TITLE:  CSE Construction, B-291268.2, December 16, 2002
BNUMBER:  B-291268.2
DATE:  December 16, 2002
**********************************************************************
CSE Construction, B-291268.2, December 16, 2002

   Decision
    
    
Matter of:    CSE Construction
    
File:             B-291268.2
    
Date:              December 16, 2002
    
Nicholas E. Barrack, for the protester.
Rick Grebel, KCI Construction Company, Inc., the intervenor.
Dawn P. Wade, Esq., U.S. Army Corps of Engineers, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  In a negotiated procurement for a fixed-price construction contract,
based upon a price/technical tradeoff, the selection of the higher-rated,
higher-priced proposal was unreasonable where the source selection
authority did not credit the protester for its substantially lower
proposed price, but improperly viewed the protester's low price as too low
and demonstrating the protester's lack of understanding of contract
requirements, where the solicitation did not provide for an evaluation of
offerors' understanding.
    
2.  Agency evaluated protester's and awardee's proposals unequally, where
the two firms provided similar sparse information in response to a
technical evaluation subfactor, but the protester's proposal received a
lower technical rating.
DECISION
    
CSE Construction, a small business concern, protests the award of a
contract to KCI Construction Company, Inc. under request for proposals
(RFP) No. DACA41-02-R-0006, issued by the U.S. Army Corps of Engineers for
the design and construction of firing ranges at Fort Leonard Wood,
Missouri.  CSE challenges the agency's technical and price evaluation of
its proposal.
    
We sustain the protest.
    
The RFP provided for the award of a fixed-price contract for design and
construction services to upgrade an existing firing range and to build a
new range at Fort Leonard Wood, Missouri.  Offerors were informed that the
agency planned to make award, without conducting discussions, on the basis
of a price/technical tradeoff.  The technical evaluation factors were
stated to be together more important than price.  The following technical
evaluation factors and subfactors were identified:
    

   +------------------------------------------------------------------------+
|1.  Past Performance                                                    |
|------------------------------------------------------------------------|
| |Quality of product and services                                       |
| |----------------------------------------------------------------------|
| |Customer satisfaction                                                 |
| |----------------------------------------------------------------------|
| |Timeliness of performance                                             |
|------------------------------------------------------------------------|
|2.  Corporate Experience                                                |
|------------------------------------------------------------------------|
| |Construction experience with projects of similar type, size and       |
| |complexity                                                            |
| |----------------------------------------------------------------------|
| |Designer experience with projects of similar type, size and complexity|
|------------------------------------------------------------------------|
|3.  Management Plan                                                     |
|------------------------------------------------------------------------|
| |General management structure and plan                                 |
| |----------------------------------------------------------------------|
| |Management of multiple subcontractors including designer              |
| |architect-engineer                                                    |
+------------------------------------------------------------------------+

    
RFP amend 2, at 27.  The RFP provided that factor 1 was more important
than factors 2 and 3, which were of equal importance, and that the
subfactors were listed under each factor in descending order of
importance. 
    
With respect to price, the RFP requested only that offerors provide fixed
prices for eight contract line items (CLIN) that comprised various aspects
of the design and construction work.  RFP amend. 2, at 3.  That is, for
each of the firing ranges, offerors were required to provide a fixed price
for design, construction of buildings, site work, and utility work.  The
RFP requested no cost data or information explaining offerors' proposed
prices for these CLINs.  With regard to the price evaluation, the RFP
stated that price
    
will not be point scored but will be subjectively evaluated for
reasonableness over the life of the contract. . . . Because the evaluation
of the price proposal will represent a portion of the total evaluation, it
is possible that an offeror might not be selected because of an unbalanced
or an unreasonable price proposal. 
RFP amend. 2, at 27-28. 
    
The Corps received three proposals, including those of CSE and KCI.  The
proposals were evaluated by the agency's technical evaluation team (TET),
as follows:
    

   +------------------------------------------------------------------------+
|Factor          |Subfactor                    |KCI         |CSE         |
|----------------+-----------------------------+------------+------------|
|Past            |Quality of product or service|Very Good   |Very Good   |
|Performance     |-----------------------------+------------+------------|
|                |Customer satisfaction        |Very Good   |Very Good   |
|                |-----------------------------+------------+------------|
|                |Timeliness of performance    |Satisfactory|Very Good   |
|----------------+-----------------------------+------------+------------|
|Corporate       |Construction experience      |Very Good   |Satisfactory|
|Experience      |-----------------------------+------------+------------|
|                |Designer experience          |Excellent   |Marginal    |
|----------------+-----------------------------+------------+------------|
|Management Plan |General management structure |Satisfactory|Marginal    |
|                |-----------------------------+------------+------------|
|                |Management of multiple       |Satisfactory|Satisfactory|
|                |subcontractors               |            |            |
+------------------------------------------------------------------------+

    
Agency Report, Tab 4, TET Report, Aug. 14, 2002, at 7.  CSE received a
marginal rating under the designer experience subfactor because CSE's
proposed design subcontractor had no specific experience with firing
ranges.  CSE's marginal rating for the general management structure
subfactor reflected the evaluators' judgment that CSE's organizational
chart lacked detail and that there was no discussion of the firm's
design/build strategy.  Id. at 6.
    
CSE submitted the lowest price of $2,558,716, and KCI submitted the next
low price of $4,875,000.  The government estimate was $4,325,100, and the
third offeror submitted a price of $4,910,256.  Agency Report, Tab 5,
Price Evaluation Team (PET) Report, Aug. 16, 2002, at 2.  The PET
concluded that CSE's price was unreasonably low, stating that:
    
This low offeror is CSE from Rolla, Missouri, which is approximately 35
miles from Fort Leonard Wood.  This project is a design/build, which
implies a certain amount of impreciseness.  Also, no internal information
was supplied on the proposals and further internal evaluation is not
possible at this point.  The [government estimate] was and is perceived as
being reliable.[1]
It is advised that the low proposal by CSE be ask[ed] to verify their
proposal.  If this proposal is verified, it is believed there is
sufficient reason to not consider the proposal fair and reasonable based
on technical evaluation criteria in the RFP.
Likewise, it is not reasonable to define the two high firms (KCI and [the
third offeror]) as not fair and reasonable.
While there is significant variation in the individual bid items, there is
not specific indication of unbalanced bidding.
Id. at 3-4.  The PET concluded that KCI proposal was *most desirable* from
the standpoint of price.  Id. at 4.  CSE was not asked to verify its
price.
    
The evaluation results were provided to the source selection authority
(SSA), who determined that *KCI's technical proposal was markedly superior
to [CSE's] and [the other offeror's] proposals.*  Agency Report, Tab 9,
Source Selection Decision, at 3.  With respect to CSE's proposal, the SSA
stated that:
    
CSE's price proposal was significantly below both the Government Estimate
and all other proposals.  CSE was the lowest priced proposal at 59% of the
Government Estimate.  This price proposal is too low and reflects a lack
of understanding of the requirements of this project.  CSE is considered
to be the second best qualified offeror for this effort.  However, with
the two [technical] subfactor rankings of *marginal,* and an unreasonably
low price, I am unwilling to select this proposal.
Id. at 2.
    
Award was made to KCI on the basis of initial proposals, and this protest
followed.  Performance of KCI's contract has been stayed pending our
decision in this matter.
    
CSE disputes the agency's determination that the firm's proposed price was
unreasonably low and reflected a lack of understanding of the requirements
of the project.  In this respect, CSE has provided detailed cost
information to show how its proposed price was calculated.  This
information was not requested by the RFP nor seen by the Corps before its
source selection decision.
    
Before awarding a fixed-price contract, an agency is required to determine
that the price offered is fair and reasonable.  Federal Acquisition
Regulation (FAR) S: 15.402(a).  An agency's concern in making a price
reasonableness determination focuses primarily on whether the offered
prices are higher than warranted, and the results of the analysis may be
used in negotiating reasonable prices.  See McDonnell Douglas Corp.,
B-259694.2, B‑259694.3, June 16, 1995, 95-2 CPD P: 51 at 9. 
Although not required, an agency may also provide for a price realism
analysis in a solicitation for the award of a fixed-price contract for the
purpose of assessing whether an offeror's low price reflected on its
understanding of the contract requirements or the risk inherent in an
offeror's approach.  WorldTravelService, B-284155.3, Mar. 26, 2001, 2001
CPD P: 68 at 3; PHP Healthcare Corp., B‑251933, May 13, 1993, 93-1
CPD P: 381 at 5.  Where there is no relevant evaluation criterion
pertaining to realism or understanding, a determination that an offeror's
price on a fixed-price contract is too low generally concerns the
offeror's responsibility, i.e., the offeror's ability and
capacity to successfully perform the contract at its offered price.  See
Possehn Consulting, B‑278579, Jan. 9, 1998, 98-1 CPD P: 10 at 3;
Envirsol, Inc., B-254223, Dec. 2, 1993, 93-2 CPD P: 295 at 5. 
    
Here, there was no technical or price evaluation factor providing for the
evaluation of the offerors' understanding of the requirements.  The price
evaluation factor provided only for the evaluation of the *reasonableness*
of the proposed price (that is, whether the price was unreasonably high)
and for whether the price proposal was unbalanced, which is not contended
here.  See RFP amend. 2, at 27-28.  Moreover, the RFP did not request cost
or pricing information or any other information that would allow the
agency to determine that a low proposed price reflected a lack of
understanding of the contract requirements.[2]
    
The agency's apprehension that CSE's price was too low would appear to
concern the firm's responsibility, that is, whether CSE could
satisfactorily perform at its proposed price, Possehn Consulting, supra,
at 4, or whether CSE may have made a mistake in its proposed price.  Since
CSE is a small business concern, if the agency believed that CSE could not
satisfactorily perform the contract at its proposed price, the Corps was
required to refer this finding of non-responsibility to the Small Business
Administration (SBA) for that agency's review under its certificate of
competency procedures.[3]  Id.  If the agency believed CSE had made a
mistake in its proposed price, it was required to request that CSE verify
its price.  FAR S: 15.306(b)(3)(i), which incorporates the bid mistake
rules of FAR S: 14.407-3 (contracting officer should obtain sufficient
information to be reasonably assured that the bid confirmed is without
error).  As noted above, the agency did not request verification here.
    
In any case, here, the record establishes that CSE's proposal was not
considered for award by the SSA based primarily upon her judgment that
CSE's proposed price was unreasonably low and reflected a lack of
understanding of the contract requirements.  See Agency Report, Tab 9,
Source Selection Decision, at 2.  That is, although CSE was considered to
be the *second best qualified offeror,* CSE was not selected because of
its two marginal ratings and *unreasonably low* price.  Id.  In performing
the price/technical tradeoff required by the RFP, the SSA did not consider
CSE's significantly lower price to be an advantage to be weighed against
the awardee's higher technical rating.  We think that if CSE's price
advantage had been properly weighed in the agency's price/technical
tradoff analysis, it would have had a reasonable possibility of being
selected for award.  Accordingly, we sustain CSE's protest on this basis.
    
CSE also objects to the marginal and satisfactory ratings its proposal
received under the corporate experience and management plan factors.  With
respect to the marginal rating the firm received under the general
management structure/plan subfactor to the management plan factor, CSE
complains that its proposed design/build strategy is clearly described,
and is *simple, effective and economical.*  Protester's Comments at 4. 
The Corps responds that CSE's proposal did not provide sufficient
information in response to this factor.
    
From our review of the proposals we find that neither CSE nor KCI provided
much of the information requested by the RFP for this subfactor.  In fact,
the consensus evaluation documentation indicates that both firms'
proposals were similarly sparse.  Specifically, the evaluators, in rating
CSE's proposal as marginal under this subfactor, noted as weaknesses that:
    
Proposal does not indicate available manpower and utilization for a
project of this size.  The proposal does not provide much information or
detail on design-build management strategy and tactics.  The
organizational chart does not show that the firm has an understanding of
the design-build process or of [Corps] [quality control (QC)]/Safety
requirements.  No QC/Safety officer was identified.
Agency Report, Tab 7, CSE Consensus Rating Sheet for the General
Management Structure and Plan Subfactor.
    
The evaluators, in rating KCI's proposal as satisfactory under this
subfactor, noted as weaknesses that:
    
Organizational chart is simple and lacks detail.  There is limited
discussion on design/build strategy.  The chain of command is not clear
from the organizational chart.
Agency Report, Tab 7, KCI Consensus Rating Sheet for the General
Management Structure and Plan Subfactor. [4]  The evaluators also noted as
a general comment that KCI had not identified its key personnel.  Although
not mentioned by the evaluators, KCI's proposal, like CSE's, does not
indicate available *manpower and utilization.*
    
Given that a *marginal* rating reflected a proposal that lacked detail and
left issues requiring clarification, see Agency Report, Tab 3, Source
Selection Plan, at 26, we fail to see why KCI received a higher rating
than CSE under this factor.  Indeed, our review of the record, including
the proposals, suggests that both proposals' responses in this area were
similarly sparse.  Accordingly, we think that the Corps should review its
evaluation ratings under this subfactor and ensure that the two firms are
treated equally.
    
With respect to the other evaluation ratings that CSE received, and
specifically the marginal rating the firm received under the designer
experience subfactor to the corporate experience factor, we find no basis
from our review of the record to question the agency's evaluation
judgment.  For example, the RFP's proposal preparation instructions stated
with regard to the designer experience subfactor:
    
Designer experience with projects of similar type, size, and complexity. 
For this [sub]factor, a project of similar type, size and complexity is
considered to be a firing range, or complex of pre-engineered buildings
and facilities, with site improvement work and construction similar to a
firing range facility that incorporates most or all of these features: 
standardized range[] design; modernized target system(s)[;] control tower;
latrine facilities; ammunition facilities; classroom facilities; and
covered bleacher facilities.
RFP amend. 2, at 19.  Although CSE complains that it should have received
a higher rating under this subfactor, the protester admits that its
proposed design subcontractor does not have any experience designing
firing ranges, nor does the protester argue that its proposed
subcontractor's experience is of similar type, size, and complexity to the
contract work, as defined by the solicitation.  Although CSE clearly
disagrees with the agency's evaluation of its proposal under the designer
experience subfactor and certain other subfactors, its disagreement does
not show that the agency's evaluation of these subfactors was
unreasonable.  See UNICCO Gov't Servs., Inc., B-277658, Nov. 7, 1997, 97-2
CPD P: 134 at 7.
    
We sustain the protest.
    
We recommend that the Corps assess CSE's low proposed price in accord with
this decision and evaluate the firms' proposals under the general
management structure/plan subfactor.  If the agency believes that CSE may
have made a mistake in its proposed price, that should be handled in
accordance with FAR S: 15.306(b)(3)(i).  If CSE is found to be
nonresponsible, this matter should be referred to the SBA for that
agency's review.  If CSE is found to be responsible, the Corp should
perform a new price/technical tradeoff analysis that gives CSE credit for
the firm's low proposed price.  If a firm other than KCI is selected for
award, KCI's contract should be terminated and award made to that other
firm.  We also recommend that CSE be reimbursed the reasonable costs of
filing and pursuing the protest.  4 C.F.R. S: 21.8(d)(1) (2002).  CSE
should submit its certified claim for costs, detailing the time expended
and costs incurred, directly to the Corps within 60 days of this decision.
    
Anthony H. Gamboa
General Counsel
    
    

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

   [1] The PET chair prepared the government estimate.  Agency Report, Tab
16, Declaration of PET Chair, Oct. 11, 2002, at 1.
[2] The submission of a *below-cost* price is not by itself legally
objectionable.  See Arctic Slope World Servs., Inc., B-284481, B-284481.2,
Apr. 27, 2000, 2000 CPD P: 75 at 13.
[3] There is no evidence in the record that the Corps considered CSE to be
non-responsible or performed any analysis to determine whether CSE had the
necessary resources to perform at its proposed price.
[4] The consensus rating sheet also identifies as a deficiency (that is,
*omitted material required by the RFP*) that KCI is *[m]issing the
design/build strategy.*  There is no explanation in the record to
reconcile the evaluators' inconsistent consensus comments that KCI's
design/build strategy was missing rather than limited.