TITLE: B-296435.4; B-296435.9, R&G Food Service, Inc., d/b/a Port-A-Pit Catering, September 15, 2005
BNUMBER: B-296435.4; B-296435.9
DATE: September 15, 2005
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B-296435.4; B-296435.9, R&G Food Service, Inc., d/b/a Port-A-Pit Catering, September 15, 2005

   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: R&G Food Service, Inc., d/b/a Port-A-Pit Catering

   File: B-296435.4; B-296435.9

   Date: September 15, 2005

   John Lukjanowicz, Esq., and B. Michael Schestopol, Esq., Oles Morrison
   Rinker & Baker LLP, for the protester.

   Byron W. Waters, Esq., Department of Agriculture, for the agency.

   Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency unreasonably determined that the protester's prices were not fair
   and reasonable where the agency's price evaluation considered only
   offerors' unit prices and, in so doing, failed to provide a reasonable
   basis for comparing the relative costs to the government of offerors'
   competing proposals.

   DECISION

   R&G Food Service, Inc., d/b/a Port-A-Pit Catering (Port-A-Pit) protests
   its nonselection for contract award under request for proposals (RFP) No.
   49-05-07, issued by the National Interagency Fire Center, Forest Service,
   Department of Agriculture, for mobile food services in various locations;
   for certain locations, the Forest Service awarded contracts to offerors
   other than Port-A-Pit and, for other locations, elected not to make
   contract award. Port-A-Pit argues that the agency's evaluation of
   proposals, including the evaluation of its price proposal, was improper.

   We sustain the protest.

   BACKGROUND

   The RFP, issued on February 9, 2005, contemplated multiple awards of
   fixed-price requirements contracts for a base year and four 1-year
   options. The successful contractors under the RFP would be required to
   provide hot and cold meals and various supplemental items at 27 field
   locations (referred to as designated dispatch points, or DDPs) during
   wildland fires and other types of activities throughout the contiguous
   western United States and Alaska by means of mobile food service units
   (MFSU). The RFP permitted offerors to propose for multiple DDPs, but
   contemplated the award of one contract for each location.

   The solicitation required offerors to submit unit prices for meal services
   (e.g., breakfast, sack lunch, dinner), MFSU mileage, and handwashing
   units, which would form the basis of a requirements-type contract, as well
   as unit prices for additional refrigeration storage space, additional
   tents and seating, and supplemental food and beverage items, which would
   form the basis of a blanket purchase agreement (BPA). RFP sect. B, at 1-4.

   In addition to price, the solicitation identified the following technical
   evaluation factors, in descending order of importance: proposed equipment;
   past performance; experience; and technical approach. The RFP informed
   offerors that the technical factors, when combined, were approximately
   equal in importance to price. Contract awards were to be made to the
   offerors submitting the proposals determined to meet the minimum
   requirements of the solicitation and to be the most advantageous (i.e.,
   "best value") to the government. The RFP also stated that the Forest
   Service might reject any or all offers and not award all DDP locations if
   doing so were determined to be in the government's best interest. RFP
   sect. M.2, at 105.

   The RFP contained detailed instructions for the preparation of proposals,
   and required that the offerors' proposals consist of two parts--a
   technical proposal and a business/price proposal. Offerors were instructed
   that the technical proposals would be used to determine, among other
   things, whether the proposals met the requirements of the RFP. The
   solicitation also established minimum equipment requirements for an MFSU,
   and required offerors to complete an equipment requirements checklist for
   each unit offered. RFP sect. C.3, at 21-27, exh. M.2, at 112-18. The RFP
   stated that the equipment requirements would be evaluated on a pass/fail
   basis, and that "any unit that fails to meet any of these minimum
   requirements will be unacceptable and may not be considered any further."
   Id. at 112. With regard to an offeror's proposed price, the solicitation
   stated that the offeror's business/price proposal would be evaluated to
   determine the reasonableness of the offeror's price for the effort
   proposed. Id. sect. M.3, at 108. The solicitation also stated that, for
   purposes of contract award, only an offeror's pricing for meals, mileage,
   and handwashing units under the requirements contract would be
   considered.[1] Id.

   Twenty-five offerors, including Port-A-Pit, submitted proposals by the
   March 11 closing date. Port-A-Pit offered three MFSUs for 10 DDP
   locations. An agency technical evaluation board (TEB) evaluated offerors'
   technical proposals using an adjectival rating system: exceptional,
   acceptable, marginal, or unacceptable for those technical factors other
   than past performance; and exceptional, acceptable, neutral, marginal, or
   unacceptable for past performance.[2] The TEB completed its evaluation of
   offerors' technical proposals on June 2. The overall ratings for the MFSUs
   proposed by Port-A-Pit were: Acceptable (+) for Unit 01; Exceptional (-)
   for Unit 02; and Acceptable (+) for Unit 03. Agency Report (AR), Tab 14,
   TEB Consensus Report, at 2.

   The TEB subsequently considered the offerors' proposed prices and
   technical ratings, and made award recommendations for each DDP. Id., Tab
   15, TEB Best Value Analysis Report. In certain instances the TEB
   recommended that no contract award be made because of the lack of
   proposals that were considered technically acceptable with fair and
   reasonable prices. The contracting officer concurred with the TEB's
   recommendations, decided not to conduct discussions with the offerors, and
   forwarded the award recommendations and associated materials to the
   agency's source selection authority for review and approval. Id., Tab 16,
   Source Selection Decision; Contracting Officer's Statement, July 18, 2005,
   at 6-7. The source selection authority accepted the findings and
   recommendations of the TEB and made contract award to 12 offerors for 21
   DDPs. AR, Tab 16, Source Selection Decision.

   Port-A-Pit received no awards because of the agency's determination that
   the firm's prices were not fair and reasonable, thereby making Port-A-Pit
   ineligible for award.[3] This protest followed. The agency proceeded with
   award and authorized the contractors to begin performance notwithstanding
   the protests, based on a written determination that urgent and compelling
   circumstances significantly affecting the interests of the United States
   would not permit waiting for the decision of our Office. See 31 U.S.C.
   sect. 3553(d) (2000).

   DISCUSSION

   Port-A-Pit's protest primarily focuses upon the agency's evaluation of the
   firm's prices. The protester argues that the agency's determination that
   its prices were not fair and reasonable was improperly based upon only one
   component of its proposed price (i.e., its mileage price). Port-A-Pit
   argues that given the relative proportions of the items likely to be
   required under the contracts (meals, mileage, handwashing units), an
   offeror with a higher mileage price could nevertheless represent a lower
   overall cost to the government. The protester also contends that the
   Forest Service's price evaluation was irrational because it only
   considered offerors' unit prices. We agree.

   Where a protester challenges an agency's evaluation of proposals,
   including the evaluation of an offeror's proposed cost or price, our
   Office will not reevaluate proposals, but instead will examine the record
   to determine whether the agency's judgment was reasonable and consistent
   with the stated evaluation criteria and applicable procurement statutes
   and regulations. Liquidity Servs., Inc., B-294053, Aug. 18, 2004, 2005 CPD
   para. 130 at 5; SAMS El Segundo, LLC, B-291620.3, Feb. 25, 2003, 2003 CPD
   para. 48 at 8. When an agency evaluates proposals for the award of a
   fixed-price contract, in which the government's liability is fixed and the
   contractor bears the risk and responsibility for the actual costs of
   performance, the analysis of an offeror's price need only determine that
   the price offered is fair and reasonable to the government (i.e., price
   reasonableness), and focuses primarily on whether the offered price is
   higher--as opposed to lower--than warranted.[4] FAR sections 15.402(a),
   15.404-1(a); see Dismas Charities, Inc., B-289575.2, B-289575.3, Feb. 20,
   2004, 2004 CPD para. 66 at 4; SAMS El Segundo, LLC, supra.

   Agencies must consider cost to the government in evaluating proposals, 41
   U.S.C. sect. 253a(b)(1)(A), (c)(1)(B) (2000), and while it is up to the
   agency to decide upon some appropriate and reasonable method for the
   evaluation of offerors' prices, an agency may not use an evaluation method
   that produces a misleading result. See Bristol-Myers Squibb Co.,
   B-294944.2, Jan. 18, 2005, 2005 CPD para. 16 at 4; AirTrak Travel et al.,
   B-292101 et al., June 30, 2003, 2003 CPD para. 117 at 22. The method
   chosen must also include some reasonable basis for evaluating or comparing
   the relative costs of proposals, so as to establish whether one offeror's
   proposal would be more or less costly than another's. Id.; see FAR
   sect. 15.405(b)("the contracting officer's primary concern is the overall
   price the government will actually pay"). For example, in Health Servs.
   Int'l, Inc.; Apex Envtl., Inc., B-247433, B-247433.2, June 5, 1992, 92-1
   CPD para. 493, the solicitation contemplated the award of a fixed-price,
   indefinite-quantity contract and offerors' proposals were required to
   include hourly rates for six categories of labor. We sustained a protest
   challenging the agency's price evaluation because it was based solely upon
   offerors' average hourly labor rates, without consideration of the
   estimated quantities of each labor category the agency expected to order,
   and thereby failed to establish whether one offeror's proposal was in fact
   more or less costly than another's.

   Based on our review of the record here, we conclude that the Forest
   Service's price evaluation, including the determination that Port-A-Pit's
   prices were not fair and reasonable, was fundamentally flawed because it
   did not reflect the actual cost to the government of the offerors'
   competing proposals.

   As set forth above, the solicitation required offerors to submit unit
   prices for meals, mileage, and handwashing units, which were the prices
   upon which the agency's contract award determination would be made.[5]
   Port-A-Pit's unit prices, in comparison to the agency's government
   estimates[6] and offerors' average prices, were as follows:

   +------------------------------------------------------------------------+
   |                   |      Meals      |   Mileage    | Handwashing Unit  |
   |-------------------+-----------------+--------------+-------------------|
   |    Port-A-Pit     |  $[DELETED][7]  |  $[DELETED]  |    $[DELETED]     |
   |-------------------+-----------------+--------------+-------------------|
   |  Gov't Estimates  |     $47.21      |    $12.78    |      $65.00       |
   |-------------------+-----------------+--------------+-------------------|
   |    Average[8]     |     $44.24      |    $20.00    |      $73.82       |
   +------------------------------------------------------------------------+

   AR, Tab 13, Abstract of Offerors' Prices by DDP, at 8; Tab 15, TEB Best
   Value Analysis Report, at 1.

   In performing the evaluation of offerors' prices, the contracting officer
   did not utilize any quantity estimates for the meals, mileage, and
   handwashing unit items, but instead limited her evaluation to offerors'
   unit prices. The contracting officer determined that while Port-A-Pit's
   unit prices for meals and handwashing units were not objectionable, its
   unit price for mileage was not fair and reasonable, in comparison to both
   the government estimate and the average price of other offerors.[9] AR,
   Tab 15, TEB Best Value Analysis Report, at 1, 4-5. Based on the
   contracting officer's determination that Port-A-Pit's price for mileage
   was not fair and reasonable, the Forest Service found Port-A-Pit
   ineligible for contract award. Id. at 6; Contracting Officer's Statement,
   July 18, 2005, at 11 ("I made the determination based on price analysis
   that [Port-A-Pit's] mileage price was not fair and reasonable and could
   not form the basis for award").

   The record reflects that mileage is by no means the largest component of
   cost to the government. Rather, the parties agree that meals are the
   primary cost for the services to be provided under the contract.[10]
   Protest, June 21, 2005, at 8, exh. 1; AR, Tab 15, TEB Best Value Analysis
   Report, at 1. For example, the record indicates that under a predecessor
   contract, Port-A-Pit provided a total of [DELETED] meals and drove a total
   of [DELETED] miles in response to a fire in Ash, Arizona.[11] Protest,
   June 21, 2005, exh. 1, at 1. Using the unit prices proposed by Port-A-Pit
   here, meal costs would have been approximately $39,644, while mileage
   costs, in comparison, would have been approximately $17,100.[12]
   Similarly, the record indicates that with regard to a fire in Jimtown,
   Montana, meal costs to the government would have been approximately
   $69,285 while mileage costs would have been approximately $35,600.[13] In
   light of the substantial difference in the relative costs for meals and
   mileage, the agency's price evaluation, to the extent that it considered
   only offerors' unit prices, failed to reflect the likely actual cost to
   the government of the offerors' approaches.

   The record shows that the agency itself was aware of the shortcomings in
   its price evaluation methodology. Specifically, when making its source
   selection decision for DDP No. 23 (Salt Lake City, Utah), the TEB stated,
   "It is difficult to predict if [Port-A-Pit's] lower meal and sink prices
   outweigh [the awardee's] lower mileage price due to the uncertainty of the
   amount of services that will be required." AR, Tab 15, TEB Best Value
   Analysis Report, at 37. Notwithstanding the fact that the Forest Service
   had not determined whether Port-A-Pit's proposal would in fact be more
   costly than other offerors', the agency found the protester's prices were
   not fair and reasonable. In light of the fact that the Forest Service's
   price evaluation was not meaningful--because, as explained above, there is
   no necessary relationship between an offeror's unit prices and the likely
   actual cost of the contract to the government--we find the rejection of
   Port-A-Pit's price proposal to be unreasonable.

   We recognize that the evaluation of price in the award of an
   indefinite-quantity contract can be challenging. Nonetheless, in our view,
   the way in which the agency evaluated prices here (i.e., examining only
   unit prices without also considering the estimated quantities of each
   item) does not satisfy the legal requirement to consider cost to the
   government. Moreover, there appears to be no reason why the Forest Service
   could not develop estimates for each of the delivery items to be
   considered in the contract award determinations. The record reflects that
   the Forest Service possesses historical data on both the meals and mileage
   billed to the agency under prior contracts for these items. AR, Tab 16,
   Source Selection Decision, at 5. In fact, as set forth above, the agency
   determined the relative significance of offerors' mileage costs by
   examining the total number of miles incurred and billed to the Forest
   Service by a selected MFSU during a prior fire season. We see no reason
   why the agency could not also develop and apply in the price evaluation
   realistic estimates for the meals and handwashing unit quantities
   expected. Without using such estimates, the Forest Service's evaluation
   here failed to account for the difference in the relative proportions of
   the cost for meals and mileage in the total cost to the government, and,
   as a result, there was no direct relationship between the evaluated prices
   of a particular offeror and the actual price of performance by that
   offeror. See Health Servs. Int'l, Inc.; Apex Envtl., Inc., supra, at 3.

   Port-A-Pit also challenges the agency's evaluation of other offerors'
   proposals. The protester contends that the technical proposals submitted
   by two other offerors (i.e., [DELETED] and [DELETED]) failed to meet the
   minimum equipment requirements of the solicitation.[14] The agency
   specifically addressed and refuted these contentions in its report,
   explaining that the proposals submitted by both [DELETED] were properly
   determined to have met all minimum equipment requirements. In its
   comments, Port-A-Pit expresses disagreement with the agency report but
   makes no substantive rebuttal to the agency's position. Comments, Sept. 6,
   2005, at 3. Our review of the record provides no basis to find the
   agency's evaluation here unreasonable or otherwise objectionable.

   RECOMMENDATION

   We conclude that the Forest Service's price evaluation, including the
   determination that Port-A-Pit's prices were not fair and reasonable, was
   improper because it did not provide a meaningful basis to consider
   offerors' proposed costs to the government. We recommend that the agency
   reevaluate offerors' prices and make a new source selection decision for
   all DDP locations for which Port-A-Pit submitted a proposal, employing a
   price evaluation method that allows comparison of the relative cost to the
   government of the offerors' competing proposals. We also recommend that
   the protester be reimbursed the reasonable cost of filing and pursuing its
   protest, including attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2005). The
   protester should submit its certified claim for such costs, detailing the
   time expended and costs incurred, directly to the contracting agency
   within 60 days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

   The protest is sustained.

   Anthony H. Gamboa
   General Counsel

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

   [1] If an offeror received the award of a requirements contract, the
   offeror's prices for the additional optional items would then be
   evaluated, and a BPA awarded to the same offeror if the optional item
   prices were also determined to be reasonable. Id. sect. M.3, at 108.

   [2] The TEB rated each offeror's MFSUs separately. The TEB also employed
   the use of "+" and "-" (e.g., "acceptable plus") in its rating system. AR,
   Tab 21, TEB Consensus Report, at 2-3.

   [3] This included four of the six DDPs where the TEB recommended that no
   award be made (i.e., DDPs #7, 8, 16, and 25). AR, Tab 15, TEB Best Value
   Analysis Report, at 10, 12, 25, 42.

   [4] By contrast, when an agency evaluates proposals for the award of a
   cost-reimbursement contract, in which the government bears the risk and
   responsibility to pay the contractor its actual allowable costs regardless
   of the costs proposed by the offeror, see FAR sect. 16.301-1, the agency's
   analysis must also determine the realism of the offeror's proposed costs
   and what the costs are likely to be under the offeror's technical
   approach, assuming reasonable economy and efficiency (i.e., cost realism).
   See Pueblo Envtl. Solution, LLC, B-291487, B-291487.2, Dec. 16, 2002, 2003
   CPD para. 14 at 13; PADCO, Inc.--Costs, B-289096.3, May 3, 2002, 2002 CPD
   para. 135 at 5.

   [5] For evaluation purposes, meal prices were based upon a per-person
   per-day (i.e., breakfast, lunch, and dinner combined) rate; MFSU mileage
   was based upon a per-mile traveled rate; and handwashing units were based
   upon a per-sink per-day rate.

   [6] The government estimates were based upon historical price competition,
   using MFSUs under contract with the Forest Service during a prior fire
   season. AR, Tab 15, TEB Best Value Analysis Report, at 1.

   [7] While Port-A-Pit's meal price was $[DELETED] per-person per-day in
   most instances, the offeror's meal price for its Unit 03 (all DDPs), as
   well as Units 01 and 02 (for the California-based DDPs), totaled
   $[DELETED]. AR, Tab 13, Abstract of Offerors' Prices by DDP.

   [8] The TEB determined that the average mileage price proposed under the
   solicitation was $20 per mile. The agency did not compute an overall
   average price for meals and handwashing units, but did so for each DDP.
   The average meal and handwashing unit prices set forth above are for DDP
   23 (Salt Lake City, Utah), one of the locations upon which Port-A-Pit
   proposed. AR, Tab 13, Abstract of Offerors' Prices, at 8.

   [9] The contracting officer also considered the mileage price that the
   agency had negotiated with Port-A-Pit on an earlier occasion in her
   determination here. AR, Tab 15, TEB Best Value Analysis Report, at 5.

   [10] The agency determined the relative significance of offerors' mileage
   costs by examining the total number of miles incurred and billed to the
   Forest Service by a selected MFSU during a prior fire season. AR, Tab 15,
   TEB Best Value Analysis Report, at 1. The parties agree that the cost for
   handwashing units was not significant to the overall cost to the
   government.

   [11] While the record demonstrates the actual number of meals and amount
   of mileage provided here, it does not also indicate reflect the
   contractor's actual rates and thus, the government's actual costs.

   [12] [DELETED] total meals / 3 = [DELETED] meals per person per day.
   [DELETED] x $[DELETED] per person per day = $39,644. [DELETED] total miles
   x $[DELETED] per mile = $17,100.

   [13] [DELETED] total meals / 3 = [DELETED] meals per person per day.
   [DELETED] x $[DELETED] per person per day = $69,285.04. [DELETED] total
   miles x $[DELETED] per mile = $35,600.

   [14] Port-A-Pit also protested that the proposal submitted by [DELETED]
   was not signed and did not acknowledge the amendments to the RFP; the
   protester subsequently withdrew this issue. Comments, Sept. 6, 2005, at 3
   n.1.