TITLE:  Blue Rock Structures, Inc., B-293134, February 6, 2004
BNUMBER:  B-293134
DATE:  February 6, 2004
**********************************************************************
Blue Rock Structures, Inc., B-293134, February 6, 2004

   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:   Blue Rock Structures, Inc.
    
File:            B-293134
    
Date:           February 6, 2004
                          
David J. Taylor, Esq., Tighe Patton Armstrong Teasdale, for the protester.
Paul R. Smith, Esq., and Richard G. Welsh, Esq., Naval Facilities
Engineering Command, and Kenneth Dodds, Esq., and John W. Klein, Esq.,
Small Business Administration, for the agencies.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
of the General Counsel, GAO, participated in the preparation of the
decision.
DIGEST
    
1. Under request for proposals providing for award of multiple contracts,
source selection authority*s (SSA) decision to select lower technically
rated, lower-priced proposals instead of protester*s higher technically
rated, higher-priced one was inadequately documented and thus could not be
determined reasonable where SSA failed to furnish any explanation as to
why he did not consider protester*s higher-priced proposal to offer
technical advantages or why he did not consider these advantages to be
worth a price premium.
    
2. Agency properly did not apply Historically Underutilized Business Zone
(HUBZone) price evaluation preference in evaluating proposals where
HUBZone small business*s price exceeded the price of the lowest responsive
and responsible offeror by more than 10 percent.
DECISION
    

   Blue Rock Structures, Inc., a Historically Underutilized Business Zone
(HUBZone) small business, protests the award of contracts to six other
firms under request for proposals (RFP) No. N62470-03-R-0839, issued by
the Department of the Navy for construction services at the Marine Corps
Air Station (MCAS), Cherry Point, North Carolina. The protester contends
that the source selection authority*s (SSA) *best value* determination was
flawed.
    

   We sustain the protest.
    
The RFP sought proposals for general construction services and
contemplated the award of up to six
indefinite-delivery/indefinite-quantity (ID/IQ) contracts for a base and 3
option years.  In addition, the RFP described a *seed project,* i.e.,
repairs to MCAS Building 199, and sought a lump-sum price for
accomplishment of this work.[2]   The solicitation provided for award of
contracts to those offerors whose proposals were determined most
advantageous to the government, price and technical factors considered,
with technical factors significantly more important than price in the
evaluation and price to be evaluated on the basis of the price for the
seed project.  Technical proposals were to be evaluated on the basis of
three equally weighted technical factors:  past performance, management
and organization, and small business subcontracting effort.[3]  The RFP
incorporated by reference Federal Acquisition Regulation (FAR) S: 52.219-4
(Notice of Price Evaluation Preference for HUBZone Small Business
Concerns).
    
Seventeen offerors submitted timely proposals.  A technical evaluation
board (TEB) rated the proposals and forwarded its findings to a source
selection board (SSB).[4]  To arrive at final proposal ratings, the SSB
adjusted the TEB*s ratings in accordance with the following scheme:  the
ratings of the lowest priced proposal and all proposals with proposed
prices within 10 percent of the lowest proposed price were raised one step
(e.g., from Good Plus to Excellent Minus); the ratings of all proposals
with proposed prices 10 to 20 percent higher than the lowest proposed
price were not adjusted; and the ratings of all proposals with prices more
than 20 percent higher than the lowest proposed price were lowered one
step.  Ratings (both before and after adjustment) of the 10 firms rated by
the TEB as Good Minus or better were as follows:
    

   +------------------------------------------------------------------------+
|    Offeror  |  Past.  |Mgmt./Org.| Small  |Overall| Adjusted  | Price  |
|             |  Perf.  |          |  Bus.  |       |  overall  |        |
|-------------+---------+----------+--------+-------+-----------+--------|
|    Tesoro   | Good +  |   Good   |  Exc   |Good + |   Exc -   |$199,471|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Joyce    |  Exc -  |   Good   | Exc -  |Good + |   Exc -   |$210,705|
|-------------+---------+----------+--------+-------+-----------+--------|
|    CL Price |  Exc -  |   Good   | Exc -  |Good + |  Good +   |$229,100|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Sauer    |  Exc -  |  Sat +   |  Exc   |Good + |   Good    |$293,182|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Blue Rock| Good +  |  Good -  | Exc -  |Good + |   Good    |$422,000|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Shaw     | Good +  |  Good -  |  Good  | Good  |  Good +   |$204,694|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Offeror A| Good +  |  Good +  |  Sat   | Good  |  Good -   |$286,901|
|-------------+---------+----------+--------+-------+-----------+--------|
|    C Constr.|  Sat +  |  Sat +   |  Good  |Good - |   Good    |$197,000|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Offeror B|  Sat +  |  Sat -   | Exc -  |Good - |   Sat +   |$249,410|
|-------------+---------+----------+--------+-------+-----------+--------|
|    Virtexco |  Good   |  Good -  |  Sat   |Good - |   Good    |$194,167|
+------------------------------------------------------------------------+

    

    Technical Evaluation Board Report, Aug. 21, 2003, at 83; Source Selection
    Board Report, Aug. 27, 2003, at 7-9.

    
As noted in the table, because its proposed price was more than 20 percent
higher than the lowest proposed price, Blue Rock*s rating of Good Plus was
lowered to Good.  The adjustment scheme resulted in nine firms receiving
final ratings of Good Minus or better.  The SSB recommended that all nine
firms be awarded contracts.  It also recommended that the seed project be
awarded to Virtexco, which had proposed the lowest price of $194,167.
    
The SSA rejected the SSB*s recommendation for nine awards, determining
that six should be made instead.  He also *ignored the mechanics* of the
SSB*s rating adjustment process and instead performed his own
price/technical tradeoff to determine which proposals represented the best
value to the government.  SSA Memorandum for the File, Sept. 25, 2003, at
1.  The SSA concluded that awards should be made to the four firms whose
proposals the SSB had rated as Excellent Minus or Good Plus, i.e., Joyce &
Associates, Tesoro Corporation, C.L. Price & Associates, and Shaw Beneco. 
For the remaining two awards, the SSA considered the four proposals to
which the SSB had assigned adjusted ratings of Good.  He analyzed the four
proposals as follows:
    
Four firms (Sauer, Blue Rock Structures, C Construction and Virtexco) had
the next highest overall rating.  There is a clear distinction between
these four firms based on the price differential above the Government
estimate of $468,824.[5]  Using Virtexco, the lowest offeror, as the base
price of 1.0 you have
Offeror                       Tech. Rating             
Price               Price Variance
Virtexco                                 G-                   
$194,167                     1.0
C Construction                      G-                   
$197,000                     1.05
Sauer                                      G+                  
$293,182                     1.51
Blue Rock Structures           G+                  
$422,000                     2.17
    
The four offerors have price variances from 1.0 to 2.17.  Based on price
there is a clear break between Virtexco and C Construction who are very
close in price, and Sauer and Blue Rock Structures who are considerably
higher in price.  Sauer and Blue Rock Structures have price variances of
1.51 and 2.17, respectively.  The Source Selection Plan stated that
technical was significantly more important than price.  However, price
still needs to be considered in the final overall ratings.  Even though
Sauer and Blue Rock Structures are rated higher technically than Virtexco
and C Construction, when price considerations are added to the analysis,
they fall below Virtexco and C Construction overall.  This is due to Sauer
and Blue Rock Structures having large price variances from Virtexco and C
Construction.  This makes Sauer and Blue Rock Structures seventh and
eighth, respectively, of possible awards in my opinion.         
Id. at 1-2.  The SSA concluded that the remaining two awards should be
made to Virtexco and C Construction and that the seed project should be
awarded to Virtexco.
    
The protester challenges the SSA*s price/technical tradeoff decision,
arguing that the SSA inadequately documented his rationale for deviating
from the SSB*s recommendation that it be awarded a contract and for
finding that the proposals of Virtexco and C Construction represent a
better value to the government than its own.[6]
    
Where solicitations provide for award on a *best value* or *most
advantageous to the government* basis, price and technical factors
considered, agencies may make price/technical tradeoffs, and the extent to
which one is sacrificed for the other is governed only by the test of
rationality and consistency with the stated evaluation criteria.  Shumaker
Trucking and Excavating Contractors, Inc., B-290732, Sept. 25, 2002, 2002
CPD P: 169 at 6.  Where a price/technical tradeoff is made, the source
selection decision must be documented, and the documentation must include
the rationale for any tradeoffs made, including the benefits associated
with additional costs.  FAR S: 15.308.  The source selection official may
furnish the explanation in the award decision, or it may be evident from
the documents on which the source selection decision is based.  Id.  The
propriety of the price/technical tradeoff decision turns not on the
difference in the technical scores or ratings per se, but on whether the
selection official*s judgment concerning the significance of the
difference was reasonable and adequately justified in light of the RFP*s
evaluation scheme.  Johnson Controls World Servs., Inc., B-289942,
B-289942.2, May 24, 2002, 2002 CPD P: 88 at 6.  An agency that fails to
document adequately its source selection decision runs the risk that our
Office may be unable to determine that the decision was reasonable.  Id.
    
In our view, the SSA has failed to furnish an adequate rationale for his
tradeoff determination here, and thus we are unable to conclude that the
determination was reasonable.  As the excerpt from his selection decision
quoted above shows, the SSA simply concludes, without any mention of the
technical advantages of Blue Rock*s higher-rated proposal or a finding
that despite its higher rating, Blue Rock*s proposal was essentially equal
to those of Virtexco and C Construction in technical merit, that the
latter two proposals represent better value than the protester*s because
they are significantly lower in price.  A tradeoff analysis that fails to
furnish any explanation as to why a higher-rated proposal does not in fact
offer technical advantages or why those technical advantages are not worth
a price premium does not satisfy the requirement for a documented tradeoff
rationale, particularly where, as here, price is secondary to technical
considerations under the RFP*s evaluation scheme.[7]  See Preferred Sys.
Solutions, Inc., B-292322 et al., Aug. 25, 2003, 2003 CPD P: 166.
    
In addition to failing to furnish an adequate rationale for his selection
of Virtexco and C Construction for award, the SSA failed to furnish an
adequate rationale for his selection of Shaw Beneco.  The SSA justified
his selection of Shaw on the grounds that it had *a technical rating of
Good+ and low competitive pricing.*  SSA Memorandum for the File, Sept.
25, 2003, at 1.  Shaw*s technical rating of Good Plus resulted from the
SSB*s technical score adjustment scheme, however; i.e., Shaw*s original
technical rating (of Good) was raised one step as credit for its low
price.  Accordingly, the SSA in essence gave Shaw double credit for its
low price by considering both its adjusted rating and its price.  Since
Shaw*s technical rating, as unadjusted, was lower than the technical
ratings of both Blue Rock and Sauer, and its price was higher than the
prices of Virtexco and C Construction, we think that it was unreasonable
for him to select Shaw for award without comparing its combination of
technical merit and price to those of the other four offerors.
    
Next, the protester argues that the agency improperly failed to apply the
HUBZone price evaluation preference (PEP) provided for in 15 U.S.C. S:
657a(b)(3)(A) (2000) and FAR S: 19.1307, and incorporated into the RFP via
FAR S: 52.219-4, in evaluating the prices offered by Virtexco and Shaw
Beneco, which are large businesses.[8] 
    
Section 657a(b)(3)(A) of 15 U.S.C. provides that:
    
Subject to subparagraph (B) [which applies to purchases of agricultural
commodities by the Secretary of Agriculture], in any case in which a
contract is to be awarded on the basis of full and open competition, the
price offered by a qualified HUBZone small business concern shall be
deemed as being lower than the price offered by another offeror (other
than another small business concern), if the price offered by the
qualified HUBZone small business concern is not more than 10 percent
higher than the price offered by the otherwise lowest, responsive, and
responsible offeror.
FAR S: 19.1307 provides in relevant part as follows:
(a)  The price evaluation preference for HUBZone small business concerns
shall be used in acquisitions conducted using full and open competition. 
The preference shall not be used*

    
(1) In acquisitions expected to be less than or equal to the simplified
acquisition threshold;
(2) Where price is not a selection factor so that a price evaluation
preference would not be considered (e.g., Architect/Engineering
acquisitions);
(3) Where all fair and reasonable offers are accepted (e.g., the award of
multiple award schedule contracts).
    
(b)  The contracting officer shall give offers from HUBZone small business
concerns a price evaluation preference by adding a factor of 10 percent to
all offers, except*
(1) Offers from HUBZone small business concerns that have not waived the
evaluation preference;
(2) Otherwise successful offers from small business concerns;
(3) Otherwise successful offers of eligible products under the Trade
Agreements Act when the acquisition equals or exceeds the dollar threshold
in 25.403; and
(4) Otherwise successful offers where application of the factor would be
inconsistent with a Memorandum of Understanding or other international
agreement with a foreign government (. . . ).[9]
    
The agency maintains that it properly did not apply the PEP in evaluating
proposals here because the statute establishing the preference, noted
above, limits its application to circumstances in which the price offered
by the qualified HUBZone [G1] small business concern is not more than 10
percent higher than the price offered by the otherwise lowest, responsive,
and responsible offeror, and the protester*s price here was more than 10
percent higher than any of the six awardees.  The Small Business
Administration (SBA), from whom we solicited comments on this issue,
agreed with the agency*s analysis, further noting that *to the extent FAR
S: 19.1307 and FAR clause 52.219-4 imply that there is no requirement that
a HUBZone SBC*s price must be within 10 percent of the lowest offeror*s
price in order for the HUBZone PEP to be applicable, these provisions must
be read in the context of the clear statutory language that [they]
implement[],* which makes clear that *[t]he HUBZone PEP is not applied if
a HUBZone SBC*s price exceeds the price of *the otherwise lowest,
responsive, and responsible offeror* by more than 10 percent.*  Letter
from SBA to GAO, Feb. 3, 2004, at 3.
    
An agency*s interpretation of a statute that it is responsible for
implementing is entitled to substantial deference.  Chevron, U.S.A., Inc.
v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).  If the
agency*s interpretation is reasonable, it should be upheld.  Appalachian
Council, Inc., B-256179, May 20, 1994, 94-1 CPD P: 319 at 16.  Here, the
SBA is responsible for implementing the statutory HUBZone preferences,
and, given the deference that we afford the SBA*s view in these
circumstances, we cannot conclude that the SBA has unreasonably
interpreted S: 657a(b)(3)(A) as providing for application of the PEP only
where a HUBZone SBC*s price exceeds the price of the otherwise low,
responsive, and responsible offeror by less than 10 percent.[10]
    
We recommend that the SSA make a new source selection decision containing
a comparative analysis of the proposals and the rationale for any
price/technical tradeoffs.  If the new source selection decision
determines that the proposal of an offeror or offerors other than the six
originally selected represents the best value to the government, the
agency should terminate the awards to any offerors not again selected and
make award to any additional offerors selected.  We also recommend that
the protester be reimbursed for the costs of filing and pursuing its
protest.
4 C.F.R. S: 21.8(d)(1) (2003).  In accordance with our regulations, Blue
Rock*s certified claim for such costs, detailing the time expended and the
costs incurred, must be submitted directly to the agency within 60 days
after receipt of the decision.
    
The protest is sustained.
    
Anthony H. Gamboa
General Counsel
    
    
    
    
    
    
    
    

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

   [1] The six firms are Virtexco Corporation, C Construction Co., Inc., C.L.
Price & Associates, Joyce and Associates Construction, Inc., Shaw Beneco,
Inc., and Tesoro Corporation.
[2] While the solicitation did not define the scope of the construction
services to be furnished, a solicitation synopsis published on ESOL, the
Naval Facilities Engineering Command*s web site for solicitations,
explained that *the work will consist of new construction, additions,
renovations, alterations and repairs to buildings and structures* at the
MCAS.  The synopsis also furnished the following guidance with regard to
award of the seed project and subsequent task orders:
After award of the initial contract(s), up to six contractors will compete
for task orders based on best value, low price or low price technically
acceptable to the Government. . . .  The Best Value Contractor of the six
IDIQ contracts will be awarded the seed project with the initial award. 
All six contractors will compete on subsequent task orders.
[3] The RFP provided for use of adjectival ratings (Excellent, Good,
Satisfactory, Marginal, and Poor) in the evaluation and permitted the
further differentiation of proposals through application of plus (+) or
minus (-) to the adjectival ratings.
[4] A price evaluation board also reviewed offerors* pricing, but the only
evaluation it performed was a comparison of the proposed prices for the
seed project to the government estimate.
[5] This is a misstatement on the part of the SSA since all four proposed
prices were in fact lower than the government estimate.
[6] The protester further argues that the Navy*s selection process here
was inconsistent with its selection process under a highly similar RFP
that we considered in C Constr. Co., Inc., B-291792, Mar. 17, 2003, 2003
CPD P: 73.  According to the protester, we made it clear in that decision
that where a solicitation provides for the award of multiple ID/IQ
contracts, with technical merit of greater importance than price, *the
correct procedure is to select the top tier offerors for award, based on
technical merit, not on price for the seed project.*  Protester*s
Comments, Dec. 12, 2003, at 7.
    
While it is true that in the procurement protested by C Construction, the
Navy made award to the eight offerors with the highest technical rankings,
apparently without taking into consideration their seed project pricing,
we were not asked to address the propriety of that determination in our
decision.  Instead, the protester challenged the technical evaluation of
its own and other offerors* proposals; accordingly, these are the matters
that we addressed in our decision.  Thus, we offered no guidance as to the
correct procedure for selecting awardees under a solicitation providing
for the award of multiple ID/IQ contracts, where technical was more
important than price and price was to be evaluated on the basis of the
price for a seed project.
[7] While, as noted above, the rationale for an SSA*s tradeoff
determination may be evidenced in the documentation on which the SSA
relied in reaching his conclusion, such as the SSB report, that was not
the case here.  The SSB engaged in no tradeoff analysis with regard to the
Blue Rock, Virtexco, and C Construction proposals; rather, it recommended
awards to all.
[8] The protester also contends that the agency awarded its proposal an
unreasonably low rating of Satisfactory Minus for bonding capability,
which was a subfactor under the management and organization evaluation
factor.  As noted by the agency in its report, it is clear from the record
that improving the protester*s rating on the bonding capability subfactor,
which was the least important of the four listed under management and
organization factor, would not have raised the protester*s overall rating
under the factor.  Accordingly, we agree with the agency that even
assuming arguendo that the rating of Satisfactory Minus was in error, it
resulted in no prejudice to Blue Rock.
[9] FAR S: 52.219-4, which was incorporated into the RFP by reference,
contains language substantially similar to FAR S: 19.1307(b).
[10] The Navy also argued that it was proper for it not to apply the PEP
in evaluating the proposals here because, pursuant to FAR S:
19.1307(a)(3), the PEP does not apply to a multiple award contract.  We
disagree.  Section 19.1307(a)(3) provides for non-application of the PEP
in only a subgroup of multiple award procurements, i.e., those in which
*all fair and reasonable offers are accepted (e.g., the award of multiple
award schedule contracts.)*  Here, as noted by the SBA in its comments to
our Office, the agency did not accept all fair and reasonable offers;
thus, the PEP was not rendered inapplicable to the procurement by virtue
of FAR S: 19.1307(a)(3). 
    

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