TITLE: B-298865.3, Team BOS/Naples--Gemmo S.p.A./DelJen, December 28, 2007
BNUMBER: B-298865.3
DATE: December 28, 2007
*******************************************************************
B-298865.3, Team BOS/Naples--Gemmo S.p.A./DelJen, December 28, 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: Team BOS/Naples--Gemmo S.p.A./DelJen

   File: B-298865.3

   Date: December 28, 2007

   Philip J. Davis, Esq., William A. Roberts, III, Esq., John W. Burd, Esq.,
   and John R. Prairie, Esq., Wiley Rein LLP, and Reed L. von Maur, Esq., for
   the protester.

   T. Wayne Gray, Esq., Joseph P. Hornyak, Esq., and Megan M. Mocho, Esq.,
   Holland & Knight LLP for Joint Venture Penauillie Italia S.p.A.; Cofathec
   S.p.A.; SEB.CO S.a.s.; CO.PEL.S.a.s., an intervenor.

   Damon Martin, Esq., Department of the Navy, for the agency.

   Jonathan L. Kang, Esq., and Ralph O. White, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest challenging evaluation of offerors' technical and price
   proposals is denied where agency's evaluation was reasonable and supported
   by the record.

   2. Protest challenging the adequacy and reasonableness of the agency's
   source selection decision is denied where the record supports the source
   selection authority's explanation that certain errors in the selection
   decision did not affect underlying rationale.

   DECISION

   Team BOS/Naples--Gemmo S.p.A./DelJen (BOS) protests the award of a
   contract to Joint Venture Penauillie Italia S.p.A.; Cofathec S.p.A. (JVP)
   under request for proposals (RFP) No. N33191-06-R-0001, issued by the
   Department of the Navy, Naval Facilities Engineering Command, for base
   operations services. The protester argues that the Navy unreasonably
   evaluated offerors' technical proposals, failed to conduct a reasonable
   price realism evaluation, and that the agency's selection decision was
   flawed both because of the above-referenced evaluation errors, and because
   of certain other errors in the information relied upon by the source
   selection authority (SSA) in his selection decision.

   We deny the protest.

   BACKGROUND

   The RFP was originally issued on January 24, 2006, and sought proposals to
   provide base operations services for the Navy in the Naples, Italy area.
   Offerors were required to propose facilities management, facility
   investment, janitorial, pest control, refuse collection and recycling,
   ground maintenance, street sweeping and external area cleaning, service
   calls, and miscellaneous support services. The solicitation consolidated
   requirements that had been provided under separate contracts; JVP was the
   incumbent for most of these contracts. Agency Report (AR) at 2-3. The RFP
   anticipated the award of a fixed-price contract, with both fixed-price
   work and indefinite-delivery orders, for a 1-year base performance period
   and nine 1-year option periods. The RFP stated that proposals would be
   evaluated on the basis of the following factors: organizational
   experience, organizational past performance, management plan, staffing
   plan and resources, and price. The non-price factors were of equal
   importance and, combined, were "approximately equal in importance" to
   price. RFP sect. M-1.

   With regard to the organizational experience criterion, the RFP instructed
   joint venture offerors to "provide a single page that lists the joint
   venture partners along with the percentage of work each partner is
   proposed to perform for the [contract] and that briefly describes the
   specific work that each partner will be performing." RFP sect. M-2. The
   RFP further advised that "if the Joint Venture offeror fails to comply
   with the requirement in this paragraph, then the Joint Venture offeror
   cannot be assigned a rating of satisfactory or better for this factor."
   Id.

   As relevant here, the RFP stated that the agency would evaluate offerors'
   price proposals as follows:

     FACTOR 5, PRICE:

     2. Price proposals will not be given an adjectival rating but may be
     evaluated for realism, completeness, balance and reasonableness using
     methods described below:

     i) Realism. Prices are compatible with the scope of solicitation,
     performance requirements, and proposed technical approach. . . .

     3. Unrealistic, unreasonable, or unbalanced pricing may cause a proposal
     to be determined unacceptable, or cause a reduction in price proposal
     rankings.

   RFP sect. M-2.

   The agency received proposals from 12 offerors by the April 4, 2006,
   proposal due date. The agency convened a technical evaluation board (TEB)
   and price evaluation board (PEB) to evaluate offerors' proposals. The TEB
   and PEB evaluations were reviewed by a source selection board (SSB), whose
   purpose was to make an award recommendation to the contracting officer
   (CO), who also served as the SSA. As relevant here, the initial ratings of
   the offerors, based on the TEB and PEB evaluations, were as follows:

   +------------------------------------------------------------------------+
   |                                      |      JVP      |       BOS       |
   |--------------------------------------+---------------+-----------------|
   |OVERALL TECHNICAL                     |   EXCELLENT   |    EXCELLENT    |
   |--------------------------------------+---------------+-----------------|
   |-- Organizational Experience          |   Excellent   |    Excellent    |
   |--------------------------------------+---------------+-----------------|
   |-- Organizational Past Performance    |   Excellent   |      Good       |
   |--------------------------------------+---------------+-----------------|
   |-- Management Approach                |   Excellent   |    Excellent    |
   |--------------------------------------+---------------+-----------------|
   |-- Staffing Plan and Resources        |   Excellent   |    Excellent    |
   |--------------------------------------+---------------+-----------------|
   |PRICE                                 |   [deleted]   | EUR55.6 million |
   +------------------------------------------------------------------------+

   AR, SSB Report, Sept. 1, 2006, at 7.[1]

   The SSB noted that three offerors, including JVP, submitted incomplete
   price proposals. The SSB recommended, and the SSA agreed, that these
   offerors should not be considered further for award. With regard to the
   remaining offerors, the SSB disagreed with the evaluation methodology of
   the TEB because of "several inconsistently-, or wrongly-, applied
   strengths, weaknesses, deficiencies, and ratings to the proposals." AR,
   SSB Report, Sept. 1, 2006, at 2-3. The SSB reevaluated the nine remaining
   offerors' technical proposals, using revised evaluation methodologies to
   correct the TEB's errors. As relevant here, the agency identified four
   strengths for BOS's proposal under the staffing plan and resources
   evaluation factor:

     (1) proposed staffing plan is very well detailed and shows a more than
     adequate number of Managers and QCs; (2) proposed number of FTEs is more
     than adequate and well distributed among the various Annexes; (3)
     proposed number of FTEs for both the Prime and Subcontractor Management
     system is also more than adequate; (4) proposed list of equipment
     includes all required instruments for each different ELIN in a more than
     adequate number.

   AR, TEB Report, Aug. 29, 2006 at 7; SSB Report, Sept. 1, 2006, at 9-10.
   The SSB also assigned a strength that the TEB had recognized under the
   management approach factor to BOS's evaluation under the staffing plan and
   resources factor: "proposal describes in detail the implementation of
   quality control and safety programs." AR, TEB Report, Aug. 29, at 7; SSB
   Report, Sept. 1, 2007, at 9-10. In the end, however, the SSB did not
   change BOS's overall technical rating of "excellent." Id. at 8-9.

   Following the SSB's reevaluations, the board recommended award to BOS
   because its proposal was the lowest-priced and highest technically rated.
   Id. at 19. The SSA agreed with the SSB's recommendation, and the Navy
   awarded the contract to BOS on September 15. Following a debriefing by the
   Navy, JVP filed a protest with our Office challenging the Navy's
   determination that its proposal was ineligible for award. On January 3,
   2007, we denied the protest, concluding that the Navy had reasonably
   rejected JVP's proposal as incomplete based on the company's failure to
   submit required pricing information. See Joint Venture Penauillie Italia
   S.p.A.; Cofathec S.p.A.; SEB.CO S.a.s.; CO.PEL.S.a.s., B-298865;
   B-298865.2, Jan. 3, 2007, 2007 CPD para. 7. Following our Office's
   decision in that protest, JVP filed a protest at the Court of Federal
   Claims (COFC), challenging the award to BOS. Prior to the COFC's
   resolution of the protest, the Navy took voluntary corrective action by
   reopening the competition. AR at 6.

   In February 2007, the Navy reevaluated the technical proposals of the
   three offerors, including JVP, that had been eliminated from award
   consideration due to their incomplete price proposals. AR, Business
   Clearance Memorandum (BCM), Feb. 26, 2007. After applying the revised
   technical evaluation methodology adopted in the September 2006 SSB report,
   the SSB revised JVP's proposal ratings under the organizational experience
   and organizational past performance evaluation factors from "good" to
   "excellent." Id. at 3-4. The agency determined that JVP's proposal
   remained at the "excellent" level under the management approach and
   staffing plan and resources evaluation factors. Id. at 4.

   On March 23, the agency requested revised proposals from offerors. The
   agency provided offerors' with their technical evaluation ratings, a
   summary of their evaluated strengths and weaknesses, and an assessment of
   their proposed price relative to the government's estimate and the
   lowest-priced offeror's proposal. The Navy also issued amendment No. 7 to
   the RFP, which added new requirements to the performance work statement,
   including, as relevant here, a recycling program.

   The Navy received revised proposals from the offerors, including JVP and
   BOS, which were evaluated by the SSB; the agency did not, as it did in the
   initial competition, use a TEB or PEB. In its evaluation of BOS's revised
   proposal under the staffing plan and resources factor, the SSB credited
   the company with a strong recycling plan and noted updates to BOS's
   corporate experience and past performance references. AR exh. 9, SSB
   Report, June 5, 2007, at 4-5. The SSB concluded, however, that the
   individual and overall technical evaluation ratings for BOS did not merit
   revision. Id. In its price realism analysis, the agency identified areas
   where it concluded that BOS's proposed price either was too low or
   unbalanced. Id. at 15-17.

   In evaluating JVP's revised proposal, the SSB similarly credited JVP with
   a strength for its recycling plan, but--as in its evaluation of
   BOS--concluded that the technical ratings did not merit revision. Id. at
   5-6. In its evaluation of JVP's revised price proposal, the SSB noted that
   JVP had proposed the lowest overall price of all offerors, and had lowered
   its proposed price by EUR[deleted] from its previous proposal. Id. at
   11-12. The agency also cited concerns regarding the realism of JVP's price
   proposal. Id. at 12.

   The SSB concluded that the agency could not make award based on the
   revised proposals, and should instead conduct additional discussions
   because "at this time no proposal is eligible for award, as submitted, due
   to the assessment of technical deficiencies, pricing deficiencies, or
   both." Id. at 28. The SSB recommended narrowing the competitive range to
   five offerors, including JVP and BOS. The SSA concurred with the SSB
   report and determined that further discussions would be required to
   address concerns regarding the remaining offerors' proposed prices. AR
   exh. 8, SSA Determination, June 7, 2007, at 1.

   In its discussions with JVP, the Navy identified four concerns regarding
   the realism of JVP's prices. These concerns were as follows: (1) JVP's
   overall price was low, (2) the proposed price escalation was "erratic and
   negative in the first two [option] periods,"[2] (3) the revised proposal
   contained a significant increase in phase-in costs, despite a reduction in
   the overall price, and (4) there was "significant variance" between
   certain of JVP's proposed line item prices and the government estimates.
   AR exh. 11, JVP Discussions Questions, July 31, 2007, at 1-2.

   With regard to the first concern, the agency advised JVP that its "total
   evaluated price is significantly low." AR exh. 11, JVP Discussions
   Questions, July 31, 2007, at 1. The Navy explained that the concerns arose
   because JVP had lowered its price from EUR[deleted] in its initial
   proposal, to EUR50,698,224.66 in its revised proposal. In its response,
   JVP stated that "we stand by our pricing as provided in our revised price
   proposal" based on the following rationale:

     The retention of the Naples BOS contract is a key part of our overall
     corporate strategy to [deleted] to provide an economy of scale that
     allows management and staffing efficiency for [deleted]. Maintaining
     this economy of scale allows us to provide the outstanding services we
     do at a lower price than our competitors. Furthermore, the intense
     competitive pressures caused by the re-evaluation of proposals following
     release of general pricing for all offerors has required us to reduce
     our offer to the fullest extent prudent.

   AR, exh. 13, JVP Discussions Responses, at 2.

   JVP also responded with charts showing the actual full-time equivalent
   (FTE) staffing for the various contract requirements, Id., attach. 1.
   Finally, JVP stated that its average profit anticipated for the work was
   [deleted] percent, which JVP viewed as "an acceptable return for the
   company." Id. at 2. The Navy concluded that JVP's response regarding its
   efficiencies accomplished through economies of scale, as well as the
   detail in the breakdown of proposed prices, showed that JVP "demonstrates
   a thorough review and understanding of the requirements," and therefore
   addressed the agency's first concern. AR, exh. 14, SSB Report, Aug. 16,
   2007, at 5.

   Second, the agency expressed concern that the escalation of JVP's pricing
   "is erratic and negative in the first two periods." AR exh. 11, JVP
   Discussions Questions, July 31, 2007, at 1. JVP responded that its
   "escalation of pricing is part of our overall strategy to [deleted]." AR,
   exh. 13, JVP Discussions Responses, at 2. JVP stated that its "escalation
   [rate] is negative for the first two years," but increases [deleted]
   percent per year starting in the third year. Id. JVP explained that this
   approach was based on the company's proposal [deleted]. Id. JVP also noted
   that its revised proposal included [deleted], which accounted in part for
   the negative escalation in the first option year. Id.

   The Navy concluded that JVP had addressed the second concern because the
   pricing structure was intended to maintain a competitive advantage, and
   the offeror had provided a "detailed breakdown of the cost savings related
   to [deleted]." AR, exh. 14, SSB Report, Aug. 16, 2007, at 5.

   Third, the agency noted that "[t]here is a significant increase in the
   Phase In costs and, at the same time, a significant decrease in total
   price from the original proposal to the revised proposal." AR exh. 11, JVP
   Discussions Questions, July 31, 2007, at 1. JVP responded that the
   addition of the recycling services to the RFP statement of work required
   an increase to the start up costs from EUR[deleted] to EUR[deleted]. AR,
   exh. 13, JVP Discussions Responses, at 3. JVP noted, however, that its
   increase in costs for the transition was "independent from our overall
   proposal pricing," which was explained in JVP's responses to the other
   discussions questions. Id. The Navy concluded that JVP had adequately
   explained the increase to the phase-in costs, and that the price proposal
   overall was realistic and reasonable. [3] Id.

   After evaluating offeror's responses to the discussions questions, the SSB
   concluded that all of the concerns regarding JVP's and BOS's price realism
   had been satisfactorily addressed. In its final evaluation, the SSB did
   not revise the technical evaluations for either BOS or JVP. The agency's
   final evaluation of BOS's and JVP's proposals was as follows:

    +----------------------------------------------------------------------+
    |                                      |       JVP       |     BOS     |
    |--------------------------------------+-----------------+-------------|
    |OVERALL TECHNICAL                     |    EXCELLENT    |  EXCELLENT  |
    |--------------------------------------+-----------------+-------------|
    |-- Organizational Experience          |      Good       |  Excellent  |
    |--------------------------------------+-----------------+-------------|
    |-- Organizational Past Performance    |      Good       |    Good     |
    |--------------------------------------+-----------------+-------------|
    |-- Management Approach                |    Excellent    |  Excellent  |
    |--------------------------------------+-----------------+-------------|
    |-- Staffing Plan and Resources        |    Excellent    |  Excellent  |
    |--------------------------------------+-----------------+-------------|
    |PRICE                                 | EUR50.7 million |  [deleted]  |
    +----------------------------------------------------------------------+

   AR exh. 15, SSD, Aug. 27, 2007, at 1.

   The SSA selected JVP's proposal for award, concluding that JVP's
   lower-priced, lower-technically rated proposal was the better value as
   compared to BOS's higher-priced, higher-technically rated proposal. Id. at
   2. Specifically, the SSA found that because "the weight of the technical
   factors combined is approximately equal to price, the slightly superior
   technical proposal and somewhat higher price proposal of Team BOS does not
   present the best value or decrease the performance risk to the
   Government." Id.

   During the course of this protest, the agency acknowledged that a portion
   of the selection decision document contained erroneous references to
   documents relied upon by the SSA in his determination. As discussed above,
   the reevaluation of offerors' proposals performed by the Navy following
   the protests at our Office and the COFC was performed by the SSB; thus,
   the TEB and PEB did not conduct new technical evaluations or price
   evaluations or produce new reports. In the selection decision, however,
   the CO stated that the proposals had been evaluated by the "Technical
   Evaluation Board/Source Selection Board/Price Evaluator assigned for this
   contract," and that he relied upon his "review of the reports provided by
   the TEB and SSB" in conducting "an independent assessment of the proposal
   and report information." Id. at 1. The CO now acknowledges that the
   references to TEB and PEB evaluations were in error. Decl. of CO, Nov. 7,
   2007, at 1. In this regard, the CO explains the error as follows:

     The admittedly erroneous [TEB] and [PEB] references in my Source
     Selection Authority Decision dated August 27, 2007 ("the SSAD"),
     resulted when a staffer using Microsoft WORD to cut text from previous
     sample SSADs that included [TEB] and [PEB] references, pasted such text
     into the SSAD. I inadvertently failed to delete such [TEB] and [PEB]
     references from my final version of the SSAD. . . . Despite the
     unfortunate typo, I did not rely therefore upon any reports other than
     the SSB [report] to reach my evaluation and award decisions. Id.

   Id. at 2.

   Following its selection determination, the Navy notified BOS that the
   contract had been awarded to JVP. After receiving a debriefing by the
   Navy, BOS filed this protest.

   DISCUSSION

   BOS raises three primary arguments: the technical evaluation was flawed
   because the agency improperly evaluated BOS's proposal to provide a
   24-hour staffing presence at the Naval Hospital and treated JVP and BOS
   unequally regarding this matter; the agency's price realism analysis was
   unreasonable; and the selection decision was unreasonable because of the
   alleged flaws in the technical and price evaluations cited by BOS, and
   because of certain errors regarding citations to the record, which have
   been acknowledged by the CO. For the reasons discussed below, we find that
   none of these protest grounds have merit.[4]

   A. Technical Evaluation

   BOS first argues that the agency's technical evaluation failed to credit
   the protester for its proposal to provide, as part of its staffing plan,
   "the 24-hour presence of a BOS employee at the Naval Hospital for
   preventative maintenance and inspection [PMI] . . . response." Protester's
   Comments on the AR at 11. The protester further argues that the agency
   treated BOS and JVP unequally because, the protester contends, the agency
   may seek to obtain the 24-hour services from JVP, and JVP may not have
   included the costs of such services in its proposal.

   The evaluation of an offeror's proposal is a matter within the agency's
   discretion, since the agency is responsible for defining its needs and the
   best method for accommodating them. U.S. Textiles, Inc., B-289685.3, Dec.
   19, 2002, 2002 CPD para. 218 at 2. In reviewing a protest against an
   agency's evaluation of proposals, including technical evaluations, our
   Office 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. See Shumaker Trucking &
   Excavating Contractors, Inc., B-290732, Sept. 25, 2002, 2002 CPD para. 169
   at 3. A protester's mere disagreement with the agency's judgment in its
   determination of the relative merit of competing proposals does not
   establish that the evaluation was unreasonable. C. Lawrence Constr. Co.,
   Inc., B-287066, Mar. 30, 2001, 2001 CPD para. 70 at 4.

   BOS states that after it was awarded the contract in September 2006, the
   Navy "informed BOS at the pre-performance meeting that they [placed]
   substantial value on this round-the-clock presence." Decl. of BOS Project
   Manager, at 1. Additionally, BOS states that, following our Office's
   denial of JVP's protest in January 2007, the Navy reinstated the award to
   BOS and "confirmed its position as to the importance of the PMI service
   during the second pre-performance meeting, and requested confirmation that
   BOS would continue to provide such service." Id. Finally, the protester
   contends that after the recent award to JVP, "BOS learned that the Navy
   desired and was implementing the same round-the-clock PMI service from
   JVP." Id.

   To the extent that the protester believes the Navy should have credited
   BOS with a strength for proposing to provide 24-hour PMI, we disagree. As
   the protester acknowledges, the RFP did not contain a requirement for
   24-hour PMI services, nor did the agency state that it would evaluate
   offeror's proposals to provide such services. Protester's Comments on the
   Supplemental AR (SAR) at 7. Thus, the Navy's determination as to whether
   it would give credit to BOS for proposing to exceed the minimum technical
   requirements is a matter of the agency's discretion. See U.S. Textiles,
   supra. The protester's disagreement with the agency's judgment here
   provides no basis to sustain the protest. See C. Lawrence Constr., supra.
   Furthermore, even if, as BOS contends, certain unnamed agency officials
   stated during pre-performance meetings that they valued the 24-hour PMI
   services, such statements could not bind the evaluators or SSA to
   favorably evaluate BOS during the subsequent recompetition.

   The protester also argues that the Navy treated the offerors unequally
   because the protester "learned" that the agency still valued the services
   and would obtain them from JVP. BOS contends that JVP did not propose
   similar services, and that, if the agency intends to obtain the same level
   of these services from JVP, the agency should have determined that JVP's
   prices were unrealistic because they did not account for such staffing
   costs. As the Navy and intervenor note, however, JVP proposed services
   that were similar to those proposed by BOS, e.g., dedicated personnel for
   preventative maintenance and operations at the Naval Hospital, including
   [deleted]. AR, JVP Technical Proposal, at 6. To the extent that BOS argues
   that the agency may ask JVP to provide a level of services that is exactly
   the same as those proposed by BOS, or that such services will have higher
   costs to JVP than those JVP already proposed, such allegations are
   speculative at best and provide no basis to sustain the protest. See,
   e.g., Ogden Logistics Servs., B-257731, et al., Dec. 12, 1994, 95-1 CPD
   para. 3 at 13-14 (concluding that protester's speculation that protester
   will not perform contract as proposed does not provide an effective
   challenge to the agency's evaluation). In sum, we find no basis to
   question the agency's evaluation of BOS's or JVP's proposals with regard
   to the provision of 24-hour PMI services.[5]

   Next, the protester contends that the agency evaluated JVP under the
   organizational experience factor in a manner inconsistent with the
   solicitation. As discussed above, the RFP stated that offerors were
   required to submit in their proposals "a single page that lists the joint
   venture partners along with the percentage of work each partner is
   proposed to perform for the [contract] and that briefly describes the
   specific work that each partner will be performing." RFP sect. M-2.

   The Navy effectively acknowledges that JVP did not submit its
   organizational information in the manner specified in the RFP. SAR at 15.
   However, the Navy contends that all of the required information was
   submitted, and that the agency was able to evaluate JVP's proposal. Id. at
   15-16. Thus, even if the agency did waive the requirement, there was no
   harm to BOS because the requirement was "merely informational" and did not
   affect the substance of JVP's proposal.

   In our view, the agency's decision to waive the single-page requirement
   has not, in any way, prejudiced the protester. Our Office will not sustain
   a protest without evidence of prejudice to the protester; that is, unless
   the protester demonstrates that, but for the agency's actions, it would
   have had a substantial chance of receiving the award. McDonald-Bradley,
   B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see Statistica, Inc. v.
   Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996). With regard to the
   protester's argument, our Office will only sustain a protest that an
   agency has waived or relaxed its requirements for the awardee where the
   protester establishes a reasonable possibility that it was prejudiced by
   the agency's actions; that is, had it known of the changed requirements,
   it would have altered its proposal to its competitive advantage. XTec,
   Inc., B-299744.2, B-299744.3, Aug. 6, 2007, 2007 CPD para. 148 at 11-12.

   The protester has not alleged that it would have changed its proposal had
   it known that the agency would relax this requirement. Indeed, given that
   the requirement pertained solely to the format in which information was
   submitted, we find no possibility that other offerors such as BOS could
   have been prejudiced by the agency's decision to accept the required
   information in a different format.

   B. Price Realism Evaluation

   The protester contends that the agency failed to reasonably evaluate JVP's
   proposal for price realism. As discussed above, the agency identified four
   areas in which it had concerns regarding the realism of JVP's proposed
   prices. The protester contends that JVP's responses failed to address the
   Navy's concerns in three of those areas, and that the agency's evaluation
   after receipt of those responses unreasonably concluded that JVP's
   proposed prices were realistic. For the reasons discussed below, we
   disagree.[6]

   Agencies are required to perform a cost realism analysis when the
   solicitation anticipates the award of a cost-reimbursement contract. Under
   such a contract, an offeror's proposed costs are not considered
   controlling because, regardless of the costs proposed, the government is
   bound to pay the contractor its actual and allowable costs. Federal
   Acquisition Regulation (FAR) sections 15.305(a)(1), 15.404-1(d).
   Consequently, an agency must perform a cost realism analysis to determine
   the extent to which an offeror's proposed costs represent what the
   contract should cost, assuming reasonable economy and efficiency. FAR
   sect. 15.404-1(d)(2); Hanford Envt'l Health Found., B-292858.2,
   B-292858.5, Apr. 7, 2004, 2004 CPD para. 164 at 9-10.

   In contrast, where, as here, an RFP contemplates the award of a
   fixed-price contract, or fixed-price portion of a contract, an agency may
   provide in the solicitation for the use of a price realism analysis for
   the limited purpose of measuring an offeror's understanding of the
   requirements or to assess the risk inherent in an offeror's proposal.
   Puglia Eng'g of California, Inc., B-297413 et al., Jan. 20, 2006, 2006 CPD
   para. 33 at 6. Although the FAR does not use the term "price realism," it
   provides that cost realism analysis may be used to evaluate fixed-price
   proposals as follows:

     Cost realism analyses may also be used on competitive fixed-price
     incentive contracts or, in exceptional cases, on other competitive
     fixed-price-type contracts when new requirements may not be fully
     understood by competing offerors, there are quality concerns, or past
     experience indicates that contractors' proposed costs have resulted in
     quality or service shortfalls. Results of the analysis may be used in
     performance risk assessments and responsibility determinations. However,
     proposals shall be evaluated using the criteria in the solicitation, and
     the offered prices shall not be adjusted as a result of the analysis.

   FAR sect. 15.404-1(d)(3).

   As an initial matter, the protester contends that the agency's price
   realism evaluation was unreasonable because the agency failed to consider
   JVP's technical proposal in its evaluation. The protester draws an
   inference that because the SSB did not perform a new technical evaluation
   at the same time it evaluated JVP's responses to the agency's price
   realism discussions questions, the agency must have ignored JVP's
   technical approach. The record does not support this assumption.

   While, as discussed above, the SSB identified errors with the TEB's
   evaluation methodology during the initial competition, the record shows
   that the Navy reevaluated both JVP's and BOS's technical proposals to
   correct these errors. AR, SSB Report, Sept. 1, 2006, at 8-9 (correcting
   BOS's evaluation); BCM, Feb. 26, 2007, at 3-4 (correcting JVP's
   evaluation). Subsequently, the SSB's report of June 5, 2007, evaluated
   JVP's and BOS's revised technical proposals, and also evaluated the
   proposals for price realism. AR exh. 9, SSB Report, June 5, 2007, at 5-6,
   11-12, 33-34. Finally, although the SSB's report of August 16, 2007,
   evaluated JVP's and BOS's responses to discussions questions regarding
   price realism, the SSB did not reevaluate the offerors' technical proposal
   ratings at that time. AR, exh. 14, SSB Report, Aug. 16, 2007, 4-6.

   The fact that the SSB did not reconsider or revise the technical
   evaluation factor ratings in its final August 16, 2007, report does not
   necessarily mean, as the protester suggests, that the agency ignored the
   existing technical evaluations or JVP's proposal in the course of
   conducting its price realism analysis. Rather, the SSB's final evaluation
   of offerors' proposals, including its evaluation of JVP's response to the
   agency's price realism discussions questions, shows that the agency did
   consider JVP's technical approach to meeting the RFP requirements. For
   example, the SSB stated that, with regard to the refuse collection
   requirements, "[JVP] provided a detailed breakdown of the cost savings
   related to refuse collection and the implementation of a recycling
   program." AR exh. 14, SSB Report, Aug. 16, 2007, at 5. With regard to the
   Navy's concern regarding certain unbalanced prices, the SSB stated the
   "response provided by [JVP] demonstrates a thorough review and
   understanding of the requirements, and confirmation of its proposed
   price." Id. Overall, the Navy concluded that JVP's "price proposal is
   determined to be realistic and reasonable for the requirements of the
   RFP." Id. On this record, we find no merit to the protester's argument
   that the agency failed to consider JVP's technical approach in its
   evaluation of the realism of that offeror's proposed prices.[7]

   With regard to the four specific concerns about JVP's price proposal
   identified by the Navy, BOS argues that JVP failed to adequately address
   three of them, and that the agency failed to reasonably evaluate JVP's
   responses. In general, the protester disagrees with the level of scrutiny
   applied by the agency to JVP's responses. The depth of an agency's price
   realism, however, is a matter within the sound exercise of the agency's
   discretion. Citywide Managing Servs. of Port Washington, Inc.,
   B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD para. 6 at 4-5. Although
   agencies must identify a most probable cost to the government when
   conducting a cost realism analysis, no such requirement exists for a price
   realism analysis. Rather, a price realism analysis addresses whether an
   offeror understands the technical requirements and whether its proposed
   price presents risks to the government. Puglia Eng'g, supra. In reviewing
   protests challenging price realism evaluations, our focus is whether the
   agency acted reasonably and in a way consistent with the terms of the
   solicitation. Grove Resource Solutions, Inc., B-296228, B-296228.2, July
   1, 2005, 2005 CPD para. 133 at 4-5.

   As set forth below, BOS contends that its challenges to three of the four
   Navy concerns about JVP's price proposal fall into two primary
   categories--JVP's overall low price and its negative price escalation. Our
   responses in both areas follow.

     1. JVP's Overall Low Price

   First, the protester notes that the first and third discussions questions
   regarding JVP's price addressed similar concerns, specifically, why JVP's
   price was low overall, and why JVP's revised price decreased by
   approximately EUR[deleted] from its initial proposal. As discussed above,
   JVP cites three primary reasons for its low price, and why it was reduced:
   (1) JVP will take advantage of economies of scale; (2) JVP can perform at
   those prices, as evidenced by its supporting data; and (3) JVP recognized
   the need to lower its price during the recompetition, and intends for the
   contract to be part of its overall strategy to [deleted].

   The protester contends that the economies of scale cited by JVP are
   illusory, and that the Navy did not understand or properly evaluate JVP's
   response. Specifically, BOS argues that JVP's response anticipates
   efficiencies and cost savings based on economies of scale from contracts
   that JVP might win in the future, rather than economies of scale that it
   can currently leverage to achieve lower costs.

   Although the protester contends that JVP's response permits only one
   possible interpretation, i.e., that JVP is hinging its prices on
   assumptions of winning future contracts, we disagree. JVP's response
   states that the [deleted]. AR exh. 13, JVP Discussions Responses, at 2.
   While the protester may parse JVP's response to draw the conclusion that
   JVP's efficiencies will occur in the future, we think another reasonable
   interpretation is that JVP currently has an economy of scale which it
   seeks to maintain through winning the contract. The record indicates that
   the agency interpreted JVP's response consistent with this view, i.e.,
   that the company currently benefits from an economy of scale: "[JVP]
   explains that the low price is achieved by a robust presence that provides
   an economy of scale." AR, exh. 14, SSB Report, Aug. 16, 2007, at 5. On
   this record, we conclude that the Navy's determination was reasonable.

   Next, the protester argues that the chart of supporting data provided by
   JVP does not demonstrate that the prices themselves are realistic. Put
   differently, BOS contends that merely listing the information does not
   demonstrate that the prices are reasonable, and that the agency failed to
   adequately scrutinize the data provided by JVP.

   We think that the Navy reasonably relied on JVP's information. As the Navy
   notes, the agency's technical evaluation determined that JVP's proposed
   staffing approach was adequate for the contract requirements. AR, BCM,
   Feb. 26, 2007, at 4. Thus, JVP's chart, which details its prices in terms
   of FTEs assigned to each work requirement, provides further transparency
   into JVP's claim that it could provide the staff it proposed at the price
   offered. AR exh. 13, JVP Discussions Responses, at 2, attach. 1. To the
   extent that the protester contends that the Navy should have given the
   data more scrutiny, this argument merely expresses disagreement with the
   depth of the agency's analysis and provides no basis to sustain the
   protest. See Citywide Managing Servs., supra.

   Finally, the protester argues that the primary motive for JVP's reduction
   of its proposed price was merely to win the contract, and was not based on
   actual achievable savings. JVP stated in its response to the Navy's
   discussions questions that "the intense competitive pressures caused by
   the re-evaluation of proposals following release of general pricing for
   all offerors has required us to reduce our offer to the fullest extent
   prudent." AR exh. 13, JVP Discussions Responses, at 2. BOS contends that
   this statement should have caused the agency to subject JVP's proposal to
   heightened scrutiny regarding JVP's explanations for why its prices were
   realistic.

   To the extent that BOS argues that JVP improperly lowered its proposed
   price simply to respond to what JVP called "intense competitive
   pressures," this argument is unavailing. As a general matter, it is
   unobjectionable for an offeror 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. Crown Title Corp., B-298426, Sept. 21,
   2006, 2006 CPD para. 145 at 5-6. In any event, the agency reasonably
   concluded that JVP's response to the Navy's discussions questions
   indicates that it can perform at its proposed price. AR exh. 13, JVP
   Discussions Responses, at 2. Moreover, as discussed above, the Navy
   determined that JVP's explanation regarding its ability to achieve lower
   prices satisfied the agency's concerns. We find no basis on this record to
   question the reasonableness of the agency's conclusions.

     2.  JVP's Negative Price Escalation

   Next, the protester argues that JVP did not adequately respond to the
   agency's concern that its proposed pricing escalation was "erratic and
   negative." The Navy asked JVP to address why JVP's proposed price declined
   following the base period and first two option years of the contract. AR
   exh. 11, JVP Discussions Questions, July 31, 2007, at 2. JVP acknowledged
   that its proposed prices decrease in the first and second option years,
   but stated that JVP's proposed prices increase by [deleted] percent per
   year in the third and succeeding option years. AR exh. 13, JVP Discussions
   Responses, at 2. JVP explains that its price escalation approach was part
   of its overall pricing strategy, i.e. to remain competitive. The price
   decreases were based, in part, on JVP's assumption that [deleted]. Id. at
   2-3. JVP provided data detailing its anticipated savings from [deleted].
   Id. at 3.

   The protester argues that the data regarding JVP's recycling proposal do
   not address the Navy's negative escalation concerns. Specifically, BOS
   argues that JVP's statement in response to the discussions questions that
   it would achieve savings through [deleted] stands in contrast to more
   qualified language in its technical proposal that JVP [deleted]. See AR,
   JVP [deleted], at 1 ("[deleted]").

   We do not think that BOS's challenges regarding the tone JVP used in
   describing its [deleted] provides a basis for our Office to conclude that
   the agency's evaluation in this area was unreasonable. As discussed above,
   the fixed-price nature of this contract places the financial risk on the
   contractor, rather than the government. The Navy identified a concern
   regarding the negative escalation, and reasonably concluded that the
   protester's response addressed this concern.

   In sum, although the protester disagrees with the level of scrutiny the
   Navy applied to JVP's responses to the discussions questions, we conclude
   the record here shows that the agency reasonably satisfied its obligation
   under the FAR and the RFP to perform a price realism evaluation.

   C. Source Selection Decision

   Finally, the protester contends that the selection decision here cannot
   withstand scrutiny because of certain factual errors in the document that
   have been acknowledged by the CO.[8] We disagree.

   As discussed above, the CO acknowledges that the selection decision
   erroneously states that the record considered when selecting JVP for award
   included evaluations by TEB and PEB evaluators. Decl. of CO, Nov. 7, 2007,
   at 1. As the record shows, the Navy used a TEB or PEB to evaluate
   offerors' proposals for the initial award in 2006, but did not use these
   teams in its reevaluation of proposals in 2007. Instead, all of the 2007
   reevaluations were conducted by the SSB. The CO explains that the
   misstatements in the selection decision were due to Navy personnel who
   assisted in the drafting of the document using an outdated model document.
   Id. The CO further states that he relied solely on the SSB reports
   produced during the recompetition, and that he "did not rely . . . upon
   any reports other than the SSB [reports] to reach my evaluation and award
   decisions." Id.

   The CO's clarification is consistent with the record. Although the
   selection decision refers to "recommendations reported by the TEB and
   Price Evaluator," AR exh. 15, SSD, at 1, the source of the information
   relied upon in the tradeoff determination clearly comes from the SSB
   report. First, the technical ratings for JVP reflect the SSB's
   reevaluation of that offeror's proposal that were conducted in February
   2007, following the Navy's decision to take corrective action in response
   to JVP's COFC protest. See AR, BCM, Feb. 26, 2007. The record shows that
   the TEB, in contrast, had no input as to technical evaluations after its
   final August 2006 report.

   Next, the prices cited in the selection decision are clearly those from
   the offerors' final proposals, submitted during the 2007 recompetition.
   Both JVP's and BOS's revised prices, and the differences between them, are
   cited in the selection decision and reflect the 2007 proposals, rather
   than the initial proposals which were evaluated by the PEB in 2006.[9]

   In sum, all of the information cited by or relied upon in the selection
   decision for the award determination is clearly based on the August 16,
   2007, SSB report; conversely, none of the information cited is based on
   the outdated TEB or PEB evaluations. In our view this essentially cosmetic
   error--misidentifying the source of the final assessments when the record
   clearly shows that the assessments were drawn from different sources
   (which were provided to protester's counsel during the course of this
   protest)--does not provide a basis to challenge the reasonableness of the
   selection decision here.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The agency used an evaluation scheme of Excellent, Good, Satisfactory,
   Marginal, and Poor. Offerors without relevant past performance were
   assigned a rating of Neutral.

   [2] By negative escalation, the agency meant that JVP's proposed prices
   decreased in the first two option years from the base period price.

   [3] Although the Navy identified a fourth price realism concern regarding
   JVP proposed ELIN pricing, the protester does not specifically challenge
   JVP's response or the agency's evaluation of that response. Thus, we do
   not discuss this matter in this decision.

   [4] In addition to these protest grounds, BOS filed a supplemental protest
   challenging the agency's evaluation of the level of JVP's proposed
   staffing for hospital maintenance. The documents pertaining to this
   protest allegation, specifically, the February 2007 BCM, were not provided
   by the Navy in its report on the protest, despite the agency's assurance
   that all relevant documents had been provided. Instead, the agency
   produced the documents after BOS and JVP filed their comments on the
   agency report, in response to the protester's argument that the record
   regarding the evaluation of JVP's technical proposal was not complete.
   Because this new protest ground arose too late to be considered in this
   decision, we will consider the challenge to the evaluation of JVP's
   proposed staffing in a separate decision.

   [5] In its comments on the agency report, the protester argued that the
   Navy failed to reevaluate JVP's proposal following the SSB's disagreement
   with the TEB's August 2006 evaluation. As discussed above, the record
   shows that this argument is factually incorrect because the agency did
   reevaluate JVP's technical proposal in February 2007. In arguing that it
   was prejudiced by the agency's failure to reevaluate JVP's technical
   proposal, BOS also argued that the agency should not have determined that
   JVP's proposed staffing was "more than adequate" to perform the
   solicitation requirements. Although the protester notes that it proposed
   more FTEs than JVP under certain labor categories, the protester does not
   explain how these isolated differences rendered unreasonable the Navy's
   overall evaluation of the offerors' proposals as equal under the staffing
   plan and resources factor. To the extent that the protester believes these
   differences warranted a lower evaluation for JVP, this disagreement does
   not provide a basis to sustain the protest.

   [6] The Navy and intervenor argue that BOS's protest of the agency's price
   realism analysis should be denied because the RFP stated only that
   offerors' proposed prices "may be evaluated for realism." RFP sect. M-2
   (emphasis added). This argument is without merit. Although the RFP states
   that the agency "may" conduct a price realism analysis, the RFP also
   advised that "[u]nrealistic, unreasonable, or unbalanced pricing may cause
   a proposal to be determined unacceptable, or cause a reduction in price
   proposal rankings." Id. Thus, offerors were told that they risked a
   negative evaluation if they did not propose realistic prices. Furthermore,
   the Navy conducted discussions with offerors during the recompetition,
   instructing them to specifically address the agency's concerns regarding
   price realism. Finally, the agency conducted a price realism analysis,
   concluded that JVP's proposed prices were realistic, and relied upon that
   conclusion in its decision to select JVP's proposal for award. AR exh. 14,
   SSB Report, Aug. 16, 2007, at 4-6; exh. 15, SSD, Aug. 27, 2007, at 2. On
   this record, our Office will review the price realism analysis actually
   conducted and relied upon by the agency to determine whether it was
   reasonable and consistent with the record.

   [7] The protester also notes that, throughout the course of this protest,
   the Navy's counsel has argued that the evaluation of JVP's technical
   proposal is not relevant to the price realism evaluation. See, e.g., Email
   from Agency Counsel, Nov. 7, 2007; SAR at 4, n.2. To the extent that the
   Navy takes the position that the technical proposals and the agency's
   understanding of offerors' technical approaches are irrelevant to our
   consideration of the agency's price realism analysis, we disagree.
   However, as discussed above, the contemporaneous evaluation record shows
   that the agency did consider JVP's technical approach in the evaluation of
   price realism consistent with the RFP language and FAR guidance.

   [8] BOS also argues that the selection decision was flawed based on the
   underlying technical and price realism evaluation errors that the
   protester identified in its protest. As discussed above, however, we find
   no basis to sustain any of the protester's arguments concerning the
   underlying technical or price realism evaluations.

   [9] Additionally, the selection decision states that the proposal
   submitted by another offeror, [deleted], was considered ineligible for
   award due to a rating of "marginal" under the management approach
   evaluation factor. AR exh. 15, SSD, at 2. This evaluation rating was
   assigned to [deleted]'s proposal for the first time in the SSB's August 16
   evaluation; prior to that evaluation, [deleted]'s proposal had received a
   rating of good under the management approach factor. AR exh. 14, SSB
   Report, Aug. 16, 2007, at 3; exh. 9, SSB Report, June 5, 2007, at 7. This
   updated reference to the evaluation of [deleted]'s proposal further
   evidences that the SSB report was the basis for information relied upon by
   the SSA in his selection decision.