Link: GAO Opinion
Agency: Department of Defense
Disposition: Protest denied.
Keywords: Price Reasonableness
General Counsel P.C. Highlight: The techniques and procedures described under FAR 15.404-1(b) Price Analysis, are generally the primary means of assessing price reasonableness.
United Concordia Companies, Inc. (UCCI) protests the award of a contract by the Department of Defense, TRICARE Management Activity, to Metropolitan Life Insurance Company (MLIC), in connection with the TRICARE Dental Program (TDP) pursuant to a request for proposals (RFP).
The solicitation contemplated award of a fixed price incentive contract to provide a comprehensive worldwide dental healthcare insurance program for eligible family members of military personnel for a 12-month base period, and five one-year option periods. UCCI is the incumbent contractor. The solicitation provided for award on a best value basis and established three evaluation factors: technical, past performance, and price. Offerors were advised that if two proposals were determined essentially equal under the non-price factors, price could become the determining factor for award.
Under the technical evaluation factor, the solicitation established three equally weighted subfactors: network development/maintenance; beneficiary/provider services and satisfaction; and management approach. In addition to the evaluation of technical merit, proposals would be evaluated for proposal risk under each of the technical subfactors. With regard to past performance, offerors were directed to identify the three largest prior contracts they considered to be relevant to this solicitation. The solicitation provided that the agency would make relevancy assessments for each of the identified contracts based on the scope and magnitude of services that had been performed, and would also assign performance ratings for each contract. With regard to price, the solicitation provided that each offeror’s price would be evaluated to determine whether it was fair and reasonable, further providing that “[t]he techniques and procedures described under FAR [Federal Acquisition Regulation] 15.404-1(b) Price Analysis will be the primary means of assessing price reasonableness. Although UCCI and MLIC’s technical proposals were rated equally, UCCI was ultimately notified of MLIC’s selection for award based on its lower price.
UCCI first asserts that the agency failed to properly consider proposal risk and/or various weaknesses associated with MLIC’s proposal. Specifically, UCCI asserts that the agency did not properly consider UCCI’s incumbent advantage and that MLIC’s network was insufficient. GAO states that in reviewing a protest challenging the agency’s evaluation it will not reevaluate proposals, nor substitute our judgment for that of the agency, as the evaluation of proposals is generally a matter within the agency’s discretion. Rather, GAO will review the record only to determine whether the agency’s evaluation was reasonable and consistent with the stated evaluation criteria and with applicable procurement statutes and regulations. A protester’s mere disagreement with the agency’s evaluation judgments does not render those judgments unreasonable.
First, the record shows that the solicitation’s evaluation criteria did not contemplate the assignment of evaluation credit based on UCCI’s status as the incumbent contractor. To the contrary, the agency maintains that the agency consciously drafted its solicitation to create a level playing field upon which all competitors in the dental insurance industry could fairly compete. Additionally, in contrast to UCCI’s assertion that “MLIC is merely promising to build and develop a network,” the record shows that MLIC already has an existing, established dental care provider network and, further, that MLIC’s existing network is larger than UCCI’s own incumbent network. GAO has reviewed the record, including the solicitation’s evaluation criteria, and agrees with the agency’s assertion that the solicitation did not contemplate the assignment of evaluation credit based on UCCI’s status as the incumbent. Similarly, under the provisions of this solicitation, there was no basis to, in effect, penalize MLIC for its status as a non?incumbent offeror. Further, GAO finds no basis to question the agency’s determination that MLIC’s proposal of a larger, existing network of dental care providers was superior to UCCI’s proposal of a smaller, existing network.
Offerors were directed to identify three contracts for the agency to review for purposes of making relevancy assessments and performance ratings; these relevancy assessments and performance ratings led to the agency’s assignment of overall performance confidence ratings. The solicitation advised offerors that the agency would make relevancy assessments based on the scope and magnitude of the prior contracts. The agency’s contemporaneous evaluation record establishes that, in making its relevancy assessments, the agency considered a significant amount of information regarding the offerors’ prior contracts, and that this information related to both the scope and the magnitude of the services that had been performed. Among other things, in assessing the magnitude of similar claims processing contracts, the agency considered whether the number of claims processed was greater than, or less than, 800,000, concluding that an otherwise relevant contract that involved fewer than 800,000 claims would be considered less relevant. The GAO has reviewed the agency’s entire past performance evaluation record, and rejects UCCI’s assertions that the agency relied “solely” on the 800,000 claim criterion for its relevancy assessments, or that the agency employed an “arbitrary, mechanical scheme.” To the contrary, the record is clear that the agency considered various differing informational aspects regarding the magnitude of the prior contracts, including, as shown above, the number of “covered lives,” the annual dollar value, and the annual claims volume of each contract. In this context, there is nothing unreasonable in the agency’s establishment of an 800,000 claim threshold for distinguishing between relevant and less relevant contracts.
Finally, UCCI challenges the agency’s price evaluation, arguing that certain components of MLIC’s lower price are unrealistic. GAO states that before awarding a fixed-price contract, an agency is required to determine whether the price offered is fair and reasonable. An agency’s concern in making this determination in a fixed-price environment is primarily whether the offered prices are too high, as opposed to too low, because it is the contractor and not the government that bears the risk that an offeror’s low price will not be adequate to meet the costs of performance. Although an agency may choose to provide for a price realism analysis in connection with a solicitation for a fixed-price contract, there is no requirement that it do so.
It is clear that the solicitation did not provide for a realism assessment. As noted above, the solicitation stated that each offeror’s price would be evaluated to determine whether it was fair and reasonable, further advising offerors that “[t]he techniques and procedures described under FAR 15.404-1(b) Price Analysis will be the primary means of assessing price reasonableness.” In this regard, the record also shows that, in evaluating offerors’ prices, the agency performed an extensive comparison of the offerors’ proposed prices and made a reasonable determination that proposed prices were fair and reasonable. In performing its evaluation, the agency compared the offerors’ proposed prices to each other by CLIN, by contract period, and by total evaluated price. The protest is denied.