TITLE:  PharmChem, Inc., B-291725.3; B-291725.4; B-291725.5, July 22, 2003
BNUMBER:  B-291725.3; B-291725.4; B-291725.5
DATE:  July 22, 2003
**********************************************************************
PharmChem, Inc., B-291725.3; B-291725.4; B-291725.5, July 22, 2003

   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:    PharmChem, Inc.
    
File:             B-291725.3; B-291725.4; B-291725.5
    
Date:              July 22, 2003
    
Joseph P. Hornyak, Esq., and Hector Garcia-Santana, Esq., Sonnenschein
Nath & Rosenthal, for the protester.
Tenley A. Carp, Esq., and Karen Yankosky, Esq., McGuire Woods, for
Scientific Testing Laboratories, Inc., an intervenor.
Rafael A. Madan, Esq., John L. Pensinger, Esq., and Linda Fallowfield,
Esq., Department of Justice, for the agency.
Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Agency's evaluation of offeror's proposal of [deleted] to staff three
key personnel positions as acceptable was unobjectionable where
solicitation did not prohibit proposed staffing plan, agency ensured
offeror understood requirements, and agency considered performance risk.
    
2.  Protest that contracting agency conducted inadequate and unequal
discussions as between the protester and awardee is denied where record
shows that agency properly tailored discussions to each offeror, and
provided each the opportunity to revise its proposal.
    
3.  Awardee's proposal of a labor rate of $0.00 for certain personnel in
procurement for award of time-and-materials contract was unobjectionable
where agency conducted price realism evaluation that encompassed
consideration of awardee's ability to perform while furnishing the
affected personnel at no cost to the government.
    
4.  Where agency reasonably determined that offerors' proposals were
technically equivalent notwithstanding protester's slightly higher rating
under single technical factor, agency properly considered evaluated price
as the determining factor in its *best value* determination.
    
DECISION
    
PharmChem, Inc. protests the award of a contract to Scientific Testing
Laboratories, Inc. (STL) under request for proposals (RFP) No.
OJP-2002-R-002, issued by the Department of Justice (DOJ) for laboratory
testing and technical assistance.  PharmChem challenges the technical and
price evaluations and the adequacy of discussions.
    

   We deny the protest.
    
BACKGROUND
    
The RFP sought proposals to provide all personnel, equipment and materials
necessary to support the National Institute for Justice's (NIJ) Arrestee
Drug Abuse Monitoring (ADAM) Program.  The NIJ is the research and
development agency for DOJ and is authorized to conduct research,
development, evaluation, and dissemination programs to improve and
strenghten the systems of criminal justice programs in the United States. 
Tasks to be performed in support of the ADAM program include data
analysis, results interpretation, and on-time delivery of data results to
the NIJ and ADAM data collection contractor (DCC).  The data comes
primarily from the collection and analysis of voluntary and anonymous
interviews and urine specimens from adult and juvenile arrestees.  Each
specimen will be screened for a minimum of 10 drugs. 
    
The RFP contemplated the award--on a *best value* basis--of a fixed-price,
indefinite‑delivery, indefinite-quantity, and time-and-materials
contract for a base year, with 3 option years.  Proposals were to be
scored on an adjectival basis--outstanding, good, acceptable, marginal or
unacceptable--under three factors, listed in descending order of
importance:  technical capability, past performance, and price.  Technical
capability was to be evaluated on the basis of three equally weighted
subfactors:  organization and management approach; technical
approach/quality assurance; and staff qualifications.  The non-price
factors combined were significantly more important than price, but the
degree of importance of price was to increase if the proposals were
relatively equal. 
    
Four offerors, including PharmChem and STL, submitted proposals.  The
source evaluation board (SEB) rated the two firms' proposals good
overall.  The other two proposals were rated acceptable.  STL proposed the
lowest price, approximately 18 percent lower than PharmChem's.  The agency
subsequently resolved certain weaknesses in STL's proposal through
clarifications, but did not communicate with PharmChem or the other
offerors.  Based on the SEB's evaluation of PharmChem's and STL's
proposals as technically equal, the source selection authority (SSA)
determined that STL's low price was the determining factor and awarded it
the contract. 
    
After receiving notice of the award and a debriefing, PharmChem filed a
protest with our Office in November 2002.  PharmChem raised a number of
assertions, including that the agency improperly allowed STL to submit a
revised proposal and that the best value determination was flawed.  The
agency proposed corrective action in the form of reopening the
procurement, conducting discussions, obtaining revised proposals, and
making a new best value determination.  Based on this proposed action,
PharmChem withdrew its protest (B-291725, B-291725.2, Dec. 20, 2002).
    
The agency conducted discussions with PharmChem, STL and a third offeror,
and received revised proposals from them.  The final evaluations were as
follows: 
    

   +------------------------------------------------------------------------+
|                                  |PharmChem    |STL        |Offeror 3  |
|----------------------------------+-------------+-----------+-----------|
|Technical Capability (overall)    |Good         |Good       |Acceptable |
|----------------------------------+-------------+-----------+-----------|
|  Organizational & Mgmt Approach  |Outstanding  |Good       |Acceptable |
|----------------------------------+-------------+-----------+-----------|
|  Technical Approach              |Good         |Good       |Acceptable |
|----------------------------------+-------------+-----------+-----------|
|  Staff Qualifications            |Good         |Good       |Good       |
|----------------------------------+-------------+-----------+-----------|
|Past Performance                  |Excellent    |Excellent  |Excellent  |
|----------------------------------+-------------+-----------+-----------|
|Evaluated Price                   |$4,030,787   |$3,968,230 |$4,303,722 |
+------------------------------------------------------------------------+

    
In making the new award determination, the SSA considered that both
PharmChem and STL offered a large number of value-added strengths, with no
weaknesses or deficiencies, and that they remained essentially equal
technically.  The SSA therefore again determined that STL's proposal
represented the best value based on its low price.  After receiving notice
of the award and a debriefing, PharmChem filed this protest.[1]
    
TECHNICAL EVALUATION
    
In reviewing a protest of an agency's proposal evaluation, it is not our
role to reevaluate proposals.  Rather, we will consider only whether the
evaluation was reasonable and consistent with the terms of the
solicitation and applicable statutes and regulations.  CWIS, LLC,
B‑287521, July 2, 2001, 2001 CPD P: 119 at 2.
    
Key Personnel
    
PharmChem asserts that the agency should have downgraded STL's proposal,
or rejected it as noncompliant, under the staffing qualifications
subfactor.  Specifically, noting that the RFP identified three key
personnel positions--data manager, chemist, and technical writer--and the
fact that STL proposed [deleted]  to fill [deleted] positions, PharmChem
maintains that the proposal violated the terms of the RFP, and that this
should have been reflected in the evaluation.
    
PharmChem's argument is without merit.  While the RFP identified three
positions that were considered to be key personnel, it neither required
the proposal of [deleted]  to fill them, nor prohibited offerors from
proposing [deleted].  RFP S:S: C‑100.7; H.2A.  Rather, the RFP
required only that offerors propose personnel who met the stated
qualifications; provide an adequate work force; and provide fully
qualified back-up staff.  RFP S:S: C‑100.8, C‑100.10.  The
resume of the individual STL proposed for [deleted]  indicated that he was
qualified to perform [deleted], since he met or exceeded the experience
and education requirements in the RFP.  STL also proposed [deleted] *to
ensure uninterrupted contract performance.*  STL Revised Proposal at TCP
3.  The agency verified STL's proposed staffing plan during discussions,
and the SEB ultimately rated STL's proposal good under the staff
qualifications subfactor.  Since there is nothing in the record to
indicate that STL violated or otherwise failed to meet the RFP's staffing
requirements, the evaluation was reasonable.
    
Performance Risk
    
PharmChem asserts that the agency failed to consider the performance risk
associated with STL's proposal to fill [deleted]  positions with
[deleted], maintaining that the [deleted]; PharmChem notes in this regard
that the RFP prohibited the contractor from charging more than 40 hours
per week for any individual.  PharmChem also points out that the [deleted]
proposed and the [deleted] have other company responsibilities at STL: 
the proposed [deleted] is the company's research director, and the
proposed [deleted] is a co‑owner, officer, corporate director, and
part-time forensic laboratory director. 
    
This argument is without merit.  The SEB considered each offeror's
proposed staffing plan to determine if it met the RFP's requirements or
posed any performance risks.  Second Supplemental Agency Report (AR) at
4.  As part of that evaluation, the contracting officer reviewed STL's
staffing plan and observed that [deleted] would provide the support
required in the NIJ statement of work . . . [and would] be assisted by a
team of support personnel.*  Source Selection Decision at 6.  The agency
also points out that the combined level of effort for the [deleted] was
estimated at 1,800 hours for the base year, 1,000 hours for the first
option, 900 hours for the second option, and 800 hours for the third
option.  Based on a 2,080-hour work year (40 hours x 52 weeks), the agency
reasons, [deleted]  can perform [deleted]  with time left over, and the
proposed [deleted]  will be available to perform if unforeseen
difficulties arise.  We find nothing unreasonable in the agency's
findings; accordingly, there is no basis for us to object to this aspect
of the evaluation.
    
Evaluated Strengths
    
PharmChem asserts that the SEB arbitrarily assigned 33 strengths to both
its and STL's proposals, and that STL's proposal was not entitled to some
of the identified strengths.  For example, the protester alleges that the
SEB double-counted the same strength under two subfactors for STL and gave
STL credit for proposing to subcontract a sweat patch test to PharmChem,
but did not assign a strength to the protester for using its own test.   
    
The evaluation was reasonable.  First, regarding the alleged double
counting, the agency noted STL's emphasis on [deleted] under both the
organization/management and ability to meet deadlines subfactors.  There
is nothing improper in an agency's finding that the same strength has
value under multiple subfactors, Teledyne Brown Eng'g, B‑258078,
B-258078.2, Dec. 6, 1994, 94-2 CPD P: 223 at 4-5, and the protester has
not shown that STL's proposed [deleted] will not have a positive effect
under both subfactors.  Further, PharmChem itself received the benefit of
a similar double counting of its strength regarding [deleted] under both
the quality control and quality control/assurance plan subfactors. 
    
The record does not support PharmChem's claim that the SEB failed to
assign its proposal a strength for its sweat patch test.  In this regard,
under the same subfactor‑-urinalysis, data reporting, and
formats--under which STL's proposal received its sweat patch strength, the
SEB assigned PharmChem's proposal the following strength:  *[t]he proposer
is well known for having developed certain new technologies in the drug
testing area (Attachment 4).*  SEB Report at 12.  Attachment 4 of
PharmChem's proposal is entitled *Urine, Saliva and Sweat Patch Collection
Procedures.*  PharmChem Proposal at 84.  Thus, although the SEB did not
specifically reference the sweat patch test, it is apparent that it
accorded PharmChem's proposal credit for this technology. 
    
PharmChem also asserts that the agency irrationally rated as a strength
STL's proposal to [deleted] test results by using [deleted] immunoassay
test, [deleted].[2]  PharmChem maintains that [deleted] in fact will
provide no benefit to the government, since [deleted] would be similar,
and thus likely would produce similar results.  To the extent they
produced different results, PharmChem continues, [deleted] would skew the
statistical results because only [deleted] would be tested [deleted]. 
Further, use of the [deleted] would deprive the government of confirmation
of amphetamines by the more accurate gas chromatography/mass spectrometer
(GC/MS) testing method.
    
The evaluation was reasonable.  The agency determined that [deleted] would
be beneficial because [deleted], may eliminate certain false positive
results attributable to an assay's cross-reaction with chemically-similar
substances.  While the agency acknowledges that [deleted], it maintains
that it would not necessarily do so, and also points out that the
government would have the flexibility either to select [deleted] for
detecting drugs of abuse, or to use [deleted] for research analysis.  With
regard to GC/MS confirmation testing of amphetamine-positive specimens,
STL explains, and its proposal specifically provides, that it will
*[c]onfirm all specimens screened positive for amphetamines . . . by
GCMS.*  STL Second Supplemental Comments at 12; Proposal at 18.  In fact,
STL further explains, [deleted].  STL Second Supplemental Comments at 12. 
Since the agency was fully aware of both the potential statistical impact
of [deleted] and the need for flexibility in determining when and whether
such tests and results will be considered, we think it reasonably rated
the proposed [deleted] as a strength based on the potential benefit of
eliminating [deleted] test results. 
    
DISCUSSIONS
    
PharmChem asserts that the agency provided it with inadequate and unequal
discussions with regard to the data manager, a key personnel position. 
Specifically, the protester notes that, during discussions, the agency
provided STL with a *description of the requirement* (AR, Tab 50), after
which STL revised its price proposal to eliminate any cost for the data
manager.  From this, PharmChem deduces that the agency must have provided
STL with information that allowed STL to determine that it could cover the
data manager position in its overhead costs instead of billing for it
separately.  PharmChem maintains that the agency was required to provide
the same information to it when the agency reopened negotiations.
    
In negotiated procurements, the scope and extent of discussions with
offerors in the competitive range are a matter of contracting officer
judgment.  Federal Acquisition Regulation (FAR) S: 15.306(d)(3);
Biospherics, Inc., B-285065, July 13, 2000, 2000 CPD P: 118 at 5.  While
offerors must be given an equal opportunity to revise their proposals, and
the FAR prohibits favoring one offeror over another, discussions need not
be identical; rather, discussions are to be tailored to each offeror's
proposal.  FAR S:S: 15.306(d)(1), (e)(1); WorldTravelService, B-284155.3,
Mar. 26, 2001, 2001 CPD P: 68 at 5-6.
    
We find no improprieties in the discussions here.  The record shows that,
prior to the original award decision, the agency sought clarification of
STL's proposal of $0.00 for the chemist position and the accuracy of other
figures.  AR, Tabs 46-47.  In a subsequent contact with STL, the agency
clarified the role of the data manager and STL determined that it could
absorb data manager costs in its overhead without charging the
government.  AR, Tab 9 at 2.  According to the agency and STL, the
agency's communication in this matter consisted of simply confirming that
STL understood the data manager's role in the ADAM requirement; it did not
involve discussion of the appropriate labor rate to charge.  Second
Supplemental AR at 2; STL Second Supplemental Comments at 4.  Based on
this record, there is no basis to conclude that STL's proposal regarding
the data manager was the result of any coaching by the government; rather,
STL's decision to reduce the rate for the data manager appears to have
been based on its own business judgment.  This being the case, and since
PharmChem, as the incumbent, was well aware of the requirements for the
data manager, there was no need for the agency to provide PharmChem with
discussions in this area. 
    
PRICE EVALUATION
    
PharmChem asserts that the agency failed to perform a proper price realism
analysis of STL's proposed labor rates, in accordance with RFP S: M.5. 
Specifically, citing the RFP's requirement for total compensation plans
and fully loaded rates for all key personnel, the protester concludes that
STL's proposed rate of $0.00 for the data manager and chemist should have
been found unrealistic. 
    
As with fixed-price contracts, where, as here, the award of a fixed-rate
contract is contemplated, the *realism* of offerors' proposed labor rates
is not ordinarily considered, since a fixed-rate contract, like a
fixed-price contract, places the risk and responsibility for contract
costs and resulting profit or loss on the contractor.  See WinStar Fed.
Servs., B-284617 et al., May 17, 2000, 2000 CPD P: 92 at 9.  However, an
agency may, at its discretion, provide for the use of a price realism
analysis in a solicitation for the award of a fixed-rate or fixed-price
contract to assess the risk in an offeror's approach.  Id.; PHP Healthcare
Corp.; Sisters of Charity of the Incarnate Word, B-251799 et al., May 4,
1993, 93-1 CPD P: 366 at 5.  The nature and extent of an agency's price
realism analysis are matters within the sound exercise of the agency's
discretion.  Cardinal Scientific, Inc., B-270309, Feb. 12, 1996, 96-1 CPD
P: 70 at 4. 
    
The price realism evaluation here was reasonable.  The agency evaluated
each line item and the total price for each proposal and compared them
with its independent estimate and with other offerors' prices.  The agency
noted STL's proposal of a $0.00 rate for the two personnel positions and
specifically raised the matter in discussions.  In response, STL's revised
proposal explained: 
    
STL's decision not to charge the government directly or indirectly in the
base year or in any of the option years for CLINs 1014 and 1015 is a
business decision and it is based on a realistic understanding of the work
to be performed under this contract.  STL is not [deleted] to obtain this
particular contract or any future contract.
STL Proposal at TCP 1.  STL also included the requisite total compensation
plan, as well as salary and benefit packages for the proposed labor
categories.  The contracting officer reviewed this information and
concluded that, overall, the proposed compensation was fair and in line
with market prices.  AR, Tab 34, at 5.  Proposal of below-cost
rates--including a rate of $0.00--for certain labor categories, is
permissible in a fixed-rate environment, even where, as here, the RFP
requires offerors to propose fully-loaded rates.  GTSI Corp.,
B‑286979, Mar. 22, 2001, 2001 CPD P: 55 at 5; ORI, Inc.,
B‑215775, Mar. 4, 1985, 85‑1 CPD P: 266 at 4.   Having
reviewed STL's labor pricing and having ensured that STL understood the
ramifications of its pricing strategy, the agency fulfilled its
responsibility to conduct a reasonable analysis of the challenged prices. 
    
Unbalanced Pricing
    
In a related argument, PharmChem asserts that the agency should have
rejected STL's proposal as unbalanced.  Again, noting that STL proposed
$0.00 for some labor rates, PharmChem concludes that other line items were
necessarily overstated to compensate for these understated rates. 
    
This argument is without merit.  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 underpricing
of one or more other line items).  Ken Leahy Constr., Inc., B-290186, June
10, 2002, 2002 CPD P: 93 at 2; see FAR S: 15.404-1(g)(1).  Where an agency
determines that a firm's pricing is unbalanced, it is required to conduct
a risk analysis to evaluate whether award to the firm will result in the
government's paying an unreasonably high price for contract performance. 
FAR S: 15.404-1(g)(2).
    
There is no basis for concluding that STL's pricing is unbalanced. 
PharmChem does not identify any specific prices that it believes are
significantly overstated and the record does not indicate that any of
STL's prices are overstated.  In this latter regard, for example, in the
base year, STL's line item prices exceed the government estimate under
only 4 of 13 line items.  Further, while STL's proposal of $0.00 for
[deleted] labor categories could be considered *understated,* such labor
rate proposals alone do not establish that a bid is unbalanced.  See SMC
Info. Sys., B‑224466, Oct. 31, 1986, 86‑2 CPD P: 505 at 5.  In
any case, even if STL's labor rate pricing evidenced unbalancing, it is
clear that the agency considered the risk involved; it specifically
inquired about STL's $0.00 labor rate pricing, and had no concern that
these rates would result in a higher contract price.  Source Selection
Decision at 6-7. 
    
SOURCE SELECTION
    
PharmChem asserts that the agency's determination that its and STL's
proposals were technically equivalent was unreasonable, and that the
source selection therefore was flawed.  Specifically, PharmChem cites the
fact that technical factors were significantly more important than price,
the fact that its proposal received a higher rating under the
organization/management technical subfactor, and the fact that its price
is less than 2 percent higher than STL's.  PharmChem concludes that the
agency should have conducted a price/technical tradeoff and determined
that its proposal's technical advantage outweighed STL's insignificant
price advantage and represented the best value.
    
Source selection officials are vested with broad discretion to determine
the manner and extent to which they will make use of evaluation results. 
Resource Mgmt. Int'l, Inc., B-278108, Dec. 22, 1997, 98-1 CPD P: 29 at 4. 
Although evaluation ratings are useful as guides, they do not mandate
automatic selection of a particular proposal.  PRC, Inc., B-274698.2,
B-274698.3, Jan. 23, 1997, 97-1 CPD P: 115 at 12.  Whether a given spread
between two competing proposals indicates a significant superiority of one
proposal over the other depends on the facts and circumstances of each
procurement and is primarily a matter within the discretion of the
procuring agency.  Resource Mgmt. Int'l, Inc., supra, at 4.  Where
selection officials reasonably regard proposals as being essentially equal
technically, price will become the determining factor in making award,
notwithstanding that the evaluation criteria assigned price less
importance than technical factors.  Id.; The Parks Co., B-249473, Nov. 17,
1992, 92-2 CPD P: 354 at 4.
    
The agency reasonably evaluated the proposals as technically equal.  While
PharmChem's proposal was rated outstanding, and STL's only good, under the
organization/management subfactor, this advantage was mitigated both by
the fact that this was only one of three equally-weighted subfactors under
the technical factor, and the fact that both proposals received a
significant number of strengths under the subfactor (12 for PharmChem
versus 8 for STL).  Further, it appears that three of PharmChem's
evaluated strengths duplicated other strengths.[3]  In view of these
considerations and the fact that, as discussed above, the SEB assigned the
proposals an equal number of strengths overall, there is no basis to
question the agency's conclusion that the proposals were technically
equivalent.  It follows that the agency reasonably determined that STL's
low price made its proposal the best value.[4] 
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    

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

   [1] PharmChem raises a number of arguments.  We have reviewed them all and
find that none has merit.  This decision addresses only the more
significant issues. 
[2] Immunoassay screening tests are based on reactions between an antibody
and a target drug.  Supplemental AR at 9.
[3] The three, near verbatim, duplicate strengths concerned [deleted].
[4] PharmChem also asserts that the SSA improperly considered STL's small
business status in making the award, even though it was not an evaluation
factor.  PharmChem concedes that size status was not an evaluation factor
considered by the SEB, but observes that the agency report included a
notation that the contracting officer *considered* STL's small business
status and its financial responsibility in the best value determination. 
AR at 20, n. 12.  While the source selection decision includes the
statement that *STL is a small business,* when read in context, it is
clearly a matter of factual background and not an indication that it
formed an additional basis for the SSA's finding that STL's proposal was
the best value.