Nutech Laundry & Textiles, Inc., B-291739, February 10, 2003

B-291739 Feb 10, 2003 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Which exceeded the government estimate by more than 50 percent and was almost double the offer of a large business. Was fair and reasonable. Was not fair and reasonable. Offerors were to provide unit pricing for bulk linen and 21 other laundry service line items. Award was to be made to the small business contractor that provided the "best overall value to the Government. Submitted proposals in response to the RFP. /1/ Both proposals were found technically acceptable. Nutech's price was more than twice that of the other offeror (Offeror A) and well above the government estimate (dated February 21. During which Nutech was informed that its "costs appear to be excessive" and was asked to "verify and reconsider" its costs. View Decision Nutech Laundry & Textiles, Inc., B-291739, February 10, 2003 DIGEST Attorneys DECISION Nutech Laundry & Textiles, Inc. protests the cancellation of request for proposals (RFP) No. CC-02-07, issued as a small business set-aside, by the National Institutes of Health (NIH), Department of Health & Human Services, for laundry services. Nutech contends that NIH improperly cancelled the RFP based on its allegedly unreasonable determination that the price of Nutech, the sole eligible small business offeror, was not fair and reasonable. We deny the protest. The RFP contemplated award of a fixed-price requirements contract for a base year with four 1-year options. Offerors were to provide unit pricing for bulk linen and 21 other laundry service line items, based upon estimated quantities provided by NIH. Award was to be made to the small business contractor that provided the "best overall value to the Government," cost and other factors considered. By May 29, 2002, two offerors, including Nutech, submitted proposals in response to the RFP. /1/ Both proposals were found technically acceptable; however, Nutech's price was more than twice that of the other offeror (Offeror A) and well above the government estimate (dated February 21, 2002). Discussions followed, during which Nutech was informed that its "costs appear to be excessive" and was asked to "verify and reconsider" its costs. Protest, exh. 3, Letter from NIH to Nutech (June 28, 2002). Nutech reduced its price slightly. Final pricing was as follows: . Government Estimate Offeror A Nutech Bulk linen $.33 per lb. $.30 per lb. $.54 per lb. Base year $ 977,151.76 $ 714,586.48 $1,457,774.40 Total $5,187,862.08 $3,687,586.90 $7,572,178.55 NIH determined that Nutech's price, which was more than 50 percent above the government estimate, was not fair and reasonable, and selected Offeror A, whose price was determined to be fair and reasonable, for award. Supplemental Agency Report, encl. 5, Cost Analysis, at 10, 16. However, Offeror A was later determined ineligible for award because it was a large business. NIH then reopened discussions with Nutech, informing it that its price was still "substantially excessive" based upon the competitive market and again requesting that Nutech reconsider its costs. NIH stated that, at Nutech's current price, the contracting officer could not make the required determination that Nutech's price was fair and reasonable. Protest, exh. 9, Letter from NIH to Nutech (Sept. 18, 2002); see Federal Acquisition Regulation (FAR) Sec. 15.402(a). In response, Nutech did not reduce its price, but argued that it believed its price was fair and reasonable, primarily because it was similar to that in its incumbent contract with NIH. /2/ Protest, exh. 10, Letter from Nutech to NIH (Sept. 23, 2002). However, NIH suspected that Nutech's price under its incumbent contract might not be fair and reasonable, because there had been no price competition (Nutech's had been the only acceptable proposal received). Supplemental Agency Report at 2. Additionally, a November 2001 study, performed by a laundry-linen management consultant retained by NIH, concluded that the prices NIH paid under the incumbent contract were "exorbitant" and recommended that NIH take steps to revise its procurement practices to increase competition. Agency Report, Tab 3, Linen Study, at 2. In addition to comparing Nutech's price to Offeror A's price and the government estimate, NIH also compared Nutech's proposed price to that of another laundry services contract that Nutech was performing for the Department of the Navy in the immediate geographical vicinity to where the NIH contract would be performed. NIH found that Nutech's unit price for bulk linen under the Navy contract was approximately $.29 per pound, which was barely half of Nutech's proposed unit price for the NIH effort, yet was similar to Offeror A's proposed unit price and the government estimate. Contracting Officer's Statement at 8-9.