TITLE:  M.K. Taylor, Jr. Contractors, Inc., B-291730.2, April 23, 2003
BNUMBER:  B-291730.2
DATE:  April 23, 2003
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M.K. Taylor, Jr. Contractors, Inc., B-291730.2, April 23, 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:    M.K. Taylor, Jr. Contractors, Inc.
    
File:             B-291730.2
    
Date:              April 23, 2003
    
Robert E. Korroch, Esq., and James J. Reid, Esq., Williams Mullen Clark &
Dobbins, for the protester.
Patrick H. O'Donnell, Esq., Terence Murphy, Esq., Stanley G. Barr, Jr.,
Esq., and Mary Elizabeth Anderson, Esq., Kaufman & Canoles, for Pembroke
Construction Co., Inc., an intervenor.
Clarence D. Long, III, Esq., Department of the Air Force, for the agency.
Jacqueline Maeder, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Where agency's required quantity of services increased substantially after
issuance of solicitation, agency improperly failed to issue amendment
notifying all offerors of the changed requirements; however, since, by
protester's own calculations, increased quantities would not have led
protester to reduce its price sufficiently to give it a substantial chance
of receiving the award, protester was not prejudiced by agency's actions
and there thus is no basis to sustain protest.
DECISION
    
M.K. Taylor, Jr. Contractors, Inc. protests the award of a contract to
Pembroke Construction Company, Inc. under request for proposals (RFP) No.
F44600-02-R0107, issued by the Department of the Air Force, 1st
Contracting Squadron, Langley Air Force Base, Virginia, for repair of
pavements at the base.  Taylor argues that the agency improperly failed to
amend the solicitation to reflect changed requirements and that Pembroke
submitted unbalanced prices.
    

   We deny the protest.
    
The solicitation, issued July 15, 2002, provided for the award of a
fixed-price, indefinite-delivery, indefinite-quantity (ID/IQ) contract for
a base year, with 5 option years.  RFP at 34.  The contractor was to
maintain the paved areas on the base, including, among other things,
excavation and hauling; surface preparation; repair of existing concrete
sidewalks, curbs and gutters, and airfield pavement slabs and spalls;
repair of airfield box drains; painting of stripes on the airfield;
resetting manholes and catch basins; and pothole repair.  RFP,
Specifications, S: 01110, at 1.  All services would be performed in
response to negotiated delivery orders issued on a fixed-price basis.  RFP
at 10-11.
    
Offerors were to submit unit and extended prices for each of 70 contract
line item numbers (CLINs) covering the various tasks for the base year and
each option year.  RFP at 3.  Each CLIN contained an estimated quantity. 
Relevant here, for each of the 6 years, CLIN A001CQ, Remove and Replace 3
Foot Box Drain, listed an estimated quantity of 200 linear feet; CLIN
A0001AC, Hauling, listed an estimated quantity of 1,920 cubic yards; CLIN
A001CR, Precast Concrete Manholes, listed an estimated quantity of 10; and
CLIN A001CW, Paint Runway Markings, listed an estimated quantity of 82,000
square feet.  RFP, Bid Schedule, at 1-15.  In addition to the estimated
quantity for each CLIN, the solicitation provided a $5,000 contract
minimum guarantee for the base year and a $25,000,000 maximum for the life
of the contract.  RFP at 3. 
    
The RFP provided for award, without discussions, to the offeror whose
proposal, conforming to the solicitation, was determined to be most
advantageous to the government, based on a tradeoff between recent and
relevant past performance and price.  RFP at 38.  Past performance
included five subfactors, under each of which proposals were to be
assigned a rating/confidence level; based on these subfactor ratings, an
overall rating/confidence level then would be assigned for the factor
(exceptional/high confidence; very good/significant confidence;
satisfactory/ confidence; neutral/unknown confidence; marginal/little
confidence; or unacceptable/no confidence).  RFP at 38-39. 
      
Two proposals, Taylor's and Pembroke's, were received by the August 28
closing time, and both were rated exceptional/high confidence for past
performance.  Because the past performance ratings of the two offerors
were identical, and Pembroke offered the lower price ($21,739,615 versus
$23,082,599), the Air Force determined that Pembroke's proposal offered
the best value to the government.  It made award to Pembroke on September
23. 
    
On September 28 and 29, the agency issued seven delivery orders under the
awarded contract, several of which included CLIN quantities that exceeded
the base year and/or estimated 6-year contract quantities that had been
set forth in the RFP. 
    
INACCURATE ESTIMATES
    
Taylor cites the September delivery orders in arguing that the award to
Pembroke under the solicitation as issued was improper because the
delivery orders show that the solicitation did not reflect the agency's
true minimum needs.  Taylor notes, for example, that the solicitation
estimated a quantity of 200 linear feet of box drain work for each of 6
years, but delivery order 0006 required 5,050 linear feet of box drain
work in the base year alone.[1]  Protester's Comments, Feb. 24, 2003, at
4.  Similarly, Taylor notes that, whereas the RFP included estimated
quantities of 1,480 cubic yards of excavation, 1,920 cubic yards of
hauling, 1,140 tons of aggregate base, 4,400 square feet of petrotac
fabric, and 10 precast concrete manholes, delivery order 0006 required
that Pembroke excavate and haul 3,910 cubic yards, apply 4,930 tons of
aggregate base, use 25,330 square feet of petrotac fabric, and install
22 precast concrete manholes.  Agency Comments on Telephone Conference,
attach. 1, Revised, at 1.  Taylor asserts that the fact that these
increases were ordered just 6 days after the award demonstrates that the
agency knew before award that its requirements far exceeded the estimated
quantities in the RFP, and that, once the agency became aware of these
changes, it was obligated to amend the solicitation and provide all
offerors the opportunity to respond to the revised requirements.  First
Supplemental Protest, Jan. 14, 2003, at 3-4.  Taylor states that, had the
larger quantities been included in the RFP, it would have substantially
reduced its prices. 
    
In response, the agency explains that, in June 2002, immediately prior to
issuance of the solicitation, it planned to include the box drain work
under an existing contract with Pembroke.  Agency Report (AR), Contracting
Officer's Supplemental Statement of Facts, Tab 31, at 8.  This decision
reportedly reflected a change in the *funding philosophy* for box drain
repairs, in that the agency decided to repair all box drains under a
single delivery order rather than spread the work over several years. 
Id.  Subsequently, however, it became apparent to the agency that
Pembroke's contract's price ceiling would not accommodate all of the box
drain work, and it thus decided to award the work to whichever firm was
awarded a contract under the RFP here.  The agency asserts that, although
this would increase certain quantities substantially above the estimates
in the RFP, there was no need to change the estimates because the
increased quantities were not funded prior to the award, and thus were
uncertain.  Id. at 9.  In this regard, the agency notes that it used an
ID/IQ contract here precisely because it could not predetermine above a
specified minimum the precise quantities of supplies or services that
would be required; the agency claims it therefore properly used estimated
quantities based on *the best information available to [the agency] at the
time of solicitation preparation.*  AR, Memorandum of Law, Tab 30, at 6. 
    
We disagree with the agency.  While an ID/IQ contract does give the
government flexibility when it cannot determine its needs above a minimum
quantity in advance of contracting, the use of such a contract does not
excuse the government from actually identifying its needs.  Where an
agency's requirements change after a solicitation has been issued--even
after the submission of best and final offers and up until the time of
award--it is required to issue an amendment to notify offerors of the
changed requirements and afford them an opportunity to respond.  Federal
Acquisition Regulation (FAR) S: 15.206(a); NV Servs., B‑284119.2,
Feb. 25, 2000, 2000 CPD P: 64 at 17; Symetrics Indus., Inc., B-274246.3 et
al., Aug. 20, 1997, 97-2 CPD P: 59 at 6.  This requirement ensures that
award decisions are based on the agency's most current view of its needs,
Symetrics Indus., Inc., supra, and that proposals will be prepared on a
common basis that reflects the agency's actual needs.  Dairy Maid Dairy,
Inc., B‑251758.3 et al., May 24, 1993, 93-1 CPD P: 404 at 7-9.
    
As noted above, the record shows that the agency's funding philosophy
concerning box drain repair had changed prior to issuance of the RFP, and
that it was aware after issuance of the RFP that, if funding could be
obtained, it would order the work under the contract awarded under the
RFP.  Under these circumstances, the quantity changes should have been
communicated to all offerors through an RFP amendment.  This is
particularly the case under the circumstances here, since Pembroke had
been made aware of the increased box drain quantities through the agency's
attempt to include that work under its prior contract.  Although Pembroke
perhaps could not be certain that the additional work ultimately would be
funded, Taylor should have been furnished with equivalent information, so
that it would have had the same opportunity Pembroke had to factor this
risk into its prices.  It is undisputed by the agency that the quantity
changes at issue were significant. 
    
Notwithstanding this conclusion, we will not sustain a protest absent a
showing of competitive prejudice, that is, unless the protester
demonstrates that, but for the agency's actions, it would have had a
substantial chance of receiving award.  McDonald-Bradley, B-270126, Feb.
8, 1996, 96-1 CPD P: 54 at 3; see Statistica, Inc. v. Christopher, 102 F.
3d, 1577, 1581 (Fed. Cir. 1996). 
    
In response to our request that it address the issue of prejudice, Taylor
asserts that, due to *economies of scale,* several of its CLIN
prices--and, thus, its total price--would have been significantly lower if
it had been advised of the contemplated increased quantities.  Protester's
Comments on Telephone Conference, at 2.  However, Taylor's own
calculations show that its evaluated price would have been reduced by only
$100,270, far less than Pembroke's $1.3 million price advantage.  Id.,
attach. 1, at 7.  There thus is no basis for finding competitive prejudice
as a result of the agency's failure to apprise Taylor of the increased
quantities; it follows that there is no basis for sustaining this aspect
of the protest.[2] 
PRICING AMBIGUITY
    
Taylor maintains that the solicitation was ambiguous regarding the work
that was to be included in the box drain CLIN, and that this led Taylor to
overprice its offer relative to Pembroke's.  Specifically, Taylor claims
that it interpreted a sketch in RFP amendment No. 0007 as requiring
offerors to include in the box drain CLIN costs for items related to the
box drain work--such as hauling, excavating, and packing the drain area
with stone--despite the fact that there were separate CLINs for these
related items.  Protester's Comments, Feb. 24, 2003, at 5.  Taylor
contends that, while it included these costs in the box drain CLIN,
Pembroke did not.  By the protester's calculations, its price would be
lower than Pembroke's for the box drain work had it taken the same pricing
approach as Pembroke under this CLIN.  Id.  We need not resolve this issue
because, by Taylor's own calculations, this alleged ambiguity inflated its
bid by only $113,423 (Protester's Comments on Telephone Conference,
at 3-4); even combined with the claimed effect ($100,270) of the agency's
failure to disclose the increased quantities, Pembroke's price advantage
remains substantial.  Taylor thus was not prejudiced by any ambiguity as
to box drain pricing. [3]
    
UNBALANCED PRICES
    
Taylor points to six CLINs in Pembroke's offer--four of which allegedly
are understated, and two overstated--in arguing that the awardee's prices
are unbalanced and present an unacceptable risk to the government.  Second
Supplemental Protest, Jan. 14, 2003, at 2. 
    
Unbalanced pricing exists when the price of one or more contract line
items is significantly overstated, with the price of one or more other
line items understated, to obtain an overall acceptable or even low total
price.  FAR S: 15.404-1(g)(1).  Unbalancing typically arises either
between base period prices and option period prices or, in a solicitation
for an indefinite-quantity contract, between line items for different
goods or services.  In the latter, which is the kind of unbalancing
primarily at issue here, the accuracy of the solicitation estimates is
critical, since the unbalanced offer will become less advantageous than it
appears if the government ultimately requires a greater quantity of the
overpriced items and/or a lesser quantity of the underpriced ones.  Copy
Graphics, B-273028, Nov. 13, 1996, 96-2 CPD P: 185 at 4.  Even where
prices appear unbalanced, an agency may lawfully award a contract on the
basis of a proposal with unbalanced pricing, provided it has concluded
that the pricing does not pose an unacceptable level of risk, and the
prices the agency is likely to pay under the contract are not unreasonably
high.  FAR S: 15.404-1(g)(2); Citywide Managing Servs. of Port Washington,
Inc., B‑281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD P: 6 at 7. 
    
There is no improper unbalancing here.  While Taylor asserts generally
that the estimated quantities included in the solicitation are incorrect,
it has provided no evidence that this is the case with regard to the
estimates for the six CLINs as to which it alleges Pem4broke's prices are
high or low.  Moreover, in order for unbalancing to pose a risk to the
government, there must be overpricing of items for which the quantity
estimates are shown to be low, and underpricing of items for which the
quantity estimates are shown to be unrealistically high.  Here, Taylor has
not articulated such a correlation, and our review provides no basis to
question the agency's conclusion that Pembroke's pricing was *materially
balanced and fair and reasonable.*  AR, Contracting Officer's Supplemental
Statement of Facts, Feb. 24, 2003, at 11. 
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    

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

   [1] While Taylor's protest cites the quantities ordered under four of the
delivery orders, our discussion focuses on delivery order 0006, box
drains, because it includes a large number of line items that
substantially exceed the estimated quantities (7 of 10).  Our discussion
(below) of the potential price impact of the delivery orders is based on
five of the delivery orders; although Taylor challenges only four, its
calculations in arguing competitive prejudice include five.
[2] Taylor asserts that the agency may have materially understated other
estimated quantities.  However, the record does not support this
conclusion.  As discussed, the agency has explained that the anomaly in
its requirement for box drain repair was triggered by its *changed
philosophy* regarding this type of work.  There is no evidence that the
agency has changed its approach with regard to performing the work under
other CLINs, and the protester has not established that there is a basis
for assuming that the agency will do so.
[3] The protester states that, because it used this pricing methodology
for all CLINs, it *believes that its subtotal for the remaining CLINs
probably is overstated . . . .*  Protester's Comments on the Telephone
Conference, at 2.  However, since Taylor does not identify any specific
CLINs that it overpriced, this assertion is insufficient to establish
prejudice.