TITLE: B-299904.2, Zolon Tech, Inc., September 18, 2007
BNUMBER: B-299904.2
DATE: September 18, 2007
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B-299904.2, Zolon Tech, Inc., September 18, 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: Zolon Tech, Inc.

   File: B-299904.2

   Date: September 18, 2007

   J. Patrick McMahon, Esq., and William T. Welch, Esq., Barton, Baker,
   McMahon & Tolle, LLP, for the protester.

   John E. Jensen, Esq., Daniel S. Herzfeld, Esq., and Kelly E. Buroker,
   Esq., Pillsbury Winthrop Shaw Pittman LLP, for Vistronix, Inc., an
   intervenor.

   Heather M. Self, Esq., Department of Agriculture, for the agency.

   Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Agency reasonably assessed weaknesses in evaluation of protester's
   experience as to core technology, where firm intended to rely on
   experienced consultant instead of contractor personnel, and as to
   management system, where firm's initial quotation did not address the
   system and oral presentation/revised quotation included only limited
   reference to it.

   2. Price evaluation that determined protester's prices to be unrealistic
   was unobjectionable where based on both firm's low revised draft task
   order price, as compared to government estimate, and sample of firm's
   loaded labor rates, which were significantly lower than those of incumbent
   contractors.

   3. Agency determination that small business's unrealistically low price
   represented high risk, and decision to make award to vendor with
   technically superior, higher-priced quotation were part of a comparative
   best value evaluation, not a responsibility determination requiring
   referral to the Small Business Administration.

   DECISION

   Zolon Tech, Inc. protests the establishment of a blanket purchase
   agreement (BPA) with Vistronix, Inc. under request for quotations (RFQ)
   No. AG-3144-S-07-0012, issued by the Department of Agriculture, Natural
   Resources Conservation Service (NRCS), for information systems
   development, support, and maintenance services. Zolon challenges the
   technical and price evaluations and the risk determination.

   We deny the protest.

   The RFQ contemplated the establishment, on a "best value" basis, of a
   single BPA against the successful vendor's Federal Supply Schedule
   contract for a base year, with 4 option years. Work under the BPA was to
   be accomplished on the basis of task orders for technology, operations,
   and management support services, primarily in the areas of software and
   database analysis, design, development, integration, deployment, support,
   and maintenance at NRCS in Fort Collins, Colorado, and other locations
   across the country.

   Quotations were to be evaluated under five factors--technical approach,
   past performance, socioeconomic business status, socioeconomic business
   status of the overall contractor team arrangement (if proposed), and
   price. Under the technical approach factor, quotations were to be
   evaluated on the vendor's BPA master management plan, draft task order
   management and quality control plans, transition plan, and technical
   experience, including key personnel. Past performance was to be evaluated
   on the basis of how well vendors had performed work the same as or similar
   to that described in the statement of work. Price was to be evaluated for
   completeness, realism, and reasonableness based on each vendor's BPA skill
   category listing and a lump-sum, fixed-price, level-of-effort price for a
   draft task order. Non-price factors were equal to one another and,
   combined, of greater weight than price. The importance of price was to
   increase with the degree of equality of the quotations under the non-price
   factors.

   The agency received nine quotations and, after the initial evaluation,
   five--including Zolon's and Vistronix's--were evaluated as strong, and
   included in the competitive range. The competitive range vendors were
   invited to make an oral presentation, which was evaluated along with final
   proposal revisions (FPR) from each. Vistronix's and two other vendors'
   quotations were evaluated as "strong proposal, few weaknesses." Technical
   Evaluation Board (TEB) Report at 00381. Based on its review and the
   consensus technical strengths and weaknesses of each of these quotations,
   the TEB concluded that they were technically equal and recommended award
   to any of the three vendors.

   In making the initial best value determination, the contracting officer,
   as source selection authority (SSA), (following the administrative
   contracting officer's (ACO) recommendation) eliminated both Zolon's and
   another vendor's quotation from further consideration, since both had
   lower technical ratings and Zolon's was the highest-priced and the other
   was the lowest-priced, which was considered to pose a high risk to the
   government. As to the three higher- and equally-rated quotations, based on
   the ACO's recommendations and her own review of the evaluation record, the
   SSA concluded that award to Vistronix represented the best value based on
   its quotation's technical strengths and lowest pricing among the three
   quotations.

   When Zolon received its debriefing, the agency realized that the SSA had
   failed to consider that the firm had lowered its price by approximately
   $1.2 million in its FPR. The agency therefore reconvened the TEB and
   reviewed all of Zolon's submissions. Based on the firm's technical
   weaknesses, the TEB recommended that, regardless of its pricing, Zolon's
   quotation was not the best value when compared to the three top-rated
   quotations. In making her amended best value determination, the ACO
   analyzed Zolon's lower pricing (lowest of all quotations) and found that a
   number of its proposed labor rates were lower than those under the
   incumbent contracts. She concluded that the proposed pricing structure was
   not realistic or reasonable and represented a high risk to the agency in
   terms of Zolon's ability to transition or retain incumbent personnel.
   Based on these pricing concerns and Zolon's technical weaknesses, she
   again recommended award to Vistronix. The SSA adopted the recommendation
   and made award to Vistronix. This protest followed.

   Zolon asserts that the agency's technical and price evaluations, as well
   as the risk determination, were flawed. In considering a protest of an
   agency's evaluation, our review is confined to determining whether the
   evaluation was reasonable and consistent with the terms of the
   solicitation and applicable statutes and regulations. United Def. LP,
   B-286925.3 et al., Apr. 9, 2001, 2001 CPD para. 75 at 10-11. The
   evaluation here was unobjectionable.

   TECHNICAL EVALUATION

   Zolon asserts that the agency improperly evaluated its quotation in the
   technical evaluation. Specifically, it asserts that the agency improperly
   assessed two weaknesses relating to its experience in Geographic
   Information Systems (GIS) and earned value management (EVM), despite its
   coverage of both areas in its quotation.

   Zolon's assertions are without merit. With regard to GIS experience, the
   RFQ advised that each vendor was to provide evidence of experience in NRCS
   core technologies, including GIS web and client application development.
   RFQ at 00139. Vendors were also required to provide pricing in their draft
   task orders for three GIS specialist positions encompassing some 20,000
   hours. RFQ at 00164. The TEB found Zolon's quotation to be weak in this
   area because it failed to mention any GIS projects, and because the
   relevance of the listed key personnel's experience, over 10 years old, was
   questionable. Agency Report (AR), Tab 9, at 00270, 00272-273. Zolon
   challenges the agency's conclusion, pointing to its proposal of a GIS
   technical expert from Colorado State University (CSU) as a resource in its
   local information technology (IT) pool; and the fact that he would chair
   the firm's senior advisory group and would be part of the CSU resources
   that would participate in all Zolon IT projects, providing "short and long
   term consultants and employees." Zolon Quotation at 00178, 00326. However,
   the agency was fully aware that Zolon proposed these CSU resources; it
   considered them of less than optimal value, since they were proposed in an
   advisory capacity and not as a subcontractor. Contracting Officer's
   Statement para. 27. Since 100 percent of contract performance was
   committed to Zolon and its subcontractors, providing no guarantee that CSU
   would actually supply resources or expertise to the team, we think the
   agency reasonably found that Zolon lacked GIS experience and that this was
   a weakness in its quotation.

   With regard to EVM, the draft task order made a number of references to
   EVM and agency expectations of contractors, including NRCS's use of an EVM
   system to report and track performance of investments under the task order
   and the contractor's responsibility to provide project managers with
   periodic EVM data to document the cost, schedule, and performance of work.
   RFQ at 00147. The TEB noted that Zolon's initial quotation contained no
   reference to EVM tools currently in use by the firm (AR, Tab 9, at 00269)
   and that, despite a specific request for additional information related to
   EVM (AR, Tab 10, at 00276), Zolon's oral presentation contained only
   limited reference to EVMs. In its final evaluation, the TEB questioned
   whether Zolon had a completely automated system to collect and report EVM,
   was concerned about its real-time reporting capabilities, and found
   unclear the firm's prior experience in actual use of an EVM system. AR,
   Tab 12, at 00314. Zolon asserts that its oral presentation, including four
   slides depicting its EVM approach, demonstrated its experience and ability
   to implement EVM in performing under the BPA. However, the agency notes
   that the slides appeared to consist largely of industry standard textbook
   diagrams and that, during the oral presentation, when the TEB asked about
   the link between Zolon's paper-based timekeeping system and its EVM
   system, no one present from the Zolon team could answer the question.
   Supplemental Contracting Officer's Statement para. 5. In view of Zolon's
   failure to include any EVM information in its initial quotation, use of
   standard diagrams, and its inability to answer the TEB's question, the
   agency reasonably found a weakness in the firm's quotation regarding EVM.

   PRICE REALISM EVALUATION

   Zolon asserts that the agency misevaluated its price proposal as
   unrealistically low based on a number of alleged errors. Where, as here,
   award is to be made on a fixed-rate basis, the realism of vendors'
   proposed labor rates is not ordinarily considered, since the risk and
   responsibility for contract costs and resulting profit or loss rests on
   the contractor. PharmChem, Inc., B-291725.3 et al., July 22, 2003, 2003
   CPD para. 148 at 7. However, an agency may, at its discretion, provide for
   the use of a price realism analysis under a fixed-rate solicitation for
   various reasons, such as to assess the risk in a vendor's approach. Id.
   The nature and extent of an agency's price realism analysis are matters
   within the agency's discretion, and our review is limited to determining
   whether the evaluation was reasonable and consistent with the
   solicitation's evaluation criteria. Uniband, Inc., B-289305, Feb. 8, 2002,
   2002 CPD para. 51 at 4.

   The price realism analysis conducted here was unobjectionable. The agency
   noted that Zolon's overall draft task order price was reduced by over $1.2
   million (9.4 percent) from its initial quotation and that its revised
   price was some $638,000 (5 percent) lower than the government's estimate,
   an amount the agency considered significant. Best Value Determination at
   00389; Supplemental Contracting Officer's Statement paras. 1 and 3a. The
   agency also compared Zolon's individual labor rates to the incumbent rates
   for six key (i.e., the largest number of hours) skill categories.[1] In
   making this comparison, the agency found that Zolon's rates were 10, 24,
   26, 27, 34 and 43 percent lower than the rates under the incumbent
   contracts.[2] Best Value Determination at 00390. Based on this analysis,
   the agency concluded that Zolon's pricing represented a high risk to
   successful transition and retention of incumbent personnel. Id. at 00389.
   In this regard, the agency noted that most incumbents had been in place
   for a number of years and that their billing rates reflected their long
   experience and expertise. Id. at 00390. The agency was concerned that, if
   the firm were unable to match or slightly increase compensation upon
   transition due to pricing constraints, the loss of the incumbent resources
   would cause a severe hardship to the government with a large impact on
   accomplishing the agency's mission. Id. In our view, the agency's
   conclusions were reasonable and consistent with the evaluation criteria in
   the RFQ. That is, we think the agency reasonably could find that the
   deviation in Zolon's rates from the rates it was currently paying under
   the incumbent contracts brought into question whether the firm would be
   able to transition and retain the incumbent workforce, both considerations
   inherent in the price realism evaluation.[3]

   Zolon asserts that the agency's failure to consider the cost elements of
   its loaded labor rates led it wrongly to assume that the firm would have
   to pay incumbent personnel less than they currently receive. Specifically,
   Zolon notes that, with its low overhead and G&A rate, it could offer
   prospective employees higher salaries than the incumbents currently pay.
   It also notes that its quotation included a plan for hiring/retaining
   incumbent workers, and reported its past successes in retaining incumbent
   personnel.

   Zolon's assertions are without merit. While its overhead and other aspects
   of its loaded labor rates may be lower than those of the incumbents, the
   RFQ did not request any of these cost elements. Since the RFQ only
   requested loaded rates, Zolon was on notice that any realism analysis
   would be based on those rates and not on individual cost elements; indeed
   Zolon's quotation did not include the cost element information it claims
   the agency should have considered. To the extent Zolon is challenging the
   failure to request the information or include it in its evaluation, its
   protest is untimely; protests of solicitation improprieties must be filed
   prior to the closing time for receipt of quotations. Bid Protest
   Regulations, 4 C.F.R. sect. 21.2(a)(1) (2007). We note moreover, that the
   ACO in fact specifically concluded that the price difference between the
   government estimate and Zolon's revised draft task order, and Zolon's
   lowered skill category pricing, were too low to be accounted for by a
   small business's lower overhead rate. Supplemental Contracting Officer's
   Statement para. 1. As for the firm's incumbent worker retention plan, the
   TEB found it inadequate, noting that its transition experience was limited
   and its actual experience was on a smaller scale than would be required in
   this procurement. Id. para. 2. Based on this information, the agency
   reasonably concluded that Zolon's revised pricing represented a risk with
   regard to transitioning and retaining the incumbent workforce.[4]

   Zolon asserts that the evaluation also was flawed because the agency
   failed to compare Vistronix's labor rates with the incumbents'. Zolon is
   incorrect. The record shows that the agency compared all 22 rates of the
   top three quotations, including Vistronix's, with the incumbents' onsite
   and offsite rates. Best Value Determination at 00395. While Vistronix's
   rates are lower than the incumbents', with regard to the six key
   categories used in the price realism evaluation, the awardee's rates
   ranged from only 1.12 to 33.15 percent below the average current billing
   rates.[5] Further, only two of Vistronix's rates were more than 15.5
   percent below the average. (We note that Zolon's rates ranged from 10 to
   43 percent lower and included four that were more than 15.5 percent
   lower.) In addition, Vistronix's draft task order price was higher than
   the government estimate. The agency concluded that Vistronix's labor
   category rates would be closely in line with the current contracts, with
   only a few significantly higher or lower outliers. Supplemental
   Contracting Officer's Statement para. 3a. Under these circumstances we
   find nothing unreasonable in the agency's price evaluation.

   RISK DETERMINATION

   Zolon asserts that the agency's determination that its revised price was
   unrealistic and risky constituted a finding that the firm was not
   responsible. In this regard, Zolon notes that, in making the best value
   determination, the agency found that the firm's pricing structure would
   make it very difficult or impossible to transition a large percentage of
   the incumbent personnel to a new contract, and was highly unlikely to
   allow the firm to meet the government's performance standards. Zolon also
   notes that the agency considered its past performance and experience to be
   deficiencies that it could not overcome. Zolon concludes that since it is
   a small business, the agency was required to refer the matter of its
   responsibility to the Small Business Administration (SBA) for review under
   its certificate of competency procedures. See Federal Acquisition
   Regulation sect. 19.602-1(a).

   Zolon's assertions are without merit. An agency may use traditional
   responsibility factors, such as personnel competencies and capabilities,
   as technical evaluation factors where, as here, a comparative evaluation
   of those areas is to be performed. Advanced Resources Int'l, Inc.-Recon.,
   B-249679.2, Apr. 29, 1993, 93-1 CPD para. 348 at 2. A comparative
   evaluation means that competing proposals will be rated on a scale
   relative to each other rather than on a pass/fail basis. Dynamic Aviation
   Helicopters, B-274122, Nov. 1, 1996, 96-2 CPD para. 166 at 3. No SBA
   referral is required where a small business offeror's proposal, while
   evaluated as acceptable, is not selected for award because another
   offeror's proposal is evaluated as superior under a comparative analysis
   or because of a cost/technical tradeoff analysis. Capitol CREAG LLC,
   B-294958.4, Jan. 31, 2005, 2005 CPD para. 31 at 6-8. There was no
   pass/fail evaluation here; the record shows that evaluation of Zolon's
   past performance and experience, as well as the price realism and risk
   assessment based on the firm's low proposed labor rates, were all part of
   a comparative, best value evaluation, not a responsibility determination.
   Best Value Determination at 00385, 00389-390.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] These were the senior system analyst, senior system architect, senior
   programmer, programmer, junior programmer, and senior database
   administrator.

   [2] Zolon criticizes a number of these percentages, noting that some were
   rounded up; some were based on the higher of the two incumbent rates
   instead of the average; some failed to account for the difference between
   the rates for a senior and regular programmer; and some used offsite,
   instead of more appropriate onsite, rates. Zolon Comments at 9-11. While
   the agency concedes some of these matters and otherwise explains its bases
   for making its comparisons, we need not resolve these issues, since it
   does not appear that Zolon was prejudiced. See McDonald-Bradley, B-270126,
   Feb. 8, 1996, 96-1 CPD para. 54 at 3 (GAO will not sustain a protest
   unless the protester demonstrates a reasonable possibility that it was
   prejudiced by the agency's actions); see Statistica, Inc. v. Christopher,
   102 F.3d 1577, 1581 (Fed. Cir. 1996). In this regard, the agency's
   recalculation of all the comparisons, consistent with Zolon's criticisms,
   resulted in rates 4.46, 11.94, 21.57, 23.35, 25.40, and 33.76 percent
   lower than the incumbent's. Supplemental Contracting Officer's Statement
   at 00416. In our view, these percentages are sufficiently similar to those
   relied upon by the agency and do not affect our analysis above.

   [3] Zolon asserts that the agency improperly evaluated its pricing as
   unreasonable, since its price was lower than the government estimate and
   price reasonableness concerns whether a price is higher, not lower, than
   warranted. See Dismas Charities, Inc., B-289575.2, B-289575.3, Feb. 20,
   2004, 2004 CPD para. 66 at 4. While low prices are not an indication of
   price unreasonableness, the protester was not prejudiced by the agency's
   evaluation. See McDonald-Bradley, supra; Statistica, Inc. v. Christopher,
   supra. As discussed above, the agency reasonably concluded that Zolon's
   low pricing was unrealistic and risky; its additional conclusion that the
   pricing was unreasonable had no discernible negative impact on the price
   evaluation.

   [4] Zolon also asserts that the TEB improperly considered the firm's
   revised price in its reevaluation of Zolon's quotation after it was
   reconvened, and that the ACO and SSA used this as a substitute for a
   proper and reasonable price evaluation. Zolon Comments at 12. There was
   nothing improper in the TEB's evaluation. When reconvened, the TEB
   reviewed all of Zolon's submissions and, after identifying the same
   weaknesses and noting the presence of three higher-rated quotations,
   recommended that award to Zolon would not be the best value, regardless of
   its lower price. TEB Report at 00384. While this recommendation included
   an assessment that Zolon's price did not outweigh its weaknesses, the
   essence of the TEB's evaluation was technical; it did not usurp the SSA's
   responsibility to make the best value tradeoff determination. In this
   regard, as discussed above, the ACO fully considered and analyzed
   representative portions of Zolon's revised pricing before concluding that
   it represented a high risk to the government. When this risk assessment
   was coupled with Zolon's technical weaknesses, the ACO recommended award
   to Vistronix with its higher priced, higher technically rated quotation.
   Since the RFQ placed greater importance on technical superiority, the
   SSA's agreement with the ACO's award recommendation was reasonable.

   [5] The percentage differences between Vistronix's and the incumbents'
   rates are even smaller under the agency's recalculated comparison (see
   footnote 2). Using onsite, average rates as the comparison points,
   Vistronix's rates were only 1.12, 4.8, 7.95, 9.64, 21.51, and 23.03
   percent lower. Supplemental Contracting Officer's Statement at 00416.