TITLE: KPMG LLP, B-292624, October 27, 2003
BNUMBER: B-292624
DATE: October 27, 2003
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KPMG LLP, B-292624, October 27, 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: KPMG LLP
File: B-292624
Date: October 27, 2003
Edward J. Tolchin, Fettmann, Tolchin & Majors, for the protester.
James J. McCullough, Esq., Deneen J. Melander, Esq., and Wendy P.
Fischman, Esq., Fried, Frank, Harris, Shriver & Jacobson, for Deloitte &
Touche LLP, the intervenor.
John A. Carlo, Esq., Social Security Administration, for the agency.
Paul I. Lieberman, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest that vendor*s quotation should have been rejected for failure to
satisfy alleged solicitation requirement to provide labor rates under a
specific labor category is denied where the solicitation did not contain
mandatory labor categories, but rather invited vendors to determine the
labor mix with which they proposed to fulfill the solicitation performance
requirements.
DECISION
KPMG LLP protests the issuance under the General Services Administration
(GSA) Federal Supply Schedule (FSS) of a blanket purchase agreement (BPA)
to Deloitte & Touche LLP, under request for quotations (RFQ) No.
SSA-RFQ-03-0290, issued by the Social Security Administration (SSA). KPMG
contends that Deloitte & Touche*s quotation should have been rejected as
noncompliant with the solicitation requirements.
We deny the protest.
SSA issued the RFQ on March 31, 2003, for contract services to conduct
reviews of SSA*s financial management systems and management controls, and
special studies of selected financial management functions for the
agency*s chief financial officer. The RFQ sought quotes by April 29, and
contemplated the issuance of a BPA, under the vendor*s current FSS
contract, under which subsequent task orders will be issued, for a base
year with 4 option years. Selection was to be made on a *best value*
basis with the evaluation criteria consisting of technical acceptability
and experience, which were equal in importance; past performance, which
was less important; and price which was least important, but which could
be determinative if the difference in the other factors was slight in
comparison to the price difference. RFQ S: E(B), (C).
With respect to price, the RFQ called for quotes of prices and discounts
that were consistent with the contractor*s GSA schedule, and provided that
price would be evaluated on the basis of the overall price for the
functions required during the base year of the contract, with option year
prices to be evaluated for completeness, reasonableness, balance, and
consistency with the contractor*s GSA schedule. RFQ S: E(A)(4). The
agency received quotes from KPMG and Deloitte, both of which were
evaluated as warranting the maximum possible score under each of the three
non-price evaluation factors, and were considered technically equal.
KPMG*s base year price was evaluated as [DELETED], and its total price
including all option years was evaluated as [DELETED]. Deloitte*s base
year price was evaluated as $2,993,487.40, and its total price including
all option years was evaluated as $18,593,467.60. Agency Report (AR), Tab
E, Business Management and Cost/Price Evaluation Reports, at 5. However,
the evaluators recognized that the price difference *may be a result of
KPMG not applying escalation to Contract Years 2-5.* Id.[1] As a result,
the agency issued amendment No 6, which provided in relevant part that
overall price would be evaluated on the basis of the 5-year term of the
contract, rather than only the base year, called for *fixed prices* for
the full 5-year contract term, and required revised quotes by June 25.
RFQ amend. 6.
In response, Deloitte did not change its quote because, consistent with
its FSS schedule, Deloitte*s prices reflected a constant [DELETED] percent
labor escalation rate for each option year; KPMG revised its quote, which
had not contained any option year escalation, consistent with its FSS
schedule which provides for future adjustment based on a market index.[2]
KPMG stated that for each option year, it now *applied an escalation
factor of [DELETED] to the previous year*s labor category rates,* and that
it *understand[s] that this change will provide the Social Security
Administration (SSA) with greater contract price certainty by providing
firm fixed labor category rates for each labor category over the life of
the contract, and an estimated firm fixed price for each contract year,
based on the estimated labor hours detailed in your solicitation.* AR,
Tab B, KPMG Revised Quotation, Cover Letter. In the revised quote, KPMG*s
base year price was unchanged. However, its total price including all
option years increased to [DELETED]. There were no changes to either
vendor*s technical quotation. The contracting officer concluded that
Deloitte*s quotation represented the best value on the basis that its
quotation had the highest technical rating, which was technically equal to
KPMG*s quotation, and that Deloitte quoted the lower price. AR, Tab S,
Summary of Award, at 4. KPMG was advised of this determination on June
30, and a BPA was issued to Deloitte on July 3.
After filing an agency-level protest on July 7, KPMG sought a debriefing
on July 8. While the SSA contracting officer advised KPMG that it was not
entitled to a statutory debriefing, he met with KPMG representatives on
July 17 to discuss the award *in the spirit of free and open competition,*
AR at 7, and at that meeting also provided KPMG with a written denial of
its agency-level protest. KPMG filed this protest with our Office on July
22, and as clarified in its subsequent submissions, alleges that the
agency improperly failed to reject Deloitte*s quotation as noncompliant
because of Deloitte*s alleged failure to quote prices for security
analysts, which KPMG characterizes as a mandatory labor category.
Supplemental Protest at 1.[3] In particular, KPMG argues that the RFQ
specifically requires vendors to provide pricing for security analysts,
which KPMG contends are critical to contract performance, and that
Deloitte failed to provide any labor rates under this category, as a
result of which the agency was required to reject Deloitte*s quote.
Where, as here, an agency treats the selection of vendors under the FSS as
a
competition in a negotiated procurement, and a protest is filed
challenging the outcome of the competition, we will review the agency's
actions to ensure
that the evaluation and selection determination was fair, reasonable and
consistent with the terms of the solicitation. Garner Multimedia, Inc.,
B-291651, Feb. 11, 2003, 2003 CPD P: 35 at 3. While KPMG*s argument is
based on the premise that Deloitte*s quote failed to satisfy the RFQ
requirement to provide pricing for security analysts, the RFQ does not
contain such a requirement. Rather, the RFQ calls for contractors to
furnish the necessary personnel to perform the specified reviews,
including the security review component, and explicitly permits the vendor
to *specify the [l]abor [m]ix, estimated hours for each category and
rates.* RFQ at 4. The RFQ does contain a pricing table which lists a
number of positions, including *security analyst,* as well as a line
permitting the entry of *additional positions ([c]ontractor to [l]ist.)*
RFQ at 5. However, nowhere in the RFQ is there a requirement that
vendors quote or price any particular labor category. Further, there is
no requirement that any particular number of hours be specified for any of
the labor categories. The agency explains that the flexibility afforded
to the vendors to provide a labor mix and the fact that no specific labor
categories were required by the RFQ reflect the agency*s intent to have
the pricing table simply provide representative descriptions of positions,
which did not correlate directly with the labor categories contained in
either KPMG*s or Deloitte*s GSA FSS contracts for these services.
Supplemental Agency Report at 5.
In response to the RFQ, Deloitte submitted a pricing table that included
most, but not all, of the listed categories and certain additional
categories, but which did not include hours or pricing for a security
analyst category. KPMG*s price list included pricing for all of the labor
categories, and certain additional categories as well. KPMG argues that
by failing to provide pricing for the security analyst category, Deloitte
failed to satisfy a solicitation requirement to provide these analysts.
We disagree.
As described above, the RFQ explicitly requested the vendors to ascertain
their labor mix, and did not require any of the listed labor categories.
The fact that no set or minimum number of hours were called for in the
pricing sheet confirms that the categories were not requirements since an
entry of *zero* would be completely consistent with the table format.
Further, the RFQ sought quotes based on the vendors* extant FSS schedules,
which did not contain these precise labor categories. Thus, while KPMG
entered prices next to the listed labor categories in the pricing table,
it specifically stated with respect to these prices that *[h]ourly rates
are based on KPMG*s GSA Financial and Business Solutions Schedule 2003
Rates [and] . . . represent a blend of GSA Labor Categories.* AR, Tab B,
KPMG Quotation, Pricing Table. Further, while KPMG asserts that the
security analyst was a critical labor category, it added a labor category
*junior security analyst,* which contained the majority of the hours
proposed for the security analyst position. The agency reasonably
determined that Deloitte*s quotation, including its project management
plan (PMP) and resumes of the proposed individuals identified by Deloitte,
made clear that the security review work sought under these categories was
proposed to be performed by Deloitte*s FSS labor categories of senior
staff financial management services, senior staff auditing services, and
experienced consultant financial management services, which were priced in
the hours proposed by Deloitte under the listed representative labor
categories of senior financial management analyst, senior financial
management analyst II, and senior systems analyst.
In short, the record reflects that both vendors proposed pricing
consistent with the labor categories contained in their FSS schedules, and
the agency reasonably evaluated both quotations as satisfying the
representative labor categories listed in the RFQ. There is no basis for
eliminating Deloitte*s quotation as technically noncompliant with a labor
category pricing line which did not constitute a requirement, and with
respect to which KPMG*s quotation reflects a substantially similar
approach, that is, a blend of its actual FSS labor categories.
KPMG also argues that Deloitte*s quotation should have been downgraded
under the technical acceptability criterion because of the relatively
lesser experience reflected by the proposed staffing. Protest at 6.
Again KPMG misconstrues the RFQ, which provides that the evaluation of
technical acceptability would consist of a feasibility assessment of the
vendor*s *PMP to determine whether the contractor has a viable management
plan, necessary resources (personnel and facilities) to execute the plan,
and sufficient resources applied to each level of review to meet required
reporting timelines.* RFQ S: E(A). There is simply no requirement in the
RFQ for an evaluation of the relative experience of the proposed staff
(although we note that Deloitte*s quotation was actually evaluated as
providing relatively more senior staffing); further, we note that the RFQ
experience and past performance evaluation criteria explicitly call for
evaluation of the vendor, not of its proposed staff. The record reflects
that the agency performed the evaluation of the technical acceptability of
Deloitte*s quotation in a manner that was consistent with the evaluation
criteria; KPMG*s objection reflects a misreading of the evaluation
criteria, and provides no basis to object to this evaluation.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] KPMG*s option year pricing tables used the base year rates and
reserved the right to adjust the rates, and its cover explanation stated
that the proposed option year rates represent the 2003 GSA schedule rates,
and *will be adjusted in the out years (if necessary) to reflect currently
published GSA rates.* AR, Tab B, KPMG Quotation, Pricing Quotation
Assumptions, at 9.
[2] It is undisputed that these different adjustments reflect the two
choices available to FSS contractors for economic price adjustments under
GSA*s Standard Clause I-FSS-969, which calls for vendors to elect one of
the two choices for price adjustments to their schedule rates on or after
the first 12 months of the contract period.
[3] KPMG also complains that it was unfairly disadvantaged by Amendment
No. 6 because it permitted price changes only, as a result of which
Deloitte allegedly had been given an unfair advantage in structuring its
staff mix and, which *force[d] KPMG to bid capped rates and not actual
fixed rates.* Protester*s Supplemental Comments, Oct. 3, 2003, at 4.
This allegation is an untimely protest of an alleged apparent solicitation
impropriety which, under our Bid Protest Regulations, was required to be
protested before the closing time for receipt of proposals after the
allegedly defective amendment. 4 C.F.R. S: 21.2(a)(1) (2003). KPMG
asserts that the impropriety was not apparent until it learned that
Deloitte was its competitor. However, the alleged impact of the amendment
on KPMG*s proposed labor structure and pricing was obvious from the
amendment, and KPMG knew or should have known that it could face
competition from an FSS competitor, such as Deloitte, that had chosen the
fixed price escalation option available under the FSS schedule;
accordingly, the alleged impropriety was obvious on the face of the
amendment and KPMG*s protest of the effect of the amendment, first filed
after notice of the selection of Deloitte to receive the BPA, is untimely
and not for consideration on the merits.