TITLE: B-299981.2; B-299981.4, Legacy Management Solutions, LLC, October 10, 2007
BNUMBER: B-299981.2; B-299981.4
DATE: October 10, 2007
**************************************************************************
B-299981.2; B-299981.4, Legacy Management Solutions, LLC, October 10, 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: Legacy Management Solutions, LLC

   File: B-299981.2; B-299981.4

   Date: October 10, 2007

   Kevin P. Mullen, Esq., and David E. Fletcher, Esq., Cooley Godward
   Kronish, LLP, for the protester.

   Joseph P. Hornyak, Esq., and Allison V. Feierabend, Esq., Holland &
   Knight, for The S.M. Stoller Company, an intervenor.

   H. Jack Shearer, Esq., and Young H. Cho, Esq., Department of Energy, for
   the agency.

   Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Where solicitation contemplated award of fixed-price contract, agency's
   comparing proposed prices to government estimate and other proposed prices
   and ensuring that prices reflected labor categories and hours specified in
   solicitation constituted reasonable price realism analysis.

   2. Protest of alleged unbalanced pricing among awardee's proposed labor
   rates is denied where agency evaluated challenged rates as reasonable and
   realistic; record shows that rates were within range of all offerors'
   proposed rates, so that there was no basis to find them significantly
   overstated or understated, and thus no basis to find them unbalanced.

   DECISION

   Legacy Management Solutions, LLC protests the award of a contract to The
   S.M. Stoller Co. under request for proposals (RFP) No. DE-RP01-07LM00060,
   issued by the Department of Energy (DOE) for support services. Legacy
   complains that the agency improperly evaluated the technical proposals and
   failed to perform an adequate price realism analysis.

   We deny the protest.

   DOE's legacy program is responsible for managing land structures and
   facilities that were associated with nuclear weapons production during the
   cold war and are now closed. The RFP sought support services for this
   program, and provided for award of a contract on a time-and-material
   basis, with provision for a base fee and award fees. The RFP indicated
   that the award would be made on a "best value" basis considering technical
   factors--technical approach, management approach, personnel qualifications
   and staffing, corporate experience, and past performance--and price; the
   technical factors were more important than price. RFP at 88-92. Regarding
   price, the RFP, as amended, included a list of 15 labor categories, with
   multiple experience levels and the estimated number of hours that each
   level could be expected to perform annually. RFP at 381. The RFP also
   specified a dollar amount that each offeror was to include in its proposal
   for other direct costs. RFP at 383. Offerors were to propose a loaded,
   fixed, hourly rate (minus fee) for each labor category, as well as a base
   fee and an award fee. RFP at 78-79. Price was to be evaluated for
   reasonableness, realism, and completeness. RFP at 92.

   The agency received five proposals, including Legacy's and Stoller's. A
   technical evaluation committee (TEC) reviewed and scored the proposals
   under each factor. Stoller's proposal was ranked first, with a technical
   score of 920 (of 1,000 available) points--320 (of 400) for technical
   approach, 250 (of 250) for management approach, 200 (of 200) for personnel
   qualifications and staffing, 100 (of 100) for corporate experience, and 50
   (of 50) for past performance. AR at 7. Legacy's proposal was ranked
   second, with a score of 615 points--200 for technical approach, 125 for
   management approach, 160 for personnel qualifications and staffing, 80 for
   corporate experience, and 50 for past performance. Id. Stoller's proposed
   price was the lowest, at $167,656,172, and Legacy's the second lowest, at
   $184,943,641. AR at 8. Based on its highest technical score and lowest
   price, Stoller's proposal was ranked first overall; Legacy's was ranked
   second. Id. Based on the technical evaluation report, the source selection
   authority (SSA) determined that Stoller's proposal represented the best
   value, and thus selected Stoller for award. Legacy protests the award
   decision.

   PRICE REALISM ANALYSIS

   Legacy challenges the reasonableness of the agency's price realism
   analysis. In this regard, section M of the RFP stated that proposals would
   be evaluated for realism, reasonableness and completeness in order to
   establish a probable cost. The RFP further specified regarding price
   realism that proposals

     will be evaluated to determine if the proposed costs are realistic and
     consistent with the Technical Proposal with regard to the nature, scope,
     and duration of the work to be performed. Inconsistencies between the
     Cost/Price Proposal and other portions of the proposal could raise
     concerns regarding the offeror's understanding of the requirements and
     ability to perform the work for the proposed price.

   RFP at 92.

   Where a fixed-price contract--including a fixed-rate contract such as the
   one here--is to be awarded, a solicitation may provide for a price realism
   analysis for such purposes as measuring an offeror's understanding of the
   solicitation requirements and assessing the risk inherent in an offeror's
   proposal. Star Mountain, Inc., B-285883, Oct. 25, 2000, 2000 CPD para.189
   at 4. The Federal Acquisition Regulation (FAR) identifies a number of
   price analysis techniques that may be used to determine whether prices are
   reasonable and realistic, including comparison of the prices received with
   each other and with the independent government estimate, and analysis of
   pricing information provided by the offeror. FAR sect. 14.404-1(b)(2). The
   nature and extent of a realism analysis ultimately are matters within the
   sound exercise of the agency's discretion, unless the agency commits
   itself to a particular methodology in the solicitation. Id. We will review
   an agency's price realism evaluation only to determine whether it was
   reasonable and consistent with the solicitation requirements. Id.

   DOE's realism analysis consisted of comparing the proposed rates for the
   specified labor categories to both the government estimate and the other
   proposed prices, and the use of statistical analysis techniques to analyze
   the information. Technical Evaluation Report (TER) at 37-46, and attach.
   4. As a result of its analysis, the agency concluded that all offerors'
   total prices were realistic, including Stoller's, which was approximately
   11.6 percent lower than the government estimate. AR at 40. In this regard,
   the agency found that, while some of Stoller's and other offerors' labor
   rates were lower than the government estimate and that some were higher,
   overall, all offerors' proposed rates were consistent with the government
   estimate. AR at 40. In addition, DOE verified that each offeror's prices
   reflected the estimated number of labor hours for each labor category
   specified in the RFP.[1]

   Legacy complains that DOE's analysis was inadequate because the agency did
   not determine whether offerors' proposed hours were consistent with the
   nature, scope, and duration of the efforts described in their technical
   proposals, or perform a reasonable probable cost analysis, as required by
   the RFP. We find nothing objectionable in the agency's evaluation
   methodology. As noted above, the solicitation, as amended, included the
   labor categories, the levels within the labor categories, and the exact
   number of hours for each level that offerors were required to use to
   prepare their proposals. RFP at 381. Since offerors thus were not
   responsible for proposing their own required hours, it obviously would
   have served no purpose--the RFP language aside--for the agency to
   separately consider whether Stoller's hours were sufficient. The agency's
   failure to conduct this analysis thus does not render the evaluation
   unreasonable.[2] Similarly, since the number of hours and other direct
   costs were specified in the RFP, once the agency determined that the
   proposed rates were realistic, its calculating probable cost by
   multiplying the proposed rates by the estimated hours, and totaling the
   results, was reasonable.

   Legacy also objects to the price realism analysis on the ground that it
   was based on an unreasonable government estimate. In this regard,
   following receipt of proposals, DOE revised the estimate to correct errors
   and to take into account inapplicable and likely inaccurate assumptions.
   Among other things, DOE reduced the overhead rate from 100 percent to 50
   percent because the lower rate was more consistent with contracts, such as
   this one, that will be performed on government property, and also reduced
   the profit rate to reflect the rates actually proposed. AR at 52. Legacy
   argues that, instead of a 50 percent overhead rate, the estimate should
   have incorporated a [DELETED] percent overhead rate, which allegedly is
   the rate Stoller applied under its incumbent legacy contract. According to
   Legacy, had the higher rate been included in the estimate, the comparison
   with the estimate would have shown that Stoller's price was
   unrealistically low.

   We find no basis to question the government estimate. Legacy has not shown
   that the basis for the agency's decision to include the lower overhead
   rate in the estimate was unreasonable. Specifically, Legacy has not shown
   that the agency incorrectly determined that, Stoller's overhead rate
   notwithstanding, the lower rate is consistent with the rate typically
   experienced under contracts performed on government property. Thus,
   Legacy's argument that the agency should have used the higher rate
   constitutes no more than disagreement with DOE's approach, which is
   insufficient to demonstrate that the agency's approach was unreasonable.
   See UNICCO Gov't Servs., Inc., B-277658, Nov. 7, 1997, 97-2 CPD para. 134
   at 7. In any case, the agency's analysis also was based on a comparison of
   Stoller's overall prices to the other offerors' proposed prices, which
   analysis the protester does not challenge. See generally Fiserv NCSI,
   Inc., B-293005, Jan. 15, 2004, 2004 CPD para. 59 at 10 (price evaluation
   was reasonable, notwithstanding that it was based in part on flawed
   government estimate, where agency also had a separate valid basis for its
   evaluation conclusion).

   UNBALANCED PRICING

   Legacy argues that Stoller's labor rates are unbalanced between the
   experience levels in certain labor categories, and that its proposal
   should have been rejected on this basis. Specifically, Legacy points out
   that, for the administrative specialist position, Stoller proposed a rate
   of [DELETED] for level 4, [DELETED] percent higher than the [DELETED] rate
   it proposed for level 3; similarly, for the records management specialist
   position, Stoller proposed a rate for level 4 more than [DELETED] percent
   higher than the rate for level 3; and, for the beneficial reuse specialist
   position, Stoller's rate for level 3 was [DELETED] percent higher than its
   rate for level 2. According to Legacy, the differences in experience
   requirements between the levels--for example, a level 3 administrative
   specialist must have at least 8 years of experience, while a level 4 must
   have at least 12 years--are not sufficient to explain the extreme
   differences in the proposed rates.[3]

   Unbalanced pricing exists where the prices of one or more contract line
   items are significantly overstated, despite an acceptable total evaluated
   price (typically achieved through underpricing of one or more other line
   items). Ken Leahy Constr., Inc., B-290186, June 10, 2002, 2002 CPD para.
   93 at 2; see FAR sect. 15.404-1(g)(1).

   Legacy has not established that Stoller's labor rates for the more
   experienced personnel were overstated, and our review does not indicate
   that this is the case. In reviewing the labor rates, the agency found that
   Stoller's rates were both reasonable (that is, not too high), and in line
   with the other offerors' rates. In this latter regard, Stoller's rate of
   [DELETED] for the level 4 administrative specialist position was within
   the $30.38 to $38.56 range of rates among all offerors; its [DELETED] rate
   for the level 4 records management specialist position was within the
   $48.17 to $66.07 range of rates; and its [DELETED] rate for the level 3
   beneficial reuse specialist position was within the $42.50 to $116.73
   range among all offerors. Since there thus is no basis for us to find that
   Stoller proposed overstated rates for higher-level personnel, there is no
   basis for us to find unbalanced pricing.[4]

   EVALUATION OF STOLLER'S TECHNICAL PROPOSAL

   Under the personnel qualification and staffing factor, offerors were
   required, among other things, "to demonstrate [their] ability to recruit,
   retain, and provide highly skilled qualified personnel . . . over wide
   spread geographic locations, and under widely fluctuating workloads," RFP
   at 75, to ". . . discuss their plan for providing the non-key personnel
   required for this contract. . . ," id. at 76, and to ". . . include . . .
   for each non-key labor category, (1) the number of personnel . . .
   currently employed by the offeror; (2) the number . . . to be provided
   from the current employees of a proposed subcontractor . . . ; and (3) the
   number . . . to be provided from new hires including incumbent staff." Id.
   The RFP informed offerors that they would be evaluated on, their
   "demonstrated ability to recruit, retain and provide qualified key and
   non-key personnel to ensure sufficient staffing . . ." and ". . . for
   demonstrated ability to provide non-key staff at the necessary skill
   levels, whether by new hire or retention of current or incumbent staff."
   Id. at 90.

   In its proposal, Stoller, the incumbent contractor, proposed to provide
   non-key personnel by restructuring its current staff; it would fill
   approximately [DELETED] percent of its requirements with new staff who
   either would be in new positions at new localities or would replace staff
   currently paid more than their duties demand.[5] The agency found that
   Stoller adequately addressed the solicitation requirement to recruit,
   retain and provide qualified personnel to ensure successful performance.
   AR at 31, 32.

   Legacy argues that Stoller's personnel plan should have been assigned a
   weakness under each technical factor. Among other things, Legacy believes
   the evaluators should have considered the negative effect Stoller's
   approach could have on the morale and effectiveness of the remaining
   incumbent workforce, the unlikelihood of a smooth transition to the new
   contract, and the probable decline in the overall quality of performance
   associated with the [DELETED] of personnel who were responsible for
   Stoller's favorable past performance rating. Supplemental Protest at 3.

   In reviewing a protest challenging an agency's proposal evaluation, our
   role is limited to ensuring that the evaluation was reasonable and
   consistent with the terms of the solicitation, and applicable statutes and
   regulations. Phillips Med. Sys. N. Am. Co., B-293945.2, June 17, 2004,
   2004 CPD para. 129 at 2.

   The evaluation here was unobjectionable. Offerors' staffing plans were
   submitted in response to the requirements under the personnel
   qualifications and staffing factor, as discussed above, and the evaluation
   scheme provided for evaluating the staffing plans under that factor. Thus,
   while the protester asserts that Stoller's staffing plan should have been
   evaluated as a weakness under all factors, doing so would have been
   inconsistent with the terms of the solicitation. With respect to the
   evaluation under the personnel qualifications and staffing factor,
   offerors were not required to provide a plan that was based on using 100
   percent of the incumbent employees; they were only required to submit a
   plan that demonstrated that they would be capable of staffing the
   contract. DOE found that Stoller's plan demonstrated its ability to staff
   the contract, TEC Report at 31, and Legacy has not demonstrated otherwise.
   Accordingly, we have no basis to question this aspect of the evaluation.

   PREJUDICE

   Legacy protests the evaluation of its own proposal under the technical and
   management approach factors on several grounds. However, we will not
   sustain a protest unless the protester demonstrates a reasonable
   possibility that it was prejudiced by the agency's actions, that is,
   unless the protester demonstrates that, but for the agency's actions, it
   would have had a substantial chance of receiving the award.
   McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see
   Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996).
   There is no basis to find that Legacy was prejudiced by these alleged
   evaluation errors.

   In evaluating the technical proposals, the TEC assigned a base score of
   0 to 10 for each factor; a proposal was assigned 10 points if, among other
   things, it was evaluated with significant strengths and no weaknesses, and
   8 points if, among other things, it was evaluated with one or more
   strengths and no significant weaknesses. AR at 6. The TEC then applied
   multipliers to the base scores, reflecting the different relative weights
   of the factors--40 for technical approach, 25 for management approach, 20
   for personnel qualifications and staffing, 10 for corporate experience,
   and 5 for past performance--to arrive at the weighted scores discussed
   above. Legacy's total weighted score of 615 included scores of 125 for
   management approach and 200 for technical approach, the factors in
   question. Stoller's proposal was selected for award based on its evaluated
   strengths, as reflected in its total weighted score of 920 points.

   Applying the agency's methodology, it is clear that Legacy's proposal
   would not be in line for award even if we found merit to its evaluation
   challenges. Under the management factor, Legacy's proposal received a base
   score of 5 points based on the TEC's assessment of one strength and one
   weakness; this base score was multiplied by 25 for a weighted score of
   125 points. Legacy challenges the assignment of the one weakness; if we
   agreed with Legacy, its proposal would merit, at most, a base score of 8
   points, since it was evaluated as having no significant strengths under
   the factor. AR at 6. This would increase Legacy's score under the
   management approach factor by 75 points, to 200 points (8 multiplied by
   25). Under the technical approach factor, Legacy's proposal received a
   base score of 5 points based on, among other things, two significant
   strengths and three significant weaknesses; this base score was multiplied
   by 40, resulting in a weighted score of 200 for the factor. Legacy has
   challenged each of the significant weaknesses; if we found all of Legacy's
   arguments meritorious, Legacy's base score would increase to the maximum
   of 10 points, and its weighted score for the factor would increase by 200
   points, to the maximum of 400 points. Based on these two changes, the
   record shows that Legacy's total score would increase by a total of
   275 points, from 615 to 890. Since this would leave Legacy's proposal with
   a lower rating than Stoller's, and Stoller's lower price would remain
   unchanged, there is no basis in the record for concluding that Legacy's
   proposal would be selected for award over Stoller's, even with the higher
   score that could result if we found its challenges meritorious. It follows
   that Legacy was not competitively prejudiced by the alleged errors in the
   evaluation of its technical proposal, and we therefore need not consider
   them.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1]DOE notes that a substantial part of the difference in Stoller's and
   Legacy's proposed prices was due to [DELETED]. AR at 40.

   [2]We recently resolved this precise issue in deciding a protest by
   another unsuccessful offeror under this procurement. See Navarro Research
   and Eng'g, Inc., B-299981, B-299981.3, Sept. 28, 2007, 2007 CPD para. __.

   [3]Legacy also argues that DOE did not consider the only obvious
   explanation for the extreme variation in rates from one level to another
   within the same labor category-- that Stoller violated the RFP by
   including profit in its labor rates. Legacy has not supplied any evidence
   to support this argument. Accordingly, we find that it is based on
   speculation and will not consider it.

   [4]We note that, in any case, the concept of unbalanced pricing has only
   limited application in the context of a procurement where the government's
   primary objective is the best value, not the lowest price. USATREX Int'l,
   Inc., B-275592, B-275592.2, Mar. 6, 1997, 98-1 CPD para. 99 at 6; we apply
   the concept of unbalancing in such cases only where price ultimately is
   the basis for the source selection. MG Indus., B-283010.3, Jan. 24, 2000,
   2000 CPD para. 17 at 7. Here, while the award was made to the low-priced
   offeror, price was the least important award factor. In addition, while in
   the source selection decision the SSA recognized that Stoller's price was
   low, it is clear that price was not the basis for her award decision.
   Source Selection Document at 3, 4.

   [5] Stoller addressed DOE's need for possible short-term or specialized
   staffing by proposing to supply [DELETED], but indicated it would consider
   whether [DELETED] to meet these needs. Stoller Proposal at 89. Legacy's
   argument also applies to this aspect of Stoller's proposal.