proposition that the procedures of FAR Part
15

are inapplicable to FSS procurements.

We agree with the Navy that the procedures of FAR Part 15, governing
contracting by negotiation, do not govern competitive procurements under the
FSS program. This does not mean, however, that the agency can announce one
basis for award and then make award on another basis. Under the FSS program,
agencies are not required to conduct a competition before using their
business judgment in determining whether ordering supplies or services from
an FSS vendor represents the best value and meets the agency's needs at the
lowest overall cost. FAR sect. 8.404(a); Amdahl Corp., B-281255, Dec. 28, 1998,
98-2 CPD para.161 at 3. However, where an agency conducts a competition, we will
review the agency's actions to ensure that the evaluation was

reasonable and consistent with the terms of the solicitation. Id.; COMARK
Fed. Sys., B-278343, B-278343.2, Jan. 20, 1998, 98-1 CPD para. 34 at 4-5. [3]
Selecting a vendor on an award basis different than that announced in the
solicitation is not consistent with the agency's obligation to treat vendors
fairly. See FAR sect. 1.102-2(c)(3).

The Navy contends that vendors were informed that the agency would be using
GSA's "new procedures" in conducting the procurement and that these special
ordering procedures require that an order be issued based on the lowest
overall cost quote. We do not agree that the Navy, by reference to these
procedures, informed vendors that award would be made to the technically
acceptable, lowest-priced quote. To the contrary, GSA's ordering procedures
for services provide that agencies should notify vendors of the basis upon
which orders will be awarded, evaluate quotes against the factors identified
in the RFQ, and document the rationale for any tradeoffs made in the award
decision. See Agency Report, Tab 2, GSA Ordering Procedures for Services, at
1-3.

Here, the RFQ stated that an order would be issued to the firm that offered
the government the best value, price and other factors considered. RFQ at 3.
By identifying evaluation factors in descending order of importance, the RFQ
informed vendors that technical quality would be more important than price
in determining which vendor would receive the order. Accordingly, under the
evaluation scheme presented by this solicitation, where one vendor offers
superior technical merit and another offers a lower-price, the agency must
perform a cost/technical tradeoff to determine which offers the government
the best value. [4]

The Navy alternatively argues that a cost/technical tradeoff was not
required in any event because there were no qualitative advantages between
the quotes that would warrant a cost/technical tradeoff. Agency Report, Tab
20, Declaration of Contracting Officer, Mar. 15, 2000, at 2. This
post-protest assertion is not consistent with the contemporaneous evaluation
documentation.

As noted above, the technical evaluator noted a number of differences
between CPI's and Tessada's quotes that appear to be meaningful
discriminators under the stated evaluation factors. For example, CPI
appeared to have greater and more specific experience than did Tessada.
Also, the evaluator noted that CPI owned the COBRA software, the use of
which is required to perform the RFQ requirements, while Tessada did not
indicate whether it had access rights to the software. Moreover, CPI had a
trained staff ready to perform, while Tessada [DELETED]. Agency Report,
Tab 11, Technical Evaluation, at 2-3.

The record does not evidence that these evaluation findings were
meaningfully considered by the contracting officer in her selection
decision. Specifically, there is no documentation in the record that
reflects that the agency considered whether these apparent evaluated
discriminators were meaningful or not. We recognize that the contracting
officer states that she consulted the technical evaluator and was informed
that the evaluator saw no technical differences between the two firms'
quotes that would justify paying a price premium. See Agency Report, Tab 20,
Declaration of Contracting Officer, Mar. 15, 2000, at 2. However, the agency
provides no explanation from the contracting officer or technical evaluator
as to why this is the case, given the evaluated differences between the two
firm's quotes. In the absence of persuasive evidence that the agency
considered the relative evaluated technical merits of the firms' quotes, as
reflected in the contemporaneous evaluation documentation, we conclude that
the agency selected Tessada for award, as the
firm with the technically acceptable, lowest-priced quote, and not on the
basis of announced evaluation criteria that provided that technical merit
would be accorded more weight than price. We sustain CPI's protest on this
basis. [5]

In crafting our recommendation, we must address the fact that the RFQ is
fundamentally defective. We see no rational basis for dictating a level of
effort of 11,955 hours while allowing vendors to propose different labor
mixes, nor do we believe that the agency can rationally select a vendor
without evaluating the different labor mixes or assessing whether the
vendors' proposed solutions satisfy the agency's needs. This is true
regardless of whether the solicitation calls for a cost/technical tradeoff
or selection of the low-cost, technically acceptable solution.

Accordingly, we recommend that the Navy amend the RFQ to clarify the basis
upon which award will be made (for example, to specify that award will be
based upon the lowest-priced, technical acceptable quote, if that is the
basis upon which the agency wishes to make award). Regardless of the basis
of award selected, if the agency chooses to allow vendors to propose
different solutions, then the RFQ should allow the submission of different
numbers of labor hours and different labor mixes, both of which should be
evaluated by the agency. The Navy should obtain new quotes and make a new
source selection decision. If a quote from another firm is selected, we
recommend that the Navy terminate the order issued to Tessada and place an
order with the other firm. We also recommend that the protester be
reimbursed the reasonable costs of filing and pursuing the protest,
including attorneys' fees.
4 C.F.R. sect. 21.8(d)(1). The protester should submit its certified claim for
such costs, detailing the time expended and the costs incurred, directly to
the contracting agency within 60 days after receipt of this decision.

The protest is sustained.

Comptroller General
of the United States

Notes

1. See http://pub.fss.gsa.gov/schedules/ordinssv.cfm. This guidance states
that the special ordering procedures take precedence over the procedures in
Federal Acquisition Regulation (FAR) sect. 8.404. The special ordering
procedures are apparently designed to address the concern that, when a
schedule contains services priced at hourly rates, merely comparing
competing vendors' hourly rates, without regard to the number of hours or
mix of labor categories the different vendors would use, is an inadequate
indicator of which vendor represents the lowest price. We note that the
procedures call for vendors to be provided a performance-based statement of
work, which presumably would allow vendors to propose differing levels of
effort and labor category mixes. In this regard, it is unclear why, in this
case, the Navy dictated a level of effort of 11,955 labor hours, which
limited vendors' ability to craft innovative solutions, or why, given that
it dictated the level of effort, it did not provide for the evaluation of
the labor categories that would be employed under this order. As indicated
below, we find this to be a fundamental defect in the solicitation.

2. CPI developed the COBRA software, which it licenses for use. Protest at
6.

3. This is consistent with the standard of review announced by the Court of
Federal Claims in Ellsworth Assocs., Inc., which cites our decision in
COMARK Fed. Sys., supra. See 45 Fed. Cl. at 394-96.

4. The Navy argues that the term "best value," which was used in this
solicitation, does not necessarily require that award be based upon a
cost/technical tradeoff. Agency Report at 7-8. We agree that, as defined by
the FAR, "best value" simply "means the expected outcome of an acquisition
that, in the Government's estimation, provides the greatest overall benefit
in response to the requirement." FAR sect. 2.101. This definition would
encompass a solicitation providing for selection of the low-cost,
technically acceptable proposal, as well as one calling for a cost/technical
tradeoff. Thus, the term "best value" does not itself inform vendors how
offers or quotes will be evaluated and the award decision made. Whether a
cost/technical tradeoff is required is dependent upon the evaluation
criteria and their weighting, as stated in the solicitation, and upon the
facts presented in the procurement, for example, whether one vendor presents
greater technical merit while another presents a lower price.

5. CPI also protests that Tessada's quote was unacceptable because it did
not demonstrate knowledge of the COBRA software. Protest at 6. However,
Tessada's quote specifically states that [DELETED]. Agency Report, Tab 10,
Tessada Quote,
at 5.