TITLE:  Molina Engineering, Ltd./Tri-J Industries, Inc. Joint Venture, B-284895, May 22, 2000
BNUMBER:  B-284895
DATE:  May 22, 2000
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Molina Engineering, Ltd./Tri-J Industries, Inc. Joint Venture, B-284895, May
22, 2000

Decision

Matter of: Molina Engineering, Ltd./Tri-J Industries, Inc. Joint Venture

File: B-284895

Date: May 22, 2000

George Molina and Peter Stella for the protester.

Col. Nicholas P. Retson and Maj. Ralph J. Tremaglio, Department of the Army,
for the agency.

Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

  1. Exclusion of protester's proposal from competitive range is
     unobjectionable where agency reasonably concluded that, based on its
     evaluation of the offeror's technical and experience and past
     performance ratings and its price, the proposal was not among the most
     highly rated; determination that protester's price was unrealistically
     low was reasonable.
  2. Agency's evaluation of protester's experience for risk rating purposes
     properly took into consideration the fact that protester had not
     performed contracts that were similar in size and scope to the contract
     contemplated by the solicitation.

DECISION

Molina Engineering, Ltd./Tri-J Industries, Inc. Joint Venture protests the
exclusion of its proposal from the competitive range under request for
proposals (RFP) No. DAPC50-00-R-0001, issued by the Department of the Army
to obtain maintenance services and minor construction for family military
housing at the Aliamanu Military Reservation, Hawaii. Molina contends that
the Army improperly concluded that its price was unrealistically low and
unreasonably evaluated its proposal with respect to past performance.

We deny the protest.

The types of services needed to maintain the 2,585 housing units at Aliamanu
correspond with the three contract line items (CLIN) set forth in the
solicitation: service calls and other recurring work; change-of-occupancy
housing maintenance; and other indefinite-quantity work. RFP sect. B. The
solicitation contemplated the award of a fixed-price,
indefinite-delivery/indefinite-quantity (ID/IQ) contract, with a 1-year base
period and up to four 1-year option periods. RFP sect.sect. C.1, F.1, F.3, L.4. The
solicitation was limited to qualifying section 8(a) firms. [1] RFP sect.sect. I.10,
L.9.

The Army intended to award the contract to the offeror whose proposal
represented the best value. RFP sect.sect. L.3.f.1, 4. Offers were to be evaluated
under the following factors: experience and past performance; technical;
oral presentations; and price. RFP sect.sect. M.2, M.3. The experience and past
performance factor was equal in importance to the technical factor and oral
presentation factor when combined. RFP sect. M.3. Price was not scored, but its
importance was considered approximately equal to all non-price factors when
combined. Id. The solicitation contemplated conducting price realism
analyses of the price proposals. RFP sect.sect. L.12.B.3.d, M.4.d.1.

The initial evaluation was to be based on the offerors' experience and past
performance, technical, and price proposals. After evaluating these
proposals, the Army planned to establish a competitive range. The
contracting officer intended to limit the number of proposals in the
competitive range to the number that would permit an efficient competition
among the most highly rated proposals.

RFP sect. L.12.B.1.b., L.3.f.4. Oral presentations would be made by only the
offerors within the competitive range. RFP sect. M.2. The Army received 12
proposals in response to the solicitation.

The source selection evaluation team used color/risk ratings to evaluate
proposals under the experience and past performance factor and color ratings
to evaluate under the technical factor, [2] and also conducted price realism
analyses. The contracting officer completed the final evaluation and made
his competitive range determination the next day. He found that the five
most highly rated proposals formed a natural cluster in pricing and
categorized them as the "Group 2" proposals. Competitive Range Determination
(CRD) para. 5. The offers of Molina and another firm--the "Group 1"
proposals--received lower ratings and proposed substantially lower prices
than did the Group 2 offerors. The offers of the remaining firms--the "Group
3" proposals--received lower ratings and proposed substantially higher
prices than did the Group 2 firms. Id.

For reasons discussed below, the contracting officer determined that
Molina's proposed price was unrealistically low. In addition, the firm's
technical rating was yellow/acceptable, and its experience and past
performance rating was yellow/moderate risk, based on a green/low risk
rating for past performance and an amber/high risk rating for experience.
The amber rating resulted from the Army's finding that both joint venture
firms lacked significant experience in contracts of this type and/or
magnitude. The contracting officer believed that this limited experience
might be a contributing factor to the firm's unrealistically low price. CRD

para. 7.a.2.

The contracting officer established a competitive range of three offerors
drawn from Group 2 and eliminated the remaining offerors, including Molina.
Molina filed an agency-level protest when it learned of the Army's decision,
and filed the instant protest prior to receiving an agency response. The
firm takes issue with the Army's decision to eliminate it from the
competitive range, contending that the Army improperly concluded that its
price was unreasonably low and unreasonably evaluated it as lacking
significant experience in contracts of this type and/or magnitude.

The determination of whether a proposal is in the competitive range is
principally a matter within the reasonable exercise of discretion of the
procuring agency. In reviewing an agency's evaluation of proposals and
subsequent competitive range determination, we will not evaluate the
proposals anew in order to make our own determination as to their
acceptability or relative merits; rather, we will examine the record to
determine whether the documented evaluation was fair and reasonable and
consistent with the evaluation criteria. Matrix Gen., Inc., B-282192, June
10, 1999, 99-1 CPD para. 108 at 3. A protester's mere disagreement with an
agency's evaluation does not, without more, establish that the evaluation
was unreasonable. Beneco Enters., Inc., B-278591, Feb. 17, 1998, 98-1 CPD para.
91 at 3.

Contracting agencies are not required to retain in the competitive range a
proposal that is not among the most highly rated ones or that the agency
otherwise reasonably concludes has no realistic prospect of award. Federal
Acquisition Regulation (FAR) sect. 15.306(c)(1); Matrix Gen., Inc., supra, at 3;
SDS Petroleum Prods., Inc., B-280430, Sept. 1, 1998, 98-2 CPD para. 59 at 5.
Here, the record shows that, while Molina submitted an acceptable proposal,
it was not included in the competitive range because it was deemed to
contain unrealistically low pricing and because the non-price aspects of its
proposal were not rated as highly as were the three competitive range
offers. As a result, it was not among the most highly rated proposals.

In evaluating an offeror's proposed price, the Army's concern was to
determine whether the price reflected the firm's understanding of the
project and ability to successfully organize and perform the contract;
whether the price was reasonable when compared to the independent government
estimate (IGE) and reflected the fair market value; whether the price was
reasonable when compared to any similar complex efforts; and that the price
was neither excessive nor insufficient for the effort to be accomplished.
Unrealistically low prices might result in eliminating the proposal from the
competitive range on the basis that the offeror does not understand the
project. RFP sect.sect. M.4.d.1, L.12.B.3.d.2. Moreover, the Army might determine a
proposal is unacceptable if the prices are materially unbalanced between
line items. RFP sect. L.3.f.8.

Since the risk of poor performance when a contractor is forced to provide
services at little or no profit is a legitimate concern in evaluating
proposals, an agency in its discretion may, as here, provide for a price
realism analysis in the solicitation of fixed-price proposals. [3] Volmar
Constr., Inc., B-272188.2, Sept. 18, 1996,

96-2 CPD para. 119 at 5. The FAR sets forth a number of price analysis
techniques that may be used to determine whether prices are reasonable and
realistic, including a comparison of the prices received with each other;
with previous contract prices for the same or similar services; or with the
IGE. FAR sect. 15.404-1(b)(2). The agency's determination was premised on two of
these techniques.

The Army first compared Molina's proposed price with the other prices it
received. The firm's price was significantly below the price of the
next-lowest offer, and lower still than what the agency termed the fair
market price, which was obtained by averaging the prices of the Group 2
offerors. This pricing disparity led the Army to believe that Molina's price
was unrealistically low. The Army's concerns were heightened by the apparent
correlation between Molina's lower non-price ratings and its lower price;
the Army believed the firm's limited experience could be a contributing
factor to its unrealistically low price.

The Army next compared Molina's proposed price with the IGE. The Army
assumed the responsibility for providing this requirement's acquisition
support, which had long been provided by the Navy, with this procurement.
The original Navy IGE was largely based on the current contract pricing,
developed more than 5 years ago. The Army explains that, while this
solicitation is the follow-on, it is not a carbon copy of the current
contract: several estimated quantities have increased, several new work
requirements have been added, and the current pricing did not account for
subsequent wage and rate increases. [4] Agency Response to Molina's Mar. 8,
2000 Letter at Agency Report, Tab 19. As a result, before the RFP was
issued, the Army Corps of Engineers reviewed the Navy IGE with a resulting
upward adjustment of several million dollars. After the evaluation, this
adjusted IGE was reexamined because it appeared to be substantially higher
than the fair market price. A comparison between the IGE and the fair market
price resulted in a downward revision of the IGE, to a level almost exactly
the same as the Navy's original IGE but still substantially higher than the
fair market price. The contracting officer attributes the difference between
the IGE and the fair market price to the current competitive market in
Hawaii.

Molina objects that the IGE was "tampered with" and that it is no longer
independent, but was distorted to conform to the fair market price. We
disagree. The competitive range determination chronicles the revisions made
to the adjusted IGE and provides the rationale for each adjustment. CRD para. 6.
While some adjustments were made in comparison with the fair market
pricing-many others were made in comparison with other contract prices for
similar work--this fact alone does not mean that the IGE was distorted.
Instead, the Army merely adjusted the IGE, in the face of competitively
provided, market prices, to make it more accurate. As for Molina's assertion
that the most reliable estimate was the original Navy IGE, we note that the
IGE as adjusted after the evaluation was almost identical to the original
Navy IGE. [5]

We turn now to the Army's evaluation of Molina's proposal under the
experience and past performance factor. With respect to the experience
component of the factor, Molina argues that the Army did not give adequate
consideration to its only family housing maintenance contract when it found
that both joint venture firms lacked significant experience in contracts
similar in scope and size to the instant requirement.

In reviewing a protest against an agency's evaluation of proposals, we
examine the record to determine whether the agency's judgment was reasonable
and consistent with the stated evaluation criteria and applicable statutes
and regulations. Support Servs., Inc., B-282407, B-282407.2, July 8, 1999,
99-2 CPD para. 30 at 3. We find that the evaluation here was reasonable.

The RFP instructed offerors that performance risk was to be evaluated
considering overall experience and past performance under existing and
previous contracts. Provided that the offeror had prior contracts, which was
the case here, the Army planned to evaluate experience in projects that are
similar in type, scope, magnitude, and complexity to the instant
procurement. [6] RFP sect. M.4.a.1.a. The record shows that, despite
post-protest statements suggesting otherwise, the Army evaluators considered
Molina's family housing maintenance contract at its appropriate dollar
value, and that Molina was given credit for having performed that contract.
Indeed, the Army specifically cites that contract as evidence the firm had
some family housing maintenance contract experience. Technical Evaluation
Document at 30; Army Response to Request for Supplemental Information, May
3, 2000, attachs. 2, 3.

The reason for Molina's amber/high risk rating was twofold. First, the
firm's sole family housing maintenance contract was for a dollar value
substantially lower than the value of the instant contract. While the work
performed was similar, with apparently similar rates of service calls and
change-of-occupancy maintenance work, the overall contract was much smaller.
Second, Molina's other contracts were not for overall family housing
maintenance--the requirement here--but for parts of that work, such as the
repair of window systems and playgrounds, the installation of gas meters,
and exterior painting, lead and asbestos abatement. Molina's Proposal at Tab
4. As a result, even though the work under the contracts was similar, in
whole or in part, we think the agency reasonably could conclude that
experience on a number of smaller contracts does not equate with the
performance of a single, larger contract such as the one here. See Support
Servs., Inc., supra, at 5-6. While Molina argues that dollar value, or size,
should not be considered in determining whether its prior contracts were the
same or similar to the current procurement, size is a proper consideration
in determining whether an offeror has experience performing similar
contracts. See Proteccion Total/Magnum Sec., S.A., B-278129.4, May 12, 1998,

98-1 CPD para. 137 at 6.

The protest is denied.

Comptroller General
of the United States

Notes

1. Section 8(a) of the Small Business Act, 15 U.S.C. sect. 637(a) (1994),
authorizes the Small Business Administration (SBA) to contract with
government agencies and arrange for performance of those contracts by
awarding subcontracts to small socially and economically disadvantaged
businesses.

2. The color/risk ratings for the experience and past performance factor
were blue/very low risk; green/low risk; yellow/moderate risk; amber/high
risk; red/very high risk; and gray/unknown risk. The color ratings for the
technical factor were blue/excellent understanding; green/good
understanding; yellow/acceptable understanding; amber/shallow understanding;
and red/clear misunderstanding. Source Selection Evaluation Plan sect. IV.A.1.

3. Molina incorrectly alleges that the Army's concerns with its low pricing
constituted a pass/fail determination of nonresponsibility of a small
business that the agency was required to refer to the SBA for consideration
under that agency's certificate of competency procedures. The Army's
concerns reflected its evaluated assessment of the firm's understanding of
the RFP's requirements, consistent with the evaluation scheme. See Sutron
Corp., B-270456, B-270456.2, Mar. 7, 1996, 96-1 CPD para. 143 at 7.

4. For this reason, Molina's argument that the Army should have compared its
proposed pricing with the existing contract price is unpersuasive, as it
would not be a valid comparison. See FAR sect. 15.404-1(b)(2)(ii).

5. While apparently not dispositive in the decision to eliminate Molina's
proposal from the competitive range, the contracting officer also concluded
that Molina's prices for the three major categories of work were unbalanced.
As noted above, the three categories are service calls/recurring work (CLIN
0001), change-of-occupancy housing maintenance (CLIN 0002), and other IDIQ
work (CLIN 0003). The RFP specifies that CLIN 0001 is the guaranteed minimum
to be ordered under the contract. RFP sect. B.4. Molina's pricing for CLIN 0001
was higher than the fair market price for the work, while its pricing for
CLINs 0002 and 0003 was substantially lower than the fair market pricing for
the same work. This raised a particular concern with respect to CLIN 0003,
which comprised 53 percent of the required effort. Molina's objection to the
Army's conclusion does not directly address--and, in fact, partly
concedes--the heart of the agency's concern: that Molina had priced part of
the work for CLINs 0002 and 0003 under CLIN 0001.

6. Molina incorrectly asserts that the Army should have considered the
experience of one of its principals in evaluating its experience; the RFP
did not provide for such consideration.