B-240181.2, B-240181.3, May 21, 1991, 70 Comp.Gen. 505

B-240181.2,B-240181.3: May 21, 1991

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The agency advised the protesters that their offers were technically acceptable. Retention Factor 3 - Price will be evaluated using price analysis. The price will not be numerically scored. Will be evaluated to determine the extent to which it is reasonable and realistic and also for consistency with the technical proposal. The solicitation provided that the three evaluation criteria were of equal weight and each of the subfactors within the first two evaluation criteria was of equal weight. Award was to be made for each line item "for a given site/location ... to the responsible offeror who provides the technically acceptable. 12 offers were received by the closing date for the submission of offers.

B-240181.2, B-240181.3, May 21, 1991, 70 Comp.Gen. 505

PROCUREMENT - Competitive Negotiation - Discussion - Adequacy - Criteria An agency may not reject protesters' low fixed-price proposals for proposing unrealistically low professional compensation packages, where the agency did not discuss the matter with those firms, the technical evaluation criteria specifically encompassed the adequacy of professional compensation packages, and the agency advised the protesters that their offers were technically acceptable.

National Medical Staffing, Inc.; RP/Health Care Professionals:

National Medical Staffing, Inc. (NMS) and RP/Health Care Professionals (RPHCP) protest the award of two contracts under request for proposals (RFP) No. DADA10-90-R-0025, issued by the Department of the Army to acquire pharmacist services at a number of Army medical installations. Both protesters argue that the agency improperly awarded the contracts to other than the low-priced offerors in contravention of the RFP's terms.

We sustain the protests.

The RFP contemplated the award of one or more firm, fixed-price contracts for the provision of pharmacists at several Army medical installations /1/ for a base period and four 1-year options. The RFP listed three evaluation factors, with subfactors, as follows:

Factor 1 - Personnel Qualifications

a. Management Experience/Qualifications

b. Employee/Subcontractor Qualifications

Factor 2 - Business Management/Understanding of Requirement/Commitment

a. Recruitment

b. Backup

c. Retention

Factor 3 - Price will be evaluated using price analysis.

The price will not be numerically scored, but will be evaluated to determine the extent to which it is reasonable and realistic and also for consistency with the technical proposal.

The solicitation provided that the three evaluation criteria were of equal weight and each of the subfactors within the first two evaluation criteria was of equal weight.

Under the "Evaluation Factors for Award" section in the RFP, award was to be made for each line item "for a given site/location ... to the responsible offeror who provides the technically acceptable, lowest reasonable, realistic priced offer." Elsewhere the RFP reserved to the agency the right to make award to other than the low-priced offeror.

The solicitation also contained the clauses appearing in Federal Acquisition Regulation (FAR) Sec. 52.222-45 and 52.222-46, which provide for the evaluation of compensation of professional employees to assess the offerors' management approach and understanding as those factors relate to the retention of professional employees. This evaluation includes an assessment of the offerors' ability to provide uninterrupted high quality work through adequate professional compensation, the impact on recruiting and retention of professionals, the consistency of the offerors' technical proposal with a total compensation plan, and price realism. "Unrealistically low" professional compensation may be viewed as evidence of failure to comprehend the complexity of the contract requirements.

In response to the solicitation, 12 offers were received by the closing date for the submission of offers; 10 were determined to be susceptible of being made technically acceptable and two were rejected as unacceptable. The agency then conducted two rounds of discussions after which eight proposals were determined technically acceptable. (The proposals were not point scored.) The agency then solicited and received best and final offers (BAFO) from seven firms. /2/

Next, the agency conducted a "cost realism" analysis of the offers, which only analyzed the adequacy of the proposed professional compensation rates. This analysis adjusted, for evaluation purposes, the proposed professional labor rates to account for differences in offered vacation time and annual leave as compared to an independent government estimate.

As a result of the Army's post-BAFO analyses, the decision was made not to make awards to various low-priced offerors because their evaluated professional compensation rates were considered unrealistically low as compared to the government estimate. In this regard, RPHCP's and NMS' proposals for Letterman, Fort Ord and Walter Reed were rejected. American Healthcare Staff Management, which submitted the third low offer for both Letterman and Fort Ord, received the awards for those facilities, while PHP Healthcare Corp., the fourth low offeror, received the award for Walter Reed. RPHCP received the award for Brook, an award which has not been protested.

Based on our review of the record, we find that the Army did not conduct meaningful discussions with the protesters on the subject of professional compensation. Discussions with the competitive range offerors are required to be meaningful; to satisfy that standard, agencies generally must advise offerors of deficiencies in their proposals and provide them with an opportunity to revise their proposals to fully satisfy the government's requirements. Secure Servs. Tech., Inc., B-238059, Apr. 25, 1990, 90-1 CPD Para. 421. The agency did not provide that opportunity here.

The agency conducted two rounds of discussions during which it identified discrepancies and deficiencies in the offerors' proposals and requested clarifications and additional information. In the first round of discussions, complete cost breakouts of the firms' compensation packages were requested from the protesters and other offerors, and in the second round some additional details on the compensation packages were requested of, and supplied by, RPHCP (although apparently no such questions were asked of NMS). The record shows that the agency discussed with the protesters only the sufficiency of the cost breakdown documentation and the level of overhead and profit, and did not discuss the level of, or the sufficiency of, their compensation packages.

At the close of discussions when BAFOs were requested, the agency determined the seven remaining proposals were technically acceptable. This determination necessarily took cognizance of the adequacy of the offerors' proposed professional compensation packages, since one of the technical evaluation subfactors, "retention," expressly encompassed professional employee compensation. /3/ The record, including the technical evaluation worksheets, discloses no evidence that the agency was concerned over the levels of professional compensation proposed by the seven "acceptable" offerors. Indeed, in the request for BAFOs, the offerors, including the protesters, were expressly advised they were "technically acceptable" with no reservations. /4/ Thus, the protesters could reasonably presume at that point that their compensation packages, including the levels of professional compensation, were acceptable.

Subsequent to the receipt of BAFOs, the agency apparently decided to conduct a "cost realism" analysis, which was limited to assessing the realism of the level of professional compensation proposed by the offerors. (No such in-depth analysis of the compensation packages had previously been done, nor were any concerns expressed on this subject.) The agency then rejected as "unrealistic" and "unreasonable" offers reflecting professional compensation levels that it considered to be too low. /5/

The agency did not satisfy its obligation to conduct meaningful discussions under these circumstances. When it rejected the protesters for the sole reason that they proposed too low a level of professional compensation, it did so without first informing the protesters of its concern with the compensation rates and giving them an opportunity to explain or revise their proposals in this regard. In fact, during the course of discussions, the protesters were expressly advised that their proposals were acceptable. Therefore, once the agency determined that the protesters' professional compensation rates were unrealistically low, the agency, having conducted discussions, should have reopened discussions and pointed out this deficiency to the protesters, before rejecting their proposals on this basis. Its failure to do so was inconsistent with the statutory and regulatory requirements governing competitive range discussions. See 10 U.S.C. Sec. 2305(b)(4) (1988); FAR Sec. 15.610.

As an additional matter, we find that the record does not clearly support the determinations that the protesters' professional compensation rates were unrealistically low; the rates of the protesters are not, in our view, significantly lower than those proposed by the awardees for the three installations in question. /6/ Also, from our review, we are not convinced of the propriety of the agency's "cost realism" adjustments to the offerors' professional compensation rates to account for the differences in proposed annual leave. In at least one case, the agency made adjustments to a low offeror's rates because it found that the offeror did not propose annual leave or vacation time. Yet, our review of the that offeror's proposal indicates that it did propose such leave.

Finally, we think that the basis for award under the RFP is not entirely clear. While on one hand the evaluation criteria are weighted and the government reserved the right to make award to other than the low priced offeror, the specific award selection statement in the RFP (quoted above) only allows award to the low priced, technically acceptable offeror. See Technology Applications, Inc., B-238259, May 4, 1990, 90-1 CPD Para. 451. Moreover, the role and weight of the evaluation of proposed professional compensation rates is not clearly stated in the RFP.

The protests are sustained.

We recommend that the agency proceed with one of two alternative corrective actions. If the Army now determines the professional compensation rates proposed by the rejected offerors are in fact realistic, it should terminate the contract awards for the Letterman, Fort Ord, and Walter Reed facilities and make awards to the low-priced offerors for those line items. /7/ Alternatively, if the Army continues to question the proposed compensation rates, it should reopen discussions, point out deficiencies with respect to proposed professional compensation plans, amend the solicitation to clearly state the basis for award, request new BAFOs and make award selections in accordance with the stated evaluation criteria; if firms other than the current awardees are selected, the current contracts should be terminated and the appropriate awards made. In addition, both NMS and RPHCP are entitled to the costs of pursuing their protests. 4 C.F.R. Sec. 21.6(d) (1991).

The Honorable Michael P.W. Stone

The Secretary of the Army:

Enclosed please find a copy of our decision of today sustaining the protests of National Medical Staffing, Inc. (NMS) and RP/Health Care Professionals (RPHCP), against certain awards made under request for proposals (RFP) No. DADA10-90-R-0025 issued by the Department of the Army to acquire pharmacist services at various installations. We find that the Army failed to conduct meaningful discussions.

We recommend that the agency proceed with one of two alternative corrective actions. If the Army now determines the professional compensation rates proposed by the rejected offerors are in fact realistic, it should terminate the contract awards for the Letterman, Fort Ord, and Walter Reed facilities and make awards to the low-priced offerors for those line items. Alternatively, if the Army continues to question the proposed compensation rates, it should reopen discussions, point out deficiencies with respect to proposed professional compensation plans, amend the solicitation to clearly state the basis for award, request new BAFOs and make award selections in accordance with the stated evaluation criteria; if firms other than the current awardees are selected, the current contracts should be terminated and the appropriate awards made. In addition, both NMS and RPHCP are entitled to the costs of pursuing their protests. 4 C.F.R. Sec. 21.6(d) (1991).

Since the enclosed decision contains a recommendation for corrective action, we direct your attention to 31 U.S.C. Sec. 3554(e)(1) (1988), which requires that the head of the procuring activity responsible for the solicitation report to Office if the agency has not fully implemented our recommendations within 60 days of receipt of our decision. Please advise us in any case of the action taken on the recommendation.

Gloria M. Bertacchi for National Medical Staffing, Inc., and Marie Minichino for RP/Health Care Professionals, the protesters.

Joel R. Feidelman, Esq., Fried, Frank, Harris, Shriver & Jacobson, for PHP Health Care Corporation, and Moses O. Nwaigwe, R.Ph., for American Healthcare Staff Management, interested parties.

Herbert F. Kelly, Jr., Esq., Department of the Army, for the agency.

Scott H. Riback, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.

/1/ As originally issued, the RFP called for services at six different installations: Brook Army Medical Center; U.S. Army Medical Activity, Fort Carson; Letterman Army Medical Center; Madigan Army Medical Center; U.S. Army Medical Activity, Fort Ord; and Walter Reed Army Medical Center. Before award, the agency eliminated the requirements at Madigan and Fort Carson.

/2/ One firm withdrew from the competition.

/3/ In the technical proposal instructions of the RFP, the subfactor "Retention" is defined as:

"Describe the procedures and techniques to be used to retain qualified personnel performing services under the contract. The objective should be to ensure that substitution of personnel is kept to an absolute minimum during the period of the contract in recognition of the professional necessity for continuity of personnel. Describe any incentives used to retain personnel, such as fringe benefits, bonuses or any other incentives. If applicable, offerors should submit examples of employment/subcontract agreements proposed to be used for this requirement."

/4/ NMS also claims, without rebuttal, that it was expressly advised its compensation package was acceptable.

/5/ The agency did not conclude that the protesters' overall prices were unrealistic or unreasonable.

/6/ We do not disclose these rates because of their proprietary nature. The protesters' proposals contain information supporting the reasonableness and the comparability of the rates to local professional rates.

/7/ We do not disclose the low offeror for these line items because the agency may elect to follow the alternative recommendation that the solicitation be amended and discussions reopened. The RPHCP award at Brook Army Hospital was not protested and our recommendation therefore does not encompass this award.