TITLE: B-310661; B-310661.2, Karrar Systems Corporation, January 3, 2008
BNUMBER: B-310661; B-310661.2
DATE: January 3, 2008
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B-310661; B-310661.2, Karrar Systems Corporation, January 3, 2008

   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: Karrar Systems Corporation

   File: B-310661; B-310661.2

   Date: January 3, 2008

   Kevin P. Connelly, Esq., Seyfarth Shaw LLP, for the protester.

   Ross Aboff, Esq., Archer & Greiner, PC, for BANC3, Inc., an intervenor.

   Daniel Pantzer, Esq., Denise M. Marrama, Esq., and James F. Ford, Esq.,
   Department of the Army, 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. Protest that agency failed to hold meaningful price discussions with
   protester regarding reasonableness of its proposed price is denied where
   agency did not find its price unreasonable and brought its only pricing
   concern to protester's attention.

   2. Protest that awardee had an impermissible conflict of interest is
   denied where agency thoroughly considered circumstances in which awardee
   could have a conflict, and reasonably determined that there was no actual
   or potential conflict.

   DECISION

   Karrar Systems Corp. protests the award of a contract to BANC3, Inc.,
   under request for proposals (RFP) No. W15P7T-07-R-A226, issued by the
   Department of the Army for program and administrative services for its R2
   program. Karrar principally asserts that the Army failed to provide it
   with meaningful discussions, and that BANC3 had an impermissible
   organizational conflict of interest (OCI).

   We deny the protest.

   The solicitation contemplated a "best value" award of a 5-year
   indefinite-quantity/ indefinite-delivery (ID/IQ) contract based on four
   evaluation factors (in descending order of importance): technical (with
   subfactors for three sample task orders--pre-award, post-award and
   budget), management (with subfactors for transition plan to Aberdeen,
   transition plan, and management plan), performance risk, and price. RFP at
   59. Four offerors responded to the RFP. A source selection evaluation
   board (SSEB) assigned the initial proposals adjectival ratings under the
   technical and management factors and subfactors based on the proposals'
   evaluated strengths and weaknesses.[1] Following the initial evaluation, a
   competitive range determination, discussions, and the submission and
   evaluation of final proposal revisions, Karrar's proposal was rated good
   for the technical factor, with subfactor ratings of good for the pre- and
   post-award sample task orders, and acceptable for the budget sample task
   order, Final Source Selection Briefing at 21; acceptable for the
   management factor, with subfactor ratings of acceptable for transition to
   Aberdeen, good for transition plan, and acceptable for management plan,
   id. at 37; and low for performance risk. BANC3's proposal was rated
   overall acceptable under the technical factor, with acceptable ratings for
   each subfactor, id. at 13; overall good under the management factor, with
   ratings of good for each subfactor, id. at 29; and low for performance
   risk. Karrar's proposed price was $25,119,864, and BANC3's was
   $17,251,531.92. Id. at 44. Based on these evaluation results, the agency
   selected BANC3's proposal as offering the best value to the government.
   Karrar protests the award decision.

   DISCUSSIONS

   Karrar asserts that the Army failed to provide it with meaningful
   discussions with respect to its price proposal. The solicitation contained
   historical workload data. In its proposal, Karrar referred to an
   anticipated increase in workload during the option years of the contract.
   Based on this language, the Army questioned whether Karrar had based its
   price proposal on the historical data in the RFP, and whether it
   understood that the contract was being awarded as a 5-year ID/IQ contract,
   and not as a contract with option years. AR at 14. During discussions, the
   Army advised Karrar that: "Your proposal refers to Option years. This will
   be a Five (5) Year Indefinite Quantity Indefinite Delivery Type contract.
   Please confirm that your offer is based on the historical workload
   provided in the Performance Work Statement." Id. Karrar responded by
   removing the reference to option years and stating that "Prices ... are
   based on our interpretation of the historical workload provided in the
   Performance Work Statement ... for each SLIN in each year over a five (5)
   year period...." Id.

   Karrar argues that the price discussions were not meaningful because the
   Army did not specifically ask what factors the firm had considered in
   determining its price. In this regard, Karrar asserts that it was clear
   from its proposal that it had used factors other than the historical data
   in determining its price. Karrar maintains that the Army was obligated to
   point out the specific additional elements that Karrar should not have
   considered in formulating its price, rather than merely asking it to
   confirm that its price was based on the historical workload information.

   Discussions, when conducted, must be meaningful; that is, they may not
   mislead offerors and must identify deficiencies and significant proposal
   weaknesses that could reasonably be addressed in a manner to materially
   enhance the offeror's potential for receiving award. Lockheed Martin
   Corp., B-293679 et al., May 27, 2004, 2004 CPD para. 115 at 7. There is no
   requirement, however, that discussions be all encompassing or extremely
   specific in describing the extent of the agency's concerns; rather,
   agencies need only lead offerors into the areas of their proposals that
   require amplification. Professional Performance Dev. Group, Inc.,
   B-279561.2, et al., July 6, 1998, 99-2 CPD para. 29 at 5.

   The protester's discussions challenge is without merit. First, the agency
   was not even required to conduct price discussions here. In this regard,
   where an offeror's price is not so high as to be unreasonable and thus
   unacceptable for award, the agency is not required to advise the offeror
   during discussions that its prices  are considered high. MarLaw-Arco MFPD
   Mgmt., B-291875, Apr. 23, 2003, 2003 CPD para. 85 at 6. There is no
   indication in the record that the Army considered Karrar's prices to be
   unreasonably high; it therefore was not required to question Karrar's
   pricing during discussions. In any case, the price discussions the agency
   nevertheless provided were meaningful. The agency's request that Karrar
   confirm that its prices were based on the historical data in the RFP was
   sufficient, we think, to reasonably indicate both that the agency believed
   the firm's prices were high, and that this might be because its prices
   were not based on the historical data. This question clearly conveyed the
   nature of the agency's concern, and thus was sufficient to lead Karrar
   into the area of its proposal that it needed to address. Indeed, Karrar's
   response--that its prices were in fact based on the historical
   data--indicates that it fully understood the nature of the agency's
   concern.

   OCI

   Karrar asserts that the agency improperly failed to consider that BANC3
   has an impermissible OCI due to the fact that it is a subcontractor to,
   and has a mentor-protege agreement with, Lockheed Martin Corporation, one
   of the eight prime contractors for the R2 program. Karrar's assertion is
   based on its claim that BANC3's Internet website references the
   mentor-protege relationship.

   The situations in which OCIs arise are addressed in Federal Acquisition
   Regulation (FAR) subpart 9.5 and in decisions of our Office. As relevant
   here, one type of OCI, which reflects concerns about a firm's "impaired
   objectivity," consists of situations where a firm's work under one federal
   contract could entail its evaluating its own or a related entity's
   performance under another federal contract, thus undermining the firm's
   ability to render impartial advice to the government. FAR sect. 9.505-3;
   Aetna Gov't. Health Plans, Inc.: Found. Health Fed. Servs., Inc.,
   B-254397.15 et al., July 27, 1995, 95-2 CPD para. 129 at 13.

   The responsibility for determining whether an OCI exists, and the extent
   to which a firm should be excluded from the competition, rests with the
   contracting agency, SRS Techs., B-258170.3, Feb. 21, 1995, 95-1 CPD para.
   95 at 8-9. Where an agency has given thorough, documented consideration to
   an offeror's activities and their potential to create OCIs, we will not
   substitute our judgment for the agency's conclusions drawn from such a
   comprehensive review, provided the conclusions are otherwise rational and
   reasonable. See, e.g., Business Consulting Assocs., B-299758.2, Aug. 1,
   2007, 2007 CPD para. 134 at 9-10; Overlook Sys. Techs., Inc., B-298099.4,
   B-298099.5, Nov. 28, 2006, 2006 CPD para. 185 at 10-18; Alion Sci. & Tech.
   Corp., B-297022.4, B-297022.5, Sept. 26, 2006, 2006 CPD para. 146 at 5-8.

   The Army reports that it was aware of the potential OCI here--the
   possibility that BANC3's relationship with Lockheed would undermine its
   ability to render impartial advice to the agency under the
   contract--because BANC3 was performing in the R2 project office as a
   subcontractor under a task order issued to Lockheed, which was to expire
   in August 2007, but was extended to October 31. AR at 10. The Army
   determined that, if BANC3 were awarded the contract, it would have an
   impermissible OCI if it continued to work with Lockheed or any other R2
   prime contractor. Accordingly, on Oct. 15, after BANC3 received the award,
   the Army met with the firm to discuss its transition plans. At this
   meeting, BANC3 indicated that it was withdrawing from all teaming
   arrangements with R2 prime contractors and would not compete as a prime
   contractor or subcontractor for any future R2 contract. BANC3 further
   indicated that it would not have any contractual relationship with
   Lockheed after the current work order expired on October 31. The Army
   concluded that, since any services that could result in an OCI issue would
   not be ordered until after the relationship between Lockheed and BANC3
   ended, no impermissible OCI existed. As for the alleged mentor-protege
   agreement between BANC3 and Lockheed, the Army and BANC3 state that there
   is not and never has been such an agreement. BANC3 explains that the
   statement on its website was included in a draft version of its company
   brochure because it explored the possibility of such an agreement, but the
   agreement was never completed. The protester has provided no evidence to
   the contrary. We find that, after thoroughly and reasonably considering
   the possibility of an OCI, the agency reasonably concluded that there
   existed no OCI that precluded BANC3 from participating in the procurement
   or from receiving the award. This argument thus provides no basis for
   questioning the award.

   ABANDONED ISSUES

   In its initial and supplemental protests, Karrar challenged the evaluation
   of its proposal under the technical and management factors on several
   grounds: its proposal should have been rated outstanding under the
   technical factor and subfactors; its proposal should have received
   evaluation credit for providing flow charts; the evaluators erroneously
   found that Karrar failed to notice an error on a sample form for the
   budget sample task; its proposal should have been rated outstanding or
   good, rather than acceptable, under the management factor; its proposal
   should have been accorded a strength for avoiding potential OCIs and for
   its willingness to satisfy the agency's desire for a corporate partnering
   agreement; and that its proposal should have been accorded significant
   strengths for its extensive discussion of its approach to supporting R2
   personnel requirements, and for its discussion of the role of its facility
   manager in coordinating the preparation for the R2 office relocation.

   In its report in response to the protest, the Army conceded one minor
   error in the evaluation, but refuted the remainder of the allegations,
   specifically explaining the basis for Karrar's proposal ratings, as well
   as the reasons why its proposal was not assigned the strengths Karrar
   argued should have been assigned. In its comments in response to the
   agency report, Karrar did not dispute the agency's explanation of the
   basis for the technical and management evaluations. Accordingly, we
   consider these issues abandoned and will not consider them.[2] See Council
   for Adult & Experiential Learning, B-299798.2, Aug. 28, 2007, 2007 CPD
   para. 151.[3]

   The protest is denied.

   Gary L. Kepplinger
   General Counsel 

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

   [1] Under the technical factor and subfactors, proposals were rated
   outstanding, good, acceptable, or unacceptable. Under the management
   factor and subfactors, proposals also could be rated as susceptible to
   being made acceptable.

   [2]Karrar also abandoned its arguments that BANC3 had an OCI due to its
   relationship with a second R2 prime contractor; that BANC3 had access to
   information that provided it with a competitive advantage; and that the
   agency failed to hold meaningful discussions with Karrar with respect to
   its technical proposal.

   [3] Karrar has filed a supplemental protest in which it further challenges
   the evaluation of its proposal and argues that the agency did not treat
   offerors equally. We are developing the record in that protest and will
   address these arguments in a separate decision.