BNUMBER: B-274405.2; B-274405.3
DATE: December 18, 1996
TITLE: Pacific Architects and Engineers, Inc.
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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:Pacific Architects and Engineers, Inc.
File: B-274405.2; B-274405.3
Date:December 18, 1996
Howell Roger Riggs, Esq., for the protester.
Stuart Young, Esq., and Cheralyn S. Cameron, Esq. for DynCorp, an
intervenor.
Thomas J. Duffy, Esq., Department of the Army, for the agency.
Katherine I. Riback, Esq., Glenn G. Wolcott, Esq., and Paul Lieberman,
Esq., Office of the General Counsel, GAO, participated in the
preparation of the decision.
DIGEST
1. Although agency did not give protester an opportunity to comment
on each individual survey response regarding past performance,
discussions were adequate where agency identified multiple categories
in which protester's past performance was deficient and protester has
not identified any other past performance areas under which its
proposal was downgraded.
2. Agency's cost realism analysis was adequate where the agency
reasonably considered the likely cost of awardee's performance,
including a determination that the awardee's proposed manning levels
were adequate to perform the solicitation tasking requirements.
DECISION
Pacific Architects and Engineers, Inc. (PAE) protests the Department
of the Army's award of a contract to DynCorp under request for
proposals (RFP) No. DAHC92-95-R-0132. PAE, the incumbent contractor,
argues that the agency failed to conduct adequate discussions,
improperly evaluated its proposal, and failed to perform an adequate
cost realism analysis.[1]
We deny the protest.
BACKGROUND
On April 26, 1996, the agency issued the RFP, seeking proposals to
provide base operations support services (BOSS) to the Army at Soto
Cano Air Base, Honduras. The RFP contemplated the award of a
cost-plus-award-fee contract for a base period with four 1-year option
periods.
The solicitation provided that proposals would be evaluated, in
descending order of importance, on the basis of management, technical
and cost factors, and stated that the evaluation would also
incorporate a performance risk assessment.[2] With their proposals,
offerors were required to submit multiple references regarding their
performance of recent contracts for similar services. Under the
management factor, the RFP listed three subfactors, the most important
being past performance. The RFP also provided that award would be
based on the proposal offering the best value to the government
following an integrated assessment of all evaluation factors.
PAE and DynCorp submitted initial proposals by the June 13, 1996,
closing date; each proposal listed multiple past performance
references. Upon receipt, the contracting officer sent past
performance surveys to each reference and subsequently evaluated the
initial proposals. At the time evaluation of initial proposals was
completed, the agency had received past performance responses
regarding two of PAE's prior contracts--the predecessor BOSS contract
at that Soto Cano Air Base and another contract for similar services
performed in Japan.
Following initial evaluation, the agency had certain concerns
regarding PAE's proposal, including negative past performance
information and the agency's conclusion that PAE's proposed manning
levels were excessive. By letters dated June 28, the agency conducted
written discussions with both offerors, which consisted of multiple
"items for negotiation" (IFNs). Discussions with PAE included the
following:
"IFN # 32
Contractor's past performance input from Japan has indicated less
than minimum performance in PAE's internal quality control plan,
contractor's initiative, timely providing adequate resources,
personnel turnover, data reporting and average initiative to
initiate and employ cost savings. Panama's input notes a number
of problems with government property accountability, initiative
to employ cost savings, implementation of TQM and employees
relations training."[3]
Regarding PAE's proposed manning levels, discussions included the
following:
"IFN # 28
Labor Hours. Overall [PAE's proposal] has overestimated the
hours of labor. [PAE's] labor structure more or less resembles
the current contractor labor structure [but] the U.S. labor hours
are higher than current contract hours, and the estimate for
local hours appears to be unreasonabl[y] high. Explain why
[deleted] [hours per year] is used to calculate hours required
under the contract. . . ."
On July 11, both offerors submitted best and final offers (BAFOs).
PAE's BAFO incorporated responses to each IFN, including those quoted
above. Regarding past performance, PAE essentially maintained either
that it was without fault or disagreed with the negative assessments.
Regarding its proposed staffing levels, PAE's BAFO reflected its view
that the manning levels in its initial proposal were appropriate.
Subsequently, the agency received additional survey responses
regarding PAE's past performance.
BAFO evaluation resulted in PAE's BAFO receiving a management rating
of outstanding with "moderate" risk;[4] a technical rating of
outstanding; and an evaluated price of [deleted]. DynCorp's BAFO
received a management rating of outstanding with "low" risk;[5] a
technical rating of good; and an evaluated price of [deleted]. The
agency determined that DynCorp's proposal offered the best value to
the government and awarded a contract to that firm on August 26. This
protest followed.
DISCUSSION
PAE first protests that the award to DynCorp is improper because the
agency failed to discuss each individual comment it received regarding
PAE's past performance.[6] PAE also complains that, after discussions
were completed, the agency received and reviewed additional responses
to the past performance surveys which had been sent to PAE's
references. PAE asserts that the agency's failure to discuss all
survey responses with PAE violates Federal Acquisition Regulation
(FAR) sec. 15.610(c)(6) (FAC 90-31), which provides that, when conducting
discussions, the contracting officer shall:
"Provide the offeror an opportunity to discuss past performance
information obtained from references on which the offeror had not
had a previous opportunity to comment. Names of individuals
providing reference information about an offeror's past
performance shall not be disclosed."
The agency responds that IFN # 32, quoted above, gave PAE an
opportunity to comment on the past performance information the agency
had at the time discussions were conducted. Further, the agency
maintains that the survey responses received after discussions did not
have any impact on PAE's past performance rating. The agency explains
that the negative information regarding PAE's performance as the
incumbent contractor on the Soto Cano BOSS contract, along with the
negative information regarding PAE's performance of a similar contract
in Japan, formed a reasonable basis for the agency to conclude that
"some doubt exists, based on [PAE's] performance record, that [PAE]
can successfully perform the proposed effort."
We do not view the requirements of FAR sec. 15.610(c)(6) as requiring an
agency to provide offerors with verbatim comments regarding all past
performance surveys received. Indeed, such an approach could well
violate the provision of this FAR section which proscribes disclosing
to an offeror the identity of the individuals providing the past
performance information. In evaluating whether there has been
sufficient disclosure of information during discussions, the focus is
on whether the agency imparted sufficient information to afford the
offeror a fair and reasonable opportunity to respond to the problems
identified. See Aydin Computer and Monitor Div., Aydin Corp.,
B-249539, Dec. 2, 1992, 93-1 CPD para. 135.
Here, in conducting discussions with PAE, the agency identified
multiple categories of past performance problems including: internal
quality control; timely providing adequate resources; personnel
turnover; data reporting; initiative to employ cost savings;
accountability for government property; implementation of TQM; and
employee training. Although PAE has now reviewed all of the surveys
which the agency received, PAE has not identified any basis on which
its proposal was downgraded for past performance which does not fall
within one or more of the problem categories which were called to its
attention during discussions. On this record, we see no merit in
PAE's assertion that the agency failed to conduct adequate discussions
regarding past performance.
PAE next protests that it was improper for the agency to consider
PAE's implementation of total quality management (TQM) techniques in
its performance of the prior Soto Cano contract, since the terms of
the solicitation under which that contract was awarded did not
expressly require use of TQM techniques. It is undisputed that the
current solicitation includes the TQM requirement.
The protest regarding this issue is untimely. In the discussion
questions sent to PAE on June 28, the agency clearly advised PAE that
it viewed its TQM efforts under the prior BOSS contract as a relevant
consideration in assessing past performance, specifically referring to
"problems with . . . implementation of TQM." Not only did PAE fail
to raise the issue at that time, its response is not consistent with
its current assertion that it had no obligation to implement TQM
techniques under the prior contract. Specifically, PAE responded:
"The last problem dealing with this question [IFN #32] is in
regard to our implementation of TQM. This problem surfaced
recently on our [prior BOSS contract] when our Program Manager,
because of an emergency, had to be replaced on the contract. At
the time of his emergency, he was almost finished with the
submittal of our TQM Plan. We recently have replaced our
previous manager, but the TQM Plan remained incomplete. Last
month, we sent our Corporate QC Manager to Panama to meet with
the [agency] COR and resolve the problem. Our Corporate QC
Manager provided the COR with a 30 day schedule for submittal of
a site-specific TQM Program, which met with approval from the
COR."
Our Bid Protest Regulations require that a protest be filed not later
than
10 days after the protester knew or should have known its basis for
protest. Bid Protest Regulations, sec. 21.2(a)(2), 61 Fed. Reg. 39,039,
39,043 (July 26, 1996) (to be codified at 4 C.F.R. sec. 21.2(a)(2)).
Here, PAE was advised by letter dated June 28 that the agency was
assessing its TQM efforts under the prior contract in connection with
its evaluation under this procurement; since it did not raise this
matter until after the contract to DynCorp was awarded on August 26,
this issue is not timely filed. Id. [7]
Finally, PAE protests that the agency's cost realism analysis was
either nonexistent or inadequate. PAE maintains that DynCorp's
staffing levels are unrealistic and that the actual cost to the
government will be greater than that stated in DynCorp's proposal.[8]
Where an agency evaluates proposals for a cost contract, an offeror's
proposed estimated costs are not controlling since they may not
provide valid indications of actual costs to the government. See
Global Assocs., supra. However, an agency is not required to verify
each and every item in conducting its cost analysis. Theta Eng'g,
Inc., B-271065; B-271065.2, June 12, 1996, 96-2 CPD para. 76. Generally,
an agency's determination that an offeror's technical approach will
satisfy the solicitation requirements and that the offeror's
corresponding cost proposal reflects the costs reasonably associated
with the technical approach provides an adequate basis for determining
cost reasonableness. See The Research Found. of State Univ. of New
York, B-274269, December 2, 1996, 96-2 CPD para. 207; Sociometrics, Inc.,
B-261367.2; B-261367.3, Nov. 1, 1995, 95-2 CPD para. 201.
Here, it is undisputed that the difference in proposed manning levels
is the overwhelming basis for the approximately $4.5 million
difference in the cost of the two proposals. Specifically, PAE
proposed an overall manning level of [deleted], while DynCorp proposed
a manning level of [deleted]. In evaluating proposals, the evaluators
specifically considered whether each offeror's proposed manning level
was appropriate for the RFP's tasking requirements.[9] The evaluators
determined that DynCorp's proposed manning levels for the various
tasks were adequate and that PAE's were excessive.[10] In addition to
considering the manning levels proposed, the agency reviewed the wage
rates proposed by DynCorp, concluding that they complied with Honduran
law and that labor could be reasonably obtained at the rates
proposed.[11]
Moreover, PAE's own conduct demonstrates its recognition that its
proposed manning levels could be reduced, as was done by DynCorp.
Specifically, in connection with the agency's extension of PAE's
contract--necessitated by this protest--PAE submitted a memorandum to
the agency's administrative contracting officer containing the
following statement:
"Previously we accomplished a scrub of the manning in preparation
for submission of the PAE proposal for the follow on contract and
had planned on a reduction of approximately 65 employees . . . ."
As an attachment to this memorandum, PAE included a document, dated
May 28, 1996, in which it identified, by category, areas in which
manning levels could be reduced.
Because the contracting agency is in the best position to make the
cost realism determination, our review in this regard is limited to a
determination of whether the agency's cost realism analysis is
reasonably based and not arbitrary. Grey Advertising, Inc., 55 Comp.
Gen. 1111 (1976), 76-1 CPD para. 325. An agency may rely on information
contained in offerors' cost proposals in performing a cost evaluation
without seeking additional independent verification of each item of
proposed costs, since the extent to which proposed costs will be
examined is generally a matter for the agency to determine. Id.
Finally, even where an agency's cost analysis prior to award contains
flaws, this Office may consider information in addition to that on
which the agency relied in evaluating proposals. See, e.g., The
Boeing Co., B-259255.5, May 15, 1995, 95-1 CPD para. 284.
Here, the agency determined that the technical approach proposed by
DynCorp would meet the solicitation requirements and that the
corresponding cost proposal reasonably reflected the costs associated
with that approach.[12] On the record here, we find no merit in PAE's
assertion that the agency failed to perform an adequate cost realism
analysis.
The protest is denied.
Comptroller General
of the United States
1. The protester initially raised other arguments that were the
subject of a partial dismissal earlier in this proceeding.
2. The RFP specifically stated: "performance risks are those
associated with an offeror's ability to perform the solicitation's
requirement as indicated by that offeror's record of past and current
performance."
3. The BOSS contract at Soto Cano Air Base is administered from
Panama.
4. Under the agency's source selection plan, a rating of "low"
performance risk meant that "little doubt exists, based on the
offeror's performance record, that the offeror can perform the
proposed effort." A performance risk rating of "moderate" meant that
"some doubt exists, based on the offeror's performance record, that
the offeror can perform the proposed effort." A performance risk
rating of "high" meant that "significant doubt exists, based on the
offeror's performance record, that the offeror can perform the
proposed effort."
5. The agency received nine responses from DynCorp's past performance
references with no negative comments.
6. The past performance surveys contained a total of 43 questions
regarding various areas of performance.
7. In any event, since PAE, in fact, attempted to implement TQM
techniques under the prior Soto Cano contract, we see no basis why the
agency could be precluded from assessing those efforts.
8. In 1992, the then-incumbent BOSS contractor at the Soto Cano Air
Base unsuccessfully filed a virtually identical challenge to the
agency's award of a contract to PAE. Global Assocs., B-244367.3, Feb.
26, 1992, 92-1 CPD para. 229.
9. The agency evaluators were subject matter experts regarding the
various tasks, several of whom worked daily with PAE under the prior
Soto Cano BOSS contract.
10. As noted above, the agency clearly communicated its conclusion
regarding PAE's proposed manning levels to PAE during discussions,
expressly stating that its proposal "overestimated the hours of labor"
and noting that "[PAE's proposed] labor structure more or less
resembles the current contract labor structure." In its BAFO, PAE
declined to decrease the proposed manning levels.
11. The record shows that, in many cases, the wage rates DynCorp
proposed to pay its employees were actually higher than the rates PAE
is paying its employees under the current BOSS contract.
12. In addition to challenging the realism of DynCorp's proposed
manning levels, PAE identified various other minor aspects of
DynCorp's cost proposal which PAE maintains do not reflect the actual
costs to the government. Even if each of PAE's assertions were valid,
by PAE's own calculations, the alleged understatement of costs would
amount to less than $600,000. The source selection official has
stated that, in light of the approximately $4.5 million difference in
the proposed costs, an increase in DynCorp's proposed cost of $600,000
would not alter the source selection decision. Accordingly, even if
all of these assertions were valid, there would be no prejudice to
PAE.