TITLE: Rodgers Travel, Inc., B-291785, March 12, 2003
BNUMBER: B-291785
DATE: March 12, 2003
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Rodgers Travel, Inc., B-291785, March 12, 2003
Decision
Matter of: Rodgers Travel, Inc.
File: B-291785
Date: March 12, 2003
Mark Pestronk, Esq., for the protester.
Clarence D. Long, III, Esq., Department of the Air Force, 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. Under solicitation for fixed-price contract that provided for a price
realism evaluation, agency reasonably evaluated awardee's low price where
it verified pricing; reviewed other contracts performed by awardee;
considered additional information regarding awardee's reliance on overhead
rates and commissions; and analyzed awardee's ability to make a profit
while paying Service Contract Act wages.
2. Where solicitation did not provide otherwise, it was proper for agency
to consider in past performance evaluation awardee's experience performing
similar services as a subcontractor.
DECISION
Rodgers Travel, Inc. protests the award of a contract to Kola Nut Travel,
Inc. (KNT) under request for quotations (RFQ) No. F29650-02-T-0084, issued
by the Department of the Air Force for travel services at Kirtland Air
Force Base (AFB), New Mexico. Rodgers challenges the agency's price
realism analysis and past performance evaluation.
We deny the protest.
The RFQ, a section 8(a) small business set-aside, sought quotes to provide
all personnel, equipment, tools, materials, supervision and other
items/services to manage and operate a commercial travel office at
Kirtland AFB. The RFQ contemplated the issuance of purchase orders for
the 10-month base period (an estimated 16,800 transactions) and six
6-month options (an estimated 12,600 transactions per option). Quotes
were to be evaluated on the basis of past performance and price, with past
performance considered more important. Past performance was to be
evaluated on an adjectival basis--exceptional, very good, satisfactory,
neutral, marginal, or unsatisfactory--and was to be based on a review of
references furnished by the vendor, as well as information independently
obtained by the agency. Price was to be evaluated for reasonableness and
realism, to determine if the proposed transaction fee was realistic for
the work to be performed and reflected a clear understanding of the
government's requirement. RFQ at 6; Proposal Evaluation Report (PER) at
6. Award was to be made to the vendor whose quote was considered most
advantageous to the government.
Six vendors, including Rodgers and KNT, submitted quotes. The agency's
evaluation included a review of vendors' past performance questionnaires
and transaction fees. The agency concluded that all vendors' prices were
reasonable and realistic, and evaluated the top three vendors' quotes as
follows:
+------------------------------------------------------------------------+
| |Past Performance |Price |
|------------------+--------------------------+--------------------------|
|Rodgers |Exceptional |$1,339,128 |
|------------------+--------------------------+--------------------------|
|KNT |Exceptional | $663,600 |
|------------------+--------------------------+--------------------------|
|Vendor 3 |Exceptional |$1,380,120 |
+------------------------------------------------------------------------+
The contracting officer determined that, because KNT's past performance
was exceptional and its price the lowest, its quote represented the best
value to the government. After receiving notice of the award and a
debriefing, Rodgers filed this protest.
PRICE REALISM
Rodgers asserts that KNT's price was not realistic. As the incumbent
vendor, Rodgers currently charges $20.00 per transaction and so concludes
that KNT's average transaction fee ($7.17 as calculated by Rodgers) must
be too low to meet KNT's costs of performance. Rodgers maintains that the
agency's analysis failed to take all of KNT's costs into account.
Where, as here, an RFP contemplates the award of a fixed-price contract,
the agency is not required to conduct a realism analysis; this is because
a fixed-price (as opposed to a cost-type) contract places the risk and
responsibility for loss on the contractor. 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. However, an agency may, as
the agency did here, provide for the use of a price realism analysis for
the limited purpose of measuring offerors' understanding of the
requirements or to assess the risk inherent in an offeror's proposal. PHP
Healthcare Corp., supra. The nature and extent of an agency's price
realism analysis ultimately are matters within the sound exercise of the
agency's discretion. Star Mountain, Inc., B-285883, Oct. 25, 2000, 2000
CPD P: 189 at 6.
Here, after concluding that all prices were reasonable, the contracting
officer examined whether the prices were realistic.[1] In concluding that
KNT's prices were realistic, the contracting officer considered the
following: KNT's specific verification of its proposed fees; its pricing
rationale, which included *very low overhead,* outsourcing of a number of
services, anticipated commissions on car and hotel reservations, and a
5‑percent commission paid by Southwest Airlines; and the fact that
Southwest currently accounts for approximately 40 percent of the Kirtland
contract travel. PER at 6-7; attach. 2.
The contracting officer did note that KNT's proposed transaction fees
(expressed as a percentage of expected revenue) were lower than those in
KNT's current contracts, but reasoned that the pricing nevertheless was
realistic. Specifically, he noted that expected commissions from
Southwest would increase the percentage as would income from hotel and car
reservation commissions. He also observed that *the estimated ticketing
revenue for [Kirtland] is three times higher than the higher of the two
contracts in the comparison, [thus,] it [was] reasonable to assume that
operating efficiencies at higher volumes would effect a lower management
fee percentage.* PER at 7. In addition, the contracting officer tested
the ability of KNT to meet the current Service Contract Act (SCA) wage
determination with and without the potential revenue from Southwest
commissions. Specifically, he calculated the highest SCA wages and
benefits for the number of employees used by Rodgers on the incumbent
work, and found that KNT would experience a loss only if no commissions
were collected from Southwest, and would earn a profit if only half of the
commissions were obtained. Since KNT was not required to pay all of its
employees at the highest rates, would not necessarily hire the same number
of employees as Rodgers, and operated with a *very low overhead,* the
contracting office concluded that KNT's prices were realistic. In view of
the contracting officer's detailed and very thorough comparisons and
considerations, there is no basis to conclude that his findings of price
realism were unreasonable.
Rodgers asserts that the contracting officer's calculations were flawed.
For example, Rodgers suggests that, even though KNT will rely on its low
overhead and commissions paid by Southwest, the agency's calculations did
not take into account other costs such as credit card processing fees and
the cost of *floating* government receivables.
The agency acknowledges that some of Rodgers' calculations are more
accurate than those originally performed by the contracting officer. As
discussed above, however, the agency undertook a detailed evaluation of
the realism of KNT's prices using information it believed was accurate to
roughly calculate the costs and the revenues that likely would be realized
by KNT during performance. The fact that more precise calculations may
have been possible does not establish that the agency's analysis was
unreasonable. Moreover, this was only one aspect of the price realism
analysis. As discussed above, the contracting officer otherwise concluded
that KNT's price was realistic based on KNT's business practices,
assumptions, and its prior performance on comparably priced contracts.
In any case, based on its own analysis using Rodgers' assumptions and
market research on transaction processing times, it remains the agency's
position that KNT's prices are realistic. In this regard, the agency
concludes that, based on a minimum of five employees paid at SCA salary
rates and performing just over three transactions per hour (some 40
percent slower than the rates indicated in the agency's market research),
the contracting officer concludes that KNT could successfully perform the
estimated number of transactions at a profit. The agency notes that the
RFQ did not require the vendor to propose a minimum number of employees to
perform the work. In our view, the contracting officer's additional
calculations confirm that his earlier realism analysis was reasonable.
Although Rodgers maintains that KNT cannot perform the work as quickly as
the agency estimated, or with so few employees, it has presented no
evidence to this effect aside from its own experience performing the
contract; this constitutes mere disagreement with the agency's analysis,
which is insufficient to establish that it was unreasonable. BFI Waste
Sys. of Nebraska, Inc., B-278223, Jan. 8, 1998, 98-1 CPD P: 8 at 2.
PAST PERFORMANCE
Rodgers asserts that the agency's evaluation of KNT's past performance as
exceptional was flawed because KNT has never performed a similar contract,
i.e., an Air Force on-site travel services or other government contract.
Rodgers maintains that consideration of KNT's past performance as a
subcontractor was improper because a subcontractor is not responsible to
the government.
In reviewing protests against allegedly improper evaluations, it is not
our role to reevaluate proposals. Rather, our Office examines the record
to determine whether the agency's judgment was reasonable and in accord
with the RFP criteria. Abt Assocs. Inc., B-237060.2, Feb. 26, 1990, 90-1
CPD P: 223 at 4.
Here, the RFQ provided for an assessment of past performance based on
information from references provided by the vendor and data independently
obtained from other government and commercial sources. RFQ at 6. The RFQ
did not require vendors to possess past performance experience as
operators of an Air Force travel office or to have performed government
contracts. Thus, there was nothing improper in the agency's considering
KNT's past performance of commercial contracts. Further, nothing in the
RFQ prohibited the agency from considering KNT's past performance as a
subcontractor, nor did it specify that such past performance would be
rated as inferior to prime contract past performance. Where, as here, the
solicitation does not provide otherwise, an agency properly may consider
an offeror's performance as a subcontractor in its past performance
evaluation. Rolf Jensen & Assocs., Inc., B‑289475.2, 289475.3, July
1, 2002, 2002 CPD P: 110 at 6.
There also was nothing unreasonable in the agency's conclusion that KNT's
performance on its prior contracts warranted an *exceptional* past
performance rating. In this regard, the agency reviewed questionnaires
for two contracts performed by KNT, one of which was a subcontract. The
questionnaire respondents rated KNT's performance, on average, as 2.6,
which translated to an exceptional rating under the RFQ's evaluation
scheme. The questionnaires also contained the following comments:
[KNT is] competitive without compromising service. Always consistent,
courteous and responsive to their customers. Very experienced and
knowledgeable of the industry requirements. Compliant with preparation
and accuracy of reports. Always met deadlines. Any modification requests
were always done without incident and rarely at the expense of the
company. Commendable ability to identify problems and correct them.
PER at 4. The contracting officer also contacted the prime contractor for
the subcontract and verified that KNT performed everything *on its own.*
We conclude that the evaluation was reasonable.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] Rodgers also asserts that the agency's price reasonableness evaluation
of KNT's low prices was flawed. However, the purpose of a price
reasonableness review is to determine whether the prices offered are
higher--as opposed to lower--than warranted. WorldTravelService, supra,
at 4 n.2. Since Rodgers asserts that KNT's prices are too low, not too
high, there is no reason to question KNT's prices on the basis of price
reasonableness.