TITLE:  S3 LTD, B-287019.2; B-287019.3; B-287021.2; B-287021.3, September 14, 2001
BNUMBER:  B-287019.2; B-287019.3; B-287021.2; B-287021.3
DATE:  September 14, 2001
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S3 LTD, B-287019.2; B-287019.3; B-287021.2; B-287021.3, September 14, 2001

Decision

Matter of: S3 LTD

File: B-287019.2; B-287019.3; B-287021.2; B-287021.3

Date: September 14, 2001

Robert A. Klimek, Esq., Nicholas H. Cobbs, Esq., and Darrell Craft, Esq.,
Klimek, Kolodney & Casale, for the protester.

Daniel R. Weckstein, Esq., Michael L. Sterling, Esq., Walter T. Camp, Esq.,
and David W. Lannetti, Esq., Vandeventer Black, for MANCON, Inc., an
intervenor.

Philip E. Adams, Esq., Department of the Navy, Naval Supply Systems Command,
for the agency.

Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest contention that an agency conducted misleading discussions by
orally changing the terms of the solicitation is denied because, even if the
agency made the claimed change, offerors cannot reasonably rely on an oral
modification to a solicitation which is inconsistent with its written terms,
absent a written amendment, or confirmation of the modification, as required
by Federal Acquisition Regulation sect. 15.206(f).

2. Protester's assertion that an awardee's outstanding past performance
rating is unreasonable as it was partially based on the responses of an
agency reference who provided a photocopy of identical performance ratings
and narrative responses as an answer to a request for his assessment of the
awardee's performance under each of four separate contracts is denied where
the record shows that, while the reference's approach was less than ideal,
his answers were consistent with the answers of other references, and
consistent with his responses in a telephonic interview conducted by the
contract specialist, and where there is no showing that the photocopied
responses were inaccurate for any of the four contracts.

DECISION

S3 LTD protests the award of two contracts to MANCON, Inc., by the
Department of the Navy's Fleet and Industrial Supply Center, Jacksonville,
Florida, pursuant to requests for proposals (RFP) Nos. N68836-00-R-0012 and
N68836-00-R-0025, for personnel support services. S3 argues that the Navy
failed to hold meaningful discussions by improperly encouraging the company
to raise its direct labor rates to the point where it was no longer the
lowest-priced offeror for these contracts. S3 also argues that the Navy
misevaluated both its and the awardee's past performance.

We deny the protests.

BACKGROUND

The Navy issued these solicitations to procure certain personnel support
services for the Department of Defense and other federal agencies in
transition as a result of being reorganized, realigned, streamlined, or
closed, due to regionalization, consolidation of functions, or cost
comparison studies conducted pursuant to Office of Management and Budget
Circular A-76. These support services are provided by the Fitting Out and
Supply Assistance Center, Norfolk, Virginia, under the Navy's Intra Fleet
Supply Operations Program. Both solicitations anticipate the purchase of
temporary personnel services for various professional and Service Contract
Act labor categories, including accounting, information technology,
administration, engineering, environmental, finance, logistics, human
resources, transportation, child care, mechanical trades, custodial, food
service, clerical, drafting, electronics, library services, laboratory
services, social services, and hazardous material services. Agency Report
(AR) at 3. These solicitations are similar, with the differences related to
the geographical areas covered by each: RFP No. N68836-00-R-0012 (R-0012)
has 2,541 separately priced contract line items (CLIN) covering the eastern
United States and Puerto Rico; RFP No. N68836-00-R-0025 (R-0025) has 5,112
CLINs covering the western United States, Guam and Hawaii. Id.

The RFPs [1] here anticipated award of
indefinite-delivery/indefinite-quantity, time and materials contracts, for a
1-year base period with two 1-year options, to the offeror whose proposal
was determined most advantageous to the government, price and other factors
considered. To determine the most advantageous proposal, the RFPs identified
four evaluation factors--price/cost, past performance, technical, and
subcontracting plan--and advised that each factor was approximately equal in
importance. RFPs at 20. Only two of the factors--past performance and
technical--were to be given adjectival ratings; a proposal's subcontracting
plan was to be assessed as either acceptable or unacceptable, and its price
was to be assessed only for reasonableness (after application of a
10-percent price evaluation preference for HUBZone offerors). Under the past
performance factor, a proposal was rated either outstanding, good, average,
marginal, or neutral; under the technical factor, a proposal was rated
either outstanding, good, average, or marginal.

Seven offers were received in response to R-0012 (East Coast), and six
offers were received in response to R-0025 (West Coast). S3 and MANCON
submitted offers in response to both solicitations. In reviewing the initial
offers, the agency determined that both S3 proposals lacked pricing on some
labor categories, and a Professional Employee Compensation Plan, which was
required by the solicitations. As a result S3 was initially excluded from
the competitive range for award in both procurements. After S3 filed
protests with our Office challenging its exclusion, the agency reinstated
the company to the competitive range in both procurements, advised that it
would request revised proposals from all offerors, and sought dismissal of
the protests, which was granted. See S3 LTD, B-287019, B-287021, Jan. 9,
2001.

The record shows that the agency held discussions with S3 on three separate
occasions--March 23, April 13, and April 20. The discussions held on April
13 were specifically tailored to the East Coast solicitation (R-0012), and
final revised proposals for that solicitation were due April 17. Affidavit
of Contract Specialist, Aug. 9, 2001, at 2. The discussions on April 20 were
specifically tailored to the West Coast solicitation (R-0025), and final
revised proposals were due April 24. Id.; AR at 7.

In evaluating the final revised proposals, the agency assigned the same
evaluation ratings in the areas of technical and past performance to an
offeror's proposal under both solicitations, and concluded that all of the
large businesses (including MANCON and S3) had proposed acceptable small
business subcontracting plans for both solicitations. After reviewing these
ratings, as well as the proposed prices, the agency concluded that the
proposals of MANCON and S3 received the highest ratings with the lowest
proposed prices under both solicitations. Accordingly, we set forth below
the evaluation results of only these two offerors under both solicitations
(and the prices shown do not include the 10 percent HUBZone price evaluation
factor):

                           MANCON                   S3

 Technical Rating          Outstanding              Outstanding

 Past Performance          Outstanding              Good

 OVERALL RATING            Outstanding              Outstanding

 Total Price (R-0012)      $30,214,085              $30,625,581

 Total Price (R-0025)      $11,739,353              $12,024,293

AR, Tab 25 at 4, 8 (R-0012); AR, Tab 26, at 4, 8 (R-0025). Based on MANCON's
higher-rated, lower-priced offers, the agency awarded both contracts to
MANCON on May 29. These protests followed.

DISCUSSION

As indicated above, S3's protests essentially raise three issues in two
areas, price and past performance. In the area of price, S3 argues that
during discussions the agency improperly encouraged it to raise its direct
labor rates to the point where it was no longer the lowest-priced offeror.
In the area of past performance, S3 raises a single challenge to MANCON's
past performance rating, and multiple challenges to its own past performance
rating. [2]

With respect to pricing, S3 notes that both its initial proposed prices, and
interim prices, were lower than those of MANCON, leading the protester to
complain generally that the agency used discussions to wrongly encourage the
company to raise its direct labor rates until it was no longer in line for
award. In its supplemental protest, S3 complains specifically that during
negotiations the contract specialist directed the company to raise its rates
for professional employees to a level comparable to the federal government's
general service (GS) step 5 rate for the appropriate GS grade. [3] In
addition, S3 claims that the oral guidance it received regarding the use of
the GS step 5 rate was contrary to guidance in the solicitation directing
the use of a step 1 rate.

In negotiated procurements, contracting agencies generally must conduct
discussions with all offerors whose proposals are within the competitive
range. 10 U.S.C. sect. 2305(b)(4)(A)(i) (1994); Federal Acquisition Regulation
(FAR) sect. 15.306(d)(1). Although discussions must be meaningful, leading an
offeror into the areas of its proposal requiring amplification or revision,
the agency is not required to "spoon-feed" an offeror as to each and every
item that could be raised to improve its proposal. Du & Assocs., Inc.,
B-280283.3, Dec. 22, 1998, 98-2 CPD para. 156 at 7-8. An agency has not
satisfied its obligation to conduct meaningful discussions if it misleads an
offeror or conducts prejudicially unequal discussions. Biospherics,Inc.,
B-278278, Jan. 14, 1998, 98-1 CPD para. 161 at 6.

With respect to S3's general contention that it was improperly urged to
raise its rates, our review of the record shows that during discussions, the
contract specialist encouraged upward adjustments to the professional rates
of almost all the offerors, including MANCON. For example, the record shows
that during discussions related to R-0012, S3 was advised that the
professional rates in its initial proposal for computer specialists,
facilities administrators, engineers, environmental specialists, financial
managers, and ILS specialists appeared low; MANCON was advised that its
professional rates for environmental specialists, engineers, and ILS
specialists appeared low. AR Tab 25, Post-Clearance Memorandum at 6-7.
Similarly, during discussions related to R-0025, S3 and MANCON were given
the same direction regarding the categories of professional employees
described above, as well as advice on unique issues related to doing
business in Hawaii. AR Tab 26, Post-Clearance Memorandum at 6-8. [4] In
response, both offerors claimed to have reviewed their rates carefully, and
raised them in several areas. Given the similarities in the discussions
here, and the nuanced responses to the agency direction from both offerors
in their revised proposals, there is no evidence in this record to support a
conclusion that S3 was treated unfairly. Biospherics,Inc., supra.

In its supplemental protest, S3 moves from its general challenge to a
specific claim that during negotiations the contract specialist orally
directed the use of GS step 5 rates for professionals, despite language in
the RFP which, in S3's view, mandated the use of GS step 1 rates. In support
of its contention, S3 appended to its supplemental protest numerous
affidavits from its employees--five of which contain claims of hearing the
contract specialist direct the use of GS step 5 rates, and five of which
indicate that the affiant learned from others that the contract specialist
directed the use of such rates.

FAR sect. 15.206(a) requires that when "the Government changes its requirements
or terms and conditions, the contracting officer shall amend the
solicitation." On the subject of whether such changes may be communicated
orally, the FAR permits oral notice of changes, but requires that
contracting officers formalize the oral notice with an amendment to the
solicitation. FAR sect. 15.206(f).

Here, both solicitations incorporated a question from an offeror, and the
agency answer thereto, addressing the use of GS step rates as follows:

11. Which step should be used for the GS equivalent rates?

Ans: Step 1

RFPs, Amend. 0002 at 4. Despite the agency's contention that this direction
applied to other groups of employees, and not professionals, S3's filings
leave no doubt that it viewed this direction as applicable to an offeror's
professional rates. Supp. Protest at 2; Supp. Comments at 5-6. In fact, S3
expressly acknowledges that it viewed the direction it alleges it received
during discussions--i.e., to use Step 5 rates for professional employees--as
contrary to the terms of the RFP. Supp. Protest at 2-3.

Even if, as alleged, the agency orally indicated during discussions that
offerors should use GS step 5 rates to set professional compensation--and
the agency vigorously asserts it did not--offerors cannot reasonably rely on
oral modifications to an RFP which are inconsistent with its written terms,
absent a written amendment, or confirmation of the oral modification. Fluid
Power Int'l, Inc., B-278479, Dec. 10, 1997, 97-2 CPD para. 162 at 3 n.1;
Occu-Health, Inc.; Analytical Sciences, Inc., B-258598.2 et al., Feb. 9,
1995, 95-1 CPD para. 59 at 4. This clear principle provides fairness to all
parties by ensuring that competitions are conducted under equal terms, and
protects both protesters and agencies from the kind of credibility disputes
raised here, as well as protecting the integrity of the procurement process
overall. [5] Since S3's assertion that discussions were improper is premised
upon oral direction inconsistent with the written terms of the RFP, we will
not consider this issue further.

With respect to S3's challenge to the past performance evaluation, we turn
first to its allegation that the agency's assessment of MANCON's past
performance was unreasonable. In this regard, S3 alleges that one of the
MANCON's past performance references photocopied his ratings and detailed
comments, and provided identical answers for each of the four contracts for
which he was identified as a reference. In the area of past performance, as
in any other area of proposal evaluation, our review consists of examining
the record to determine whether the agency's judgment was reasonable and
consistent with stated evaluation criteria and applicable statutes and
regulations. ESCO, Inc., B-225565, Apr. 29, 1987, 87-1 CPD para. 450 at 7.

The past performance evaluation materials related to MANCON and provided
with the agency report (AR Tab 20) consist, in part, of eight separate
questionnaires, completed by two individuals, covering four prior MANCON
contracts. Thus, there is a completed questionnaire from both individuals
addressing all four contracts. In addition, the materials include copies of
handwritten notes prepared by the contract specialist memorializing
telephone conversations with both of the individuals who completed
questionnaires, as well as with a third Navy individual familiar with
MANCON's performance. Based on our review of these materials, it appears
that S3 is correct in its assertion that the answers and ratings from one of
MANCON's references were photocopied and provided under separate cover
sheets identifying

each of the four contracts and its contract value.

Before turning to the specifics of the evaluation here, we note that
providing identical photocopied questionnaire answers and comments in
response to a request for information about an offeror's performance under
different contracts, is a less than ideal way for agency references to
provide the specific and detailed feedback needed to assess past performance
during a competitive procurement. Under different circumstances, such an
approach could place at risk the reasonableness of an agency's past
performance assessment, and hence its procurement decisions. On the other
hand, we conclude that the answers at issue here are sufficiently consistent
with the individualized ratings provided by the other respondent, and with
the information provided by all three individuals in their telephone
conversations with the contract specialist, to merit a conclusion that the
overall assessment of MANCON's past performance was reasonable.

For example, while the reference who photocopied his ratings and provided
the same responses for all four contracts answered 52 times that MANCON's
performance was outstanding, the reference whose replies were individualized
awarded 45 outstanding ratings, and 7 ratings of good. In addition, the 7
ratings of good did not hinder this reference from rating MANCON's
performance outstanding overall on all four contracts. The congruity between
these ratings, and the telephonic responses of all three of the individuals
interviewed by the contract specialist, leads us to conclude that the
outstanding past performance rating given MANCON was, in fact, reasonable.
We also note that S3 has made no showing that the information provided was
incorrect. As a result, we have no basis to question the past performance
rating here.

With respect to S3's three challenges to its own past performance rating of
good (versus MANCON's outstanding rating), we need not address in detail the
protester's specific contentions. During the course of this protest, S3
raised a procedural challenge to the agency's inclusion of an incomplete
Contractor Performance Assessment Report (CPAR) in its past performance
file; a challenge to the agency's failure to advise it during discussions of
certain negative comments received from some of S3's references; and a
challenge to the agency's apparent, but not established, reliance on certain
negative backup information about S3's performance included with the agency
report. We have reviewed each of these arguments, as well as the totality of
the past performance materials submitted for both S3 and MANCON, and
conclude that--even if we accept at face value each of S3's contentions, and
even if S3's overall past performance rating were raised from good to
outstanding as a result of these contentions--the specific ratings,
comments, and concerns raised throughout the materials would not support a
decision to select S3's higher-priced offer over MANCON's offer. In this
regard, we note that MANCON's outstanding rating is supported nearly
universally throughout the past performance materials; in contrast, the
materials paint a more complex picture of S3's past performance--including
allegations of personality issues, and performance problems during a
bankruptcy, which, the evaluators concede, as S3 points out, were eventually
addressed. Given these differences, we conclude that S3 cannot show a
reasonable possibility that it has been prejudiced by the agency's actions,
or claim that but for the agency's actions, it would have had a substantial
chance of receiving the award. McDonald-Bradley, B-270126, Feb. 8, 1996,
96-1 CPD para. 54 at 3; see Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581
(Fed. Cir. 1996).

The protests are denied.

Anthony H. Gamboa

General Counsel

Notes

1. Since these RFPs are identical in terms of performance periods,
evaluation factors, award criteria, and other matters not related to the
geographic place of performance, this decision will describe the
solicitations jointly as "the RFPs." In addition, both RFPs use a system of
pagination wherein the pages of sections A through J are numbered
sequentially, while section K begins again with page 1 and continues
sequentially through the end of section M. Since sections K through M are
identical in the two RFPs, and since these identical provisions appear on
the same pages in both solicitations, they will be referenced hereinafter as
"RFPs at __." Any citation to the earlier portions of the solicitations will
be referenced as "R-0012 at ___" or "R-0025 at ___."

2. In its initial and supplemental protests, S3 raises 10 separate issues.
Of the total, S3 withdrew three of its issues, and folded one into other
issues. The remaining six issues all fall within the areas of price and past
performance, as explained above.

3. The federal government's GS schedule identifies the annual salary for
federal employees for each of 15 grades. Each grade has 10 pay steps, with
step 1 representing the lowest salary within that grade, and step 10
representing the highest salary within that grade. In this context, S3's
allegation regarding pay is that it was improperly directed to increase its
compensation rates for professionals closer to the middle of the range of
what federal employees are paid to perform comparable work, rather than the
bottom of the range.

4. We note for the record that the agency report's description of the
general content of discussions with S3 is confirmed by transcripts prepared
from tape recordings of portions of the discussions, which were made by S3
(apparently without the Navy's knowledge); these transcripts were appended
to S3's comments on the agency report.

5. For the record, we note that the protester argues that its affidavits,
and the contrast between them and the contract specialist's denial of having
directed the use of step 5 rates, requires our Office to convene a hearing
in this matter. We disagree. The purpose of a hearing here would be to take
testimony from the contract specialist, and perhaps from all of the S3
affiants, regarding the content of discussions, in order to determine which
witness or witnesses appear most credible. For the policy reasons set forth
above, we will not consider claims of alleged oral changes to the express
terms of a solicitation. Thus, no hearing to explore these claims is needed,
or appropriate. We also note that there is nothing in the record to support
S3's implied claim that MANCON must have received different direction during
discussions. Rather, the Navy's materials (which, as noted above, are
consistent with S3's transcripts of recordings made during its own
discussions) indicate that MANCON, like S3, was advised in general terms,
and with respect to specific categories, that its professional rates
appeared low.