TITLE:  Star Mountain, Inc., B-285883, October 25, 2000
BNUMBER:  B-285883
DATE:  October 25, 2000
**********************************************************************
Star Mountain, Inc., B-285883, October 25, 2000

Decision

Matter of: Star Mountain, Inc.

File: B-285883

Date: October 25, 2000

William W. Goodrich, Esq., Richard J. Webber, Esq., and David Vogel, Esq.,
Arent Fox Kintner Plotkin & Kahn, for the protester.

James J. McCullough, Esq., Steven A. Alerding, Esq., and Catherine E.
Pollack, Esq., Fried, Frank, Harris, Shriver & Jacobson, for National Center
for Housing Management, Inc., an intervenor.

Philip E. Adams, Esq., Department of the Navy, for the agency.

Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. In a solicitation for a fixed-price contract that provided for a price
realism evaluation, agency's failure to downgrade awardee's proposal for
lack of understanding was reasonable where the record shows that the
agency's analysis included examining the awardee's supporting cost data and
comparing its proposed prices with those of other offerors and a government
estimate, and awardee's proposal, oral presentation, and discussions
concerning low prices, reasonably were found to demonstrate its
understanding of the solicitation's requirements.

2. Where past performance evaluation scheme provided for consideration of
offerors' recent experience with services similar to those solicited, agency
reasonably evaluated non-incumbent offeror as outstanding based on its
extensive experience performing similar work.

DECISION

Star Mountain, Inc. protests the award of a contract to the National Center
for Housing Management, Inc. (NCHM) under request for proposals (RFP) No.
N68836-00-R-0010, issued by the Fleet and Industrial Supply Center (FISC),
Department of the Navy, for training services. Star, the incumbent
contractor, challenges the agency's price realism and past performance
evaluations.

We deny the protest.

The RFP sought training services for the Family Housing Management Institute
(FHMI). The FHMI is responsible for providing housing management training
for civilian and military personnel of the Navy, Air Force, and other
government services, and certain contractor personnel. The goal of the
course instruction is to provide these personnel with a thorough
understanding and working knowledge of broad policies and job-level
procedures required to manage the Navy and Air Force housing programs.
According to the statement of work (SOW), the training services include
course instruction, curriculum and course material maintenance, and in some
instances curriculum development. Courses are structured into lectures,
simulations, discussions, exercises, and group projects covering topics such
as housing assignment, housing management, financial management, and
facilities contracting. Training is to be presented at five regional
locations, including: FHMI Jacksonville, Florida (or anywhere east of the
Mississippi River); San Diego, California (or anywhere west of the
Mississippi River); Hawaii; Japan (or anywhere in the Far East); or Europe.
The RFP, as amended, contemplated the award of a fixed-price (with some cost
reimbursable items) requirements contract for a base year, with 4 option
years.

Proposals were to be evaluated on a best value basis applying three equally
weighted factors: past performance, technical, and cost/price. The past
performance evaluation included review of offeror-submitted evidence of
successful efforts in similar work. The technical evaluation included review
of the offerors' information on key personnel, management plan, and quality
control plan. The cost/price evaluation included review of the offerors'
section B unit and extended prices, along with "supporting cost data." [1]
The RFP also provided that cost/price proposals would be evaluated for
realism in regards to the relationship between the proposed Cost/Price and
the technical proposal." RFP sect. M.52.217-5(e).

Four offerors, including NCHM and Star, submitted proposals by the May 1,
2000 closing time. One of the four withdrew its proposal and another
proposal was found technically unacceptable. In evaluating Star's and NCHM's
proposals, the contracting officer found pricing disparities in both.
Accordingly, the contracting officer determined to open discussions with
both offerors to resolve the pricing issues. The contracting officer also
decided to allow oral demonstrations to assist the government in determining
whether each offeror had a clear understanding of the RFP requirements and
to assist the government in determining which offeror had the best technical
approach.

Based on the offerors' 2-hour oral presentations, the evaluators concluded
that each had demonstrated their understanding of the requirements. While
both offerors' proposals contained some weaknesses, the evaluators concluded
that neither proposal contained deficiencies and that both proposals'
strengths exceeded their weaknesses. After conducting discussions with both
offerors, the agency obtained best and final offers (BAFO). After amending
the RFP to convert the contract from an
indefinite-delivery/indefinite-quantity type to a fixed-price requirements
type, the agency allowed the offerors to submit revised BAFOs. The final
evaluation results were as follows:

 Factor\Offeror     Star               NCHM

 Past Performance   Outstanding        Outstanding

 Technical          Good               Good

 Cost/Price         $8,004,255.93      $7,002,768.21

Since both offerors' proposals received the same ratings under the past
performance and technical factors and NCHM's proposed price was almost $1
million lower than Star's, the contracting officer determined that NCHM's
proposal represented the best value and awarded NCHM the contract. After
receiving notice of the award, Star requested and received a debriefing, and
then filed this protest with our Office. In Star's view, the award
determination was flawed because the underlying technical and past
performance evaluations were unreasonable.

EVALUATION OF PROPOSALS

In reviewing protests against allegedly improper evaluations, our Office
will examine the record to determine whether the agency's determination was
reasonable and consistent with the evaluation criteria listed in the
solicitation. Hattal & Assocs., B-243357, B-243357.2, July 25, 1991, 91-2
CPD para. 90 at 7. Evaluation judgments, by their nature, are often subjective;
nevertheless, the exercise of these judgments in the evaluation of proposals
must be reasonable and bear a rational relationship to the announced
evaluation criteria. Southwest Marine, Inc.; American Sys. Eng'g Corp.,
B-265865.3, B-265865.4, Jan. 23, 1996, 96-1 CPD para. 56 at 10.

Star alleges that NCHM's "unrealistically low" prices were not adequately
supported by its cost data, and essentially indicated a lack of
understanding of the RFP requirements. Star concludes that the technical
evaluation lacked a reasonable basis because the agency did not use NCHM's
"low" prices to downgrade the awardee's technical proposal. In this regard,
as indicated, the RFP here provided that an offeror's cost/price proposal
would be evaluated for realism regarding the relationship between the
proposed cost/price and the technical proposal. RFP sect. M.52.217-5(e). It also
provided that "[u]nrealistic personnel compensation rates or other cost
elements may also be considered in the technical evaluation . . . which
could result in [a] lower technical evaluation based on risk analysis." Id.

Cost realism ordinarily is not considered in the evaluation of proposals for
a fixed-price contract such as the one involved here, since a fixed-price
contract provides for a definite price and places the risk and
responsibility for all contract costs and resulting profit or loss upon the
contractor. Volmar Constr., Inc., B-272188.2, Sept. 18, 1996, 96-2 CPD para. 119
at 5. Rather, in a fixed-price contract, the purpose of a price analysis
generally is to ensure a fair and reasonable price, given the circumstances
surrounding the acquisition. Medical Dev. Int'l, B-281484.2, Mar. 29, 1999,
99-1 CPD para. 68 at 13. An agency may provide, as here, for the use of a price
realism analysis in a solicitation for the award of a fixed-price contract
for such purposes as measuring an offeror's understanding of the
solicitation's requirements and assessing the risk inherent in an offeror's
proposal. Consolidated Eng'g Servs., Inc, B-279565.5, Mar. 19, 1999, 99-1
CPD para. 76 at 10. The Federal Acquisition Regulation (FAR) provides a number
of price analysis techniques that may be used to determine whether prices
are reasonable and realistic, including comparison of the prices received
with each other; comparison of previously proposed prices for the same or
similar items; comparison with independent government estimates; and
analysis of pricing information provided by the offeror. FAR
sect. 15.404-1(b)(2). The nature and extent of an agency's price realism
analysis ultimately are matters within the sound exercise of the agency's
discretion. Cardinal Scientific, Inc., B-270309, Feb. 12, 1996, 96-1 CPD
para. 70 at 4.

Based on our review of the record, we find that the agency performed a
reasonable price realism analysis, and reasonably concluded that NCHM
understood the requirement. The record shows that the contracting officer
independently evaluated NCHM's proposal, looking at the offeror's
understanding of the requirement and checking its cost information to ensure
that its key personnel would be compensated fairly so as not to impose undue
risk on contract performance. Agency Report at 12. Specifically, the
contracting officer compared all offerors' proposed prices with other
offerors' prices to determine "market pricing." She also compared them with
an independent government estimate, which included assumptions based on CLIN
requirements, costs incurred under the current contract, and other estimated
pricing for course revision, instructor guide development, certification
courses, and regional travel for instructors, assistant instructors, and
guest speakers. Pre-Clearance Business Memorandum at 4-6, attachs. 7-11. To
facilitate these comparisons, the agency prepared a CLIN-by-CLIN price
abstract for all offerors at each stage of the evaluation. Agency Report,
Tabs 6, 27. Based on these comparisons, the agency identified price
disparities in 34 CLINs including those associated with course development
instructor guides, course presentation, course travel charges, pay for
assistant instructors and guest speakers, and course revision. In this
regard, the agency observed that NCHM's proposal prices were higher than
Star's on some CLINs, while Star's were higher than NCHM's on others.

Subsequently, the agency conducted price discussions with the offerors to
resolve these and other price issues. Specifically, negotiations with both
offerors addressed travel CLINs to clarify how they were to be priced, and
course development CLINs "to ensure appropriate effort [was] given to Course
Development, Final Draft and Instructor Guide." Post-Negotiation Business
Clearance Memorandum at 3-4. Further, the agency specifically addressed
travel costs with NCHM and a number of course presentation CLINs, the prices
for which appeared low. Id. As a result of these discussions, NCHM raised
some of its prices and otherwise explained that its status as a nonprofit
organization with its primary business emphasis in housing management,
coupled with its in-house capabilities (including printing equipment and
in-house experts and instructors), allowed it to offer lower prices by
avoiding substantial subcontract costs and the attendant additional profit.
Id. at 4. In addition, the agency considered that both offerors proposed
"mostly [the] same key personnel [who] are familiar with the requirement."
Agency Report, Contract Specialist's Workpapers, Tab 26, at 2. In this
regard, the agency found that NCHM had included letters of commitment from
these key personnel stating that they had mutually agreed to the terms of
salary, fringe benefits and positions, such that there did not appear to be
any risk that either offeror would be unable to retain professional
personnel. The agency took these observations and NCHM's explanations into
consideration in determining that NCHM's prices were realistic and that it
understood the requirement. Agency Report at 13-15. In our view, based on
this detailed price analysis, coupled with discussions to resolve questioned
prices, the agency conducted a reasonable and thorough price realism
analysis in accordance with the RFP's requirements.

Having concluded that NCHM's prices were realistic, the agency had no basis
to conclude that NCHM's pricing showed a lack of understanding that would
warrant downgrading its technical proposal. In this regard, NCHM's technical
proposal and oral presentation provided a detailed explanation of how NCHM
intended to perform the contract, from which the evaluators reasonably
concluded that NCHM "demonstrated a very high understanding of the [SOW]."
Agency Report, Tab 16. For example, during the oral presentation, NCHM
described in detail its capabilities, resources, relevant experience, and
transition plan, and presented a matrix showing its qualified staff,
including incumbent instructors and management personnel. Agency Report, Tab
15. During questioning by the agency, NCHM also demonstrated its
understanding by describing its contingency plans to provide coverage for
instructors who became ill or otherwise unavailable, including its current
ability to provide two or more instructors for every existing course and its
proposal to have a minimum of [deleted] qualified instructors for all
courses. [2] Agency Report, Tab 15, Video Tape of Oral Presentation, at
1:52.

Notwithstanding the detailed evaluation conducted by the agency, Star
maintains that the price realism analysis was insufficient because it failed
to consider a number of CLIN prices proposed by NCHM which allegedly
represented an insufficient level of effort or otherwise failed to include
certain cost elements which Star included in its own proposal. Again,
however, the nature and extent of an agency's price realism analysis are
matters within the agency's discretion. Arctic Slope World Servs., B-284481,
Apr. 27, 2000, 2000 CPD para. 754 at 13; Cardinal Scientific, Inc., supra. The
fact that the agency may not have closely examined certain specific costs or
did not reach the same conclusions regarding the level of effort for each
CLIN identified by Star does not render the evaluation unreasonable. In this
regard, even where a cost realism analysis is required (which was not the
case here), an agency is not required to conduct an in-depth analysis of
each and every item. Allied Tech. Group, Inc., B-271302, B-271302.2, July 3,
1996, 96-2 CPD para. 4 at 7.

Moreover, even if we agreed that the agency was required to conduct a price
realism analysis in the depth argued by Star, based on our review of the
record, none of the matters identified by Star provides any basis for
questioning the agency's conclusions that NCHM's prices were realistic and
that NCHM understood the RFP requirements. [3] In this regard, Star's
arguments are based on a comparison of its supporting cost data with NCHM's.
From our review, the differences in the price proposals are attributable
more to a difference in approach by the offerors rather than to NCHM's lack
of understanding. [4]

For example, Star asserts that "NCHM bid a fraction of the people, hours,
and dollars that were bid by [Star]" for course presentation CLINs.
Protester's Comments at 10. Yet, while Star shows a higher cost for
[deleted], both offerors proposed the same amount of time for presentation
of the courses. Star's higher prices for the CLINs are due to its approach
of including for all such CLINs [deleted]. [5] In contrast, NCHM included
its costs for the project manager and program coordinator in overhead, as
required by the RFP. RFP sect.sect. C.12.02, C.12.04. In addition, for all but the
subcontractor CLINs, Star included more than twice as much [deleted] for
each course as NCHM did, and included [deleted] costs identified for
[deleted] for each (non-subcontracted) course, which in most cases was
[deleted] the cost of the [deleted] for that course. However, nothing in the
RFP required a special speaker, training time for other instructors, or
research visits for all course offerings. NCHM states that it recognized
that the cost of replacement instructors would not be in addition to that of
the intended instructor and thus did not warrant a separate cost, and
explains that the cost for the limited number of necessary training and
research visits was included in its overhead costs. NCHM's Supplemental
Comments at 20. Since a significant amount of extra cost is included in
[deleted] that is covered in overhead in NCHM's proposal, there was no basis
for the agency to conclude that Star's approach of assigning higher prices
to certain CLINs was more realistic than or otherwise superior to NCHM's.
[6]

PAST PERFORMANCE

Section L of the RFP, entitled "PROPOSAL REQUIREMENTS" (at 245) identified
the information that offerors were to include in their proposals with regard
to past performance:

Include evidence of successful efforts in similar work, to verify that the
Offeror has an established professional reputation in the full integration
of managing, developing, conducting and administering training programs of a
similar nature (including course development, course maintenance and
presentation). . . . The experience may include work accomplished for
Government and non-Government entities.

Provide a chronological matrix of recent corporate experience within the
last five (5) years, in which performance has occurred of a comparable
nature and complexity. It is not sufficient to state an effort is comparable
in magnitude and scope. Rationale must be provided to convince the
Government that the experience is indeed comparable. [Emphasis added.]

In order to be rated as outstanding, an offeror's past performance had to
"clearly and consistently demonstrate[ ] a commitment to customer
satisfaction and timely delivery of quality services," as well as have
"significant and documented recent experience with similar services."
Proposal Evaluation Plan, sect. 1.11.2.d.

Star, citing its status as the incumbent contractor, asserts that NCHM's
past performance information does not meet the RFP's "similarity" standard
quoted above. Star maintains that NCHM has not performed a contract as large
as the incumbent effort, and that NCHM's other experience cannot reasonably
be considered comparable in magnitude and scope to that covered by the RFP.
From our review of the record, we conclude that the evaluation in this area
was reasonable and consistent with the RFP's evaluation criteria. Hattal &
Assocs., supra.

NCHM's proposal contained three pages of information on its past
performance, including one page of narrative; a second containing a matrix
with detailed descriptions of 12 individual-course contracts performed
between 1997 and 2000, ranging in value from $8,544 to $24,960; and a third
listing 12 military courses and 48 other programs it performed from 1997 to
2000, along with references and their telephone numbers. The contracting
officer contacted a number of the references and received consistent
comments indicating that, from both quality and delivery standpoints, NCHM
provided excellent services. Agency Report at 17-18. With regard to the
similarity of the services NCHM had provided, the agency observed that NCHM
was established by Executive Order No. 11,668 (3 C.F.R. 706 (1971-1975)) to
perform the following functions: develop training in educational programs
for housing management and personnel; cooperate with public and private
national, state, and local organizations and institutions in extending
housing management training and educational opportunities; and develop
improved housing management practices and assistance in making professional
the housing management industry. In addition, the agency noted that, under
the terms of the RFP, all offerors, including Star, were required to
contract with NCHM to meet certain course certification requirements.

While the individual contracts listed in NCHM's proposal are small compared
to the protester's incumbent contract, the record shows that NCHM regularly
performs a volume of work that is at least equivalent to (and actually
appears to exceed) that required under the current contract or the RFP. In
this regard, the agency recognized that NCHM offered 250 certification
courses each year and had conducted more than 2,000 training certification
programs worldwide in the past 5 years. Further, NCHM's organization is
structured to routinely run more than 30, 3-day certification courses every
month "in almost every city in the nation." NCHM Proposal, Tab 1. By way of
comparison, the contract requirements under this RFP call for approximately
45 courses per year, or fewer than four courses per month, a level of effort
currently performed by NCHM every 2 months. NCHM Supplemental Comments at
25. This information established a reasonable basis for the agency's
evaluation of NCHM's proposal as outstanding in this area.

BEST VALUE

Star argues that the best value determination was flawed, because technical
factors were of greater importance than price, and the agency's
determination failed to take into account the evaluation errors Star alleges
in its protest. However, since we have found that there was nothing
unreasonable or objectionable in the agency's evaluation, there is no basis
to question the determination that the proposals were technically equal and
that NCHM's proposal represented the best value due to its lower price.

The protest is denied.

Anthony H. Gamboa
Acting General Counsel

Notes

1. The RFP did not specify the level of detail for the cost data apart from
identifying under which contract line items (CLIN) the costs for certain
items were to be included. For example, travel and per diem expenses for
instructors, as well as instructor compensation for authorized travel days
and rest days, were to be included as part of the applicable zone travel
CLIN. RFP sect.sect. C.6.04, C.6.14.

2. The matrix shows [deleted] instructors qualified to teach the 14 existing
courses, plus [deleted] instructors in training to deliver courses as
needed. The matrix also shows at least [deleted] qualified instructors for
eight courses and [deleted] for the other six.

3. Star identifies a number of CLINs and "required" costs which NCHM
ostensibly failed to include. For example, with regard to costs associated
with required rest days and instructor compensation for those days, NCHM's
cost support accounts for the rest days and per diem for them but, unlike
Star's, does not include [deleted] for them. NCHM explains that most of
[deleted], and that it is not NCHM's policy to [deleted]; thus, it did not
include additional costs for [deleted]. Because the RFP simply required that
this cost be included under particular CLINs and did not otherwise set a
minimum for this compensation, there was nothing in NCHM's approach that
warranted downgrading its proposal.

4. There were 21 course presentation CLINs for the base year and each option
year. On seven of these CLINs, NCHM proposed a higher price than did Star.
Of the remaining 14 where NCHM's proposed price was lower than Star's, the
agency specifically discussed NCHM's lower prices on eight CLINs.

5. For all but the subcontractor CLINs, Star also included [deleted] in the
course presentation CLINs. While the [deleted] are listed with a [deleted]
overhead rate, the [deleted] is listed with a [deleted] rate for the
majority of these CLINs. Protester's Comments, exh. 2.

6. As noted by NCHM, the difference in prices proposed is also attributable
to the fact that Star's proposal includes a profit rate of [deleted] and a
G&A rate of [deleted], while NCHM's proposal includes a fee of only
[deleted] (depending on the CLIN) and a G&A rate of [deleted]. NCHM's
Comments at 6. In addition, NCHM's labor costs for instructors, based on its
in-house staff of experts ([deleted] per hour), are significantly lower than
Star's consultant costs for instructors ([deleted] per hour). Id.