TITLE:  Strategic Resources, Inc., B-287398; B-287398.2, June 18, 2001
BNUMBER:  B-287398; B-287398.2
DATE:  June 18, 2001
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Strategic Resources, Inc., B-287398; B-287398.2, June 18, 2001

Decision

Matter of: Strategic Resources, Inc.

File: B-287398; B-287398.2

Date: June 18, 2001

Janice Davis, Esq., Davis & Steele, for the protester.

Robert E. Gregg, Esq., and Karen R. Harbaugh, Esq., Squire, Sanders &
Dempsey, for Manufacturing Engineering Systems, Inc., an intervenor.

Robert J. McMullen, Esq., Department of the Navy, for the agency.

Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office of
the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

  1. Contracting agency reasonably determined that protester's performance
     under predecessor contract was entitled to greatest weight in its past
     performance evaluation and that performance of protester's proposed
     subcontractor on related contracts was entitled to little weight where
     subcontractor was to perform only approximately 20 percent of the
     solicited effort.
  2. Contracting agency reasonably attributed past performance of
     subcontractor's subsidiary to the subcontractor where subsidiary and
     subcontractor share key management personnel.
  3. Contracting agency reasonably viewed awardee's proposal as stronger
     than protester's under management approach factor where awardee
     furnished more detailed information regarding risk mitigation and staff
     recruitment procedures in its proposal.

DECISION

Strategic Resources, Inc. (SRI) protests the award of a contract to
Manufacturing Engineering Systems, Inc. (MESI) under request for proposals
(RFP) No. N00140-00-R-4046, issued by the Department of the Navy, Fleet and
Industrial Supply Center, for academic services in support of the Navy
College Program in the western U.S. and the Pacific. SRI contends that the
agency misevaluated both MESI's proposal and its own.

We deny the protest.

The Navy College Program seeks to assist sailors in earning a college degree
during their active duty Navy careers, by building, to the maximum extent
possible, on the academic credit they earn for Navy training and on-the-job
experience. The solicitation here sought services in support of 18 different
Navy College Offices located in the western U.S. and Japan. The services
include educational counseling, test administration, tuition assistance,
computer lab facilitation, education planning, program management, and
administrative/clerical assistance.

The RFP, which was issued on September 25, 2000 as a competitive set-aside
for small disadvantaged businesses under the Small Business Administration's
8(a) program, [1] contemplated the award of a fixed-price contract to the
offeror whose proposal was determined to be most advantageous to the
government, price and other factors considered. The solicitation defined
"other" factors as past performance and management approach, and provided
that they would be of equal importance in the evaluation. The RFP further
provided that in the evaluation of proposals, the risk associated with an
offeror's technical proposal would be considered more important than price.

Four proposals were received by the November 1 closing date. Agency
evaluators rated the technical proposals as follows:

 Offeror      Past Performance   Mgmt. Approach     Overall Rating

 MESI         Acceptable (LR)    Acceptable (HE)    Acceptable (MR)
                                                    [2]

 SRI          Acceptable (LR)    Acceptable (MR)    Acceptable (LR)

 Offeror A    Acceptable (LR)    Acceptable (MR)    Acceptable (LR)

 Offeror B    Acceptable (LR)    Acceptable (MR)    Acceptable (LR)

The evaluators ranked MESI's technical proposal first, citing its "strong"
management approach section. SRI's technical proposal was ranked second,
ahead of offeror A's and offeror B's, "because [SRI is] currently providing
services to the Navy under a similar contract." Technical Evaluation Report
at 1.

Offerors' prices, which were not revealed to the technical evaluators, were
as follows:

 MESI               $13,025,729.28

 SRI                $14,271,309.35

 Offeror A          $18,676,505.39

 Offeror B          $23,169,632.49

The source selection authority (SSA) selected MESI's proposal as most
advantageous to the government, noting that all four offerors had been rated
"essentially the same with mild differentiation within the acceptable
range," and, thus, that the best value determination hinged on price. PCO
Source Selection Decision Memorandum at 4. The SSA further noted that MESI's
management plan was stronger than SRI's, which more than offset any
advantage that SRI might have in the area of past performance. Id. On
February 27, 2001, the Navy awarded MESI a contract.

SRI takes issue with the agency's evaluation of technical proposals, arguing
that its proposal should have been rated higher than MESI's under both the
past performance and management approach factors.

The evaluation of technical proposals is a matter within the contracting
agency's discretion, since the agency is responsible for defining its needs
and the best method of accommodating them. Hago-Cantu Joint Venture,
B-279637.2, July 20, 1998, 98-2 CPD para. 99 at 11. In reviewing an agency's
technical evaluation, we will not reevaluate the proposal, but will examine
the record of the evaluation to ensure that it was reasonable and in
accordance with stated evaluation criteria and not in violation of
procurement laws and regulations. Id.

The protester argues that it should have received a higher past performance
rating than MESI because it has far more recent, relevant experience than
the awardee. In addition, SRI contends that the evaluators unfairly failed
to attribute to it the past performance of its proposed subcontractor, while
crediting MESI with its subcontractor's performance. SRI further argues that
the evaluators conducted their reference check in a manner designed to
downgrade SRI in order to move MESI ahead, and that, in conducting their
evaluation, the evaluators improperly ignored pertinent information of which
they were aware.

The RFP instructed offerors to identify in their proposals contracts
performed within the last 5 years that were similar in scope, magnitude, and
complexity to the effort here. In its proposal, SRI listed six contracts
that it had performed itself and one that its proposed subcontractor,
[deleted], had performed. [3] The evaluators determined that two of SRI's
own contracts, the predecessor contract to the one here and a contract in
support of the Army Continuing Education Service, were similar in scope,
magnitude, and complexity to the contract to be awarded here, but that the
remaining four were not. [4] Technical Evaluation Report at 6. The
evaluators contacted references for the two SRI contracts deemed relevant,
and both references rated SRI's performance as satisfactory. Id. at 6-7.

The evaluator responsible for checking SRI's references did not contact the
reference for the [deleted] contract. She explains that she did not do so
because she had already determined, based on a prior conversation with the
reference in connection with another procurement, that the contract was for
family advocacy services, which were not very relevant to the educational
services sought here. Evaluator's Declaration, May 9, 2001, at 1; Agency
Supplemental Report, May 11, 2001, at 5-6.

SRI disputes the evaluator's account of her conversation with the point of
contact (POC) for [deleted] Marine Corps contract, maintaining that the POC
did not inform her that the contract was for family advocacy services. SRI
further argues that, even assuming that as a result of miscommunication, the
evaluator understood the reference to be imparting that information, she was
subsequently notified by [deleted] president that his company had provided
educational services, as well as family advocacy services, under the
contract. [5] Moreover, the protester asserts, the evaluator, [deleted], was
already aware that [deleted] was providing educational services to the Navy
College Program under contract [deleted]. SRI asserts that not only did the
reference for contract [deleted] indicate that [deleted] had furnished
educational services under the contract, but further that he stated that he
was absolutely satisfied with [deleted] performance. [6] SRI argues that the
evaluators should have attributed this very positive reference regarding
[deleted] performance to SRI, which would have raised its past performance
rating.

We need not resolve the dispute over whether the evaluator had been
informed, or was otherwise aware, that [deleted] had been furnishing
educational services under contract [deleted] because the SSA, who was
ultimately responsible for the award decision, was aware at the time he made
the source selection decision that [deleted] had been furnishing educational
services to the Navy College Program. The record shows that the SSA, in his
capacity as a contracting officer, awarded a separate contract for such
services to [deleted] in October 1999, and that he was aware that the
contracting officer's representative on that contract was generally happy
with [deleted] performance. SSA's Declaration, May 29, 2001 at 1. The SSA
explains that in evaluating offerors' past performance, he gave the greatest
weight to the past performance that he considered most relevant to the
instant RFP, which in SRI's case was its performance on the predecessor
contract. The SSA further explains that he found [deleted] performance on
other contracts to be a less valid predictor than SRI's performance on the
incumbent contract because SRI had proposed [deleted] to perform only
approximately 20 percent of the solicited effort. Because the reference for
SRI's incumbent contract had rated SRI's performance as satisfactory, the
SSA assigned SRI a past performance rating of acceptable. Id.

We think that the SSA's decision to rely principally on SRI's performance
under the predecessor contract in rating its past performance was
reasonable. Although an agency may properly consider the past performance of
a proposed subcontractor, see Federal Acquisition Regulation (FAR) sect.
15.305(a)(2)(iii), [7] the key consideration is whether the experience is
reasonably predictive of the offeror's performance under the contract.
Oceanometrics, Inc., B-278647.2, June 9, 1998, 98-1 CPD para. 159
at 5. We see no reason that the SSA could not reasonably conclude that the
performance of SRI on its predecessor contract was a much stronger predictor
of performance under the solicited effort than any performance by [deleted],
and on that basis determine that [deleted] performance on contract [deleted]
was entitled to little weight in his evaluation.

SRI further argues that the evaluators conducted their reference check in a
manner designed to downgrade SRI in order to move MESI ahead. [8]
Specifically, the protester asserts that notes taken by the agency evaluator
who interviewed the POC for SRI's contract No. DASW01-98-C-0066, in support
of the Army Continuing Education Service, reveal that, while the POC
initially stated that SRI's performance was "good," the evaluator then asked
whether he considered SRI's performance to be "satisfactory," to which the
POC replied in the affirmative. According to SRI, the wording of the
follow-up question permitted the reviewer to lower the rating from good to
satisfactory.

The protester's argument that the rating of its performance on the above
contract was lowered from good to satisfactory as a result of the
evaluator's leading question is not supported by the record. The notes that
the protester cites do not in fact pertain to contract No. DASW01-98-C-0066;
they pertain to a separate contract of far lesser value cited by SRI in its
proposal, No. DATB23-00-P-0008. This contract was one of the four cited by
SRI that were determined by the technical evaluators not to be similar in
magnitude and complexity to the solicited effort, and thus not considered in
the past performance evaluation. Accordingly, the evaluators did not assign
the protester's performance on it a rating and did not consider it in their
past performance evaluation.

The protester also argues that the evaluators failed to consider relevant
information in rating its performance under the predecessor contract. In
particular, SRI notes that its proposal referred to "Monthly Customer
Satisfaction Surveys" that it conducted under the predecessor contract, on
which it received an overall service rating of 4.75 out of 5.00 from Navy
College Program Directors.

The Navy responds that because the protester's proposal indicated that its
program manager, a contractor employee, had conducted the Monthly Customer
Satisfaction Surveys referred to above, the SSA concluded that they were
internal SRI ratings and, as such, were not entitled to the same weight as
the assessments provided by the POCs for SRI's relevant contracts, who were
the government personnel responsible for monitoring SRI's performance.
Agency Report, Apr. 11, 2001,
at 25-26. We think that the SSA's decision not to give much weight to the
questionnaires was reasonable given that they were contractor-generated
documents and that they focused on customer satisfaction with the
performance of individual employees rather than on overall contractor
performance.

In addition to challenging the agency's evaluation of its own past
performance, SRI takes issue with the agency's evaluation of MESI's past
performance. Specifically, the protester argues that the agency improperly
attributed to MESI the performance of a subsidiary of its proposed
subcontractor, despite the fact that there was no indication in MESI's
proposal that the subsidiary would be involved in performance.

In the past performance section of its proposal, MESI listed three contracts
that it had performed itself. In addition, it identified one contract
performed by its proposed subcontractor, [deleted], and two performed by a
subsidiary of [deleted]. The evaluators determined that none of MESI's own
experience was related, but that the experience of [deleted] was; when
contacted, one of the [deleted] references stated that she was "extremely
happy" with the contractor's support; another stated that he was "absolutely
satisfied;" and the third stated that he was "pretty happy" with the
support. Agency Report, Tab F, Evaluators' Handwritten Notes. Based on these
comments, the evaluators rated MESI as acceptable (low range) under past
performance; the SSA agreed with the rating of acceptable, noting that
[deleted] past performance was relevant because it would be furnishing
[deleted] percent of the required personnel. PCO Source Selection Decision
Memorandum at 2.

In determining whether one company's performance should be attributed to
another, the agency must consider not simply whether the two companies are
affiliated, but the nature and extent of the relationship between the
two--in particular, whether the workforce, management, facilities, or other
resources of one may affect contract performance by the other. ST Aerospace
Engines Pte. Ltd., B-275725, Mar. 19, 1997, 97-1 CPD para. 161 at 3. In this
regard, it is appropriate to consider an affiliate's performance record
where it will be involved in the contract effort, Fluor Daniel, Inc.,
B-262051, B-262051.2, Nov. 21, 1995, 95-2 CPD para. 241 at 12, or where it
shares management with the offeror. Morris Knudsen Corp., B-280261, Sept. 9,
1998, 98-2 CPD para. 63 at 4-5.

Here, the record establishes that [deleted] is a wholly-owned subsidiary of
[deleted] and that the two companies share the following key management
personnel: president, chief financial officer, controller, human resources
director, and director, military division. Declaration of President of
[deleted], May 4, 2001. Given that [deleted] and [deleted] share key
management personnel, we think that the evaluators and the SSA reasonably
could have attributed [deleted] performance to [deleted]. In turn, given
that [deleted] will be performing a significant portion of the contract
work, we think that the agency reasonably attributed [deleted] past
performance to MESI. See FAR sect. 15.305(a)(2)(iii).

The protester also argues that the notes taken by the evaluator who
conducted the interview of the reference for [deleted] contract indicate
that the contract did not involve related services; accordingly, the
protester asserts, the contract should not have been considered in rating
MESI's past performance. In support of its argument, the protester notes
that the interviewer crossed out the word "provide" before the words
"academic advisement;" [9] the protester argues that this should be
interpreted as evidence that [deleted] did not provide that sort of service
under the contract. Accordingly, SRI concludes, the contract should not have
been considered in rating MESI's past performance. Protester's Comments,
Apr. 23, 2001, at 10.

The evaluator who conducted the interview and made the notes in question
states that, as reflected in his notes, the reference informed him that
[deleted] had rendered the following services under the effort in question:
academic advisement, student assessment eligibility, guidance counseling,
study materials, and appropriate college-level testing. The evaluator
further states that while he apparently crossed out the word "provide" in
his notes, he does not recall why he did so and does not attach any
significance to that word being crossed out. According to the evaluator, the
crossing out was "certainly not intended as an indication that the above
cited services were not provided by [deleted]." Evaluator's Declaration, May
9, 2001, at 1. Accordingly, the record does not support the protester's
argument that [deleted] did not furnish related services under this effort.

Regarding the protester's complaint that it was inequitable for the agency
to give MESI credit for [deleted] past performance while failing to give the
protester credit for [deleted], we think that--for the reasons previously
discussed--the agency had a reasonable basis for treating the two offerors
differently. As noted, we think that the SSA reasonably concluded that SRI's
performance on the predecessor contract was a much stronger predictor of
performance on this effort than any performance by [deleted]. In MESI's
case, in contrast to SRI's, there was no particular contract of overarching
significance as a predictor of performance; thus, the evaluators reasonably
considered other contracts as indicators. In addition, MESI intended to rely
on its subcontractor far more heavily in the performance of the contract
work than did SRI.

SRI further argues that the evaluators and the SSA unreasonably regarded
MESI's management approach as stronger than its own.

The RFP instructed offerors to address the following areas in describing
their management approach: plan for staffing the requirement; management of
personnel and contingency plan for replacement of personnel; procedures for
training staff; and procedures for monitoring attendance and performance. In
addition, each offeror was instructed to address the risk associated with
its management plan and the steps that it would take to mitigate this risk,
and to explain whether it had successfully used the techniques and methods
identified for risk mitigation.

The agency reports that while the proposals of both SRI and MESI adequately
addressed the above areas, MESI's proposal addressed more thoroughly the
areas of risk mitigation and staffing. The agency notes that in the area of
risk mitigation, MESI provided specific examples of how its risk mitigation
procedures had been successfully employed under previous contracts, while
SRI's proposal did not provide such examples. Agency Report, Apr. 11, 2001,
at 15. The agency further notes, with regard to staffing, that MESI
presented a comprehensive plan for the hiring and retention of new
employees, while SRI was less detailed in its staffing approach. Id. at
15-16.

The protester takes issue with the agency's explanation. With regard to risk
mitigation, SRI insists that it did provide examples of instances in which
its risk mitigation procedures had been employed under prior contracts. The
protester notes, for example, that in its proposal it cited "the loss of a
valued staff member" as a problem that it had encountered in performing its
incumbent contract in support of the Navy College Program. According to the
protester, its proposal further stated that it had immediately implemented
its staffing plan to target qualified replacement staff in a more aggressive
manner, which was one of its risk mitigation procedures. As a second
example, SRI notes that it mentioned in its proposal that under another
previous contract, it had received a complaint concerning one of its
educational specialists and had, in response, immediately implemented its
customer complaint process.

The examples that the protester cites were not in fact presented in its
proposal as examples of instances where its risk mitigation procedures had
been employed; the information was presented in the past performance section
of SRI's proposal as examples of instances in which performance problems
were encountered and corrective action taken. Further, the protester did not
explain in its proposal how it had successfully mitigated the risk
associated with the loss of a valued staff member (which, we assume, would
be that it would be unable to locate a qualified replacement promptly)
through implementation of its staffing plan, or explain what sort of risk it
had mitigated through its prompt implementation of its customer complaint
process.

Regarding staffing, SRI provided a time line for filling positions not
occupied by incumbent employees, but furnished little detail about how it
would recruit employees for these positions. In this regard, SRI's proposal
noted only that [deleted]. SRI Proposal at 22. MESI, in contrast, furnished
a great deal of detail regarding its approach to recruiting, noting that
[deleted].

Based on the more detailed information furnished by MESI in its proposal
regarding risk mitigation and staff recruitment procedures, we think that
the agency reasonably viewed its proposal as stronger than SRI's under the
management approach evaluation factor.

Next, SRI contends that in evaluating MESI's technical proposal, the agency
should have considered the risk that MESI, which offered [deleted], would
not be able to staff the positions adequately.

The record shows that the SSA, who was also the contracting officer,
considered MESI's proposed labor rates in his analysis. In his presentation
to the contract review board, the SSA noted that MESI had proposed to pay
its employees [deleted] at each location than SRI had proposed, and that the
MESI rates represented [deleted]. The SSA further noted, however, that
[deleted]. Contract Review Board Presentation at 8. While the SSA did not
conclude his analysis with a statement to the effect that the rates did not
pose a risk to performance, we think that such a conclusion is implicit in
the fact that having discussed the rates, he did not conclude that they did
pose a risk to performance.

Finally, SRI argued in its initial protest that the agency had evaluated
proposals and made its award decision based on an evaluation process that
sought to select the lowest-priced technically acceptable proposal despite
the fact that the RFP provided for award on a best-value basis. The agency
responded to this argument in its report, explaining that while it did
select for award the lowest-priced proposal, the award decision was based on
a proper best-value analysis. In support of its position, the agency points
out that even where technical merit carries greater weight than price in the
evaluation of proposals, price necessarily assumes greater importance as
technical proposals become more equal, as was the case here. In commenting
on the agency report, the protester has neither taken issue with nor
attempted to rebut the

agency argument; accordingly, we consider it to have abandoned this basis of
protest. O. Ames Co., B-283943, Jan. 27, 2000, 2000 CPD para. 20 at 7.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. Section 8(a) of the Small Business Act, 15 U.S.C. sect. 637(a) (1994),
authorizes the Small Business Administration to enter into contracts with
government agencies and to arrange for the performance of such contracts by
letting subcontracts to socially and economically disadvantaged small
business concerns.

2. LR stands for low-range; HE stands for high-end, and MR stands for
mid-range.

3. SRI listed the [deleted] contract, [deleted], twice in its proposal,
apparently because the contract involved the provision of services to both
the Navy and the Marine Corps.

4. The protester has not challenged the agency determination that these
contracts were not similar to the effort here.

5. [Deleted] president states that he was contacted in December 2000 by the
evaluator, who inquired about his company's performance under contract
[deleted]. He states that he explained to the evaluator that the contract
was a Marine Corps delivery order contract involving five performance areas,
one of which was voluntary education/lifelong learning and another of which
was family advocacy services. The president further states that he told the
evaluator that his company had provided educational specialists and Lifelong
Learning Program analysts at Marine Corps Headquarters and provided test
control examiners at 18 Marine Corps installations worldwide. He states that
he also explained to the evaluator that the Navy "piggybacked" on the
voluntary education/lifelong learning delivery order sometime in 1998, and
under that arrangement, his company provided educational specialists and
administrative support to the Navy College Program. Affidavit of [deleted]
President, Apr. 23, 2001. The Navy has not disputed the statements in that
affidavit.

6. Despite SRI's assertions that, if called upon to testify, the reference
would state that he confirmed to the evaluator that [deleted] was furnishing
educational services under contract [deleted] and that he was absolutely
satisfied with [deleted] performance, the reference did not so attest in the
declaration that he filed with our Office. Instead, the reference stated
that he spoke with the evaluator in general about [deleted] performance
under various efforts in which educational services were performed and
informed her that he was absolutely satisfied with [deleted] performance
under those contracts. According to the reference, he did not discuss
specific contract numbers with the evaluator, other than at the end of the
conversation, when the evaluator mentioned contract [deleted] and said it
was for family services, to which he responded "yes."

7. This subsection provides that "[t]he evaluation should take into account
past performance information regarding predecessor companies, key personnel
who have relevant experience, or subcontractors that will perform major or
critical aspects of the requirement when such information is relevant to the
instant acquisition."

8. While the protester denies that it intended the above argument to be
interpreted as an allegation of bad faith, we do not see how an allegation
that the evaluators conducted their reference check "in a manner designed to
downgrade SRI in order to move MESI ahead" can be otherwise construed. To
show bad faith, a protester must submit convincing proof that the procuring
agency directed its actions with the malicious and specific intent to injure
the protester. Molly Maguires, B-278056,
Dec. 22, 1997, 97-2 CPD para. 169 at 5. As discussed infra, SRI has not shown
that the evaluators in fact lowered SRI's rating on any contract as a result
of their follow-up questioning; thus, not only has the protester failed to
demonstrate that the evaluators intentionally harmed it, but further, it has
failed to demonstrate that it was harmed at all.

9. The quoted phrase is found in a portion of the handwritten notes that
appears to list the types of services performed under the contract.