United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

 

Decision

Matter of: Laboratory Corporation of America

File: B-407108

Date: November 5, 2012

David E. Frulla, Esq., Robert I. Steiner, Esq., and Elizabeth C. Johnson, Esq., 

Kelley Drye & Warren LLP, for the protester.

Merle M. DeLancey, Esq., and Ryan P. McGovern, Esq., Dickstein Shapiro LLP, for 

Quest Diagnostics, Inc., an intervenor.

Kevin L. Pearson, Esq., Department of Veterans Affairs, for the agency.

Jennifer D. Westfall-McGrail, Esq., and Edward Goldstein, Esq., Office of the 

General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Under solicitation contemplating establishment of fixed-price blanket purchase 

agreement, protest objecting to agency’s failure to perform realism analysis of 

successful vendor’s pricing for individual items is denied where the contracting 

officer reasonably evaluated the awardee’s lower price.

2. Protester’s challenge to technical evaluation is denied where the weaknesses 

attributed to the protester’s technical submission were reasonably based.

DECISION

Laboratory Corporation of America (LabCorp), of Burlington, North Carolina, 

protests the establishment of a blanket purchase agreement (BPA) with Quest 

Diagnostics Nichols Institute (Quest), of Chantilly, Virginia, under request for 

quotations (RFQ) No. VA-246-11-RQ-0321, issued by the Department of Veterans 

Affairs for laboratory testing services for Veterans Integrated Service Network 

(VISN) 6. The protester argues the agency failed to conduct an adequate analysis 

of the realism of Quest’s proposed pricing. LabCorp also argues that the evaluation 

of its own technical proposal was unreasonable.1

 1 While the solicitation was issued as a RFQ, it referred to vendor submissions as 

“proposals” and the vendors themselves as “offerors.”

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to 

a GAO Protective Order. This redacted version has 

been approved for public release.
Page 2 B-407108 

We deny the protest.

BACKGROUND

The RFQ contemplated the establishment of a fixed-price BPA against the 

successful vendor’s Federal Supply Schedule (FSS) contract for a base period of 

one year and four 1-year options. Services to be provided include specimen 

processing, transportation of specimens from the VISN 6 primary VA medical 

facilities to the contractor’s laboratory/laboratories, performance of testing, and 

reporting of results. The solicitation also included a “courier pick-up option” for the 

transportation of specimens, reports, and supplies between VA’s smaller 

Community Based Outpatient Centers (CBOCs) and the primary VA medical 

facilities.

Proposals were to be evaluated on the basis of technical, past performance, and 

price factors, with technical and past performance, when combined, of significantly 

greater importance than price. Under technical, proposals were to be evaluated on 

the basis of the following 10 factors (in descending order of importance): specimen 

testing, sample processing, specimen processor, transportation services, reporting 

of results, customer service, specimen storage, performance improvement 

activities, utilization reports, and value added characteristics. 2

 The RFQ included a 

detailed chart summarizing the technical factors and their subfactors, the evaluation 

standard for determining whether a subfactor had been met, and information 

pertaining to the subfactor that offerors should include in their proposals.3 RFQ at 

24-28.

Under the price factor, the solicitation included a pricing schedule, which contained 

two tabs. Tab 1 (Lab Testing) contained a list of 1,235 tests with estimated 

quantities. The 64 tests with the highest estimated quantities were identified as 

 2 There were 3 subfactors under the specimen testing factor, 2 subfactors under 

sample processing; 4 subfactors under specimen processor; 8 subfactors under 

transportation services; 5 subfactors under reporting of results; and 1 subfactor 

under each of the remaining factors.

3 The solicitation provided that a proposal would be assigned a technical rating of 

blue/excellent if the proposal demonstrated that the offeror met or exceeded all of 

the government’s requirements for the technical factor/subfactor; a rating of 

green/satisfactory if the offeror met most of the government’s requirements for the 

technical factor; a rating of yellow/marginal if the offeror met some of the 

government’s requirements for the technical factor; and a rating of 

red/unsatisfactory if the offeror did not meet the government’s requirements. RFQ 

at 29.
Page 3 B-407108 

“core tests.” The solicitation provided that the pricing on core tests would “be used 

as a tool for quick comparison,” but that “all test pricing [would] be analyzed.” RFQ, 

amend. 0002, at 3. Tab 2 (Courier Pick up Option Pricing for CBOCs) listed 23 

CBOCs and their associated VA Medical Centers. Offerors were to furnish a 

“proposed annual cost” for courier service between each CBOC and its parent 

medical center. The RFQ provided that the agency would evaluate each offeror’s 

“total price” to determine whether it reflected an understanding of the project and 

the ability to perform successfully, was adequately supported and realistic in terms 

of the offeror’s proposed technical approach, and was reasonable. RFQ at 30.

The VA received three proposals prior to the September 23, 2011 closing date. A 

technical evaluation panel (TEP) met in November, 2011 to assign consensus 

ratings to the proposals. LabCorp’s proposal was rated as green/satisfactory under 

each of the technical factors, with the exception of performance improvement 

activities (for which it received a rating of yellow/marginal); overall, the VA rated the 

protester’s technical proposal as green/satisfactory. Quest’s proposal received 

ratings of blue/excellent under seven of the technical factors and ratings of 

green/satisfactory under the other three; overall, the VA rated Quest’s technical 

proposal as blue/excellent.4

 The third offeror’s proposal received an overall 

technical rating of yellow/marginal. A subgroup of the TEP evaluated past 

performance and assigned all three offerors ratings of excellent in that area.

LabCorp’s annual price for both the core tests and all tests was lower than Quest’s--

[deleted] vs. [deleted] for the former, and [deleted] vs. [deleted] for the latter. 

Contracting Officer’s Statement at 3. Quest’s total annual price for the courier 

pickup option was considerably lower than the protester’s, however--i.e., [deleted] 

vs. [deleted]. When overall totals for all tests, plus the courier pickup option were 

calculated, Quest’s total annual price ($3,767,798) was lower than LabCorp’s 

($4,107,712).5

 Id. at 5.

Because Quest’s proposal had both the highest technical rating and the lowest 

evaluated price, by decision of June 19, 2012, the contracting officer determined 

that Quest’s proposal represented the best value to the Government.

The agency notified the protester of its decision in a letter dated July 23. The 

protester requested, and, on July 26, was furnished with a written debriefing. The 

debriefing letter identified the following “marginal technical findings” in the 

protester’s proposal:

 4 Factors under which Quest received ratings of green were sample processing, 

reporting of results, and customer service.

5 The third offeror’s prices for the testing and the courier services were higher than 

both LabCorp’s and Quest’s.
Page 4 B-407108 

• LabCorp will repeat a test within 5 days if the provider 

questions the results but the test must be performed by 

[LabCorp].6

• LabCorp will provide a STAT test within 4 hours but there is an 

additional charge of [deleted] for STAT testing.

• If LabCorp’s normal specimen processor is not available, the 

facility will have to provide their own specimen processor if 

LabCorp cannot find a replacement.

• LabCorp will remove the specimen processor with a 60 day 

notice if there is a drop in the testing volume.

• LabCorp will change their courier routes at any time at their 

sole discretion which will change the facilities pickup schedule.

• LabCorp charges for a STAT pickup of a sample.

• LabCorp will provide a weekly report for test delays whereas 

competitor will provide a daily fax.

• LabCorp saves specimens for 5-7 days which is the least for all 

offerors.

• LabCorp’s response to Quality Assurance Plan/Performance 

Improvement Activities was weak compared to responses from 

the other 2 offerors. LabCorp’s proposal did not provide much 

detail on [its] Quality Improvement and Quality Assurance 

activities. For example, listing of quality improvement monitors, 

outlining quality indicators, and the reporting and auditing 

process in reference to quality measurements.

Debriefing Letter, July 26, 2012, at 1. LabCorp protested to our Office on August 1.

DISCUSSION

LabCorp argues that Quest’s courier pick-up prices are unrealistically low and that 

the agency had an obligation to confirm them to ensure they did not reflect a 

misunderstanding of the solicitation’s requirements on Quest’s part. The protester 

further argues that Quest’s courier service pricing for some of the CBOCs is below 

market, which is contrary to the terms of the RFQ. In addition, LabCorp challenges 

all but one of the agency’s “marginal technical findings,” arguing that they lacked a 

reasonable basis. For the reasons discussed below, we conclude that the protest is 

without merit.

 6 The actual agency finding referenced repeat tests being performed by Quest. The 

agency acknowledged that this reference to Quest was in error and that the 

reference was supposed to be to LabCorp.
Page 5 B-407108 

Price Evaluation

In challenging Quest’s courier pick-up prices as unrealistically low, the protester 

highlights the language in the RFQ indicating that the agency would evaluate prices 

to determine, in part, whether they reflected the offerors’ “understanding of the 

project”, and whether they were “realistic” in terms of their proposed technical 

approaches. As a general matter, when awarding a fixed-price contract, an agency 

is only required to determine whether offered prices are fair and reasonable. 

Federal Acquisition Regulation (FAR) § 15.402(a). An agency’s concern in making 

a price reasonableness determination focuses primarily on 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. Sterling Servs., Inc., B-291625, B-291626, Jan. 14, 

2003, 2003 CPD ¶ 26 at 3.

While price realism need not be considered in evaluating proposals for the award of 

a fixed-price contract, an agency may include in a solicitation a provision that

provides for a price realism evaluation for the purpose of assessing whether an 

offeror’s low price reflects on its understanding of the contract requirements. 

General Dynamics One Source, LLC; Unisys Corp., B-400340.5, B-400340.6, 

Jan. 20, 2010, 2010 CPD ¶ 45 at 9. Where a solicitation provides for a price 

realism evaluation, the depth of an agency’s evaluation in this regard is a matter 

within the sound exercise of the agency’s discretion. Citywide Managing Servs. of 

Port Washington, Inc., B-281287.12, B-281287.13, Nov. 15, 2000, 2001 CPD ¶ 6 at 

4-5. In reviewing protests challenging price realism evaluations, our focus is on 

whether the agency acted reasonably and in a manner consistent with the 

solicitation’s requirements. General Dynamics One Source, LLC; Unisys Corp., 

supra. 

Here, to the extent the solicitation provided for a price realism evaluation, it 

indicated that “total price” would be evaluated, and the record reflects that the 

agency considered Quest’s overall total evaluated price realistic where it was close 

to LabCorp’s total price and the government estimate. Contracting Officer’s 

Statement at 12. Moreover, the record reflects that the VA investigated the one 

element of Quest’s pricing--the courier services pricing--which was significantly 

lower than the pricing proposed by the other offerors. Best Value Determination, at 

5. In response to an inquiry by the contracting officer, Quest provided the basis for 

its courier pricing, which was consistent with the other offerors’ courier services. Id. 

Although LabCorp argues that Quest’s low courier pricing reflects an inherent lack 

of understanding of the agency’s courier requirements and that the agency should 

have conducted further inquiry regarding the matter, its arguments in this regard 

amount to little more than disagreement with the agency’s exercise of its discretion 

in evaluating Quest’s pricing, which does not provide a basis for our Office to 

conclude that the agency’s evaluation was improper or otherwise unreasonable. 
Page 6 B-407108 

See Flight Safety Servs. Corp., B-403831, B-403831.2, Dec. 9, 2010, 2010 CPD 

¶ 294 at 6-7. 

LabCorp also contends that Quest’s courier service pricing for some of the CBOCs 

is below market, in contravention of the terms of Attachment B. As previously 

explained, the RFQ included an option for courier services between many of the 

CBOCs located within VISN 6 and their associated primary VA medical centers, and 

Tab 2 of the solicitation’s pricing schedule asked offerors to provide a “proposed 

annual cost” for the services. In connection with the courier pick-up option, 

Attachment B to the RFQ provided as follows:

b. During the term of this agreement, contractor agrees at the request 

of a VISN 6 Primary Facility to provide courier services for the facility 

Monday – Friday excluding holidays (. . .) on behalf of its customers 

which are located along the contractor’s Laboratory Courier Routes. 

. . . It is specifically understood that the facility and its customers shall 

be responsible for delivery of such reports and supplies to the 

contractor in a timely fashion and in a timely manner sufficient for 

contractor to include them in contractor’s normal courier routines. . . .

c. In consideration for the Services, the designated Facility agrees to 

pay monthly and the contractor agrees to accept sums specifically 

defined for referenced routes listed in Attachment A. The parties 

agree that such fees payable hereunder shall not be less than “fair 

market value” of the services being provided, meaning the value in 

arms length transaction, consistent with general market price. While 

billed separately, consistent pricing for services should be reflected for 

all facilities.

RFQ, Att. B, at 2. 

The record reflects that the VA is agreeing to pay Quest the amounts that Quest 

itself proposed for courier service between the various CBOCs and their parent 

medical centers. Since Quest proposed the amounts, they represent not less than 

what Quest regards as the fair market value of the services to be rendered. Under 

such circumstances, we have no basis to object to the amounts proposed.

Technical Evaluation

The protester also challenges the agency’s evaluation of its technical proposal, 

arguing that several of the agency’s “marginal technical findings” lacked a 
Page 7 B-407108 

reasonable basis.7 We have reviewed all of the protester’s challenges in this regard 

and, as illustrated by the examples discussed below, we find them to be without 

merit. 8

As a general matter, where an agency conducts a formal competition for the 

establishment of a BPA, we will review the agency’s actions to ensure that the 

evaluation was reasonable and consistent with the solicitation and applicable 

procurement statutes and regulations. OfficeMax, Inc., B-299340.2, July 19, 2007, 

2007 CPD ¶ 158 at 5. 

LabCorp argues that the agency acted unreasonably by assigning its proposal 

weaknesses based on LabCorp’s indication that if its normal specimen processor is 

not available, and it is unable to provide a substitute, the agency will have to provide 

its own specimen processor, as well as LabCorp’s indication that it would remove 

the specimen processor with a 60 day notice if there is a drop in the testing volume.

The solicitation required the contractor to provide personnel on-site at the primary 

VA facilities to process specimens for testing and to record test results. The RFQ 

further required the contractor “to provide uninterrupted specimen processor 

support.” RFQ at 11. 

In its response to the RFQ, LabCorp proposed as follows:

In the event the assigned specimen processor is unable to provide 

Specimen Processing Services, LabCorp shall make reasonable 

efforts to provide a substitute specimen processor or if no such 

substitute is available, make reasonable efforts to secure such 

specimen processor coverage. LabCorp shall not be considered in 

breach of this Agreement in the event the aforementioned coverage 

cannot be obtained due to circumstances beyond LabCorp’s control. 

Notwithstanding, if for any reason LabCorp is unable to provide 

Specimen Processing Services during such regularly scheduled 

 7 The protester did not challenge the findings pertaining to additional charges for 

STAT testing (although it did point out that the finding that it charged for a STAT 

pick-up of a sample was repetitive of the finding that there was an additional charge 

of [deleted] for STAT testing.) 

8 We do agree with the protester with regard to one of its complaints--that is, we are 

not persuaded that it was reasonable for the evaluators to attribute a weakness to 

the proposal for LabCorp’s reservation to itself of the discretion to change its courier 

routes. It does not appear, however, that elimination of this weakness would alter 

the rating assigned the protester’s proposal under the transportation services factor.
Page 8 B-407108 

hours, CLIENT agrees to provide its own Specimen Processing 

Services.

LabCorp’s Proposal at 4. The proposal further stated that “[i]f at any time during the 

term of the executed agreement, should specimen volume drop to a level that does 

not support the placement of the processor, LabCorp reserves the right to remove 

the processor upon sixty (60) days notice to CLIENT.” Id. at 5.

With regard to the weakness pertaining to coverage during the regular processor’s 

absences, the protester argues that the conditions under which its proposal requires 

the agency to furnish a processor are unlikely to occur. In this connection, LabCorp 

notes that during the past five years, it is, in fact, aware of only a single isolated 

incident in which a VA facility was required to provide its own specimen processor 

for any amount of time. Similarly, with regard to its reservation of the right to 

remove a specimen processor, the protester points out that it reserved the right to 

do so only in the event that specimen volume drops to a level that does not support 

the placement of the processor. According to LabCorp, this is an event, which to its 

knowledge, has never occurred during its performance under the predecessor 

contract.

We find the protester’s position to be unavailing. LabCorp’s proposal failed to 

demonstrate full compliance with the requirement of the RFQ that the contractor 

ensure uninterrupted coverage of the specimen processor position. Moreover, 

while the protester appears to be arguing that it took only very limited exception to 

the requirement (because the circumstances in which it reserved to itself the right 

not to comply are unlikely to occur), the very fact that LabCorp included the 

conditions in its proposal shows that it believed them to have some significance.

The protester further argues that the evaluators unreasonably assigned its proposal 

a weakness where it proposed to save specimens for only 5-7 days, which the 

agency noted to be “the least for all offerors.” In this regard, LabCorp contends that 

the agency’s evaluation should have factored in LabCorp’s “extremely short” 

turnaround time for many of the tests, which would offset the amount of time that 

the specimen needs to be stored. LabCorp pointed out, by way of example, that if it 

stored a specimen only 5 days, but turned around test results in 1 day, “the 4 extra 

days of storage would be greater than an offeror who stored the specimen 7 days 

but took 4 days to turn around the test results.” Protest at 9-10.

The RFQ required that the contractor store specimens “a minimum of seven days 

after the test is reported in the event that subsequent action is necessary (i.e.

problem solving, add-on test, and/or repeat testing).” RFQ at 16. In its proposal, 

LabCorp stated that it “retains most specimens for five to seven (5-7) days.” 

LabCorp’s Proposal at 30. Thus, there is no question but that the protester failed to 

demonstrate compliance with the RFQ requirement pertaining to specimen storage. 
Page 9 B-407108 

In sum, the record demonstrates a reasonable basis for the agency’s assignment of 

a technical rating of green/satisfactory to the protester’s proposal and for its 

selection of Quest’s higher-rated, lower-priced proposal for award.

The protest is denied.

Lynn H. Gibson

General Counsel