BNUMBER:  B-258243; B-258243.2; B-258243.3
DATE:  December 28, 1994
TITLE:  Serv-Air, Inc.; Kay and Associates, Inc.

**********************************************************************

DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release.
Matter of:Serv-Air, Inc.; Kay and Associates, Inc.

File:     B-258243; B-258243.2; B-258243.3

Date:December 28, 1994

Richard O. Duvall, Esq., Richard L. Moorhouse, Esq., and Dorn C. 
McGrath III, Esq., Holland & Knight, for Serv-Air, Inc., and Laura K. 
Kennedy, Esq., Kevin P. Connelly, Esq., and G. Matthew Koehl, Esq., 
Seyfarth, Shaw, Fairweather & Geraldson, for Kay and Associates, Inc., 
the protesters.
Thomas J. Madden, Esq., James F. Worrall, Esq., and Jerome S. Gabig, 
Jr., Esq., Venable, Baetjer, Howard & Civiletti, for Beech Aerospace 
Services, Inc., an interested party.
William P. McGinnies, Esq., Arthur I. Rettinger, Esq., and Marc J. 
Weinberger, Esq., Department of the Treasury, U.S. Customs Service, 
for the agency.
Richard P. Burkard, Esq., and John Van Schaik, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest against agency's failure to discuss with protester its 
apparent willingness to cap its general and administrative (G&A) rates 
is sustained where proposal indicated a willingness to accept a 
ceiling on those rates and agency mistakenly believed that its 
concerns about the G&A rates and cap had been raised with the firm.  

2.  Protest alleging that agency conducted an improper cost evaluation 
by adjusting protester's cost for realism and assessing the risk to 
the government that the protester would have difficulty retaining 
personnel is denied where solicitation provided for such a cost 
realism adjustment and risk assessment.

3.  Where protester learns of specific grounds of protest from a 
debriefing but fails to raise those grounds until after agency's 
report responding to a general allegation contained in initial 
protest, the specific grounds are untimely and will not be considered.

4.  Allegation that agency waived a mandatory requirement for the 
awardee is denied where the record shows that the agency interpreted 
the requirement in a flexible manner for both the protester and 
awardee and the protester was not prejudiced by the agency's approach 
to the evaluation of the requirement.

DECISION

Serv-Air, Inc. and Kay and Associates, Inc. protest the award of a 
contract to Beech Aerospace, Inc., under request for proposals (RFP) 
No. CS-94-004, issued by the United States Customs Service, Department 
of the Treasury, for aircraft maintenance and related services.  
Serv-Air, the incumbent contractor, alleges in two protests that the 
agency unreasonably evaluated its proposal, failed to conduct proper 
discussions, waived a mandatory requirement for Beech, and failed to 
adequately justify the selection of the awardee at a higher cost.  Kay 
contends principally that the agency failed to conduct proper 
discussions with it concerning its cost and technical proposal.

We sustain Kay's protest in part, deny it in part and dismiss it in 
part.  We dismiss in part and deny in part Serv-Air's protests. 

BACKGROUND

The RFP contemplated the award of a cost-plus-award-fee contract for a 
base year and 4 option years.  The aircraft to be maintained under the 
contract are used by the Customs Service to detect, interdict, track, 
and apprehend aircraft, marine, and land vehicles attempting to 
smuggle contraband into the United States.  The RFP provided that the 
contractor "shall provide program management, aircraft maintenance, 
logistics, supply and Electronic Data Processing (EDP) support 
requirements necessary to ensure that Customs has the numbers, types 
and properly configured aircraft available where and when required to 
meet all Customs aviation operational commitments."  

The RFP set forth the following technical evaluation factors, which 
were to be weighted higher than cost in the selection decision:  

          (1)  Technical Approach
                    Staffing
                    Methodology
                    Past Performance
          (2)  Quality Management
          (3)  Phase-In and Phase-Out

Factors (1) and (2) were of equal importance and "four times greater 
than" factor (3).  The subfactors under factor (1) were of equal 
importance.  

Cost proposals were to be evaluated for allowability, allocability, 
realism, and risk.  The RFP provided that most probable cost 
adjustments would be made to the offerors' proposed costs "based upon 
the determination that a given cost is unrealistically high or low. . 
. ."  It stated further that the agency "is concerned with the quality 
and stability of the work force to be employed on this contract. . . .  
The cost proposal will be considered in terms of its impact upon 
recruiting and retention, its realism, and its consistency with the 
Technical Proposal."  The RFP provided that the award would be made to 
the offeror "whose proposal offers the best value to the Government in 
terms of technical and cost rather than to the proposal offering the 
lowest estimated cost."   

The agency received six proposals by the December 29 closing date.  
Four proposals, including the protester's and the awardee's, were 
included in the competitive range.  Following discussions, the agency 
requested and received best and final offers (BAFO).  Customs 
considered Beech's proposal to be technically superior to the others 
and considered Kay's to be superior to Serv-Air's.  The agency's 
estimated cost of awarding the contract to Serv-Air was $145,750,224, 
the estimated cost of awarding to Beech was $155,870,088, and the 
estimated cost of awarding to Kay was $169,148,044.  The Customs 
source selection official determined that Beech's proposal presented 
the best value, and the agency awarded the contract to Beech on August 
12, 1994.  

KAY'S PROTEST 

Kay argues principally that the agency improperly failed to conduct 
discussions concerning Kay's willingness to cap its general and 
administrative (G&A) costs.  We agree with the protester and sustain 
the protest on this issue.  The protester raises three other grounds 
of protest.  As discussed below, one of these grounds is denied, and 
two are dismissed as untimely.  

Kay's G&A Costs

Kay's initial cost proposal set forth its historic G&A rates for 1991, 
1992, and 1993 at approximately [DELETED] percent and offered G&A 
rates of [DELETED] percent for labor and [DELETED] percent for 
materials for the years 1994-1999.  The proposal stated that Kay 
considered those rates to be reasonable "given the business volume 
assumptions (including the impact of this contract) during the 
forecast period."  The proposal also stated that "[Kay] will accept a 
G&A ceiling rate arrangement in any contract awarded as a result of 
this proposal."  

By letter dated February 4, 1994, Customs provided Kay with a number 
of discussion questions concerning its cost proposal.  None of the 
questions concerned Kay's proposed G&A rates.  

On February 16, Customs requested that the Defense Contract Audit 
Agency (DCAA) conduct an audit of the indirect rates contained in 
Kay's proposal.  By letter dated March 25, to Customs, DCAA responded 
that upon "review of the request and the [Kay] proposal package" a 
field audit "would not be necessary."  DCAA reviewed the Kay cost 
proposal but did not meet with Kay or discuss the proposal with Kay.  
The letter summarized DCAA's findings, in pertinent part, as follows:  

        "The only indirect rate involved is a proposed ceiling G&A 
        rate of:

          [DELETED]% on reimbursable material
          [DELETED]% on reimbursable labor and ODCs [other direct 
          costs]"

The letter noted that those rates are significantly lower than "recent 
actuals" and concluded as follows:

        "The proposed ceiling rates are considered reasonable and 
        acceptable, so long as they are to be ceilings.  It appears 
        that a new group of `site locations' would be involved if this 
        procurement is awarded to [Kay] and it is reasonable to assume 
        a lower than normal G&A would be appropriate."

The March 25 letter was not provided to Kay, and Customs did not 
discuss the DCAA concerns with Kay.

In its BAFO, Kay lowered its proposed G&A rates for labor and 
materials for all years of the contract to [DELETED] and [DELETED] 
percent, respectively.  The BAFO stated further:

        "Kay and Associates, Inc. is being considered for numerous 
        contracts that would substantially increase business volume.  
        In recognition of these proposals and our potential for award, 
        Kay and Associates, Inc. has passed the savings to U.S. 
        Customs Service by decreasing our G&A rate on labor and 
        materials."

        "[Kay] will accept a G&A ceiling rate arrangement in any 
        contract awarded as a result of this proposal."

Kay's proposed cost was $142,202,069.  Customs prepared a most 
probable cost for each offeror including adjustments to reflect the 
realistic cost to the government for the work to be performed.  Kay's 
cost was adjusted to $169,148,044.  [DELETED] of the increase, 
approximately $[DELETED] million, resulted from Customs' decision to 
adjust Kay's G&A rate to [DELETED] percent. 

Customs's most probable cost evaluation explains the adjustment as 
follows:

        "DCAA questioned the G&A rate of [DELETED]% proposed by [Kay] 
        . . . . The offeror proposed to enter into an agreement 
        capping G&A after contract award and at the same time 
        proposing a yet lower rate of [DELETED]%. . . .  [T]he 
        government does not accept the lower rate and adjusted the 
        offeror's proposed cost using the prior year G&A rate of 
        [DELETED]%.  After DCAA debriefing, the offeror had the 
        opportunity to cap the proposed G&A during BAFO.  Instead the 
        offeror still proposed an agreement [at] contract award."
  
Kay argues first that the agency erred in failing to give Kay credit 
for proposing to cap its G&A rates.  It states that its probable cost 
should not have been adjusted since its proposal stated that it would 
cap those costs; consequently, according to Kay, G&A costs exceeding 
the specified levels would not be passed on to the agency.  Kay argues 
further that to the extent Customs did not understand its proposal as 
providing for a cap or ceiling, the agency was required to bring this 
to Kay's attention before increasing its probable cost.  Kay concludes 
that the agency, as a result, misevaluated its cost proposal by 
adjusting it by approximately $[DELETED] million.

Customs and Beech argue initially that the language in Kay's proposal 
concerning a ceiling on its G&A rates was tentative and nonbinding and 
could not reasonably be read as an offer to cap its G&A rates.  They 
also argue that there was no requirement for the agency to hold 
discussions concerning the cap.[1]  In this respect, Customs asserts 
that the failure of Kay "to use contractually enforceable language" 
was neither a weakness, excess, nor deficiency and therefore did not 
need to be the subject of discussions.  The agency concludes that if 
Kay "wanted to cap its G&A rates, presumably, [it] knew how to do so."

When agencies evaluate proposals for the award of a cost-reimbursement 
contract, an offeror's proposed estimated 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 (FAR)  sec.  15.605(d).  Consequently, a cost 
realism analysis must be performed by the agency to determine the 
extent to which an offeror's proposed cost represents what the 
contract should cost, assuming reasonable economy and efficiency.  
MAR, Inc., B-255309.4; B-255309.5, June 8, 1994, 94-2 CPD  para.  19.  As a 
general rule, however, the maxim that the government bears the risk of 
cost overruns in the administration of a cost-reimbursement contract 
is reversed when a contractor agrees to a cap or ceiling on its 
reimbursement for a particular category or type of work.  Vitro Corp., 
B-247734.3, Sept. 24, 1992, 92-2  para.  202.  An offeror that proposes a 
cap has shifted the risk of cost overruns away from the government, 
such that upward adjustments to capped costs are improper, unless the 
caps are ineffective or can be circumvented.  Id.  

For these reasons, agencies typically identify to offerors concerns 
they may have about unrealistically low cost categories and often take 
affirmative steps to negotiate ceilings on such costs during 
discussions to prevent cost overruns.  See Compliance Corp., B-254429, 
B-254429.2, Dec. 15, 1993, 94-1 CPD  para.  166;  University Research Corp., 
B-253725.4, Oct. 26, 1993, 93-2 CPD  para.  259.  In this regard, the FAR 
provides for negotiating advance agreements on the treatment of costs 
which are expected to be questionable in order to preclude, to the 
extent possible, disputes during the administration of a contract, 
thus eliminating the need to litigate such matters.  Mandex, Inc., 
B-241841, Mar. 6, 1991, 91-1 CPD  para.  253; FAR  sec.  31.109.  The agency did 
not do that here.  Instead, it simply increased Kay's evaluated cost 
by nearly $[DELETED] million, without regard to the potential savings 
suggested by Kay's expressed willingness to accept a cap.  Under the 
circumstances, we conclude that Customs did not satisfy its obligation 
to conduct meaningful discussions with Kay.  

In negotiated procurements, contracting officers generally are 
required to conduct discussions with all offerors whose proposals are 
included in the competitive range.  FAR  sec.  15.610.  Although 
discussions need not be all-encompassing, discussions are required to 
be meaningful; that is, the agency must lead offerors into the areas 
of their proposals which require amplification or correction.  Jaycor, 
B-240029.2 et al., Oct. 31, 1990, 90-2 CPD  para.  354.  In this regard, the 
agency is required to point out weaknesses, excesses, or deficiencies 
in a proposal unless doing so would result in technical transfusion or 
leveling.  FAR  sec.  15.610(c) and (d); Innovative Training Sys., 
B-251225.3, Oct. 19, 1993, 93-2 CPD  para.  232.  This obligation is not met 
where an agency's discussion questions concern relatively 
insignificant aspects of the agency's evaluation without apprising the 
offeror of the principal deficiencies in its proposal.  Columbia 
Research Corp., B-247631, June 22, 1992, 92-1 CPD  para.  539.

Under this standard, the agency should have provided Kay with an 
opportunity to clarify and formalize its intent to cap its G&A rates.  
The record shows that Kay submitted a competitive proposal and that 
the agency pursued detailed discussions with Kay concerning both cost 
and technical aspects of its proposal.  While relatively minor 
weaknesses were raised during discussions,[2] the agency failed to 
question the proposal's reference to G&A ceiling rates.  Without the 
$[DELETED] million adjustment for G&A, Kay's overall evaluated cost 
would have been approximately $[DELETED] million, less than Beech's 
overall evaluated cost of $155,870,088.  With the adjustment for G&A, 
however, Kay's overall evaluated cost was substantially higher than 
that of Beech; obviously, this adjustment could have had a material 
impact on the selection decision.  Given Kay's willingness to cap its 
G&A rates and the agency's conclusion that Kay had not in fact capped 
those rates, we find unreasonable the agency's failure to raise with 
Kay its concerns about Kay's proposed G&A costs.  We note, in this 
regard, that Customs did raise its concerns with Beech about that 
firm's overhead and indirect costs and specifically requested a 
breakdown of overhead rates.

Although the agency states that Kay's willingness to cap its G&A rates 
was not required to be discussed, the contemporaneous evaluation 
record shows that the agency intended that Kay be notified of the 
agency's concerns on this issue.  The cost evaluators were under the 
mistaken impression that Kay had been given a "DCAA debriefing" which 
had afforded the protester the opportunity to clarify its position 
concerning the appropriate G&A rates.  Also, the agency's cost 
evaluation record for Kay characterizes Kay's cost proposal as "high 
risk" and states that "DCAA questioned the G&A rate proposed" and that 
"the offeror was debriefed by DCAA."  Indeed, even during much of the 
development of the record in this protest, the agency and interested 
party argued that DCAA's view of Kay's G&A rates and the ceiling 
language in Kay's proposal had been communicated to Kay, so that the 
agency was relieved of its responsibility to raise the issue with Kay 
during discussions.[3]  In fact, no debriefing occurred.  Instead, 
DCAA sent the agency a letter which characterized the G&A rates as 
"proposed ceiling rates" and essentially suggested that the agency 
should confirm that they are firm ceilings.  In addition, the DCAA 
letter stated further "it is reasonable to assume a lower than normal 
G&A would be appropriate."  This letter was not provided to Kay nor 
did the agency bring its or DCAA's concerns to the attention of Kay 
before substantially increasing Kay's probable cost.

While generally offerors bear the burden for failing to submit 
adequately written proposals, this does not excuse an agency from its 
obligation under the FAR to conduct meaningful discussions.  We agree 
that Customs could reasonably conclude that Kay's proposal did not 
contain a contractually binding cap on its G&A rates; nevertheless, 
the agency could not reasonably consider that it had no obligation to 
discuss the matter with Kay.  Kay had no reason to further explain its 
G&A rates or to provide a firm cap for these rates unless the agency 
advised Kay of its view that Kay's proposed G&A costs were 
significantly understated and not effectively capped.

Other Issues

Kay also alleges that Customs failed to conduct meaningful discussions 
concerning its technical proposal.  Specifically, it asserts that the 
agency failed to raise during discussions concerns Customs had about 
Kay's use of part-time personnel on weekends, its buying methodology 
for aircraft parts, its hazardous material reporting plan, and the 
complexity of its EDP system.  Kay states that all of these concerns 
were listed in the evaluation record as weaknesses in Kay's technical 
proposal, yet none of these weaknesses was discussed.

Based on our review of the record, we find nothing improper in the 
agency's conduct of technical discussions.  First, Kay's use of 
part-time personnel was first introduced in its BAFO.  Where problems 
are introduced in a BAFO, the agency is not obligated to reopen 
discussion so that an offeror may remedy the defects.  State Technical 
Institute at Memphis, B-250195.2; B-250195.3, Jan. 15, 1993, 93-1 CPD  para.  
47.  Second, with respect to buying methodology, in our view, the 
agency sufficiently led Kay into this area of concern by asking four 
questions concerning the role of Kay's buyer and buying methodology.  

The final two weaknesses, concerning Kay's hazardous material 
reporting plan and EDP, did not have a significant adverse impact on 
the proposal's technical rating in the context of the entire 
evaluation.  With respect to the reporting plan, the evaluators noted 
that Kay proposed an oral as opposed to a written reporting system.  
We agree with Customs that this weakness was insignificant, since the 
agency considered Kay's approach to be acceptable as proposed and the 
requirement appears to be a minor part of the contract.  Concerning 
Kay's EDP system, the evaluators rated it "outstanding" in terms of 
staffing, methodology, and past performance.  Since discussions need 
not be all-encompassing, we will not object to the agency's decision 
not to discuss these relatively minor issues and deny this protest 
ground.  Booz, Allen & Hamilton, Inc., B-249236.4; B-249236.5, Mar. 5, 
1993, 93-1 CPD  para.  209.  

Kay raises two other protest bases.  First, Kay contends that Customs 
improperly evaluated its cost proposal by adjusting its cost based 
upon anticipated G&A costs associated with Kay's "other direct costs" 
(ODC).  This argument is based on Kay's review of the agency cost 
evaluation.  Second, the protester complains that the agency's 
methodology for arriving at consensus ratings under the technical 
evaluation was unreasonable and inconsistent.  Kay's argument is based 
on its review of the adjectival ratings assigned by the evaluators 
under each of the evaluation subfactors.  Kay concludes that its 
overall technical consensus rating should have been "outstanding," 
rather than "good."  We find these issues to be untimely.   

Under our Bid Protest Regulations, protests not based upon alleged 
improprieties in a solicitation must be filed no later than 10 working 
days after the protester knew, or should have known, of the basis for 
protest, whichever is earlier.  4 C.F.R.  sec.  21.2(a)(2) (1994).  Here, 
Kay became aware of the agency's cost adjustment based on ODCs and the 
consensus rating methodology on September 12, when the agency provided 
copies of all documents relevant to the evaluation of Kay's cost and 
technical proposal and source selection.  Since Kay did not raise 
these objections until October 12, these issues are untimely and will 
not be considered.  Republic Environmental Sys., Inc., B-249898, Dec. 
15, 1992, 92-2 CPD  para.  417.  While the protester argues that its initial 
protest should be read so as to encompass these allegations, we 
disagree.  Based on a debriefing, Kay's protest raised specific 
challenges to the procurement.  Neither the evaluation of ODCs nor the 
method of "rolling up" the evaluators' adjectival ratings was 
mentioned or suggested in the initial protest.  

SERV-AIR'S PROTEST

Serv-Air raises numerous objections to the award in two separately 
filed protests.  The protester contends that Customs unreasonably 
evaluated its cost and technical proposal, improperly evaluated 
Beech's proposal, and conducted an unreasonable cost/technical 
tradeoff.  We have carefully reviewed the protest allegations and find 
them to be without merit or untimely.  While our decision does not 
specifically address each and every argument and subargument raised by 
the protester, each has been considered.  We discuss below several of 
the protest issues raised. 

Cost Evaluation of Serv-Air's Proposal

The evaluators found that Serv-Air had proposed reducing wage rates to 
levels below rates paid by Serv-Air as the incumbent under the current 
contract.  They also noted that the protester proposed to lower the 
current escalation rate from [DELETED] percent to [DELETED] percent 
and reduce fringe benefits.  Accordingly, Customs adjusted Serv-Air's 
estimated labor costs by approximately $[DELETED] million.  Customs 
also adjusted the protester's proposed other direct costs by 
approximately $[DELETED] million.  In addition, the evaluators stated 
that the current wages and benefits were insufficient to retain a 
qualified, skilled work force, noting a turnover rate of 17 percent 
under the current contract and concluded that Serv-Air's cost proposal 
presented a high risk to the government to retain a qualified, 
skilled, and stable work force.  

The protester has presented no evidence showing the cost adjustments 
to be unreasonable.  Rather, the protester contends that Customs 
imposed a "double penalty" on Serv-Air by deeming its cost proposal 
high-risk because of its proposed wage rates and benefits and, at the 
same time, upwardly adjusting its cost to reflect wages that the 
agency believed would ultimately have to be paid during the contract.  

It is not the function of this Office to evaluate technical proposals 
de novo; rather, in reviewing protests against allegedly improper 
evaluations, we will examine the record to determine whether the 
agency's judgment was reasonable and consistent with the evaluation 
criteria listed in the solicitation.  Rome Research Corp., B-245797.4, 
Sept. 22, 1992, 92-2 CPD  para.  194.  A protester's disagreement with the 
agency's judgment is itself not sufficient to establish that the 
agency's evaluation was unreasonable.  PHH Homequity, B-244683, Oct. 
7, 1991, 91-2 CPD  para.  316.

Here, the RFP provided that the cost proposal would be evaluated for 
allowability, allocability, realism, and risk and that the evaluation 
would include "an assessment of the offeror's ability to provide 
uninterrupted high-quality work."  In this regard, as explained, an 
agency should conduct a cost realism analysis in order to determine 
what probable and realistic cost it expects to incur if it accepts a 
particular proposal.  The cost adjustment that results from such an 
analysis, however, does not eliminate or ameliorate risks inherent in 
an offeror's contemplated approach since the agency's cost adjustment 
is for evaluation purposes only and does not alter the offeror's 
proposal to pay the lower rates.  See Honeywell,Inc., B-238184, Apr. 
30, 1990, 90-1 CPD  para.  435.  Thus, we do not think that a "double 
penalty" resulted from Customs upwardly adjusting Serv-Air's wages and 
benefits for cost realism purposes while at the same time concluding 
that those wages and benefits, which Serv-Air proposed to pay, would 
present a high risk that the firm would not be able to retain a 
qualified, skilled work force.

Technical Evaluation of Serv-Air's
  Proposal and Meaningful Discussions

In its comments on the agency's administrative reports,[4] Serv-Air 
alleged, for the first time, that the agency unreasonably downgraded 
its technical proposal based on specific perceived weaknesses in its 
approach to staffing.  It also argued in its comments that the staff 
reductions which it proposed in its BAFO were justified based on 
reductions in the RFP requirements made prior to the agency's request 
for BAFOs and that the agency was obligated to reopen discussions 
after BAFOs to raise its staffing concerns with Serv-Air.  

These arguments are untimely because they were not raised within 10 
working days of when the protester knew of these protest grounds.  4 
C.F.R  sec.  21.2(a)(2).  

The record shows that Serv-Air was aware of the agency's evaluation of 
its staffing and the fact that the agency had not discussed staffing 
with it at the time it filed its initial protest on August 19, but did 
not raise these issues until its comments nearly 2 months later.  In 
this respect, on August 18, Customs provided Serv-Air with a thorough 
debriefing at which it disclosed the detailed staffing weaknesses in 
Serv-Air's proposal.  Serv-Air's protest of August 19, containing 10 
separate counts, did not identify any alleged impropriety in the 
agency's judgments about Serv-Air's proposed staffing.  While the 
protest included a count called "arbitrary evaluation," that count 
primarily challenged the qualifications of the evaluators.  With 
respect to the actual evaluation, it merely stated "[i]n addition, 
Customs' evaluation was erroneous and improper."  No factual basis was 
provided for this conclusion.  Similarly, the protest contained a 
count called "Lack of Adequate or Meaningful Discussions."  It stated 
that the agency had identified 15 weaknesses at the debriefing and 
asserted that "Customs failed to raise these issues with Serv-Air in 
the regular course of discussions."  The protest did not identify the 
nature of the weaknesses, nor did it contend that the agency was 
required to conduct post-BAFO discussions.

Our regulations require a protester to provide a detailed statement of 
the factual and legal grounds of protest.  4 C.F.R.  sec.  21.1(b)(4).  
This requirement is intended to provide our Office and the contracting 
agency with a sufficient understanding of the grounds of protest and 
with the opportunity to expeditiously consider and resolve the protest 
with minimal disruption to the orderly process of government 
procurement.  American President Lines, Ltd., B-236834.8; B-236834.9, 
May 15, 1991, 91-1 CPD  para.  470.  Despite the fact that on August 18 the 
agency provided the protester with detailed information forming the 
bases of these allegations, the protester failed to raise the issues 
until its comments which it filed almost 2 months later.  Since the 
protester did not raise these issues within 10 days of the debriefing, 
these issues are untimely, and we will not consider them.  

Evaluation of Beech's Proposal

Serv-Air contends that the agency improperly waived a mandatory 
requirement for Beech by allowing Beech to take exception to the RFP 
requirement to "perform all . . . maintenance" for night vision 
goggles (NVG).  Serv-Air states that Beech's proposal indicated that 
Beech would not perform certain depot level NVG maintenance and 
recommended that those services be subcontracted to the manufacturer 
or other approved vendor.[5]

The record shows that Beech and Serv-Air offered similar approaches to 
performing these requirements:  each offered to perform depot-level 
maintenance using equipment available at the agency site and each 
indicated that depot-level maintenance requiring equipment not 
available from the government would be performed by the NVG 
manufacturer or other approved vendor.[6]  The agency states that it 
found this approach to be acceptable for both offerors and that 
neither offeror was considered capable of performing all the required 
NVG services "in-house."  The agency states further that the offerors 
were "judged similarly on the technical side with regard to 
maintenance of the night vision goggles."  Thus, to the extent that 
the agency waived a mandatory requirement for the awardee, it also 
waived the requirement for Serv-Air.  Accordingly, we conclude that 
the protester has failed to show that Customs's flexibility in 
interpreting the NVG depot-level maintenance requirement was 
unreasonable or that it prejudiced the protester.  Planning Sys. Inc., 
B-246170.4, Dec. 29, 1992, 92-2 CPD  para.  445.

Source Selection Decision

Finally, Serv-Air challenges Customs' decision to award the contract 
to Beech, notwithstanding its higher cost.  The protester states that, 
based on its review of the proposals and evaluation documents, it is 
unable to ascertain the cost difference and suggests that the 
difference between Serv-Air's estimated cost and Beech's higher cost 
is greater than the agency believed.  Serv-Air also expresses general 
disagreement with the agency's cost/technical tradeoff.

Cost/technical tradeoffs may be made in selecting an awardee subject 
only to the test of rationality and consistency with the established 
evaluation factors.  Maytag Aircraft Corp., B-237068.3, Apr. 26, 1990, 
90-1 CPD  para.  430.  In performing such tradeoffs, an agency's source 
selection authority retains considerable discretion in determining the 
significance of technical rating differentials and their relationship 
to proposed costs.  Loral Infrared & Imaging Sys., Inc., B-247127.3, 
July 13, 1992, 92-2 CPD  para.  52.

Concerning the agency's judgment of the probable cost difference 
between the protester's and awardee's proposals, Serv-Air has not 
explained in any detail the basis for its conclusion that the agency's 
cost comparison was flawed.  Based on our review, however, it appears 
that the protester fails to recognize that the agency adjusted its 
proposed "other direct costs" by nearly $[DELETED] million over the 
life of the contract, and the estimated probable costs appear to be 
reasonably based.  The record also supports the agency's determination 
that Beech's technical proposal was superior to Serv-Air's, 
particularly with respect to its approach to staffing.  In sum, 
Serv-Air's protest provides no basis for us to object to the 
cost/technical tradeoff decision. 

RECOMMENDATION

Since we have found that Customs failed to conduct meaningful 
discussions with Kay, we recommend that the agency reopen discussions 
with Kay in order to ascertain the appropriate G&A rates to be used in 
determining the G&A costs which would be incurred if the agency 
accepted Kay's proposal.  The agency should also conduct discussions 
with all other competitive range offerors and request new BAFOs.  If, 
after evaluating the BAFOs received, Customs determines that an 
offeror other than Beech has submitted the most advantageous offer, 
Customs should terminate Beech's contract and award to that offeror.  
We also find that Kay is entitled to recover its costs of filing and 
pursuing its protest, including reasonable attorneys' fees.  4 C.F.R.  sec.  
21.6(d)(1).  In accordance with 4 C.F.R.  sec.  21.6(f)(1), Kay's certified 
claim for such costs, detailing the time expended and costs incurred, 
must be submitted directly to Customs within 60 days after receipt of 
this decision.

The protest of Kay is sustained in part, denied in part, and dismissed 
in part.  The protests of Serv-Air are dismissed in part and denied in 
part.

Comptroller General
of the United States

1. Customs and Beech also argue that the protester's argument that the 
agency failed to discuss the alleged ceiling on G&A rates is untimely.  
We disagree.  Kay's initial protest, filed within 10 days of a 
debriefing at which Kay was advised that Customs had substantially 
adjusted Kay's G&A costs, specifically raised the issue.  The protest 
stated that, at the debriefing, Customs raised cost concerns with 
Kay's proposal "that had not been raised during negotiations.  Namely, 
Customs stated its concerns with [Kay's] G&A costs, notwithstanding 
that [Kay] had explicitly stated in its proposal that it would accept 
a firm price ceiling for G&A."  In the protest's "Legal Discussion" 
section, Kay argued that Customs failed to engage in meaningful 
discussions with Kay, again stating that at the debriefing the agency 
identified "cost concerns never previously raised which . . . caused 
Customs to increase [Kay's] most probable cost."  We therefore 
conclude that the issue was timely raised.

2. For example, Customs questioned aspects of Kay's cost proposal such 
as paying a clerk an hourly wage below the minimum wage and failing to 
show elements of phase-in travel expenses which were expressed as a 
fixed unit price.

3. Referring to the March 25 DCAA audit letter, Customs stated in one 
submission to this Office that Kay "was clearly put on notice that its 
trial balloon regarding a ceiling contained in its initial proposal 
was not a firm offer of a ceiling."  Subsequently, the agency conceded 
that it "was mistaken in its belief that [the March 25] letter had 
been supplied to [Kay]."

4. Serv-Air filed one set of comments on both reports.

5. According to the RFP, depot-level maintenance is the "highest 
possible level of maintenance and consists of major overhaul, rework 
and repair of complete aircraft systems, avionics systems, sensor 
systems . . . ."

6. Serv-Air proposed to perform depot-level maintenance at the 
government's San Angelo Aviation Branch, which the proposal stated 
should be designated as the "centralized Customs Level Two facility," 
and that "[m]aintenance requirements that exceed the capabilities of 
the Level Two facility will be coordinated with the manufacturer or 
other approved commercial vendor."  Similarly, while Beech's proposal 
stated that its price "does not include the cost for D-level test 
equipment and training for NVG," it stated that Beech will perform the 
D-level maintenance "commensurate with available test equipment at a 
centralized location" and recommended that the D-level requirements be 
"subcontracted to the NVG manufacturer or other approved, qualified 
commercial or DOD vendors."