BNUMBER: B-266053.2
DATE: April 29, 1996
TITLE: CHP International, 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:CHP International, Inc.
File: B-266053.2
Date:April 29, 1996
Alan S. Weitz, Esq., and Edward Tolchin, Esq., Ginsburg, Feldman &
Bress, for the protester.
Clayton S. Marsh, Esq., and Kurt S. Kusiak, Esq., Ropes & Gray, for
World Learning, Inc., an interested party.
Mark P. Lindberg, Esq., and Steven Schwinn, Esq., Peace Corps, for the
agency.
Jacqueline Maeder, Esq., Glenn Wolcott, Esq., and Paul Lieberman,
Esq., Office of the General Counsel, GAO, participated in the
preparation of the decision.
DIGEST
1. Protest that agency conducted inadequate cost realism analysis is
denied where the agency considered the realism of the awardee's
proposed direct labor costs, the number of labor hours and the mix of
labor categories, the fringe benefits, travel and miscellaneous costs,
and the indirect rates, and it is clear from the record that the
protester was not prejudiced by the agency's failure to make certain
adjustments to the labor escalation rate or fringe benefits that the
protester believes should have been made.
2. Protest that agency conducted unequal discussions with the
protester and the awardee is denied where the record establishes that
the agency properly tailored its discussions to the specific
weaknesses in each offeror's proposal and gave both offerors an equal
opportunity to address these weaknesses.
3. The substitution of personnel after award is not improper where
the offeror provided resumes and firm letters of commitment for its
proposed individuals and nothing in the record suggests that the names
were submitted other than in good faith.
DECISION
CHP International, Inc. protests the award of a contract to World
Learning, Inc. under request for proposals (RFP) No. 95-3, issued by
the Peace Corps for the pre-service training of Peace Corps volunteers
in technical, language, cross-cultural and personal support skills
necessary for their assignments in Guatemala and El
Salvador. CHP, the incumbent contractor, challenges various aspects
of the proposal evaluation and source selection process, particularly
the cost realism evaluation of the awardee's proposed costs.
We deny the protest.
The RFP, issued March 10, 1995, contemplated the award of a
cost-plus-fixed-fee contract to provide pre-service and in-service
training to Peace Corps volunteers serving in Guatemala and El
Salvador for a 1-month pre-training period and a base year with 4
option years. Offerors were required to submit separate technical and
cost proposals. In the technical proposal, each offeror was to
describe its technical approach for providing the required services.
Additionally, the RFP required each offeror to "identify the training
staff by name, position, and vita" and to provide letters of intent.
The RFP identified required key personnel, including, for example, a
training director, master trainers, and language coordinators, but did
not specify the exact number of language and technical trainers
required. Proposed staff were required to meet the minimum
requirements set forth in the statement of work.
The RFP provided that cost proposals would be evaluated to determine
if the costs proposed were realistic and appropriate for the required
effort. Award was to be made to the offeror whose proposal presented
the best combination of features and provided the best value to the
government, with technical competence considered more important than
cost, and past performance considered the least important evaluation
criterion.
The Peace Corps received three proposals, including those of CHP and
World Learning, by the May 2 closing date. A four-member technical
evaluation panel evaluated the proposals based on four technical
competency ratings (exceptional, good, marginal, and poor). After
review of initial proposals and costs, all three
proposals were included in the competitive range. Discussions were
held with the three offerors, all of which submitted best and final
offers. The final evaluation results were as follows:
Technical Cost Past PerformanceRank
World LearningGood $3,391,492 Excellent 1
Firm X Good+ $4,279,412 Excellent 2
CHP Good $4,206,090 Excellent 3
All offerors provided a Certificate of Current Cost or Pricing Data
attesting to the accuracy, currency and completeness of their cost or
pricing data. The contracting officer performed a cost realism
analysis and concluded that the proposed costs were reasonable and
realistic. Since all three proposals were regarded as essentially
technically equal, the determining element in the source selection
decision was the substantial difference in evaluated cost. On that
basis, World Learning's proposal was selected for award as most
advantageous to the government. This protest followed.
CHP contends that the agency failed to conduct a reasonable cost
realism analysis of World Learning's proposal, alleging that the
awardee improperly proposed a [deleted] trainers, that staff salaries
and fringe benefits proposed by World Learning were understated, and
that the agency should have normalized the annual salary escalation
rates proposed by the offerors. CHP also alleges that World Learning
never intended to supply the individuals for whom it submitted resumes
for evaluation, and that discussions were unequal.[1]
When a cost reimbursement contract is to be awarded, the offerors'
estimated costs of contract performance should not be considered as
controlling since the estimates may not provide valid indications of
the final actual costs which the government is required to pay. See
Federal Acquisition Regulation sec. 15.605(c). Consequently, the
contracting agency must perform a cost realism analysis to determine
the realism of an offeror's proposed costs and to determine what the
costs are likely to be under the offeror's technical approach,
assuming reasonable economy and efficiency. CACI, Inc.-Fed., 64 Comp.
Gen. 71 (1984), 84-2 CPD para. 542. An agency is not required, however,
to conduct an in-depth analysis or to verify each item in conducting a
cost realism analysis. Hattal & Assocs., 70 Comp. Gen. 632 (1991),
91-2 CPD para. 90. A cost realism assessment necessarily involves the
exercise of informed judgment which the agency is clearly in the best
position to make; our Office will review such a determination only to
ascertain whether it had a reasonable basis. Id.
Here, the record demonstrates that the Peace Corps performed an
extensive analysis of the different cost elements for each proposal.
Specifically, the contracting officer reviewed each offeror's proposed
labor rates, the number of labor hours and the mix of labor categories
and concluded that the proposals in these areas were realistic and
compatible with the required effort. World Learning's proposed direct
labor rates were [deleted] than CHP's because World Learning proposed
primarily [deleted] rather than [deleted]. The contracting officer
also reviewed the fringe benefits required by United States and
Guatemalan law and concluded that these were appropriate under each
proposal. Next, the contracting officer reviewed proposed costs for
travel, materials, supplies, communications and support services.
While the three offerors' costs for these items were [deleted], World
Learning's travel expenses were [deleted] because its proposed staff,
as noted above, were [deleted] and travel was therefore [deleted].
The contracting officer also contacted the cognizant government
auditors to verify each offeror's proposed indirect rates.[2]
Finally, the contracting officer considered the total proposed costs
as one measure of cost realism; in that analysis, he concluded that
the total costs of each proposal were realistic.
As a preliminary matter, the protester complains that World Learning
supplied [deleted] trainers from which it [deleted] and did not
[deleted] trainers it intended to hire. According to the protester,
each offeror was required to determine how many trainers would be
required for each training cycle and propose the specific individuals
by position.
As noted above, the RFP does not specify the exact number of trainers
required; rather, it requires that the offeror identify its proposed
training staff by name, position, and vita and provide letters of
intent. World Learning specifically identified its proposed staff and
had firm commitments from each proposed staff member. The fact that
this staff made up [deleted] for specific work does not mean that the
RFP was ignored--this approach simply was not prohibited by the
solicitation. In this regard, nothing in the RFP specifically
required offerors to [deleted] and neither CHP nor World Learning
provided such breakdowns for all staff for the entire contract period.
On this record, we find nothing objectionable about the manner in
which World Leaning identified its proposed personnel.
CHP points to several components of World Learning's cost proposal as
evidence that the agency's cost realism analysis was unreasonable.
First, CHP argues that World Learning's proposed salaries for its two
master trainers are [deleted]. World Learning proposed a host-country
national for the master trainer in Guatemala at an annual salary of
[deleted] and an American master trainer for El Salvador at a weekly
salary of [deleted] or [deleted] per year. According to the
protester, based on these individuals' previous salaries, the proposed
salaries are [deleted] because the Guatemalan national was allegedly
earning [deleted] per month ([deleted]) in his previous job,[3] and
CHP paid the American master trainer [deleted] per week in 1993.
The record does not support CHP's allegations. The resume submitted
by World Learning for its Guatemalan national shows that he was
earning approximately [deleted] per month or [deleted] per year from
his previous employer. As for the American master trainer, World
Learning states that her [deleted] per week base salary does not
include health, dental, retirement and disability benefits which, when
added to her base salary, result in total compensation greater than
what she earned from CHP. Moreover, CHP's [deleted] salary was for a
6-day workweek; World Learning's proposed [deleted] salary is for a
5-day workweek. On this record, there is no merit in CHP's allegation
that World Learning's proposed salaries for these positions are
unrealistic.
CHP also alleges that World Learning has violated Guatemalan law by
classifying some personnel as "consultants" and not including fringe
benefits for them in its cost proposal.[4] CHP argues that World
Learning's alleged violation of Guatemalan law contributed to the
agency's improper cost realism analysis.
The jurisdiction of our Office is established by the bid protest
provisions of the Competition in Contracting Act of 1984, 31 U.S.C. sec.
3551-3556 (1994). Our role in resolving bid protests is to ensure
that the statutory requirements for full and open competition are met,
Brown Assocs. Management Servs., Inc.--Request for Recon., B-235906.3,
Mar. 16, 1990, 90-1 CPD para. 299, and does not generally include a final
determination regarding foreign employment statutes and regulations.
Here, both the Peace Corps and the awardee argue that an employer is
not required to pay fringe benefits to consultants under Guatemalan
law. In any event, we need not resolve this issue because, even if
fringe benefits for consultants should have been included in the
awardee's costs, these fringe benefits, according to the protester's
own calculations, would amount to approximately [deleted] per year.
Because all proposals were evaluated as technically equal but World
Learning's proposed costs were approximately $1 million lower, adding
fringe benefits for consultants to World Learning's evaluated cost
would not affect the award determination.
CHP next complains that the Peace Corps failed to normalize the annual
salary escalation rates used by the offerors.[5] In this regard, the
record shows that CHP proposed a [deleted]-percent annual increase and
World Learning proposed a [deleted]-percent annual escalation. The
protester argues that when an agency believes that labor costs will
escalate, it should adjust cost proposals in its cost realism analysis
to reflect the agency's reasonable projection of anticipated
escalation in labor rates over the term of the contract and that,
ordinarily, the same percentage multiplier or escalation rate should
be employed in normalizing offerors' proposed labor costs. See Infotec
Dev., Inc., B-258198 et al., Dec. 27, 1994, 95-1 CPD para. 52.
Here, the record shows that the agency did not normalize the rates
because it believed that World Learning's rate was a function of
private business decisions and salary arrangements between World
Learning and its proposed personnel, and that the escalation of labor
rates experienced by World Learning could differ from that experienced
by CHP. Although agencies are permitted to normalize the escalation
rates applied to labor costs, there is no requirement that they do so.
See General Research Corp., supra. Here, in light of the
substantially different make-up of the labor force proposed by World
Learning, we cannot conclude that the agency's action was
unreasonable. In any event, the agency's failure to normalize rates
had no prejudicial effect on the protester. Specifically, the
difference between World Leaning's proposed contract costs using its
[deleted]-percent salary escalation and its contract costs using the
protester's [deleted]-percent escalation applied to all costs
(salaries, fringe benefits and indirect costs) amounts to less than
[deleted]. As noted above, CHP's and World Learning's proposals were
rated technically equal but World Learning proposed costs were nearly
$1 million less than those of CHP. Thus, even if the agency had
normalized proposed escalation rates, there would have been no impact
on the agency's source selection decision.
CHP also contends that discussions were unequal because the Peace
Corps discussed direct labor costs with World Learning but limited
discussions with CHP to costs relating to travel and fees. CHP
contends that the agency's allegedly inadequate discussions seem
"calculated . . . to throw CHP off the track."
In the circumstances presented, the Peace Corps did not engage in
unequal discussions by discussing salaries and benefits with World
Learning without discussing these specific issues with CHP. The
record shows that after initial cost and technical evaluations, the
negotiations with CHP focused on its proposed travel costs and fee
because the contracting officer considered these costs [deleted].
Other costs were not discussed because they were consistent with CHP's
current work effort and the salaries then being paid to CHP's proposed
incumbent staff. Negotiations with World Learning concentrated on
salaries because the salaries proposed were [deleted] than those being
paid the incumbent staff, and World Learning had not originally
provided for any escalation. Thus, the agency tailored its
discussions to address the agency's specific concerns regarding each
offeror's proposal. Although discussions must provide offerors an
equal opportunity to revise their proposals, discussions with each
offeror need not be identical; rather, a procuring agency should
tailor its discussions to each offer since the need for clarifications
or revisions will vary with the proposals. The Pragma Corp., B-255236
et al., Feb. 18, 1994, 94-1 CPD para. 124.
Finally, the protester complains that World Learning substituted many
of the incumbent personnel following contract award, and that these
substitutions demonstrate that World Learning never intended to supply
the individuals for whom it submitted resumes for evaluation.
Offeror "bait-and-switch" practices, whereby an offeror proposes the
use of personnel that it does not expect to use during contract
performance, have an adverse effect on the integrity of the
competitive procurement system and generally provide a basis for
proposal rejection. Unisys Corp., B-242897, June 18, 1991, 91-1 CPD para.
577. This does not mean that an offeror must use the personnel it
proposed or risk losing the contract for which it is competing in
every case. For example, where, as here, the offeror provides firm
letters of commitment from the personnel proposed, but after award
additional personnel become available, the contractor is not precluded
from substituting such personnel where the agency has no objection to
that substitution. Id.
On this record, it is clear that World Learning intended to employ the
personnel it proposed. In this regard, World Learning provided
individual employee resumes and letters of intent as required by the
solicitation for each of the language and technical trainers it
proposed. When, however, other trainers became available because the
incumbent contractor did not win the award,[6] World Learning elected
to utilize some these incumbent personnel. These facts do not suggest
that World Learning engaged in a "bait and switch" tactic.
The protest is denied.
Comptroller General
of the United States
1. The protester also challenges the agency's technical evaluation of
its proposal. Specifically, CHP argues that ratings for certain
proposed staff should have been "excellent" rather than the "good-,"
"good," or "good+" awarded by the Peace Corps. We have reviewed the
record and found that CHP's arguments merely reflect its disagreement
with the judgment of the agency's evaluators and are without merit.
2. Because World Learning is considered an institution of higher
education, its overhead rate is set by the Department of Health and
Human Services under Office of Management and Budget Circular A-21.
CHP's indirect rates were verified by the Peace Corps's Office of
Inspector General.
3. CHP stated: "In the course of CHP's proposal preparation, CHP
interviewed [the Guatemalan national]. He told CHP that he was
earning approximately [deleted] per month."
4. According to the protester, under Guatemalan law, an employer is
responsible for paying fringe benefits for anyone who works for that
employer for a specified period of time during the course of a year.
5. Labor escalation provides for the increase in labor costs due to
inflation or other usual salary increases over the life of a contract,
and, as indicated here, is accomplished by the use of a percentage
multiplier that is applied to proposed direct labor costs. General
Research Corp., 70 Comp. Gen. 279 (1991), 91-1 CPD para. 183, aff'd,
American Management Sys., Inc.; Department of the Army--Recon.,
70 Comp. Gen. 510 (1991), 91-1 CPD para. 492.
6. World Learning could not have proposed using the incumbent's
personnel because, CHP states, "CHP required its proposed trainers, as
a condition of submitting them with the CHP proposal, . . . not [to]
allow their names to be submitted with any other proposal."