TITLE: B-298889, U.S. Dynamics Corporation, December 19, 2006
BNUMBER: B-298889
DATE: December 19, 2006
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B-298889, U.S. Dynamics Corporation, December 19, 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: U.S. Dynamics Corporation

   File: B-298889

   Date: December 19, 2006

   Henry L. Goldberg, Esq., Norman Steiger, Esq., and Brian P. Craig, Esq.,
   Goldberg & Connolly, for the protester.

   Robert G. Fryling, Esq., and Brian S. Gocial, Esq., Blank Rome LLP, for
   U.S. Technologies, Inc., an intervenor.

   Gary R. Allen, Esq., Department of the Air Force, for the agency.

   Paula A. Williams, Esq., and Glenn G. Wolcott, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest challenging agency's evaluation of awardee's price proposal is
   denied where the record supports the agency's determination that awardee's
   prices were fair and reasonable.

   DECISION

   U.S. Dynamics Corporation (USDC) protests the Department of the Air
   Force's award of a contract to U.S. Technologies, Inc. (USTI) under
   request for proposals (RFP) No. FA8217-06-R-76466 for a quantity of
   exciter radios, a part used in radar transmitters. USDC contends that the
   agency improperly evaluated the awardee's price proposal and, thus, made a
   flawed award decision.

   We deny the protest.

   The RFP, as amended, provided for the award of a fixed-price contract for
   the exciter radios, and the competition was limited to qualified sources
   known to have the required experience and capability. RFP amend. 3, at 3.
   Offerors were advised that the agency would "utilize the Lowest Price
   Technically Acceptable source selection procedure" to arrive at a "best
   value" award decision by "obtaining the lowest evaluated price." RFP
   amend. 2, add., sect. M-900(a). The application of this technique involved
   determining the acceptability of each offeror's proposal by ascertaining
   whether the offeror "has been notified by the government that they are
   considered a qualified source." Id., sect. M-900(b)(1). There is no issue
   in this protest regarding the evaluation of USTI's proposal as technically
   acceptable.

   Rather, this protest challenges the evaluation of USTI's proposal under
   the price factor. Schedule B of the RFP called for fixed prices to produce
   a first article unit, test report and test plan data, a minimum production
   quantity of three and a maximum production quantity of six units after
   approval of the first article. RFP amend. 3, at 3-7. The RFP also stated
   that:

     The price will be evaluated using the lowest price. [T]his solicitation
     is for a minimum quantity of 4 each, including first article, and a
     maximum quantity of 7 each. The evaluation for award will be made on a
     total price based on a quantity of 4, 5, 6, or 7--example: If a total
     quantity of 4 is selected for award the evaluation would be a First
     Article price, Data Price, and Production unit price multiplied by the
     quantity of 3. These three prices . . . would be summed to provide the
     lowest evaluated price for the quantity of 4 each. The [contracting
     officer] will make a unilateral decision on which quantity will be
     awarded.

   RFP amend. 2, add., attach. 1, Price Evaluation. In addition, the
   solicitation also stated as follows:

     In accordance with FAR [Federal Acquisition Regulation] 15.403-1(b) and
     15.403-3(a), information other than costs and pricing data may be
     required to support price reasonableness. Information shall be provided
     in accordance with FAR 15.403-5. If, after receipt of proposals, the CO
     [Contracting Officer] determines that there is insufficient information
     available to determine price reasonableness and none of the exceptions
     in FAR 15.403-1 apply, the offer shall be required to submit costs or
     pricing data.

   RFP amend. 2, add., sect. L-900(c)(1).

   Four firms, including USDC and USTI, submitted proposals. Of these, only
   USDC and USTI were deemed qualified sources. RFP amend. 3, at 3; Agency
   Report (AR), exh. 13, Final Price Competition Memorandum, at 7. The agency
   thus evaluated both USDC's and USTI's proposals as technically acceptable
   and included those proposals in the competitive range. The agency
   conducted discussions with each competitive range offeror by issuing
   evalution notices to address the delivery schedule for the production
   units. Offerors were required to respond to the written discussion and
   clarification questions and were then given an opportunity to submit final
   revised proposals. Contracting Officer Statement (COS), at 1

   Final revised proposals were received and evaluated. For seven units, USTI
   offered a total price of $2,600,472, comprised of (1) a first article unit
   price of $371,496; (2) a test report and test plan data unit price of
   $0.00; and (3) a production unit price of $371,496. [DELETED] AR exh. 12,
   Final Price Abstract, at 1-2.

   In performing a price reasonableness analysis, the contracting officer
   compared and contrasted the offerors' final proposed prices for the
   various quantities of the exciter radios. More specifically, the
   contracting officer did a comparison of the proposed prices with each
   other, a comparison of the proposed prices to the independent government
   estimate ($2,629,791.78), the technical support office's screening
   analysis estimate ($3,251,178.28), the final market research estimate, and
   the historical pricing information for similar items. AR exh. 13, Final
   Price Competition Memorandum, at 1-7; COS, at 4-7. The final price
   evaluation report narrative summarized the contracting officer's
   conclusion thus:

     [t]he offeror selected for award was based on adequate price
     competition. The prices are extremely competitive. . . . The government
     made the determination to award 7 each (1 First Article, 1 Data Line
     item and 6 Production Units). [USTI] was the lowest price for this
     quantity. The offeror selected for award has provided the best value to
     the Government based on the evaluation addressed in the RFP. The offered
     price selected is fair and reasonable based on adequate price
     competition.

   AR exh. 13, Final Price Competition Memorandum, at 7. Thereafter, award
   was made to USTI. This protest followed.

   USDC asserts that the Air Force did not properly evaluate the
   reasonableness of USTI's proposed price. More specifically, USDC maintains
   that by proposing the same unit price for both the first article and the
   production quantities, USTI failed to include necessary non-recurring
   costs (such as, environmental testing, test fixtures, and reverse
   engineering due to parts obsolescence) required for the successful
   production of the first article unit. In addition, USDC points to the fact
   that USTI entered "zero" dollars for the first article test plan and data
   report as further evidence that USTI's pricing should have raised
   questions as to whether USTI's costs were realistic for the work to be
   performed and whether USTI had a clear understanding of all the
   solicitation requirements. Protest at 3-6; Protester's Comments at 3-4.

   The FAR provides a number of price analysis techniques that may be used to
   determine whether prices are fair and reasonable, including comparison of
   the prices received with each other; comparison of previously proposed
   prices for the same or similar items; and comparison with the independent
   government estimate. FAR sect. 15.404-1(b)(2). A price reasonableness
   determination is a matter of administrative discretion involving the
   exercise of business judgment by the contracting officer that we will
   question only where it is unreasonable. The Right One Co., B-290751.8,
   Dec. 9, 2002, 2002 CPD para. 214 at 5. Our review of the record here
   provides no basis to question the reasonableness of the contracting
   officer's determination.

   Section M of the RFP, quoted above, clearly stated that an offeror's
   evaluated price would be calculated by multiplying each of the priced line
   items by the estimated quantities and by adding all of the extended prices
   to arrive at the lowest total evaluated price for the varied quantities.
   RFP amend. 2, adden., attach. 1, Price Evaluation. Further, section M did
   not require the use of price realism analysis to measure the offerors'
   understanding of the government's requirements or to assess the risk
   inherent in an offeror's proposal. PHP Healthcare Corp., B-251933, May 13,
   1993, 93-1 CPD para. 381 at 5. Rather, as described above, the record
   shows that the contracting officer agency conducted a price reasonableness
   evaluation based upon adequate price competition, which reflected
   approximately a 4 percent differential between the proposals of USDC and
   USTI, along with comparison of the proposed prices to the government
   estimate. Although USDC's essential complaint is that the contracting
   officer's analysis should have been more exhaustive, our review confirms
   that the price evaluation conducted by the agency was reasonable and fully
   consistent with the provisions of the RFP.

   USDC asserts that the contracting officer should have obtained and
   analyzed additional information in evaluating offerors' proposed prices.
   In support of its position, USDC points to language in section L of the
   RFP which states that information other than costs and pricing data may be
   required to support price reasonableness. As discussed above, in this
   case, section M of the RFP did not require that additional information
   would be evaluated as part of the agency's price evaluation. Absent an RFP
   provision in a solicitation for a fixed-price contract requiring a price
   realism analysis, no such analysis is required. Dismas Charities, Inc.,
   B-289575.2; B-289575.3, Feb. 20, 2004, 2004 CPD para. 66 at 4.[1]

   In sum, we conclude, based on this record, that the agency reasonably
   satisfied its obligation under the FAR and the RFP to perform a price
   reasonableness evaluation. USDC's mere disagreement with how the agency
   conducted its price reasonableness analysis for these requirements, and
   with the agency's ultimate conclusion that USTI's prices were fair and
   reasonable, does not establish that the agency's evaluation was improper.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] Additionally, USDC asserts that the Air Force should have considered
   whether USTI's pricing methodology created doubt that the firm would
   satisfy the requirements of the solicitation. However, USDC has not
   pointed to any areas in USTI's proposal where USTI took exception to the
   solicitation requirements.