TITLE:  SatoTravel, B-287655, July 5, 2001
BNUMBER:  B-287655
DATE:  July 5, 2001
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SatoTravel, B-287655, July 5, 2001

Decision

Matter of: SatoTravel

File: B-287655

Date: July 5, 2001

James H. Roberts, III, Esq., and David A. Leib, Esq., Manatt, Phelps &
Phillips, for the protester.

Josephine L. Ursini, Esq., for N&N Travel and Tours, Inc., an intervenor.

John D. Inazu, Esq., Michael G. Vecera, Esq., and Gerald M. Lawler, Esq.,
Department of the Air Force, for the agency.

Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Awardee took no exception to the terms of the solicitation by proposing to
provide commercial travel office services at no cost to the government in
any of the performance periods as evidenced by its insertion on the
solicitation's price schedule of "$zero" for the base period and a discount
fee/rebate (an amount less than "$zero") for each of the option periods.

DECISION

SatoTravel protests the award of a contract to N&N Travel and Tours, Inc.
under request for proposals (RFP) No. F41689-00-R-0065, issued by the
Department of the Air Force for official commercial travel office services
at various Air Force facilities. SatoTravel essentially contends that N&N's
proposal did not conform to the terms of the RFP and could not properly form
the basis for award.

We deny the protest.

The RFP contemplated the award of a fixed-price requirements contract (no
guaranteed minimum) for the base period and eight 6-month option periods to
the responsible offeror whose proposal represented the best value to the
government, the mission capability technical evaluation factor (staffing and
personnel qualifications, performance plan, and small and small
disadvantaged business participation), past performance, and price
considered. Proposals determined technically acceptable would be ranked
according to price, and then the offerors' past performance would be
evaluated and assigned an adjectival rating (as relevant here,
exceptional/high confidence; very good/significant confidence; and
satisfactory/confidence). With respect to price, offerors were to insert on
the RFP schedule a "service fee" for air transactions in the base and each
option period. (The RFP included estimated workloads for use in preparing
proposals, but advised offerors that actual requirements were subject to
substantial variation in quantity over time.) The RFP stated that a past
performance/price tradeoff would be made, with past performance being
evaluated on a basis approximately equal to price.

Six firms, including SatoTravel (the incumbent contractor) and N&N,
submitted proposals. After discussions, the proposals of SatoTravel and N&N
were determined technically acceptable. With respect to past performance,
SatoTravel received an exceptional/high confidence rating, while N&N
received a satisfactory/confidence rating. Regarding price, SatoTravel
inserted on the RFP schedule for each period of performance a service fee
per air transaction higher than zero, i.e., a positive monetary amount.
Under SatoTravel's pricing scheme, the agency calculated that it would pay
approximately $1.4 million in service fees to SatoTravel over the term of
the contract. In contrast, N&N inserted on the RFP schedule a service fee of
"$zero" per air transaction for the base period; for each option period, N&N
inserted an amount less than zero, i.e., a negative monetary amount, which
was labeled by N&N as representing a "discount fee" per airline ticket. In
other words, for the base and option periods, N&N proposed a service fee of
zero and, as an added incentive in the option periods, N&N proposed a
monetary rebate to the agency for each air transaction. Under N&N's pricing
scheme, the agency calculated that over the term of the contract, N&N would
rebate to the agency approximately $190,350. Finally, the agency determined
that both SatoTravel and N&N submitted prices that were fair and reasonable
based on current market conditions, competition, and market research and
information obtained during discussions, and that both firms were
financially responsible.

The source selection authority (SSA) recognized that SatoTravel's proposed
service fees were significantly less than what was being charged under the
predecessor contract; that SatoTravel received an exceptional/high
confidence past performance rating; and, that SatoTravel's performance as
the incumbent was excellent and highly relevant. The SSA also recognized
that N&N received a satisfactory/confidence rating, noting that N&N has
provided commercial travel office services at a number of Air Force bases
and that the firm's proposed subcontractors also had relevant commercial
travel office experience. The SSA pointed out that most of N&N's references
reported highly satisfactory or satisfactory performance by the firm. The
SSA reported that unfavorable past performance reports for N&N were
investigated, but these reports "did not result in discernible doubt"
regarding N&N's ability and commitment to provide high quality travel
services. References for N&N's proposed subcontractors reported exceptional,
very good, and satisfactory performance. The SSA noted that since N&N
proposed a service fee of zero for the base period and discount fees/rebates
in the option periods, N&N's proposal would result in no costs to the
government over the term of the contract. Agency Report (AR), Tab 14, Source
Selection Decision Document, at 3-4.

In accordance with the terms of the RFP, which provided that past
performance and price were approximately equal in importance, and
recognizing that since the estimated difference in cost between the
proposals of N&N and SatoTravel was approximately $1.6 million over the term
of the contract, the SSA determined that in the current environment of
restricted travel funds, she could not justify paying such a significant
premium to SatoTravel, despite its exceptional/high confidence performance
rating, when N&N had relevant satisfactory past performance and a proven
record of satisfying travel service requirements for the Air Force over an
extended period of time. Accordingly, the agency awarded a contract to N&N,
the firm submitting the best value proposal. Id. at 4.

SatoTravel basically argues that N&N, in proposing discount fees/rebates,
submitted a nonconforming, technically unacceptable proposal. SatoTravel
complains that this pricing scheme is inconsistent with the terms of the
RFP, which called for the insertion of a "service fee" for each period of
performance. SatoTravel maintains that it was prejudiced by the agency's
relaxation of a material RFP term for N&N, and, as a result, the firms were
not competing on an equal basis. We disagree.

Our analysis begins with the premise that an offeror may elect not to charge
for a certain item and if it indicates a commitment to furnish the item in
question, for example, by inserting "$0" in its proposal, its proposal is
compliant. GTSI Corp., B-286979, Mar. 22, 2001, 2001 CPD para. 55 at 6;
Integrated Protection Sys., Inc., B-229985, Jan. 29, 1988, 88-1 CPD para. 92
at 2. Here, while under the terms of the RFP, offerors were requested to
insert a "service fee" for each period of performance, the RFP did not
prohibit a firm from proposing a fee of zero, or even a negative fee, and
such a fee was not inconsistent with the terms of the RFP. Under N&N's
pricing scheme, where the firm inserted on the RFP schedule a service fee of
"$zero" for the base period and a fee of zero plus an incentive (discount
fees/rebates) for the option periods, the firm committed to provide the
required services for no cost to the government in any of the performance
periods. N&N did not take exception to the RFP requirement to identify its
proposed service fees; rather, N&N elected not to charge the agency for
providing the required services in any of the performance periods, plus it
proposed discount fees/rebates in the option periods. We have no basis to
object to N&N's pricing scheme. [1]

In any event, assuming, arguendo, that discount fees/rebates were not
consistent with the terms of the RFP, SatoTravel has failed to demonstrate
prejudice. In this regard, there is nothing in SatoTravel's proposal or the
procurement record to indicate that the firm ever considered proposing a
service fee of zero. In fact, SatoTravel's proposed service fees for the
base and option periods were significantly higher than zero and increased
each year over the term of the contract. We agree with the agency's
position, which SatoTravel does not meaningfully rebut, that only if
SatoTravel had been willing to propose a service fee of zero (or an amount
close to zero) could it reasonably argue that it was prejudiced by not being
made aware that the agency would consider discount fees/rebates. 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). SatoTravel has failed to make the required
showing.

SatoTravel also questions the agency's affirmative determination that N&N,
in light of N&N's internal financial arrangements, was responsible and
capable of satisfying contract requirements. [2]

A determination that an offeror is capable of performing a contract is
based, in large measure, on subjective judgments which generally are not
susceptible to reasoned review. Thus, an agency's affirmative determination
of a contractor's responsibility will not be reviewed by our Office absent a
showing of possible bad faith on the part of procurement officials, or that
definitive responsibility criteria in the solicitation may not have been
met. Bid Protest Regulations, 4 C.F.R. sect. 21.5(c) (2001). Neither exception
applies here. [3] Moreover, issues relating to N&N's actual performance of
the contract involve matters of contract administration which are not
reviewed by our Office. 4 C.F.R. sect. 21.5(a).

On this record, where the RFP stated that past performance was approximately
equal in importance to price and where N&N's proposal would result in no
costs to the government, we conclude that the agency reasonably determined
that it could not justify the payment of a significant price premium to
SatoTravel, despite its exceptional/high confidence performance rating.
Accordingly, we have no basis to object to the agency's tradeoff decision
resulting in the selection of N&N's technically acceptable, no-cost proposal
for award.

The protest is denied. [4]

Anthony H. Gamboa

General Counsel

Notes

1. We reject SatoTravel's argument that under N&N's pricing scheme, there is
no legally binding consideration between N&N and the agency. In this regard,
the RFP contemplated the award of a fixed-price requirements contract; while
the RFP did not provide a "guaranteed minimum" in terms of the dollar value
of services to be procured, the resulting requirements contract mandates
that the agency procure the referenced services exclusively from N&N and
that N&N provide all of those services. The essence of a requirements
contract is twofold--the government agrees to satisfy all its requirements
from one contractor and the contractor agrees to fill all those
requirements. Satellite Servs., Inc., B-280945 et al., Dec. 4, 1998, 98-2
CPD para. 125 at 4. Such is the case here.

2. Contrary to SatoTravel's speculation, there is no basis to question that
N&N, as the proposing entity and awardee, is the legal entity responsible
for performing the contract.

3. SatoTravel also questions the agency's price reasonableness determination
in light of N&N's no-cost pricing scheme. (The record shows that during
discussions, the agency expressed some concern that N&N may have
overestimated its profit margin. In response, in its final proposal
revision, N&N reduced the amount of its proposed discount fees/rebates. The
agency determined that N&N's price was fair and reasonable.) SatoTravel's
concern that N&N's proposal is unreasonably low-priced constitutes a
challenge to the submission of a below-cost or low profit proposal. These
types of proposals are not illegal and provide no basis for challenging an
award of a fixed-price contract to a responsible contractor, like N&N, since
fixed-price contracts are not subject to adjustment during performance,
barring unforeseen circumstances. GTSI Corp., supra, at 5. Here, in the
absence of unforeseen circumstances, N&N, not the agency, will bear all
financial risks, including a low profit margin.

4. In its initial protest, SatoTravel also argued that N&N's proposal was
technically unacceptable in the areas of staffing and subcontracting plan.
In its administrative report, the agency addressed these issues. In its
comments on the agency report, SatoTravel did not rebut the agency's
position on these issues. Accordingly, we deem these matters to be
abandoned. See Heimann Sys. Co., B-238882, June 1, 1990, 90-1 CPD para. 520 at 4
n.2.