TITLE:  Hanley Industries, Inc., B-295318, February 2, 2005
BNUMBER:  B-295318
DATE:  February 2, 2005
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   Decision

   Matter of:   Hanley Industries, Inc.

   File:            B-295318

   Date:              February 2, 2005

   T. Gaynor Blake for the protester.

   Gary Van Osten, Esq., Department of the Navy, for the agency.

   Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest of agency's past performance evaluation and price/past performance
tradeoff is denied where record shows evaluation and source selection were
reasonable and consistent with evaluation criteria; mere disagreement with
agency's evaluation and award is insufficient to show they were
unreasonable.

   DECISION

   Hanley Industries, Inc. protests the award of a contract to Capco, Inc.
under request for proposals (RFP) No. N00104-04-R-K081, issued by the
Department of the Navy for impulse cartridges used to release
aircraft-mounted detonating projectiles.  Hanley, which received a
contract under the RFP for a lesser quantity than that awarded to Capco,
contends that the agency improperly evaluated its past performance and
unreasonably concluded that the performance risk associated with an award
to Hanley for the larger quantity of units outweighed the cost advantage
associated with such award.

   We deny the protest.

   The RFP, issued on July 16, 2004, contemplated the award of two
fixed-price contracts to different contractors in order to increase the
industrial base for the item and enhance competition; one contract was for
16,000 units and the other was for 9,396 units.  RFP at 2.  The awards
were to be made based on the agency's determination of which combination
of offers was most advantageous to the agency in terms of two
approximately equal evaluation factors, price and past performance; past
performance was to be rated under two subfactors, quality and delivery. 
Id. atA 47.  All offerors were advised that the past performance
evaluations would be based upon the offerors' quality and delivery records
reported under the Red/Yellow/Green (RYG) Program. [1]  The offerors were
also advised that they could submit additional past performance
information for consideration, such as explanations of delivery problems
and the corrective actions taken by the contractor.  Id. at 45.

   Four proposals were received by the scheduled closing time.  Hanley, which
submitted the lowest price for each of the two quantities, submitted no
additional past performance information for review by the agency. 
Consequently, its past performance evaluation was based on its RYG
performance ratings.  Under the quality subfactor of the past performance
factor, all four offerors received low risk ratings for quality.  Under
the second subfactor, delivery, Hanley received a high risk rating for
delivery based upon its RYG red delivery rating; the RYG records for the
firm demonstrated a 32-percent delivery delinquency rate for similar
items.  The other three offerors received low risk ratings for delivery.

   Ranking each of the possible combinations of offers for the two awards in
terms of total cost to the agency, the evaluators recognized that the
lowest-priced combination of offers involved Hanley's lowest proposed
price for the 16,000-unit award, and another firm's second lowest-priced
offer for the 9,396-unit award.  The evaluators expressed concern about an
award of such a large number of units to Hanley, however, since the firm
had been late in its deliveries of similar units in the past. 
Consequently, the agency determined that the second lowest-priced
combination of offers (involving Capco's second lowest-priced offer for
the 16,000 units, and Hanley's lowest-priced offer for the 9,396 units) at
a combined price that was only 3.4A percent higher than the lowest-priced
combination, offered the best value to the agency.  The agency determined
that this combination was most advantageous because an award of 16,000
units to Capco would provide the agency with a sufficient number of units
to absorb any potential late delivery of the additional 9,396 units from
Hanley.  The agency did not conduct discussions with the offerors; awards
were made to Capco and Hanley on September 30.  Following the agency's
denial of Hanley's agency-level protest of the agency's consideration of
the protester's adverse RYG performance records, the firm filed this
protest with our Office.

   Hanley challenges the agency's reliance on the negative past performance
information included in the firm's RYG records to assign Hanley a high
risk rating under the delivery subfactor.  Hanley alleges that most of the
late deliveries reported in the RYG records resulted from a flawed
technical data package (TDP) provided by the agency, which, Hanley
contends, caused its units' adhesive to fail during first article testing,
delaying performance of the contracts.[2]  Regarding two other reported
late deliveries, Hanley only generally states that one resulted from its
need to change certain product numbering, and that the other related to
the agency's failure to respond to a clarification request.

   The agency asserts it properly relied on the past performance information
in Hanley's RYG records, noting that the protester was given ample
opportunity to provide additional past performance information for
consideration, both in connection with its RYG records and under the
current RFP, but that the firm did not avail itself of them.  For
instance, the agency reports that although Hanley knew of its red (high
risk) rating for delivery under the RYG Program, the firm failed to
contest the rating in any way during the comment period available under
RYG procedures.  Hanley also chose not to submit any past performance
information with its proposal, as the RFP expressly invited offerors to
do, in order to, for example, explain the circumstances of known late
deliveries, or to seek credit for any corrective action that may have been
taken by the firm.  The agency also disputes Hanley's assertion that one
late delivery was caused by the agency's failure to respond to a request
for clarification; in this regard, the agency reports that the
clarification was provided 4A months prior to the scheduled delivery date.

   As a preliminary matter, to the extent that the protester contends that it
was improper for the agency to consider the adverse past performance
information included in its RYG records without providing the protester
with a further opportunity prior to award to explain the information,
Federal Acquisition Regulation (FAR) S 15.306(a)(2), which addresses
clarifications and award without discussions, states in relevant part that
where award will be made without conducting discussions, "offerors may be
given the opportunity to clarify certain aspects of proposals (e.g., the
relevance of an offeror's past performance information and adverse past
performance information to which the offeror has not previously had an
opportunity to respond) or to resolve minor or clerical errors."  As the
agency points out, and as discussed further below, Hanley has had ample
opportunity to comment on the adverse past performance information in its
RYG records.  Given the permissive language of FAR S 15.306(a)(2), and the
fact that Hanley has been given ample opportunity to comment upon the past
performance information, the fact that Hanley now wishes to provide
further comments on the information in its RYG records does not give rise
to a requirement for the agency to provide an opportunity to do so.  See
TLT Constr. Corp., B-286226, Nov. 7, 2000, 2000 CPD P 179 at 7-8; A.G.
Cullen Constr., Inc., B-284049.2, Feb. 22, 2000, 2000 CPD P 45 at 5-6. 

   With regard to Hanley's principal challenge--that it was unreasonable for
the agency to assign Hanley a high risk rating based on its RYG
records--where a solicitation requires the evaluation of offerors' past
performance, we will examine an agency's evaluation to ensure that it was
reasonable and consistent with the solicitation's evaluation criteria,
since determining the relative merits of offerors' past performance
information is primarily a matter within the contracting agency's
discretion.  DGR Assocs., Inc., B-285428, B-285428.2, Aug. 25, 2000, 2000
CPD P 145 at 11.  An agency may base its evaluation of past performance
upon its reasonable perception of inadequate prior performance, regardless
of whether the contractor disputes the agency's interpretation of the
facts.  See Quality Fabricators, Inc., Ba**271431, B-271431.3, June 25,
1996, 96-2 CPD P 22 at 7.  Further, where an award is to be based on the
best value to the government, a price/technical trade-off may be made in
selecting an awardee, subject only to the test of rationality and
consistency with the evaluation factors.  Demusz Mfg. Co., Inc., B-209575,
Aug. 5, 2002, 2002 CPD P 141 at 3.  A protester's mere disagreement with
the agency's judgment is not sufficient to establish that the agency acted
unreasonably.  Birdwell Bros. Painting & Refinishing, B-285035, July 5,
2000, 2000 CPD P 129 at 5.  Our review of the record leads us to conclude
that the agency's evaluation of Hanley's past performance, and the source
selection based on the agency's determination that the second lowest
combination of offers was most advantageous to the agency, were both
reasonable and consistent with the RFP's evaluation terms.

   The RFP advised offerors that the past performance evaluations would be
limited to the firms' RYG performance records unless they chose to
supplement that information with additional past performance information. 
Here, Hanley knew its RYG report included a red (high risk) rating for
delivery, yet the firm did not oppose the adverse rating during the notice
and comment period given to the firm at the time the rating was assigned. 
Further, the firm failed to submit any explanation in its proposal about
the late deliveries reflected in the RYG records; the firm also did not
explain or otherwise seek credit for any corrective actions taken by the
firm.  Under the express terms of the RFP, the protester should have known
that its negative RYG delivery rating would affect its evaluation for
award.  Nevertheless, as the record shows, Hanley failed to take advantage
of the various opportunities available to it to contest the conclusions
and associated high risk rating stemming from the firm's negative RYG
performance history.

   We recognize that Hanley argues that some of its late deliveries were
related to defects in the TDP for the product.  As the agency reports,
however, the protester's earlier claim on this basis was not properly
pursued by the firm and is not currently under review by the agency;
accordingly, it provides no basis to question the agency's consideration
of the firm's RYG reports.  Moreover, our review of the record shows that
Hanley has other unexplained late deliveries unrelated to the allegedly
defective TDP that reasonably support the agency's concern of substantial
performance risk in terms of timely delivery.  For instance, Hanley admits
responsibility for at least one late delivery due to certain product
numbering undertaken by the firm.  Additionally, although Hanley suggests
that another late delivery was caused by the agency's failure to provide
requested clarification of requirements, the agency has reported that the
clarification was received by the firm 4A months prior to the missed
delivery date; Hanley has not refuted that assertion.  In short, the
protester has not shown that the agency was unreasonable in assigning high
performance risk to the firm's proposal based on the negative RYG
performance data obtained for the firm, consistent with the RFP's
evaluation terms.

   Further, the protester has not shown that the agency's price/past
performance tradeoff lacks a reasonable basis.  In this regard, Hanley
provides no basis to question the reasonableness of the agency's
determination that limiting the number of units to be delivered by Hanley
will, in turn, limit the overall performance risk to the agency.  In sum,
given the reasonableness of the agency's determination that the minimal
cost premium associated with the selected combination of offers for award
is outweighed by the reduction in performance risk to the agency, the
record provides no basis for us to question the propriety of the selection
decision.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] The RYG Program is a Navy/Air Force automated system that classifies
the performance risk associated with a particular contractor by assigning
a color rating to the vendor's quality and delivery performance history; a
green rating signifies low risk, yellow signifies moderate risk, red
signifies high risk, and a neutral rating applies to contractors lacking
recent or relevant past performance information.

   [2] While Hanley suggests that the agency has knowledge of defects in the
TDP, the agency disputes that assertion, and further states that the
matter is not, as Hanley suggests, currently under consideration. 
According to the agency, although Hanley filed a request for equitable
adjustment in 2003 for what it considered TDP-related delays, the firm,
despite notice of the requirement to do so, failed to certify its claim
for review.