TITLE: B-299820; B-299820.3, PWC Logistics Services, Inc., August 14, 2007
BNUMBER: B-299820; B-299820.3
DATE: August 14, 2007
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B-299820; B-299820.3, PWC Logistics Services, Inc., August 14, 2007
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Decision
Matter of: PWC Logistics Services, Inc.
File: B-299820; B-299820.3
Date: August 14, 2007
Michael R. Charness, Esq., Robert J. Rothwell, Esq., Suzanne D. Reifman,
Esq., and Alexander O. Levine, Esq., Vinson & Elkins, LLP, for PWC
Logistics Services, Inc.
Thomas P. Barletta, Esq., Daniel C. Sauls, Esq., Paul R. Hurst, Esq., and
Ana Holmes Voss, Esq., Steptoe & Johnson, LLP, for Science Applications
International Corporation, an intervenor.
Benjamin G. Perkins, Esq., Robert E. Sebold, Esq., and Ed Murray, Esq.,
Defense Logistics Agency, for the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that agency applied unstated environmental risk management plan
factor in its evaluation of management proposals is denied where record
shows that agency provided all offerors identical information during
discussions that effectively amended the evaluation criteria of the
solicitation.
2. Protest that agency failed to provide protester discussions relating to
the adequacy of its environmental risk management plan is denied where
record shows (1) agency only assigned protester's proposal a minor
weakness in the area--and therefore was not required to discuss the
matter--and (2) agency, in fact, afforded protester discussions relating
to this aspect of its proposal.
3. Protest relating to reasonableness of the agency's evaluation of
protester's and awardee's proposals in the area of environmental risk
management plan is denied where record supports agency's conclusions that
there were qualitative distinctions between the proposals in this area.
4. Protest relating to the agency's finding that awardee's proposal
offered superior past performance is denied where record shows that agency
had a reasonable basis for finding the awardee's past performance more
relevant than that of other offerors', and the protester's assertions
relating to awardee's past performance are based on factually incorrect
assumptions.
5. Protest relating to the reasonableness of agency's price evaluation is
denied where record shows that agency's evaluation was reasonable and
consistent with the terms of the solicitation.
DECISION
PWC Logistics Services, Inc. protests the award of a contract to Science
Applications International Corporation (SAIC) under request for proposals
(RFP) No. SPM4A2-06-R-0001, issued by the Defense Logistics Agency (DLA)
for the supply, storage and distribution of chemicals, packaged petroleum,
oil and lubricating products for military activities. PWC maintains that
the agency improperly applied an unstated evaluation criterion,
misevaluated proposals, and failed to engage in meaningful discussions.[1]
We deny the protest.
BACKGROUND
DLA is responsible for the wholesale management of the Department of
Defense's requirements for packaged petroleum products, oil, and
lubricating products (referred to as POLs) under federal supply class
(FSC) 9150, and chemical products under FSCs 6810, 6820, 6840 and 6850. To
meet those requirements, the agency historically has maintained various
field activities that were responsible for comprehensive inventory
management (acquisition, storage, distribution and disposal) of the items.
In 2005, the Base Realignment and Closure Commission recommended that DLA
privatize the wholesale supply, storage and distribution of POLs. Pursuant
to that recommendation, the agency engaged in market research, based on
which it determined, among other things, to expand the current acquisition
to include chemical products. In all, the RFP contemplates privatizing
some 4,648 FSC items.
The RFP contemplates the award of an indefinite-delivery,
indefinite-quantity contract for a base period of 5 years, with a 5-year
option period, to provide comprehensive supply chain management for the
described POLs and chemicals. Award was to be made on a "best value" basis
considering four equally weighted considerations: technical proposal,
management proposal, past performance, and price. The non-price
considerations combined were significantly more important than price. RFP
sect. M, at 1. There were numerous subfactors under the non-price factors.
The technical proposal factor was comprised of four equally weighted
subfactors: forecasting, purchasing, inventory management, and
distribution. Id. at 2. The management proposal factor included three
subfactors: risk management (most important), organization, and transition
(equal in importance). Id. at 2-3. The past performance factor included
three subfactors (in descending order of importance): substantially
similar past performance, corporate experience (to be evaluated only where
an offeror received a neutral rating under the substantially similar past
performance subfactor), and past compliance with subcontracting goals. Id.
at 3-4.[2] Under all non-price evaluation areas, the agency assigned
adjectival ratings of highly acceptable (HA), acceptable (A), minimally
acceptable (MA), deficient (D), or neutral (N) (for past performance
only). Source Selection Plan at 6. Proposals also were assigned risk
ratings of either high (H), moderate (M), or low (L) under each evaluation
area. Id. at 6-7.
Proposed prices were to be evaluated for realism, fairness and
reasonableness. RFP sect. M, at 4. For pricing purposes, the RFP
distinguished between material prices (unit prices for the various items
being purchased) and fees for contract performance.
The agency received four proposals, including PWC's and SAIC's. The agency
evaluated the proposals and included three of the four in the competitive
range. AR exh. 6. The agency then engaged in numerous rounds of
discussions that led, ultimately, to the submission of final proposal
revisions on March 8, 2007. AR at 14. The agency's source selection
advisory group (SSAG) evaluated the FPRs and arrived at the following
evaluation results:
+------------------------------------------------------------------------+
| | SAIC | PWC |
|--------------------------------+-------------------+-------------------|
|Overall Proposal Rating |Highly |Low Risk|Highly |Low Risk|
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
|Overall Technical Rating |Highly |Low Risk|Highly |Low Risk|
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Forecasting|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Purchasing|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Inventory Management|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Distribution|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
|Overall Management Rating |Acceptable|Low Risk|Highly |Low Risk|
| | | |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Organization|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Transition Plan|Highly | |Highly | |
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Risk Management|Acceptable| |Highly | |
| | | |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
|Overall Past Performance Rating |Highly |Low Risk|Highly |Low Risk|
| |Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Substantially Similar Past|Highly | |Highly | |
| Performance|Acceptable| |Acceptable| |
|--------------------------------+----------+--------+----------+--------|
| Compliance with Subcontracting|Highly | |Acceptable| |
| Goals|Acceptable| | | |
|--------------------------------+-------------------+-------------------|
|Price, Best Case Scenario |$2.355 Billion |$2.346 Billion |
|--------------------------------+-------------------+-------------------|
|Price, Worst Case Scenario |$5.652 Billion |$5.667 Billion |
+------------------------------------------------------------------------+
AR exh. 17 at 2.
The SSA used these evaluation results in making his award decision, but
also made independent findings regarding the relative merits of the
proposals in several specific areas. First, regarding the acceptable
rating for SAIC's management proposal, the SSA concluded that, because of
several features that he viewed as strengths, the proposal was "just shy"
of receiving a highly acceptable rating. AR exh. 17 at 5. Regarding the
highly acceptable rating assigned to PWC's management proposal, the SSA
identified one feature as a weakness; he concluded that this weakness
significantly detracted from the highly acceptable rating assigned by the
SSAG, but did not warrant downgrading the rating to acceptable. Id. at 11.
The SSA concluded that, notwithstanding their different adjectival
ratings, the two offerors' management proposals were essentially equal.
Id. at 13. In a similar vein, the SSA found that, while PWC's and SAIC's
past performance proposals received the same highly acceptable rating,
SAIC's past performance was better overall as compared to PWC's. Id. at
13-14.
Based on these and other non-price evaluation findings, the SSA concluded
that SAIC's proposal was the strongest overall in the non-price areas. AR
exh. 17 at 14. The SSA went on to consider price, and concluded that,
based on all considerations, award to SAIC represented the best value to
the government. The agency therefore made award to SAIC. Following a
debriefing, PWC filed this protest.
UNSTATED EVALUATION FACTOR
PWC asserts that the agency improperly applied an unstated consideration
when evaluating proposals. According to the protester, the agency
considered environmental risk management under the management factor, even
though such a consideration was never mentioned in the solicitation. PWC
directs our attention to RFP section L-2.3.3 (instructions to offerors),
which describes the information to be included in proposals regarding
offerors' risk management plans. That section enumerates eight risks to be
addressed, but does not include environmental risk management. PWC also
notes that section M-3.3 of the solicitation's evaluation factors provides
only that proposals should include a comprehensive risk management plan
resolving every conceivable risk; according to the protester, this general
requirement was inadequate to put offerors on notice that the agency would
give significant consideration to the offerors' environmental risk
management plans.
This argument is without merit. Agencies are required to advise offerors
of the basis for evaluation and then to evaluate proposals consistent with
that stated basis. STEM Int'l, Inc., B-295471, Jan. 24, 2005, 2005 CPD
para. 19 at 3. Here, the RFP advised offerors that, in evaluating
management proposals, the agency would consider the degree to which the
proposals included a comprehensive risk management plan resolving every
conceivable risk. RFP sect. M-3.3, Major Subfactor M3: Risk Management.
Further, the agency provided all offerors with identical discussion
materials relating to the solicitation's environmental requirements.
Specifically, the agency advised all firms by e-mail dated November 30,
2006 that it was forwarding an attachment that contained additional
environmental requirements that had to be addressed. AR exhs. 10A at 22;
10B at 25. The attachment provided as follows:
The final proposal revisions will be evaluated in accordance with
Section M. Please note that included under paragraphs 2.4 [the RFP's
technical evaluation subfactor for distribution] and 3.3 [the RFP's
management subfactor for risk management], the government will address
the offerors' capability to execute this contract's environmental
requirements and the offerors' proposed management of environmental
issues.
AR exhs. 10A at 26; 10B at 26. Thus, not only did the RFP highlight the
need for offerors to address risk management generally, but the agency
specifically advised offerors that it would consider the firms'
environmental risk management plans under the risk management subfactor of
the management factor. The evaluation in this area therefore was
unobjectionable.[3]
ADEQUACY OF DISCUSSIONS
PWC asserts that the agency failed to engage in meaningful discussions
with it in connection with its environmental risk management proposal.
According to the protester, the agency identified its environmental risk
proposal as a significant weakness in its management proposal, and
ultimately used this as a discriminator in its source selection decision.
PWC also notes that it was criticized during an environmental preaward
survey, and that the agency's representative improperly failed to advise
the firm of his concerns at that time. PWC maintains that the agency could
not properly have downgraded its proposal in this area without advising it
of this weakness during discussions.
While agencies are required to engage in meaningful discussions--that is,
point out significant weaknesses and deficiencies that, unless corrected,
would prevent an offeror from having a reasonable chance of receiving
award--agencies are not required to afford offerors all-encompassing
discussions, or to point out every aspect of a proposal that offers a
relatively less desirable approach. Volmer Constr., Inc., B-270364,
B-270364.2, Mar. 4, 1996, 96-1 CPD para. 139 at 4. Further, where a
weakness in a proposal ultimately becomes a discriminator for source
selection purposes among closely ranked proposals, but the weakness is
minor in nature and did not render the proposal unacceptable, the agency's
failure to have raised the matter in discussions is unobjectionable. Id.
at 4-5.
The discussions here were unobjectionable. The record shows that each
evaluator individually rated PWC's risk management proposal either highly
acceptable or acceptable, AR exh. 15A, at BATES 407, 417, 432, 449, 471,
and that the SSAG rated it--as well as its management proposal
overall--highly acceptable. AR exh. 16A, at BATES 85, 88. The record also
includes an environmental preaward survey recommending "no award" to PWC,
primarily based on a conclusion that, while PWC's environmental
subcontractor had experience in handling waste management at Department of
Energy (DOE) facilities (where the primary work relates to the handling
and disposition of nuclear waste), it had little experience handling
hazardous materials in the context of a supply chain-type requirement such
as the one here. AR exh. 11A, at BATES 17-18. The survey also observed
that PWC was only now trying to get systems and procedures in place for
the management of hazardous materials. Id. at 18.[4] Against this
backdrop, the SSA reached the following conclusion:
PWC proposes to use a subcontractor, Cornerstone/Weskem Services (CWS),
to manage environmental, safety and health (ES&H) risks. The proposal
suggests that CWS will establish ES&H processes at each PWC distribution
site only after contract award. PWC identified CWS's facility in Oak
Ridge, Tennessee, as an appropriate site to visit for the pre-award
survey. The survey resulted in a `no award' recommendation, because CWS
has no existing experience managing hazardous materials like those
involved in this effort; its experience at Oak Ridge relates to nuclear
materials, which are not governed by the same regulatory bodies. While
this is not sufficient to downgrade PWC's overall Management rating to
the `Acceptable' level, it significantly detracts from the `Highly
Acceptable' rating PWC's management proposal earned.
AR exh. 17 at 11. The SSA ultimately concluded that PWC's and SAIC's
management proposals were essentially equal. Id. at 13.
The record thus shows that, despite the criticisms relating to PWC's
environmental risk management proposal and the results of the
environmental preaward survey, the firm's management proposal ultimately
was viewed by the SSAG and the SSA as highly acceptable (albeit, ranked at
the low end of the highly acceptable spectrum), and as essentially equal
to the awardee's. In these circumstances, the agency was under no
obligation to have discussions with PWC relating to its environmental risk
management proposal.
In any event, the agency did, in fact, ask PWC several questions relating
to its environmental management proposal that adequately led PWC into, and
thus provided PWC an opportunity to improve, this area of its proposal. On
November 30, 2006, after evaluating PWC's initial proposal, the agency
presented discussion questions relating to several areas, including four
questions relating to PWC's environmental management proposal, which asked
PWC to: (1) identify its (and its subcontractor's) management personnel
responsible for compliance with environmental rules and regulations
identified in the SOW, including restrictions on storage and
transportation of hazardous materials, occupational safety and health
requirements and hazardous materials release response, AR exh. 10A, at
BATES 26; (2) describe its team, at the prime and subcontractor level,
that would be responsible for managing these requirements, id.; (3)
identify and explain any notice of any major environmental non-compliance
incident within the last 10 years, id.; and (4) respond to several
environmental scenarios. Id. at BATES 26-27. On February 14, 2007, PWC was
asked a follow-up discussion question relating to the roles and
responsibilities of its environmental health and safety subcontractor,
CWS. Id. at BATES 62.
ENVIRONMENTAL RISK MANAGEMENT EVALUATION
PWC asserts that the evaluation of its and SAIC's proposals in the area of
environmental risk management was unreasonable. According to the
protester, the agency unreasonably downgraded its proposal for offering
CWS, a newly-created entity, to manage its environmental risk effort, and
for proposing to establish environmental safety and health ES&H procedures
only after award. The protester maintains that CWS existed prior to the
source selection decision and that it had ES&H procedures at its disposal
prior to award that it was prepared to use. PWC further maintains that the
agency unfairly downgraded its proposal on the basis that its
environmental risk management experience was primarily only in handling
nuclear materials when, in fact, it also has ample experience in handling
other hazardous materials. The protester also asserts that the agency
unreasonably failed to take cognizance of the fact that SAIC proposed to
provide environmental risk management through the use of a team comprised
of [deleted] that would only enter into subcontracts after award of the
prime contract, and that it would be more difficult to integrate these
[deleted] team members than it would be to integrate the functions of CWS.
In reviewing protests challenging proposal evaluations and source
selection decisions, it is not our role to reevaluate proposals; rather,
we will examine the record to determine whether the agency's judgment was
reasonable and in accord with the stated evaluation criteria and
applicable procurement laws and regulations. See Abt Assocs., Inc.,
B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. We find that the
evaluation here was unobjectionable.
With respect to the establishment of CWS, the protester is correct that it
was established on February 23, 2007, prior to the award to SAIC.
Protester's Comments, July 9, 2007, exh, 1. However, the record shows
that, in reaching its conclusion relating to the establishment of the new
entity, the agency relied on PWC's own proposal materials submitted prior
to that date; PWC's initial proposal was submitted in September 2006, and
its answers to the agency's discussion questions were submitted in
November 2006, and on February 22, 2007. AR exhs. 5A, 10A. None of these
materials showed the existence of CWS as an entity at that point in time.
Simply stated, there was nothing unreasonable in the agency's conclusion
that PWC was proposing a newly-formed entity to perform its environmental
risk management functions.
The record also supports the agency's conclusion that CWS apparently did
not have existing ES&H policies and procedures in place, and that they
would be establishing these policies and procedures after award. For
example, in responding to the agency's discussion question asking PWC to
provide a detailed description of its organizational team responsible for
managing compliance with environmental rules and regulations, PWC stated:
[deleted]
AR exh. 10A, Discussion Responses, Dec. 18, 2006, at 13-14; see also, AR
exh. 10A, Discussion Responses, Feb. 22, 2007, at 6-11 (wherein PWC
describes the responsibilities of its ES&H personnel as including, among
other things, developing and implementing ES&H policies); AR exh. 5A, at
III.3.2-16 (PWC proposed to implement a comprehensive HAZMAT/HAZWASTE
plan).[5] PWC has not shown that its proposal elsewhere included
information showing that it had pre-existing ES&H policies and procedures
that it offered to use in performance of the contract and, based upon the
materials presented, the agency reasonably concluded that PWC did not have
an ES&H program in place.
In addition, the record shows that the agency reasonably concluded that
CWS (predominantly Weskem Services) had experience principally in handling
nuclear materials as opposed to managing chemicals and petroleum products
in the context of a supply chain management contract. This conclusion was
based primarily on the results of the environmental preaward survey
conducted at DOE's facility at Oak Ridge, Tennessee, where Weskem Services
performs hazardous waste disposition services. A slide presentation
(included in the record) that was provided to the agency during the
preaward survey describes Weskem's key capabilities and experience at
various DOE facilities as the [deleted]. E.g., AR, exh. 11B, at BATES 62.
While the protester is correct that the described activities are not
exclusively associated with handling nuclear materials (as opposed to
other hazardous materials), we think the description sufficiently
emphasizes nuclear materials to support the agency's conclusion that this
was the predominant area of CWS's experience. Moreover, none of the cited
experience involves handling these materials in the context of a supply
chain management requirement, as contemplated under the RFP. These
considerations, together with CWS's apparent lack of pre-existing policies
and procedures to manage the type of environmental risks presented by the
subject requirement, led the agency to find that CWS's experience lay
primarily in other hazardous materials related work. We find that the
agency's conclusions were reasonable.
Finally, with respect to PWC's allegation that the agency failed to
recognize that SAIC would need to integrate its team of contractors,
nothing in the record shows that SAIC was dependent upon any of its
teaming partners to develop and implement its ES&H policies and
procedures, as was the case with the protester. Rather, the record shows
that SAIC had pre-established, well-developed ES&H policies and procedures
that it intended to use upon award. AR exh. 10B, at BATES 167-176. The
fact that SAIC was partnering with other concerns was not relevant to the
agency's conclusion that SAIC proposed the best environmental risk
management proposal; in contrast, as concluded above, the agency was
legitimately concerned that PWC's approach would require a
newly-established entity to develop and implement an environmental risk
management plan that did not exist. In sum, there was no basis for the
agency to downgrade SAIC's proposal in this area simply because the firm
was teaming with several contractors.
PAST PERFORMANCE EVALUATION
PWC maintains that the agency unreasonably determined that SAIC's past
performance was more relevant than its own. In this regard, PWC's protest
focuses on SAIC's six regional maintenance repair and overhaul (MRO) prime
vendor contracts given as past performance examples. According to the
protester, the agency erroneously concluded that these contracts were
substantially similar to the current requirement. In this respect, the
protester maintains that SAIC's MRO contracts do not have a critical
element required under the current contract, namely, a requirement to
handle vendor managed inventory (VMI). According to the protester, VMI
contracts are unique in that they require the contractor to invest in
inventory by purchasing goods in advance and selling them as orders are
received. Protester's Comments, July 9, 2007, at 20. The protester
maintains that the risks associated with this type of contract are
markedly different from those under other kinds of supply contracts.
This argument is without merit. The protester is incorrect regarding both
what constitutes VMI supply chain management services, and the services
performed by SAIC under its MRO contracts. The RFP does not describe VMI
as vendor-purchased-and-managed inventory. According to the RFP, "Vendor
Managed Inventory (VMI) refers to DLA owned material stored at or managed
through a vendor location based on contractual arrangements (see Section
3.1.4)." RFP sect. C, at 9. Section 3.1.4 of the SOW in turn describes how
and when DLA-owned inventory will be transferred from government depots to
the contractor's facilities to be sold as VMI. RFP sect. C, at 10-11.
As for SAIC's MRO contracts, the record shows that they are essentially
identical to the current requirement in that they require precisely what
the protester maintains are VMI services, as well as VMI services as
described in the RFP. SAIC's proposal describes these contracts as:
Supply chain management, purchasing and distribution of facilities
maintenance products (plumbing, electrical, heating/ventilating/air
conditioning, tools, paints, containers, prefabricated structures,
lumber, hardware and assorted industrial materials) for more than
[deleted] ordering activities at federal installations in five
geographic regions CONUS [continental United States] and one OCONUS
[outside the continental United States] . . . .
SAIC Proposal, vol. 4, at 1-1. That same description goes on to state:
SAIC is performing CMS [chemical management services] for chemicals,
POLs, aerosols, paints, epoxies, cleaners and sealants, including NSNs
[national stock numbers] covered under the Chemicals/POLs contract (e.g.
acetone, methyl ethyl ketone and solid film aerosol lubricant). We
established chemical/HAZMAT storefront operations at [deleted], and
transitioned chemical/HAZMAT management functions from the government to
SAIC, which included the physical transfer of government-owned inventory
to SAIC. We use SAIC's [deleted] system to perform forecasting,
purchasing, inventory management, and distribution of chemicals/POLs to
points-of-use (POU) lockers strategically located at production areas.
[deleted] ensures adequate inventory levels are maintained to prevent
stockouts. SAIC also inputs receipts into the [deleted], providing
information to end-user's environment and safety departments for local,
state, federal, EPA reporting, shelf-life management, reporting on
government inventory levels and value, and compliance with depot
environment and safety regulations.
Id. Thus, contrary to the protester's assertion, SAIC's MRO contracts
include not only those services the protester incorrectly maintains are
VMI services under the current solicitation, but also VMI services as
defined under the RFP. Given that the protester has not advanced any
evidence to show that SAIC's MRO contracts do not encompass essentially
the same services as those called for under the RFP, we conclude that the
agency reasonably found that SAIC's past performance--more specifically,
its MRO contracts--was more relevant than PWC's.
PRICE EVALUATION
PWC objects to the agency's price analysis, specifically, its calculation
of the offerors' material prices, maintaining that it provided an
irrational basis for the award decision. The agency calculated the
offerors' material prices by first establishing estimated total material
prices without adjusting those prices to account for potential price
increases due to application of the RFP's economic price adjustment (EPA)
clauses. Those calculations showed that PWC's total evaluated price,
including fees (unadjusted) was $1,717,367,601.59, while SAIC's was
$1,730,958,436.84. [6] AR exh. 13 at 16. The agency then calculated prices
using what it referred to as "best case" and "worst case" EPA scenarios.
In calculating the best case scenarios, the agency applied an increase to
the prices equal to the average historical increase in prices over the
last 10 years for the commodities in question; for chemical prices, the
agency applied an annual price increase of 3.5 percent, and for POLs 12.3
percent. Id. For the worst case scenarios, the agency applied a price
increase equal to the highest annual increase in prices over the last 10
years;[7] for chemicals, 10 percent, and for POLs, 38 percent. Id. The
agency then calculated the prices using four combinations of these
scenarios; best case chemicals/best case POLs (BCC/BCP), worst case
chemicals/ best case POLs (WCC/BCP), best case chemicals/worst case POLs
(BCC/WCP), and worst case chemicals/worst case POLs (WCC/WCP). Id. Finally
the agency took an average of these calculations to arrive at a fifth
price scenario. Id. The agency's calculations showed the following:
+------------------------------------------------------------------------+
| | SAIC | PWC |
|------------------------+-----------------------+-----------------------|
| | Price | Price |
|------------------------+-----------------------+-----------------------|
| BCC/BCP | $2.355B | $2.346B |
|------------------------+-----------------------+-----------------------|
| WCC/BCP | $2.601B | $2.600B |
|------------------------+-----------------------+-----------------------|
| BCC/WCP | $5.404B | $5.414B |
|------------------------+-----------------------+-----------------------|
| WCC/WCP | $5.652B | $5.667B |
|------------------------+-----------------------+-----------------------|
| Average | $4.003B | 4.007B |
+------------------------------------------------------------------------+
Id. The agency found from these calculations that SAIC had the lowest
evaluated price in three of the five scenarios (WCC/WCP, BCC/WCP and
average), while PWC had the lowest evaluated price in two (BCC/BCP and
WCC/BCP). The SSA concluded that, because SAIC had a price advantage in
three of the five scenarios, it had a "razor thin" price advantage over
PWC. AR exh. 17 at 16.
PWC asserts that its evaluated price was lower than SAIC's when calculated
without adjustment for the EPA scenarios, and that the agency ignored its
pricing advantage by employing the EPA scenarios. The protester also
asserts that the agency unreasonably determined that the BCC/BCP scenario
was the least likely to occur, and actually should have concluded that it
was the most likely because it took into consideration price changes over
a 10-year period. PWC argues additionally that the agency's worst case EPA
scenarios were unrealistic, because they employed the highest historical
rate of price increase for each of 10 years, a scenario that the protester
maintains is not likely to occur. Finally, PWC asserts that the agency's
conclusion that SAIC had a razor thin price advantage was irrational
because it was based on consideration of the fifth, averaged, calculation;
the protester maintains that, in fact, it was a dead heat between the two
offerors, with each having lower evaluated prices in two of the four
scenarios that were not averaged.
We have no basis to object to the price evaluation. First, the RFP
specifically advised offerors that the evaluation would be based on these
calculations, stating as follows:
Material Prices. Material prices will be evaluated by multiplying proposed
price times average demand quantities (ADQ) times 10 to arrive at an
estimated material contract value unadjusted by EPA. The SSA will be
provided with various EPA scenarios to more fully appreciate the effect
that EPA adjustments will have on material prices and the relative
difference between offers.
RFP sect. M, at 4. In other words, the agency's actions were entirely
consistent with the terms of the solicitation. It follows that, had the
agency evaluated prices as PWC suggests--unadjusted for EPA scenarios--it
would have failed to evaluate proposals in accordance with the RFP.
Second, while the protester speculates that the BCC/BCP scenario is the
most likely because it is based on 10 years of historical data, there was
no reason for the agency to conclude that any particular scenario was
necessarily more or less likely to occur during performance than any other
scenario; as a practical matter, the agency will only know after contract
performance which of the various EPA scenarios most closely reflects the
actual performance of these pricing indexes over the next 10 years.[8] In
any case, as noted, the RFP expressly indicated that the agency would
calculate various EPA scenarios in order to more fully appreciate the
effects EPA adjustments would have on material prices, and the agency's
use here of various EPA scenarios enabled it to consider the potential
cost to the government of differing rates of cost increase. This was both
consistent with the terms of the solicitation, as well as reasonable in
light of the fact that the government will bear the financial liability of
price increases over time.
Third, as for the protester's assertion that the agency's worst case
scenarios are unrealistic, the agency notes, correctly, that it is liable
for price increases of up to 40 percent per year for chemicals and up to
150 percent per year for POLs. RFP sect. B, at 6. The agency's
calculations of the worst case scenarios used annual increases of
10 percent for chemicals and 38 percent for POLs, figures well within the
government's potential liability under the contract. We conclude that the
agency reasonably calculated its worst case scenarios in a manner that
would reflect some (but not all) of its potential liability in its effort
to estimate the most probable cost to the government in light of possible
price increases that are fully supported by historical examples.[9]
Finally, as to the protester's assertion that the agency unreasonably
concluded that SAIC had a "razor thin" price advantage, its objection is
premised upon the assertion that use of the "average" scenario was
improper. As noted above, however, we find that the agency reasonably
could have used all of the various EPA scenarios in its analysis of price.
In any event, the record shows that the SSA appreciated the closeness of
the two firms' prices, and recognized where PWC was found to have a price
advantage over SAIC under the BCC/BCP scenario; in that circumstance, he
made a cost/technical tradeoff, finding that SAIC's technical superiority
was worth the slight cost premium associated with its proposal. The SSA
stated:
In Price, SAIC and PWC are extremely close, with SAIC's and PWC's
pricing 0.5 percent or less apart under all five escalation scenarios.
SAIC has a slight edge overall due to its better pricing in three of the
five scenarios, including the average scenario price. Further, even
considering that PWC may be as much as 0.4 percent less than SAIC in one
case (BCC/BCP), SAIC's past performance provides greater assurance of
successful performance under this contract that is worth more than that
slight difference in price in that one pricing scenario.
AR exh. 17 at 17. Since the record thus shows that the SSA selected SAIC
over PWC where PWC enjoyed a price advantage under the scenario that it
maintains is the most likely, it follows that his decision would have been
no different had the firms been found to have arrived at a `dead heat' in
terms of price, as asserted by the protester.
The protest is denied.
Gary L. Kepplinger
General Counsel
------------------------
[1] In response to the agency's report, PWC filed a supplemental protest
asserting that SAIC's proposal failed to conform to two material
solicitation requirements. Supplemental Protest, July 9, 2007. The agency
responded to these assertions and, by letter dated July 24, the protester
withdrew these assertions.
[2] The agency also identified numerous elements under each of the
subfactors in rating proposals to arrive at its subfactor ratings. Agency
Report (AR) exhs. 7, 15.
[3] PWC suggests that the agency could not properly revise the
solicitation through discussions rather than through a formal amendment.
Where, as here, an agency provides identical language or information to
all offerors during discussions, its actions are tantamount to amending
the RFP, even though no formal amendment has independently been issued.
Phenix Research Prods., B-292184.2, Aug. 8, 2003, 2003 CPD para. 151 at 5.
[4] PWC suggests that the individual that conducted the preaward survey
was obligated during the survey to convey his reservations to the firm at
that time in order for the agency to have discharged its obligation to
engage in discussions. However, since the agency was conducting a preaward
survey--as opposed to engaging in oral discussions--the individual in
question was under no such obligation.
[5] The agency report also contains materials gathered during the PWC
preaward survey. Those materials include a proposal dated December 20,
2006 from a software concern, Dolphin Software, Inc., to sell chemical
management software to the protester. AR exh. 11B, at BATES 67 et seq.
[6] For purposes of establishing material prices, the RFP distinguished
between "cost-driver" and "non-cost-driver" items. Offerors were required
to propose unit prices for the cost driver items, while the government
established the unit prices for the non-cost-driver items. These unit
prices then were multiplied by anticipated demand quantities established
by the agency, and then multiplied again by 10 (the number of years of
contract performance) to arrive at an estimated material contract value,
unadjusted by the RFP's EPA clauses. RFP sect. M, at 4.
[7] For POLs, the agency actually used the second highest, rather than the
highest annual increase (49.92 percent) during the last 10 years,
reasoning that, due to volatility, this would be more realistic. AR exh.
19, at BATES 67.
[8] In an affidavit submitted with its comments on the agency report, the
protester's consultant asserts that the agency calculated the "average"
scenario used in the agency's price evaluation using a weighted average,
assigning a 10 percent probability to the BCC/BCP scenario, a 20 percent
probability to the WCC/BCP scenario, a 30 percent probability to the
WCC/WCP scenario and a 40 percent probability to the BCC/WCP scenario.
Protester's Comments, July 9, 2007, exh. 2 at 4. The protester's
consultant is incorrect. The record shows that, in calculating the
"average" scenario, the agency used a simple mathematic calculation that
expressed the mean of the four scenarios. AR exhs. 13, at 16; 17 at 16.
The protester's consultant also states in his affidavit that the agency
performed its calculations using only 9 years of data instead of 10.
Protester's Comments, July 9, 2007, attach. 2, at 3. This assertion also
is not supported by the record, which shows that, in fact, the agency
consistently used 10 years of data in performing its calculations. E.g.,
AR exh. 14, at 1-11.
[9] We point out that the agency did not even use the highest historical
increase in POL prices in making its calculations. That figure--49.92
percent--also is within the parameters of the government's liability under
the EPA clause.