TITLE: B-296875, J.A. Farrington Janitorial Services, October 18, 2005
BNUMBER: B-296875
DATE: October 18, 2005
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B-296875, J.A. Farrington Janitorial Services, October 18, 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: J.A. Farrington Janitorial Services

   File: B-296875

   Date: October 18, 2005

   Michael A. Gordon, Esq., and Fran Baskin, Esq., Holmes & Gordon, for the
   protester.

   Clarence D. Long III, Esq., and Bradford L. Buchanan, Esq., Department of
   the Air Force, for the agency.

   Katherine I. Riback, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Agency's rejection of fixed-price proposal submitted by HUBZone small
   business because the price was determined unrealistically low was
   improper, where the solicitation contains no evaluation criterion
   pertaining to price realism or understanding; such a determination
   concerns the offeror's responsibility, i.e., the offeror's ability and
   capacity to successfully perform the contract at its offered price, and
   must be submitted to the Small Business Administration for a possible
   certificate of competency.

   2. Agency determination that the protester's past performance was only
   entitled to a "confidence" rating was reasonable and gave appropriate
   consideration to the considerable relevant and successful past performance
   of protester's mentor and major subcontractor, where the protester had no
   relevant past performance.

   3. Protest challenging the past performance evaluation of the awardee is
   sustained where the record fails to explain why the contracts, on which
   the past performance rating was based, were relevant, given their
   relatively low dollar value compared to the estimated dollar value of the
   solicited contract.

   DECISION

   J.A. Farrington Janitorial Services (JAF) protests the award of a contract
   to Roberts Treescaping, LLC (RTS) under request for proposals (RFP) No.
   FA2543-04-R-0003, issued by the Department of the Air Force for integrated
   grounds management at Buckley Air Force Base (AFB), Colorado.

   We sustain the protest.

   The RFP, issued on July 26, 2004 as a Small Business Historically
   Underutilized Business Zone (HUBZone) set-aside, contemplated the award of
   a
   fixed-price contract for a 2-month base period, four 1-year options, and a
   10-month option, to the offeror whose proposal represented the "best
   value" to the government, price and past performance considered. The
   solicitation provided that "Past Performance is approximately equal to
   Price." RFP amend. 3, at 177. The RFP also provided that "any offer could
   be rejected if it is unreasonable as to
   price." Id. (emphasis supplied).

    

   The RFP provided that past performance was to be evaluated by making a
   "relevancy" determination of the offeror's present and past
   performance,[1] and then rating the past performance based on the
   following adjectival rating system: exceptional/high confidence, very
   good/significant confidence, satisfactory/ confidence, neutral/unknown
   confidence, marginal/little confidence, and unsatisfactory/no confidence.
   The RFP also provided, "In evaluating past performance, the Government
   reserves the right to give greater consideration to information on those
   contracts deemed most relevant to the effort described in this
   solicitation." The solicitation also provided that "Past performance
   regarding predecessor companies, key personnel who have relevant
   experience, or
   sub-contractors that will perform major or critical aspects of the
   requirement will be rated as highly as past performance information for
   the principal offeror." RFP amend. 3, at 176.

   Five offerors, including JAF and RTS--all HUBZone firms--submitted
   proposals prior to the September 9 closing date. JAF's "teaming partner"
   and major subcontractor was Joppa Maintenance Company, Inc., a large
   business and the incumbent contractor for Buckley AFB's grounds
   maintenance requirement, who, according to JAF's proposal, was to perform
   49 percent of the work under the contract.[2]

   The agency issued several amendments, engaged in several rounds of
   discussions and requested two final proposal revisions (FPR) from the
   offerors. During discussions, JAF was repeatedly advised that the agency
   considered its price to be unrealistically low. In response to the
   agency's notices, JAF increased its pricing somewhat. The evaluators
   ultimately assigned the following ratings:

+------------------------------------------------------------------------------+
|Offeror             |Proposed Price       |Past Performance Confidence Rating |
|--------------------+---------------------+-----------------------------------|
|JAF                 |[DELETED]            |            Confidence             |
|--------------------+---------------------+-----------------------------------|
|Offeror A           |[DELETED]            |            Confidence             |
|--------------------+---------------------+-----------------------------------|
|RTS                 |$14,458,683.40       |          High Confidence          |
|--------------------+---------------------+-----------------------------------|
|Offeror B           |[DELETED]            |      Significant Confidence       |
|--------------------+---------------------+-----------------------------------|
|Offeror C           |[DELETED]            |            Confidence             |
+------------------------------------------------------------------------------+

   AR, Tab 5AD, Source Selection Document, at 1. After reviewing JAF's
   response to the last FPR, the agency determined that JAF's proposed price
   continued to be unrealistically low and that the discussions with JAF
   indicated that it did not understand the requirement. For this reason the
   Air Force rejected JAF's proposal. Id. at 7. The agency then determined
   that the proposal of RTS represented the best value to the government and
   awarded a contract to that firm on July 5, 2005. This protest followed.

   The protester contends that the agency improperly rejected its proposal
   for being unrealistically low.[3] We agree.

   Before awarding a fixed-priced contract, an agency is required to
   determine that the price offered is fair and reasonable. Federal
   Acquisition Regulation (FAR) sect. 15.402(a). An agency's concern in
   making a price reasonableness determination focuses primarily on whether
   the offered prices are higher than warranted, and the results of the
   analysis may be used in negotiating reasonable prices. See McDonnell
   Douglas Corp., B-259694.2, B-259694.3, June 16, 1995, 95-2 CPD para. 51 at
   9. Although agencies are required to perform some sort of price or cost
   analysis on negotiated contracts to ensure that proposed prices are fair
   and reasonable, where, as here, the award of a fixed-price contract is
   contemplated, a proposal's price realism is not ordinarily considered,
   since a fixed-price contract places the risk and responsibility for
   contract costs and resulting profit or loss on the contractor. An agency
   may, but is not required to, provide in the solicitation for a price
   realism analysis for such purposes as measuring an offeror's understanding
   of the solicitation requirements, or to avoid the risk of poor performance
   from a contractor who is forced to provide goods or services at little or
   no profit. Grove Resource Solutions, Inc., B-296228,
   B-296228.2, July 1, 2005, 2005 CPD para. 133 at 4-5. However, where there
   is no relevant evaluation criterion pertaining to realism or
   understanding, a determination that an offeror's price on a fixed-price
   contract is too low generally concerns the offeror's responsibility, i.e.,
   the offeror's ability and capacity to successfully perform the contract at
   its offered price. CSE Constr., B-291268.2, Dec. 16, 2002, 2002 CPD para.
   207 at 4-5; Cromartie Constr. Co., B-271788, July 30, 1996, 96-2 CPD para.
   48 at 5.

   As indicated, JAF's proposal was not considered for award because its
   proposed price was considered unreasonably low. However, there was no
   technical or price evaluation factor under the RFP providing for the
   evaluation of price realism or the offerors' understanding of the
   requirements. The price evaluation provided only for the evaluation of the
   "reasonableness" of the proposed price, that is, whether the price was
   unreasonably high. Thus, the agency's concern that JAF's price was too low
   was a matter of the firm's responsibility. Since JAF is a small business,
   if the Air Force believed that JAF could not satisfactorily perform the
   contract at its proposed price, it was required to refer this finding of
   nonresponsibility to the SBA for that agency's review under its
   certificate of competency procedures. Accordingly, we sustain JAF's
   protest on this basis.

   JAF also challenges the past performance ratings of itself and RTS. Our
   Office will question an agency's past performance evaluation only where it
   lacks a reasonable basis, violates statute or regulation, or is
   inconsistent with the stated evaluation criteria. Albert Moving & Storage,
   B-290733, B-290733.2, Sept. 23, 2002, 2003 CPD para. 8 at 5.

   The protester contests its "confidence" rating for past performance on the
   grounds that it does not adequately reflect the 49 percent participation
   of its mentor, Joppa, a firm that was the incumbent contractor for Buckley
   AFB's grounds maintenance requirement and that received six
   "exceptional/high confidence" overall ratings from past performance
   references. AR, Tab 5M, JAF's Past Performance Evaluation. According to
   the protester, the agency's method of evaluating past performance rendered
   its mentor/protege agreement with Joppa "totally irrelevant." JAF's
   Comments at 3.

   JAF provided four past performance references, none of which were
   considered to be relevant to the work under this contract and for which it
   therefore received a rating of "neutral/unknown confidence." JAF has
   provided no basis to challenge this assessment. The record shows that the
   agency positively considered Joppa's past performance, and that was the
   reason JAF's rating was changed from "neutral/unknown confidence" to
   "satisfactory/confidence."

   We find that agency's evaluation of the past performance of JAF and its
   major subcontractor, Joppa, to be reasonable and consistent with the
   solicitation. We see nothing improper in the agency focusing, in
   particular, on the prime contractor's lack of past performance, given that
   it is the entity responsible for performing the contract, even where its
   mentor or subcontractor has considerable positive past performance. See
   Joint Mgmt. & Tech. Servs., B-294229, B-294229.2, Sept. 22, 2004, 2004 CPD
   para. 208 at 6. Here, the agency properly accounted for Joppa's
   considerable past performance, but reasonably did not rate JAF's past
   performance any higher than "confidence" in view of JAF's lack of relevant
   past performance.

   The protester also attacks RTS's "high confidence" rating, noting that
   RTS's past performance references all related to contracts for amounts
   less than $127,000 per year as a prime contractor, and none were for
   government contracts. The protester notes that the size of the previous
   grounds maintenance contract performed by Joppa was over $1.2 million per
   year.

   The agency responds that the relevance of RTS's past performance
   references was determined by assessing both the magnitude and the
   complexity of these projects. As noted above, the solicitation indicated
   that in order to be considered relevant, "Past/present performance effort
   involve[s] much of the magnitude of effort and complexities this
   solicitation requires."

   While the record indicates that RTS's referenced contracts were
   specifically determined to be of similar complexity, the agency record
   lacks any contemporaneous explanation for the agency determination that
   the awardee's past performance references related to contracts that
   involved sufficient magnitude of effort to be considered relevant, given
   their relatively small dollar value compared to the estimated dollar value
   of the present contract for integrated grounds maintenance at Buckley AFB.
   The only explanation offered in the agency report was that the agency
   determined that it was proper to take a "very generous view of magnitude"
   in determining that RTS's referenced contracts were relevant. Agency Legal
   Memorandum at 9. Since we are unable, based on this record, to find RTS's
   past performance relevant so as to allow for its "high confidence" rating,
   we sustain JAF's protest on this basis as well.

   We recommend that, consistent with this decision, the agency determine
   whether JAF is a responsible contractor. If the agency determines that JAF
   is not responsible because of its low price and alleged lack of
   understanding, this matter should be referred to the SBA for a possible
   certificate of competency. If JAF is found to be responsible, the agency
   should reevaluate RTS's past performance, in particular to determine the
   relevance of the contracts reported on by RTS's references, and make a new
   award decision that gives JAF credit for its low proposed price. If a firm
   other than RTS is selected for award, RTS's contract should be terminated
   and award made to that other firm. We also recommend that JAF be
   reimbursed the reasonable costs of filing and pursuing the protest,
   including reasonable attorneys' fees.
   4 C.F.R. sect. 21.8(d)(1). JAF should submit its certified claim for
   costs, detailing the time expended and costs incurred, directly to the
   agency within 60 days of receiving this decision.

   Anthony H. Gamboa

   General Counsel

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

   [1] The RFP included the following definitions:

   Relevant. Past/present performance effort involved much of the magnitude
   of effort and complexities this solicitation requires.

   Not Relevant. Past/present performance effort did not involve any of the
   magnitude of effort and complexities this solicitation requires.

   [2] A JAF/Joppa teaming agreement was formed under the Small Business
   Administration's (SBA) mentor-protege program. See 13 C.F.R. sect. 124.520
   (2005). Agency Report (AR), Tab 5G, JAF/Joppa Teaming Agreement, at 6-10.

   [3] The Air Force argues that JAF is not an interested party to protest
   under our Bid Protest Regulations, 4 C.F.R. sect. 21.0(a), inasmuch as it
   is not eligible for this HUBZone small business award because Joppa, its
   subcontractor and mentor, is not a HUBZone small business. We disagree.
   The Air Force does not challenge JAF's status as an eligible HUBZone small
   business concern. JAF is permitted to subcontract with other than HUBZone
   small businesses consistent with applicable SBA regulations, see 13 C.F.R.
   sect. 126.700, and nothing in the record suggests that JAF's proposed
   subcontracting arrangement with Joppa is inconsistent with SBA
   regulations. Thus, the Air Force has provided no basis for us to consider
   JAF as anything other than an interested party.