Diversified Capital, Inc., B-293105.4; B-293105.8, November 12, 2004

Diversified Capital, Inc., B-293105.4; B-293105.8, November 12, 2004 TITLE: Diversified Capital, Inc., B-293105.4; B-293105.8, November 12, 2004 BNUMBER: B-293105.4; B-293105.8 DATE: November 12, 2004 ********************************************************************** Decision Matter of: Diversified Capital, Inc. File: B-293105.4; B-293105.8 Date: November 12, 2004 Joseph P. Hornyak, Esq., Sonnenschein Nath & Rosenthal, for the protester. Margaret A. Dillenburg, Esq., for PEMCO, Ltd., an intervenor. R. Rene Dupuy, Esq., Department of Housing and Urban Development, for the agency. Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Protest of alleged unbalanced pricing is denied where challenged prices were not significantly overstated and agency evaluated them as reasonable. DECISION Diversified Capital, Inc. (DCI) protests the award of a contract to PEMCO, Ltd. under request for proposals (RFP) No. R-OPC-22505, issued by the Department of Housing and Urban Development (HUD) for management and marketing services for single-family housing and other property owned by HUD. DCI asserts that the agency should have rejected PEMCO's proposal due to unbalanced pricing. We deny the protest. The solicitation contemplated the award of indefinite-delivery, indefinite-quantity, fixed-unit-price contracts in 24 geographic regions for management and marketing services in connection with the disposition of single-family homes owned by, or in the custody of, HUD. At issue in this protest is the contract for the Santa Ana Area 1, which covers properties located in 11 counties in Southern California. The RFP advised offerors that the agency would make award on a "best value" basis, considering price and specified non-price factors, with the non-price factors considered significantly more important than price. Offerors were required to submit unit prices (expressed as a lump-sum fee, but payable in four equal monthly installments) for their property management fee and their vacant lot management fee (contract line item numbers (CLIN) 0001 and 0002); a price for the firm's marketing fee (expressed as a percentage of the net sale price of a single-family home) (CLIN 0003); a monthly fee for maintenance of "held off market" properties, that is, properties which, due to unusual circumstances, are not being marketed by the contractor (CLIN 0004); and a monthly fee for maintenance of properties not owned, but held in custody, by HUD (CLIN 0005). For purposes of calculating the offerors' total evaluated prices, fixed unit prices were to be multiplied by the estimated quantities included in the solicitation. Prices also were to be evaluated for reasonableness. Thirteen firms, including DCI and PEMCO, submitted proposals for the Santa Ana Area 1 requirement. After the initial evaluation and the establishment of a competitive range, the agency engaged in discussions and obtained final proposal revisions (FPR). Based on the FPR evaluation, the agency rated both DCI and PEMCO's proposals excellent with very low risk. The agency concluded that the two proposals were essentially technically equal, and thus made award to PEMCO based on its lower evaluated price--$103,432,502.88 versus DCI's $116,660,784. After a written debriefing, DCI filed this protest. DCI asserts that PEMCO's prices were impermissibly unbalanced. Specifically, it maintains that PEMCO's price for CLIN 0001 (property management) was disproportionately high, and that its price for CLIN 0003 (marketing) was very low. DCI's Comments at 10. DCI infers that PEMCO improperly allocated a significant portion of its CLIN 0003 costs to its CLIN 0001 price. DCI maintains that, since the CLIN 0001 fee would be paid during the first 4 months of the contract, PEMCO's pricing was front-loaded and its proposal therefore should have been rejected.[1] Unbalanced pricing exists where the price of one or more CLINs is significantly overstated, despite an acceptable total evaluated price (typically achieved through underpricing of one or more other line items). Ken Leahy Constr., Inc., B-290186, June 10, 2002, 2002 CPD P 93 at 2; see Federal Acquisition Regulation (FAR) SA 15.404a--1(g)(1). Unbalanced pricing does not automatically preclude award; rather, an agency lawfully may award a contract on the basis of a proposal with unbalanced pricing, provided it concludes that the pricing does not pose an unacceptable level of risk, and the prices the agency is likely to pay under the contract are not unreasonably high. FAR S 15.404-1(g)(2); Citywide Managing Servs. of Port Washington, Inc., B-281287.12, Ba--281287.13, Nov. 15, 2000, 2001 CPD P 6 at 7. PEMCO's prices were not unbalanced, since any overstatement of its CLIN 0001 price was not significant.