TITLE:  Systems, Studies, and Simulation, Inc., B-295579, March 28, 2005
BNUMBER:  B-295579
DATE:  March 28, 2005
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   Decision

   Matter of:   Systems, Studies, and Simulation, Inc.

   File:            B-295579

   Date:              March 28, 2005

   Gary L. Rigney, Esq., for the protester.

   Victor G. Vogel, Esq., and Sharon B. Patterson, Esq., Department of the
Army, and Thedlus L. Thompson, Esq., General Services Administration, for
the agencies.

   John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency's evaluation of the protester's quotation under the solicitation's
"pricing structure" evaluation criterion as posing "moderate risk" was
reasonable where the quotation included the protester's Federal Supply
Schedule labor rates, and the protester's rates were slightly to
significantly lower than the agency's calculated historical rates, and the
specific services to be performed are highly complex in nature.

   DECISION

   Systems, Studies, and Simulation, Inc. (S3) protests the rejection of its
quotation under request for quotations (RFQ) No. W31P4Q-04-T-0564, issued
by the Department of the Army, for advisory and assistance services in
support of the Army Aviation and Missile Command.1

   We deny the protest.

   The RFQ informed vendors that the Army "intends to award a minimum of four
BPAs [blanket purchase agreements] to responsible BPA teams whose
quotations are considered most advantageous to the government" based on
the following five evaluation criteria:  performance capability, teaming
and business arrangements, socio-economic benefits, pricing structure, and
past performance.2  RFQ at 47.  The solicitation stated that the awards
would "be made to those BPA Teams demonstrating the best overall
capabilities and value to the government based upon the evaluation
criteria," and specified that "awards may be made to other than the lowest
priced BPA Teams."  RFQ at 47.  Vendors were informed that the BPAs would
be "entered into pursuant to the terms of the BPA holder's [Federal Supply
Schedule] FSS contract number," and that under the BPAs the agency would
award fixed price and/or fixed-rate, time-and-materials or labor-hour task
orders to the vendors whose quotations in response to the task order
solicitations were found to represent the best value to the government. 
RFQ at 3, 8. 

   The solicitation provided detailed instructions for the preparation of
quotations for the BPAs, and requested that each quotation include a
general information volume, a business and performance capabilities
volume, a pricing structure volume, and a past performance volume.  RFQ at
44.  The solicitation "cautioned that *parroting' of the functional
requirements with a statement of intent to perform does not reveal
understanding of the requirement or the capability to perform it," and
advised in this regard that "[t]he quotation should demonstrate that the
BPA team can perform at an acceptable level of risk."  RFQ at 44.  The RFQ
notified vendors that although "the government has not formally
*set-aside' the small business awards under procedures set forth in
[Federal Acquisition Regulation] FAR Subpart 19.5," the agency anticipated
awarding two BPAs to small businesses, one BPA to a small disadvantaged
business, and one BPA to a "large" business.  RFQ at 47.

   The RFQ was issued to "seven selected contractors," with each of the
selected vendors, including S3, submitting a quotation.  Contracting
Officer's Statement at 1-2.  The quotations were evaluated, and the
quotation submitted by S3 (a small business) was evaluated as "green/very
good" under the performance capability, teaming and business arrangements,
and socio-economic benefits criteria, "yellow/moderate risk" under the
pricing structure criterion, and "blue/outstanding" under the past
performance criterion.3  AR, Tab I, Source Selection Decision, at 17.  The
agency ultimately selected the quotations of one large business, one small
business, and two small disadvantaged businesses, for award of the BPAs. 
Id. at 19.  The record evidences that the reason that S3's quotation was
not accepted for award was its moderate risk rating for the pricing
structure criterion.

   After requesting and receiving a debriefing, and filing an agency-level
protest (which was denied), S3 filed this protest with our Office.  The
protester argues that the agency's evaluation of its quotation under the
pricing structure criterion as "moderate risk" was unreasonable,
contending that the agency's "cost realism methodology compared [S3's]
proposed loaded rates against other loaded rates without consideration to
the load factors" and without reasonably considering any "objective
historical evidence."  Protest at 6; Protester's Comments at 2.  The
protester asserts that it "presumed that the contracting officer would
conduct a cost realism analysis" in evaluating quotations under the
pricing structure evaluation criterion, and that in doing so the agency
would gather additional information so that it could "analyze indirect
loads, evaluate unloaded hourly rates, as well as the benefit package
included in the overhead burden to permit a risk analysis consistent with
the purposes set forth in the RFP."  Protest at 5.  The protester also
argues that the methodology used by the agency in evaluating S3's
quotation under the pricing structure criterion was flawed in that it
"assumed a uniform labor mix without consideration to the . . . historical
or projected requirements for critical labor categories or
highly-qualified personnel."  Protest at 8.  Additionally, the protester
points out that its quotation included "its undiscounted minimum
qualifying GSA schedule rates," which in accordance with FARA SA 8.404(d)
have previously been determined to be "fair and reasonable," and that as
evidenced by the agency's evaluation of its quotation under the past
performance criterion as "blue/outstanding," it has "successfully
performed $61 million . . . of task orders for [Army] customers using its
GSA rates."  Protester's Supplemental Comments at 3.

   The RFQ (at 48) provided as follows with regard to the pricing structure
evaluation criterion:

   The government will evaluate the BPA Team's overall ability to support
task order requirements with highly qualified personnel as evidenced by
the BPA Team's GSA schedule pricing structure.  The evaluation will
consist of a risk analysis including a comparison to historical averages
adjusted for anticipated future changes in market conditions.  The risk
analysis will consider price realism and reasonableness as an indicator of
risk associated with the BPA team's understanding of the requirements of
the Statement of Work.  Pricing structures considered too low to support
anticipated task order requirements with highly qualified personnel may
receive a higher risk rating due to increased risk.

   To facilitate this evaluation, the RFQ required that vendors complete two
attachments to the solicitation, each of which essentially provided for
the inclusion of the vendor's name, the labor categories proposed, and
their FSS and BPA prices on an hourly basis for each proposed labor
category.  RFQ attachs. 4, 10.

   The record reflects that the agency evaluated the quotations received
under the pricing structure criterion by determining that the labor
categories proposed were equivalent to those set forth in the solicitation
in terms of education, experience, and description of duties, ensuring
that no critical labor categories were omitted from the quotations, and
comparing the rates proposed to "historical averages."  Contracting
Officer's Statement at 7.  Specifically, with regard to the vendors'
proposed labor rates, the agency calculated an "average mapped rate" for
each vendor based upon the vendor's quoted labor rates for the labor
categories set forth in their quotations, and compared the vendor's
"average mapped rate," as well as the vendor's rates for each labor
category included in its quotation, to the historical averages experienced
by the agency.  AR, Tab D, Evaluation of Quotations.  The agency explains
that its calculated historical averages were developed based upon "[o]ver
100 prime and subcontractor rates . . . currently available for each
baseline labor category identified in the RFQ" from predecessor contracts
that were awarded for the same services in the area where the services are
to be performed.  Contracting Officer's Statement atA 7-8.

   With regard to S3's quotation, the agency found as a "strength" that S3's
"offered pricing structure provided coverage for the required critical
skills."  AR, Tab D, Evaluation Report for S3 Pricing Structure Criterion,
at 1.  However, the agency also found as "weaknesses" that S3's quotation
offered rates "for four of the labor categories were slightly lower than
corresponding rates used in a historical model," and rates for "an
additional six labor categories were moderately to substantially lower
than the rates used in the historical model."  Id.  For example, the
agency found that S3's proposed labor rates for an "Engineer/Scientist,"
"Entry Level Engineer/Scientist," and "Administrative Support" personnel
were, respectively, 4, 29 and 21 percent lower than the agency's
calculated historical averages for these same positions.  The agency
ultimately concluded that because certain of S3's quoted labor rates and
its "average mapped rate" were slightly to substantially lower than the
rates set forth in the agency's historical model, "there [was] some doubt
that the offeror's pricing structure will support the . . . requirements
with highly qualified personnel," and as mentioned previously, evaluated
S3's quotation under the pricing structure evaluation criterion as
"yellow/moderate risk."  AR, Tab D, Evaluation Report for S3 Pricing
Structure Criterion, at 1, Rate Analysis. 

   Although the protester clearly disagrees with the agency's evaluation
methodology as well as the agency's ultimate conclusion that S3's pricing
structure posed "moderate risk," we cannot find either unreasonable.  In
this regard, the agency performed its pricing structure evaluation
precisely as it explained it would in the RFQ.[4]  That is, the agency
developed an estimate for each labor category set forth in the vendors'
proposals based upon the loaded rates from predecessor contracts for the
same services, and compared the loaded labor rates quoted to the agency's
calculated historical loaded rates.[5]  Further, the methodology employed
by the agency in its pricing structure evaluation was consistent with the
type of solicitation issued and the information the solicitation
requested.  That is, the solicitation contemplated the issuance of BPAs
providing for the award of task orders on a fixed-price or fixed-rate
basis to FSS vendors, and requested from the vendors only their loaded FSS
and BPA rates--the solicitation did not request that vendors provide any
cost data or information. 

   As noted, the protester claims that the agency was required to perform a
"cost realism analysis" as part of the evaluation of quotations under the
pricing structure criterion.  The concept of cost realism applies to
cost-reimbursement contracts where a request for proposals requires the
submission of cost data and it is important for the government to measure
the likely cost of performance before choosing among competitors for the
contract.[6]  Acepex Mgmt. Corp., B-279173.5, JulyA 22, 1998, 98-2 CPD P
128 atA 7.  A cost realism analysis is the process of independently
reviewing and evaluating specific elements of each offeror's cost estimate
to determine whether the estimated proposed cost elements are realistic
for the work to be performed, reflect a clear understanding of the
requirements, and are consistent with the unique methods of performance
and materials described in the offeror's proposal.  FAR SA 15.404-1(d)(1);
Advanced Communication Sys., Inc., B-283650 et al., Dec. 16, 1999, 2000
CPD P 3 atA 5.

   In contrast, where, as here, with regard to a BPA contemplating
fixed-price or fixed-rate task orders to be issued against the vendors'
GSA FSS contracts, the "realism" of vendor's proposed pricing is not
ordinarily considered because the fixed-price contracting vehicle places
the risk and responsibility for contract costs and ensuing profit or loss
on the contractor.  See Camber Corp., B-293930; B-293930.2, July 7, 2004,
2004 CPD PA 144 atA 4; OMNIPLEX World Servs. Corp.; B-291105, Nov. 6,
2002, 2002 CPD P 199 at 9.  However, because there is a risk of poor
performance in certain circumstances, such as where a contractor fails to
obtain and keep qualified personnel, an agency may, in its discretion,
provide for a price realism analysis in a solicitation that contemplates
the issuance of a BPA against the vendors' GSA FSS contracts.  OMNIPLEX
World Servs. Corp., supra.  Here, the methodology used by the agency in
evaluating quotations under the pricing structure criterion was consistent
with that provided in part 15 of the FAR for the performance of price
realism analyses--the comparison of proposed prices, in the form of loaded
labor rates, with prior contract prices for the same or similar services
and with an independent government cost estimate.  See Acepex Mgmt. Corp.,
supra, atA 8; FAR SA 15.404-1(b). 

   As noted, the agency's conclusion that S3's quotation warranted a
"moderate risk" rating under the pricing structure criterion is not only
consistent with the RFP evaluation scheme but is reasonably supported by
the record.  As indicated, the agency's evaluation of quotations under the
pricing structure criterion was relatively detailed, and included an
analysis of the labor rate quoted for each of the labor categories set
forth in S3's quotation.  S3's quoted rates in some instances were
substantially lower, and overall were slightly lower, than the agency's
calculated historical rates for the same positions, and as such, we
believe that the agency reasonably determined that there was "some doubt
that [S3's] pricing structure will support the [agency's] requirements
with highly qualified personnel."  AR, Tab I, Source Selection Report,
atA 16.  S3 has not showed that the loaded rates reflected in the
historical averages were erroneous, unreasonable or unrealistic or that
the comparison of S3's loaded rates to the historical averages was flawed.

   We also agree with the Army and GSA that the Army's determination that
S3's undiscounted FSS rates posed "moderate risk" was not inconsistent
with GSA's previous finding that S3's rates were "fair and reasonable." 
See FAR S 8.404(d).  As noted by GSA, "the scope and complexity of an
activity's requirement is frequently an important factor when establishing
multiple BPAs," and the ordering activity, here the Army, is in the best
position to determine its needs.  GSA Report at 3.  As to the Army's
specific requirements, the record reflects that the services here will be
provided "in the distinct, highly technical area of aircraft and missiles"
and require a "high level of expertise."  Agency Supplemental Report at
4-5.  Accordingly, we cannot disagree with the Army's position that it
needed to ensure, through the pricing structure evaluation criterion, that
the vendors' proposed labor rates "could support every requirement with
highly qualified personnel."  Id.  Nor can we disagree with GSA's position
that the vendors' FSS rates "negotiated by GSA are the building blocks
used by ordering activities," and the position of both agencies that the
Army's determination that S3's FSS rates posed "moderate risk" under the
unique circumstances of this procurement was thus not inconsistent with
GSA's previous determination that S3's FSS rates are "fair and
reasonable."  GSA Report at 3-4.

   The protester argues for the first time in its comments on the agency
report that the Army did not make a reasonable "best value" determination
that adequately considered S3's past performance or cost to the
government.  Our Bid Protest Regulations provide that where, as here, a
protest has been initially filed with the contracting agency, we will
consider a subsequent protest if the initial protest was timely filed.  4
C.F.R. S 21.2(a)(3) (2004).  Because our regulations do not provide for
the unwarranted piecemeal presentation of protest issues, where a
protester initially files a timely agency-level protest, and subsequently
files a protest with our Office which includes additional grounds, the
additional grounds must independently satisfy our timeliness
requirements.  Wilderness  Mountain Catering, B-280767.2, Dec.A 28, 1998,
98-2 CPD P 4 at 5. 

   The record reflects that the agency informed S3 at the debriefing of,
among other things, the ratings its quotation received under each of the
solicitation's evaluation criteria, as well as the ratings of the four
quotations selected for issuance of the BPAs, and the agency's selection
decision.  AR, Tab K, Debriefing Slides and Questions and Answers.  S3
should have been aware from the debriefing of the evaluation criteria used
by the agency in evaluating quotations and determining which quotations
represented the best value to the agency, and the relative ratings of S3's
quotation and the quotations of the vendors that were selected for
issuance of the BPAs.  Thus, S3's protest that the agency did not make a
reasonable best value determination that adequately considered S3's past
performance and cost to the government was required to be filed within 10
days of its debriefing, and this protest contention, first raised in S3's
comments on the agency report, is untimely and will not be considered.  4
C.F.R. S 21.2(a)(2).   

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   1 Our discussion in this decision is necessarily general because a
protective order was not issued in connection with this protest.

   2 The solicitation further informed vendors that the performance
capability criterion was the most important criterion and was slightly
more important than the teaming and business arrangements and
socio-economic benefits criteria.  The teaming and business arrangements
and socio-economic benefits criteria were stated to be equal in
importance, and slightly more important than the pricing structure
criterion, which in turn was more important than the past performance
criterion.  RFQ at 47.

   3 The agency evaluated proposals as either "blue/outstanding," "green/very
good," "yellow/satisfactory," "red/marginal," or "black/unacceptable"
under the performance capability, teaming and business arrangements, and
socio-economic benefits criteria.  Quotations were evaluated as "blue/low
risk," "yellow/moderate risk," or "red/high risk" under the pricing
structure criterion, and "blue/low risk," "yellow/moderate risk,"
"red/high risk," or "white/neutral" under the past performance criterion. 
Agency Report, Tab G, Evaluation Plan, at 8.

   [4] Contrary to the protester's argument, under the RFQ's evaluation
scheme S3's successful past performance, which was considered under a
separate evaluation criterion, was not to be considered under the pricing
structure criterion.

   [5] The stated methodology did not indicate that the various labor
categories would be variously weighted in the evaluation under the pricing
structure criterion, as the protester suggests should have been done, but
indicates that all of the labor categories listed in the RFQ would be
considered.

   [6] When an agency evaluates proposals for the award of a cost
reimbursement contract, an offeror's proposed estimated costs are not
considered controlling, because regardless of the costs proposed, the
government is bound to pay the contractor its actual and allowable costs. 
FAR SS 15.305(a)(1), 15.404-1(d).  Consequently, a cost realism analysis
must be performed by the agency to determine the extent to which an
offeror's proposed costs represent what the contract should cost, assuming
reasonable economy and efficiency.  FAR S 15.404-1(d)(2); TRW, Inc.,
B-282162, B-282162.2, June 9, 1999, 99-2 CPD P 612 at 5.