TITLE:  J.W. Holding Group & Associates, Inc., B-285882.11; B-285882.12, October 23, 2002
BNUMBER:  B-285882.11; B-285882.12
DATE:  October 23, 2002
**********************************************************************
J.W. Holding Group & Associates, Inc., B-285882.11; B-285882.12, October 23,
2002

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        
                                                                              
                                                                              

   Decision
    
    
Matter of:    J.W. Holding Group & Associates, Inc.
    
File:             B-285882.11; B-285882.12
    
Date:              October 23, 2002
    
Daniel S. Koch, Esq., Paley, Rothman, Goldstein, Rosenberg & Cooper, for
the protester.
Thomas J. Madden, Esq., Lars E. Anderson, Esq., John J. Pavlick, Jr.,
Esq., and Rebecca E. Pearson, Esq., Venable, Baetjer & Howard, for Sodexho
Management, Inc., an intervenor.
Julius Rothlein, Esq., U.S. Marine Corps, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Agency's new price realism determination was consistent with limitation on
reopened discussions (which essentially restricted changes to price
proposals) where, although it was based on staffing not clearly indicated
in awardee's prior technical proposal, that staffing level was reflected
in prior price proposal.
DECISION
    
J.W. Holding Group & Associates, Inc. (JWH) protests the U.S. Marine
Corps's (USMC) award of a contract to Sodexho Management, Inc. (SMI) under
request for proposals (RFP) No. M00027‑00‑R‑0002, for
food services.  JWH challenges the evaluation of proposals.
    

   We deny the protest.
    
BACKGROUND
    
The RFP provided for award of a primarily fixed-price incentive contract
for a base period of 5 years, with 3 option years, to provide regional
garrison food service at 23 messhalls on the West Coast.  (Another RFP,
No. M00027‑00‑R‑0001, provided for award of a similar
contract for 32 messhalls on the East Coast.)  Under the solicitation, the
contractor would provide full food service at 13 of the 23 West Coast
messhalls, and management and mess attendant services (with food
preparation performed by USMC cooks) at 10 of the messhalls.  In addition,
the contractor would assume responsibility for the procurement of food
(the price of which was to be included in the fixed incentive price per
meal) and (after a transition period) maintenance (on a fixed-price basis)
and repair (on a time and materials basis) of food preparation and serving
equipment.  Further, seven messhalls were set aside under the
Javits-Wagner-O'Day Act (JWOD), 41 U.S.C. S: 46‑48c (2000), for
performance by JWOD organizations for the blind or other severely
handicapped as subcontractors.  RFP S: H.5(f).
    
Award was to be made to the offeror whose proposal represented the *best
value* to the government based on four evaluation factors:  (1) price;
(2) integrated organization and management, including subfactors for
organization and management plan, advanced food technology plan, quality
control plan, and phase‑in plan; (3) small business subcontracting
plan; and (4) past performance.  Price was the most important criterion
and was equal in importance to the other criteria combined.  With respect
to price, the solicitation provided for an evaluation *to determine that
the price . . . is realistic for the work to be performed; i.e., it
reflects a clear understanding of the requirement and is consistent with
the various elements of the offeror's technical proposal.*  RFP
S: M.3.4.1.  (The solicitation indicated that, in addition to
consideration under the price criterion, results of the price realism
analysis may be used in making the performance risk assessment and
responsibility determination.  Id.)  The solicitations specified that the
price realism evaluation would include consideration of the completeness
(with respect to required pricing information), reasonableness and realism
of the proposed prices.
    
Four offerors submitted proposals.  SMI's, JWH's and a third offeror's
(Eurest Support Services (ESS)) proposals were included in the competitive
range.  After conducting written and oral discussions, USMC requested
final proposal revisions (first FPRs).  Based on its evaluation of the
resulting first FPRs, the agency concluded that SMI's proposal represented
the best value and therefore made award to SMI.  (SMI also received the
award under the East Coast solicitation.)
    
JWH protested the award; we denied that protest.  J.W. Holding Group &
Assocs., Inc., B-285882.3, B‑285882.6, July 2, 2001, 2002 CPD P: __
at 3.  However, we sustained protests filed by ESS (against the award of
both the West Coast and East Coast contracts) to SMI.  Eurest Support
Servs., B-285813 et al., July 3, 2001, 2002 CPD P: __ at 14-15. 
Specifically, we concluded that USMC's price evaluation did not reasonably
account for SMI's [DELETED]-percent reduction from its initial pricing
based on a [DELETED] staffing reduction, and consequent [DELETED] increase
in assumed productivity, in its first FPR.  We also found that the price
evaluation did not adequately consider that SMI had largely failed to
substantiate its [DELETED] FPR reduction in the costs associated with its
proposed use of central food production facilities.  We concluded that
USMC lacked a reasonable basis for its conclusion that SMI's evaluated
price represented the lowest cost to the government, and recommended that
the agency reopen discussions with offerors in the competitive range and
request revised proposals.
    
In implementing our recommendation, USMC decided to limit the reopened
discussions to the areas of concern identified in our decision.  The
amended solicitation provided that changes to offerors' organization and
management plans, small business subcontracting plans, and past
performance information, were not solicited; that those plans/information,
as included in the initial proposals and first FPRs, instead would remain
in effect; and that the first FPR evaluation of these factors would carry
forward to the second FPR.  Amended RFP S:S: L.8.2(b); M.3.4.2.  The
amended RFP stated, under the amended description of the technical
evaluation factors, that *[o]nly proposal changes based upon the issues
addressed in this Amendment 0014 will be evaluated by the Government.* 
Id.  In this regard, USMC included as an attachment to SMI's copy of the
amendment a number of requests for information, including requests to
justify and explain its first FPR reductions in staffing and central food
processing facility costs. 
    
SMI and the other offerors were further cautioned as follows:  *The only
pricing revisions to be permitted in this second FPR will be limited to
escalation changes directly resulting from the delay in the start of
contract performance, and the issuance of revised Wage Determinations and
Collective Bargaining Agreements (CBA), incorporated in the enclosed
Amendment 0014.*  USMC Letters to Offerors, Jan. 24, 2002, at 4; RFP S:
L.8.2(b).  Offerors were instructed to provide a breakdown supporting the
updated pricing proposed in accordance with RFP S: L.10.2, which required
that detailed cost information and detailed staffing by messhall be
submitted; that *[s]upport for any revisions in pricing from that proposed
in the first FPR must include a detailed breakdown of the basis for the
revision*; and that any revisions to pricing in the second FPR must be
substantiated as *directly and only attributable to* escalation, or new
wage determinations and CBAs.  USMC Letters to Offerors, Jan. 24, 2002, at
Encl. 1; RFP S: L.10.2.1.[1]  Subsequently,USMC indicated that an offeror
also could correct an *arithmetic error* in its first FPR.  Amend. No. 17,
Question/Answer No. 5.
    
USMC determined that, of the three second FPRs it subsequently received,
only SMI's essentially complied with the established restrictions on the
scope of the reopened discussions and furnished the required proposal
information and explanation.  USMC found that ESS and JWH had reduced
their pricing without a sufficient showing that the reductions were
consistent with the established restrictions.  USMC thereupon requested
ESS and JWH to clarify the bases for their price reductions.  After
evaluating the responses, USMC again determined that neither ESS nor JWH
had adequately justified their price reductions.  The agency thus
disallowed the reductions for purposes of the price evaluation.  In total,
USMC disallowed approximately $[DELETED] in reductions by ESS and
$[DELETED] in reductions by JWH.  Source Selection Decision (SSD) at 2;
Agency Report, Aug. 9, 2002, at 9.
    
In evaluating the pricing (with the above adjustments), the agency used
three different estimating approaches:  (1) the basic government cost
estimate (GCE)‑‑which was based upon the government's estimate
of projected labor costs, adjusted for potential labor savings from the
use of central food production, and the government's estimate of other
costs‑‑considered in conjunction with the offeror's proposed
target price, ceiling price and share ratios to derive a total cost to the
government; (2) a tailored GCE, in which the basic GCE was adjusted to
reflect the extent to which the offeror proposed to take advantage of
central food production; and (3) a projected cost, in which the offeror's
proposed target labor cost was revised to reflect the tailored GCE labor
estimates, but other, non-labor costs were included as proposed.  Final
Summary of Findings, July 3, 2002, at 18-21, 28-9; Agency Report, Aug. 9,
2002, at 4-6.  The evaluation results were as follows:
    

   +------------------------------------------------------------------------+
|                          |JWH            |ESS           |SMI           |
|--------------------------+---------------+--------------+--------------|
|Share Ratio (USMC/        |[DELETED]      |[DELETED]     |[DELETED]     |
|       Contractor)        |               |              |              |
|--------------------------+---------------+--------------+--------------|
|Proposed Target Price     |$[DELETED]     |$[DELETED]    |$[DELETED]    |
|--------------------------+---------------+--------------+--------------|
|Projected Cost            |$[DELETED]     |$[DELETED]    |$[DELETED]    |
|--------------------------+---------------+--------------+--------------|
|Tailored GCE              |$[DELETED]     |$[DELETED]    |$[DELETED]    |
|--------------------------+---------------+--------------+--------------|
|Risk                      |               |              |              |
|    Proposal              |Moderate       |Low           |Low           |
|    Performance           |Moderate       |Moderate      |Low           |
|--------------------------+---------------+--------------+--------------|
|Technical Score           |66.2           |84.2          |84.3          |
+------------------------------------------------------------------------+

    
Agency Report, Aug. 9, 2002, at 8-9. 
    
USMC determined that the technical proposals submitted by SMI and ESS were
essentially equal, and that both were *far superior* to JWH's.  In
considering price/cost, the agency placed *greater weight*on JWH's
tailored GCE than on its lower projected cost.  SSD at 4.  Noting that
non-labor costs were incorporated in the projected cost as proposed, such
that omitting non-labor costs would understate the resulting projected
cost, the agency viewed JWH's projected cost estimate as invalid on the
basis that JWH's proposal unrealistically failed to include any provision
for other direct costs (ODC) or G&A costs.  Final Summary of Findings,
July 3, 2002, at 32.  Thus, based on the tailored GCE, the agency
determined that the most probable cost of SMI's proposal (up to
$[DELETED]) was lower than both JWH's ($[DELETED]) and ESS's
($[DELETED]).  SSD at 4.  As a result, USMC ranked SMI's proposal first,
with the best technical proposal, lowest risk and lowest price; ESS's
second, with a technical rating equal to SMI's but far superior to JWH's,
and a lower risk than JWH's; and JWH's third.  Upon learning of the
resulting award to SMI, and after being debriefed, JWH filed this protest
with our Office challenging USMC's evaluation conclusions.
    
In reviewing an agency's evaluation of proposals and source selection
decision, our review is confined to a determination of whether the agency
acted reasonably and consistent with the stated evaluation factors and
applicable procurement statutes and regulations.  United Def. LP,
B-286925.3 et al., Apr. 9, 2001, 2001 CPD P: 75 at 10‑11; Main Bldg.
Maint., Inc., B-260945.4, Sept. 29, 1995, 95-2 CPD P: 214 at 4.  Based on
our review of the record, we find no basis to question the award to SMI.
    
SMI STAFFING
    
JWH asserts that USMC improperly permitted SMI to change its technical
proposal, in violation of the limits the agency had placed on the scope of
discussions, so as to increase the level of staffing above the level
evaluated under SMI's first FPR.  In this regard, in its first FPR, SMI
[DELETED] reduced its initially proposed staffing (as well as its price),
but furnished little or no substantiation and much less detail than
previously furnished concerning the resulting staffing levels.  In
particular, SMI furnished no detailed staffing information in its first
FPR cost proposal, while in its technical proposal it furnished only
staffing charts, indicating the staffing at each messhall in each of
several consolidated staffing categories from phase-in until full
performance (with full implementation of proposed central food
production).  SMI's first FPR technical proposal indicated a total staff
of [DELETED] full‑time equivalents (FTE), including [DELETED] FTEs
at the [DELETED] messhalls, which was [DELETED] FTEs fewer than the
[DELETED] FTEs at [DELETED] messhalls shown in SMI's initial proposal. 
SMI Initial Proposal, West Coast Staffing Chart, Day 540; SMI First FPR,
Final Discussion Points, West Coast Staffing Chart, Day 540; USMC
Comments, Oct. 8, 2002, Encl. 1.[2]  USMC in its evaluation of SMI's first
FPR and selection of SMI for award, and the parties in their submissions
during the protests of the ensuing award to SMI, assumed that SMI's
staffing level was the [DELETED] FTEs shown in SMI's first FPR technical
proposal. 
    
In its second FPR, SMI advised the agency that the staffing charts in the
technical proposal of its first FPR indicating staffing of [DELETED] FTEs
did not fully reflect the staffing included in its first FPR pricing. 
According to SMI's second FPR, while the staffing levels in SMI's initial
proposal were consistent with the staffing levels in place at USMC
facilities operated by small businesses, the [DELETED] FTE staffing level
in SMI's first FPR technical proposal was based on the expectation that
SMI could introduce the productivity levels achieved on SMI's comparable
commercial contracts.  However, according to SMI's second FPR, SMI
recognized in preparing its first FPR that [DELETED].  SMI's second FPR
indicated that SMI therefore had included in its first FPR pricing a *risk
mitigation factor* consisting of an additional [DELETED] FTEs, for a total
staffing of [DELETED] FTEs.  SMI Second FPR, Discussion Point 2A,
at 6‑8.  In determining that SMI's second FPR included adequate
staffing, USMC included in the evaluated staffing level the additional
[DELETED] FTE risk mitigation factor.  Initial Evaluation of Second FPRs,
May 13, 2002, at 11‑12. 
    
JWH asserts that, because SMI did not make its risk mitigation staffing
visible in its first FPR, and the agency did not include the additional
[DELETED] FTEs in its evaluation of first FPRs, the added staffing
constituted a prohibited change in SMI's technical proposal and therefore
should not have been evaluated.
    
JWH's position is not persuasive.  Although SMI's risk mitigation
allowance of [DELETED] FTEs may not have been evident on the face of its
first FPR technical proposal, the record supports USMC's position that,
viewing the initial proposal and first FPR together, it was apparent prior
to the initial award that SMI's pricing included an additional staffing
allowance of approximately [DELETED] FTEs, which would be consistent with
a total staff of at least [DELETED] FTEs.  In this regard, while SMI's
staffing charts indicated a [DELETED] FTE reduction in staffing at
[DELETED] messhalls in its first FPR, the total dollars subcontracted to
[DELETED] as indicated in SMI's first FPR ($[DELETED]) remained
essentially the same as the cost of the [DELETED] subcontracts indicated
in its initial proposal ($[DELETED]) after accounting for the
3‑month increase in the contract term (from 93 to 96 months). 
Initial Price Proposal, Subcontracting Plan, at 2;  First FPR, Discussion
Points, Subcontracting Plan, at 2; see USMC Comments, Oct. 8, 2002, at
1-2, Encl. 1.  We agree with USMC that, unless one unreasonably assumes
that SMI was proposing an increase in the average hourly [DELETED] labor
rate of approximately [DELETED] percent (from $[DELETED] in the initial
proposal to $[DELETED] in the first FPR), USMC Comments, Oct. 8, 2002,
Encl. 1, the most reasonable interpretation of SMI's unchanged pricing was
that, notwithstanding the apparent staffing reduction in its first FPR
staffing charts, SMI's first FPR pricing in fact still included all of the
[DELETED] FTEs indicated in SMI's initial proposal.
    
Considering the actual staffing included in SMI's FPR pricing was
consistent with the scope of the reopened discussions.  SMI's explanation
that its FPR pricing included an additional risk mitigation allowance of
[DELETED] FTEs was responsive to the goal established for the reopened
discussions‑‑that SMI demonstrate the realism of its proposed
pricing, including demonstrating that it was offering adequate staffing. 
Indeed, the agency would have failed in its obligation to evaluate the
reasonableness of the proposed pricing had it not considered the actual
staffing included in SMI's pricing.  Also consistent with the limitations
established in the reopened solicitation is the fact that the additional
staffing was not used to alter the evaluation of SMI's organization and
management plans, small business subcontracting plan, and past
performance.  RFP S: M.3.4.2.  We conclude that USMC reasonably evaluated
SMI's second FPR based on a staffing level of [DELETED] FTEs.
    
JWH'S EVALUATION
    
JWH challenges USMC's disallowance of the deletion from its second FPR of
all hours (approximately [DELETED] hours per month, resulting in a
reduction of approximately $[DELETED]) for JWH utility workers at the
seven JWOD messhalls supported by the National Industries for the Severely
Handicapped (NISH), which were included in JWH's first FPR.  According to
JWH, its first FPR included utility worker hours in JWH's own labor force
based on the assumption that NISH would not be performing this function at
the seven messhalls, but NISH's proposal to JWH for second FPRs made clear
that NISH would in fact be furnishing mess attendant utility workers.  JWH
claims that the deletion of the hours amounted to correction of an
inadvertent duplication of effort, rather than a prohibited change in
approach. 
    
This aspect of the evaluation was reasonable.  As noted by USMC, any
mistake related to the deletion of JWH utility worker hours at the NISH
messhalls was not apparent from JWH's second FPR or its subsequent
clarification response.  When asked by USMC to clarify how its reduction
in JWH utility worker hours complied with the limits on the scope of
discussions, JWH responded as follows:  *We had staffed these messhalls
with Utility/G.I. Man but NISH is taking responsibility for these hours. 
Thus, according to NISH's price proposal, we had to delete our
Utility/G.I. Man, which accounts for the decrease in labor hours.*  USMC
Clarifications Request, May 13, 2002, at 2, Encl. 2; JWH Clarifications
Response, May 20, 2002, at 1.  USMC interpreted JWH's response as
indicating, not that there had been a discrepancy in its first FPR, but
that NISH now would be assuming responsibility for furnishing the utility
worker hours.  Based on this interpretation, and the fact that there was
no apparent indication of an increase in NISH labor in the second FPR, the
agency concluded that JWH simply was reducing its overall effort and
pricing, which was not permitted.  We find the agency's interpretation
reasonable, especially given that JWH was explaining a change that first
appeared in its second FPR, well after the time when the agency could
reasonably expect that any mistake in division of effort would have been
discovered.  It follows that the agency reasonably disallowed the
reduction in hours and associated pricing.
    
JWH questions USMC's determination that the projected cost estimate for
JWH's proposal, which was significantly lower than the tailored GCE, was
invalid.  As indicated above, the agency discounted the projected cost
estimate‑‑in which non‑labor costs were incorporated as
proposed rather than as estimated/evaluated‑‑on the basis that
JWH's proposal unrealistically failed to include any provision for ODC or
G&A costs.  JWH claims that these costs in fact were incorporated in its
proposal.
    
This argument is untimely.  In its initial protest, JWH simply asserted
that *the ODCs and G&A were included in its proposal, on a chart entitled
'indirect labor costs.'*  Protest, July 15, 2002, at 7.  JWH did not
explain, however, nor is it otherwise evident, how the chart to which JWH
apparently refers specifically and clearly identifies JWH's projected ODC
and G&A costs.  Subsequently, in its August 19 comments, JWH furnished a
declaration from a JWH vice president that provided a more detailed
explanation of its claim that its proposal included ODC and G&A costs. 
Under our Bid Protest Regulations, protests based on other than
solicitation improprieties must be filed within 10 days of when the
protester knew or should have known their bases. 4 C.F.R. S: 21.2(a)(2)
(2002).  Our Regulations do not contemplate the piecemeal presentation or
development of protest issues; where a protester raises a broad ground of
protest in its initial submission but fails to provide details within its
knowledge until later, so that a further response from the agency would be
needed to adequately review the matter, these later issues will not be
considered.  Vision Blocks, Inc., B-281246, Jan. 14, 1999, 99-1 CPD P: 20
at 4; Litton Sys., Inc., Data Sys. Div., B-262099, Oct. 11, 1995, 95-2 CPD
P: 215 at 2.  JWH's August 19 explanation therefore is untimely.
    
In any case, the additional information furnished by JWH does not show
that JWH's second FPR specifically and clearly identified, broke out and
quantified the overall extent of ODCs and G&A.  For example, the JWH vice
president indicates that G&A costs were *included within a [DELETED]%
burden applied to direct labor, on the pay charts by mess hall, and are
included in all rollups of costs.  The [DELETED]% includes about
[DELETED]% for FICA, FUTA, Workers Compensation, etc., fees, and about
[DELETED]% for G&A.*  However, JWH's first FPR identified the [DELETED]
percent rate as a fee paid to its *employee benefits and payroll
accounting small business subcontractor,* to enable it to *account for all
employee health and welfare benefits, manage all federal and state tax
contributions, social security reporting and depositing, workmen's
compensation, etc.*  First FPR Price Proposal, Price Proposal Overview, at
6 of 7.  This contemporaneous explanation does not appear to be consistent
with JWH's current claim that the rate covers all of its G&A expense. 
(Moreover, notwithstanding the requirement that the second FPR set forth
the offeror's G&A expense, JWH's second FPR did not explain this [DELETED]
percent rate.)
    
In fact, the record indicates that JWH's evaluated price actually was
understated by a significant amount.  Although JWH, in response to a
clarification request from USMC, updated its second FPR's pricing to
reflect the latest applicable wage rate determinations and collective
bargaining agreements, USMC has determined, and JWH has not shown to be
incorrect, that the agency's evaluation did not reflect this increase in
JWH's pricing.  USMC calculates that the net effect of making the
appropriate correction would be an increase in JWH's proposed target price
from $[DELETED] to $[DELETED], that is, above SMI's proposed target price
($[DELETED]), and would have increased the tailored GCE for JWH's proposal
    
    
from $[DELETED] to $[DELETED], that is, above SMI's tailored GCE
($[DELETED] to $[DELETED]).[3]
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    

   ------------------------

   [1] USMC reemphasized the limits on pricing changes when it stated in
amendment No. 16 that *[a]ny changes must be solely attributable to the
delay rather than to changes in an offeror's technical approach,
management philosophy or assumptions,* and reiterated that *the basis for
the changes must be clearly delineated and adequately substantiated.* 
Amend. No. 16, Question/Answer No. 2.
[2] According to SMI, the number of [DELETED] staffing positions at the
[DELETED] messhalls, as distinct from the total number of FTEs at the
[DELETED] messhalls, was [DELETED] FTEs in its initial proposal, and this
was reduced by [DELETED] FTEs to [DELETED] FTEs in SMI's first FPR.  SMI
Comments, Oct. 8, 2002, at 2.
[3] JWH asserts that the costs of SMI's central food production facility
were understated by approximately $[DELETED].  However, where the record
does not demonstrate that, but for the agency's actions, the protester
would have had a reasonable chance of receiving the award, our Office will
not sustain a protest, even if a deficiency in the procurement is found. 
McDonald‑Bradley, B-270126, Feb. 8, 1996, 96-1 CPD P: 54 at 3; see
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996). 
Here, even if SMI's pricing was significantly increased, it is clear that
JWH would not be next in line for award.  After adjusting the evaluated
JWH pricing upward to reflect the latest applicable wage rate
determinations and collective bargaining agreements, the record indicates
that the tailored GCE for JWH would be $[DELETED], higher than ESS's
$[DELETED].  USMC Comments, Sept. 6, 2002, Memorandum for the Record, at
3.  Since ESS's technical proposal was evaluated as more advantageous,
receiving a technical score of 84.2 and low/moderate risk ratings, while
JWH's received a score of only 66.23 and moderate risk ratings, it is
clear that ESS, not JWH, would be next in line for award.  Accordingly,
JWH was not prejudiced by any deficiency in the evaluation of SMI's
pricing.