B-174799, JUN 30, 1972

B-174799: Jun 30, 1972

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WHILE A-V'S OFFER TO PROVIDE ITS OWN ANIMATION SERVICES AND ITS NATURAL ADVANTAGE AS THE INCUMBENT CONTRACTORS ARE FACTORS WHICH WOULD NOT ORDINARILY BE CONTROLLING THEY WERE WITHIN THE EVALUATION FRAMEWORK LISTED IN THE RFP AND. THE USE OF THESE ELEMENTS AS "DISCRIMINATORS" WAS NEITHER ARBITRARY NOR CAPRICIOUS. THE AWARD IS BEING WITHHELD PENDING OUR DECISION WITH PRESENT NEEDS BEING FULFILLED UNDER AN EXTENSION TO THE EXISTING CONTRACT FOR THE SAME SERVICES WITH A-V. WERE EVENTUALLY CONSIDERED FOR AWARD. TECHNICAL AND MANAGEMENT UNDERSTANDING IS WEIGHTED HIGHER THAN ANY OTHER INDIVIDUAL CATEGORY. KEY PERSONNEL IS WEIGHTED HIGHER THAN EXPERIENCE AND PAST PERFORMANCE. THE EXPERIENCE AND PAST PERFORMANCE CATEGORY WEIGHT IS LESS THAN HALF THAT ASSIGNED TO TECHNICAL MANAGEMENT AND UNDERSTANDING.

B-174799, JUN 30, 1972

BID PROTEST - ALLEGED IMPROPER EVALUATION DECISION DENYING THE PROTEST OF H. G. PETERS & CO; INC; AGAINST THE PROPOSED AWARD TO A-V CORP UNDER AN RFP ISSUED BY THE MANNED SPACECRAFT CENTER, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, FOR MOTION PICTURE PRODUCTION SERVICES. IN VIEW OF THE PRICE VARIABILITY INVOLVED IN COST-REIMBURSEMENT TYPE CONTRACTS, THE CONTRACTING OFFICER'S DECISION TO DISREGARD THE SLIGHT DIFFERENCE IN THE TWO BID PRICES CANNOT BE CONSIDERED AN ABUSE OF DISCRETION FURTHER, WHILE A-V'S OFFER TO PROVIDE ITS OWN ANIMATION SERVICES AND ITS NATURAL ADVANTAGE AS THE INCUMBENT CONTRACTORS ARE FACTORS WHICH WOULD NOT ORDINARILY BE CONTROLLING THEY WERE WITHIN THE EVALUATION FRAMEWORK LISTED IN THE RFP AND, IN VIEW OF THE SUBSTANTIAL DEGREE OF PRICE AND TECHNICAL EQUALITY IN THE TWO PROPOSALS, THE USE OF THESE ELEMENTS AS "DISCRIMINATORS" WAS NEITHER ARBITRARY NOR CAPRICIOUS. CONSEQUENTLY, THERE EXISTS NO BASIS FOR ALLOWING BID PREPARATION COSTS AND THE PROTEST MUST BE DENIED.

TO H. G. PETERS & COMPANY, INC.:

WE REFER TO YOUR LETTERS OF JANUARY 3, 1972, AND MARCH 31, 1972, PROTESTING AGAINST THE PROPOSED AWARD OF A CONTRACT TO A-V CORPORATION (A- V) UNDER REQUEST FOR PROPOSALS (RFP) NO. BB43-64-1-33P, ISSUED JUNE 8, 1971, BY THE MANNED SPACECRAFT CENTER (MSC), NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA), HOUSTON, TEXAS, FOR MOTION-PICTURE PRODUCTION SERVICES FROM JANUARY 1 TO DECEMBER 31, 1972. THE AWARD IS BEING WITHHELD PENDING OUR DECISION WITH PRESENT NEEDS BEING FULFILLED UNDER AN EXTENSION TO THE EXISTING CONTRACT FOR THE SAME SERVICES WITH A-V.

OF THE 55 FIRMS WHICH RECEIVED THE RFP, ONLY FOUR SUBMITTED TIMELY PROPOSALS. ONLY THE PROPOSALS OF A-V CORPORATION AND H. G. PETERS & COMPANY, INC. (HGP), WERE EVENTUALLY CONSIDERED FOR AWARD, TWO OTHER PROPOSALS HAVING BEEN REJECTED AT EARLIER STAGES OF THE SELECTION PROCESS. THE RFP SET OUT THE FOLLOWING EVALUATION CRITERIA AND GENERAL RELATIVE WEIGHTS TO BE ASSIGNED THERETO.

"EVALUATION CRITERIA

A. TECHNICAL AND MANAGEMENT UNDERSTANDING

(1) ORGANIZATION AND MANAGEMENT

(2) OPERATING PLAN

B. KEY PERSONNEL

C. COMPANY EXPERIENCE AND PAST PERFORMANCE

"OF THE THREE MAJOR EVALUATION CATEGORIES IDENTIFIED ABOVE, TECHNICAL AND MANAGEMENT UNDERSTANDING IS WEIGHTED HIGHER THAN ANY OTHER INDIVIDUAL CATEGORY. KEY PERSONNEL IS WEIGHTED HIGHER THAN EXPERIENCE AND PAST PERFORMANCE, AND THE EXPERIENCE AND PAST PERFORMANCE CATEGORY WEIGHT IS LESS THAN HALF THAT ASSIGNED TO TECHNICAL MANAGEMENT AND UNDERSTANDING. WITHIN THE TECHNICAL AND MANAGEMENT UNDERSTANDING CATEGORY, OPERATING PLANS ARE CONSIDERABLY MORE IMPORTANT THAN ORGANIZATION AND MANAGEMENT.

"OFFERORS SHOULD KEEP IN MIND THAT AN EXTREMELY LOW SCORE IN A PARTICULAR ELEMENT MAY HAVE A CRITICAL IMPACT ON THE FINAL AWARD DECISION. OFFERORS ARE FURTHER CAUTIONED NOT TO IGNORE NOR TO GIVE INADEQUATE ATTENTION TO A PARTICULAR ELEMENT BECAUSE IT HAS A RELATIVE LOW WEIGHTING.

"IN ADDITION TO THE MAJOR CRITERIA IDENTIFIED ABOVE OTHER FACTORS WILL BE PRESENTED TO THE SOURCE SELECTION OFFICIAL FOR HIS CONSIDERATION IN MAKING A SELECTION. THESE OTHER FACTORS INCLUDE THE EQUAL EMPLOYMENT OPPORTUNITY PLAN, TRAINING, PROGRESSIVE NATURE OF THE COMPANY, FINANCIAL STATUS OF THE COMPANY, ADEQUACY OF THE COST ACCOUNTING SYSTEM, AND LABOR RATE REALISM."

THE SOURCE EVALUATION BOARD AT MSC INITIALLY JUDGED THE A-V AND HGP PROPOSALS AS FOLLOWS:

EVALUATION CRITERIA MAXIMUM POINTS A-V HGP

TECHNICAL & MANAGEMENT PLANS 500 400 400

OPERATING PLANS (350)(280) (280)

ORGANIZATION & MANAGEMENT (150) (120) (120)

KEY PERSONNEL 300 300 240

FIRST TIER (150) (150) (120)

SECOND TIER (150) (150) (120)

COMPANY EXPERIENCE AND PAST

PERFORMANCE 200 200 100

TOTAL POINTS 1000 900 740

THE NUMERICAL RATINGS SET OUT ABOVE NOT ENCLOSED BY PARENTHESES REPRESENT THE TOTALS FOR THE SUBCATEGORIES SET OUT IMMEDIATELY BENEATH THOSE IN PARENTHESES. THE ABOVE EVALUATION CRITERIA CATEGORIES EQUATE SUBSTANTIALLY TO THE MAJOR CRITERIA DESCRIBED IN THE RFP AND QUOTED ABOVE.

THIS INITIAL EVALUATION OF THE BOARD WAS REVIEWED AND APPROVED BY THE SENIOR ADVISORY GROUP OF THE SOURCE EVALUATION BOARD ON SEPTEMBER 17, 1971. A-V AND HGP WERE THEN INVITED TO PARTICIPATE IN ORAL DISCUSSIONS IN ORDER TO CLARIFY, ELABORATE, OR CONFIRM THE CONTENTS OF THEIR PROPOSALS. THE BOARD, AFTER INCORPORATING THE RESULTS OF THESE DISCUSSIONS INTO EACH PROPOSAL, REEVALUATED THE PROPOSALS ON THE BASIS OF THE ORIGINAL CRITERIA AND ASSIGNED THE FOLLOWING FINAL POINT SCORES TO EACH, WITH THE EVALUATORS' ADJECTIVE RATING FOR EACH CATEGORY SET OUT NEXT TO THE RESPECTIVE NUMERICAL SCORES:

MAX.

CRITERIA POINTS A-V HGP

OPERATING & MANAGEMENT

PLANS 500 400 500

OPERATING PLANS (350) GOOD (280) EXCELLENT (350)

MANAGEMENT & ORGANIZATION (150) GOOD (120) EXCELLENT (150)

KEY PERSONNEL 300 300 270

FIRST TIER (150) EXCELLENT (150) EXCELLENT (150)

SECOND TIER (150) EXCELLENT (150) GOOD (120)

COMPANY EXPERIENCE 200 EXCELLENT 200 GOOD 160

TOTAL POINTS 1000 900 930

ON THE BASIS OF THESE SCORES, THE A-V PROPOSAL WAS RATED AS GOOD/EXCELLENT AND THE HGP PROPOSAL RECEIVED A RATING OF EXCELLENT.

SUBSEQUENTLY, NEGOTIATIONS WERE CONDUCTED WITH BOTH FIRMS WITH THE RESULT THAT EACH SUBMITTED REVISIONS WHEREIN DISCLOSED AREAS OF WEAKNESSES WERE AMENDED OR CLARIFIED. APPARENTLY, HGP IMPROVED ITS POSITION WITH RESPECT TO PROPOSED SECOND-TIER PERSONNEL BY SUPPLYING THE NAMES OF TWO FILM EDITORS IT INTENDED TO EMPLOY IF IT RECEIVED THE AWARD. NO OTHER WEAKNESSES IN THE HGP PROPOSAL WERE NOTED BY THE EVALUATORS, ALTHOUGH IN THE AREA OF COMPANY EXPERIENCE AND PAST PERFORMANCE, HGP'S RELATIVE POSITION WAS NOT CHANGED.

A-V CORRECTED THE WEAKNESSES IN ITS PROPOSAL BY SUBMITTING REVISED PLANS WHICH PARTLY CLARIFIED BY EXPLANATION OR ELABORATION ITS BASIC PROPOSALS, AND, IN OTHER RESPECTS, CHANGED ITS BASIC PROPOSAL. ALTHOUGH THE PROPOSALS WERE NOT RESCORED AFTER THESE NEGOTIATIONS, WE HAVE BEEN ADVISED THAT RESCORING WOULD PROBABLY SHOW THAT A-V WOULD RECEIVE AN "EXCELLENT" RATING FOR ALL EVALUATION CRITERIA AND HGP WOULD RECEIVE A RATING OF "EXCELLENT" FOR ALL CRITERIA EXCEPT COMPANY EXPERIENCE FOR WHICH IT WOULD RECEIVE A RATING OF "GOOD". IF THE PROPOSALS HAD BEEN RESCORED, A-V WOULD HAVE RECEIVED 1,000 AND HGP, 960.

THE NET RESULT OF THE EVALUATION OF THE HGP AND A-V PROPOSALS, AS MODIFIED DURING NEGOTIATIONS, WAS THAT BOTH WERE CONSIDERED HIGHLY QUALIFIED AND WERE, IN FACT, RATED AS ESSENTIALLY EQUAL FROM A TECHNICAL STANDPOINT, AND, AS DISCUSSED BELOW, FROM A PRICE STANDPOINT. ACCORDINGLY, IT WAS DETERMINED THAT CONTRACTS SHOULD BE PREPARED FOR AND SIGNED BY EACH PROPOSER AND PRESENTED TO THE SOURCE SELECTION OFFICIAL (THE MSC DIRECTOR) FOR HIS DECISION CONCERNING WHICH CONTRACT NASA WOULD SIGN. THE CONTRACT SIGNED BY HGP IS A COST-PLUS-AN AWARD-FEE (CPAF) CONTRACT; THAT SIGNED BY A-V IS A COST-PLUS-A-FIXED FEE (CPFF) CONTRACT. IT IS THE OPINION OF NASA OFFICIALS THAT A CPAF CONTRACT PROVIDES AN INCENTIVE FOR A NEW CONTRACTOR TO ATTAIN QUALITY PERFORMANCE. ONCE HE HAS ATTAINED A SATISFACTORY LEVEL OF PERFORMANCE AND MAINTAINED THAT LEVEL FOR A REASONABLE LENGTH OF TIME UNDER A CPAF CONTRACT, HOWEVER, IT IS CONSIDERED TO BE IN THE GOVERNMENT'S INTEREST TO SUBSTITUTE IN ITS PLACE A CPFF CONTRACT FOR WHICH LESS ADMINISTRATIVE COST IS REQUIRED. THUS, THE PROPOSED AWARD OF A CPFF CONTRACT TO A-V IN VIEW OF ITS PAST PERFORMANCE WAS CONSIDERED APPROPRIATE WHILE A CPAF CONTRACT WOULD HAVE BEEN CONSIDERED APPROPRIATE IF AWARD WAS CONTEMPLATED TO HGP SINCE IT WOULD BE A "NEW CONTRACTOR". THE COST ESTIMATE OF THE HGP CONTRACT, INCLUDING THE MAXIMUM FEE THAT COULD BE AWARDED, IS $490,280. THE ESTIMATE FOR THE A V CONTRACT, INCLUDING FIXED FEE, IS $499,099. EACH CONTRACT WOULD EXTEND FOR A ONE-YEAR PERIOD ENDING DECEMBER 31, 1972, WITH ONE-YEAR OPTIONS FOR TWO MORE YEARS.

THE COST ESTIMATED BY HGP WAS APPROXIMATELY $18,000 LESS THAN THAT ESTIMATED BY A-V AND APPROXIMATELY $8,800 LESS FOR THE TOTAL CONTRACT PRICE, INCLUDING FEES. NASA CONSIDERS THE COST ESTIMATE MADE BY HGP TO BE GENERALLY ACCURATE. HOWEVER, BECAUSE HGP'S LOWER LABOR COSTS, REPRESENTING MORE THAN ONE-HALF THE TOTAL COST OF THE PROPOSED CONTRACT, DEPEND UPON RENEGOTIATION OF A LOWER ESCALATION RATE THAN THAT IN THE CURRENT AGREEMENT WITH A-V, THE COST ESTIMATE IS CONSIDERED LESS CERTAIN THAN NORMAL FOR A COST-REIMBURSEMENT TYPE CONTRACT. THE CONTRACTING OFFICER CONSIDERS IT UNLIKELY THAT A REDUCTION IN THE CURRENT RATE CAN BE NEGOTIATED. ALSO, WHILE HGP SUBMITTED A HIGHER ESTIMATE FOR THE LEASE OF THE SAME STUDIO NOW BEING LEASED TO A-V, IT IS POSSIBLE THAT A-V WOULD BE REQUIRED TO LEASE AT THE INCREASED RATE. FURTHER, HGP HAD LITTLE OR NO COST HISTORY FOR THE ESTIMATES IT WAS PROPOSING, NOT HAVING PREVIOUSLY DEALT WITH THE LABOR UNION PERFORMING THE WORK FOR THESE NASA REQUIREMENTS, AND IT HAD NO KNOWN EXPERIENCE WITH A COST-REIMBURSEMENT CONTRACT. AFTER CONSIDERATION OF THESE UNCERTAINTIES, THE RELATIVE CLOSENESS OF THE PROPOSALS, AND THE NON BINDING NATURE OF COST- REIMBURSEMENT TYPE CONTRACTS, IT WAS DETERMINED THAT THE PRICES PROPOSED WERE ESSENTIALLY EQUAL AND PRICE WAS ELIMINATED AS A BASIS FOR MAKING AWARD.

ON DECEMBER 16, 1971, THE DIRECTOR OF MSC SELECTED A-V FOR AWARD OF THE CONTRACT. IN HIS STATEMENT EXPLAINING THE REASONS FOR HIS DECISION, THE DIRECTOR NOTED THAT THE ONLY DIFFERENCES BETWEEN THE TWO PROPOSALS WERE THE FOLLOWING: (1) A-V WOULD PERFORM ITS OWN ANIMATION WORK, A SMALL PART OF THE CONTRACT, WHILE HGP PLANNED TO SUBCONTRACT THE ANIMATION WORK WITH A FIRM IN PHILADELPHIA; (2) A-V IS A "KNOWN HIGH-QUALITY PERFORMER FOR THE SPECIFIC REQUIREMENTS OF THE PROPOSED CONTRACT AT MSC," WHEREAS HGP'S ABILITY TO MAINTAIN THE SAME HIGH STANDARD IS "NOT CLEARLY KNOWN." THE DIRECTOR CONCLUDED HIS STATEMENT AS FOLLOWS:

"AFTER CAREFUL CONSIDERATION OF THE RESULTS OF NEGOTIATIONS, AND OTHER FACTORS DESCRIBED ABOVE, I CONCLUDED THAT THE TWO FIRMS WERE RELATIVELY EQUAL WITH RESPECT TO TECHNICAL CAPABILITY AND COST, BUT THAT A-V'S EXPERIENCE WAS MORE DIRECTLY RELATED. A-V WOULD PERFORM THE TOTAL REQUIREMENT LOCALLY AND WITHIN ITS OWN RESOURCES AND A-V'S HIGH QUALITY PERFORMANCE IS KNOWN. THESE FACTORS REPRESENTED ADVANTAGES TO THE GOVERNMENT WHICH WOULD NOT BE PRESENT WITH HGP AND WHICH I CONSIDERED TO OVERRIDE ANY POSSIBLE SLIGHT COST ADVANTAGE OF THE HGP PROPOSAL. CONSEQUENTLY, I DECIDED THAT IT IS IN THE GOVERNMENT'S BEST INTEREST TO CONTRACT WITH A-V."

MSC NOTIFIED HGP OF THE DECISION AND EXPLAINED IT IN A DEBRIEFING CONFERENCE WITH REPRESENTATIVES OF HGP ON DECEMBER 20, 1971. YOU SUBMITTED A PROTEST TO OUR OFFICE BY TELEGRAM OF DECEMBER 21, 1971, AND IN SUBSEQUENT LETTERS, CONTENDING THAT HGP SHOULD BE DESIGNATED TO RECEIVE THE AWARD.

THE PRIMARY THRUST OF YOUR PROTEST IS THAT NASA ENTERTAINED A PREFERENCE FOR ITS INCUMBENT CONTRACTOR, A-V, THE RESULT OF WHICH WAS THAT PROPOSAL PREPARATION AND SUBMISSION BY HGP WAS AN "EXERCISE IN FUTILITY," INVOLVING SUBSTANTIAL EXPENSE WITH NO CHANCE OF RECOUPMENT. IN THIS REGARD, YOU MAINTAIN GENERALLY THAT THE LOWER PRICE PROPOSED BY HGP WAS NOT SPECULATIVE AND SHOULD HAVE PROVIDED SUFFICIENT BASIS FOR CHOOSING HGP FOR AWARD. YOU ALSO CHALLENGE THE DETERMINATION BY THE SOURCE SELECTION OFFICIAL THAT A-V'S PROPOSED USE OF ITS HOUSTON FACILITIES FOR IN-HOUSE PERFORMANCE OF ANIMATION SERVICES WAS PREFERABLE TO THE PROPOSED USE BY HGP OF A PHILADELPHIA SUBCONTRACTOR, ON THE GROUND THAT USE OF A SUBCONTRACTOR PROVIDES SIGNIFICANT INDIRECT COST BENEFITS AND ON THE FURTHER GROUND THAT THE DISTANCE INVOLVED BETWEEN THE PHILADELPHIA SUBCONTRACTOR AND THE SITE OF THE CONTRACT WORK IN HOUSTON WOULD RESULT IN NO SUBSTANTIAL DETRIMENT FROM EITHER A TIME OR A RELIABILITY STANDPOINT. FINALLY, YOU ARGUE THAT HGP'S EXTENSIVE PRIOR SATISFACTORY EXPERIENCE UNDER CONTRACTS WITH OTHER GOVERNMENT AGENCIES FOR SIMILAR WORK COUPLED WITH HGP'S PROPOSAL TO HIRE EXPERIENCED A-V EMPLOYEES IN THE EVENT OF CONTRACT AWARD SHOULD HAVE SERVED TO NEUTRALIZE ANY ADVANTAGE GAINED BY A- V AS THE INCUMBENT CONTRACTOR, CONTRARY TO THE SOURCE SELECTION OFFICIAL'S CONCLUSION THAT A-V'S DIRECTLY RELATED EXPERIENCE WAS A DISCRIMINATING FACTOR AS BETWEEN THE TWO PROPOSALS.

YOU RAISE OTHER PERIPHERAL ISSUES, SUCH AS THE ALLEGED UNFAIR ADVANTAGE GAINED BY A-V BECAUSE OF ITS CUSTOMARY USE OF EMPLOYEES ON WORK OTHER THAN THE NASA CONTRACT, THE POSTPONEMENT OF AN AWARD DECISION UNTIL LATE DECEMBER 1971, WITH RESULTING DETRIMENT TO A FOLLOW ON CONTRACTOR IF PERFORMANCE WERE TO BEGIN AS ORIGINALLY CONTEMPLATED, ON JANUARY 1, 1972; THE ALLEGED UNFAIRNESS ON THE PART OF THE NASA EVALUATORS IN CHOOSING A CONTRACTOR WITHOUT "RESCORING" PROPOSALS FOLLOWING FINAL NEGOTIATIONS; AND THE DIVULGENCE BY NASA IN ITS ADMINISTRATIVE REPORT OF INFORMATION CONCERNING HGP OVERHEAD AND G&A RATES. YOU CONCLUDE BY REQUESTING REIMBURSEMENT OF $12,000 IN PROPOSAL PREPARATION COSTS.

FOR REASONS SET OUT BELOW, WE CONCLUDE THAT THE SELECTION OF A-V IN THIS INSTANCE WAS MADE IN A FAIR AND IMPARTIAL MANNER AND IS, THEREFORE, NOT SUBJECT TO QUESTION BY OUR OFFICE.

AT THIS JUNCTURE, IT SHOULD BE EMPHASIZED THAT DETERMINATIONS WITH RESPECT TO PROPOSAL EVALUATIONS ARE MATTERS WITHIN THE DISCRETIONARY AUTHORITY OF THE PROCUREMENT AGENCY SUBJECT TO QUESTION BY OUR OFFICE ONLY WHERE CLEARLY UNREASONABLE OR IN VIOLATION OF PROCUREMENT STATUTES OR REGULATIONS. SEE B-174056, JUNE 1, 1972. ON THE QUESTION OF THE SIGNIFICANCE OF HGP'S LOWER PRICE PROPOSAL, THE STANDARD FOR DETERMINING THE VALIDITY OF AN AWARD OF A COST-REIMBURSEMENT TYPE CONTRACT IS SET OUT IN NASA PROCUREMENT REGULATION (NASAPR) 3.805-2, AS FOLLOWS:

"IN SELECTING THE CONTRACTOR FOR A COST-REIMBURSEMENT TYPE CONTRACT, ESTIMATED COSTS OF CONTRACT PERFORMANCE AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING, SINCE IN THIS TYPE OF CONTRACT ADVANCE ESTIMATES OF COST MAY NOT PROVIDE VALID INDICATORS OF FINAL ACTUAL COSTS. THERE IS NO REQUIREMENT THAT COST-REIMBURSEMENT TYPE CONTRACTS BE AWARDED ON THE BASIS OF EITHER (I) THE LOWEST PROPOSED COST, (II) THE LOWEST PROPOSED FEE, OR (III) THE LOWEST TOTAL ESTIMATED COST PLUS PROPOSED FEE. THE AWARD OF COST-REIMBURSEMENT TYPE CONTRACTS PRIMARILY ON THE BASIS OF ESTIMATED COSTS MAY ENCOURAGE THE SUBMISSION OF UNREALISTICALLY LOW ESTIMATES AND INCREASE THE LIKELIHOOD OF COST OVERRUNS. THE COST ESTIMATE IS IMPORTANT TO DETERMINE THE PROSPECTIVE CONTRACTOR'S UNDERSTANDING OF THE PROJECT AND ABILITY TO ORGANIZE AND PERFORM THE CONTRACT. THE AGREED FEE MUST BE WITHIN THE LIMITS PRESCRIBED BY LAW *** AND APPROPRIATE TO THE WORK TO BE PERFORMED*** . BEYOND THIS, HOWEVER, THE PRIMARY CONSIDERATION IN DETERMINING TO WHOM THE AWARD SHALL BE MADE IS: WHICH CONTRACTOR CAN PERFORM THE CONTRACT IN A MANNER MOST ADVANTAGEOUS TO THE GOVERNMENT."

FURTHER, UNDER NASAPR 3.806(B), THE CONTRACTING OFFICER NEGOTIATING AN AWARD IS DIRECTED, AS FOLLOWS, TO NOT MAKE THE BIDDER'S POTENTIAL PROFIT THE PRIMARY CONSIDERATION IN MAKING AN AWARD:

"PROFIT OR FEE IS ONLY ONE ELEMENT OF PRICE AND NORMALLY REPRESENTS A SMALLER PROPORTION OF THE TOTAL PRICE THAN DO SUCH OTHER ESTIMATED ELEMENTS AS LABOR AND MATERIAL. WHILE THE PUBLIC INTEREST REQUIRES THAT EXCESSIVE PROFITS BE AVOIDED, THE CONTRACTING OFFICER SHOULD NOT BECOME SO PREOCCUPIED WITH PARTICULAR ELEMENTS OF A CONTRACTOR'S ESTIMATE OF COST AND PROFIT THAT THE MOST IMPORTANT CONSIDERATION, THE TOTAL PRICE ITSELF, IS DISTORTED OR DIMINISHED IN ITS SIGNIFICANCE. GOVERNMENT PROCUREMENT IS PRIMARILY CONCERNED WITH THE REASONABLENESS OF THE PRICE WHICH THE GOVERNMENT PAYS AND ONLY SECONDARILY WITH THE EVENTUAL COST AND PROFIT TO THE CONTRACTOR."

ON THE BASIS OF THE RECORD, WE ARE UNABLE TO CONCLUDE THAT NASA HAS NOT EXERCISED PROPER DISCRETION IN ITS DETERMINATION THAT THE LOWER PROPOSAL OF HGP SHOULD NOT BE CONSIDERED THE DETERMINING FACTOR IN SOURCE SELECTION IN VIEW OF THE UNCERTAINTIES INVOLVED IN ITS PROPOSED COSTS, AS SUMMARIZED ABOVE. SEE IN THIS REGARD, B-164382, OCTOBER 7, 1968.

WITH RESPECT TO YOUR COMPLAINT CONCERNING THE SUBCONTRACTING OF ANIMATION SERVICES, THE CONTRACTING OFFICER STATES THAT HGP'S PROPOSAL WAS NOT "DOWN -GRADED" FOR PLANNING TO USE A PHILADELPHIA SUBCONTRACTOR FOR ANIMATION SERVICES, BUT THAT, RATHER, THE ENTIRE PROPOSAL RECEIVED THE MAXIMUM POSSIBLE SCORE FOR "OPERATING AND MANAGEMENT PLANS" IN WHICH THE SUBCONTRACT WAS INCLUDED. HOWEVER, SINCE THE TWO PROPOSALS WERE OTHERWISE SUBSTANTIALLY EQUAL IN QUALITY AND PRICE, THE DIFFERENCE IN PROPOSED PERFORMANCE OF ANIMATION SERVICES WAS USED AS A "DISCRIMINATOR" BETWEEN THE TWO PLANS. WE CANNOT CONCLUDE THAT THIS RELIANCE ON FACTORS CONSIDERED TO RENDER THE A-V PROPOSAL MARGINALLY SUPERIOR TO THAT OF HGP REPRESENTS ANY ABUSE OF DISCRETION GIVEN THE SUBSTANTIAL EQUALITY OF THE PROPOSALS.

WITH RESPECT TO THE PROPRIETY OF THE DETERMINATION OF THE SOURCE SELECTION OFFICIAL THAT A-V'S EXPERIENCE WAS "MORE DIRECTLY RELATED," THE NASA REPORT OF MARCH 8, 1972, A COPY OF WHICH WAS FURNISHED HGP, POINTS OUT THAT THE RFP REQUIRED STATEMENTS OF EXPERIENCE IN SIX SPECIFIED WORK CATEGORIES DIRECTLY RELATED TO THE WORK TO BE REQUIRED UNDER THE CONTRACT, INDICATING THAT THE EXPERIENCE REQUIREMENT WAS, THEREFORE, ONE DESIGNED TO BE A REALISTIC MEASURE OF PRIOR PERTINENT EXPERIENCE RATHER THAN A MERE STATEMENT OF PREFERENCE FOR AN INCUMBENT CONTRACTOR. THE REPORT FURTHER POINTS OUT THAT THE PROPOSED USE OF A PORTION OF THE EXISTING WORK FORCE BY HGP CANNOT COMPLETELY NEUTRALIZE A-V'S PRIOR DIRECTLY PERTINENT LABOR AND MANAGEMENT EXPERIENCE. ON THE QUESTION OF THE COMPETITIVE ADVANTAGE GAINED BY AN INCUMBENT SUPPORT CONTRACTOR IN A REPROCUREMENT SITUATION SUCH AS IS INVOLVED HERE, IT GOES WITHOUT SAYING THAT AN INCUMBENT CONTRACTOR ENJOYS A COMPETITIVE ADVANTAGE OVER OTHER OFFERORS. HOWEVER, AS STATED IN THE CONTRACTING OFFICER'S SUPPLEMENTAL STATEMENT, IT WOULD NOT BE IN THE GOVERNMENT'S INTEREST "TO COMPLETELY IGNORE THE ADVANTAGE OF AN INCUMBENT." SEE ALSO IN THIS REGARD, B-164552(2), FEBRUARY 24, 1969, WHEREIN THE SAME SENTIMENT IS EXPRESSED. WE, THEREFORE, DO NOT CONSIDER THE RELIANCE ON A-V'S MORE DIRECTLY RELATED EXPERIENCE TO HAVE BEEN UNREASONABLE.

WITH RESPECT TO THE PERIPHERAL ISSUES RAISED BY YOU, WE CONSIDER THE ANSWERS CONTAINED IN THE NASA ADMINISTRATIVE REPORT ON THE FIRST TWO OF THOSE ISSUES, I.E; THE USE OF A-V EMPLOYEES ON NON-CONTRACT WORK AND THE POSTPONEMENT OF AN AWARD DECISION, TO BE SUFFICIENT. IN THIS REGARD, NASA POINTED OUT THAT SO LONG AS COSTS ARE PROPERLY ALLOCATED, IT IS IN THE INTEREST OF THE GOVERNMENT UNDER A COST-REIMBURSEMENT CONTRACT TO MAKE PAYMENTS ONLY FOR LABOR ACTUALLY REQUIRED FOR THE NASA PROJECT AND THAT THE DELAY IN AWARD "WAS OCCASIONED BY THE NEED FOR DUAL NEGOTIATIONS OF FINAL CONTRACT TERMS BROUGHT ABOUT BY THE CLOSE RANKING OF THE H. G. PETERS AND A-V PROPOSALS AT THE FIRST PRESENTATION."

THE LATTER TWO ISSUES REQUIRE COMMENT. FIRST, THE ASSIGNMENT OF ADJECTIVE OR NUMERICAL SCORES OR RATINGS TO PROPOSALS IS NOT A REQUIREMENT OF STATUTE OR REGULATION, BUT RATHER IS SIMPLY AN ATTEMPT TO QUANTIFY WHAT OTHERWISE WOULD BE ESSENTIALLY A SUBJECTIVE JUDGMENT FOR PURPOSES OF REALISTIC AND FAIR PROPOSAL EVALUATION. THEREFORE, THERE WAS NO DUTY ON THE PART OF NASA'S SOURCE EVALUATION BOARD TO RESCORE PROPOSALS FOLLOWING FINAL NEGOTIATIONS SO LONG AS THE EVALUATORS WERE AWARE OF ANY CHANGES IN THE OVERALL RANKING OF PROPOSALS BROUGHT ABOUT BY SUCH FINAL NEGOTIATIONS. THE "HYPOTHETICAL RATINGS" REFERRED TO IN THE NASA REPORT MERELY INDICATED AN ATTEMPT TO SHOW HOW THE TWO PROPOSALS IN CONTENTION FOR AWARD WERE BETTERED AS A RESULT OF NEGOTIATIONS.

SECONDLY, THE ISSUE OF HGP'S PROPOSED OVERHEAD AND G&A RATES WAS FIRST RAISED BY HGP IN ITS LETTER TO OUR OFFICE DATED JANUARY 3, 1972. FURTHERMORE, OUR REVIEW OF THE DOCUMENTS FORWARDED TO HGP AND A-V DOES NOT INDICATE THAT ANY SPECIFIC COST BREAKDOWNS OR OTHER COST INFORMATION NOT PREVIOUSLY DISCUSSED IN HGP CORRESPONDENCE WERE REVEALED. THOSE ENCLOSURES TO THE NASA REPORT CONTAINING PROPRIETARY OR DETAILED FINANCIAL INFORMATION WERE SPECIFICALLY PROTECTED FROM DISCLOSURE BY NASA.

AS INDICATED ABOVE IN OUR CONSIDERATION OF THE SPECIFIC GROUNDS OF YOUR PROTEST, IT IS OUR OPINION THAT NASA, WHEN FACED WITH TWO HIGHLY QUALIFIED, COMPETENT OFFERORS, LOOKED TO DISTINGUISHING ELEMENTS IN THE TWO SUBSTANTIALLY EQUAL PROPOSALS, REFERRED TO AS "DISCRIMINATORS", IN ORDER TO CONCLUDE A SELECTION FOR AWARD. INASMUCH AS THESE DISTINGUISHING ELEMENTS WERE WITHIN THE FRAMEWORK OF THE EVALUATION FACTORS SET OUT IN THE RFP, NO BASIS EXISTS FOR CRITICIZING THE SOURCE SELECTION OFFICIAL'S RELIANCE ON SUCH ELEMENTS. IN FACT, OUR REVIEW OF THE RECORD DEMONSTRATES THAT THE NASA EVALUATORS WERE FAIR IN THEIR EVALUATION OF THE HGP AND A-V PROPOSALS. THEREFORE, YOUR REQUEST FOR REIMBURSEMENT OF PROPOSAL PREPARATION COSTS CANNOT BE ALLOWED SINCE REIMBURSEMENT OF SUCH COSTS IS ONLY ALLOWABLE WHERE IT IS DEMONSTRATED THAT THE ACTIONS OF THE CONTRACTING OFFICER IN REJECTING A BID OR PROPOSAL WERE ARBITRARY OR CAPRICIOUS. SEE, IN THIS REGARD, HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 135 CT. CL. 63, 71 (1956) AND KECO INDUSTRIES, INC. V. UNITED STATES, 192 CT. CL. 773, 784 (1970).

IN ACCORDANCE WITH THE ABOVE CONSIDERATIONS, YOUR PROTEST MUST BE DENIED.