TITLE: Semont Travel, Inc., B-291179, November 20, 2002
BNUMBER: B-291179
DATE: November 20, 2002
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Semont Travel, Inc., B-291179, November 20, 2002
Decision
Matter of: Semont Travel, Inc.
File: B-291179
Date: November 20, 2002
Dona Davison for the protester.
Mark Pestronk, Esq., for Rodgers Travel, Inc./American Express, an
intervenor.
Andrew D. Fallon, Esq., Department of the Air Force, for the agency.
Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Award based on quotation that the agency considered unbalanced is
unobjectionable where the agency considered the risk of unreasonably high
prices for contract performance and reasonably determined that the
unbalanced pricing did not pose an unacceptable level of risk to the
government.
DECISION
Semont Travel, Inc. protests the issuance of a purchase order to Rodgers
Travel, Inc./ American Express under request for quotations (RFQ) No.
F05604-02-T-0025, issued by the Department of the Air Force for commercial
travel management services at various Air Force installations within
Colorado. Semont maintains that the Air Force failed to reasonably
evaluate the risks to the government associated with Rodgers' unbalanced
pricing in making its award decision.
We deny the protest.
The RFQ, issued on April 2, 2002, contemplated the issuance of a
requirements-type order for a base year, with four 6-month options, to
provide travel services for official travel at Peterson Air Force Base
(AFB), Schriever AFB, Buckley AFB, and the Air Force Academy. The RFQ
established three evaluation factors--technical acceptability, past
performance, and price--and notified vendors that the past performance of
technically acceptable vendors was approximately equal in importance to
price. The solicitation established that award would be made to the
responsible vendor whose quotation was most advantageous to the
government, and that the agency would utilize a *price performance
trade-off technique,* whereby the two factors would be traded off, one
against the other, in order to make a *best value* award determination.
The RFQ's price schedule required that vendors provide a unit price per
ticketed transaction (i.e., a transaction fee), as well as an extended
price for each performance period based upon agency workload estimates.
[1] The RFQ informed vendors that the agency would take into account all
option prices in the evaluation of price, though the evaluation of options
would not obligate the agency to exercise the options. The solicitation
also stated that the agency *may determine that an offer is unacceptable
if the option prices are significantly unbalanced.* RFQ at 13.
Nine vendors, including Semont and Rodgers, submitted quotations by the
June 28 closing date. A technical evaluation team determined that six of
the quotations were technically acceptable, and rated each of the vendors
that submitted them as exceptional as to past performance. The agency
determined that Rodgers submitted the lowest total evaluated price of
$1,296,000, while Semont submitted the second-lowest total evaluated price
of $1,610,280. The contracting officer, however, expressed concern over
Rodgers' pricing structure, which was as follows:
+------------------------------------------------------------------------+
| | |Unit Price |Extended Price |
|------------------------------------------------------------------------|
|Base Period |$24.00 |$648,000 | |
|------------------+-------------------+------------------------+--------|
|Option 1 |$18.00 |$243,000 | |
|------------------+-------------------+------------------------+--------|
|Option 2 |$14.00 |$189,000 | |
|------------------+-------------------+------------------------+--------|
|Option 3 |$10.00 |$135,000 | |
|------------------+-------------------+------------------------+--------|
|Option 4 | $6.00 | $81,000 | |
|------------------+-------------------+------------------------+--------|
|Total | | $1,296,000 | |
|------------------+-------------------+------------------------+--------|
+------------------------------------------------------------------------+
See Agency Report, Tab 10, Source Selection Spreadsheet, Source Selection
Decision Memorandum, at 1. By contrast, Semont's quotation was priced at
$19.88 per ticketed transaction for the base and all option periods.
In a subsequent analysis of Rodgers' pricing, the Air Force determined
that Rodgers' prices were unbalanced, but concluded that the lack of
balance did not pose an unacceptable risk to the government. Agency
Report, Tab 11, Price Analysis of Rodgers' Quotation, at 1; Tab 10, Source
Selection Decision Memorandum, at 2. Having determined that Rodgers
offered the lowest total evaluated price among technically acceptable
quotations submitted by vendors with similar past performance, the
contracting officer issued a purchase order to Rodgers. Agency Report,
Tab 10, Source Selection Decision Memorandum, at 2. Following a
debriefing, Semont filed this timely protest.
Semont protests that the agency's decision to make award to Rodgers was
improper. Specifically, the protester contends that the Air Force
improperly failed to evaluate the risks to the government associated with
Rodgers' unbalanced pricing.
Unbalanced pricing exists where the price of one or more contract line
items is significantly overstated, despite an acceptable total evaluated
price (typically achieved through the underpricing of one or more other
line items). See 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. While unbalanced pricing
may increase risk to the government, agencies are not required to reject
an offer solely because it is unbalanced. FAR S: 15.404-1(g)(1). Rather,
where an unbalanced offer is received, the contracting officer is required
to consider the risks to the government associated with the unbalanced
pricing in making the award decision, including the risk that the
unbalancing will result in unreasonably high prices for contract
performance. FAR S: 15.404-1(g)(2). An offer may be properly rejected if
the contracting officer determines that the lack of balanced poses an
unacceptable risk to the government. Id.; L. W. Matteson, Inc., B-290224,
May 28, 2002, 2002 CPD P: 89 at 3. Our Office will review for
reasonableness both an agency's determination as to whether an offeror's
prices are unbalanced, and an agency's determination as to whether an
offeror's unbalanced prices pose an unacceptable risk to the government.
See L. W. Matteson, Inc., supra, at 4; Gemmo Impianti SpA, B-290427, Aug.
9, 2002, 2002 CPD P: 146 at 2 n.1.
Our analysis in this case begins with the agency's decision to analyze
Rodgers' quotation as a result of concerns about the awardee's pricing
structure. While the RFQ informed vendors that the travel services
workload would remain constant, the Air Force observed that Rodgers'
quotation had significant unit price reductions in every performance
period. The agency also noted that the magnitude of Rodgers' price
reductions--beginning with a $24 unit price in the base period and ending
with a $6 unit price in the last option period--was inconsistent with the
pricing patterns of the other vendors. Agency Report, Tab 11, Price
Analysis of Rodgers' Quotation, at 1. Based on these reasons, the agency
judged Rodgers' quotation to be unbalanced. Id.
In assessing the risk associated with Rodgers' unbalanced pricing, the Air
Force considered the prices the government would pay for contract
performance should the option periods not be exercised. The agency found
that the highest ($24) transaction fee quoted by Rodgers was *essentially
the same, or less, than three of the four other technically acceptable
offers received.*[2] Id. Having determined that the government would not
pay unreasonably high prices for contract performance, even during the
base period, the Air Force concluded that Rodgers' unbalanced prices did
not pose an unacceptable risk.[3] Id. As the agency properly considered
the risks associated with Rodgers' pricing structure, including the risk
of unreasonably high prices for contract performance, we find the agency's
determination that Rodgers' quotation did not pose an unacceptable level
of risk to the government to be reasonable.
Semont protests that the Air Force did not fairly and fully evaluate the
risks to the government associated with Rodgers' unbalanced pricing.
Specifically, Semont contends that the Air Force failed to consider that
Rodgers' prices for the last two option periods were, in fact, below
cost. Protest at 5-7. Semont also asserts that the agency did not
consider whether the subject purchase order *would actually run its full
term,* in light of the planned implementation of the Defense Travel System
(DTS) for the Colorado area by the fall of 2003.[4] Protest at 5. Semont
alleges that because the actual contract performance period will not
include all options, the Air Force will actually be paying higher prices
by selecting Rodgers over Semont.[5] We find Semont's arguments
unpersuasive, for the following reasons.
Even assuming that Rodgers' prices for some (or even all) option periods
were below cost, we find this fact to be irrelevant to the agency's risk
analysis here. The potential risk associated with unbalanced pricing
arises from those line items with overstated prices, not from underpriced
ones. HSG Philipp Holzmann Technischer Serv. GmbH, B-289607, Mar. 22,
2002, 2002 CPD P: 67 at 6. Vendors are not prohibited from submitting
below-cost quotes on fixed-price contracts, see Reece Contracting, Inc.,
B-285666, Aug. 21, 2000, 2000 CPD P: 135 at 2 n.1, and the ability of a
vendor to perform at the price offered is an issue of contractor
responsibility, not unbalanced pricing. See Ventura Petroleum Servs.,
Inc., B-281278, Jan. 21, 1999, 99-1 CPD P: 15 at 6.
Additionally, contrary to Semont's arguments, the agency reasonably
determined it appropriate to consider all option periods in the analysis
of Rodgers' prices, notwithstanding the scheduled implementation of the
DTS program. [6] As part of the agency report, the contracting officer
noted,
DTS was originally scheduled for implementation approximately seven year
ago. However, it has been repeatedly delayed due to difficulties in
establishing standard practices and system hardware acceptable for all
military installations. Therefore, the Government solicited and accepted
offers under the premise the contract would run its full term.
Contracting Officer's Statement at 4. While Semont disputes the agency's
conclusion regarding the implementation of DTS, and deems it unsupported,
the fact remains that the Air Force properly considered this factor in its
determination of the risks presented by Rodgers' pricing structure.
In our view, the agency has satisfied the FAR requirements regarding
Rodgers' pricing structure, which the agency judged unbalanced, by
reasonably determining that the risks posed to the government were not
significant enough to render its quote unacceptable. We will not disturb
an agency's assessment of the risk posed to it by unbalanced pricing when
the agency reasonably considers all relevant factors. The fact that the
protester disagrees or can construct a hypothetical situation under which
the awardee's quotation might not be low does not render the agency's
conclusion unreasonable. Reece Contracting, Inc., supra, at 5.
Lastly, Semont also asserts in its protest that the agency failed to
evaluate Rodgers' pricing against the RFQ requirement that an offeror's
quotation *be in line with current commercial practices,* and that Rodgers
does not intend to provide the travel services required by the
solicitation. The agency specifically addressed and refuted these
contentions in its report, explaining that Rodgers' transaction-fee
pricing was consistent with current commercial practices, and its overall
price was determined fair and reasonable. The Air Force also pointed out
that allegations concerning an agency's affirmative responsibility
determination are not reviewed by our Office. In its comments, Semont at
best expresses mere disagreement with the agency report and makes no
substantive rebuttal to the agency's positions here. Accordingly, we
consider these issues to be abandoned by the protester. Wilson 5 Serv.
Co., Inc., B-285343.2, B-285343.3, Oct. 10, 2000, 2000 CPD P: 157 at 3
n.2.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] While the Air Force did not guarantee any specific volume of travel
services, the statement of work estimated the travel services workload at
27,000 transactions annually. RFQ, Statement of Work, at 31. The
solicitation's price schedule utilized the same workload estimates in
determining each vendor's extended prices. RFQ, at 2-4.
[2] The base period unit prices of the vendors, other than Rodgers and
Semont, were $26.75, $24, $23.75, and $22. Agency Report, Tab 10, Source
Selection Spreadsheet. We note that, as the agency essentially determined
that Rodgers' highest price was not significantly overstated, the agency
reasonably could have concluded that Rodgers' quotation was not, in fact,
unbalanced.
[3] While recognizing that whether a firm can perform a contract at the
price offered is a matter of responsibility, the agency also considered
the risk to the government of Rodgers' possible nonperformance during the
option periods when Rodgers' prices were lower. Id.
[4] DTS is a paperless travel system that allows the individual traveler
to coordinate and arrange official travel from a desktop or laptop
computer. The planned implementation of DTS, which involves the
competitive award of travel services contracts for all Defense Department
personnel within a specified geographic area, would result in the
discontinuance of local travel service contracts such as the present one.
See http://www.dtic.mil/travelink/whatisdts.html.
[5] Semont argues that its overall price would be lower than that offered
by Rodgers through the end of the second option period. Protest at 5.
[6] To the extent that Semont challenges the validity of the Air Force's
decision to consider option prices in the evaluation of price, given the
intended implementation of the DTS program, we find this argument untimely
since it concerns an alleged impropriety apparent from the face of the
solicitation and was not raised prior to the closing time for submission
of quotations. See 4 C.F.R. S: 21.2(a)(1) (2002).