TITLE: B-298720.3, Midland Supply, Inc., May 14, 2007
BNUMBER: B-298720.3
DATE: May 14, 2007
**********************************************
B-298720.3, Midland Supply, Inc., May 14, 2007

   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: Midland Supply, Inc.

   File: B-298720.3

   Date: May 14, 2007

   Richard D. Lieberman, Esq., and Nicole S. Allen, Esq., McCarthy, Sweeney &
   Harkaway, P.C., for the protester.

   Adele Ross Vine, Esq., General Services Administration, for the agency.

   Kenneth Kilgour, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Under solicitation providing for award to offeror whose proposal is found
   to be the most advantageous to the government based on past performance,
   delivery, and price, protest challenging selection decision is sustained
   where the record shows that the best value determination mischaracterized
   the relative quality of the offerors' on-time delivery records, a key
   factor in the selection decision.

   DECISION

   Midland Supply, Inc. protests the award of a contract to Danaher Tool
   Group under request for proposals (RFP) No. 6FLS-G3-050327-N, issued by
   the General Services Administration (GSA) for quantities of 50 commercial
   line items in the 5120 Federal Supply Class (hand tools, non-edged,
   non-powered). The agency made a new best value determination after we
   sustained a prior Midland protest objecting to the award to Danaher.
   Midland Supply, Inc., B-298720.2, Nov. 29, 2006, 2007 CPD para. 2. Midland
   again challenges the agency's award for line item No. 1 for socket wrench
   sets (an item Midland has provided to the government since 2001) to
   Danaher, a firm submitting a lower technically rated, lower-priced
   proposal for this line item, arguing that the best value determination is
   irrational and arbitrary.

   We sustain the protest.v

   The RFP, issued on February 24, 2006, contemplated awards of fixed-price
   requirements contracts for a 2-year base period with three 1-year options.
   The RFP provided that the agency would award contracts to the responsible
   offerors whose proposals, conforming to the solicitation, were determined
   to be most advantageous to the government, past performance, delivery, and
   price considered. Past performance was comprised of three
   subfactors--on-time delivery, quality deficiency notices, and orders
   terminated. The RFP stated that past performance and delivery, when
   combined, would be considered significantly more important than price, and
   that if proposals were determined to be essentially technically equal,
   awards would be made to the firms submitting the lowest prices. The RFP
   required that delivery be made within 120 calendar days after receipt of
   order for all items, but permitted offerors to propose a more favorable
   delivery time. The RFP included a clause entitled "Performance History,"
   which states that the "vendor's Federal Supply Service (FSS) Supplier
   Rating Reports, from contracts for comparable products, will constitute
   the primary performance history for the evaluation of the offer." RFP at
   104.

   In evaluating proposals, the agency assigned the following raw points
   under the three evaluation factors: excellent (5 points); good (4 points);
   average (3 points); and poor (0 points). The agency used the following
   scale in evaluating on-time performance: excellent (90-100 percent
   on-time); good (80-89 percent); average (70-79 percent); and poor (under
   70). These raw scores were then multiplied by the following weights: 35
   percent for both past performance and delivery (for a total combined
   weight of 70 percent) and 30 percent for price. The agency then added the
   weighted scores together to arrive at a total point score for each
   proposal.

   In evaluating Midland's past performance, the agency assigned it a raw
   score of 3 points under the on-time delivery subfactor based on Midland's
   [DELETED]-percent on-time delivery record.[1] Because Midland had no
   quality deficiency notices and no terminated orders, the agency assigned
   it a raw score of 5 points under each of the other two past performance
   subfactors. The agency averaged these scores, for a final past performance
   raw score of 4.34 points. Because Midland proposed a [DELETED]-day
   delivery schedule, the agency assigned it the highest raw score of
   5 points under the delivery factor.[2] Midland's price for line item No.
   1--$[DELETED] per item--received a raw score of 3 points. Contracting
   Officer's (CO) Statement, Sept. 26, 2006, at 4.[3] (Midland's price was
   approximately [DELETED] percent higher than Danaher's price.)

   In evaluating Danaher's past performance, the agency assigned it a raw
   score of 3 points under the on-time delivery subfactor based on Danaher's
   [DELETED]-percent on-time delivery record. Because Danaher had no quality
   deficiency notices and no terminated orders, the agency assigned it a raw
   score of 5 points under each of the other two past performance subfactors.
   The agency averaged these scores, for a final past performance raw score
   of 4.34 points, the same as Midland's. Because Danaher proposed an
   [DELETED]-day delivery schedule, the agency assigned it a raw score of
   4 points under the delivery factor. Danaher's price for line item No.
   1--$[DELETED] per item--received a raw score of 5 points. Id. at 3.

   The agency then multiplied the raw scores for the three evaluation factors
   by the weights assigned to each of these evaluation factors, which yielded
   the following results for the four top-scoring firms, including Midland
   and Danaher:

 +---------------------------------------------------------------------------+
 |                     |  Midland   |  Offeror A   |  Offeror B  |  Danaher  |
 |---------------------+------------+--------------+-------------+-----------|
 |  Past Performance   |    152     |  [DELETED]   |  [DELETED]  |    152    |
 |---------------------+------------+--------------+-------------+-----------|
 |      Delivery       |    175     |  [DELETED]   |  [DELETED]  |    140    |
 |---------------------+------------+--------------+-------------+-----------|
 |        Price        |     90     |  [DELETED]   |  [DELETED]  |    150    |
 |---------------------+------------+--------------+-------------+-----------|
 | Total Point Scores  |    417     |     418      |     430     |    442    |
 +---------------------------------------------------------------------------+

   Agency Report (AR), Tab 10, Evaluation Chart.

   The agency awarded a contract for line item No. 1 to Danaher because its
   proposal received the highest total point score of the 15 proposals
   received.

   Midland's previous protest challenging the agency's decision to award line
   item No. 1 to Danaher argued that the agency merely mechanically
   considered the total point scores assigned to the Midland and Danaher
   proposals and then awarded to Danaher because its proposal had the highest
   total point score. Midland maintained that the agency made no meaningful
   price/technical tradeoff, pointing out, for example, that the agency
   failed to consider whether Midland's proposed [DELETED]-day delivery
   schedule was worth the payment of an approximately [DELETED] percent price
   premium, in light of Danaher's significantly longer proposed delivery
   schedule of [DELETED] days. We sustained the protest and recommended that
   the agency perform and document a new price/technical tradeoff analysis.

   In response to our recommendation, the CO prepared a new best value
   determination. After noting that the protester's proposed delivery time
   was "substantially better" than the awardee's, the contracting officer
   stated as follows with regard to the past performance of the two offerors:

     Midland's past performance had substantial weaknesses as follows:
     Midland's past performance reflected an on-time rate of [DELETED]
     according to statistics provided by the Administrative Contracting
     Officer. Danaher's past performance was significantly better than that
     of Midland. The evaluation of past performance for Danaher reflected the
     following: Danaher had an on-time rate of [DELETED]. As it relates to
     the delivery and past performance evaluation factors, the Government is
     able to manage a slower delivery in the stock program but poorer
     delivery cannot be controlled and could result in GSA being unable to
     meet its requirements to the U.S. military--its major customer. The
     price offered by Midland Supply was $[DELETED], which is [DELETED] than
     that of Danaher which offered $[DELETED]. When reviewing the evaluation
     factors of delivery, past performance and price, it is the opinion of
     the contracting officer that the shorter delivery time offered by
     Midland, who has a past performance history of [DELETED], when compared
     to Danaher, which offered a [DELETED] day delivery time, and which has
     an excellent record of past performance, does not justify payment of the
     higher price of $[DELETED] offered by Midland. As previously stated, the
     needs of the government related to a shorter delivery time, as offered
     by Midland, can be handled through good inventory management and more
     frequent orders. In view of this, the proposal for item 1 provided by
     Danaher Tool Group is determined to be the best value to GSA.

   Supplemental (Supp.) AR, Tab 14, Best Value Determination at 1 (emphasis
   added).

   Based on this tradeoff analysis, the agency again selected Danaher for
   award.

   The protester argues that the on-time delivery subfactor scores for it and
   the awardee were the same, meaning that they both fell within the "average
   band," and that therefore the agency could not properly consider the
   [DELETED] percent difference in the offerors' on-time delivery percentages
   in its tradeoff analysis. We disagree.

   There is nothing improper about an agency's decision to look behind
   ratings given proposals by evaluators in an attempt to ascertain the true
   relative strengths and weaknesses of proposals. ATA Def. Indus., Inc.,
   B-282511.2, July 21, 1999, 99-2 CPD para. 33 at 12. Adjectival ratings and
   point scores are but guides to, and not substitutes for, intelligent
   decision making. See Shumaker Trucking & Excavating Contractors, Inc.,
   B-290732, Sept. 25, 2002, 2002 CPD para. 169 at 6. They are tools to
   assist source selection officials in evaluating proposals; they do not
   mandate automatic selection of a particular proposal. PRC, Inc.,
   B-274698.2, B-274698.3, Jan. 23, 1997, 97-1 CPD para. 115 at 12. Those
   officials have broad discretion in determining the manner and extent to
   which they will make use of, not only the adjectival ratings or point
   scores, but also the written narrative justification underlying those
   technical results, subject only to the tests of rationality and
   consistency with the evaluation criteria. The propriety of the
   price/technical tradeoff decision turns on whether the selection
   official's judgment concerning the significance of the difference in the
   technical ratings was reasonable and adequately justified. Johnson
   Controls World Servs., Inc., B-289942, B-289942.2, May 24, 2002, 2002 CPD
   para. 88 at 6.

   The shortcoming in the agency's best value determination here is not that
   it considers the possible value to the agency of the small difference in
   the on-time delivery percentages, but rather that it in effect
   mischaracterizes the offerors' delivery records. First, the agency states
   that the protester's past performance[4] had "substantial weaknesses" as
   reflected in an on-time delivery rate of [DELETED]. In fact, as noted
   above, an on-time delivery rate of [DELETED] percent merited a rating of
   "average," and the characterization of that rate as reflecting a
   substantial weakness is unreasonable. Similarly, the agency concludes that
   the awardee's past performance was "significantly better" than the
   protester's because the awardee had an on-time rate of [DELETED] percent,
   even though that rate is only [DELETED] percent better than the
   protester's and is also in the average range. Moreover, the best value
   determination characterized the awardee's average performance as
   "excellent," which is likewise inconsistent with the rating scheme used by
   the agency. Taken together, these misstatements, which were material to
   the agency's best value determination, are unreasonable and inconsistent
   with the evaluation scheme, and could not be the basis for the best value
   determination made by the agency here.

   In defending its best value determination, the agency argues that, while
   it may have contained some inaccurate language, the determination itself
   has a rational basis, and the agency reasonably considered past
   performance information. Although the protester offered a shorter delivery
   time, the agency argues, it is not as reliable as the awardee in making
   deliveries on time. Because the agency is more certain when the awardee's
   parts will be delivered, the agency maintains that it can mitigate the
   protester's advantage of a "significantly better" proposed delivery time
   through more efficient inventory management.

   In assessing the reasonableness of the best value determination, we cannot
   overlook either the language used or the conclusion that formed the basis
   of the determination, namely, that the awardee had a "significantly
   better" on-time delivery record than the protester, and that this factor
   outweighed any advantage of the shorter delivery time offered by the
   protester. Without a reasonable explanation, supported by the record, of
   why the [DELETED] percent difference in on-time delivery rates is a
   meaningful indicator of the relative quality of the protester's and the
   awardee's proposals, we cannot conclude that the best value determination
   is reasonable.

   Further, in making its qualitative assessment of the offerors' on-time
   delivery performance, the agency ignored the fact that for 2-1/2 years the
   protester has achieved a [DELETED] percent on-time delivery record for the
   very part being procured. The agency argues that it is precluded from
   considering this fact by the plain language of the "Performance History"
   clause in the RFP, quoted above. We disagree. The clause says simply that
   the Federal Supply Schedule supplier rating reports for "contracts for
   comparable products" will constitute the "primary" performance history. In
   our view, this language allows the agency the discretion to consider as
   particularly relevant and predictive of future performance the incumbent's
   past performance on prior contracts for the same item. See Federal
   Acquisition Regulation sect. 15.305(a)(2) (currency of information and
   general trends in contractor's performance shall be considered); United
   Paradyne Corp., B-297758, Mar. 10, 2006, 2006 CPD para. 47 at 5-6. In
   fact, once the agency decided to look behind the raw scores for the
   on-time delivery subfactor, we think it was unreasonable for it not to
   consider this performance data in its assessment of the relative quality
   of the offerors' on-time delivery records.

   RECOMMENDATION

   We recommend that the agency perform and document a new price/technical
   tradeoff analysis. If the agency determines that Danaher's proposal for
   line item No. 1 is not the most advantageous to the government, we
   recommend that the agency terminate Danaher's contract for this line item
   and award to the offeror whose proposal is determined to be the most
   advantageous. In addition, we recommend that the agency reimburse Midland
   for the reasonable costs of filing and pursuing this protest, including
   reasonable attorneys' fees. Bid Protest Regulations, 4 C.F.R. sect.
   21.8(d)(1) (2006). Midland's certified claim for costs, detailing the time
   expended and costs incurred, must be submitted to the agency within 60
   days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

   The protest is sustained.

   Gary L. Kepplinger
   General Counsel

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

   [1] It is undisputed that the protester has a [DELETED]-percent on-time
   delivery record for the last 2-1/2 years for the part being procured.

   [2] With respect to the delivery evaluation factor, the agency conducted a
   market survey in October 2005, in which nine firms, including Midland and
   Danaher, participated. Eight of the firms, including Midland, responded
   that delivery could be accomplished in 60 days. Based on the results of
   the market survey, the agency used 60 days as the lowest projected
   delivery timeframe. As a result, the agency determined that proposed
   delivery schedules of 60 days or less would be evaluated as excellent and
   assigned a raw score of 5 points, while proposed delivery schedules of 61
   to 90 days would be evaluated as good and assigned a raw score of 4
   points.

   [3] With regard to price, points were assigned based on comparison to the
   lowest price received. Thus, for example, a raw score of 5 points was
   assigned to prices within 5 percent of the lowest proposed price, and a
   raw score of 4 points was assigned to prices within 6-10 percent of the
   lowest proposed price.

   [4] The agency refers repeatedly to past performance, although the
   discussion concerns one subfactor of past performance, on-time delivery.