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Atteloir, Inc. , B-290601; B-290602, August 12, 2002

Matter of:  Atteloir, Inc. 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.

File: B-290601; B-290602
Date:        August 12, 2002


Raymond J. Sherbill, Esq., and Stuart A. Schwager, Esq., Ridberg, Press & Sherbill, for the protester.

William F. Dalton for E.L. Hamm & Associates, Inc., an intervenor.

Maj. Robert B. Neil and Capt. Peter Hartman, Department of the Army, 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.

Protest against agency's selection of a lower-rated, lower-priced proposal for award is denied where record supports reasonableness of agency's source selection decision; even where price is the least important consideration, agency properly may select a lower-rated, lower-priced proposal for award where it concludes that higher rated proposal is not worth the associated price premium.

Atteloir, Inc. protests the award of a contract to E.L. Hamm and Associates, Inc. under request for quotations (RFQ) No. DADW35-02-T-0083[1] issued by the Department of the Army, Military District of Washington (MDW) for management, operation and maintenance of visual information services.  Atteloir maintains that the agency's award decision is not consistent with the terms of the solicitations.
We deny the protest.
The solicitation contemplated award of a contract for a base year, with four 1-year options, to provide a variety of visual information services.  Offerors were required to submit technical and price proposals, and award was to be made on a “best value” basis.  Technical proposals were to be evaluated using four equally-weighted criteria:  prior experience, past performance (with subcriteria not relevant to the protest), organization and staffing, and management approach.  Agency Report (AR), exh. 5.4, at 74.  While price was subordinate to all technical evaluation factors, as proposals became more technically equal, price would become a determining factor for award purposes.  Id.
The agency received four proposals.  The agency evaluated the proposals (with adjectival ratings in each of the four areas of either excellent, good, satisfactory, marginal or unacceptable), established a competitive range, engaged in discussions and performed a final evaluation.  The results of the final evaluation for the protester and awardee were as follows:

Offeror Prior Experience Past Performance Organization and Staffing Management Approach Price
Atteloir Excellent Excellent Excellent Excellent [deleted]
E.L.Hamm Excellent Good Excellent Good [deleted]

AR, exhs. 4, 22.  The agency assigned both proposals overall adjectival ratings of excellent.  In reviewing Atteloir's price proposal, the agency concluded that its unit prices for some of the contract line items (CLINs) were unbalanced, and that this posed some performance risk, in terms of either increased cost to the government or performance risk to the contractor based on its furnishing below-cost supplies (because the CLINs were requirements-type line items where quantities could vary).  AR, exh. 26, at 2-4.  The agency also identified a weakness in Atteloir's cost proposal based on a lack of escalation in labor and other costs during the option years.  Id.  On the basis of these evaluation results, the agency made award to E.L. Hamm, finding that its proposal offered the best overall value to the government.
Atteloir maintains that the agency improperly found either that its proposal was essentially equal, or only slightly technically superior, to E.L. Hamm's from a technical standpoint, and then improperly made award on the basis of E.L. Hamm's lower price.  Atteloir maintains that the adjectival ratings assigned by the agency mask greater qualitative differences between the proposals.  In this regard, Atteloir maintains that it offered an employee benefits package that was superior to E.L. Hamm's and that this feature was worth the additional cost.  (This aspect of the proposals was reviewed under the management approach criterion.)  Atteloir also contends that its past performance was superior to E.L. Hamm's. 
Source selection officials have broad discretion to determine the manner and extent to which they will make use of the technical and price evaluation results in negotiated procurements.  Ready Transp., Inc., B-285283.3, B-285283.4, May 8, 2001, 2001 CPD ¶ 90 at 12.  Since numeric or adjectival scores are merely guides to intelligent decision making, they do not necessarily mandate selection of a particular proposal for award.  Id.  The more important consideration is whether the evaluation record and source selection decision show that the agency reasonably assessed the relative merits of the proposals in accordance with the stated evaluation criteria.  KBM Group, Inc., B-281919, B-281919.2, May 3, 1999, 99-1 CPD ¶ 118 at 11.
We have no basis to object to the agency's technical evaluation here.  The record shows that the agency performed a detailed review of the proposals and, in addition to assigning adjectival ratings, also prepared narrative materials that were thereafter used by the source selection official when she made her source selection decision.  We note that these narrative materials are incorporated into the agency's source selection decision document, AR exh. 4, take cognizance of the differences among the proposals and specifically discuss the issues raised by Atteloir.  Moreover, the narrative materials correspond directly to the adjectival ratings.
In the area of management approach, the evaluators assigned only a good rating to the E.L. Hamm proposal noting that, while the firm proposed a detailed management plan, there was no mention of an employee benefits package or incentives; the evaluators identified this as a weakness in the firm's proposal because of the risk of personnel turnover.  AR, exh. 4, at 10.  In contrast, the evaluators assigned Atteloir's proposal an excellent rating in this area and identified no weaknesses and several strengths.  AR, exh. 4, at 12.  The record thus shows that the agency evaluators and source selection official were aware of, and considered, this difference in the two proposals.
As for past performance, the evaluators assigned E.L. Hamm's proposal only a good rating, noting that the firm was rated good overall by the reference who responded to E.L. Hamm's past performance questionnaire.  This same reference remarked that the firm's on-site staff supporting the requirement always “exceeded the minimums,” and rated E.L. Hamm's customer service as “very high.”  AR, exh. 4, at 9.  The evaluators assigned Atteloir's proposal a rating of excellent for past performance, noting that both past performance references for Atteloir rated the firm's performance excellent, and cited numerous details relating to the specific advantageous attributes of Atteloir's performance.  AR, exh. 4, at 11-12.  The record thus shows that the evaluators and source selection official were aware of, and considered, the relative merits of the two proposals in the past performance area.
More generally, the technical evaluators found that Atteloir was the “preferred company” and had submitted the most technically capable proposal based on the technical evaluation (without regard to price).  AR, exh. 4, at 13.  They noted, among other things, Atteloir's “great experience” in performing visual information services, as well as its significant depth, perspective, institutional knowledge and hands-on experience.  Id.  The record thus shows that Atteloir was given full credit for its technically superior proposal, both by the evaluators and the source selection official who incorporated the technical evaluators' narrative materials into her source selection decision document. 
Although, as discussed, Atteloir submitted the superior technical proposal, the record shows that the agency was concerned about its pricing proposal in two respects.  First, Atteloir's overall price was approximately [deleted] percent higher than E.L. Hamm's.  Second, the record shows that the agency was concerned about the structure of Atteloir's pricing, as well as a lack of price escalation in its proposal for the option years.  The record includes a price negotiation memorandum relied upon by the source selection official in arriving at her decision, which raises significant concerns about Atteloir's proposed pricing:
Atteloir did not provide unit prices for [deleted] sub-priced contract line items, which was of particular importance in this Requirements type contract.  Atteloir also did not factor escalation into option period [deleted] for labor nor did they factor escalation into [deleted] for the duration of the five year effort.  Consequently, the unit prices that Atteloir was proposing could not be ascertained and it was determined that there were some price risks associated with Atteloir's proposed prices.  Specifically, comparison of Atteloir's line item totals to the Independent Government Estimate demonstrates the following: [the document goes on in some detail to describe the various sub-CLIN items that are either unreasonably low in price or unreasonably high in price].  These [deleted] variations in pricing and the [deleted] lack of escalation in the option years lead me to believe that [deleted].  To me [this] represents a major risk to the Government [because] the costs for supplies would either be significantly above what is deemed appropriate or the costs would be so low as not to be sustainable by the contractor in the option years.  Both scenarios represent a great risk to the Government.  AR, exh. 26, at 2-4.  Atteloir does not dispute these conclusions, but merely dismisses them, stating that the value of the unbalanced CLINs is relatively small, and maintaining that its pricing scheme “cuts both ways,” with the government sometimes benefiting and Atteloir sometimes benefiting. 
This argument is without merit.  Where an offeror's prices appear unbalanced (that is, the prices for some items appear understated or overstated), agencies ordinarily are required to assess the performance risk associated with such pricing, and evaluate whether the pricing scheme will result in the agency paying unreasonably high prices.  Federal Acquisition Regulation (FAR) § 15.404 (g); Citywide Managing Servs. Of Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD ¶ 6 at 7-8.  This is what the agency did here, and we find nothing unreasonable in the agency's conclusions.  The fact that the CLINs in question may represent only a relatively small portion of the contract's total value, and the fact that Atteloir's pricing “cuts both ways” go only to the magnitude of the effect of the unbalancing; even the protester does not maintain that its pricing represents no risk.  The agency did not reject Atteloir's proposal based on its pricing, but instead merely concluded that the pricing scheme presented a risk that the government might pay unreasonably high prices for some CLINs, or that Atteloir's furnishing some CLINs at understated costs could affect the firm's performance.  There was nothing improper in the agency's giving some weight to this concern in the source selection decision. 
When making its source selection decision, the agency recognized the technical superiority of the Atteloir proposal, but nonetheless identified the E.L. Hamm proposal as representing the best overall value to the government.  In this regard, the source selection decision document relies on the technical evaluation report prepared by the evaluators, as well as the recommendation of the chairman of the technical evaluation board (this latter document took into account both the technical considerations as well as the pricing concerns discussed above).  In arriving at its award decision, the agency recognized Atteloir's technical superiority, but found that this superiority was not worth the added cost premium, and noted further that its unbalanced pricing presented a risk not present in the E.L. Hamm proposal.  AR, exh. 4, at 15-16. 
Atteloir does not challenge the substance of the agency's evaluation conclusions, but instead maintains that, because the solicitation gave greater weight to the technical considerations, the agency essentially was required to make award to it because its proposal was rated higher during the technical evaluation.  This argument is without merit.  Even where price is the least important award criterion, an agency may nonetheless select a lower-priced, lower-rated proposal where it concludes that the higher-rated proposal is not worth the associated price premium.  SelRico Servs., Inc. B-286664.4 et al., June 22, 2001, 2002 CPD ¶ 6 at 3.  Source selection officials in negotiated procurements have broad discretion in determining the manner and extent to which they will make use of the technical and price evaluation results; price/technical tradeoffs may be made, and the extent to which one may be sacrificed for the other is governed only by the test of rationality and consistency with the solicitation's evaluation criteria.  Id.; NAPA Supply of Grand Forks, Inc.,
B-280996.2, May 13, 1999, 99-1 CPD ¶ 94 at 5.
As discussed, the agency was well aware of the proposals' relative merits when it made its award decision.  In the final analysis, the agency concluded that, while Atteloir's proposal was technically superior, its higher price and the element of risk introduced by Atteloir's pricing structure were sufficient to offset Atteloir's technical advantage, notwithstanding that technical considerations were of greater weight than price.  There is nothing inherently unreasonable or irrational in this conclusion. 
The protest is denied.
Anthony H. Gamboa
General Counsel 

[1] The agency initially solicited this requirement under request for proposals (RFP) No. DADW35-01-R-0030, and obtained technical and price proposals in response thereto.  Subsequently, the agency changed the contract type from a combined fixed‑price/cost reimbursement contract to a fixed-price contract, and administratively canceled the RFP and issued the RFQ requesting only price proposals; the agency used the technical proposals from the prior solicitation in making award under the RFQ. 

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