TITLE:  CWIS, LLC, B-287521, July 2, 2001
BNUMBER:  B-287521
DATE:  July 2, 2001
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CWIS, LLC, B-287521, July 2, 2001

Decision

Matter of: CWIS, LLC

File: B-287521

Date: July 2, 2001

David G. Ramagos for the protester.

Daryle A. Jordan, Esq., Patrick Henry Cappell & Lewis, for Innovative
Strategies and Solutions, Inc., the intervenor.

Virginia K. Stephens Ackerman, Esq., Department of Housing & Urban
Development, for the agency.

John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Agency's evaluation of protester's past performance was reasonable where
protester does not dispute that certain aspects of its performance on a
previous contract were deficient and the agency reasonably considered the
corrective measures taken by the protester to rectify the deficient
performance.

2. Agency's cost realism evaluation of protester's proposal that resulted in
an upwards adjustment of proposed costs for airfare was reasonable where
agency accounted for considerations relevant to performance of contract,
such as travel being required on short notice and to cities that are not
served by the airline on which protester's proposed fares were based.

DECISION

CWIS, LLC protests the award of a contract to Innovative Strategies and
Solutions, Inc. (ISSI) under request for proposals (RFP) No. R-OPC-21598,
issued by the Department of Housing and Urban Development (HUD) to obtain
assistance in the monitoring and enforcement of the manufactured housing
program, and in conducting workshops, training, and programs for program
participants. CWIS argues that the agency's evaluation of its past
performance and cost, and the selection of ISSI's proposal for award, were
unreasonable.

We deny the protest.

The RFP, restricted to firms certified under the Small Business
Administration's section 8(a) program, provided for an award of a
cost-plus-fixed-fee contract for the required services for a base period of
2 years with two 1-year options. The contractor will be required, for
example, to travel to numerous state administrative agencies and provide
training to the participants. The RFP stated that award would be made to the
offeror whose proposal is determined most advantageous to the government,
and listed the following evaluation factors and their relative values:

1. Technical Approach (40 points)

  1. Organizational Qualifications, Experience (30 points)
  2. Past Performance (20 points)
  3. Personnel Qualifications and Experience (10 points)

The RFP stated that the combined relative merit of these evaluation factors
would be considered more significant than cost/price, and advised offerors
that each offeror's proposal would be analyzed for cost realism. The
solicitation included detailed instructions for the preparation of
proposals, and advised offerors that the agency intended to establish a
competitive range, conduct discussions with those offerors whose proposals
were included in the competitive range, and seek revised proposals.

The agency received proposals from three offerors, and all were included in
the competitive range. Agency Report, Tab E, Initial Technical Evaluation
Report, at 9. Discussions were conducted, and final proposal revisions
requested. ISSI's proposal received a technical score of 88 out of 100
points, at a proposed and evaluated cost of $5,601,086, and CWIS's proposal
received a score of 81 points at a proposed cost of $4,592,073 and an
evaluated cost of $5,544,711. Agency Report, Tab K, Technical Evaluation
Panel Memorandum to the Source Selection Official, at 14. The agency
determined that ISSI's proposal represented the best value to the agency, as
compared to the other proposals received, because ISSI's proposal's higher
technical point score reflected strengths, particularly with regard to past
performance, that provided added value to the government, justifying award
based on its slightly higher evaluated probable cost, and made award to that
firm. Id. at 19-21.

The protester argues that the agency's evaluation of CWIS's proposal under
the past performance evaluation factor was unreasonable. Our Office will
examine an agency's evaluation of an offeror's past performance only to
ensure that it was reasonable and consistent with the stated evaluation
criteria and applicable statutes and regulations, since determining the
relative merit of an offeror's past performance is primarily a matter within
the contracting agency's discretion. TRW, Inc., B-282162, B-282162.2, June
9, 1999, 99-2 CPD para. 12 at 3.

In evaluating CWIS's proposal and checking its references, the technical
evaluation panel (TEP) was informed that although CWIS had performed
adequately or better on a number of contracts, its performance on one
contract was poor. Agency Report, Tab E, Initial Technical Evaluation
Report, at 8. The TEP thus downgraded CWIS's proposal under the past
performance factor, and decided that "since references were mixed, the TEP
[would] seek clarification from the offeror" regarding its past performance.
Id. Specifically, CWIS was asked to provide additional information regarding
the contract under which its performance was rated poor, as well as another
contract that had been performed by CWIS's proposed subcontractor and for
which CWIS had described certain "[p]roblems [e]ncountered" during that
contract's performance. Agency Report, Tab D, CWIS Proposal, at 4-4; Tab F,
CWIS's Response to the Technical and Cost Discussion Questions, para.para. 7, 8.

The protester responded to the agency's inquiries regarding the contract
under which its performance had been characterized as poor by detailing
certain problems that surfaced "[d]uring a routine quality check." Agency
Report, Tab F, CWIS's Response to the Technical and Cost Discussion
Questions para. 7. CWIS conceded that certain problems had occurred on that
contract, and explained in detail the problems as well as the corrective
actions taken by CWIS in response to the problems. Id. With regard to the
question posed by the agency regarding CWIS's proposed subcontractor's
performance, the protester responded only that the agency should contact the
subcontractor with any questions. Id. para. 8.

In considering CWIS's responses, the TEP raised CWIS's score under the past
performance evaluation factor from the initial score of 9 points to 11
points out of a possible 20 points because of CWIS's description of the
corrective measures it had taken to rectify its poor performance, and noted
that CWIS's failure to provide a substantive response regarding its
subcontractor's performance kept the score from being raised any higher.
Agency Report, Tab K, Technical Evaluation Panel Memorandum to the Source
Selection Official, at 11.

CWIS does not dispute the facts regarding its past performance that led to
the agency's scoring of CWIS's proposal, nor does CWIS respond to the
agency's explanation of the evaluation in its comments on the agency report.
Given the agency's reasonable explanation as to its evaluation and scoring
of CWIS's proposal under the past performance factor, and CWIS's lack of any
specific response, we have no basis on which to find this aspect of the
agency's evaluation unreasonable.

The protester next contends that the agency's evaluation of its cost as
significantly higher than proposed was unreasonable. When an agency
evaluates a proposal for the award of a cost reimbursement contract, an
offeror's proposed estimated costs are not dispositive, because, regardless
of the costs proposed, the government is bound to pay the contractor its
actual and allowable costs. Federal Acquisition Regulation (FAR)
sect.sect. 15.305(a)(1); 15.404-1(d). Consequently, a cost realism analysis must be
performed by the agency to determine the extent to which an offeror's
proposed costs represent what the contract should cost, assuming reasonable
economy and efficiency. FAR sect. 15.404-1(d)(2); TRW, Inc., supra, at 5.
Because the contracting agency is in the best position to make this
determination, we review an agency's judgment in this area only to see that
the agency's costs realism evaluation was reasonably based and not
arbitrary. TRW, Inc., supra, at 5-6.

The record reflects that the agency performed a detailed cost realism
analysis of the offerors' proposals. The agency found CWIS's proposed labor
and indirect rates, and level-of-effort and labor mix, realistic and
consistent with CWIS's proposed approach. The agency found, however, that
CWIS's cost proposal did not include any escalation factor for the second
year of the base period or either of the two option years. The agency also
found that CWIS's proposed airfare of $231.86 per ticket was unrealistic.
The agency's determination here was based upon its estimated average rate of
$414 for advance notice fares between major cities, and the fact that many
of the required trips would be between small cities and nearly a fourth of
the trips would be on such short notice that discounted airfares would be
unavailable. Based on this analysis, the agency estimated an average airfare
of $500 per trip. Agency Report, Tab J, Cost Realism Analysis of CWIS's
Proposal.

These issues were raised with CWIS during discussions, with the agency
inquiring, among other things, whether the lack of any escalation rate for
the second year of the base period was an oversight. Agency Report at 6-7.
In performing the cost realism analysis, the agency accepted that "it may be
within the control of the offeror to keep direct labor rates constant" and
thus did not apply an escalation rate to these costs. However, the agency
did apply an escalation rate of 4 percent to the protester's proposed other
direct costs (such as airfares and hotel accommodations) based upon its view
that CWIS would have no control over the escalation of these costs, and its
conclusion that these proposed costs were unrealistic absent the application
of an escalation rate. Id. Finally, CWIS's proposed costs were adjusted
upwards through the agency's application to CWIS's proposal of an average
airfare rate of $500 per trip. Id. at 7. These upward adjustments added
$952,638 to CWIS's proposed costs of $4,592,073, for a total probable cost
of performance of $5,544,711. Id.

The protester does not dispute the probable cost adjustments with regard to
escalation, but disputes the agency's upwards adjustment to CWIS's proposed
airfare rate of $231.86 per trip to the agency's average rate of $500 per
trip. In this regard, CWIS contends that its estimate of $231.86 per trip
was calculated "using actual, historical cost data from many prior trips
arranged for HUD and other government customers," and asserts that its
"computations, although performed almost one year ago, are still largely
valid." In support of its calculations, the protester included with its
comments a spreadsheet it prepared using the published rates of a particular
airline, and concludes that "[f]rom this information, it should become
evident that we will be able to support the majority of the proposed trips
from cities and airports served" by that particular airline. Protester's
Comments at 1-2.

The record reflects that the agency, in calculating an average airfare rate
of $500 per trip, "investigated historical information, and information on
the internet." As set forth above, the agency also took into consideration
the fact that many of the required trips would be between small cities and
nearly a fourth of the trips would be on such short notice that discounted
airfares would be unavailable. In response to the protester's specific
contentions, the agency points out that the particular airline upon whose
rates the protester based its calculations does not serve certain of the
cities to which travel is required by the RFP. The agency adds that even for
those cities that the airline does serve, there could readily be situations
where the required flights are not available at all or at the right time,
and that the protester's reliance on this airline's lowest published fares
in calculating its average airfare was thus flawed. Agency‘s Response
to the Protester's Comments (June 7, 2001) at 1.

Here, the agency's calculation of an average airfare rate was based upon
relevant considerations, such as the examination of actual airfares in
addition to scheduling considerations and destinations. In contrast, the
protester's calculations in support of its $231.86 per trip estimate do not
account for the costs associated with the late scheduling of air travel, and
ignore the fact that the airline on whose fares the protester based its
estimate does not serve some of the cities to which travel under the
contract will be required. Given the agency's explanation, we fail to see
why under the circumstances here the agency's upwards adjustment of the
protester's proposed costs here were unreasonable.

The protest is denied.

Anthony H. Gamboa

General Counsel