Link: GAO Opinion
Agency: Department of Health and Human Services
Disposition: Protests denied.
Keywords: Meaningful discussions; Cost realism analysis
General Counsel P.C. Highlight: In order for an agency to have conducted meaningful discussions, it must lead the offerors into the areas of their proposals that reflect deficiencies or weaknesses.
The Department of Health and Human Services issued a request for proposals (RFP) as an 8(a) set-aside in order to provide grants management support services for two of HHS’s programs. The solicitation contemplated the award of a cost-plus-fixed-fee contract, and would be awarded on a “best overall value” basis after considering three factors: technical merit, past performance, and cost/price. The RFP specifically stated that subcontractors’ past performance would be evaluated under the past performance factor.
Dixon Group, Inc. was the incumbent for the services to be provided by the contract. As part of that performance, Dixon subcontracted with Xtria LLC; however, the relationship between Dixon and Xtria soured to the point where Xtria consciously decided to withhold services in order to receive overdue payments from Dixon. Dixon was one of eight offerors that submitted proposals to HHS for the RFP, a group that also included Command Decisions Systems and Solutions, Inc., who indicated in its proposals that it intended to use Xtria as a subcontractor for the same services that it was currently providing.
After its initial evaluation, a round of discussions, and the receipt of final proposal revisions, HHS concluded that the proposal submitted by Lux Consulting Group, Inc. represented the best overall value to the government. Following this decision, Dixon and CDSS protested.
In its protest, CDSS objected to HHS’s decision to downgrade its proposal under the past performance factor based on Xtria’s performance under the predecessor contract. However, GAO determined this to be a reasonable downgrade. The RFP specifically provided that subcontractors’ past performance would be considered in its evaluation. In light of this, and through communications with the agency, Xtria stated its conscious and deliberate decision to withhold services under the prior contract to exert pressure on Dixon for due invoices, while acknowledging the adverse impact its actions had on the agency. GAO deemed these facts to be sufficient for HHS to reasonably downgrade CDSS proposal. Next DCSS claims that HHS failed to conduct meaningful discussions. In order for an agency to have conducted meaningful discussions, it must lead the offerors into the areas of their proposals that reflect deficiencies or weaknesses. Here, GAO determined that HHS met this burden by specifically advising CDSS that it was considering negative past performance information regarding Xtria. CDSS’s response acknowledged the concern and referred HHS to the communications between Xtria and the agency.
Finally, CDSS claimed that the award to Lux was improper because CDSS’s proposal was evaluated as technically superior and at a lower evaluated price. GAO’s review of the record found that the contracting officer had determined that, except for past performance, Lux’s and CDSS’s proposals were technically equal. However, the contracting officer assigned a more significant weakness to CDSS’s proposed subcontractor and that this weakness outweighed the cost advantage. GAO saw no basis on which to question the contracting officer’s determination and denied CDSS’s protest.
Dixon first protested the selection decision by claiming that the agency failed to make an appropriate best value determination. GAO’s review of the record did not support this claim. In fact, the record showed that Dixon’s proposal was rated slightly lower than Lux’s proposal under both of the non-cost evaluation factors, and that Dixon’s evaluated cost was more than $3 million higher than Lux’s evaluated cost. Next, Dixon claimed that HHS engaged in misleading discussions regarding Dixon’s proposed costs. In particular, Dixon stated that because its final proposed cost was higher than that of Lux, it was improper for the agency to question certain aspects of Dixon’s costs during discussions on the basis that they appeared to be too low. Because the contract was to be awarded on a cost-type contract, and HHS would be required to pay the contractor its actual and allowable costs, the agency is required to perform a cost realism analysis. Based on this requirement, HHS would have been remiss if it failed to identify the aspects of Dixon’s proposal that appeared to be unrealistically low, which is exactly what it did and why the GAO supported HHS’s position.
Dixon then alleged that the agency failed to perform a proper cost realism analysis regarding Lux’s proposal. GAO’s review of the record found that the agency had in fact conducted a comprehensive cost realism analysis with regard to Lux’s cost proposal, and that Dixon had not persuasively shown any aspects of that proposal to be unrealistic. Finally, Dixon argued that Lux’s proposal should have been downgraded for failing to initially include letters of commitment for certain proposed personnel. Again, GAO’s review of the record found that Lux had submitted commitment letters following the submission of its initial proposal, and Dixon’s mere disagreement with the agency’s judgment was not enough to make it unreasonable. Accordingly, Dixon’s protest was denied.