BNUMBER: B-275060; B-275060.2
DATE: January 21, 1997
TITLE: DIGICON Corporation
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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:DIGICON Corporation
File: B-275060; B-275060.2
Date:January 21, 1997
Carl J. Peckinpaugh, Esq., and Eric J. Marcotte, Esq., Winston &
Strawn, for the protester.
Alexander D. Tomaszczuk, Esq., and Matthew A. Anzaldi, Esq., Shaw
Pittman
Potts & Trowbridge, for Computech, Inc., the intervenor.
Arthur I. Rettinger, Esq., and William P. McGinnies, Esq., Department
of the Treasury, for the agency.
John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Agency properly considered in its evaluation of proposals and
source selection the risk associated with the unreasonably low labor
rates contained in the protester's proposal where the solicitation
advised offerors that among other things their compensation rates
would be evaluated to assess their impact on the recruitment and
retention of professional employees.
2. Protest that the contracting agency unreasonably evaluated the
awardee's proposal under an evaluation subcriterion relating to past
performance is denied where the record shows that the evaluation was
reasonable; the protester's mere disagreement does not render the
agency's judgment unreasonable.
DECISION
DIGICON Corp. protests the award of a contract to Computech, Inc.,
under request for proposals (RFP) No. CS-94-032, issued by the Customs
Service, Department of the Treasury, for services in support of the
agency's Automated Commercial System (ACS). DIGICON contends that the
award to Computech was not consistent with the RFP's stated evaluation
criteria, and that the evaluation of its and Computech's proposals was
unreasonable.
We deny the protest.
The ACS is the central comprehensive tracking, controlling, and
processing system that automates commercial applications and tasks
required for import and duty collection, and is used for processing
the import transactions of the international trade community,
enforcing import and export laws, and generating trade statistics.
The Customs Service, through the ACS, oversees the processing of $687
billion worth of products imported into the United States each year.
The successful contractor under the RFP will provide support services
for the ACS, primarily involving the maintenance of the system and the
development of new applications software.
The RFP provided for the award of a firm, fixed-price, indefinite
delivery, indefinite quantity contract, for a base period of 1 year
with four 1-year options. The RFP stated that award would be made to
the offeror submitting the proposal representing the best overall
value to the government, price and other factors considered, and that
technical merit was significantly more important than price. The RFP
listed the following technical evaluation criteria and subcriteria:
1. Past Performance
a.Personnel/Resumes
b.Project Descriptions/Abstracts
2. Technical Approach
a.Technical Approach
b.Understanding the Requirements
3. Management Approach
a.Management Plan
b.Staffing and Transition Plan
The RFP informed offerors that the past performance criterion was
significantly more important than the technical approach and
management approach criteria, and that the technical approach
evaluation criterion was slightly more important than the management
approach evaluation criterion.
The RFP included the clause at Federal Acquisition Regulation (FAR) sec.
52.222-46 (FAC 90-41), "Evaluation of Compensation for Professional
Employees."[1] Among other things, FAR sec. 52.222-46 advises offerors
that the agency will evaluate the offerors' compensation plans for the
professional employees covered by the solicitation in order to assess
the impact of the plan on recruitment and retention of professional
employees. Consistent with this provision, the RFP added that while
"[p]rice [would] not be a scored factor," proposals would be evaluated
to determine if proposed prices "accurately and adequately portray[ed]
the work . . . to be performed, and if they are reasonable and
realistic."
The RFP provided detailed instructions for the preparation of
proposals, and requested that offerors submit separate technical and
business/price proposals. Offerors were required to complete the
RFP's price schedules for the base and each of the option periods of
the contract by inserting the burdened hourly rate for each of the
nine listed labor categories (e.g., Technical Leader, Systems Analyst,
etc.), and extended prices based upon the RFP's estimated number of
hours for each of the labor categories. Offerors were also instructed
that their business/price proposals were to provide "a cost breakdown
with supporting data, including a breakdown of direct labor cost
estimates by each labor category including numbers of person-hours and
applicable or average hourly rates, overhead rate and supporting
schedules." The cost breakdown was also to include direct labor
rates, overhead and general and administrative (G&A) rates, and
burdened labor rates for each of the labor categories provided by
either the prime contractor and any proposed subcontractors.
The agency received 11 proposals, and included the proposals of
DIGICON, Computech, and six other offerors in the competitive range.
Written discussions were held regarding the offerors' technical
proposals, and revisions were received and evaluated. Face-to-face
discussions were held with each of the competitive range offerors
concerning their business/price proposals. Prior to the conduct of
these discussions, the agency sent each offeror a letter setting the
time, date, and agenda for the discussions, and requesting salary
histories for certain of the offerors' employees if the information
had not already been furnished. According to the record, DIGICON was
the only offeror that did not provide the requested salary histories
prior to the conduct of discussions. The agency informed DIGICON
during discussions that its labor rates appeared low when compared
with the market place, the prior contract for similar services, and
historical cost data.
In its BAFO request, the agency again informed DIGICON, which still
had not submitted the requested salary histories, that its "[p]roposed
direct labor rates appear low in comparison to historical data for
similar services, market surveys, and [the] most recent contract
award." The request informed DIGICON that it should employ its
"normal practice in developing hourly labor rates," and that "[t]he
basis for determining hourly labor rates should include direct and
indirect labor hours." The request further provided an "example
development of fully loaded labor rate," which set forth a number of
assumptions, and demonstrated how to calculate from the assumptions an
unburdened direct labor rate, burden factor, and fully burdened labor
rate.
BAFOs were received and evaluated by the agency. Computech's proposal
received the highest technical rating of 79 out of 80 points, at a
proposed price of $25,778,934. DIGICON's proposal received the
second-highest rating of 78.5 points, at a proposed price of
$23,524,793. The technical score difference was under the project
description/abstracts subcriterion, where Computech's proposal
received 8 of 9 points and DIGICON's proposal received 7.5 points.
The agency found that Computech's proposed prices "accurately and
adequately" portrayed the work to be performed, and were "mostly
reasonable and realistic." In contrast, the agency found that
DIGICON's proposed prices were "extremely low" and that DIGICON's
proposal was "a risk" because its labor rates for the labor categories
with the most hours--Senior Programmer/Analyst, Programmer Analyst,
and Programmer--were "unreasonable and unrealistic." The agency thus
concluded that DIGICON's ability to attract and retain qualified
personnel and maintain a stable workforce would be severely limited by
its "extremely low" labor rates for certain labor categories, which
made its "offer a risk."
The contracting officer (CO) concluded that Computech's proposal
represented the best value to the government. The CO found that the
"substantial operational and financial risk introduced by DIGICON's
unreasonably low and unrealistic prices" justified the $2,554,141, or
9 percent, price premium associated with the selection of Computech's
proposal for award. The CO also determined that the price premium
associated with Computech's proposal was justified based upon
Computech's superior demonstrated experience as evaluated under the
projects descriptions/abstracts evaluation subcriterion. Computech
was awarded the contract, and this protest followed.
DIGICON contends that the agency imposed an evaluation factor not
weighted in or consistent with the RFP where it determined that
DIGICON's relatively low labor rates represented a risk, inasmuch as
"risk" was not set forth in the RFP as a specific evaluation
criterion. We disagree.
The consideration of the risk involved in an offeror's proposed
approach is inherent in the evaluation of proposals. Communications
Int'l Inc., B-246076, Feb. 18, 1992, 92-1 CPD para. 194. Further, the RFP
here specifically informed offerors that the risk associated with
their proposals would be evaluated, and, as noted above, included the
standard "Evaluation of Compensation for Professional Employees"
clause, FAR sec. 52.222-46, which provides in part that the agency will
evaluate proposed compensation plans to assess "the offeror's ability
to provide uninterrupted high-quality work," and that the
"compensation proposed will be considered in terms of its impact upon
recruiting and retention, its realism, and its consistency with a
total plan for compensation." The RFP also provided that proposals
would be evaluated to determine if proposed prices were "reasonable
and realistic." Thus, the agency's consideration of risk in
connection with its determination not to award the contract to DIGICON
because of its "extremely low" labor rates for certain categories was
not improper. Information Spectrum, Inc., B-256609.3; B-256609.5,
Sept. 1, 1994, 94-2 CPD para. 251, aff'd, B-256609.6, Sept. 28, 1995, 95-2
CPD para. 150.
DIGICON argues that the agency's evaluation of the risk associated
with its proposal was flawed because, according to the protester, the
agency referred only to "burdened labor rates to judge this risk."
The protester contends that because burdened labor rates include
overhead, G&A, and fringe rates, the "analysis involves many
suppositions."
Contrary to the protester's assertions, the record demonstrates that
the agency's evaluation of DIGICON's proposal included the review of
both DIGICON's proposed burdened and unburdened labor rates. In this
regard, the price negotiation memorandum and report to the contracting
officer from the source evaluation board include detailed breakdowns
and analyses of the offerors' price proposals on individual and
comparative bases, and demonstrates that DIGICON's proposed burdened
and unburdened labor rates were significantly lower than those
proposed by any of the other seven offerors under five of the nine
listed labor categories. For example, DIGICON's burdened and
unburdened labor rates for the labor category with the most hours,
Senior Programmer/Analyst, were [DELETED] and [DELETED] percent lower,
respectively, than average of the labor rates proposed by the other
offerors, and its burdened and unburdened rates for the labor category
with the next most hours, Programmer, were [DELETED] and [DELETED]
percent lower, respectively, than the average of the rates proposed.
Based upon our review of the record, the agency's conclusions that the
protester's proposed labor rates for certain of the labor categories
were "extremely low" and thus represented substantial financial and
operational risk were reasonably based. Information Spectrum Inc.,
supra.
DIGICON protests that it was unreasonable for the agency to find that
DIGICON's proposed labor rates represented a significant risk while
concluding that Computech's proposed rates represented only a minimal
risk, when, according to the record, a greater percentage of
Computech's proposed rates are below the average rates proposed than
DIGICON's.
The agency found that Computech's proposed price reflected some risk
because of Computech's relatively low labor rates for certain labor
categories. The agency determined that the risk was minimized because
Computech's composite rates showed that a significant percentage of
the personnel within the labor categories at issue would be
compensated at "mid-to-senior-level rates." For example, although
Computech's blended burdened rate for its Senior Programmer/Analysts
in the base period was only $[DELETED] per hour, Computech's price
proposal provided that [DELETED] percent of the hours worked by Senior
Programmer Analysts would be compensated at $[DELETED] per hour and
[DELETED] percent at $[DELETED] per hour.[2] This approach was used
by Computech with regard to all but one of the nine labor categories,
and Computech's proposed burdened and unburdened labor rates for this
category--EDI Programmer/Analyst--were [DELETED] and [DELETED] percent
higher than the average rate proposed. Further, although it is true
that a greater percentage of Computech's proposed rates are below the
average of the rates proposed than DIGICON's, the difference between
Computech's proposed rates and the average rates is, in a number of
instances, relatively slight; for example, Computech's proposed
average rates for its Technical Leaders and Systems Analysts are less
than [DELETED] percent lower than the average rate proposed.
Accordingly, the agency's determination that Computech's proposed
rates presented only "some risk" because its composite rates
demonstrated that it would compensate a significant percentage of its
personnel "at the mid to senior level scale," and that DIGICON's rates
represented significant risk because certain of its "composite rates .
. . indicate [that] they intend to staff these positions with mostly
entry level and some mid level compensation rates," was reasonable and
consistent with the evaluation criteria.
The protester argues that the agency's evaluation of proposals under
the project descriptions/abstracts evaluation subcriterion to the past
performance evaluation criterion was unreasonable.[3]
The RFP required that each offeror submit three recent project
abstracts describing past performance managing software and
applications development projects in an IBM or IBM compatible
mainframe environment. The RFP provided detailed instructions as to
the format for the abstracts and what information should be included
in each abstract. As indicated, Computech's and DIGICON's proposals
received 8 and 7.5 out of 9 available points, respectively, under this
evaluation subcriterion. Computech's abstracts numbers one and three
received perfect scores of 3 points, and its abstract number two
received a score of 2 points. The agency found that Computech's
abstract number two "failed to demonstrate experience in [customer
information control system] CICS programming and a level of effort
similar to ACS to warrant full credit." The protester challenges the
agency's evaluation of Computech's second and third abstracts.
With regard to Computech's second abstract, the protester asserts that
because the total value of the contract described was $3.8 million,
the "abstract demonstrates Computech's lack of experience with
contracts the size and complexity of ACS." The record demonstrates
that each of the evaluators carefully considered all of the relevant
aspects of the contract described, and reasonably determined that it
merited a score of two out of three points. The evaluators found, for
example, that while the abstract "demonstrates experience with
applications programming in an IBM environment," it warranted a rating
of 2 out of 3 points because, as pointed out by the protester, the
size and effort described in the abstract, consistent with its total
value, was not comparable to ACS. Although the protester clearly
disagrees with the agency's determination that Computech's abstract
number two warranted a rating of two points, its mere disagreement
with this aspect of the agency's evaluation does not provide any basis
for our Office to question the propriety of the agency's evaluation.
McDonnell Douglas Corp., B-259694.2; B-259694.3, June 16, 1995, 95-2
CPD para. 51.
The protester argues that Computech's abstract number three should not
have received a perfect score of 3 points because the contract
described focuses only on application support for a communication
system, which the protester asserts is not comparable to ACS, and
because the abstract was unclear as to the total value of the contract
involved. Computech's abstract number three describes a contract
supporting the Treasury Enforcement Communication Systems performed
for the Customs Service by one of Computech's proposed subcontractors
for this procurement. The evaluators found that the contract
described met the agency's requirements and "[d]emonstrated experience
with applications programming in an IBM environment." With regard to
the size of the contract, the evaluators noted that although average
number of personnel assigned to the contract totaled 22, the contract
value was listed at only "$734,550 (to date)." The evaluators
concluded that because a contract involving 22 positions would be more
likely to have a value of at least $7 million, and the abstract
provided a contract award value of
$10.5 million, the contract value provided on the abstract must have
been an error. The evaluators thus concluded, based upon the work
described in Computech's abstract number three and their assumption
that the actual value of the contract described was $7 million, that
the abstract warranted a rating of 3 points. The protester's
assertions here again reflect its disagreement with the agency's
evaluation, and do not show that the agency's conclusions were
unreasonable. The evaluation record here evidences that each of the
evaluators carefully considered all of the relevant aspects of the
contract described, and concluded that it warranted a perfect score of
three points. The record further demonstrates that the evaluators
were correct in their assumptions concerning the actual value of the
contract described in Computech's abstract number three, in that the
contract had a total value of $14 million, and that the work performed
by Computech's subcontractor totaled $7.7 million.
The protester argues the agency's evaluation of its project abstracts
was unreasonable. DIGICON asserts that its proposal "merited a
superlative evaluation" under the project description/abstracts
subcriterion, and that "[t]o the extent that the [agency] gave DIGICON
less than full credit under this subfactor, its evaluations were
unreasonable and contrary to fact." We need not address this issue,
because it is clear from the record that even if each of DIGICON's
three project abstracts warranted perfect ratings, thus increasing
DIGICON's total rating by one and one-half points, it still would not
have been selected for award. That is, as mentioned previously, the
agency found that the price premium associated with Computech's
proposal was justified because of the significant operational and
financial risk introduced by DIGICON's extremely low labor rates
alone.
The protest is denied.
Comptroller General
of the United States
1. FAR sec. 52.222-46 is to be included in solicitations for negotiated
service contracts when the contract amount is expected to exceed
$500,000 and "the service to be provided will require meaningful
numbers of professional employees." FAR sec. 22.1103 (FAC 90-40);
Research Management Corp., 69 Comp. Gen. 368 (1990),
90-1 CPD para. 352.
2. In contrast, DIGICON's blended burdened hourly labor rate for the
Senior Programmer Analyst category in the base year was $[DELETED],
and its price proposal provided that [DELETED] percent of the hours
worked by its Senior Programmer/Analysts would be compensated at
$[DELETED] per hour, and [DELETED] percent at $[DELETED] per hour.
3. DIGICON also argued in its protest to our Office that the agency's
evaluation of proposals under each of the remaining evaluation
criteria was unreasonable and that DIGICON's proposal should have been
evaluated higher than Computech's. The agency responded to these
arguments in its report on DIGICON's protest, and because DIGICON did
not respond to the agency's position in its comments on the agency
report, we consider DIGICON to have abandoned these arguments. D & M
General Contracting, Inc., B-259995; B-259995.2, May 8, 1995, 95-1 CPD para.
235.