TITLE:  Gemmo Impianti SpA, B-290427.2, March 12, 2003
BNUMBER:  B-290427.2
DATE:  March 12, 2003
**********************************************************************
Gemmo Impianti SpA, B-290427.2, March 12, 2003

   Decision
    
    
Matter of:    Gemmo Impianti SpA
    
File:             B-290427.2
    
Date:              March 12, 2003
    
Claudio Pilotto for the protester.
J. Page Turney, Esq., and Richard G. Welsh, Esq., Department of the Navy,
for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Under a multi-service contract in which janitorial services comprise
the majority of the work to be performed, the agency reasonably found past
performance on contracts involving similar janitorial services more
relevant than past performance on multi-service contracts where little or
no janitorial services were involved.
    
2.  Past performance of an affiliate may reasonably be credited to an
offeror where the offer demonstrates a significant nexus between the
affiliate's past performance and the offeror's proposal, such as evidence
of shared performance under the prior contract and shared top level
executive/management personnel of the two entities with a commitment for
involvement by those personnel in performing the contract.
DECISION
    
Gemmo Impianti SpA protests the award of a contract to Penauille Italia
SpA under request for proposals (RFP) No. N33191-02-R-0402, issued by the
Department of the Navy, Resident Officer in Charge of Construction
Southern Italy, for various services at the Naval Support Activity,
Naples, Italy.  Gemmo protests the agency's evaluation and source
selection decision.
    
We deny the protest.
    
The RFP contemplated the award of a contract for a 9‑month base
period with 1 option year[1] for the following services:  janitorial,
grounds maintenance, refuse collection and disposal, inspection/cleaning
of sewer/drain systems, replacement of air filters for air conditioning
systems, and service calls.  The RFP included contract line item numbers
(CLIN) and sub-CLINs for regular and emergency services, e.g., basic
janitorial services (which the RFP referred to as fixed-price CLINs), and
a separate CLIN (and corresponding option CLIN) with sub-CLINs for other
services to be ordered on an as-needed basis, e.g., additional sweeping
(which the RFP referred to as the indefinite-quantity CLIN).
    
Award was to be made on a *best value* basis, considering price and three
technical factors--past performance, corporate capability and quality
control.  The corporate capability factors had three equally weighted
subfactors--performance plan, staffing plan, and organizational chart. 
The RFP stated that the three technical factors were of equal importance
to each other, and that the combined technical factors were approximately
equal in importance to price.  The price evaluation was to include a
review of the proposed prices for realism and unbalanced pricing.
    
This is Gemmo's second protest of the award to Penauille Italia under this
RFP.[2]  We sustained Gemmo's prior protest because the agency's
evaluation under at least two of three technical factors--past performance
and quality control--was unreasonable, as was the agency's evaluation of
the relative price difference between the proposals, and thus the agency's
resulting cost/technical tradeoff analysis was defective.  Gemmo Impianti
SpA, B‑290427, Aug. 9, 2002, 2002 CPD P: 146. 
    
Following that decision, the agency established a new technical evaluation
board (TEB) and source selection board (SSB) to reevaluate the proposals
that had been included in the competitive range.  The new TEB determined
that all of the proposals were unacceptable but capable of being made
acceptable, and recommended that discussions be conducted.  Agency Report,
Tab 2, TEB Report, Sept. 30, 2002, at 1.
    
The agency did not replace the price evaluation board (PEB) following the
first protest.  The PEB did not reevaluate the previously proposed prices;
it resubmitted its prior reports to the new contracting officer, SSB and
source selection authority (SSA).  Agency Report, Tab 3, Memo from PEB to
Contracting Officer and SSA (Sept. 25, 2002).  The prior PEB report
analyzed the proposal prices by CLIN, determined that Penauille Italia's
prices were unbalanced between the *fixed-price* and *indefinite-quantity*
CLINs, and stated that the agency should examine the risk that the offeror
may make up losses from the *fixed-priced* work through high unit costs
for the *indefinite-quantity* work.  Agency Report, Tab 3, PEB Report,
Mar. 18, 2002, at 8-9.  The initial report of the new SSB summarized the
CLIN-by-CLIN analysis in the PEB report, although it did not identify the
PEB's determination of price unbalancing.  Agency Report, Tab 4, SSB
Report, Oct. 10, 2002, at 14-15.
    
The SSB recommended, and the SSA approved, a revised competitive range
consisting of Gemmo's and Penauille Italia's proposals.  Id. at 16-17. 
The agency conducted written discussions with these offerors, and
requested and received proposal revisions.  Both the TEB and the PEB
evaluated the revised proposals.  The final evaluation results were as
follows:
    

   +------------------------------------------------------------------------+
|                            |Gemmo                 |Penauille Italia    |
|----------------------------+----------------------+--------------------|
|Past Performance            |Acceptable            |Superior            |
|----------------------------+----------------------+--------------------|
|Corporate Capability        |Acceptable +          |Acceptable          |
|----------------------------+----------------------+--------------------|
|    |Performance Plan       |      |Acceptable +   |    |Acceptable +   |
|----+-----------------------+------+---------------+----+---------------|
|    |Staffing Plan          |      |Acceptable     |    |Acceptable     |
|----+-----------------------+------+---------------+----+---------------|
|    |Organizational Chart   |      |Superior       |    |Acceptable     |
|----------------------------+-------------------------------------------|
|Quality Control             |Acceptable        |Acceptable +            |
|----------------------------+------------------+------------------------|
|Overall                     |Acceptable        |Acceptable +            |
|----------------------------+-------------------------------------------|
|Price                       |$5,332,703            |$5,567,997          |
|----------------------------+----------------------+--------------------|
+------------------------------------------------------------------------+

    
Agency Report, Tab 8, Final SSB Report, Nov. 14, 2002, at 3, 6. 
    
The SSB accepted the final evaluation results of the TEB and summarized
the bases for each of the ratings.  As indicated above, the organizational
chart subfactor was the only criterion where Gemmo's proposal was rated
higher than Penauille Italia's, which led to Gemmo's higher rating for
corporate capability.  This was attributed to Gemmo proposing more people
and labor hours than Penauille Italia.  However, the SSB determined that
this advantage was *somewhat negated by the fact that Penauille Italia is
successfully performing the contract at its proposed staffing level* and
by Penauille Italia's proposal to *augment staffing levels as necessary
throughout contract performance.*  Id. at 8.  The SSB also accepted the
evaluation by the PEB of the final prices, which determined that both
offerors proposed fair and reasonable prices.  Id. at 6.  The SSB
determined that, although Gemmo's price was 4.4 percent lower than
Penauille Italia's, Gemmo's proposal presented a performance risk because
it will employ many of the same people proposed by Penauille Italia, with
14 percent more labor hours than offered by Penauille Italia at a lower
price.  Id. at 9.  The SSB concluded:
    
The [s]uperior technical aspect of Gemmo's proposal is 1/9 of the
technical evaluation and this advantage is reduced by other factors
discussed above.  Conversely, the advantages offered by Penauille Italia
under Past Performance and Quality Control are 2/3 of the total technical
evaluation.  Gemmo offers the government a 4.4% lower price, the value of
which is reduced by greater (when compared to Penauille Italia)
performance risk.  This solicitation encompasses vital services in high
visibility areas, such as the [Department of Defense Dependent] schools,
the Naples hospital, the airport, and the temporary lodging.  The Best
Value method of contracting was selected to obtain the highest quality
service at a reasonable price.  Therefore, in accordance with the stated
evaluation factors, the SSB recommends award to Penauille Italia's higher
technically rated, lower risk proposal.
Id. at 10.
    
The SSA concurred with the SSB's analysis and recommended source selection
decision.  Id. at 11.  On November 19, the agency again made award to
Penauille Italia.  Following a debriefing, Gemmo filed this protest, in
which it challenges the agency's evaluation under all of the technical
factors.
    
In reviewing an agency's evaluation and source selection decision, we will
not reevaluate the proposals; we will only review the evaluation to
determine whether the evaluation was reasonable and consistent with the
stated evaluation criteria, and with applicable procurement laws and
regulations.  Gemmo Impianti SpA, supra, at 3.  A protester's disagreement
with the agency's judgment is not sufficient to establish that the agency
acted unreasonably.  Microcosm, Inc., B-277326 et al., Sept. 30, 1997,
97-2 CPD P: 133 at 4.  Our review of the record here shows that the
agency's evaluation was reasonable.
    
With regard to the past performance factor, the RFP stated that the
evaluation of this factor would be based on information received from the
references identified in proposals and from other sources, with the agency
considering the quality of an offeror's past performance and the relevance
of contracts performed to the solicited contract in term of size,
magnitude and complexity.  RFP S: M-3.a.  Since the agency determined that
the majority of  the contract work was for janitorial services, the past
performance evaluation considered contracts involving janitorial services
to be the most relevant.  Agency Report, Tab 6, Final TEB Report, Nov. 14,
2002, at 2.
    
Gemmo's proposal identified the following contracts as past performance
references:  (1) the predecessor multi-service contract, which included
janitorial services; (2) a contract for operation and maintenance of
electrical/mechanical systems and the cleaning and maintenance of building
facades; (3) a contract for the operation and maintenance of
electrical/mechanical systems at various service centers; (4) a base
operation support services contract; and (5) a public lighting maintenance
contract.  Agency Report on Prior Protest, Tab 13, Gemmo's Proposal,
attach. A, Past Performance Forms.  Other than the predecessor
multi-service contract, Gemmo's proposal did not indicate that its
referenced contracts included janitorial services, and during interviews
with Gemmo's contract references, the agency was told that two of the
contracts did not involve janitorial services.  Although contract
references rated Gemmo excellent in responding to emergency situations,
they generally rated the firm's performance as average to above average
overall.  The incumbent multi‑service contract was most relevant to
the solicited contract, although it did not include all the services
solicited here.  Under that contract, Gemmo had some problems with regard
to quality control for janitorial services, which were ultimately
resolved; Gemmo received a satisfactory performance rating.  In its
evaluation, the agency also considered a maintenance contract, not
referenced in Gemmo's proposal, for the Navy for which Gemmo received an
overall outstanding performance rating; although that contract was smaller
than the present contract, the agency considered that this outstanding
rating helped to balance other less positive feedback.[3]  Agency Report,
Tab 8, Final SSB Report, at 7.
    
Penauille Italia's proposal identified three janitorial services contracts
performed by ETS Penauille (a corporate affiliate of Penauille Italia),
and two contracts performed by Penauille Italia--a multi-service contract
that included janitorial and grounds maintenance services and a janitorial
services contract.  Agency Report on Prior Protest, Tab 14, Penauille
Italia's Proposal, attach. A, Past Performance Forms.  During the
discussions conducted after our prior decision, Penauille Italia stated
that ETS Penauille and Penauille Italia had executed formal agreements to
share resources.  Under one of these agreements, Penauille Italia would
provide equipment and technical/organizational support for one of ETS
Penauille's janitorial services contract in Italy.  Under another, ETS
Penauille would provide resources to Penauille Italia to facilitate the
expansion of Penauille Italia, both within Italy and internationally. 
Penauille also identified three top executives and managers that were
shared by the two affiliates and whom Penauille Italia committed to
performance under its proposal.  Agency Report, Tab 12, Penauille Italia's
Correspondence to Agency, at 2-3.  In addition, the agency considered
Penauille Italia's recent performance as the contractor under the present
multi‑service contract, which was rated as outstanding.
    
The record shows that the agency evaluated Penauille Italia's past
performance as superior to Gemmo's in large part because Penauille
Italia's and its affiliate's experience on large janitorial service
contracts was considered more relevant to the services to be performed
here than Gemmo's, whose experience in providing janitorial services was
much more limited.  As indicated, the agency emphasized janitorial
services experience in its evaluation of past performance because they
constitute the majority of the services under this contract. 
    
The protester challenges this evaluation, contending that multi-service
contract experience should have been considered more relevant than
janitorial services experience, and claming that Penauille Italia has no
such experience.  However, the record shows that Penauille Italia has
performed or is performing two multi-service contracts--one referenced in
its proposal and its current performance on the present contract. 
Although Gemmo's proposal referenced more multi-service contracts than
Penauille Italia's, the record evidences that the latter's two
multi-service contracts more closely matched the services to be provided
under the solicited contracts because they both involved janitorial
services and other services covered by this RFP.  In this regard, given
that the majority of the contract services were janitorial, the agency
could reasonably emphasize this experience in evaluating past
performance.  Also, the record confirms that Gemmo's experience performing
janitorial services--i.e., the majority of work to be performed under this
RFP--was more limited than Penauille Italia's.  Thus, based on our review,
we find this aspect of the past performance evaluation to be reasonable.
    
In addition, in contrast to the quality of Penauille Italia's past
performance, the agency found that Gemmo had experienced some performance
problems under the janitorial services portion of its contracts, albeit
that these problems were ultimately resolved.  The agency was also able to
compare the performance of the two offerors as incumbent contractors for
these services, where Penauille Italia's higher performance rating
indicated superior performance by that firm.  While Gemmo challenges the
validity of the agency's consideration of the offerors' most recent
contract performance--i.e., performance occurring after the date of the
original award decision, we see nothing improper in this aspect of the
agency's evaluation.  Where, as here, an agency undertakes to implement
corrective action resulting from an improper award, it generally has the
discretion to consider updated past performance of the awardee under that
contract.  See Tidewater Homes Realty, Inc., B-274689.5, Aug. 11, 1998,
98-2 CPD P: 40 at 5.  Based on our review, we also find this aspect of the
past performance evaluation to be reasonable.
    
The protester also alleges that it was improper for the agency to evaluate
the contracts performed by Penauille Italia's corporate affiliate.  This
was an issue addressed in our first decision.  We stated that, in
determining whether one company's performance should be attributed to
another, the agency must consider not simply whether the companies are
affiliated, but also the nature and extent of the relationship between the
two--in particular, whether the proposal demonstrates that the workforce,
management, facilities, or other resources of the affiliate may affect
contract performance by the offeror.  Gemmo Impianti SpA, supra, at 4
(citing Perini/Jones, Joint Venture, B‑285906, Nov. 1, 2000, 2002
CPD P: 68 at 4-5, and ST Aerospace Engines Pte. Ltd., B‑275725,
Mar. 19, 1997, 97-1 CPD P: 161 at 3).  We found that the agency had not
considered the nature and extent of the affiliation. 
    
After reopening discussions, the agency requested information about the
affiliation between Penauille Italia and its corporate affiliate. 
Penauille Italia identified a formal agreement whereby it assisted its
affiliate on the affiliate's referenced Italian contract, thus concretely
connecting the performance of its affiliate on that contract to the
offeror.  It also formally committed top executive and management
personnel shared by both affiliates to performance under the solicited
contract.  In our view, this information gave the agency a reasonable
basis to include the past performance of the affiliate in the evaluation
of Penauille Italia's past performance.  Compare Fluor Daniel, Inc.,
B‑262051, B-262051.2, Nov. 21, 1995, 95-2 CPD P: 241 at 12 (shared
top level management between subsidiary offeror and parent corporation,
where proposal also commits the parent to perform management effort, was
sufficient basis to credit subsidiary with the experience of its parent)
with ST Aerospace Engines Pte. Ltd., supra at 3-4 (shared top level
management is not sufficient basis to credit a firm with an affiliated
entity's past performance experience where the proposal does not show that
these personnel would be involved in contract performance). 
    
Under the second technical factor, corporate capability, Gemmo protests
that the agency unreasonably evaluated Gemmo's staffing plan as merely
acceptable, even though its organizational chart was rated superior. 
Gemmo argues that this evaluation was illogical because Gemmo's staffing
plan and organizational chart were essentially the same.
    
As indicated, the RFP stated two separate subfactors--staffing plan and
organizational chart--and, since each concerned different aspects of a
proposal, there was no basis to require a rating for one to be the same as
the rating for the other.  The record shows that both offerors' staffing
plans were rated as acceptable because they stated the appropriate job
descriptions for the work to be performed; Penauille Italia's staffing
plan was found to be detailed and specific to the overall work plan of the
RFP, while Gemmo's staffing plan was found to be sufficient to demonstrate
its understanding of the solicitation requirements.  Agency Report, Tab 6,
Final TEB Report, at 5, 9.  Gemmo has offered no reason why its staffing
plan should receive a higher rating than Penauille Italia's, and the
record does not otherwise support its assertion.[4]  Gemmo's proposal was
credited with a higher rating under the organizational chart subfactor
because it proposed more personnel and labor hours than Penauille
Italia.[5]  While it may have been more appropriate to evaluate the number
of personnel and labor hours under the staffing plan subfactor rather than
the organizational chart subfactor, the record shows that the agency
reasonably found that the only significant difference between the
proposals under these two subfactors was Gemmo's greater number of
proposed personnel and labor hours.  Based on our review, we find that
this relative strength in Gemmo's proposal was reasonably evaluated and
considered by the agency in the award selection.
    
Under the quality control factor, Gemmo alleges that Penauille Italia's
quality control plan should have been considered unacceptable because,
under that plan, quality control personnel will also serve as work
supervisors, which the agency, under Gemmo's previous contract, viewed as
impairing operational autonomy and required separate personnel to perform
these duties.  However, the RFP does not contain such a requirement and,
since each procurement is a separate transaction, action under the prior
procurement does not govern action under the present one.  See Beneco
Enters., Inc., B-283512, Dec. 3, 1999, 2000 CPD P: 175 at 5-6 n.6; Red
John's Stone, Inc., B-280974, Dec. 14, 1998, 98-2 CPD P: 135 at 7.  Here,
the agency rated Penauille Italia's proposal slightly higher than Gemmo's
under the quality control factor because Penauille Italia proposed a
supervisory structure for quality control that provided independence for
the quality control program (while still splitting the time of some
quality control personnel between quality control and other duties), as
well as proposing more personnel and hours for quality control.  Agency
Report, Tab 8, Final SSB Report, at 9.  Based on our review, we find this
evaluation to be reasonable.
    
Finally, the protester alleges that Penauille Italia proposed unbalanced
prices and the agency did not analyze prices for price unbalancing. 
Unbalanced pricing exists where, despite an acceptable total evaluated
price, the price of one or more CLINs is significantly overstated. 
Federal Acquisition Regulation (FAR) S: 15.404‑1(g)(1); Weber
Cafeteria Servs., Inc., B-290085.2, June 17, 2002, 2002 CPD P: 99 at 3;
Citywide Managing Servs. of Port Washington, Inc., B‑281287.12,
B‑281287.13, Nov. 15, 2000, 2001 CPD P: 6 at 7.  Here, although the
agency's evaluation of prices prior to the first protest did determine
that Penauille Italia's prices were unbalanced due to significantly
overstated prices for the *indefinite-quantity* CLINs (but that the
associated risk to the agency was not significant), Penauille Italia's
most recent price 1revisions significantly reduced those CLIN prices.  The
agency's final price analysis shows that the awardee's individual CLIN
prices were not significantly overstated.  Agency Report, Tab 7, Final PEB
Report, at 4-6.  Therefore, the record shows that Penauille Italia's final
prices were not unbalanced.[6]
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    

   ------------------------

   [1] The RFP initially contemplated a longer potential contract term. 
During discussions following Gemmo's prior protest of this award, the
amended price schedule stated the new performance period.
[2] Gemmo was the incumbent contractor for much of this requirement prior
to the initial protest.
[3] The agency initially also considered poor performance on a
construction contract performed by a corporate affiliate of the
protester.  However, the contract was not similar to the solicited
services and Gemmo explained during discussions that the affiliate's
performance was not applicable to Gemmo's performance of service
contracts.  The SSB did not consider this contract in the final
evaluation.
[4] Gemmo alleges that the agency wrongly determined that Gemmo's staffing
plan was oriented to a construction contract rather than a services
contract.  The record shows that the agency initially found a deficiency
in Gemmo's staffing plan because the TEB determined that the position
descriptions were more akin to those used in performing a construction
contract.  Agency Report, Tab 2, TEB Report, at 7.  After discussions, the
TEB determined that Gemmo had not addressed this deficiency at all;
however, since the remainder of the proposal demonstrated a clear
understanding of the contract requirements, the TEB determined that this
was merely a weakness and did not present a significant risk.  Agency
Report, Tab 6, Final TEB Report, at 5.  The SSB did not mention this as a
weakness in its report, and it was not considered in the source selection
decision.  Agency Report, Tab 8, Final SSB Report, at 8.  Since it appears
that the alleged evaluation error ultimately did not affect the award
decision, we find that the alleged error did not prejudice the protester.
[5] Although Gemmo's organizational plan had other evaluated
strengths--e.g., good equipment list and clearly illustrated management
structure--Penauille Italia's proposal had comparable strengths.  Agency
Report, Tab 6, Final TEB Report, at 5-6, 9-10.
[6] The protester alleges that Penauille Italia's prices are unbalanced
because its revised prices under the medical facilities sub-CLIN of CLIN
1001 covering janitorial services are significantly higher than its
previous prices for that same sub-CLIN.  However, the record shows that
the agency considered Penauille Italia's individual CLIN prices to be
reasonable (and therefore not overstated).  Gemmo has not shown that the
agency's determination in this regard was unreasonable.  Absent overstated
prices, there is no price unbalancing.  See FAR S: 15.404‑1(g)(1).
    
Also, in a supplemental statement submitted by the protester late in the
protest process, the protester alleged that the PEB's price analysis
contains calculation errors, and thus the price analysis cannot be relied
upon.  This is a new protest basis raised by the protester more than 10
days after it received the PEB report providing the basis for the
allegation, and is therefore untimely.  4 C.F.R. S: 21.2(a)(2) (2002);
Oceaneering Int'l, Inc., B-287325, Jun. 5, 2001, 2001 CPD P: 95 at 6 (in
order for our Office to consider new protest grounds raised during the
course of an otherwise timely protest, the new protest grounds must
independently satisfy the requirements for a timely protest).