TITLE:  Atteloir, Inc.ï¿½, B-290601; B-290602, August 12, 2002
BNUMBER:  B-290601; B-290602
DATE:  August 12, 2002
**********************************************************************
Atteloir, Inc. , B-290601; B-290602, August 12, 2002

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:   Atteloir, Inc. 
    
File:            B-290601; B-290602
    
Date:              August 12, 2002
    
Raymond J. Sherbill, Esq., and Stuart A. Schwager, Esq., Ridberg, Press &
Sherbill, for the protester.
William F. Dalton for E.L. Hamm & Associates, Inc., an intervenor.
Maj. Robert B. Neil and Capt. Peter Hartman, Department of the Army, for
the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protest against agency's selection of a lower-rated, lower-priced proposal
for award is denied where record supports reasonableness of agency's
source selection decision; even where price is the least important
consideration, agency properly may select a lower-rated, lower-priced
proposal for award where it concludes that higher rated proposal is not
worth the associated price premium.
DECISION
    
Atteloir, Inc. protests the award of a contract to E.L. Hamm and
Associates, Inc. under request for quotations (RFQ) No.
DADW35-02-T-0083[1] issued by the Department of the Army, Military
District of Washington (MDW) for management, operation and maintenance of
visual information services.  Atteloir maintains that the agency's award
decision is not consistent with the terms of the solicitations.
    
We deny the protest.
    
The solicitation contemplated award of a contract for a base year, with
four 1-year options, to provide a variety of visual information services. 
Offerors were required to submit technical and price proposals, and award
was to be made on a *best value* basis.  Technical proposals were to be
evaluated using four equally-weighted criteria:  prior experience, past
performance (with subcriteria not relevant to the protest), organization
and staffing, and management approach.  Agency Report (AR), exh. 5.4, at
74.  While price was subordinate to all technical evaluation factors, as
proposals became more technically equal, price would become a determining
factor for award purposes.  Id.
    
The agency received four proposals.  The agency evaluated the proposals
(with adjectival ratings in each of the four areas of either excellent,
good, satisfactory, marginal or unacceptable), established a competitive
range, engaged in discussions and performed a final evaluation.  The
results of the final evaluation for the protester and awardee were as
follows:
    

   +------------------------------------------------------------------------+
|Offeror |Prior      |Past        |Organization and |Management|Price    |
|        |Experience |Performance |Staffing         |Approach  |         |
|--------+-----------+------------+-----------------+----------+---------|
|Atteloir|Excellent  |Excellent   |Excellent        |Excellent |[deleted]|
|--------+-----------+------------+-----------------+----------+---------|
|E.L.Hamm|Excellent  |Good        |Excellent        |Good      |[deleted]|
+------------------------------------------------------------------------+

    
AR, exhs. 4, 22.  The agency assigned both proposals overall adjectival
ratings of excellent.  In reviewing Atteloir's price proposal, the agency
concluded that its unit prices for some of the contract line items (CLINs)
were unbalanced, and that this posed some performance risk, in terms of
either increased cost to the government or performance risk to the
contractor based on its furnishing below-cost supplies (because the CLINs
were requirements-type line items where quantities could vary).  AR, exh.
26, at 2-4.  The agency also identified a weakness in Atteloir's cost
proposal based on a lack of escalation in labor and other costs during the
option years.  Id.  On the basis of these evaluation results, the agency
made award to E.L. Hamm, finding that its proposal offered the best
overall value to the government.
    
TECHNICAL EVALUATION
    
Atteloir maintains that the agency improperly found either that its
proposal was essentially equal, or only slightly technically superior, to
E.L. Hamm's from a technical standpoint, and then improperly made award on
the basis of E.L. Hamm's lower price.  Atteloir maintains that the
adjectival ratings assigned by the agency mask greater qualitative
differences between the proposals.  In this regard, Atteloir maintains
that it offered an employee benefits package that was superior to E.L.
Hamm's and that this feature was worth the additional cost.  (This aspect
of the proposals was reviewed under the management approach criterion.) 
Atteloir also contends that its past performance was superior to E.L.
Hamm's. 
    
Source selection officials have broad discretion to determine the manner
and extent to which they will make use of the technical and price
evaluation results in negotiated procurements.  Ready Transp., Inc.,
B-285283.3, B-285283.4, May 8, 2001, 2001 CPD P: 90 at 12.  Since numeric
or adjectival scores are merely guides to intelligent decision making,
they do not necessarily mandate selection of a particular proposal for
award.  Id.  The more important consideration is whether the evaluation
record and source selection decision show that the agency reasonably
assessed the relative merits of the proposals in accordance with the
stated evaluation criteria.  KBM Group, Inc., B-281919, B-281919.2, May 3,
1999, 99-1 CPD P: 118 at 11.
    
We have no basis to object to the agency's technical evaluation here.  The
record shows that the agency performed a detailed review of the proposals
and, in addition to assigning adjectival ratings, also prepared narrative
materials that were thereafter used by the source selection official when
she made her source selection decision.  We note that these narrative
materials are incorporated into the agency's source selection decision
document, AR exh. 4, take cognizance of the differences among the
proposals and specifically discuss the issues raised by Atteloir. 
Moreover, the narrative materials correspond directly to the adjectival
ratings.
    
In the area of management approach, the evaluators assigned only a good
rating to the E.L. Hamm proposal noting that, while the firm proposed a
detailed management plan, there was no mention of an employee benefits
package or incentives; the evaluators identified this as a weakness in the
firm's proposal because of the risk of personnel turnover.  AR, exh. 4, at
10.  In contrast, the evaluators assigned Atteloir's proposal an excellent
rating in this area and identified no weaknesses and several strengths. 
AR, exh. 4, at 12.  The record thus shows that the agency evaluators and
source selection official were aware of, and considered, this difference
in the two proposals.
    
As for past performance, the evaluators assigned E.L. Hamm's proposal only
a good rating, noting that the firm was rated good overall by the
reference who responded to E.L. Hamm's past performance questionnaire. 
This same reference remarked that the firm's on-site staff supporting the
requirement always *exceeded the minimums,* and rated E.L. Hamm's customer
service as *very high.*  AR, exh. 4, at 9.  The evaluators assigned
Atteloir's proposal a rating of excellent for past performance, noting
that both past performance references for Atteloir rated the firm's
performance excellent, and cited numerous details relating to the specific
advantageous attributes of Atteloir's performance.  AR, exh. 4, at 11-12. 
The record thus shows that the evaluators and source selection official
were aware of, and considered, the relative merits of the two proposals in
the past performance area.
    
More generally, the technical evaluators found that Atteloir was the
*preferred company* and had submitted the most technically capable
proposal based on the technical evaluation (without regard to price).  AR,
exh. 4, at 13.  They noted, among other things, Atteloir's *great
experience* in performing visual information services, as well as its
significant depth, perspective, institutional knowledge and hands-on
experience.  Id.  The record thus shows that Atteloir was given full
credit for its technically superior proposal, both by the evaluators and
the source selection official who incorporated the technical evaluators'
narrative materials into her source selection decision document. 
    
PRICE
    
Although, as discussed, Atteloir submitted the superior technical
proposal, the record shows that the agency was concerned about its pricing
proposal in two respects.  First, Atteloir's overall price was
approximately [deleted] percent higher than E.L. Hamm's.  Second, the
record shows that the agency was concerned about the structure of
Atteloir's pricing, as well as a lack of price escalation in its proposal
for the option years.  The record includes a price negotiation memorandum
relied upon by the source selection official in arriving at her decision,
which raises significant concerns about Atteloir's proposed pricing:
    
Atteloir did not provide unit prices for [deleted] sub-priced contract
line items, which was of particular importance in this Requirements type
contract.  Atteloir also did not factor escalation into option period
[deleted] for labor nor did they factor escalation into [deleted] for the
duration of the five year effort.  Consequently, the unit prices that
Atteloir was proposing could not be ascertained and it was determined that
there were some price risks associated with Atteloir's proposed prices. 
Specifically, comparison of Atteloir's line item totals to the Independent
Government Estimate demonstrates the following: [the document goes on in
some detail to describe the various sub-CLIN items that are either
unreasonably low in price or unreasonably high in price].  These [deleted]
variations in pricing and the [deleted] lack of escalation in the option
years lead me to believe that [deleted].  To me [this] represents a major
risk to the Government [because] the costs for supplies would either be
significantly above what is deemed appropriate or the costs would be so
low as not to be sustainable by the contractor in the option years.  Both
scenarios represent a great risk to the Government.
AR, exh. 26, at 2-4.  Atteloir does not dispute these conclusions, but
merely dismisses them, stating that the value of the unbalanced CLINs is
relatively small, and maintaining that its pricing scheme *cuts both
ways,* with the government sometimes benefiting and Atteloir sometimes
benefiting. 
    
This argument is without merit.  Where an offeror's prices appear
unbalanced (that is, the prices for some items appear understated or
overstated), agencies ordinarily are required to assess the performance
risk associated with such pricing, and evaluate whether the pricing scheme
will result in the agency paying unreasonably high prices.  Federal
Acquisition Regulation (FAR) S: 15.404 (g); Citywide Managing Servs. Of
Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD
P: 6 at 7-8.  This is what the agency did here, and we find nothing
unreasonable in the agency's conclusions.  The fact that the CLINs in
question may represent only a relatively small portion of the contract's
total value, and the fact that Atteloir's pricing *cuts both ways* go only
to the magnitude of the effect of the unbalancing; even the protester does
not maintain that its pricing represents no risk.  The agency did not
reject Atteloir's proposal based on its pricing, but instead merely
concluded that the pricing scheme presented a risk that the government
might pay unreasonably high prices for some CLINs, or that Atteloir's
furnishing some CLINs at understated costs could affect the firm's
performance.  There was nothing improper in the agency's giving some
weight to this concern in the source selection decision. 
    
SOURCE SELECTION DECISION
    
When making its source selection decision, the agency recognized the
technical superiority of the Atteloir proposal, but nonetheless identified
the E.L. Hamm proposal as representing the best overall value to the
government.  In this regard, the source selection decision document relies
on the technical evaluation report prepared by the evaluators, as well as
the recommendation of the chairman of the technical evaluation board (this
latter document took into account both the technical considerations as
well as the pricing concerns discussed above).  In arriving at its award
decision, the agency recognized Atteloir's technical superiority, but
found that this superiority was not worth the added cost premium, and
noted further that its unbalanced pricing presented a risk not present in
the E.L. Hamm proposal.  AR, exh. 4, at 15-16. 
    
Atteloir does not challenge the substance of the agency's evaluation
conclusions, but instead maintains that, because the solicitation gave
greater weight to the technical considerations, the agency essentially was
required to make award to it because its proposal was rated higher during
the technical evaluation.  This argument is without merit.  Even where
price is the least important award criterion, an agency may nonetheless
select a lower-priced, lower-rated proposal where it concludes that the
higher-rated proposal is not worth the associated price premium.  SelRico
Servs., Inc. B-286664.4 et al., June 22, 2001, 2002 CPD P: 6 at 3.  Source
selection officials in negotiated procurements have broad discretion in
determining the manner and extent to which they will make use of the
technical and price evaluation results; price/technical tradeoffs may be
made, and the extent to which one may be sacrificed for the other is
governed only by the test of rationality and consistency with the
solicitation's evaluation criteria.  Id.; NAPA Supply of Grand Forks,
Inc.,
B-280996.2, May 13, 1999, 99-1 CPD P: 94 at 5.
    
As discussed, the agency was well aware of the proposals' relative merits
when it made its award decision.  In the final analysis, the agency
concluded that, while Atteloir's proposal was technically superior, its
higher price and the element of risk introduced by Atteloir's pricing
structure were sufficient to offset Atteloir's technical advantage,
notwithstanding that technical considerations were of greater weight than
price.  There is nothing inherently unreasonable or irrational in this
conclusion. 
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    
    

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

   [1] The agency initially solicited this requirement under request for
proposals (RFP) No. DADW35-01-R-0030, and obtained technical and price
proposals in response thereto.  Subsequently, the agency changed the
contract type from a combined fixed‑price/cost reimbursement
contract to a fixed-price contract, and administratively canceled the RFP
and issued the RFQ requesting only price proposals; the agency used the
technical proposals from the prior solicitation in making award under the
RFQ.