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.