TITLE: B-298426, Crown Title Corporation, September 21, 2006
BNUMBER: B-298426
DATE: September 21, 2006
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B-298426, Crown Title Corporation, September 21, 2006

   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: Crown Title Corporation

   File: B-298426

   Date: September 21, 2006

   Thomas C. Papson, Esq., and Matthew T. Crosby, Esq., McKenna Long &
   Aldridge LLP, for the protester.

   Thomas J. Madden, Esq., and Sharon A. Jenks, Esq., Venable LLP, for
   Lawyers Advantage Title Group, Inc., an intervenor.

   Richard A. Marchese, Esq., Department of Housing and Urban Development,
   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

   Agency's award to offeror that submitted lower-rated, lower-priced
   proposal in a best value procurement is proper where the source selection
   was based on a reasonable determination that the substantial price premium
   associated with protester's higher-rated, higher-priced proposal was not
   justified given the level of technical competence available at the lower
   price.

   DECISION

   Crown Title Corporation protests the award of a contract to Lawyers
   Advantage Title Group, Inc. under request for proposals (RFP) No.
   R-PHI-00948, a small business set-aside issued by the Department of
   Housing and Urban Development (HUD) for real estate closing agent services
   for HUD properties located in Maryland. Crown primarily contends that,
   since the RFP provided that technical merit was significantly more
   important than price, the agency should have awarded the contract to Crown
   based on its higher-rated, higher-priced proposal.

   We deny the protest.

   The RFP, issued on July 17, 2005, anticipated the award of a fixed-price,
   indefinite-quantity contract for a base year and 3 option years. RFP at 3,
   42. The award was to be made to the firm submitting the proposal found to
   offer the best value considering technical factors and price. The RFP
   provided the following equally weighted technical evaluation factors:
   prior experience (including subfactors for closings on the sale of
   HUD-owned or other properties at similar volumes and in similar
   geographical areas); technical and management approach (including
   subfactors for state licensing, quality control, office location, and
   contract operations); past performance; and personnel qualifications
   (including subfactors for resumes demonstrating relevant experience, and
   descriptions of key personnel efforts). Id. at 45-48. Together, the
   technical evaluation factors were to be significantly more important than
   price; price, however, was to remain a significant criterion for award.
   Id. at 48. Prices were to be reviewed to determine whether they were
   "necessary and reasonable," reflected a clear understanding of the
   requirements, and were consistent with the methods described in the
   proposal. Id. at 48.

   Eleven proposals were received by the August 15 closing date; six of the
   proposals were included in the competitive range. Discussions were
   conducted and final proposal revisions were submitted by November 28.
   Crown, the incumbent contractor, submitted a proposal rated "excellent"
   overall with the fourth low total evaluated price of $[deleted]; Crown
   proposed a price of $[deleted] per closing for the base year [deleted].
   Lawyers' proposal was rated "good" overall; the firm proposed the lowest
   evaluated price of $[deleted], reflecting a proposed price of $[deleted]
   for each closing [deleted].

   Both firms' proposals received favorable technical evaluations. The
   technical evaluation panel (TEP) rated the Crown proposal "excellent"
   under all four evaluation factors, reflecting subfactor ratings of mostly
   "excellent" with some ratings of "good;" the proposal was also assessed as
   having very low risk. The Lawyers proposal received one rating of
   "excellent" and three ratings of "good" under the four equally weighted
   evaluation factors, reflecting ratings of "excellent" and "good" under the
   subfactors; the proposal was assessed as having low risk. While the TEP
   concluded that both firms "can perform the work satisfactorily," the TEP
   had concerns that Lawyers' low price for this fixed-price contract did not
   reflect the level of effort the firm detailed in its technical proposal.
   TEP Report, Feb. 13, 2006 at 24. The TEP was concerned that the
   protester's proposed price might be insufficient to cover its costs of
   performing the contract and, on that basis, concluded that award to
   Lawyers was "not the best value for the Government." Id. at 25. The TEP
   noted that Crown submitted a "superior technical proposal" and reasoned
   that even though Crown's proposal was higher-priced than other proposals
   received under the RFP, it was lower than the government estimate for the
   work. Id. The TEP concluded that Crown's proposal offered the best value.
   Id.

   Upon review of the TEP report, the contracting officer took note of the
   technical strengths cited for the Lawyers proposal as well as its
   substantially lower price, which is less than one-fifth of Crown's
   evaluated price. The contracting officer also noted that Lawyers reported
   that it has been performing similar closing agent services for HUD for the
   last 15 years, and that it is currently performing closings for HUD at low
   prices similar to those proposed here. The contracting officer had her
   staff contact the HUD contracting personnel administering some of Lawyers'
   current closing agent contracts to confirm the reasonableness of the
   firm's prices under the current RFP and, in effect, to also assess the
   firm's understanding of the requirements by reviewing the quality of its
   performance at those prices. The contracting officer learned that the firm
   has been successfully performing similar closing agent services, for a
   similarly high volume of HUD properties in Florida for only $[deleted] per
   closing, and for a smaller volume of HUD properties in Northern Virginia
   for as low as $[deleted] per closing.[1] In light of the firm's successful
   performance of the required closing agent services at similarly low or
   lower prices than it proposed here, the contracting officer concluded that
   Lawyers had a sufficient understanding of, and the ability to perform, the
   requirements despite its low price. The contracting officer concluded that
   the slightly higher-rated "proposal submitted by Crown . . . [did] not
   merit the additional costs" associated with an award to that firm.
   Contracting Officer's Source Selection Recommendation, Apr. 10, 2006, at
   1-4; Contracting Officer's Statement of Facts at 3, 7. Consequently, the
   contracting officer advised the source selection authority (SSA) that she
   did not agree with the TEP's conclusion that Crown offered the best value
   to the agency. Rather, in light of the technical merit of the Lawyers
   proposal and its substantially lower price, the contracting officer
   concluded that the price premium associated with the Crown proposal was
   not warranted. The contracting officer recommended that award be made to
   Lawyers as the firm submitting the proposal that offered the best value to
   the government.

   After reviewing the TEP's comparative assessment of the proposals, and the
   contracting officer's list of comparative strengths of the two firms
   compiled from the TEP report, including the confirmation that Lawyers is
   performing similar HUD contracts successfully at similarly low prices, the
   SSA concluded that the technical distinctions between the proposals were
   not significant and that an award to Crown would not be worth the
   significant price premium associated with its proposal. Source Selection
   Decision Document, undated; Declaration of SSA, July 14, 2006, at 1-2.
   Finding that the Lawyers proposal offered the best value, the SSA selected
   Lawyers for award; an award was made to the firm on June 6, 2006. This
   protest followed.

   Crown challenges the reasonableness of the agency's source selection. The
   protester contends that the contracting officer and SSA improperly
   converted the procurement to one based on low price among technically
   acceptable offers instead of following the RFP's provision that technical
   superiority was to be significantly more important than price.[2] As
   explained below, we conclude that the record shows that the evaluation and
   selection decision here were reasonable and consistent with the RFP.

   In reviewing a protest against an agency's evaluation of proposals and
   award, including tradeoff determinations, we examine the record to
   determine whether the agency's judgment was reasonable and consistent with
   the solicitation's evaluation criteria and applicable statutes and
   regulations. Ostrom Painting & Sandblasting, Inc., B-285244, July 18,
   2000, 2000 CPD para. 132 at 4. An agency may properly select a
   lower-rated, lower-priced proposal--even where price is set out in the
   solicitation as a significantly less important factor than technical
   merit--where it reasonably concludes that the price premium involved in
   selecting a higher-rated proposal is not justified in light of the
   acceptable level of technical competence available at a lower price. Bella
   Vista Landscaping, Inc., B-291310, Dec. 16, 2002, 2002 CPD para. 217 at 4.
   Source selection officials are not bound by the recommendations of lower
   level evaluators but, rather, have the discretion to make price/technical
   tradeoffs; the extent of such tradeoffs is governed by the test of
   rationality and consistency with the evaluation criteria. Best
   Temporaries, Inc., B-255677.3, May 13, 1994, 94-1 CPD para. 308 at 3. A
   protester's mere disagreement with the agency's determinations as to the
   relative merit of competing proposals and its judgment as to which
   proposal offers the best value to the agency, does not establish that the
   evaluation or source selection was unreasonable. Weber Cafeteria Servs.,
   Inc., B-290085.2, June 17, 2002, 2002 CPD para. 99 at 4.

   Based on the record here, we find the tradeoff determination and award
   reasonably based. Our review, as discussed further below, confirms not
   only the SSA's view of the comparable technical merit of the proposals,
   but also the reasonableness of the determination that, given the level of
   technical merit available at a significantly lower price, an award to
   Crown based on its slightly higher-rated proposal was not warranted.

   The evaluation record here is clear. As the contracting offficer points
   out in her analysis of the TEP report, both firms' proposals presented
   comparable strengths under each evaluation factor. For instance, under the
   prior experience factor, where both firms were rated "excellent," each was
   credited for extensive experience with HUD and other property closings at
   similar volumes and in similar geographic areas. For the technical and
   management factor, both firms met state licensing requirements, provided
   comprehensive quality control plans, set out detailed work strategies, and
   have several offices in the area. Given the similarity in the noted
   strengths for both proposals, we find reasonable the contracting officer's
   conclusion that the difference in technical ratings assigned for the
   factor ("excellent" for Crown and "good" for Lawyers) does not reflect any
   material difference in technical merit.

   For past performance, Crown's proposal was rated "excellent" and Lawyers'
   was rated "good." While there is little explanation of the difference in
   past performance ratings in the record, our review shows that at least two
   past performance references rated Lawyers "excellent" under each
   subfactor. Additionally, while one evaluator apparently noted some
   negative performance information for the firm, the same evaluator also
   cited numerous strengths for the firm. For the final technical factor,
   personnel qualifications, the record also supports the SSA's conclusion
   that the two firms' proposals were comparable in technical merit. Both
   firms' staff resumes and biographies showed that all proposed key
   personnel met or exceeded the RFP's experience requirements and that the
   level of effort proposed was satisfactory for successful performance of
   the work. While Crown was credited (and rated "excellent") for having
   personnel committed solely to this project, it is also clear in the
   evaluation record that Lawyers (rated "good" for the personnel factor) was
   found to have fully staffed the effort with qualified, experienced
   personnel, for which its proposal was rated favorably.

   It is well-established that adjectival ratings are merely guides to
   intelligent decisionmaking; they do not mandate automatic selection of a
   particular proposal. See Calspan Corp., B-255268, Feb. 22, 1994, 94-1 CPD
   para. 136 at 10. Selection officials must decide whether the different
   ratings show technical superiority and what that difference may mean in
   terms of contract performance in determining whether a price premium
   associated with that superiority is warranted. See Computer Tech. Servs.,
   Inc., B-271435, June 20, 1996, 96-1 CPD para. 283 at 6. Here, as discussed
   above, the SSA performed a comprehensive integrated assessment of the
   proposals, including review of the TEP's detailed evaluation report and
   the contracting officer's comparative analysis of the proposals'
   strengths. Based on that review, the SSA concluded that in light of the
   technical quality shown by the Lawyers proposal and its significantly
   lower price, payment of the price premium involved in an award to Crown
   was not warranted. The record provides no basis to question the
   reasonableness of that determination.

   Crown argues that the agency failed to perform an adequate evaluation of
   the realism of Lawyers' low price. We disagree. There is no requirement
   that a realism analysis be performed when award of a fixed-price contract
   is contemplated. McDonnell Douglas Corp., B-259694.2, B-259694.3, June 16,
   1995, 95-2 CPD para. 51 at 9. This reflects the fact that it is
   unobjectionable for a firm to submit a below-cost proposal for a
   fixed-price contract, since fixed-price contracts generally are not
   subject to adjustment during performance and the contractor, not the
   agency, bears the financial risk. Id. While an agency may provide in the
   solicitation for a price realism analysis of fixed-price proposals, the
   RFP here did not do so. In support of its position that the RFP did
   require such an analysis, the protester points to the following language
   in the RFP: "If a cost realism analysis is performed, cost realism may be
   considered by the source selection authority in evaluating performance or
   schedule risk." RFP at 41 (emphasis added). Not only is the concept of
   "cost realism" ordinarily not applicable in the context of a fixed-price
   contract, Systems, Studies, and Simulation, Inc., B-295579, Mar. 28, 2005,
   2005 CPD para. 78 at 5-6, but the language in this provision is clearly
   conditional in nature.

   We recognize, as noted above, that the RFP states that prices were to be
   reviewed to determine whether they were "necessary and reasonable,"
   reflected a clear understanding of the requirements, and were consistent
   with the methods described in the offeror's proposal. RFP at 48.
   Consistent with this provision, the TEP and the contracting officer fully
   considered the issues raised by Lawyers' low price. Accordingly, we see no
   basis to conclude that the agency's consideration of the firm's
   understanding of the work based on the firm's successful performance of
   similar services at similar prices was unreasonable or was otherwise
   inconsistent with the price review provision of the RFP.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] Lawyers reports that its low pricing for its closing agent services
   contracts reflects its anticipation of additional revenue [deleted].

   [2] To the extent the protester alleges that during discussions it was
   misled to believe that its price was too low, we find nothing in the
   record to support the contention. Rather, like the other offerors, Crown
   was asked to explain how it intended to perform at prices well below the
   government estimate and those of other offerors; we do not agree with the
   protester that such inquiry conveyed, as Crown contends, that the firm
   should not reduce its price in its final proposal revision. The protester
   was simply given the opportunity to review and explain its pricing; the
   decision to leave its prices unchanged reflects the exercise of the firm's
   business judgment, not improper conduct by the agency. Professional
   Landscape Mgmt. Servs., Inc., B-286612, Dec. 22, 2000, 2000 CPD para. 212
   at 5. Moreover, while the protester generally contends that it would have
   lowered its price in its final proposal revision, but did not do so solely
   due to the agency's price inquiry during discussions, there is also no
   showing in the record that it would have lowered its price to the degree
   necessary to remain competitive with the awardee's significantly lower
   price.