For the archive: SUNY protests the award of a contract to NEMC, GAO, 2 Dec 96
Art Doherty
SUNY protests the award of a contract to NEMC, GAO, 2 Dec 96
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BNUMBER: B-274269
DATE: December 2, 1996
TITLE: The Research Foundation of State University of New York
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Matter of:The Research Foundation of State University of New York
File: B-274269
Date:December 2, 1996
Benjamin J. Luft, M.D., James R. Dennehey, Esq., and Concetta
Angilella, Esq., for the protester.
Theodore M. Hess-Mahan, Esq., Ropes & Gray, for New England Medical
Center, an intervenor.
Richard Brown, Esq. and Michael Colvin, for the Department of Health
and Human Services, for the agency.
Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency reasonably accepted in its cost evaluation the proposed costs
of proposals offering significantly different technical approaches to
performing clinical studies where the solicitation contemplated
proposals based upon the offerors' creativity in developing and
designing their own protocols for the study and the agency reviewed
the cost elements of each proposal and found each proposal's cost
reasonable and realistic for the particular study proposed.
DECISION
The Research Foundation of State University of New York (SUNY)
protests the award of a contract to New England Medical Center (NEMC),
by the Department of Health and Human Services, National Institute of
Allergy and Infectious Diseases (NIAID), under request for proposals
(RFP) No. NIH-NIAID-DMID-96-09, for clinical studies of chronic lyme
disease.
We deny the protest.[1]
The RFP, issued June 15, 1995, contemplated a cost reimbursement,
level-of-effort, contract for a 5-year term. The contractor is to
develop the research infrastructure for NIAID to address two essential
issues--the evaluation of therapeutic approaches to treat patients
with chronic lyme disease and the pathological basis/bases of the
condition.[2] The statement of work requires the contractor to
conduct clinical studies in patients with documented and well-defined
chronic lyme disease, and advises that the major focus of the studies
will be on the therapeutic effects of antimicrobial agents; that
assessments of the pharmacological properties of drugs used singly or
in combination with other therapeutic medications shall be part of the
studies when necessary and appropriate; and that pilot studies of
treatments for other manifestations or infections associated with lyme
disease may also be proposed.
The RFP required that each offeror, as part of its proposal, would
develop and design protocol(s) for conducting clinical studies of lyme
disease. The protocol is the offeror's technical approach to
conducting the clinical study of the disease and includes such things
as the drugs that the offeror proposed to utilize in studying
treatment of the disease, the duration of the treatment, and the
number of patients to be included in the study. The RFP required
offerors to submit a detailed protocol for a controlled phase III
study and also advised that they could submit up to two pilot studies
as well if appropriate. The RFP advised offerors that "it is
anticipated that a phase III study would require 150-300 patients, a
phase II study would require 30-60 patients." The RFP contemplated
that the offerors would rely upon their own creativity and expertise
in developing and designing the offered protocol, and that the
selected firm's protocol(s) likely would be modified after award based
upon the recommendations of the project officer; to this effect, the
RFP advised offerors that the award of the contract did not commit the
government to approve any of the studies presented in the offeror's
proposal--that the project officer would determine the actual studies
to be undertaken.
The RFP advised that the technical evaluation would receive paramount
consideration over cost, but that in the event of technically equal
proposals, cost would become more important. The technical criteria
were "Scientific and Technical Approach" worth 50 percent, "Personnel"
worth 25 percent, and "Facilities/Resources" worth 25 percent.
NIAID received proposals from SUNY and NEMC by the October 15 initial
closing date. Both proposals were included in the competitive range;
NEMC's proposal received a score of 58 points and SUNY's proposal
received a score of 55 points. Following technical and cost
discussions, the offerors submitted best and final offers (BAFO) by
May 1, 1996.
The offerors' proposed protocols were significantly different from
each other. Specifically, SUNY's proposed protocol involved studying
a larger number of patients under a combination therapy, four-arm
study, whereas NEMC's proposed protocol involved a monotherapy,
two-arm study with fewer patients.[3]
NIAID rated the BAFOs with equal technical scores of 79. NEMC's BAFO
cost was $4,194,968 and SUNY's BAFO cost was $5,323,058. NIAID
evaluated the realism of the cost proposals and determined that each
offeror's estimate was realistic based upon its technical approach.
On May 28, NIAID made award to NEMC based upon its lower-cost,
technically equal proposal.
The agency has indicated that the project officer is currently
considering modifications to NEMC's protocol based upon
recommendations received from an Advisory Review Panel. These
modifications involve increasing the duration of treatment, the
addition of more patients, and incorporating a second drug. VT at
11:38:11-11:39:10, 13:15:07-13:15:41. When the project officer
decides what modifications should be made, the agency will require the
protocol to be amended and will authorize the study to commence.
SUNY's primary basis for protest is that NIAID failed to conduct a
proper cost evaluation and merely accepted, and compared as the basis
for award selection, the offerors' bottom-line proposed costs without
further analysis. SUNY notes in this regard that since each offeror's
proposed protocol differed significantly in size and complexity, the
proposed costs should be somehow normalized to properly evaluate cost.
SUNY suggests in this regard that each proposal's per patient cost
could be calculated (dividing the total offered costs by the number of
patients studied) as a basis to compare the proposal costs, in which
case SUNY's proposal would have been found to be a better buy because
of its lower per patient costs resulting in more scientific
information per dollar. SUNY also contends that the agency should
have evaluated the offerors' costs based upon the clinical study
currently being considered by the project office rather than their
proposed bottom-line costs, inasmuch as this study significantly
modifies NEMC's proposed protocol from a monotherapy study to a
combination therapy study that SUNY alleges more closely resembles
SUNY's proposed protocol.
Where an agency evaluates proposals for the award of a cost
reimbursement contract, an offeror's proposed costs are not
dispositive, because regardless of the costs proposed, the government
is bound to pay the contractor its actual and allowable costs.
Federal Acquisition Regulation sec. 15.605(c). Consequently, a cost
realism analysis must be performed by the agency to determine the
extent to which an offeror's proposed costs represent what should be
reasonably incurred, assuming reasonable economy and efficiency, if
that offeror's proposal were accepted for award. CACI, Inc.-Fed., 64
Comp. Gen. 71 (1984), 84-2 CPD para. 542. Because the contracting
agency
is in the best position to make this cost realism determination, our
review is limited to determining whether the agency's cost evaluation
was reasonably based and not arbitrary. General Research Corp., 70
Comp. Gen. 279 (1991), 91-1 CPD para. 183, aff'd, American Management
Sys., Inc.; Dept. of Army--Recon., 70 Comp. Gen. 510 (1991), 91-1 CPD
para.
492; Grey Advertising, Inc., 55 Comp. Gen. 1111 (1976), 76-1 CPD para.
325.
As noted above, NIAID determined both NEMC's and SUNY's proposed
estimated costs to be reasonable and realistic for the technical
approaches that each had proposed. The contracting officer testified
that this determination was made after a comprehensive evaluation of
the various cost elements contained in each offeror's proposal. For
example, the agency examined each offeror's labor rates, travel
expenses, salaries, levels of effort, fringe benefits, overhead rates,
subcontractor costs, and material costs, and conducted cost
discussions addressing the agency's cost concerns.[4] VT at
14:10:34-14:12:07.
The contracting officer testified that it was not feasible to
normalize costs, as suggested by the protester, because the agency was
totally dependent upon each offerors' unique protocol design as a
basis for determining costs. He stated that the agency did not have a
predetermined preferred protocol design--since the RFP sought
offerors' proposals for this purpose--and that the RFP contemplated
that the offeror would design a protocol and that after award the
project officer would determine the ultimate design of the clinical
study by revising, as necessary, the contractor's proposed protocol.
VT at 14:58:38-15:03:44. Agency representatives further testified
that the contents of the revised protocol currently under
consideration were not known at the time of award, but were the result
of the recommendations of the Advisory Review Panel, and is being
developed based upon NEMC's two-arm study, and that, even though the
study being contemplated will take a combination instead of a
monotherapy approach, the fundamental distinguishing features of
NEMC's protocol remain. VT at 11:32:45-11:32:55, 11:35:38-11:37:58,
13:13:10-13:13:49, 13:18:01-13:18:10, 14:27:39-14:27:43. Furthermore,
the contracting officer testified that evaluating and comparing the
offerors' costs on a cost per-patient basis, as suggested by the
protester, would not have been valid or meaningful because the
proposed protocols contained more variables than patient numbers, for
example, duration and types of treatment; such an evaluation would
have been unjustifiably biased in favor of studies involving higher
numbers of patients regardless of the technical quality of the study;
and the RFP did not advise offerors that such an evaluation would be
considered. VT at 14:07:36-14:09:36.
Based on our review, we agree with the agency that it could not
normalize the costs as suggested by the protester. Cost normalization
involves the measurement of offerors against the same baseline where
there is no logical basis for the differences in approach or where
there is insufficient information provided with the proposals, leading
to the establishment of common "should have bid" estimates by the
agency. The purpose of such an analysis is to segregate cost factors
which are "company unique"--dependent on variables resulting from
dissimilar company policies--from those which are generally applicable
to all offerors and therefore subject to normalization. Bendix Field
Eng'g Corp., B-246236, Feb. 25, 1992, 92-1 CPD para. 227. Here, the
agency properly did not normalize costs, since the record shows that
it had no predetermined basis upon which to measure similar costs.
Dynalectron Corp.; Lockheed Elecs. Co., Inc., 54 Comp. Gen. 562
(1975), 75-1 CPD para. 17, aff'd, 54 Comp. Gen. 1009 (1975), 75-1 CPD
para.
341 (normalization improper where varying costs between competing
proposals results from innovative technical approaches).
With regard to the revised protocol currently being considered for
placement under NEMC's contract, the agency had no basis, much less
obligation, to project from each offeror's proposal and compare the
agency's assessment of what it believed would be each offeror's cost
of performing under this revised protocol.[5] In this regard, the
agency did not, at the time of award, know what clinical studies would
be authorized by the project officer because they were not to be
developed until after the award based on the awardee's protocol. Nor
does the record support SUNY's assertion that the two-arm study under
consideration more closely resembles SUNY's proposed four-arm protocol
than NEMC's two-arm protocol.
Finally, the record confirms that the proposed costs of both proposals
were analyzed and the subject of discussions and proposal revisions.
SUNY has not shown NEMC's proposed costs for its technical approach
were understated or that SUNY's were overstated. In sum, given that
the cost realism analysis considered the best cost information
available, we cannot conclude that NIAID acted unreasonably in
comparing the estimated costs of the two proposals as the basis for
award. Hager Sharp, Inc., B-258812, Feb. 17, 1995, 95-1 CPD para.
93.
SUNY also argues that NEMC's phase III protocol failed to meet the
RFP's "minimum" guideline for numbers of patients because NEMC
proposed protocol was not within the 150- to 300-patient parameter
that the RFP stated was "anticipated" for such a study. We disagree.
As indicated, the RFP contemplated creativity on the part of offerors
in designing a protocol, such that the "anticipation" announced in the
RFP cannot reasonably be interpreted as precluding an offeror from
designing a phase III protocol with patient numbers outside the
anticipated parameters. Here, NIAID found that NEMC's protocol, which
involved 110 patients in two studies and 50 patients in one study and
270 patients overall, was an acceptable phase III study, VT at
12:59:20-13:05:22, and we see no basis to question this determination.
SUNY finally argues that the technical evaluation improperly gave more
weight to the personnel and facilities over scientific approach than
was announced in the RFP evaluation scheme. In support of this
contention, SUNY only points to the source selection document, which
recognized that NEMC's proposal received a higher score than SUNY's
under personnel and facilities (as compared to SUNY's higher score
under scientific approach). This contention has no merit. The
source selection document only points out the differences between the
two equally scored technical proposals. As indicated, NIAID made
award to NEMC solely because of its lower cost, not due to any
technical advantage relating to personnel and facilities.
The protest is denied.
Comptroller General
of the United States
1. A hearing was conducted to obtain testimony regarding the protest
issues.
2. Lyme disease is the most common tick-borne disease in the United
States. The term "Post-Lyme Disease Syndrome" is a condition of
chronic or intermittent symptoms related to lyme disease that may be
caused by either active infection that has escaped control with the
use of conventional antibiotic regimens; and/or permanent damage
caused by the original infectious process.
3. A four-arm study compares four treatment groups to each other and a
two-arm study compares two groups. Combination therapy employs
several drugs and monotherapy employs a single drug. Video Transcript
(VT) at 11:36:50
4. The record contains documentation evidencing that such an analysis
was performed.
5. The contracting officer testified that while no exact cost figures
have been developed regarding the proposed modification to NEMC's
protocol because the actual study to be ordered has not been
finalized, it was reasonable to assume from the information contained
in NEMC's BAFO that the cost increase would be approximately $300,000.
VT at 14:02:21-14:03:14, 14:17:47-14:18:12, 14:21:55-14:23:07,
15:05:14-15:08:09.
SUNY protests the award of a contract to NEMC, GAO, 2 Dec 96
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