BNUMBER: B-259920.2
DATE: June 13, 1995
TITLE: Matter of: Combat Systems Development Associates Joint Venture
**********************************************************************
REDACTED VERSION[*]
Matter of: Combat Systems Development Associates Joint Venture
File: B-259920.2
Date: June 13, 1995
William Weisberg, Esq., and William Welch, Esq., Barton Mountain &
Tolle, for the protester.
L. Graeme Bell III, Esq., and Christopher M. Farris, Esq., Crowell &
Moring, for Vitro Corporation, an interested party.
Margaret A. Alfano, Esq., Department of the Navy, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protester's contention that the agency conducted an unreasonable
cost realism review of the awardee's proposed cuts to pay and benefits
is denied where the record shows that the agency reasonably concluded
that the proposed cost savings should be accepted because the awardee
would be able to unilaterally impose such cost-savings measures on its
employees, and where the record also shows that the agency adequately
reflected its concerns about the effects of the pay cuts in its
decision to downgrade the awardee's technical proposal in two separate
areas.
2. Challenge to agency's decision to accept the awardee's level of
proposed uncompensated overtime is sustained where the record shows
that despite the submission of a signed certification from every
employee promising to voluntarily perform [DELETED] hours of
uncompensated overtime each week, the agency did not consider the fact
that the awardee intended to announce on the day of contract award
significant reductions in pay rates and fringe benefits, calling into
question the continued willingness of the existing employees to
voluntarily work additional hours without compensation. The challenge
is also sustained because the record suggests that over the life of
the contract the rate of employee turnover will be higher than
estimated and that the newly hired employees will have even less
incentive to provide uncompensated overtime than existing employees.
3. Protester's contention that the agency conducted an improper
evaluation of technical proposals is denied where the record shows
that the agency review was reasonable and consistent with the
solicitation's stated evaluation criteria.
4. Argument that agency should have awarded to protester on the
strength of its initial proposal, and should have excluded the awardee
from the competitive range, is denied where the protester makes no
showing that the agency acted unreasonably in including the awardee's
proposal in the competitive range and holding negotiations.
DECISION
Combat Systems Development Associates Joint Venture (CSDA) protests
the award of a contract to Vitro Corporation by the Department of the
Navy pursuant to request for proposals (RFP) No. N00024-94-R-6360, for
technical and engineering support services for the Surface Ship
Anti-Submarine Warfare Combat System Program Office. CSDA argues that
the Navy conducted an unreasonable evaluation of the technical and
cost proposals, and improperly included the awardee's proposal in the
competitive range.
We sustain the protest.
The RFP, issued February 18, 1994, sought offers for a
cost-plus-fixed-fee level-of-effort contract for the technical and
engineering support services described above. The RFP estimated the
level of effort for the base period, and for each of five option
quantities. These estimates were as follows:
Base Year 336,396 man-hours
Option I 71,840 man-hours
Option II 400,220 man-hours
Option III 361,862 man-hours
Option IV 357,054 man-hours
Option V 323,013 man-hours
The base year together with the five options reflect approximately 5
years of contract effort. Each option effort contains several
contract line items (for example, option II consists of line items
0006-0009), and for each line item offerors were required to identify
a proposed cost for the man-hours and an accompanying fixed fee.
The RFP advised that the Navy was seeking proposals offering "the
greatest technical ability at a reasonable price," and that the agency
would select the technically acceptable offeror whose proposal offered
the greatest value to the government. The evaluation was structured
to consider technical issues and proposed costs. Under the technical
factor, there were four subfactors: technical approach; management
approach; experience; and facilities and resources. Generally, the
technical approach subfactor was substantially more important than the
other subfactors, which are listed in declining level of
importance.[1] Under the first three subfactors were additional
evaluation criteria, which need not be addressed here.
Under the cost factor, the RFP advised that the Navy would consider
realism, reasonableness and validity of the costs as proposed.
Potential offerors were also advised that they were responsible for
demonstrating the cost credibility of their proposals, and that the
government would develop an evaluated cost for each offeror's
proposal. In addition, to establish the relative balance between
technical advantage and proposed cost, the RFP set forth a formula for
calculating the amount of cost premium the agency would pay for
additional technical merit.[2]
The Navy received initial proposals from three offerors on April 26.
Technical proposals were reviewed by the technical evaluation review
panel (TERP); cost proposals were reviewed by the cost analysis panel
(CAP). Both panels submitted their reviews of initial proposals to
the contract award review panel (CARP). Upon receipt of the TERP and
CAP reports, the CARP made adjustments to the conclusions of the two
initial review panels, and then converted the adjusted adjectival
technical ratings prepared by the TERP to numerical scores, which were
weighted according to the importance of each of the evaluation
subfactors and criteria. The results of the technical and cost review
are shown below:
(Costs in millions)
Weighted Proposed Evaluated
Offeror Score Costs Costs
Vitro 84 $[DELETED] $67.8
CSDA 82 $[DELETED] $55.3
Company A 75 $[DELETED] $71.1
After completing its review, the CARP recommended negotiations, and
excluded Company A from further consideration based on its lower score
and significantly higher proposed and evaluated costs. On August 23,
the contracting officer began discussions with CSDA and Vitro.
After holding written and oral discussions with both offerors, the
Navy received best and final offers (BAFO) on October 11. Again, both
the CAP and TERP produced reports for the CARP, and, as before, the
CARP did not accept all of the findings of the two panels. Instead,
the CARP set forth in a memorandum for the record explanations for
eight separate adjustments to the ratings assigned by the TERP. After
again assigning weighted numerical scores to each offeror's BAFO and
comparing those scores to each offeror's evaluated costs, the results
of the CARP's BAFO review were as follows:
(Costs in millions)
Weighted Proposed Evaluated
Offeror Score Costs Costs
Vitro 85 $53.1 $54.6
CSDA 80 $[DELETED] $54.4
Although both proposals were technically acceptable and although
CSDA's proposal was evaluated as having a slightly lower cost than
Vitro's proposal, Vitro's slightly higher evaluated costs were within
the range established by the RFP's premium formula, given Vitro's
slightly higher weighted score. Thus, the Navy decided that Vitro's
proposal was worth the additional evaluated cost, and Vitro was
awarded the contract on December 29.
COST REALISM EVALUATION
CSDA argues that the Navy's evaluation of proposed costs was
unreasonable because the Navy: (1) failed to properly consider the
overall effect of the cost-cutting efforts in Vitro's BAFO--i.e.,
Vitro's combination of significant pay and benefit cuts together with
voluntary uncompensated overtime--on Vitro's probable costs; and (2)
acted unfairly by advising CSDA that the Navy would only accept
uncompensated overtime where the offeror could provide historical
evidence that the proposed employee had provided uncompensated
overtime in the past, but then accepting Vitro's uncompensated
overtime because Vitro submitted signed certifications from its
employees promising to perform the overtime proposed.
Background on Cost Realism Issues
Addressing CSDA's challenges to the cost realism evaluation requires
additional details about the two offerors' approach to proposed costs.
In preparing their respective cost proposals, the record clearly shows
that both Vitro, the incumbent here,[3] and CSDA were considering ways
to achieve a competitive advantage by using uncompensated overtime.[4]
The record also shows, however, that CSDA's and Vitro's enthusiasm for
proposing uncompensated overtime was tempered by their concern that
the Navy might "reject" such overtime if the overtime lacked
historical support--i.e., the Navy might recalculate the offeror's
proposed costs using a standard 40-hour workweek, thus making
evaluated costs significantly higher than those proposed.
As a preliminary matter, a brief explanation of the way uncompensated
overtime is priced demonstrates its appeal to competitors seeking an
edge in a cost reimbursement environment. In general terms, since the
RFP here requires offerors to propose costs using an estimated number
of man-hours, an offeror that can credibly state that each of its
employees will work more than 40 hours per week without additional
compensation, can, other things being equal, propose lower costs. In
addition, although the methodology for using uncompensated overtime
may vary, offerors are permitted to calculate their costs using an
uncompensated overtime rate which is lower than the employee's
standard hourly rate. Id.; see also Systems Research & Applications
Corp., B-225574.2, May 26, 1987, 87-1 CPD 540.
For example, if employees are paid $20 per hour for 40 hours of work,
but will actually work 5 additional hours without compensation, the
effective hourly rate for those employees is lower, as shown below:
$20.00 x 40 hours = $17.78
45 hours hour
Since offerors proposing uncompensated overtime may use this lower
effective hourly rate to calculate their total proposed costs, the
reduction in proposed costs can be substantial. Using the effective
rate calculated above for 5 hours of uncompensated overtime each week
(without overhead or other adjustments) and the number of man-hours in
the base period for this RFP (336,396 man-hours), the advantage of
using uncompensated overtime is shown below:
Offeror with standard rate:
336,396 x $20 = $6,727,920.
Offeror with uncompensated overtime rate:
336,396 x $17.78 = $5,981,120.80
Evaluation of the Cost Proposals
In its initial proposal, Vitro advised that its employees would work a
[DELETED], and would be required to provide an additional [DELETED]
hours of uncompensated overtime.[5] The Navy's evaluators rejected
Vitro's [DELETED] because there was no company policy in place and
because, even if implemented, there was no indication that the policy
would be in effect for any other Vitro contract. The Navy also
rejected Vitro's proposed [DELETED] hours of uncompensated overtime
per employee because the former Tracor employees performing the
contract were not under the total time accounting system necessary to
generate a verifiable history of performing such overtime during
Tracor/Vitro's past performance of this contract.[6] As a result, the
Navy's CAP report recalculated Vitro's costs using a 40-hour workweek
rather than the [DELETED]-hour weeks proposed. This
recalculation--together with adjustments to Vitro's overhead rates and
general and administrative expenses--resulted in an upward adjustment
to Vitro's initial proposed costs from $59.2 million to $67.8 million.
Vitro's BAFO attempted to address the Navy's concerns, and to
introduce other significant cost-savings measures. Vitro abandoned
the [DELETED] with the explanation that senior management had rejected
the proposal to impose a [DELETED] company policy. In its place Vitro
proposed that its employees would provide voluntary uncompensated
overtime at average amounts of [DELETED] or [DELETED] hours per
week.[7] Since Vitro did not have evidence of providing uncompensated
overtime in the past, Vitro submitted signed certifications from each
of its exempt employees promising to provide the uncompensated
overtime. These certifications stated
"I understand that the Vitro Corporation Proposal, in
response to Naval Sea Systems Command solicitation
N00024-94-R-6360, projects that exempt employees will
deliver [DELETED] [or [DELETED] where appropriate] hours of
uncompensated overtime (UT) per week on average during the
contract period of performance. As an employee of Vitro
Corporation, I hereby certify and freely represent that I
will voluntarily provide the projected UT in accordance with
the UT policies of the Company."
Vitro also proposed to cut employee pay between [DELETED] and
[DELETED] percent on the day of contract award, and to implement the
following cuts in benefits: a decrease in [DELETED]; a decrease in
[DELETED]; and the elimination of [DELETED].[8] The record indicates
that Vitro's employees had not been advised about the proposed cuts in
pay and benefits.
In response to Vitro's BAFO, the Navy explains that it considered each
of three major factors in Vitro's proposal: (1) whether Vitro was
likely to provide the uncompensated overtime in its proposal; (2) the
realism of the proposed pay cut; and (3) the adequacy of Vitro's
proposed fringe benefit rates.[9] With respect to Vitro's proposed
uncompensated overtime, the Navy accepted Vitro's approach because
each of the employees provided a signed certification. Although the
evaluation records show that the Navy would have preferred historical
data as evidence of the likelihood that it would actually receive the
benefits of the uncompensated overtime proposed, it concluded that the
use of signed employee certifications was adequate for purposes of its
cost realism review. With respect to the cuts in pay and benefits,
the Navy concluded that Vitro's approach would have a negative impact
on employee morale and downgraded Vitro's technical proposal in areas
related to contract management and retention of personnel.
CSDA's proposal, given its status as a joint venture, required
different considerations. CSDA is a joint venture comprised of two
teaming partners: EG&G Washington Analytical Services Center, Inc.,
holding a 49-percent interest in the joint venture; and GPS
Technologies, Inc., holding a 51-percent interest in the joint
venture. None of the proposed work was to be performed by the joint
venture itself; instead the work was to be performed by
subcontractors, including EG&G and GPS, to which approximately 70
percent of the total effort was allocated. The two joint venturers,
and one of the four remaining subcontractors, Matrix, accounted for
approximately 80 percent of the total effort, and were the only three
subcontractors to propose the use of uncompensated overtime. Given
the amounts of uncompensated overtime proposed by the three
subcontractors, CSDA's proposal anticipated that slightly more than
[DELETED] percent of the total required effort would be provided as
uncompensated overtime.[10]
When the Navy evaluated CSDA's proposal for cost realism, it accepted
all of Matrix's proposed uncompensated overtime, but rejected portions
of the uncompensated overtime proposed by EG&G and GPS as overly
optimistic and not supported by the historical information
available.[11] Although the record indicates that the Navy and DCAA
requested historical information from CSDA to support the proposed
uncompensated overtime, there is a dispute about what oral instruction
may have been given to CSDA regarding the necessity for historical
data. According to CSDA, the Navy's contracting officer advised CSDA
during oral discussions that the agency would only allow offerors to
propose uncompensated overtime where the offeror had historical
evidence of such overtime being performed in the past. The Navy
denies giving any such instruction to CSDA. In addition, because of
the alleged instruction regarding historical information, CSDA claims
that it instructed one of its subcontractors that it could not propose
uncompensated overtime in the BAFO since it lacked historical support
for the overtime.
Analysis
When an agency evaluates 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) 15.605(d). Consequently, a
cost realism analysis must be performed by the agency to determine the
extent to which an offeror's proposed costs represent what the
contract should cost, assuming reasonable economy and efficiency.
CACI, Inc.-Fed., 64 Comp. Gen. 71 (1984), 84-2 CPD 542. Contracting
officers are required by the FAR to document this evaluation, FAR
15.608(a)(1), and when properly documented, our review of an agency's
exercise of judgment in this area 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 183,
aff'd, American Management Sys., Inc.; Department of the Army--Recon.,
70 Comp. Gen. 510 (1991), 91-1 CPD 492; Grey Advertising, Inc., 55
Comp. Gen. 1111 (1976), 76-1 CPD 325.
With respect to CSDA's contention that the Navy should not have
accepted Vitro's pay and benefits cuts, we note first that the
evaluation record shows that the Navy expressly considered Vitro's
proposed pay and benefits cuts and ensured that the possible adverse
effect of the cuts was reflected in the evaluation, as required by FAR
15.608(a)(1). See also Amtec Corp., B-240647, Dec. 12, 1990, 90-2 CPD
482, aff'd, Department of the Army--Recon., B-240647.2, Feb. 26, 1991,
91-1 CPD 211. Specifically, the CAP identified the proposed pay and
benefits cuts in Vitro's cost proposal, and suggested that the CARP
consider their impact when reviewing the TERP's evaluation of the
technical proposal. When the CARP reviewed both the technical and
cost evaluation reports, it concluded that:
"these measures proposed by Vitro (pay cuts, benefits
reduction, working uncompensated overtime) will result in
dissatisfied and disgruntled employees. Disgruntled
employees are rarely, if ever, enthusiastic about their jobs
and will just do the bare minimum of effort needed to
accomplish the work without concern about the quality of
work."
Thus, the CARP reduced Vitro's technical ratings to address concerns
about the impact of Vitro's approach on its personnel.
The CARP reduced Vitro's technical ratings from excellent to
acceptable under the contract management criterion under the
management approach subfactor (which includes consideration of how the
offeror manages its personnel), because the CARP concluded that the
cuts suggested that Vitro lacked a good personnel management scheme.
This reduction resulted in a corresponding reduction for the entire
management approach subfactor from "excellent (low)" to "good (high)."
In addition, the CARP increased the risk assessment for the personnel
qualifications criterion under the experience subfactor from low risk
to high risk, which resulted in a corresponding increase in the risk
assessment for the entire experience subfactor from low to medium.
The Navy based this change on its concern that Vitro might have
difficulty retaining its people given the proposed changes to pay and
benefits.
We view the Navy's decision to downgrade Vitro's technical proposal
for its proposed pay and benefit cuts as a reasonable and adequate
response to the issues presented by Vitro's approach. See Information
Spectrum, Inc., B-256609.3; B-256609.5, Sept. 1, 1994, 94-2 CPD 251.
Although CSDA argues that the Navy should have rejected the proposed
pay and benefits cuts, we disagree. Unlike the voluntary nature of
the proposed uncompensated overtime, discussed below, a cut in pay and
benefits for exempt employees is a unilateral company action requiring
no employee input or action, is clearly verifiable, and is definite in
its impact on proposed costs. To the extent that the proposed cuts
raise issues regarding Vitro's personnel management, and its ability
to retain existing personnel, the Navy adequately responded to those
concerns with its adjustments to the technical evaluation.
With respect to CSDA's contention that the Navy should not have
accepted Vitro's uncompensated overtime in light of Vitro's proposed
pay and benefit cuts, we agree that the Navy's evaluation was
inadequate.
Vitro's proposal, the Navy's evaluation materials, and the pleadings
filed during the course of this protest, show that Vitro intended to
announce its pay and benefit cuts on the date of contract award if
successful in retaining its contract as a result of this competition.
The record shows that the unannounced pay cuts of between [DELETED] to
[DELETED] percent will be imposed for all employees other than the
[DELETED] most senior employees proposed for this effort, and that for
many of the junior employees, the pay cut will range from [DELETED] to
[DELETED] percent. Thus, when Vitro's proposed employees certified
that they would voluntarily provide [DELETED] (or [DELETED]) hours of
uncompensated overtime every week, they were unaware of the
significant pending cut in pay, and the pending loss of a portion of
their [DELETED]; a portion of their [DELETED]; and [DELETED].
Although the Navy considered Vitro's proposed uncompensated overtime
as part of its decision to downgrade Vitro's technical evaluation for
the proposed pay cuts, there is no evidence in the record that the
Navy considered the impact of the pay cuts on the continued
willingness of Vitro's employees to provide uncompensated overtime.
In fact, at a hearing convened by our Office, the Navy's contracting
officer testified that there was no consideration of the relationship
between these issues as part of the decision to accept the employee
certifications. In addition, given that Vitro declined to revise its
company policies and will continue to view such overtime as voluntary,
the certifications here have no bearing on whether Vitro's new hires
will voluntarily agree to continue providing uncompensated
overtime.[12]
The significance of the treatment of proposed uncompensated overtime
is clear: without continued voluntary unpaid effort from Vitro's
employees, the cost of this contract over the next 5 years will likely
be much greater than the evaluated cost upon which the Navy made its
selection decision. Accordingly, given the relatively small
difference in evaluated costs between CSDA's and Vitro's proposals, a
change in the treatment of proposed uncompensated overtime--even a
partial discounting of the amount of proposed uncompensated overtime
the Navy would accept as realistic--could have a determinative effect
on the technical/cost tradeoff and thus on the ultimate award
decision.
We conclude that the Navy failed to consider the fact that the
certifications here were solicited from and provided by employees
without knowledge of pending decreases to their pay and benefits.
Under these unique circumstances, the Navy's cost realism review must
consider whether Vitro's certifications truly provide evidence of a
long-term willingness to provide voluntary unpaid effort over the life
of this contract. Accordingly, based on our conclusion that the
Navy's cost realism evaluation with respect to Vitro's proposed
uncompensated overtime failed to consider certain key information, we
sustain the protest on this ground.
CSDA also argues that the cost realism review was unfair because the
Navy advised CSDA that it would only accept an offeror's proposed
uncompensated overtime where the offeror could provide evidence that
the employee had provided uncompensated overtime in the past, but then
accepted Vitro's uncompensated overtime even though Vitro had no
historical evidence of providing such overtime. In support of its
claim, CSDA's president testified at a hearing convened by our Office
that its understanding was supported by the terms of the RFP, by the
historical support requested during negotiations by both the DCAA and
the Navy, and because the contracting officer expressly advised CSDA
of this requirement during oral discussions.
As stated above, the record here shows that both CSDA and Vitro
expected that the Navy would focus on historical support for
uncompensated overtime, and that the Navy itself intended to disallow
uncompensated overtime when offerors lacked historical data to support
it. In fact, the Navy admits it abandoned its preference for
historical support and accepted Vitro's certifications only "after
much discussion."
Despite the Navy's clear intent at the outset to review historical
support for uncompensated overtime, the record does not support CSDA's
claim that it was advised that such information was the only way an
offeror could establish that such overtime should be accepted. First,
although CSDA is correct in noting that the RFP required offerors to
establish the credibility of their cost proposals, the RFP makes no
mention of a requirement for historical data. Second, although both
the Navy and DCAA requested information about past performance of such
overtime, the contracting officer testified that she never stated that
such information was required to show an offeror's cost realism.
Third, the Navy's memorandum for the record documenting issues covered
during oral discussions makes no mention of any discussion of
uncompensated overtime during the meeting with CSDA.[13] Finally, the
handwritten notes of CSDA's president do not clearly support CSDA's
contention: while these notes--written on the day of CSDA's oral
discussions with the Navy and produced by CSDA in response to a
document request from the Navy--show a notation about a requirement
for historical data to support uncompensated overtime, CSDA's
president testified that the relevant portion of the notes was written
after the meeting, but later the same day.
On balance, based on our review of the record, including the testimony
from both CSDA's president and the contracting officer, we find that
the Navy did not advise CSDA that historical evidence was the only way
an offeror could provide support for uncompensated overtime. While it
is clear that CSDA believed that its proposed costs might be increased
wherever it proposed uncompensated overtime without supporting
historical data, and that CSDA advised at least one of its
subcontractors of its belief, we cannot conclude that CSDA, or any of
the other offerors, was advised that such historical data was a
requirement for proposing uncompensated overtime.
TECHNICAL EVALUATION
CSDA argues that the Navy's technical evaluation was unreasonable
because the conversion of adjectival ratings to numerical scores was
unfairly executed, and because the Navy improperly downgraded CSDA's
score based on its split office arrangement. CSDA also argues that
the Navy should have excluded Vitro's proposal from the competitive
range and awarded to CSDA on the strength of its initial proposal,
rather than conduct discussions.
In considering protests against an agency's evaluation of proposals,
we will examine the record to determine whether the agency's judgment
was reasonable and consistent with the stated evaluation criteria and
applicable statutes and regulations. ESCO, Inc., 66 Comp. Gen. 404
(1987), 87-1 CPD 450. A protester's disagreement with the agency's
judgment, without more, does not show that the judgment was
unreasonable. Id.
With respect to CSDA's contention that the Navy improperly and
unfairly converted adjectival ratings to numerical scores, our review
of the record shows that none of CSDA's contentions are supported by
the facts. For example, CSDA claims that in the Navy's initial
evaluation of the management approach subfactor, Vitro was rated
"excellent (low) with low risk," but unfairly received 85 points for
this rating while all other assessments modified with the adjective
"low" received a score ending in 1--i.e., 71, 81, or 91.[14] While
Vitro's contention accurately cites the numbers in the initial CARP
report, the discrepancy is clearly an oversight. The CARP report
explains that the TERP evaluated Vitro's proposal as unacceptable
under the small business/small disadvantaged business subcontracting
plan criterion under the management approach subfactor. However,
Vitro included this information in its cost proposal and the CARP
upgraded the score awarded by the TERP from unacceptable to excellent.
The effect of the upgraded score on this criterion resulted in an
upgrade for the management approach subfactor from excellent(low) to
excellent(medium). Hence the award of 85 points was consistent with
the numerical conversion scheme that was fairly applied to both
offerors. CSDA's other challenges in this area are similarly
answered.
We also find unpersuasive CSDA's contention that the agency
unreasonably downgraded CSDA for proposing a split office. The RFP
here required offerors to propose a facility within 1 mile of the
Navy's program office in Crystal City. Prior to the closing time for
receipt of proposals, the Navy received an offeror's question asking
if the Navy required all personnel assigned to the program to reside
in one facility. The Navy answered that "the Offeror should assign
personnel in whichever facilities they (the Offeror) have determined
those personnel can best perform the requirements delineated in
Section C of the RFP." As a result, CSDA proposed that [DELETED]
percent of the personnel for this effort would be housed in Crystal
City, while the remaining personnel would be housed in CSDA's Fairfax,
Virginia facility.
Our review of the record shows that the Navy reasonably concluded that
CSDA had not adequately addressed the impact of a split office on its
ability to manage and coordinate the effort here. We see no reason to
question the CARP's concern that the physical separation of CSDA's
employees could lead to poor integration of related work efforts, or
the CARP's determination that CSDA should have identified the
separation of personnel between Crystal City and Fairfax as a
potential problem area with recommended solutions. We also note that
CSDA does not challenge the results of the agency's evaluation, but
instead contends it was misled by the Navy's response to the
pre-proposal submission question wherein the Navy stated that offerors
could appropriately locate their work force in more than one place.
We disagree. The Navy's decision to permit offerors to propose a
split work force could not reasonably be interpreted to mean that such
an approach might not raise concerns about coordinating the contract
effort. In short, we find no fault with the Navy's documented and
rational consideration of this issue.
As a final matter, CSDA argues that the Navy should have excluded
Vitro's proposal from the competitive range and awarded to CSDA on the
strength of its initial proposal, rather than conducting discussions.
To support its contention, CSDA argues that the proposal submitted by
Company A contained similar weaknesses to Vitro's proposal.
The competitive range consists of all proposals that have a reasonable
chance of being selected for award, that is, those proposals which are
technically acceptable as submitted or which are reasonably
susceptible of being made acceptable through discussions. FAR
15.609(a); Mainstream Eng'g Corp., B-251444, Apr. 8, 1993, 93-1 CPD
307. Here, the Navy included both CSDA's and Vitro's proposals in the
competitive range, but concluded that neither of the proposals could
be accepted without further negotiation. While CSDA is correct that
some of the reasons stated by the Navy for not awarding to CSDA on the
strength of its initial proposal are legally unsound--such as, for
example, the Navy's claim that it could not accept CSDA's initial
proposal because the company failed to include an executed certificate
of procurement integrity, see FAR 3.104-9(b)(3)(ii)(A); General
Elec. Ocean and Radar Sys. Div., B-250418; B-250419, Jan. 11, 1993,
93-1 CPD 30--its contentions are misplaced. The proposal to be
examined here is Vitro's, not CSDA's, and we find nothing unreasonable
about the decision to include Vitro's proposal in the competitive
range.
Even assuming the Navy reasonably could have excluded Vitro's proposal
from the competitive range--and we reach no conclusion on this
issue--it does not follow that the agency acted improperly by
including the proposal in the competitive range. See Vortec Corp.,
B-257568 et al., Oct. 18, 1994, 94-2 CPD 145 at n.1. In fact, where
there is doubt about whether a given proposal should be included in
the competitive range, that doubt should be resolved in favor of
including the proposal, since this is consistent with the overall goal
of maximizing competition. FAR 15.609(a); Birch & Davis Assocs.,
Inc.--Protest and Recon., B-246120.3; B-246120.4, Apr. 20, 1992, 92-1
CPD 372. See also Mainstream Eng'g Corp., supra; Avondale Technical
Servs., Inc., B-243330, July 18, 1991, 91-2 CPD 72. Since Vitro's
proposal was clearly technically acceptable, and since its much higher
evaluated cost was generally related to one agency decision--the
decision to reject Vitro's proposed uncompensated overtime--we will
not question the agency's decision to hold discussions with Vitro
regarding its proposal.[15]
RECOMMENDATION
Because we conclude that the Navy could not reasonably accept Vitro's
proposed uncompensated overtime on the strength of the employee
certifications submitted in Vitro's BAFO without considering the
impact of the proposed but unannounced pay and benefit cuts, we
conclude that the agency conducted an unreasonable evaluation of cost
proposals and thus lacked a rational basis for making award to Vitro.
We recommend that the Navy reconsider its evaluation of uncompensated
overtime, and make a finding regarding the likelihood that, under the
circumstances here, Vitro will deliver the uncompensated overtime
proposed. Based on the results of that reevaluation, the Navy should
make adjustments, if appropriate, to Vitro's proposed costs. In
addition, the Navy may also choose to reopen discussions with both
competitive range offerors and request revised BAFOs. If the Navy
concludes that CSDA, rather than Vitro, is the offeror whose proposal
offers the greatest value to the government--within the guidelines
established by the RFP's premium formula--then Vitro's contract should
be terminated and award made to CSDA. We also find that the protester
is entitled to recover its costs of filing and pursuing the protest,
including reasonable attorneys' fees. 4 C.F.R. 21.6. CSDA's
certified claim for such costs, detailing the time expended and costs
incurred, must be submitted directly to the agency within 60 days
after receipt of this decision.
The protest is sustained.
Comptroller General
of the United States
* The decision issued on June 13, 1995, contained proprietary
information and was subject to a General Accounting Office protective
order. This version of the decision has been redacted. Deletions in
text are indicated by "[DELETED]."
1. Specifically, paragraph B of section M of the RFP advised that the
technical approach subfactor was substantially more important than the
management approach subfactor, and was more important than the
cumulative value for all three of the remaining subfactors.
Management approach and experience were of equal importance, and each
was more important that the facilities and resources subfactor.
2. The RFP's formula for calculating the premium to be paid for
additional technical merit is based on the assumption that a proposal
scoring at least 60 (on a scale of 100) would be technically
acceptable, and that the agency would consider paying a premium of up
to 40 percent above the cost of a proposal with the lowest evaluated
cost and a technical score of 60 in order to select a proposal with
the highest achievable technical score (100).
3. The incumbent contract was actually awarded to Tracor Applied
Sciences, Inc., part of Tracor, Inc. Tracor, Inc. acquired Vitro in
August 1993, and decided to consolidate the performance of this
contract under Vitro. The contract was subsequently transferred by
novation from Tracor to Vitro.
4. Uncompensated overtime is used to describe "hours worked in excess
of an average of 40 hours per week by direct charge employees who are
exempt from the Fair Labor Standards Act (FLSA), without additional
compensation." Defense Federal Acquisition Regulation Supplement
(DFARS) 252.237-7019(a)(1). See also Tracor Applied Sciences, Inc.,
B-253732, Oct. 19, 1993, 93-2 CPD 238.
5. This decision need not consider the accounting differences between
providing a [DELETED] and an additional [DELETED] hours of
uncompensated overtime, and providing [DELETED] hours of uncompensated
overtime in addition to a standard 40 hour per week, because Vitro
abandoned its [DELETED] in its BAFO.
6. DFARS 252.237-7019 requires that contractors offering to provide
uncompensated overtime have a cost accounting practice appropriate for
accumulating and reporting uncompensated overtime hours--i.e., the
offeror must be able to record all hours worked, including
uncompensated hours, for all employees, which is referred to as a
total time accounting system.
7. Specifically, Vitro proposed that its [DELETED] most senior people
would provide [DELETED] hours of uncompensated overtime each week,
while all other exempt personnel would provide [DELETED] hours of
uncompensated overtime each week.
8. For replacement hires, Vitro proposed to offer only [DELETED].
9. The Navy's review of Vitro's proposed fringe benefit
rates--[DELETED]--considered both the impact of the fringe benefit
rates on the quality of personnel over the life of the contract, and
whether Vitro's method of calculating the rates met with the approval
of the Defense Contract Audit Agency (DCAA). CSDA does not challenge,
and our decision does not consider, the mechanics of how the fringe
rate was calculated. With respect to the impact of the lower benefits
signified by these rates, we will review this issue together with the
Navy's evaluation of the proposed pay cut.
10. For comparison, the record shows that Vitro's BAFO proposed that
slightly more than [DELETED] percent of the total effort would be made
up of uncompensated overtime.
11. Unlike Vitro, CSDA's three subcontractors, mentioned above, were
able to provide historical evidence that some of the proposed
employees had provided uncompensated overtime in the past, although in
the case of GPS and EG&G, the Navy concluded that the historical data
did not adequately support the amount of uncompensated overtime
claimed.
12. The record shows that Vitro estimated its annual turnover at
[DELETED] percent prior to proposing these cuts. Thus, prior to the
end of this contract, new hires will likely comprise a majority of
Vitro's work force, and their actions could substantially change
Vitro's ability to deliver the uncompensated overtime here.
13. With respect to the Navy's notes, the record shows that even
though CSDA submitted an agenda of issues to be covered during oral
discussions, CSDA's agenda does not mention uncompensated overtime.
In addition, the Navy's memorandum includes other issues not on CSDA's
agenda that the contracting officer testified were covered during oral
discussions, but the memorandum does not mention uncompensated
overtime.
14. The source selection plan here established the following numerical
ranges: outstanding, 91-100; excellent, 81-90; good, 71-80;
acceptable, 60-70; and unacceptable, 0-59. Within the 10-point range,
assessments modified with the adjective "low" were scored at the low
end of the range (81, 91, etc.); assessments modified with the
adjective "mid" were scored in the middle of the range (65, 75, etc.);
and assessments modified with the adjective "high" were scored at the
high end of range (79, 89, etc.).
15. To the extent CSDA claims that Vitro's proposal was not
significantly different from the proposal that was excluded, our
conclusion is twofold: as stated above, we conclude above that the
decision to include Vitro's proposal in the competitive range was
reasonable; with respect to the proposal that was excluded from the
competitive range, CSDA is not an interested party to raise this
issue. This is a matter for pursuit by the excluded company, not
CSDA. See 4 C.F.R. 21.0(a) (1995).