TITLE:  SelRico Services, Inc., B-286664.4; B-286664.5; B-287481.2; B-287481.3, June 22, 2001
BNUMBER:  B-286664.4; B-286664.5; B-287481.2; B-287481.3
DATE:  June 22, 2001
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Decision

Matter of: SelRico Services, Inc.

File: B-286664.4; B-286664.5; B-287481.2; B-287481.3

Date: June 22, 2001

Johnathan M. Bailey, Esq., Theodore M. Bailey Law Office, for the protester.

Devon E. Hewitt, Esq., and Daniel S. Herzfeld, Esq., Shaw Pittman, for Acorn
Services, Inc., an intervenor.

Kerri A. Cox, Esq., and John D. Inazu, Esq., Department of the Air Force,
for the agency.

Christina Sklarew, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Even where price is the least important evaluation factor for award under a
best-value procurement, agency may award to an offeror with a lower-priced,
lower-rated proposal if it determines that the price premium involved in
awarding to an offeror with a higher-rated proposal is too great to justify.

DECISION

SelRico Services, Inc. protests the reevaluation of proposals and resulting
contract award to Acorn Services, Inc. by the Department of the Air Force
under request for proposals (RFP) No. F41652-00-R0025 for mess attendant
services at Dyess Air Force Base, Texas. SelRico alleges that the "best
value" tradeoff decision supporting the source selection was unreasonable
and contrary to the RFP's evaluation criteria. SelRico also protests the Air
Force's issuance of a purchase order to Acorn to provide these services
during the pendency of SelRico's protest of the award to Acorn under the
RFP.

We deny the protests.

The solicitation, incorporating the Federal Acquisition Regulation (FAR)
clauses applicable to commercial items, provided that the award would be
based on an assessment of each offeror's past performance and price, with
past performance the more important factor. As relevant here, past
performance was to be evaluated on similar contracts completed within the
past 3 years or currently in progress, using a past performance survey to
determine the quality of work previously performed and to assess the
relative capability of the offeror to effectively accomplish the
solicitation requirements. The RFP stated that award would be made to the
offeror whose proposal represented the best value to the government.

Ten offerors, including SelRico (the incumbent contractor), Lewis Services/

Southway Services, and Acorn, submitted proposals. The source selection team
evaluated each offeror's past performance risk based on (1) the contractor's
record of conforming to specifications and to standards of good workmanship;
(2) the contractor's history of reasonable and cooperative behavior
including the administrative aspects of performance and commitment to
customer satisfaction; (3) the contractor's environmental record; and (4)
the contractor's business-like concern for the interests of the customer,
using questionnaires completed by references furnished by the offerors. The
proposals submitted by SelRico, Lewis, and three other offerors were given
the past performance confidence assessment rating "exceptional/high
confidence"; Acorn's proposal was rated "very good/significant confidence,"
and the proposals of the remaining four offerors were rated "neutral/unknown
confidence." Acorn's proposal offered the lowest price, while Lewis's price
was third low and SelRico's price was fourth low.

The Air Force selected Lewis for the award. SelRico and Acorn each protested
that award decision; the protests were resolved when the agency agreed to
take corrective action by reevaluating the past performance of all offerors.
The Air Force gave each offeror the opportunity to submit any additional,
relevant past performance information to be considered during the
reevaluation. The solicitation itself and previously-submitted proposals
were not changed.

The source selection team re-evaluated the submissions and submitted its
proposal evaluation report to the source selection authority. Acorn's
proposal, offering the lowest price ($4,987,136), was again rated "very
good/significant confidence" under the past performance factor. SelRico's
proposal offered the fourth lowest price ($6,061,519.40) and was again rated
"exceptional/high confidence" for past performance. Agency Report, Tab L,
Proposal Evaluation Report, at 8-9. The source selection authority (SSA)
determined that Acorn's proposal presented the best value to the government,
based on a tradeoff between past performance and price, and selected Acorn
for award. This protest followed, alleging that the agency's tradeoff was
unreasonable and inconsistent with the terms of the RFP.

Since the incumbent contract, held by SelRico, had already been extended for
6 months because of the earlier protest and was about to expire, the Air
Force needed to make arrangements to ensure continued food service. The
agency requested a price quotation from Acorn for the services, and issued a
purchase order to Acorn to provide these services for a 3-month period.
SelRico protested the agency's failure to solicit a quotation from SelRico;
the agency thereupon requested and received a price quote from SelRico on
the interim purchase order. When the agency again determined to place the
purchase order with Acorn, based on its lower price, SelRico protested that
order.

SelRico protests that the award to Acorn under the RFP is improper because
five other offerors received higher ratings for their past performance, and
past performance was to be the most heavily-weighted factor in the award
decision. Protest at 4. In support of its position, SelRico refers
repeatedly to the agency's initial source selection and argues that the Air
Force has failed to explain the "about face" that its later selection of
Acorn represents. In this regard, SelRico argues that under the initial
evaluation, Acorn's proposal was ranked sixth, and that the agency defended
this ranking when it first responded to Acorn's protest of the initial award
to Lewis.

First, we point out that the issue before us is whether the current
evaluations and source selection decision are reasonable, and not whether
they are consistent with the earlier source selection that the agency had
conceded was improper. Indeed, it is precisely because the initial selection
was improper that the agency agreed to take corrective action; therefore, we
see no purpose in further examining that decision, or the agency's initial
position with regard to that decision. [1]

Regarding the fact that Acorn's proposal did not receive the highest past
performance rating, this does not render the award improper. Source
selection officials in a negotiated procurement have broad discretion in
determining the manner and extent to which they will make use of the
technical and price evaluation results; price/technical tradeoffs may be
made, and the extent to which one may be sacrificed for the other is
governed only by the test of rationality and consistency with the
established evaluation factors. Creative Apparel Assocs., B-275139, Jan. 24,
1997, 97-1 CPD para. 65 at 6. Even where price is the least important factor, an
agency may award to an offeror with a lower-priced, lower-scored proposal if
it determines that the price premium involved in awarding to an offeror with
a higher-rated, higher-priced proposal is not justified. Id.

Here, the record shows that the agency considered three of the past
performance references submitted by Acorn to be relevant. [2] Agency Report,
Tab L, Proposal Evaluation Report, at 3-4. The past performance references
who completed "past and present performance questionnaires" for these
contracts rated Acorn's performance "satisfactory" for one of the contracts,
"very good" for another, and "exceptional" for the third. [3] Agency Report,
Tab H, Acorn Past Performance Surveys. Overall, the Air Force assigned a
rating of "very good/significant confidence" for Acorn's past performance
references. SelRico offered a price that was more than one million dollars
higher than Acorn's price. Agency Report, Tab K, Abstract of Offers, at 2.
Based on these facts, the contracting officer, acting as the SSA, concluded
that Acorn's proposal provided the best value to the government. In the
source selection report, the contracting officer recognized that Acorn's
proposal was not the most highly rated (in terms of past performance), but
decided that payment of the price premium associated with SelRico's
proposal--approximately 22 percent--was too great to be justified by
SelRico's higher past performance rating, notwithstanding the RFP's emphasis
on past performance. That analysis appears reasonable and consistent with
the RFP, and we therefore have no basis to question the contracting
officer's tradeoff determination.

SelRico also alleges that Acorn's pricing was impermissibly unbalanced, and
that the award was improper on this basis. SelRico notes that the RFP
solicited pricing for the operation of two separate dining facilities,
"Longhorn" and "Flightline." Because the Longhorn facility is larger than
Flightline (by a factor of 5) and the estimated number of meals to be served
at Longhorn is greater (by a factor of about 10), SelRico argues essentially
that pricing for the two facilities should reflect that ratio. Protester's
Comments on Supplemental Agency Report at 6. Since Acorn's price for
operating the Longhorn facility was only about three times its price for
operating the Flightline facility, SelRico argues that its proposal is
unbalanced and represents an unacceptable risk to the government.

Unbalanced pricing exists when, despite an acceptable total evaluated price,
the price of one or more contract line items is significantly overstated (as
indicated by the application of cost or price analysis techniques); the
overstated prices are generally compensated for by understated ones. See FAR
sect. 15.404-1(g)(1). An agency's acceptance of a proposal with unbalanced
pricing is not, in and of itself, improper. An agency may lawfully award a
contract on the basis of a proposal with unbalanced pricing, provided it has
concluded that the pricing does not pose an unacceptable level of risk, and
the prices the agency is likely to pay under the contract are not
unreasonably high. FAR sect.15.404-1(g)(2), (3); Citywide Managing Servs. of
Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD para. 6
at 7.

Here, the protester does not provide a basis for us to find that any of
Acorn's prices were significantly overstated, and our review does not
indicate that any were (its Flightline prices were roughly in line with
other offerors'). There is therefore no factual basis for the allegation of
unbalanced pricing. While Acorn's prices were obviously much lower than the
protester's, the risk of low prices (or even below-cost prices) is not the
risk at issue in unbalanced pricing analysis under FAR sect. 15.404-1(g).

SelRico also protests that the issuance of the interim purchase order was
improper, alleging that the agency solicited quotations without disclosing
the fact that the quotations would be compared on the basis of price alone.
The protester asserts that "Acorn's quote was, predictably, lower because
Acorn offers a lower level of service," and argues that SelRico was misled
when the contracting officer advised it to base its quotation "on the
existing solicitation." Protester's Comments at 2.

SelRico's argument is wholly without merit. First, since no new proposals,
but only prices were solicited, we fail to see how the protester was
"misled"; it submitted a price, and the price was compared to Acorn's price.
Second, to the extent the oral request was based on the RFP, the RFP never
provided for a comparative evaluation of the level of service being offered:
the only factors to be evaluated under the solicitation were past
performance and price. Since SelRico could not change its past performance,
and had received an exceptional rating for its past performance, any failure
on the agency's part to specifically alert the firm to the fact that only
pricing would be compared for the interim award would have no competitive
consequence. The only factor that the offerors could control when competing
for the interim purchase order was price, and Selrico had the opportunity to
change its price. In any event, our conclusion that the award made to Acorn
under the RFP was unobjectionable, as discussed above, renders Selrico's
protest of the evaluation and award of the interim purchase order academic.
Even if, as SelRico argues, the Air Force was required to issue the purchase
order under the same source selection

terms as pertained to the contract award under the RFP (as opposed to basing
the award on price), we would find the selection of Acorn unobjectionable,
following our analysis as detailed above.

The protests are denied.

Anthony H. Gamboa

General Counsel

Notes

1. In addition, SelRico's premise that Acorn's proposal was ever "ranked
sixth" is factually unsupported. While the agency report in response to
Acorn's protest listed the proposals in groups reflecting their past
performance confidence assessments, this grouping did not reflect any
qualitative ranking within the groups, nor did it represent the integrated
assessment of past performance and price that the award decision ultimately
would be based on. Contracting Officer's Statement at 3.

2. While SelRico challenges the relevance of the contracts that Acorn
submitted, alleging that the volume of meals served under those contracts
did not meet the RFP's threshold for relevance, we reject this allegation as
merely speculative. Acorn bases its allegation on the contracts' dollar
values, speculating that these prices either reflect a lower volume or a
lower level of service. However, the record shows that Acorn furnished
specific information regarding the number of meals served and that the
agency reasonably evaluated Acorn's past performance based on the data
submitted.

3. While SelRico alleges that Acorn received a "very good" rating from the
Air Force for a past performance reference that "contained no score above a
'satisfactory,'" Protester's Comments, May 7, 2001, at 3, the record shows
that SelRico's allegation in this regard is simply factually incorrect. See
Agency Report, Tab H, Reference for Contract No. DTCG84-99-C-AA-1002.