TITLE:  Hilton Knoxville, B-289478, February 26, 2002
BNUMBER:  B-289478
DATE:  February 26, 2002
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Decision

Matter of: Hilton Knoxville

File: B-289478

Date: February 26, 2002

Phillip E. Johnson for the protester.

Maj. Kateni T. Leakehe, Department of the Army, 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. Protester's challenge to the evaluation of its proposal is denied where
the record shows that the evaluation was reasonable and consistent with the
stated evaluation criteria.

2. Contention that an agency's price/technical tradeoff decision was an
abuse of discretion is denied where the record shows that the agency was
aware of the differences between the proposed approaches of the awardee and
the protester and reasonably concluded that the awardee's higher-priced
proposal offered a better value to the government than the protester's
proposal.

DECISION

Hilton Knoxville (HK) protests the award of a contract to Command Management
Services, Inc. by the Department of the Army's Directorate of Contracting,
Fort Knox, Kentucky, pursuant to request for proposals (RFP) No.
DABT23-01-R-1016, issued to procure meals, lodging, and transportation for
applicants arriving for processing at the Military Entrance Processing
Station (MEPS) in Knoxville, Tennessee. HK argues that the award decision
here was improper because the on-site inspection of its hotel was
unreasonable, the agency failed to consider the risk associated with award
to CMS, the agency is biased in favor of CMS, and the agency abused its
discretion when it concluded that CMS's higher-priced proposal represented
the "best value" to the government.

We deny the protest.

BACKGROUND

The RFP here is a standard solicitation developed by the Directorate of
Contracting for procuring meals and lodging for armed forces applicants
arriving at the Army's 65 MEPS locations. Contracting Officer's (CO)
Statement at 1. These MEPS RFPs are issued as commercial acquisitions using
simplified acquisition procedures, and anticipate award of a fixed-price,
indefinite-quantity requirements contract, for a base period followed by
four 1-year options, to the offeror whose proposal is considered most
advantageous to the government. RFP amend. 2, attach. 1, at 3.

The RFP requires that offerors submit a technical/quality proposal as well
as a separate cost/price proposal. Id. at 1-2. To assess proposals, the RFP
advises that offers will be evaluated on five factors: facility quality,
transportation, quality control, past performance and price. Id. at 3. The
RFP also advises that the non-cost factors are more important than price,
and that among these non-cost factors facility quality is more important
than transportation, which is more important than past performance or
quality control, which are equal in weight. Id.

In response, the agency received 11 proposals, including those of HK and
CMS; 2 of the proposals were withdrawn before the evaluation. The remaining
nine proposals were evaluated by a three-member team, which then inspected
each offeror's lodging and dining facilities. This inspection was videotaped
by a fourth person from the MEPS. The CO explained that the inspections
lasted approximately 30 to 45 minutes per hotel, and that the same
inspection procedure was used for each visit. Specifically, the evaluators
would ask to see a guest room planned for use by the MEPS applicants, the
kitchen, the dining room, any vehicles to be used to transport the
applicants, and anything else the hotel staff would like to show the team.
CO's Statement at 2.

At the conclusion of the inspection, the evaluation panel prepared a
narrative assessment and overall adjectival consensus rating for each
offeror based on the results of the investigation and on the panel's review
of the proposal. The adjectival ratings used here--excellent, good,
satisfactory, marginal, and unsatisfactory--were identified and defined in
the solicitation. RFP at 30. This information, together with the selection
decision, was memorialized in a document prepared by the CO.

For HK, the evaluation narrative focused mostly on the results of the
inspection, noting the hotel's "nice, large lobby" and convenient location,
but also noting several "deficiencies." CO Findings, Nov. 30, 2001, at 2.
For example, the narrative noted that the inspectors saw no sign of security
during their visit. With respect to the kitchen, the evaluators noted a bad
odor, outdated milk in the refrigerator, uncovered food, and two appliances
plugged into one socket; with respect to the guest room, they noted that the
bathtub was chipped and did not have safety strips, the bathroom exhaust fan
was dirty, the mattress was stained, and three items were plugged into one
outlet. As a result of these findings, the evaluators agreed that most of
the deficiencies could be corrected quickly, but also concluded that the
deficiencies were evidence that "quality control was lacking, that safety of
guests was not of paramount concern to the staff, and that [the] food
storage habits of the staff were potentially dangerous to the applicants."
Id. Thus, the evaluators concluded that HK should receive an overall rating
of satisfactory, which was comprised of underlying ratings of satisfactory
for facility quality, good for past performance, satisfactory for quality
control plan, and good for transportation plan.

HK's overall rating of satisfactory made it the fifth highest-rated
proposal. The consensus rating assigned to each proposal, and that
proposal's total price for the base year and all four option years, is set
forth below:

Offeror A Excellent $3.1 million

CMS Excellent $2.6 million

Offeror B Good $2.7 million

Offeror C Good $3.0 million

HK Satisfactory $2.1 million

Offeror D Marginal $1.5 million

Offeror E Marginal $1.6 million

Offeror F Marginal $2.2 million

Offeror G Unsatisfactory $1.4 million

Id. at 4. Based on these findings, the CO concluded that CMS's
excellent-rated proposal offered the best value to the government. In
justifying this conclusion, the CO outlined the perceived benefits of the
CMS proposal, and noted that this proposal also had the lowest price of any
of the offers rated excellent or good. In addition, the CO concluded that
CMS's excellent-rated proposal offered a better value to the government than
HK's satisfactory-rated proposal, and a better value than any of the
marginal-rated proposals, all of which were lower-priced than CMS's
proposal. Id. at 5. Accordingly, the CO selected CMS for award and this
protest followed.

Before turning to the specific arguments raised by the protester, additional
information about a significant difference between the awardee and the
protester is relevant here. First, the awardee, CMS, is not a hotel, but a
management company that subcontracts with local hotels to perform MEPS
contracts throughout the country. In fact, the CO acknowledges that CMS
currently holds approximately 40 percent of the contracts awarded by the
Army for its 65 MEPS locations. As explained in its proposal, CMS provides
two full-time on-site employees to assist with managing the MEPS contract,
and also provides all billing services and interface with the local MEPS
facility, while a subcontractor provides the rooms, meals, and
transportation required by this contract. CMS Technical/Quality Proposal at
2-4, 9-10. The CMS proposal selected here identified the Radisson Summit
Hill Hotel in Knoxville as the subcontractor; in fact, four of the five
proposals rated satisfactory or better in this competition were submitted by
CMS (although the other proposals identified other Knoxville hotels as
subcontractors). Thus, HK's proposal was the only proposal among the five
offers rated satisfactory or higher that was submitted by a hotel.

DISCUSSION

As indicated above, HK raises several arguments related to the agency's
evaluation of proposals, and contends that the decision to select CMS's
higher-priced proposal for award was unreasonable. With respect to the
evaluation, HK challenges the adequacy and accuracy of the inspection of its
hotel, and argues that the flawed results generated during its inspection
were wrongly used to downgrade its written proposal. With respect to the
selection decision, HK contends that the agency has overlooked the risk
associated with award to CMS because of its high level of subcontracting,
abused its discretion by concluding that CMS's proposal represents the best
value to the government, and is biased in favor of CMS.

With respect to the adequacy of the Army's inspection, HK argues that the
inspection did not provide a reasonable basis for evaluating its hotel
because it was limited to only one guest room, was conducted hurriedly, and
took place only days before performance was scheduled to begin. Our standard
in reviewing evaluation challenges is to examine 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. Our review of the results of
the agency's on-site inspection of HK, together with HK's challenges to
those results, leads us to conclude that there is no basis to question the
Army's reliance on the results of the inspection.

First, we know of no reason why the Army was required to view multiple guest
rooms during its inspection of the protester's hotel. As a general matter,
rooms in a given hotel are relatively fungible. In this regard, HK has
offered no evidence that inspecting multiple rooms would have led to
markedly different conclusions about the quality or type of rooms it is
offering. In addition, we note that the hotel, not the Army, identifies the
rooms that are to be used in performing the contract, and, presumably, the
room that gets reviewed. While it appears from the record that agency
inspectors entered two guest rooms at some properties, and only one room at
others, we have no reason to conclude that this matter alone renders the
inspection improper, or that the evaluators were unfairly trying to favor
one offeror over another.

With respect to the time allotted to the inspection of each hotel, and the
fact that the inspection took place only a few days before performance was
scheduled to begin, the focus of HK's complaint appears to be that the
inspection was conducted too hurriedly. HK makes no showing as to how it was
harmed by the duration or timing of the inspection, however, and there
clearly is no basis to conclude that HK was treated unfairly since the
inspections of all the offerors' facilities were conducted in a similar
manner. In short, we know of no reason that a more in-depth inspection was
required, or that the proximity of the inspection to the date of award means
that the inspection was somehow improper.

With respect to the accuracy of the inspection, we note that HK concedes
several of the deficiencies noted by the evaluators. For example, the
evaluation team noted that HK's guest room had a chipped tub in the
bathroom, that the tub lacked safety strips, that the bathroom exhaust fan
was dirty, that the mattress in the room was stained, and that there was an
outlet in the room that had three items plugged into the socket, which the
evaluation team considered a safety hazard. CO Findings at 2. Each of these
findings was communicated to HK in a letter from the CO explaining why HK
was not selected for award. Initial Protest, exh. D. HK concedes the chipped
tub, the dirty fan, and the overloaded socket, but argues that its tub was
specially manufactured to not need safety strips, and that it has been
unable to locate the alleged mattress stains.

The essence of HK's argument appears to be that any problems identified
during the inspection were minor and could be easily rectified. While HK may
be right about the correctable nature of the deficiencies, we think that the
agency reasonably viewed the inspected room as representative of the rooms
available in the hotel, and the defects noted clearly bear on the condition
of the rooms and of the hotel overall.

HK's final evaluation challenge is that the agency improperly used the
results of the inspection--which, by definition, makes an assessment of
current conditions at the hotel--to downgrade its proposed quality control
plan, which was to be implemented upon award. Specifically, HK contends that
any conclusions about the condition of the guest room inspected should not
have been used to make judgments about the quality control plan.

As a preliminary matter, we generally agree with HK's contention that the
results of a room inspection prior to award are not necessarily related to
the adequacy of a quality control plan promised for performance. As HK
argues, current conditions and promised procedures may be two different
things. On the other hand, while this solicitation, and particularly the
provisions applicable here, is no model of clarity or logic, we do not agree
that the evaluation here was unreasonable.

The solicitation required offerors to submit a technical/quality proposal
that, among other things, addressed quality control. RFP amend. 2, at 2. The
solicitation's guidance on quality control required submission of a quality
control proposal, and required this quality control proposal to be effective
at the time of award and to remain in place throughout the life of the
contract, with any changes to be approved by the contracting officer. Id. at
3. With respect to the cleanliness of rooms, HK's quality control proposal
details its cleaning procedures, and provides examples of checklists for
inspecting guest rooms, the dining room and the kitchen. HK Quality Control
Proposal at 4-8 (Agency Report, Tab E). Upon review of the written proposal,
HK initially received a rating of excellent under the quality control
evaluation factor. Agency Report, Tab H.

During the inspection, however, the evaluators noted several deficiencies in
the cleanliness of HK's rooms, and concluded that "the deficiencies
indicated that quality control was lacking." CO Findings at 2. Upon return
from the inspection, the evaluators downgraded their assessment of HK's
proposal under the quality control evaluation factor from a rating of
excellent to a rating of satisfactory. Agency Report, Tab H.

In our view, there is nothing unreasonable about the evaluator's linkage of
the deficiencies found during HK's inspection to HK's approach to quality
control in general. While HK correctly argues that the solicitation's
description of the quality control evaluation factor focuses on the quality
control proposal, HK would have our Office elevate form over substance. We
do not think the evaluators were required to ignore evidence of a lack of
current quality control merely because the quality control proposals
requested here were written prospectively, rather than as a description of
current procedures.

In addition, we see nothing unique about the cleaning procedures and
checklists in HK's quality control proposal, nor has HK pointed to any
feature within these procedures that will be newly implemented upon award of
this contract. Lastly, we note that the inspection took place on a Wednesday
before the Sunday when performance was to begin. Given that these problems
in quality control were detected only 4 days before performance was to
begin, we see no reason why the agency could not consider them as indicative
of the level of quality control that would be provided during performance.
Accordingly, we do not agree that the agency misused the results of its
inspection. [1]

Turning to the selection decision, HK makes several arguments that, in
essence, raise the same issue. Specifically, HK contends that the agency:
failed to properly consider the high risk associated with award to a company
that will, in HK's view, subcontract 100 percent of the contract;
unreasonably concluded that CMS's subcontract approach offers the best value
to the government; and is impermissibly biased in favor of CMS's approach.
We disagree on all three fronts.

As a preliminary matter, our consideration of these complaints leads us to
conclude that there may be a misunderstanding by HK about the nature of this
procurement. Although this procurement can be described simply as a purchase
of rooms, meals, and transportation for individuals who are about to be
processed into the military--and thus has been labeled a commercial item
procurement--the Army is buying more than just a standard
commercially-available room and meal. Under this solicitation, the Army is
also procuring services from the contractor that extend the agency's reach
from the MEPS station to the hotel where the applicants spend the night
before their early morning processing.

In this regard, we note that MEPS hotels are required to obtain a roster of
expected applicants every day, and ensure that those applicants are
checked-in, housed, fed, and transported to the MEPS facility the next
morning, in accordance with the facility's schedule. RFP at 34-35. Many of
these applicants are quite young, and, as a result, MEPS hotels are also
required to provide a plan for the security of the applicants in a safe
environment that is free of crime. RFP at 34. These requirements have led to
proposed approaches that offer increased interface between the MEPS facility
and the hotel, special personnel who meet the applicants and, in essence,
keep an eye on them, as well as special rooms and facilities designed
specifically and exclusively for their use, offering things like nightly
films or other entertainment. CMS addressed the unique requirements of this
solicitation by offering to supplement the staff of its subcontractor hotel
with CMS on-site employees who manage the contract and ensure that the hotel
meets its obligations. These employees serve as a designated desk clerk for
MEPS applicants, provide dedicated liaison services, and ensure the security
and safety of the applicants. Agency Report at 5 (redacted version).

With respect to HK's specific challenges, we note first that CMS is not
subcontracting 100 percent of this contract to the local hotel, although we
recognize that a significant percentage of the cost of this contract is
comprised of the rooms, meals, and transportation that are its principal
component. Instead, CMS itself is performing services that the agency
values. With respect to whether the CMS approach involves an undue reliance
on subcontracting, we note that this solicitation was not reserved for small
business, and that the Army states that it has no intention of imposing a
limit on subcontracting. [2] Given that the Army does not intend to limit
subcontracting, and given there is no other evidence that the level of, or
approach to, subcontracting here presents a risk to the agency, we see
nothing unreasonable in the agency's conclusion that the approach here
offers the best value to the government.

Finally, we turn to the protester's allegation that the agency is biased in
favor of CMS's proposed approach. We note first that when HK alleges bias in
this protest it does not claim that there is a conflict of interest here, or
some other kind of improper relationship between the Army personnel involved
in awarding this contract and the contractor that performs it. Rather, we
read HK's allegation to be that the Army personnel awarding this contract
are unreasonably impressed by CMS's approach of serving as a manager for the
contract, and supplementing local hotel personnel with CMS personnel
dedicated to improving the interface between the MEPS facility and the
hotel. While it appears HK is correct about the agency preference for CMS's
approach, there is nothing about this preference that is improper.

As indicated above, CMS is offering the Army certain services in addition to
rooms, meals, and transportation. These additional services provided by CMS,
in effect, extend the reach of the MEPS facility to the hotel where the
applicants are staying before they show up for processing. In this instance
at least, the Army concluded that CMS's approach--together with
accommodations that appeared upon inspection to be of higher quality than
those offered by HK and the other offerors--provides greater value to the
agency than lower-priced offers that do not provide these services. While
this appears to be an established preference--CMS's approach has resulted in
its receipt of 40 percent of the lodging contracts for the Army's 65 MEPS
stations--in a best value procurement, we know of no reason the agency
cannot properly make the judgment it made here.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. For the record, we note that HK raises a similar argument about the
difference between hotel security as of the day of the inspection and the
proposal's plans for security. The solicitation did not contain a separate
evaluation factor for security, as it did for quality control. Instead, the
solicitation explained that security was one of several areas to be
addressed under facility quality. RFP amend. 2, at 3. Since we conclude that
the agency's assessment of HK's facility quality as satisfactory is
supported by the other features considered under this evaluation
factor--i.e., sanitation and cleanliness, room condition, meals, special
features, and facility location--we think the impact of even an erroneous
conclusion about this matter had a de minimis effect on the rating under
this factor.

2. During the course of this protest, after neither the Army nor the
protester acknowledged that the solicitation here did, in fact, incorporate
by reference the standard Limitations on Subcontracting clause found at
Federal Acquisition Regulation (FAR) sect. 52.219-14, our Office convened a
conference call to ask the parties to address the impact of the inclusion of
the clause on the protester's complaints about CMS's excessive reliance on
subcontracting. In response, the Army explained that the clause was included
inadvertently, and that assuming arguendo that CMS's proposed approach
violated the clause, the agency was waiving its application to this
procurement. As the protester has not shown how it would have changed its
proposal had it known the agency would waive the application of the clause,
we conclude that the protester has not been prejudiced by its waiver. Brown
& Root, Inc. and Perini Corp., a joint venture, B-270505.2, B-270505.3,
Sept. 12, 1996, 96-2 CPD para. 143 at 11.