Link: GAO Opinion
Agency: Department of Education
Disposition: Protest denied.
Protest of award of four indefinite-delivery/indefinite-quantity, performance-based contracts for servicing direct federal student loans is denied where agency reasonably determined that while incumbent protester’s offer would mitigate risk during transition and benefit government in the short term, these advantages were not worth the increased overall cost to the government resulting from the refusal of the protester (unlike the awardees) to accept the agency’s proposed common pricing terms, and protester’s proposal to continue servicing loans transferred from its contract would frustrate contemplated performance-based approach under the acquisition and introduce uncertainty in contract administration.
General Counsel P.C. Highlight:
ACS first challenges the highly satisfactory past performance rating assigned an awardee and the satisfactory past performance rating assigned ACS in the evaluation, maintaining that its rating should have been higher than the awardee’s. GAO will review a past performance evaluation only to ensure that it was reasonable and consistent with the solicitation’s stated evaluation criteria and applicable statutes and regulations. The evaluation of past performance, by its very nature, is subjective; an offeror’s mere disagreement with the agency’s evaluation judgments does not demonstrate that those judgments are unreasonable.
GAO finds that the agency reasonably determined that the awardee’s past performance was superior to ACS’s. First, while the source selection authority (SSA) expressed a positive view of ACS’s performance of its Common Services for Borrowers (CSB) contract, this does not establish that ACS was entitled to the highest available past performance rating. In this regard, as noted by the agency, the “Good” rating assigned by the SSA on the past performance questionnaire was part of a four-level rating scale, “Outstanding” being the best available rating, while the agency used a three-level scale–Highly Satisfactory, Satisfactory, or Unsatisfactory–in evaluating past performance under the RFP. Since ACS’s “Good” rating on its CSB contract was not the best available rating, there simply is no reason to equate it directly with a Highly Satisfactory past performance rating, the best available past performance rating under this RFP.
Further, an offeror was to be rated Highly Satisfactory only where it had demonstrated high levels of customer satisfaction through its past performance response (as supported by identified strengths), and a strong commitment and practicable approach to improving customer service. FSA notes that ACS’s performance under the CSB contract was lacking in several respects. In contrast, FSA found that the awardee’s performance of servicing contracts under the FFEL program demonstrated a strong commitment to improving customer service. In this regard, the agency noted that the awardee had a very thorough survey process, under which surveys were broken down to more specific target audiences, thereby assisting in the identification and quicker resolution of issues. More specifically, the agency noted that the awardee had designed multiple satisfaction surveys for borrowers, focusing on their satisfaction during the term of the loan, as well additional surveys for schools, employees, and lenders.
ACS next challenges the source selection decision on the basis that FSA did not adequately consider cost to the government. In this regard, notes the protester, the source selection decision (SSD) did not identify a total evaluated contract price for any of the offerors. GAO states that agencies must consider cost to the government in evaluating proposals and while it is up to the agency to decide upon some appropriate and reasonable method for evaluating offerors’ prices, it may not use a method that produces a misleading result. The method chosen must include some reasonable basis for evaluating or comparing the relative costs of proposals, so as to establish whether one offeror’s proposal would be more or less costly than another’s.
The record indicates that price was reasonably considered in the source selection. In this regard, the SSD includes a comparison of the proposed unit prices for borrowers in each repayment status under the Common Pricing adopted by the awardees, and the pricing under ACS’s proposal, as well as various comparisons between the overall monthly price to the government under the Common Pricing and ACS’s pricing for various sample loan portfolios. Applying ACS’s higher unit prices for borrowers in In-school and in Grace or Current Repayment Status for quantities of 1 to 3,000,000 borrowers, and averaging the pricing results for the various sample loan portfolios, FSA calculated that ACS’s refusal to accept the proposed Common Pricing unit prices could result in an additional cost to the government of $11,429,832 per year, and that ACS’s higher proposed escalation rates would increase those costs by an additional $233,933 to $3,343,815 annually.
ACS maintains that the price/technical tradeoff decision did not adequately account for the significant risk mitigation that the agency found would innure from ACS’s status as the incumbent contractor and its offer of early compliance with the contract requirements. GAO states that its review of price/technical tradeoff decisions is limited to determining whether the tradeoff was reasonable and consistent with the solicitation’s evaluation criteria. Notwithstanding a solicitation’s emphasis on technical merit, an agency properly may select a lower-priced, lower technically rated proposal if it decides that the cost premium involved in selecting a higher-rated, higher-priced proposal is not justified, given the level of technical competence available at the lower price.
The tradeoff here was reasonable. While, as discussed, the SSA acknowledged that ACS’s advantage with respect to transitioning to the new contract mitigated start-up risk, he viewed this advantage as only an initial, temporary advantage that did not offset the cost impact from ACS’s refusal, unlike the other four offerors, to accept the agency’s proposed Common Pricing, and the program impact from ACS’s refusal to fully accept the performance-based approach contemplated by the solicitation. The SSA ultimately concluded that, while ACS’s offer would mitigate risk and provide benefits to the government in the short term, these advantages were not worth the increased overall cost to the government, frustration of the contemplated performance-based approach under the acquisition, and introduction of uncertainty with respect to contract administration associated ACS’s proposal. The protest is denied.