TITLE: B-299539, Moore's Cafeteria Services d/b/a MCS Management, June 5, 2007
BNUMBER: B-299539
DATE: June 5, 2007
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B-299539, Moore's Cafeteria Services d/b/a MCS Management, June 5, 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: Moore's Cafeteria Services d/b/a  MCS Management

   File: B-299539

   Date: June 5, 2007

   Sam Z. Gdanski, Esq., and Scott H. Gdanski, Esq., Gdanski & Gdanski, LLP,
   for the protester.

   Lt. Col. Frank A. March, and Matthew C. Bowman, Esq., Department of the
   Army, for the agency.

   Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
   of the General Counsel, GAO, participated in the preparation of the
   decision.

   DIGEST

   1. Contracting officer was not required to apply definition of "fair and
   reasonable price" set forth in interagency statement of policy issued in
   response to Congressional directive in evaluating reasonableness of price
   offered by state licensing agency for the blind where at the time the
   procurement was conducted, the policy had not been implemented through the
   issuance of regulations.

   2. Contracting officer reasonably determined price offered by state
   licensing agency for the blind to be fair and reasonable based on
   comparison to prices offered by other offerors with technically acceptable
   proposals and to government estimate.

   DECISION

   Moore's Cafeteria Services d/b/a MCS Management (MCS) protests the award
   of a contract to the Kentucky Office for the Blind (KOB), a state
   licensing agency for the blind (SLA), under request for proposals (RFP)
   No. W9124D-07-R-0012, issued by the Department of the Army for food
   services at Fort Campbell, Kentucky. The protester argues that the price
   offered by the KOB is not reasonable.

   We deny the protest.

   The RFP, which was issued on January 23, 2007, contemplated the award of a

   fixed-price contract for a 1-year period without options. The acquisition
   was set aside for Historically Underutilized Business Zone (HUBZone) small
   businesses, but also permitted the submission of offers by qualified SLAs
   in accordance with the Randolph-Sheppard Act. As initially issued, the
   solicitation advised prospective offerors that the acquisition was
   "subject to exercise of the Department of Defense preference policy
   regarding qualified [SLAs] in accordance with the Randolph-Sheppard Act"
   and that "[a] technically acceptable offer from a qualified [SLA] [would]
   receive preference in accordance with the Joint Report to Congress, dated
   August 29, 2006." RFP at 33. The RFP provided for award to the offeror of
   the lowest-priced technically acceptable proposal after consideration of
   the above preference. The RFP also noted that the government intended to
   award without discussions.

   The Joint Report to Congress, dated August 29, 2006, referred to above, is
   a report issued jointly by the Department of Defense, the Department of
   Education, and the Committee for Purchase From People Who Are Blind or
   Severely Disabled in response to section 848 of the National Defense
   Authorization Act of Fiscal Year 2006, Pub. L. No. 109-163, which
   instructed the three entities to issue a joint statement of policy
   concerning application of the Randolph-Sheppard Act and the
   Javits-Wagner-O'Day Act to contracts for the operation and management of
   military dining facilities. The report included the following guidance
   regarding application of the Randolph-Sheppard Act:

   METHOD OF AFFORDING THE RANDOLPH-SHEPPARD "PRIORITY."--Defense Department
   contracts for the operation of a military dining facility must be awarded
   as the result of full and open competition, unless there is a basis for
   direct negotiations . . . . When competing such contracts, contracting
   officers shall afford State licensing agencies a priority under the R-S
   Act when (1) the State licensing agency has demonstrated that it can
   provide such operation at a fair and reasonable price, with food of high
   quality comparable to that available from other providers of cafeteria
   services and comparable to the quality and price of food currently
   provided to military service members; and (2) the State licensing agency's
   final proposal revision, or initial proposal if award is made without
   discussions, is among the highly ranked final proposal revisions with a
   reasonable chance of being selected for award. . . . The term "fair and
   reasonable price" means that the State licensing agency's final proposal
   revision does not exceed the offer that represents the best value (as
   determined by the contracting officer after applying its source selection
   criteria contained in the solicitation) by more than five percent of that
   offer, or one million dollars, whichever is less, over all performance
   periods required by the solicitation.

   Joint Report at 5.

   Subsequent to issuance of the RFP, the contracting officer received an
   e-mail message from an SLA other than the KOB objecting to the
   solicitation language providing that a technically acceptable offer from a
   qualified SLA would receive preference in accordance with the Joint
   Report. The SLA argued that the policy set forth in the Joint Report had
   not been properly implemented through the issuance of regulations and thus
   should not be regarded as in effect. The contracting officer determined
   that the complaint had merit, and the agency amended the solicitation to
   remove the language referring to the Joint Report.[1]

   Five offerors submitted proposals by the February 21 closing date. Three
   of the proposals were determined to be technically acceptable; the prices
   of those proposals were as follows:

   +------------------------------------------------------------------------+
   |                   Offeror                   |          Price           |
   |---------------------------------------------+--------------------------|
   |Kentucky Office for the Blind                |$4,561,429                |
   |---------------------------------------------+--------------------------|
   |MCS Management                               |[deleted]                 |
   |---------------------------------------------+--------------------------|
   |Offeror A                                    |[deleted]                 |
   +------------------------------------------------------------------------+

   The government estimate for the work was [deleted]. The contracting
   officer determined that the price offered by the KOB was fair and
   reasonable based on comparison to the prices proposed in the other
   technically acceptable proposals and the government estimate. On February
   27, the agency awarded a contract to the KOB.

   MCS argues that, by finding the price offered by the KOB, which exceeded
   MCS's own price by [deleted] percent, to be reasonable, the agency acted
   contrary to the guidance furnished in the Joint Report, which defines a
   "fair and reasonable price" from an SLA as one that does not exceed the
   best value offer by more than 5 percent.

   While we recognize that the statement of policy in the Joint Report was
   issued at the instruction of Congress, we think that the contracting
   officer correctly concluded that adherence to the policy was not mandatory
   until it had been implemented through the issuance of regulations, which
   has not yet occurred. In our view, until such regulations are issued, the
   policy is the equivalent of internal agency guidance, which does not
   establish legal rights and responsibilities such that actions taken
   contrary to it are subject to objection. See, e.g., Indian Res. Int'l,
   Inc.,

   B-256671, July 18, 1994, 94-2 CPD para. 29 at 3. We also note that the
   Joint Report itself, at 5, provides that "[t]he [p]arties will promptly
   implement complementary regulations reflecting the joint policy herein,"
   suggesting that those responsible for drafting the policy understood that
   the issuance of regulations would be required to implement it.

   The protester further argues that the contracting officer did not conduct
   an adequate analysis of the reasonableness of the price offered by the
   KOB. MCS maintains that the contracting officer's determination was based
   on a comparison of the KOB's price to a government estimate that was
   "grossly inflated." Protester's Comments at 7. The agency responds that
   the government estimate was not faulty, and that, in any event, the
   contracting officer's determination of price reasonableness was based not
   simply on a comparison of the KOB's price to the government estimate, but
   also on a comparison to competitors' prices. We see no basis to question
   the agency's determination of price reasonableness.

   Regarding the government estimate, MCS, the incumbent contractor on the
   current contract for these services, asserts that the government figure is
   based on inaccurate projections of operational days and meal counts at the
   facilities to be served. Specifically, MCS asserts that the government
   estimate is flawed because the estimates reflected in the RFP on which the
   government estimate is based are considerably higher than the actual
   requirements under the current contract. The agency responds that the
   estimate was prepared by Fort Campbell's dining facility subject matter
   experts, who considered both possible future requirements and historical
   data in determining the number of operational days and personnel necessary
   to perform the required services. Since the RFP set out the estimated
   number of meals to be served per day, per facility, MCS's challenge to the
   government estimate, based on MCS's incumbent knowledge of the agency's
   requirements, is in essence a challenge to the estimated requirements set
   out in the RFP; to be timely, it had to be raised prior to the time that
   proposals were due. See Bid Protest Regulations, 4 C.F.R. sect. 21.2(a)(1)
   (2007). Any challenge on this ground is untimely at this juncture and
   provides no basis to question the validity of the estimated requirements,
   or, consequently, the agency's reliance on the government price estimate
   derived from those projections to determine the reasonableness of the
   awardee's proposed price.

   The agency also asserts that comparison to other offerors' prices provided
   the contracting officer with a separate basis for finding the KOB's price
   reasonable. We agree. The Federal Acquisition Regulation (FAR) recognizes
   comparison of offerors' prices to one another as a permissible technique
   for determining price reasonableness. FAR sect. 15.404-1(b)(2)(i); U.S.
   Dynamics Corp., B-298889, Dec. 19, 2006, 2007 CPD para. 21. Given that the
   price offered by the KOB, while higher than the protester's, was lower
   than the price of the third technically acceptable offeror, the comparison
   of offerors' prices to one another clearly furnished the contracting
   officer with an additional valid basis for finding the awardee's price
   reasonable.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] As amended, the RFP provided:

   Randolph-Sheppard Act Compliance: This solicitation is subject to exercise
   of the preference policy regarding qualified [SLAs] in accordance with the
   Randolph-Sheppard Act. A technically acceptable offer from a qualified
   [SLA] will receive preference in accordance with the Randolph-Sheppard
   Act. There have been conversations between the contracting office at Fort
   Knox and a qualified [SLA] in the State of Kentucky regarding interest in
   providing the services identified in this solicitation. This notice is not
   designed to discourage competition from HUBZone certified small businesses
   not eligible for the preference. This merely serves as notice that
   preference will be applied should a technically acceptable offer be
   received from a qualified [SLA].

   RFP amend. 1, at 33-34.