TITLE:  RS Information Systems, Inc., B-287185.2; B-287185.3, May 16, 2001
BNUMBER:  B-287185.2; B-287185.3
DATE:  May 16, 2001
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RS Information Systems, Inc., B-287185.2; B-287185.3, May 16, 2001

Decision

Matter of: RS Information Systems, Inc.

File: B-287185.2; B-287185.3

Date: May 16, 2001

Mary Beth Bosco, Esq., Norah D. Molnar, Esq., and T. Michael Guiffrï¿½, Esq.,
Patton Boggs, for the protester.

Kenneth J. Ingram, Esq., and Michael A. Stover, Esq., Whiteford, Taylor &
Preston, for STG, Inc., an intervenor.

Carol A. Cowgill, Esq., Environmental Protection Agency, 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. Where flaws in original cost evaluation require agency to reopen
competition, prior disclosure of awardee's contract price and request for
revised cost proposals do not create an improper auction.

2. Allegation that agency misled protester by advising it that its original
evaluated cost was lowest among all offerors, is denied where agency's
detailed cost discussions provided protester with all information necessary
to prepare competitive offer; protester's decision not to submit lower cost
proposal reflects its own business judgment and was not the result of
misleading advice from the agency.

DECISION

RS Information Systems, Inc. (RSIS) protests the award of a contract to STG,
Inc. under request for proposals (RFP) No.  PR-HQ-99-16699, a competitive
section 8(a) set-aside, issued by the Environmental Protection Agency (EPA)
for telecommunications support services. RSIS challenges several aspects of
the procurement.

We deny the protest.

BACKGROUND

EPA issued this solicitation in 1999 for telecommunications support services
for EPA's headquarters in Washington, D.C., its 10 regional offices, and
numerous laboratory and field sites. Work under the contract was to be
accomplished pursuant to delivery orders covering six functional areas:
(1) telecommunication installation, operations, and maintenance; (2)
computer services/software; (3) service center operation; (4)
advisory/assistance services; (5) design services; and (6) turn-key
projects. The RFP contemplated the award of a level-of-effort (LOE),
cost-plus-award-fee contract for a base year, with 4 option years.

The RFP did not prescribe labor categories or labor mix; instead, offerors
were required to propose the combination of labor categories they would use
to provide cost effective services. Proposals also were to include a
narrative detailing the offeror's strategy for performing the functional
areas and to demonstrate an understanding of the work and appropriate labor
mix. RFP sect. L.11.4.2. To assist offerors, the RFP included historical
estimates of the LOE and percentages for each of the areas and "plug" costs
for three of the areas.

Proposals were to be evaluated for corporate experience on a pass/fail
basis, and under four technical evaluation factors on a best value basis:
past performance (20 of 100 available points); technical proposal (40
points); key personnel/oral presentations (25 points); and start-up plan (15
points). RFP sect. M.4. With regard to the cost evaluation, the RFP provided
that EPA would perform a cost realism analysis, with unrealistic cost
proposals evaluated in a risk assessment. RFP sect.sect. M.2, M.5. Overall,
technical factors were considered more important than cost factors. Award
was to be made to the offeror whose proposal provided the greatest overall
value to the government. RFP sect. M.3.

Four offerors, including RSIS and STG, submitted proposals by the November
29, 1999 closing time. After evaluating the technical proposals and oral
presentations, the technical evaluation panel (TEP) concluded that none of
the four had any weaknesses or deficiencies. In its cost evaluation, the
agency adjusted some of the offerors' proposed costs upward to arrive at a
most probable cost. Because the top three technical proposals, including
those of RSIS and STG, were very close in score, and RSIS's proposal offered
the lowest proposed and evaluated cost, EPA made award to RSIS without
discussions.

Based on cost questions from an unsuccessful offeror, and EPA's belated
discovery that RSIS's proposal did not include needed optional quantities of
hours, the contracting officer reviewed the entire cost evaluation. This
review disclosed a number of flaws in the assumptions made by the offerors
in proposing the optional LOE quantities and costs, and in EPA's use of plug
numbers. [1] Accordingly, the agency terminated RSIS's contract for
convenience (as of February 2001) and provided the firm a debriefing
comparable to those the other offerors had received following the award to
RSIS. EPA then amended the RFP to specify the number of hours in each
functional area and to require each offeror to use the plug dollar amounts
in areas 4 through 6. The agency established a competitive range that
included all offerors, and conducted discussions with them to address
identified weaknesses and deficiencies in their cost proposals. Because the
offerors' revised proposals showed confusion about the plug amounts, EPA
again amended the RFP to clarify the amounts.

EPA obtained final proposal revisions from each offeror in December 2000.
The agency reevaluated the proposals and adjusted their costs as necessary.
The cost realism evaluation included review of the initial realism analysis
of indirect rates (which had been prepared with input from the Defense
Contract Audit Agency), a comparison of direct labor rates, consideration of
the TEP's review of the offerors' understanding, and a comparison of STG's
costs with those of RSIS and the previous incumbent. The final evaluation
results were as follows:

 Offeror        Technical Score    Evaluated Cost

 RSIS           80.71              $77.9 million

 STG            79.66              $70.3 million

 [deleted]      77.97              $72.5 million

 Offeror 4      74.03              $75.7 million

In making his award recommendation, the contracting officer found that the
three highest rated technical proposals, submitted by RSIS, STG, and
[deleted], were "equally strong." Source Selection Document at 6. The
contracting officer concluded that STG's proposal was the most advantageous
to the government because it offered the lowest proposed and evaluated total
cost plus award fee. The source selection authority approved the contracting
officer's recommendation and made award to STG. After a debriefing, RSIS
filed this protest.

ALLEGED IMPROPER AUCTION

RSIS argues that the reopened competition amounted to an improper auction,
since RSIS's price had been revealed to the other offerors following the
initial award. In RSIS's view, because the technical proposals were so
close, the other offerors were able to use the award information as a target
to "underbid" the protester.

Contracting officials in negotiated procurements have broad discretion to
take corrective action where the agency determines that such action is
necessary to ensure fair and impartial competition. Federal Sec. Sys., Inc.,
B-281745.2, Apr. 29, 1999, 99-1 CPD para. 86 at 4. Where, as here, corrective
action proposed by the agency is not improper, the prior disclosure of
information in an offeror's proposal does not preclude the corrective
action, and the request for revised cost proposals does not constitute an
improper auction. Patriot Contract Servs., LLC, et al., B-278276.11 et al.,
Sept. 22, 1998, 98-2 CPD para. 77 at 4. This is because the possibility that the
contract may not have been awarded based on a true determination of the most
advantageous proposal has a more harmful effect on the integrity of the
competitive procurement system than the fear of an auction; the statutory
requirements for competition take priority over any possible regulatory
constraints on auction techniques. Federal Sec. Sys., Inc., supra. [2]
While, until 1997, the Federal Acquisition Regulation (FAR) generally
prohibited "auction techniques," the current provision regarding limitations
on the disclosure of offerors' prices during discussions no longer includes
language regarding the prevention of auctions. FAR sect. 15.306(e)(3).

RSIS'S DEBRIEFING

RSIS asserts that, after reopening the competition, EPA misled it during its
debriefing. Specifically, EPA told the protester that its proposed and
evaluated costs were the lowest of all offerors when, in fact, the agency
had reason to believe that RSIS's costs should have been evaluated as the
highest of all offerors. RSIS claims that, had it not been misled, "it might
have employed an entirely different bidding strategy in the recompeted
procurement." RSIS Comments at 3.

RSIS's argument is without merit. First, while RSIS contends that it "might"
have changed its bidding strategy, it does not explain how it was misled or
how it would have changed its strategy. Its general assertion is not
sufficient to establish competitive prejudice. [3] Moreover, to the extent
RSIS means that it would have proposed a lower cost, we are not persuaded.
Since RSIS was aware that this was a competitive procurement, it is not
clear to us why its belief--correct or not--that its original contract price
was the lowest received would have led it to increase its proposed price
more than it otherwise would have; it seems to us that RSIS at all times had
every incentive to keep its proposed cost as low as possible. Further, as
noted, RSIS received the same evaluation information as the other offerors,
(including the TEP report on its proposal, its technical score, and its
evaluated cost), as well as detailed cost discussions. We fail to see why
this information was not sufficient to put RSIS on notice that its original
price was flawed, and to enable it to submit the lowest possible revised
cost proposal reflecting its approach to performing the work.

COST REALISM ANALYSIS

RSIS asserts that the agency failed to perform a proper cost realism
analysis in its review of STG's revised costs under the reopened
competition.

Under the Competition in Contracting Act of 1984 (CICA), 31 U.S.C. sect. 3553(a)
(1994), and our Bid Protest Regulations, 4 C.F.R. sect. 21.1(a) (2001), a
protester must be an "interested party" before we will consider its protest.
A protester is not an interested party if it would not be in line for award
if its protest were sustained. Avondale Technical Servs., Inc., B-243330,
July 18, 1991, 91-2 CPD para. 72 at 2.

Here, while the protester received the highest technical score, the agency
specifically determined that RSIS's, STG's, and [deleted] proposals were
equally strong, Source Selection Document at 6, and based the award decision
solely on evaluated cost. RSIS's evaluated cost was the highest (it has not
challenged the adjustments the agency made based on its cost evaluation).
[deleted] cost was next highest, lower than RSIS's. RSIS has not challenged
[deleted] cost or technical evaluation. Thus, even if we found that the cost
realism evaluation of STG's proposal was flawed, and that selection of its
proposal was improper, [deleted], not RSIS, would be next in line for award.
Accordingly, RSIS lacks the requisite direct and substantial interest with
regard to the award to be considered an interested party to protest the
evaluation. Id. We therefore will not consider this aspect of the protest.

MODIFICATION OF STG'S CONTRACT

Finally, RSIS asserts that the agency "made fundamental changes to the
contract immediately after the award to STG." RSIS Comments at 1.
Specifically, RSIS argues that the agency improperly modified the contract
to allow STG to eliminate the Washington, D.C.-based nationwide manager (a
key personnel position) and to transfer his responsibilities to the
on-site/field operations manager based at Research Triangle Park, North
Carolina. RSIS maintains that it should be allowed to compete based on the
agency's "new requirements." Protester's Comments at 2.

Once a contract is awarded, we generally will not review modifications to
that contract because such matters are related to contract administration
and are beyond the scope of our bid protest function. 4 C.F.R. sect. 21.5(a);
MCI Telecomms. Corp., B-276659.2, Sept. 29, 1997, 97-2 CPD para. 90 at 7. An
exception to this rule is where it is alleged that the work encompassed by a
contract modification should have been the subject of a separate
procurement, id., or an amendment to the solicitation. NV Servs.,
B-284119.2, Feb. 25, 2000, 2000 CPD para. 64 at 18. In determining whether a
modification triggers the competition requirement in CICA, we look to
whether there is a material difference between the modified contract and the
contract originally awarded. Sprint Comms. Co., B-278407.2, Feb. 13, 1998,
98-1 CPD para. 60 at 6.

Here, we find no material difference in the awarded contract and the
contract as modified. EPA explains that the modification arose in response
to the initial delivery orders under STG's contract, which resulted in the
short-term migration of a portion of EPA's customer base. In this regard,
several EPA customers (six field sites and one headquarters office) opted to
acquire their telecommunication services under a General Services
Administration (GSA) Federal Supply Schedule contract held by RSIS. The
agency reports that these EPA offices had chosen not to use the STG contract
and would realize a cost savings through use of RSIS's GSA contract. Agency
Supplemental Report at 2. Based on the effect of the lost work, the agency
agreed with STG's request to consolidate the nationwide manager's
responsibilities with those of two other management positions in another
location. The change affects one personnel position and resulted in a total
cost savings of approximately [deleted]. Since this represents only a small
percentage of the total contract amount ($70 million), and does not involve
any significant change in the work under the contract, the change was
unobjectionable. [4]

The protest is denied.

Anthony H. Gamboa
General Counsel

Notes

1. Among the problems with the offerors' cost proposals were: failure to
include an award fee; failure to propose costs for the entire requirement;
failure to propose optional incremental hours; failure to allocate other
direct costs to subcontractors; and failure to use the required plug amounts
in three functional areas.

2. In a related argument, RSIS asserts that the auction effects were
aggravated by the agency's promising, but failing, to perform a proper cost
realism evaluation to ensure that no offeror unrealistically lowered its
price based on RSIS's award price. However, RSIS points to nothing specific
to support this claim. Rather, it simply challenges the methodology of the
analysis, with no suggestion of how the result would be different if the
analysis were changed. It is plain from the record that the difference in
cost proposals is primarily attributable to the more aggressive cost
strategy employed by STG--[deleted]--rather than to unrealistic proposed
costs. Had RSIS used a similar strategy, its overall cost would have been
close to STG's.

3. Our Office will not sustain a protest unless the protester demonstrates a
reasonable possibility that it was prejudiced by the agency's actions, that
is, unless the protester demonstrates 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).

4. RSIS asserts that a permanent change in key personnel based on a
short-term change in the level of effort is unreasonable. However, since the
modification did not materially change STG's contract, it is a matter of
contract administration, which we will not review. MCI Telecomms. Corp.,
supra.