TITLE:  Comprehensive Health Services, Inc., B-285048.3; B-285048.4; B-285048.5; B-285048.6, January 22, 2001
BNUMBER:  B-285048.3; B-285048.4; B-285048.5; B-285048.6
DATE:  January 22, 2001
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Comprehensive Health Services, Inc., B-285048.3; B-285048.4; B-285048.5;
B-285048.6, January 22, 2001

Decision

Matter of: Comprehensive Health Services, Inc.

File: B-285048.3; B-285048.4; B-285048.5; B-285048.6

Date: January 22, 2001

Cyrus E. Phillips, IV, Esq., for the protester.

Joseph J. Petrillo, Esq., and Karen D. Powell, Esq., Petrillo & Powell, for
Hummer Whole Health Management, Inc., an intervenor.

Merilee D. Rosenberg, Esq., Department of Veterans Affairs, for the agency.

Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Agency determination that protester's proposal to hire incumbent
contractor's employees to perform contract presented a risk to the agency
was reasonable where protester did not furnish required letters of intent
from proposed personnel, and protester proposed a lower salary and fewer
benefits than the incumbent employer.

2. Best-value analysis was reasonable where agency fully considered the
difference in awardee's and protester's proposed prices and determined that
the additional benefits offered by the awardee were worth its higher price.

DECISION

Comprehensive Health Services, Inc. protests the award of a contract to
Hummer Whole Health Management, Inc. under Department of Veterans Affairs
(VA) request for proposals (RFP) No. 101-03-00, for the operation of a
comprehensive program of occupational health and wellness for VA and other
specified agencies.

We deny the protest.

The RFP, for a fixed-price requirements contract, contained two statements
of work (SOW). The first addressed the majority of services, including
treatment of occupational and non-occupational illnesses and injuries, an
employee assistance program, and other additional services. The second
described the services required to run the VA fitness facility. The RFP
provided that offerors who first demonstrated that they had performed
similar occupational health services during the past 5 years would be
evaluated on a best-value basis under the factors past performance, oral
presentation, organizational review and price. Past performance and the
technical factors combined were worth significantly more than price in the
award decision. With respect to price, offerors were required to propose
(for a base period and each of four option periods) fully loaded hourly
rates for designated labor categories, unit prices for optional medical
services, and other direct costs.

Four proposals were received and, following the initial evaluation, three,
including Comprehensive's and Hummer's, were placed in the competitive range
for discussion purposes. Competitive Range Determination (CRD) at 6.
Following discussions and the submission and evaluation of final proposal
revisions, Hummer's proposal was rated blue (exceptional) for its
technical/past performance proposal, and Comprehensive's was rated green
(acceptable). Hummer's evaluated price ($17,304,631.80) was the highest, and
Comprehensive's ($15,314,544.90) the second highest. Price Negotiation
Memorandum (PNM) at 9. VA performed a best value determination and concluded
that Hummer's superior technical proposal offered benefits to the government
that were worth its additional cost. Id. at 10-11; Best Value Determination
(BVD) at 6-7. Accordingly, award was made to Hummer.

Comprehensive challenges the evaluation and award decision on a number of
grounds. We have reviewed the record and find Comprehensive's arguments to
be without merit. We discuss Comprehensive's principal arguments below.

EVALUATION

Letters of Intent

The primary issue raised concerns the evaluation of Comprehensive's proposal
with respect to its proposed key personnel. In this regard, the solicitation
required that the medical support services be provided by key personnel or,
in their absence, by backup personnel. RFP at 36; RFP amend. No. 2 at
question 5. Offerors were required to identify their key and backup
personnel on "Proposed Key/Backup Personnel" forms, and to provide letters
of intent from those persons. RFP at 74, attach. 4. In its proposal, and
during its oral presentation, Comprehensive identified 34 key personnel, all
of whom currently were employees of the incumbent contractor, Hummer.
Comprehensive did not provide letters of intent from these individuals,
explaining instead that the incumbent personnel would not speak with
Comprehensive because they feared they would lose their jobs if they did so.
Comprehensive asserted that staffing would be completed during the
transition phase of the contract, that all positions would be filled with
qualified incumbents, and that, if there were not sufficient qualified
incumbents, the positions would be filled with back-up personnel or new
hires. VA ultimately concluded that, while Comprehensive's plan to hire and
perform with the incumbent employees was acceptable, it posed a risk to VA
because the employees had not signed letters of intent to work for
Comprehensive and there was no guarantee that they would do so. CRD at 2.

Comprehensive takes issue with the agency's conclusion, arguing that its
plan to hire the incumbent employees was a prudent business decision and
that, because the incumbent personnel knew that Comprehensive intended to
submit their names in its proposal, VA actually should have rated its plan a
strength. [1]

Comprehensive's argument ignores the basis for the agency's evaluation. VA
did not downgrade Comprehensive's proposal merely because it proposed to
perform with the incumbent staff. Rather, as explained above, it was
concerned that Comprehensive would have difficulty hiring all of the
employees given the absence of letters of intent. Further, during
discussions, VA asked Comprehensive, among other things, to provide a
breakdown of its labor rates for each labor category listed in the
solicitation, Comprehensive Discussion Question No. 1, because it wanted to
understand Comprehensive's fringe and benefits package. Instead of providing
the requested breakdown, Comprehensive advised the agency as follows: "The
labor rate for each labor category is comprised of personnel/fringe,
overhead, general & administrative, and fee allocated as percentages in
compliance with [Federal Acquisition Regulation (FAR)] sect. 42.7 Indirect Cost
Rates. Included in the personnel/fringe are health, dental, vision,
long/short term disability and life insurance, continuing education, all
required taxes and a 401K plan. Comprehensive has also included replacement
staff cost." Comprehensive's Response to Questions at 2. In the absence of
the breakdown, the agency reviewed Comprehensive's overall proposed labor
rates, which it found were lower than Hummer's, and noted from
Comprehensive's response quoted above that it offered fewer fringe benefits
to its employees than Hummer. BVD at 2. The agency concluded that these
considerations exacerbated the risk that at least some of Hummer's employees
would not accept employment from Comprehensive.

We find nothing unreasonable in the agency's conclusions. The purpose of
this contract is to provide medical support services--a purpose that cannot
be met without a qualified staff. The agency's concern that the contract be
staffed from inception with qualified staff was evident from the requirement
that offers include letters of intent from the key personnel proposed to
perform the contract, and the qualifications of those personnel. While it is
true that, even with letters of intent, employees might choose not to work
for a contractor, or might leave their current employer, it was reasonable
for the agency to assume that an employee who signs a letter of intent
agreeing to work for a firm on a specific contract is more likely to do so,
and thus represents a lesser risk to the agency, than one who declines to
provide a letter of intent. [2] Similarly, we think it was reasonable for
the agency to conclude that an employee will be less likely to work for a
new employer paying less and offering fewer benefits than the employee
currently receives. We conclude that it was reasonable for the agency to
find that Comprehensive's proposal, while acceptable, contained a weakness
in that it presented a risk that Comprehensive would not be able to staff
the contract. [3]

Additional Evaluation Issues

Comprehensive asserts that the agency unreasonably evaluated as a weakness
its lack of experience working with its proposed subcontractors.
Comprehensive maintains that the agency should have considered the past
performance of its teaming partners. This argument confuses two different
evaluation considerations and is without merit. The weakness identified
concerned, not past performance, but the fact that Comprehensive has not
previously worked with its subcontractors. Its subcontractors' past
performance obviously has nothing to do with the agency's concerns regarding
Comprehensive's working relationship with its subcontractors.

Comprehensive also argues that the agency's criticism that Comprehensive has
no experience working with its proposed subcontractors demonstrates that the
agency failed to recognize the validity of its teaming arrangement, in
violation of FAR sect. 9.603. This argument also is without merit; the
requirement that agencies accept the integrity and validity of teaming
arrangements in general does not preclude the agency from evaluating a
specific teaming arrangement for its potential impact on performance.

BEST VALUE DETERMINATION

In the price negotiation memorandum, dated September 12, 2000, the
contracting officer, among other things, compared the prices offered by
Hummer and Comprehensive. In doing so, she determined that the difference in
the offerors' total labor costs [DELETED] was essentially a premium Hummer
is paying for its employees' experience, and to retain them. She also noted
that there were items (totaling [DELETED] Hummer included in its proposal,
and Comprehensive did not, which were beneficial because they would either
provide a direct benefit to the government (e.g., subspecialty services), or
benefit Hummer's employees and thus help maintain a stable workforce
(professional development items). As part of her analysis, the contracting
officer subtracted the cost of these extra items and the
retention/experience premium from Hummer's total price ($17,304,631.30) and
arrived at a "guestimate" of [DELETED] for purposes of comparing Hummer's
and Comprehensive's prices for equivalent services.

Comprehensive maintains that it was improper for the contracting officer to
base the best-value determination on this "guestimate," because there is no
substantiation in the record that the difference in labor rates is a
retention and experience premium, and because it did not include
consideration of the difference in the offerors' proposed prices for
optional medical services. (Comprehensive's proposed price for optional
medical services for the base year was [DELETED] lower than Hummer's).

We find nothing improper in the tradeoff. While the contracting officer did
subtract certain costs from Hummer's proposal in an attempt to determine
what the prices would be for identical services, this exercise did not
comprise the entire tradeoff analysis. Rather, the record shows that the
contracting officer was fully aware of the difference in the offerors' total
evaluated prices (Comprehensive's price was $1,990,086.90 lower), and was
merely identifying the additional cost related to the beneficial items in
Hummer's proposal. She ultimately based her tradeoff determination on the
difference in total prices, after also concluding that the additional
benefits in Hummer's proposal would provide the government with substantial
benefits, and were worth the additional cost for those benefits. In this
regard, the contracting officer states in her determination that her
decision "is based on adequate price competition and market prices of
commercial items sold to the general public. Hummer's price is less than 13%
higher than the next lower proposal. Hummer provides more employee benefits
and a higher salary to its employees for retention purposes. In addition,
Hummer provides additional services. These additional services provide a
better comprehensive health service program." PNM at 11. We find nothing
unreasonable in the agency's approach or its conclusion.

As for Comprehensive's specific assertions, there was nothing improper in
the agency's failure to separately consider the difference in the proposed
prices for optional medical services. These were services that all offerors
were required to provide, and the offerors' proposed prices for these
services were included in their total prices. Thus, this price difference
was effectively accounted for in the tradeoff based on the total prices.
Similarly, we see nothing objectionable in the agency's characterization of
the difference in the firms' proposed labor rates as a premium for
experience and retention and, in any case, fail to see how it worked to
Comprehensive's detriment in the tradeoff.

The protest is denied.

Anthony H. Gamboa
Acting General Counsel

Notes

1. Comprehensive also asserts that evaluating its proposal to hire the
incumbent staff as a weakness was improper because the solicitation
permitted offerors to propose other staffing models. However, Comprehensive
has not elaborated on this issue, and has not explained what other staffing
model it was proposing.

2. Comprehensive argues that the agency improperly failed to consider
Hummer's inability to fill three positions (under its current contract) from
March 7 through at least September 29. While the agency did not specifically
consider this, the agency was convinced that Hummer's compensation package
was sufficient to attract personnel. In any case, this would appear to be a
minor consideration compared to Comprehensive's failure to provide any firm
staffing.

3. Comprehensive argues that VA should have advised it during discussions
that it had concerns regarding whether Comprehensive would be able to employ
the incumbent personnel. However, again, the record shows Comprehensive
fully understood the significance of its failure to obtain the required
letters of intent, as evidenced by the explanation of its failed efforts in
its proposal. In these circumstances, the agency reasonably could assume
that Comprehensive already was aware of this weakness, and that discussing
it would serve no purpose. In light of this awareness, moreover, we fail to
see how Comprehensive was prejudiced by the agency's actions.