TITLE: B-299758.2, Business Consulting Associates, LLC, August 1, 2007
BNUMBER: B-299758.2
DATE: August 1, 2007
***************************************************************
B-299758.2, Business Consulting Associates, LLC, August 1, 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: Business Consulting Associates, LLC

   File: B-299758.2

   Date: August 1, 2007

   J. Scott Hommer, III, Esq., Peter A. Riesen, Esq., Keir X. Bancroft, Esq.,
   and Patrick R. Quigley, Esq., Venable LLP, for the protester.

   Philip M. Musolino, Esq., Musolino & Dessel, for MacArthur & Baker
   International, Inc., d/b/a MBI Consulting, an intervenor.

   Jud E. McNatt, Esq., Department of Housing & Urban Development, for the
   agency.

   Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Agency reasonably concluded that the protester's and awardee's
   proposals were "technically equivalent," such that price became the
   discriminator in the award selection.

   2. Protest that agency unreasonably accepted the awardee's mitigation plan
   for a potential "impaired objectivity" organizational conflict of interest
   (OCI) is denied, where only one of the team members (a subcontractor) had
   a potential OCI, only a small portion of the work was affected, and the
   agency reasonably determined that awardee's plan to transfer the affected
   work to the other team member (the prime contractor awardee), which was
   fully capable of performing the work independently of the team member with
   an OCI, was acceptable.

   DECISION

   Business Consulting Associates, LLC (BCA), protests the award of a
   contract issued by the Department of Housing & Urban Development (HUD) to
   MacArthur & Baker International, Inc. d/b/a/ MBI Consulting (MBI) under
   request for proposals (RFP) No. R-ATL-01867, which was set aside for firms
   qualified under the Small Business Administration's (SBA) section 8(a)
   program, for post-closing portfolio management support services. BCA
   contends that the agency misevaluated proposals, including the awardee's
   apparent organizational conflict of interest (OCI).

   We deny the protest.

   The RFP sought support for HUD's project managers in analyzing certain
   unique loans that have been (and will be) created and held by HUD under
   its "Mark-to-Market" (M2M) Program or its pilot program, the "Portfolio
   Re-Engineering Demonstration Program." These typically
   below-market-interest-rate loans are generally in second lien position and
   are payable from a percentage of the operating cash flow on these recently
   underwritten transactions. The purpose of this procurement is to ensure
   that HUD's field office project managers are provided sufficient
   information to compare actual property performance to the anticipated
   performance outlined in the "M2M Restructuring Plan," which is the
   contract for debt restructuring that is negotiated between the property
   owner and HUD. The contractor awarded this contract will, among other
   things, assist the HUD project managers in drawing accurate conclusions
   regarding the financial performance of a property and help establish
   payment amounts due to HUD on the loans. RFP at 11.

   The RFP contemplated the award of a "Hybrid Contract with
   Firm-Fixed-Price, Indefinite Quantity/Fixed Unit Rate, Labor Hour and Cost
   Reimbursement (No Fee) for Travel." Id. at 4, 85. With the exception of
   the travel "contract line item numbers" (CLIN), all other CLINs were
   priced on a fixed-unit-price or fixed-hourly-rate basis, based on
   estimated quantities set forth in the solicitation. Id. at 5-9. The
   non-travel CLINs were for asset management and reporting services that
   included the following activities: post-closing portfolio management
   services (which included evaluating the financial performance of
   properties), portfolio database maintenance reporting and development
   (which included maintaining the government-owned portfolio database), and
   "intensive servicing" asset management services (which included
   investigating specific operating contracts and expenses; negotiating with
   owners, management agents, and tenants; and conducting property site
   visits). RFP at 15-25.

   The RFP provided for award on a "best value" basis, considering technical
   capability and experience, staffing and resources, past performance, and
   price. The technical factors were considered "significantly more important
   than the cost or price," although offerors were advised that cost or price
   "shall be considered a significant criterion in the overall evaluation."
   Id. at 96. Of the technical factors, technical capability and experience,
   and staffing and resources were "more importan[t]" than past performance.
   Id. In addition, although not specifically identified as an evaluation
   factor, each offeror in its proposal was to identify and discuss potential
   OCIs and provide a mitigation plan if necessary. Id. at 62.

    

   BCA and MBI submitted proposals in response to the RFP. BCA, an 8(a)
   concern, teamed with RER Solutions, Inc. (RER), the incumbent contractor
   for this work, under the SBA's mentor-protege program. Agency Report (AR),
   Tab 7(D), BCA's Final Proposal Revisions, at 11. MBI, which had previously
   managed the M2M Loan Portfolio Re-Engineering Demonstration Program in the
   1990's, teamed with Reznick Group, P.C., which also had financial analysis
   and asset management experience as well as a "long-standing" relationship
   with the firm that served as the HUD loan servicer.[1] AR, Tab 8(D), MBI's
   Final Proposal Revisions, at 2.

   BCA's and MBI's proposals, along with four others, were found to be in the
   competitive range.[2] After holding discussions and receiving revised
   proposals, a technical evaluation panel (TEP) evaluated the revised
   technical proposals against the evaluation criteria, considered the
   adequacy of mitigation plans for potential OCIs, and performed a
   comparative analysis of proposals under the technical factors.

   The TEP rated both BCA's and MBI's proposals "outstanding" under each of
   the technical factors and, after considering the features of the two
   proposals, found them to be technically "equivalent." AR, Tab 12(B), Final
   TEP Report, at 142-45. The TEP also reviewed each proposal for potential
   OCIs and determined that each offeror had identified a potential OCI, but
   that both offerors provided adequate mitigation plans that were "very
   similar" and were acceptable to the agency. Id. at 20, 68-69.

   A cost evaluation panel (CEP) performed a price reasonableness analysis
   for the fixed-price line items by comparing each offeror's proposed price
   to that of the other offerors and to the government estimate.[3] For the
   "cost type" line items, the CEP performed a cost realism analysis. As
   reported by the CEP, MBI's final proposal was evaluated at $16,287,688,
   and BCA's final proposal was evaluated at $20,918,267. Id. at 140.

   After considering the TEP and CEP reports, the solicitation, the source
   selection plan, and the proposals submitted, the source selection official
   (SSO) performed a comparative analysis of proposals, and agreed with the
   TEP that the two proposals were "outstanding and technically equivalent."
   AR, Tab 13, Source Selection Decision, at 2; attach. 1 at 2. The SSO
   concluded that BCA's "significantly" higher price was not worth the
   additional price premium, stating that:

   Given that MBI's offer provides at least the same level of technical
   sophistication, resource capacity and performance history coupled with a
   significantly better price, MBI's offer represents the best value to the
   government.

   AR, Tab 13, Source Selection Decision, at 2. The SSO thus selected MBI for
   award and this protest followed.

   BCA contends that the agency misevaluated proposals under each of the
   evaluation factors. It complains that the agency's "scoring methodology"
   was flawed because the evaluation "did not reasonably account for the vast
   differences between what BCA and the awardee offered." Protester's
   Comments at 16.

   In reviewing protests of an agency's evaluation, our Office does not
   reevaluate proposals, but instead examines the record to determine whether
   the agency's judgment was reasonable and in accord with the RFP criteria.
   Abt Assocs., Inc., B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. In
   performing our review, we are mindful that evaluation ratings, be they
   numerical, adjectival, or color, are merely guides for intelligent
   decision-making in the procurement process. Citywide Managing Servs. of
   Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD
   para. 6 at 11. Where the evaluators and the source selection decision
   reasonably consider the underlying bases for the ratings, including
   advantages and disadvantages associated with the specific content of
   competing proposals, in a manner that is fair and equitable and consistent
   with the terms of the solicitation, the protesters' disagreement over the
   actual adjectival or color ratings is essentially inconsequential in that
   it does not affect the reasonableness of the judgments made in the source
   selection decision. See id.; National Steel and Shipbuilding Co.,
   B-281142, B-281142.2, Jan. 4, 1999, 99-2 CPD para. 95 at 15-16.

   Here, the agency has provided a detailed record documenting its evaluation
   and source selection decision. This extensive analysis shows that the
   agency evaluated the relative merits of the offerors' proposals, including
   essentially all of the areas cited by the protester, and assessed ratings
   in a fair and equitable manner, consistent with the RFP. The record
   demonstrates that the SSO considered all of the information available and,
   based on his rational assessment of the relative advantages and
   disadvantages associated with the specific content of proposals, the SSO
   reasonably concluded that BCA's and MBI's proposals were "technically
   equivalent" and that the key discriminator between the proposals was
   price. We find that BCA's disagreements with the actual adjectival ratings
   assessed under this "scoring methodology" to be inconsequential, given
   that the ratings do not affect the reasonableness of the judgments made in
   the source selection decision. See Citywide Managing Servs. of Port
   Washington, Inc., supra, at 11.

   For example, BCA contends that its proposal should have received a higher
   rating than MBI's proposal under the technical capability and experience
   factor because of RER's incumbent experience. BCA contends that its
   proposal offers all of the advantages of MBI's proposal, and, in addition,
   the BCA team "is uniquely qualified to comprehend the subtlety of the
   restructuring process." Protester's Comments at 3. BCA contends that MBI's
   proposal should have been assessed weaknesses because of "[p]ossible
   inflexibility regarding the proprietary nature of the data and reporting,"
   and because the MBI team does not have a mentor-protege arrangement like
   the BCA team. Id. at 4, 6.

   The RFP for the technical capability and experience factor required that
   offerors demonstrate a number of capabilities and experience relating to
   asset management and loan servicing, but did not place a premium on
   incumbency, any particular data reporting system, or a mentor-protege
   relationship. RFP at 96. The record shows that the agency performed a
   comprehensive evaluation of the proposals consistent with the evaluation
   criteria, and the documentation supports the agency's findings that both
   proposals warranted an outstanding rating under this factor.

   Under this factor, the agency noted that the BCA team was "uniquely
   qualified" due to RER's incumbent experience and, therefore, assessed the
   team strengths for having experience with the M2M program and multifamily
   asset management and property management, and for understanding the
   contract requirements. AR, Tab 12(B), Final TEP Report, at 9. Although the
   agency initially had concerns that the BCA/RER team was new, which might
   have posed a risk to contract performance, the evaluators accepted BCA's
   explanation that the relationship was strengthened through the
   mentor-protege program and that RER had committed to [REDACTED], so the
   agency did not assess the proposal a weakness for this in the final
   evaluation. Id. at 7-8, 10.

   With regard to MBI's proposal, the agency found several strengths in the
   team's experience, including that the team provided a "[s]trong
   multifamily underwriting and financial analysis background," demonstrated
   a "thorough understanding of the complexity and subtlety of the M2M
   program," and provided "experienced leadership for this program." Id. at
   53-54. Although this was also a new team, the agency did not consider this
   to be a weakness in the final evaluation because both team members had
   successfully worked on projects involving teaming arrangements, and the
   proposal indicated that the team would implement a management process that
   incorporated "clear[] lines of authority, well defined responsibilities
   and communications protocol." Id. at 51-52. While BCA complains that MBI's
   proposal was "inflexib[le]" because MBI's data tracking system is
   proprietary,[4] Protester's Comments at 4, the agency addressed this in
   its final evaluation, after discussions were conducted on this point, and
   found that MBI's data tracking system, in fact, warranted a strength; in
   this regard, the record shows that MBI's proprietary data tracking system
   was something that the team intended to use in addition to the other
   available database systems, as a way to make sure that work did not "slip
   through the cracks," not as a tool to perform the work as the agency had
   first thought. AR, Tab 12(B), Final TEP Report, at 53.

   Thus, the record shows that the agency considered all of the areas
   complained of by BCA and reasonably concluded that both offerors'
   proposals were deserving of the highest possible rating (outstanding)
   under the technical capability and experience factor and were "technically
   equivalent," after giving due weight to RER's incumbency.

   BCA also complains that the agency did not recognize its proposal's
   superiority under the staffing and resources factor, again asserting that
   RER's incumbent experience should have set it apart from the MBI team.
   While both offerors' proposals were credited with strengths because the
   teams provided "[b]road industry knowledge," id. at 13, 61, the agency
   recognized a "distinct advantage" in BCA's proposal because the
   "[e]xisting [incumbent] staff" had "significant direct experience with
   [post-closing portfolio management] policies" and would "lose no time
   training new contractors and preparing to perform work." However, the
   agency found that this advantage was "offset by the backlog [of RER's
   work] under the existing contract." Id. at 13. Thus, the record shows that
   the agency favorably considered the advantages of RER's incumbency, but
   reasonably balanced those advantages against weaknesses and risks to
   contract performance.[5]

   With regard to MBI's proposal, the agency assessed strengths because the
   staff possessed "significant current and directly related experience at an
   expert level in multifamily underwriting and financial management," as
   well as "substantial, current experience with preparing and auditing" M2M
   financial statements. The agency noted that the MBI proposal "includes an
   excellent offering of staff skills, training/education and experience[,]
   and adequate staff commitments for this contract," and found that the MBI
   team's "combination of accounting and asset management experience and
   integration of related staff enhances the proposal." Id. at 61-62. Thus,
   the record shows that the agency reasonably found that MBI's proposal also
   warranted an outstanding rating, such that the agency could reasonably
   conclude that the proposals were "equivalent" under this factor.

   Next, BCA complains that the agency misevaluated past performance by not
   recognizing as a strength the relevance of RER's incumbent contract.
   However, the record shows that the agency credited BCA's proposal with
   strengths based on RER's incumbent contract performance and gave
   significant weight to this contract in the evaluation. Id. at 17. The
   agency also credited MBI's proposal with strengths for performance under
   contracts that were "relevant to this proposal in terms of tasks, size and
   scope." Id. at 65. While BCA contends that the agency should have more
   favorably considered its proposal under this factor relative to MBI's, we
   note that BCA's past performance was based entirely on RER's (and not
   BCA's) performance history, while MBI's past performance was based on the
   favorable record of both team members. Although the agency did not assess
   BCA's proposal a weakness for this, it also did not agree with BCA that
   the proposal warranted a higher rating than MBI's. Based on the record
   before us, we cannot find unreasonable the agency's judgment that the
   offerors were "equivalent" under this factor.[6]

   In sum, the agency reasonably determined that BCA's and MBI's proposals
   were "equivalent" under each of the technical evaluation factors and
   "technically equivalent" overall, and properly used price as the award
   discriminator.

   BCA next challenges the price evaluation, contending that the agency
   failed to consider the costs of developing a web-based interface and
   transition costs in its realism analysis. The RFP here required only that
   the agency evaluate price for "reasonableness," RFP at 97, which the
   Federal Acquisition Regulation (FAR) provides may be established by
   adequate price competition, as is the case here. FAR
   sect. 15.404-1(b)(2)(i). Further, this contract is essentially a
   fixed-price contract (the only cost-reimbursable line items are for
   travel); thus, a cost realism analysis of the fixed priced items was not
   required. See Systems, Studies, and Simulation, Inc.,

   B-295579, Mar. 28, 2005, 2005 CPD para. 78 at 6. Likewise, in the absence
   of an evaluation criterion to the contrary, price realism is not
   ordinarily a consideration in the evaluation for award of a fixed-price
   contract, since the risk of performing the contract at the proposed price
   is borne by the contractor. SOS Interpreting, Ltd., B-293026.4,
   B-293026.5, Aug. 25, 2004, 2005 CPD para. 25 at 8. Accordingly, we find no
   basis to sustain the protest on this ground.

   Finally, BCA contends that the agency did not adequately consider the
   offerors' proposed mitigation plans for potential OCIs. As noted above,
   the RFP required that each offeror identify potential OCIs and propose
   mitigation plans to neutralize these conflicts. BCA identified as a
   potential OCI that approximately [REDACTED] of the M2M portfolio involved
   loans that were previously underwritten by RER. As a mitigation plan, BCA
   proposed to subcontract to another firm the M2M loan restructuring work
   that is to be performed under the RFP for any property where RER
   underwrote the loan, and to establish a firewall between this contractor
   and the BCA/RER team. This was the same mitigation plan that RER followed
   under its incumbent contract. The agency found this plan acceptable. AR,
   Tab 12(B), Final TEP Report, at 18-20.

   The agency identified that [REDACTED] of M2M portfolio included property
   where Reznick provided financial services (accounting and underwriting
   services),[7] and determined that this, too, presented an OCI.[8] For a
   mitigation plan, the MBI team proposed that Reznick would not perform any
   work on any of the M2M properties where Reznick previously provided
   financial services, and the affected properties would be transferred to,
   and independently handled by, MBI. Further, a firewall would be
   established between Reznick and MBI for these properties. The agency found
   this mitigation plan acceptable, concluding that it was "very similar"
   to that proposed by the BCA team. Id. at 67-69.

   The parties do not dispute that the issue presented here is one of an
   "impaired objectivity" OCI, where the contractor's judgment and
   objectivity in performing the contract requirements may be impaired due to
   the fact that the performance has a potential to affect other interests of
   the contractor. Alion Sci. & Tech. Corp., B-297342, Jan. 9, 2006, 2006 CPD
   para. 1 at 5-6. BCA essentially argues that the awardee's OCI arises from
   the fact that the awardee would be giving loan restructuring advice to HUD
   on properties for which Reznick provided financial services, such that its
   objectivity in providing advice to HUD could be impaired, and that the
   awardee could not "exercise[] reasonable judgment" involving any of these
   properties because Reznick would have "proprietary knowledge of the exact
   `tolerances' acceptable to the Government" for those loans. Protester's
   Comments at 25. The agency determined that the conflict was not limited to
   the awardee. Rather, both Reznick and RER currently perform financial
   services for [REDACTED] of the M2M properties and, because of the nature
   of that work, these firms' interests could be affected by the loan
   restructuring work under this M2M program; thus, their objectivity could
   be impaired. See AR, Tab 12(B), Final TEP Report, at 18-20, 67-69;
   Contracting Officer's Statement at 20-22, 24.

   The issue here is whether the agency reasonably considered the awardee's
   proposed mitigation plan. BCA contends that MBI's plan to move the
   affected work from one team member to the other, and imposing a firewall,
   does not adequately mitigate the potential OCI. It contends that MBI's
   mitigation plan should have required MBI to subcontract the work to a firm
   that was not a team member of the offeror, like BCA's mitigation plan did.

   In cases such as this, once an agency has given meaningful consideration
   to potential conflicts of interest, our Office will not sustain a protest
   challenging a determination in this area unless the determination is
   unreasonable or unsupported by the record. Overlook Sys. Techs., Inc.,
   B-298099.4, B-298099.5, Nov. 28, 2006, 2006 CPD para. 185 at 16. In this
   regard, contracting officer's are allowed to exercise "common sense, good
   judgment, and sound discretion" in assessing whether a potential conflict
   exists and in developing appropriate ways to address it. FAR sect. 9.505;
   Epoch Eng'g, Inc., B-276634, July 7, 1997, 97-2 CPD para. 72 at 5.

   Here, the agency conducted extensive discussions with each offeror about
   the potential OCIs and the details of each offeror's proposed mitigation
   plan. As a result of these discussions, the agency reasonably determined
   the plans to be "similar." In this regard, under BCA's proposal, RER will
   subcontract the affected work to a separate entity and establish
   safeguards to ensure that RER employees will not work on the affected
   transactions. Similarly, under MBI's proposal, Reznick will transfer the
   affected work to a separate entity (MBI) and establish safeguards to
   ensure that Reznick's employees will not work on these transactions.[9]

   In evaluating the adequacy of the plans, the agency considered that both
   offerors put into place procedures to identify the affected properties and
   to ensure that the conflicted company would not be performing the work on
   these properties. AR, Tab 12(B), Final TEP Report, at 19, 68. The agency
   also considered whether the affected work could be performed independently
   from the conflicted entity in order to determine whether the safeguards
   were sufficient. Contracting Officer's Statement at 20-21. The agency
   concluded that MBI possessed "significant experience and skill" so as to
   complete the work independently of Reznick, and that the BCA team
   subcontractor was able to perform the work independently of RER. Id. The
   agency identified that only a small percentage of loans (approximately
   [REDACTED]) could potentially be affected, such that the proposed
   mitigation plans could adequately neutralize the conflict. Id.

   We have found, in other "impaired objectivity" OCI situations, that
   subcontracting or transferring work to a separate entity, and establishing
   a firewall around the impaired entity, can reasonably mitigate these types
   of OCIs. Deutsche Bank, B-289111, Dec. 12, 2001, 2001 CPD para. 210 at 4;
   see also Alion Sci. & Tech. Corp., B-297022.4, B-297022.5, Sept. 26, 2006,
   2006 CPD para. 146 at 10; Epoch Eng'g, Inc., supra, at 6. Given that the
   agency thoroughly considered the parties' potential OCIs and proposed
   mitigation plans, we find unobjectionable the agency's determination that
   MBI's mitigation plan adequately mitigated the potential OCI.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] Both RER and Reznick were identified as "subcontractor[s]" in BCA's
   and MBI's respective proposals. AR, Tab 7(D), BCA's Final Proposal
   Revisions, at 11; Tab 8(D), MBI's Final Proposal Revisions, at 2.

   [2] The evaluation of the other proposals is not relevant to this
   decision.

   [3] The government estimate was $21,422,501. AR, Tab 12(B), Final TEP
   Report, at 140.

   [4] This was a concern of the evaluators in the initial evaluation. AR,
   Tab 12(A), Initial TEB Report, at 17.

   [5] BCA contends that the agency's consideration of the backlog under the
   prior contract constitutes the evaluation of an unstated evaluation
   criterion. However, we find that consideration of this issue was
   reasonably encompassed within the RFP, which required, under the staffing
   and resources factor, the evaluation of experience "especially as it
   relates to programs of this nature and the capacity of those individuals
   to effectively and efficiently perform the required work." RFP at 97.
   Given that BCA heavily relied on RER's experience under the incumbent
   contract throughout its technical proposal, BCA cannot complain that the
   agency considered work backlogs in evaluating BCA's capability to provide
   sufficient staff and resources to perform this work.

   [6] BCA also asserts that the agency should have considered, as a
   significant discriminator under the past performance factor, that RER
   developed a web-based interface under the incumbent contract. However, the
   consideration of a web-based interface, which is not the focus of the
   solicited effort, was not required to be considered in the past
   performance evaluation. Moreover, given that MBI's proposal does not take
   exception to meeting the RFP's web-based interface requirements and the
   proposal instructions do not specifically require that proposals address
   this capability, we find no basis to find that MBI's proposal should have
   been downgraded for not having the capability of immediately satisfying
   these requirements.

   [7] BCA does not dispute that the percentage potentially affected loans
   with regard to Reznick's activities is [REDACTED].

   [8] MBI did not previously perform work that could result in an OCI.

   [9] Although BCA disputes that the plans are similar, arguing that its
   team is subcontracting the affected work to a third entity, whereas the
   MBI team is merely moving the work from one team member to another, we
   find this to be a distinction without a difference under this set of
   facts. Both MBI and Reznick are separate legal entities and the affected
   interest of Reznick is not attributable to MBI merely because they have
   teamed together as a prime/subcontractor under this contract. Here, the
   agency determined that the firewall could neutralize the potential OCI,
   and we find no basis to find this decision unreasonable. See Epoch Eng'g,
   Inc., supra, at 5-6 (finding reasonable mitigation plan that proposed to
   assign work from subcontractor to prime contractor or other team members).