BNUMBER:  B-272884
DATE:  November 1, 1996
TITLE:  EDAW, 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:EDAW, Inc.

File:     B-272884

Date:November 1, 1996

G. Brian Busey, Esq., and Kenneth W. Irvin, Esq., Morrison & Foerster, 
LLP, for the protester.
Justin P. Patterson, Esq., Sherry Kinland Kaswell, Esq., and James L 
Weiner, Esq., Department of the Interior, for the agency.
Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Where offeror for cost-type contract proposed certain contingency 
labor hours, contracting agency, in performing its cost realism 
analysis, may reasonably delete these proposed labor hours and costs 
where the record establishes that they were not required for 
successful performance of the contract services.

2.  Where the two highest-rated technical proposals were reasonably 
determined to be essentially equal technically, award properly was 
made to the offeror with the lower evaluated costs, notwithstanding 
the solicitation's emphasis on technical merit over cost 

DECISION

EDAW, Inc. protests the award of a contract to Dames & Moore (D&M) 
under request for proposal (RFP) No. 1425-6-SP-10-13840, issued by the 
Department of the Interior, Bureau of Reclamation (Reclamation), for 
the preparation of resource management plans (RMPs) in the Columbia 
Basin Area of Washington State.  EDAW  challenges the agency's 
evaluation of cost proposals, and the determination that D&M's 
proposal offered the lowest cost and best value to the government.

We deny the protest.

The RFP, as amended, contemplated the award of an indefinite delivery, 
indefinite quantity, labor hour contract for a base year with four 
1-year options.  The awardee will prepare RMPs for the development and 
management of the land and water resources at Potholes and Banks Lake 
Reservoirs.  The RMP services include developing a process to involve 
various public interest groups and agencies that have an interest in 
the management and related environmental issues at the two reservoirs 
and developing a method to provide the agency with all data acquired 
and mapping produced in the geographic information system (GIS).  The 
initial task order is for work at the Potholes Reservoir and is 
expected to take approximately 60 months.  A second task order for 
Banks Lake is expected to start in fiscal year 1998, run concurrently 
with the Potholes RMP, and use some of the same data developed for the 
Potholes Reservoir.  

The RFP provided that award would be based on the best overall 
proposal received, considering the stated evaluation factors, listed 
in descending order of importance as:  risk, program management, 
Potholes RMP plan, cost/price, key personnel, past performance/RMP 
experience, other information, and alternate proposals.  Cost was to 
be evaluated for realism, understanding of the scope of work, and 
ability to perform the contract.  Although the RFP stated that 
technical factors were more important than cost, cost would become 
primary if the offerors' technical competence were considered 
approximately the same. 

The RFP contained detailed instructions for the preparation of 
proposals.  Among other things, offerors were to submit a cost 
proposal for the Potholes RMP task order and, as part of their 
proposals, they were to include proposed costs for future task orders.  
In addition, offerors were to complete a cost data sheet matrix 
listing, among other things, the hourly rates for each of 11 specified 
labor categories, along with cost data identifying the applicable 
elements of cost, rationales for cost, and other cost information.  
The RFP, by amendment No. 005, normalized other direct costs, such as 
travel, car rental, and copying, by establishing for purposes of 
evaluation, an estimated number of trips to the study area, number of 
days for car rental, and number of pages of printing/reproduction that 
will be required under the various task orders.  

The agency received four timely offers in response to the RFP, 
including offers  from EDAW and D&M.  A technical proposal evaluation 
committee (TPEC) evaluated initial proposals, and based on those 
results, three of the four proposals were included in the competitive 
range.  The agency conducted discussions and after evaluating two 
rounds of revised proposals, best and final offers (BAFOs) were 
received and evaluated.  EDAW's proposal was ranked first as its 
technical BAFO received the highest technical rating of the offerors, 
which was indicative of EDAW's experience in providing substantially 
similar services under other Reclamation contracts and its familiarity 
with the area to be served under this RMP contract.  The TPEC noted, 
however, that EDAW proposed a significantly lower total number of 
labor hours [deleted] for the Potholes task order compared to the 
level of effort offered by D&M [deleted] and Bio/West [deleted].  
Although proposing fewer hours, as a result of higher labor rates for 
certain categories of labor EDAW's average hourly labor rates were 
significantly higher.[1]  The evaluators further noted that any 
significant changes in the work to be performed would "be relatively 
more expensive compared to [EDAW's] competitors."  However, the 
evaluators believed this cost overrun risk was mitigated by the fact 
that EDAW had absorbed some overrun costs under prior Reclamation 
contracts.  

D&M's proposal was ranked second, with the next highest technical 
rating.  D&M proposed the highest number of labor hours and a greater 
number of tasks to be performed with those hours using only one 
subcontractor to provide the professional labor.[2]  The evaluators 
considered that D&M's proposal posed a low risk for significant cost 
overruns since the firm proposed approximately 20.3 percent more labor 
hours than EDAW and 7 percent more labor hours than Bio/West.  BAFO 
costs were evaluated as follows:

                D&M             EDAW            Bio/West

Cost Reimbursable Charges Other than Labor
                [deleted]       
                                [deleted]       
                                                [deleted]

Potholes Task
Order           [deleted]       [deleted]       [deleted]

Totals costs    [deleted]       [deleted]       [deleted]

Cost Proposal adjustment[deleted]      -0-           -0-

Adjusted Total  [deleted]                       
The contracting officer, the source selection official (SSO) for this 
procurement, reviewed the relative standing, including the evaluated 
advantages, disadvantages, and probable costs, of all offerors' 
proposals.  The SSO agreed with TPEC's recommendation that cost should 
be the determining factor for award as there were no significant 
technical differences between EDAW's and D&M's proposals,  although 
EDAW's proposal had received the highest technical rating.  The SSO 
determined that D&M's offer represented the best value to the 
government and made award to that firm.  This protest followed.  
Performance of D&M's contract has not been suspended based on the 
agency's determination that continued performance is in the best 
interest of the government. 

EDAW objects to the cost evaluation, primarily complaining that the 
agency arbitrarily deleted [deleted] proposed contingency labor hours 
and costs from D&M's proposal; it asserts that without this 
"contrived" reduction, EDAW's proposal rather than D&M's would have 
had the lowest evaluated costs.  

When an agency evaluates proposals for the award of cost-reimbursement 
contract, an offeror's proposed estimated costs of contract 
performance are not controlling, since the offeror's estimated costs 
may not provide valid indications of the final actual costs which the 
government is, within certain limits, required to pay.   Federal 
Acquisition Regulation (FAR)  sec.  15.605(c) (FAC 90-31); see DATEX, Inc.,    
B-270268.2, Apr. 15, 1996, 96-1 CPD  para.  240.  Consequently, the agency 
must perform a cost realism analysis to determine the extent to which 
an offeror's proposed costs represent what the contract should cost, 
assuming reasonable economy and efficiency.  GTE Gov't Sys. Corp., 
B-260022; B-260022.2, May 16, 1995, 95-1 CPD  para.  245.  Because the 
contracting agency is in the best position to make this cost realism 
determination, our review is limited to determining whether the 
agency's judgment in this area is reasonably based and not arbitrary.  
Id.    

EDAW contends that it was improper for the agency to eliminate D&M's 
contingent labor costs because under the terms of the RFP, offerors 
could include contingency labor costs in their proposals and D&M 
certified that its proposed costs for contingency hours were 
consistent with its cost accounting standards. 

While EDAW is correct that the RFP allows an offeror to propose 
contingency labor hours, there is nothing in the solicitation which 
precludes the agency from deleting these labor hours.  The record 
shows that in conducting a cost realism analysis of D&M's proposed 
costs, the agency considered the extent to which D&M's proposed costs 
represent a reasonable estimation of future costs.  In the agency's 
judgment, the contingency hours were not related to D&M's ability to 
successfully perform the various RMP tasks.  Stated differently, the 
agency concluded that [deleted] total labor hours [deleted] were all 
that were necessary, given D&M's technical approach to accomplishing 
the work.  The agency's position is bolstered by the fact that, even 
without these contingent hours, D&M's proposal contained [deleted] 
more hours than EDAW proposed and [deleted] hours more than BIO/West 
proposed.  In this instance, we do not think it makes sense for the 
agency to include contingent labor hours and costs, which it believes 
are not necessary for performance of the contract, simply because D&M 
certified that these costs were consistent with its cost accounting 
standards.  D&M's certification that the costs proposed are consistent 
with its cost accounting standards simply is not relevant to the issue 
of whether the proposed contingency hours will actually be necessary 
for performance.  In short, the protester has not shown that the 
deletion of the contingency hours was unreasonable.

While the protester further complains that there is no evidence that 
the cost analyst compared D&M's proposal against an independent 
government estimate, we point out that the purpose of a cost realism 
analysis is to determine what, in the government's view, it would 
realistically cost the offeror to perform given the offeror's own 
technical approach.  Hager Sharp, Inc., B-258812, Feb. 17, 1995, 95-1 
CPD  para.  93.  There is no requirement that any particular type of 
analysis be performed provided the evaluation performed is reasonable.  
Satilla Rural Elec. Membership Corp., B-238187, May 7, 1990, 90-1 CPD  para.  
456.  Here, in evaluating D&M's proposed costs for realism, the cost 
analyst reviewed D&M's proposed labor rates and labor hours based on 
D&M's technical approach, and conducted written and oral discussions 
with D&M before determining the realism of D&M's proposed costs.  
Under the circumstances, we see no reason why the agency also would 
have had to refer to a government estimate since it obviously was able 
to make the necessary determination without doing so.

Next, EDAW argues that the agency improperly averaged labor costs to 
determine the costs for performance of the Potholes and the Banks Lake 
task orders in evaluating the cost proposals.  Assuming EDAW is 
correct that averaging the proposed labor costs for the Potholes task 
order to project the proposed costs for the agency's future Banks Lake 
requirements is inconsistent with the RFP, the record shows, as 
indicated above, that EDAW's evaluated proposed overall costs to 
perform only the Potholes task order is more than D&M's [deleted] 
versus [deleted].  In light of this, we fail to see how the agency's 
use of averaged labor rates can be viewed as improper or otherwise 
prejudicial to EDAW as D&M is low regardless of the method used to 
evaluate the offerors' proposed costs.   

Moreover, we think the RFP did not preclude evaluation of the costs to 
perform  the Banks Lake task order.  The RFP specifically informed 
offerors that the agency expects to award other task orders in 
addition to the Potholes task order for which offerors were required 
to submit a cost proposal.  In this regard, section L of the 
solicitation explicitly instructed offerors to describe how the Banks 
Lake task order, expected to begin in fiscal year 1998 and of "a 
similar magnitude as the Potholes RMP," would fit into the offeror's 
work schedule.  The RFP also asked offerors in amendment No. 002 to 
include in their cost proposals for the Potholes RMP task order "costs 
associated with future task orders."  We think the RFP reasonably 
contemplated, within the cost factor, the agency's consideration of 
cost projections for other task orders to be issued under this 
indefinite delivery, indefinite quantity contract.  Consideration of 
such potential costs was consistent with the concept of having a 
single contractor perform the RMPs for the two reservoirs in the 
Columbia Basin area as the scope of work for each project was similar, 
were scheduled to run concurrently with each other, and data acquired 
under the first task order would be used in performing the second task 
order.  Although the RFP did not specify how the agency would 
determine these cost projections, we find the agency's use of average 
labor costs was not inconsistent with the stated evaluation scheme.  
See Marine Animal Prods. Int'l, Inc., B-247150.2, July 13, 1992, 92-2 
CPD  para.  16. 

Finally, EDAW contends, based on all its allegations, that the SSO's 
cost/technical tradeoff was flawed.  EDAW insists that insufficient 
weight was given to its highest-rated technical proposal which offered 
the lowest proposed costs (before the agency's alleged improper 
adjustment of D&M's costs).  

While the RFP stated that technical factors were more important than 
cost, it further provided that cost would become primary if the 
offerors' technical competence were considered approximately the same.  
The record shows that in performing his cost/technical tradeoff, the 
SSO relied upon the TPEC's report in determining that EDAW's proposal 
did not demonstrate any significant advantages compared to D&M's 
proposal.  For example, the evaluators found that EDAW's advantages 
reflected in its higher rating were based on its good performance and 
familiarity with the area as the incumbent contractor.  The TPEC 
believed these advantages were neutralized by EDAW's proposed use of 
four subcontractors for this RMP contract (D&M proposed use of only 
one subcontractor).  The evaluators noted that the use of four 
subcontractors in a cost reimbursement contract would increase the 
administrative costs associated with oversight and contract 
administration and the risk of subcontractor overruns is greater as 
subcontractor overruns cannot be made up by underruns in areas 
performed by the prime contractor's own staff.  The evaluators found 
that D&M had relevant experience in the type of work called for under 
the contract and that its key personnel were comparable to EDAW's.  
The SSO concluded that EDAW's higher technical rating did not 
represent significant technical advantages which merited paying a cost 
premium.

Based on our review of the evaluation record, we see nothing improper 
with the SSO's determination that EDAW's higher technical rating was 
attributable to its incumbency status.  We have long recognized that 
source selection officials properly may conclude that a technical 
scoring advantage based primarily on incumbency does not indicate an 
actual technical superiority that would warrant paying a higher cost 
premium.  Sparta, Inc., B-228216, Jan. 15, 1988, 88-1 CPD  para.  37.  We 
see nothing unreasonable about the SSO's conclusion that there were no 
significant technical differences between EDAW's and D&M's proposals.  
Accordingly, we think that the SSO's conclusion that EDAW's technical 
rating advantage did not reflect an actual technical superiority that 
would warrant paying its higher costs also was a reasonable exercise 
of the SSO's discretion.  See NUS Corp.; The Austin Co.,        
B-221863; B-221863.2, June 20, 1986, 86-1 CPD  para.  574.  Since D&M's 
total evaluated costs [deleted] were lower than EDAW's [deleted], the 
SSO thus could properly determine, consistent with the RFP language, 
that D&M's lower cost proposal represented the best value to the 
government.[3]  Id.  In sum, EDAW has not shown that the SSO's 
judgment concerning the respective technical merit of the two firms' 
proposals or his determination to select the lower cost proposal, 
notwithstanding EDAW's evaluated technical superiority, was 
unreasonable.

The protest is denied.

Comptroller General
of the United States

1. Average labor rates were determined by dividing each offeror's 
proposed Potholes labor cost by their proposed labor hours as follows:

                       Potholes Labor Cost w/o non-labor costsPotholes 
                                       Labor Hours     Average Labor 
                                                       Cost for 
                                                       Potholes

       D&M w/ contingency hours [deleted][deleted]      [deleted]

       D&M w/o contingency hours [deleted][deleted]     [deleted]

       EDAW             [deleted]      [deleted]        [deleted]

       Bio/West         [deleted]      [deleted]        [deleted]

2. EDAW proposed a total of [deleted] hours, with [deleted] hours of 
professional labor, and [deleted] hours for editing, GIS services, and 
clerical work.  Bio/West, the other competitive range offeror, 
proposed a total of [deleted] labor hours, with [deleted] hours of 
professional labor, and [deleted] hours for editing, GIS services, and 
clerical work.  D&M proposed a total of [deleted] labor hours, with 
[deleted] hours of professional labor, plus an additional [deleted] 
hours for contingencies, and [deleted] hours for editing, GIS 
services, and clerical work.

3. The evaluated non-labor cost reimbursable charges proposed by EDAW 
and D&M in section B of their cost proposal were as follows:
            
                            D&M                  EDAW

       Site visits - planned[deleted]            [deleted]

       Site visits - unplanned[deleted]          [deleted]

       Per diem             [deleted]            [deleted]

       Rental car           [deleted]            [deleted]

       Copying              [deleted]            [deleted]

       Total, Matrix Cost   [deleted]            [deleted]