BNUMBER: B-277263.2; B-277263.3
DATE: September 29, 1997
TITLE: Boeing Sikorsky Aircraft Support, B-277263.2; B-277263.3,
September 29, 1997
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DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Matter of:Boeing Sikorsky Aircraft Support
File: B-277263.2; B-277263.3
Date:September 29, 1997
Cyrus E. Phillips IV, Esq., William H. Butterfield, Esq., and
Christopher H. Jensen, Esq., Kilcullen, Wilson & Kilcullen, and Mark
W. Reardon, Esq., The Boeing Corporation, for the protester.
Gerard F. Doyle, Esq., Ron R. Hutchinson, Esq., and Michael F. Mason,
Esq., Doyle & Bachman, for Raytheon E-Systems, an intervenor.
Christopher E. Kernan, Esq., Maj. Michael J. O'Farrell, Jr., and Col.
Nicholas P. Retson, Department of the Army, for the agency.
Paul E. Jordan, Esq., and Paul Lieberman, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Past performance risk evaluation is unobjectionable where agency
follows evaluation criteria stated in solicitation and conduct of
evaluation is reasonable.
2. Cost evaluation of award fee is unobjectionable where agency
reasonably concluded that offeror's proposed fee structure provided
limited incentive for superior performance.
3. Agency failed to conduct meaningful discussions where, as the
result of an attribution methodology in the protester's proposal which
the agency found unacceptable, but failed to address during
discussions, the agency treated as omitted and erroneously added into
its cost evaluation a significant number of direct labor hours which
were actually provided in the protester's proposal.
4. Agency's source selection analysis was defective where it
addressed cost only in terms of risk without considering proposals'
relative evaluated cost.
5. Agency's post-protest award determination reassessment does not
establish that protester was not prejudiced by discussion and
evaluation errors where the agency continues to take the position that
relative evaluated cost need not be weighed and fails to take into
consideration the relative cost differential in the areas over which
the offerors exercised any control.
DECISION
Boeing Sikorsky Aircraft Support (BSAS) protests the award of a
contract to Raytheon E-Systems under request for proposals (RFP) No.
USZA22-97-R-0001, issued by the U.S. Special Operations Command
(SOCOM). BSAS alleges that it was not afforded meaningful discussions
and challenges the propriety of various aspects of the technical and
cost evaluations and the award determination.
We sustain the protest.
BACKGROUND
SOCOM is a unified and joint command responsible for missions such as
unconventional warfare, special reconnaissance, and counter-terrorism.
SOCOM operates an industrial-type support activity which provides
dedicated, highly-responsive logistics support for special operations
forces (SOF) worldwide. The special operations forces support
activity (SOFSA) is a government-owned, contractor-operated facility
located primarily in Lexington and Richmond, Kentucky. The SOFSA
provides logistics support for the SOF, and this support is tailored
to the changing and joint nature of the force's missions. This
logistics support includes equipment repair and modification,
prototype and low volume manufacturing, maintenance management,
life-cycle support, and equipment sustainment.
This solicitation, which sought proposals for the operation and
maintenance of the SOFSA, was written to allow offerors as much
latitude as possible to propose innovative ways of doing business and
to employ creative problem-solving. The RFP was designed to test the
offerors' understanding of both the SOF requirements and the
"statement of objectives [SOO] to statement of work [SOW]" process.
This latter process asks the offerors to take an extremely general SOO
provided with a minimum of detail and translate that into a
contractor's SOW outlining performance requirements, performance
periods, and estimated costs. An offeror's ability to make this
translation in as detailed and accurate a manner as possible was
deemed critical to the operation of the SOFSA. Since the agency
anticipates issuance of approximately 500 to 700 SOOs annually, it is
critical that the support contractor's SOW and cost estimate be usable
as initially presented with little or no negotiation required. To
this end, the evaluation was designed to measure the offerors'
understanding of the process and ability to deliver a quality product.
The RFP contemplated award of a cost-plus-award fee, task order
contract for a base year with four 1-year options. The RFP required
the proposal of a zero base fee and a ceiling of $1.12 billion over
the life of the contract. The RFP encouraged offerors to propose an
award fee structure which would provide adequate incentive to perform
at an outstanding or superior level. Award was to be made to the
offeror whose proposal represented the best value to the agency.
As part of their proposals, offerors were required to respond to seven
sample tasks, six of which were included in the RFP, and the seventh
was provided 2 weeks before the closing date in order to simulate the
quick reaction environment in which the SOFSA operates. These sample
tasks were representative of potential new work to be performed, were
not to be included as part of the contract award, and did not cover
tasks already accomplished by the incumbent contractor, Raytheon.
Offerors were to make oral presentations as part of their management
proposals and provide past performance information from similar
contracts over the past 5 years.
Proposals were evaluated under four areas, in descending order of
importance: technical, management, performance risk, and cost. The
technical area was evaluated on the basis of the seven sample tasks,
six of which were of equal value, while the seventh (the 2-week
deadline task) was slightly more important than the others. Under
management, seven support functions critical to the SOFSA's success
were evaluated: operations, security, management information systems,
quality assurance, property management and control, key personnel, and
transition. Operations was slightly more important, and transition
slightly less important, than the other subfactors. The technical and
management areas were evaluated at the subfactor level on a
color-coded scale: blue (outstanding), green (acceptable), yellow
(marginally acceptable), and red (unacceptable).
Performance risk was evaluated on the basis of five factors: cost
estimating and control, quality control, security management, schedule
planning and control, and management effectiveness. In order to
perform this assessment, the evaluators used surveys of past
performance on similar contracts performed by the offerors, rating
them on a scale of high, medium, and low risk.
The cost evaluation was designed to assess each offeror's ability to
accurately estimate the cost of completing logistics support tasks and
the overall cost of the offeror's proposal. In its evaluation, the
agency used a scale similar to that for performance risk (high,
moderate, and low risk) and based the evaluation on four factors:
award fee, cost realism, labor, and overhead. Award fee was evaluated
on the basis of offerors' proposed performance standards and the
structure/application of the proposed award fee. Cost realism was
evaluated on the basis of proposed costs of sample tasks compared to
the government's evaluated reasonable cost. The labor evaluation
included a comparison of an offeror's overall labor rate (calculated
using the RFP's cost model of total labor hours) with a base rate and
midpoint (calculated from the proposed loaded rates of the offerors).
The overhead evaluation included a risk analysis of each offeror's
evaluated total cost (using the RFP cost model) as compared to a
midpoint (calculated from the total evaluated costs of the offerors).
Included within the RFP cost model was the sum of approximately $525
million in material and other direct costs set by the agency as common
costs for all offerors.
Five offerors, including Raytheon and BSAS, submitted proposals by the
January 24, 1997, closing date for receipt of initial proposals. The
source selection evaluation board (SSEB) evaluated the technical
proposals and the oral presentations. Based upon various reviews, the
SSEB determined that one offeror's proposal should be eliminated from
the competitive range and that discussions should be conducted with
the remaining offerors. The SSEB conducted written discussions,
obtained written responses, and evaluated the offerors' best and final
offers (BAFO).
Under the technical area, BSAS' BAFO received a green rating in six of
the factors and a blue in the seventh, while Raytheon's BAFO received
green ratings in five of the factors, a blue in one, and a yellow in
one. Under the management area, BSAS' proposal received green ratings
in all seven factors, while Raytheon's proposal received blue ratings
in four factors (operations, quality assurance, property management
and control, and personnel) and green ratings in the remaining
factors. Under performance risk, BSAS' proposal was rated low in all
factors except security in which it was rated medium, and Raytheon's
proposal was rated low in all factors.
Under the cost area, BSAS' proposal was rated high risk under the fee,
labor, and overhead factors and low risk under the cost realism
factor. BSAS' high risk ratings in the labor and overhead factors
were based primarily on the agency's adjustment of the BSAS direct
labor proposal to make it consistent with the cost model. The net
effect of various adjustments was to raise BSAS' proposed cost (before
fee) from [deleted] to [deleted]. Raytheon's proposal was rated low
risk in all areas but overhead, under which it was rated moderate.
Raytheon's evaluated cost of [deleted] was the same as its proposed
cost.
The final, rollup ratings for the two relevant offerors are as
follows:
OfferorTechnicalManagement Performance RiskCost
BSAS Green Green LowHigh
Raytheon Green Blue LowLow
The source selection advisory council (SSAC) reviewed the SSEB's
evaluation report and recommended that Raytheon be awarded the
contract. In making this recommendation, the SSAC noted that BSAS'
proposal was slightly better than Raytheon's in the technical area,
but concluded that Raytheon's outstanding proposal rating in the
management area clearly outweighed BSAS' slight technical advantage in
the technical area. In this regard, they found that only Raytheon
provided an outstanding proposal which offered significant advantages
over the other proposals including operations, quality assurance,
property management and control, and key personnel. With regard to
cost, the SSAC observed that BSAS' proposal was rated as a high risk,
Raytheon's as a low risk, and the others as
moderate risk. No direct consideration was given to the total
evaluated cost of the respective proposals. The SSAC concluded that
Raytheon's proposal represented the best value to the government. In
determining that award should be made to Raytheon, the source
selection authority (SSA) stated that he had independently validated
and verified the findings and recommendations of the SSAC.
After receiving notice of the award and a debriefing, BSAS filed its
protest, supplementing it based on information received in the agency
report. BSAS protests the technical and cost evaluations as well as
the source selection decision.[1]
PAST PERFORMANCE EVALUATION
BSAS argues that the agency's past performance risk evaluation was
flawed. In this regard, it is not the function of our Office to
evaluate proposals de novo. Rather, we will examine an agency's
evaluation to ensure that it was reasonable and consistent with the
stated evaluation criteria and applicable statutes and regulations
since the relative merit of competing proposals is primarily a matter
of administrative discretion. Information Sys. & Networks Corp., 69
Comp. Gen. 284, 285 (1990), 90-1 CPD para. 203 at 3; Advanced Tech. and
Research Corp., B-257451.2, Dec. 9, 1994, 94-2 CPD para. 230 at 3. The
protester's mere disagreement with the agency's judgment does not
establish that an evaluation was unreasonable. Medland Controls,
Inc., B-255204, B-255204.3, Feb. 17, 1994, 94-1 CPD para. 260 at 3.
BSAS contends that, while the RFP contemplated a qualitative past
performance risk evaluation, the agency simply tabulated the results
of the questionnaires without determining the relative importance of
the different contracts and evaluation results. In this regard, BSAS
observes that Raytheon received [deleted]. In BSAS' view, since the
incumbent contract is more relevant than any other, Raytheon's
[deleted] performance should have been more heavily weighted rather
than merely averaged in with less relevant contract performance
results. BSAS also notes that in the SSEB report, some of Raytheon's
[deleted] risk ratings were simply deemed "nondiscriminators" without
any explanation. Our review of the record discloses no basis for
objecting to the agency's evaluation.
The RFP provided that the performance risk assessment would be based
on the offeror's demonstrated past performance on programs and
projects similar to the SOFSA effort. It advised that the evaluation
would be "quite subjective" and would be based on consideration of all
relevant facts and circumstances. Offerors were required to submit
information on all pertinent contracts within the 3 years immediately
preceding the closing date. Section M of the RFP provided that the
agency would assess an offeror's performance history as it related to
cost estimating and control, quality control, security management,
schedule planning and control, and management effectiveness. To this
end, the agency sent questionnaires to the various contracting
personnel for each contract identified by the offerors. Each question
had three responses (a, b, and c), which translated to ratings of 1
(low), 2 (medium), and 3 (high). Survey responses on the same
contract were averaged together to reach a single rating for each
criterion for each contract. The evaluators then averaged all
responses to calculate a single risk rating for each criterion. The
ratings were then assessed using the following scale: 1.00 to 1.67,
low; 1.68 to 2.34, medium; and 2.35 to 3.00, high. BSAS was evaluated
as low risk overall, with low ratings in all factors and subfactors
with the exception of two medium risk ratings under the security
management factor.[2] Raytheon was evaluated as low risk overall,
with low ratings in all factors and subfactors.
Contrary to BSAS' arguments, the RFP did not require a qualitative
past performance review which placed greater emphasis on SOF-related
contracts. It did, as discussed above, limit the past performance
assessment to "similar" efforts, and, in fact, the contracts
considered met this requirement.
The evaluation that was conducted provided a reasonable "qualitative"
evaluation of the offerors' past performance risk. In this regard,
the questionnaire responses provided sufficiently specific information
to form the basis for the evaluation. For example, under cost
control, respondents could mark "a" representing "90% or more of all
projects were completed within 10% of the estimated cost (10% below or
10% above estimate)"; "b" "75% to 89% of all projects completed within
10% [above or below] of the estimated cost"; or "c" "Less than 75% of
all projects were completed within 10% [above or below] of the
estimated cost." Respondents also were invited to contact the agency
if their answers did not fit the furnished responses for each
question. The completed survey sheets contain a number of margin
notes explaining responses or the failure to mark any response. The
SSEB report contains a number of explanations concerning the ratings.
For example, under the security management factor, the narratives for
both BSAS and Raytheon explain the circumstances and impact of
security violations.
We find nothing unreasonable in the evaluators' rating. While it is
true that the SOFSA director rated Raytheon's incumbent SOFSA
performance as a [deleted], he rated the firm as [deleted] factors.
In addition, the SOFSA administrative contracting officer rated
Raytheon's performance as [deleted] factors. When [deleted] averaged
together, the combined rating was well within the [deleted]. Further,
had the agency ascribed more weight to these scores, the result should
have been detrimental to BSAS and other offerors with little or no
SOFSA experience. In sum, we see no basis to object to the agency's
past performance evaluation.[3]
AWARD FEE EVALUATION
The RFP required offerors to propose a maximum fee percentage to be
applied to the total estimated cost, excluding transition costs. Due
to the unique ordering requirements of the SOFSA, the base fee was
required to be zero. Offerors were specifically advised that the
proposed percentage should provide an adequate incentive for
outstanding performance under the contract. Accordingly, offerors
proposed their own adjectival rating scales for standards of
performance with applicable fee percentages for determination of
whether and to what extent the contractor would be entitled to a fee.
Section M of the RFP advised offerors that the magnitude of the
proposed award fee and the application of the proposed adjectival
rating and applicable percentages would be evaluated.
The agency estimated a maximum fee of [deleted] percent and a
satisfactory performance fee of [deleted] percent. In evaluating each
offeror's fee structure, the agency looked at the maximum fee proposed
and the fee proposed for performance of satisfactory work as proposed
in the offeror's adjectival rating scheme. The agency also calculated
an incentive fee range by subtracting the satisfactory fee percentage
from the maximum fee percentage and compared it with the agency's
estimate of a reasonable range, [deleted] percent ([deleted] percent
minus [deleted] percent).
BSAS contends that the agency improperly evaluated its award fee
structure as presenting a high risk. Evaluating the relative merits
of competing proposals is a matter within the discretion of the
contracting agency, since the agency is responsible for defining its
needs and the best method of accommodating them, and it must bear the
burden resulting from a defective evaluation. Advanced Tech. and
Research Corp., supra, at 3. Consequently, in reviewing an evaluation
we will not reevaluate proposals but instead will examine the agency's
evaluation to ensure that it was reasonable and consistent with the
stated evaluation factors. Id. The fact that the protester disagrees
with the agency's judgment does not render the evaluation
unreasonable. As discussed below, we have examined the agency's
evaluation here and conclude that it was both reasonable and
consistent with the stated evaluation criteria.
BSAS' primary arguments are twofold. First, it maintains that its
[deleted] maximum fee is a strength because it represents significant
savings over Raytheon's [deleted] percent fee. Second, it argues that
its fee structure is more advantageous because it provides for a
greater relative incentive than does Raytheon's proposal. We have
reviewed these and BSAS' other award fee arguments and find that they
do not demonstrate that the agency's evaluation was unreasonable or
inconsistent with the evaluation criteria.
The agency recognized that BSAS' [deleted] maximum fee represented a
potential cost savings and identified this as a strength in the
evaluation. However, the evaluators found that the incentive to
achieve this maximum fee was of significant concern. BSAS would
receive an effective fee of [deleted] percent for satisfactory work.
Using the evaluation's sample $100 million effort, this percentage
translates to [deleted] million. Since BSAS could only earn an
additional [deleted] million for excellent work [deleted], the
evaluators concluded that the proposed fee structure provided BSAS
only a very limited incentive to perform above the satisfactory level.
In this regard, the evaluators also considered that BSAS had proposed
to have its parent companies, Boeing and Sikorsky, perform subcontract
work for it and their resources and expertise were necessary to meet
the broad range of services required of the SOFSA. As finally
proposed, BSAS was to pay the parent companies from the award fee pool
without any additional profit or fee. The evaluators were concerned
that the small potential maximum fee could result in a low priority
being given to SOFSA work by the parent companies relative to work
bearing a higher potential fee. Under the circumstances of this
contract, the evaluators' conclusion is reasonable.
BSAS argues that this will not be a problem because the parent
companies do not have cost accounting and computer systems
sophisticated enough to track incoming orders and prioritize them on
the basis of expected return. In our view, this is essentially an
irrelevant response inasmuch as there are other ways that this
information may be accessed and taken into account, and it is not
unreasonable to evaluate the incentive level of the proposed fee in
part on the basis of the potential impact of expected fee at both the
prime and subcontract levels.
BSAS also argues that work will be performed on the basis of the
Defense Priorities and Allocations Systems wherein rated orders are
identified as DO and DX. All DO orders have equal priority and take
precedence over unrated orders. All DX orders have equal priority and
take precedence over DO and unrated orders. Federal Acquisition
Regulation (FAR) sec. 11.603(a). Thus, the parent companies will work on
the basis of the ratings, not the amount of fee. The agency explains,
and the incumbent Raytheon verifies, that the orders at the SOFSA are
not usually rated orders. BSAS challenges these assertions based on a
single purchase order, issued by Raytheon to Sikorsky for work under
the incumbent contract, which contains a preprinted DO priority
rating. We do not agree that a single purchase order, out of the
hundreds involved in annual work on this contract, is sufficient to
call into question the agency's statement or to render the evaluators'
assessment unreasonable.
BSAS also contends that the agency erred by evaluating the award fee
incentive on the basis of the respective differences between the
proposed fees for satisfactory versus excellent performance, rather
than by performing a detailed, level by level comparison of its award
fee structure with Raytheon's. Had it done so, BSAS contends, its
structure would have been found superior to Raytheon's. As the agency
correctly observes, BSAS' argument is premised on a misleading
comparison which uses an inaccurate alignment of categories within the
two fee structures proposed. Moreover, in order to establish the
unreasonableness of an evaluation, it is not enough that the protester
can point to alternative methodologies available to the agency;
rather, the agency's actual evaluation must be shown to lack a
reasonable basis. Payco Am. Corp., B-253668, Oct. 8, 1993, 93-2 CPD para.
214 at 7. Here, in view of the fact that the offerors' unique fee
structures made it impracticable to perform a direct comparison at any
given point, the agency reasonably determined to evaluate the total
incentive between satisfactory and excellent performance in order to
assess this aspect of the cost evaluation.
COST EVALUATION AND DISCUSSIONS
BSAS has raised two main challenges to the cost evaluation: first,
that it failed to take into account the most probable cost of the
proposals and, second, that it was based on the erroneously increased
costs attributable to labor hours. We address each of these issues in
turn.
The agency argues that it was not required to consider the most
probable cost of the proposals because the RFP did not provide for
such an assessment. In this regard, the agency maintains that,
because the RFP evaluation scheme dealt only with cost risk
assessments, there was no need to consider the cost difference between
competing proposals. The agency's view that no consideration of total
cost was required is legally incorrect.
As a general rule, agencies are required by the Competition in
Contracting Act of 1984 (CICA) to include cost or price as a
significant factor in the evaluation of proposals, 10 U.S.C. sec.
2305(a)(2)(A) (1994); see FAR sec. 15.605(b)(1)(i). An evaluation and
source selection which fails to give significant consideration to cost
is inconsistent with CICA and cannot serve as the basis for a
reasonable source selection. See generally Coastal Science and Eng'g,
Inc., 69 Comp. Gen. 66, 67 (1989), 89-2 CPD para. 436 at 3 (source
selection in which price only accounted for 10 percent of overall
evaluation was inconsistent with CICA). While agencies have
considerable discretion in determining the particular method to be
used in evaluating cost or price, that method should, to the extent
possible, accurately measure the cost to be incurred under competing
proposals. Lockheed, IMS, B-248686, Sept. 15, 1992, 92-2 CPD para. 180 at
6; Electronic Warfare Integration Network, B-235814, Oct. 16, 1989,
89-2 CPD para. 356 at 5.
Here, the RFP specifically advised offerors that "the offeror's
ability to accurately estimate the cost of completing logistics
support tasks and the overall cost of the offeror's proposal will be
evaluated." Further, the RFP specifically provided that under the
labor rates evaluation, the "resulting total dollar figure will be
used by the government as an indicator of total cost for the expected
term of the contract." Thus, the RFP expressly contemplated the
evaluation of the offeror's total costs, and we reject the agency's
argument to the contrary. Accordingly, the cost evaluation was
defective in not considering the most probable total cost of the
competing proposals, under both the terms of the RFP and the statutory
requirement that cost must be given significant consideration in award
decisions.
We next turn to the protester's allegation that the cost analysis that
was performed was based on the erroneously increased costs
attributable to labor hours.[4] The RFP included a cost model
providing for 11,504,850 direct labor hours in various categories over
the potential 5-year life of the contract. The cost model identified
each labor category (e.g., computer programmer II) and the number of
hours per year to be worked/proposed. Section L advised that offerors
were to calculate the total annual cost for each indicated category
and aggregate the categories into a single annual cost of labor.
BSAS explains that its proposal fully accounted for the required 11.5
million cost-model hours, but that they were simply detailed in two
separate and clearly identified places: [deleted]. In this regard,
BSAS' initial cost proposal provides that "all employees are
classified into [deleted]. The proposal included detailed breakdowns
of the labor positions identified in the proposed groups. In
addition, the proposal provided detailed pricing forms showing some of
the required hours as [deleted]. This methodology was repeated and
clarified in the protester's BAFO.[5]
In reviewing BSAS' initial proposal, the agency focused on apparent
discrepancies between BSAS' "grand total program summary," which
included the identification of 9,292,611.6 "total hours," and BSAS'
"grand total program labor hour summary," which reflected 11,825,450
"total hours." In separate discussion questions, the agency requested
verification of these figures. In response, BSAS explained that the
11.8 million hours figure was correct with the exception of some
transition hours which had been excluded. It also explained that the
9.2 million hours figure did not include the [deleted]. It furnished
a new grand total program summary of labor hours, which reflected both
the [deleted]. BSAS explained that the "hours portrayed on [the new
summary] represent all hours, [deleted], priced in our original cost
proposal."
Because BSAS failed to account for all cost-model hours in a single
figure, and denominated a significant number of labor hours as
[deleted], the agency upwardly adjusted BSAS' costs by more than
[deleted] to account for what it viewed as the missing approximately
[deleted] hours. BSAS contends that the addition of hours represented
an improper double counting of hours already included in its proposal.
In our view, apart from the question of the accuracy of the agency's
adjustment to BSAS' costs, having identified such a significant
"error" in BSAS' initial proposal, the agency was required to conduct
meaningful discussions with BSAS on this matter.
Procuring agencies are generally required to conduct meaningful
discussions with all offerors in the competitive range. CBIS Fed.
Inc., 71 Comp. Gen. 319, 325 (1992), 92-1 CPD para. 308 at 7. Discussions
cannot be meaningful unless they lead an offeror into those aspects of
its proposal that must be addressed in order for it to have a
reasonable chance of being selected for award, and afford an offeror
an opportunity to revise its proposal to satisfy the government's
requirements. Global Indus., Inc., B-270592.2 et al, Mar. 29, 1996,
96-2 CPD para. 85 at 4-5; Stone & Webster Eng'g Corp., B-255286.2, Apr.
12, 1994, 94-1 CPD para. 306 at 10-11. An agency may not consciously
coerce or mislead an offeror during discussions (see Eagle Tech.,
Inc., B-236255, Nov. 16, 1989, 89-2 CPD para. 468 at 3-4), nor may it
inadvertently mislead an offeror through the framing of discussion
questions into responding in a manner that does not address the
agency's concerns. Peckham Vocational Indus., Inc., B-257100, Aug.
26, 1994, 94-2 CPD para. 81 at 6.
We recognize that the RFP called for a single labor cost in the
proposal and the agency was entitled to require that BSAS follow this
format. However, the agency did not identify this as a problem in its
discussion questions; rather, in the face of BSAS' labor design, it
simply asked for verification of the totals.[6] Since the original
totals were consistent with the cost model and BSAS' proposal
structure, BSAS was not placed on notice of any problem perceived with
the structure, or of the agency's view that it was necessary to add
some [deleted] hours to the direct labor proposal. Had the agency
clearly identified the issue, BSAS could have either explained its
methodology to the agency's satisfaction, or reconfigured its cost
proposal to identify all labor costs in a single figure. Based on our
review of the record, we conclude that the agency failed to conduct
meaningful discussions on this issue. See Stone & Webster Eng'g
Corp., supra.
The effect of the agency's failure to conduct meaningful discussions
was significant. The cost adjustment that the agency made accounted
for an addition of more than [deleted] to BSAS' cost proposal and
resulted in BSAS' proposal being rated high risk in the overhead and
labor cost evaluations. Had BSAS been able to meaningfully respond to
the agency's concerns, eliminating the need to adjust its costs, BSAS'
overall labor rate would have been lower than evaluated and lower than
Raytheon's overall rate, resulting in a more favorable risk assessment
for labor and overhead. More significantly, elimination of the
[deleted] adjustment would have resulted in BSAS' evaluated cost being
approximately [deleted] lower than Raytheon's evaluated cost.
The consequence of the inadequate discussions and the resulting
apparent error in the agency's cost calculation must be viewed in the
context of the agency's failure to consider the total probable cost of
proposals. The evaluation of total cost does not appear to be crucial
with respect to the initial award determination since Raytheon's
proposal was viewed as having both an overall advantage in noncost
factors and a significant cost advantage over BSAS'. However, since
the agency appears to have erred in adding more than [deleted] to
BSAS' proposed labor costs, the actual cost advantage may be with BSAS
and not Raytheon, thus requiring a cost/technical tradeoff analysis.
While agencies have broad discretion in performing cost/technical
tradeoffs, SDA Inc., B-248528.2, Apr. 14, 1993, 93-1 CPD para. 320 at 9,
here no cost/technical tradeoff analysis was undertaken due to the
inadequate consideration of cost and the improper conclusion that
Raytheon's higher-rated proposal offered the lower cost.
In sum, we find that the agency failed to conduct meaningful
discussions and that this failure had a significant impact on the cost
evaluation.[7]
PREJUDICE
The agency has consistently argued that, because of Raytheon's
superior management evaluation, BSAS still would not be in line for
award, even if it were to prevail on all its protest grounds. During
the pendency of the protest the agency submitted a revised review and
SSA determination based on an evaluation result consistent with many
of BSAS' protest allegations, including the cost advantage alleged by
BSAS. The agency concluded that the award to Raytheon remains
warranted and therefore argues that BSAS was not prejudiced by any
errors made in the evaluation and source selection process.
In its revised review, the agency continued to maintain that its
assessment of cost risk without consideration of probable cost was
appropriate. In this regard, the agency took the position that
"inclusion of this alleged [total] cost differential would be a gross
misapplication of the terms and conditions of the RFP and Source
Selection Plan and would be improper." Making what it viewed as the
hypothetical assumption that many of the protester's allegations were
correct, the SSEB, in its post-protest reevaluation concluded that,
while BSAS' score improved in various subfactors, these improvements
were insufficient to increase BSAS' final score in the technical,
management, and past performance areas, which all remained "green."
The reevaluation did result in a low risk overall rating in the cost
area. As part of its hypothetical exercise, the SSEB prepared a
comparison of the offerors' proposed cost including transition,
resulting in the calculation of a [deleted] difference between
Raytheon's cost [deleted] and BSAS' cost [deleted]. The SSEB also
calculated total possible costs by adding to each offeror's proposed
cost the maximum fee proposed, resulting in a comparison of [deleted]
(Raytheon) to [deleted] (BSAS). The difference in these costs is
[deleted].
This post-protest analysis was reviewed and adopted by the SSA, who
concluded that Raytheon would have properly received his direction for
award, even given the assumption that all BSAS' protest allegations
were granted. He emphasized the equality of the ratings in all but
the management area and the overall [deleted] cost differential
between the two proposals. He explained why, in view of the
importance of performance at the SOFSA and its potential effect on the
agency's ability to accomplish SOF missions, he concluded that the
additional cost associated with Raytheon's proposal was more than
offset by the potential to enhance contractor performance and mission
accomplishment. The SSA also expressed the view that the cost
differential between Raytheon and BSAS was mitigated by Raytheon's
significantly lower transition costs. In sum, the SSA concluded that
Raytheon's superior management proposal, outstanding award fee plan,
and performance incentives, when considered together with the relative
importance of the management area over cost, would clearly outweigh
the [deleted] cost savings associated with the BSAS proposal (assuming
that the agency had made the errors alleged by the protester). It is
on the basis of this post-protest
reevaluation that the agency argues that any errors in its process did
not prejudice BSAS.
Our Office will not sustain a protest unless the protester
demonstrates a reasonable possibility that it was prejudiced by the
agency's actions, that is, unless the protester demonstrates that, but
for the agency's actions, it would have had a substantial chance of
receiving the award. McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1
CPD para. 54 at 3; see Statistica, Inc., v. Christopher, 102 F. 3d 1577,
1581 (Fed. Cir. 1996).
Here we are unpersuaded by the agency's argument that there was no
reasonable possibility of prejudice. While we consider the entire
record, including statements and arguments made in response to a
protest in determining whether an agency's selection decision is
supportable, we accord greater weight to contemporaneous source
selection materials rather than judgments, such as the selection
officials' reevaluation here, made in response to protest contentions.
Dyncorp, 71 Comp. Gen. 129, 134 n.12 (1991), 91-2 CPD para. 575 at 7 n.13;
Southwest Marine, Inc.; American Sys. Eng'g Corp., B-265865.3,
B-265865.4, Jan. 23, 1996, 96-1 CPD para. 56 at 10. As pointed out above,
the agency does not acknowledge that it erred. Rather, we are faced
with an agency's efforts to defend, in the face of a bid protest, its
prior source selection through submission of new analyses, which the
agency itself views as merely hypothetical and which are based on
information that the agency continues to argue is not accurate. The
lesser weight that we accord these post-protest documents reflects the
concern that, because they constitute reevaluations and
redeterminations prepared in the heat of an adversarial process, they
may not represent the fair and considered judgment of the agency,
which is a prerequisite of a rational evaluation and source selection
process.
Moreover, even in its reassessment, while the agency went through an
exercise which theoretically based the determination on the corrected
relative probable costs, it has continued to maintain that it properly
considered cost risk only and is not required to consider relative
probable cost. In considering the magnitude of the respective
probable costs, the agency considered and compared only the grand
totals and not the relative difference between the costs over which
the offerors exercised any control. That is, the contract included
fixed costs of approximately $525 million (material and other direct
costs) which were constant for all offerors. If these costs are
eliminated from the analysis, while the absolute difference in the
competing proposals' respective costs remains the same (approximately
[deleted] million), the magnitude of the relative maximum cost
difference between the cost elements which differed for each offeror
represents [deleted] percent, rather than the maximum cost difference
of [deleted] percent used by the agency in its analysis. Particularly
in light of the circumstances under which it was prepared, we cannot
accord the agency's judgment the deference we normally would. We
conclude that there remains a reasonable possibility that the
protester was prejudiced by the agency's actions.
The protest is sustained.
RECOMMENDATION
We recommend that the agency reopen negotiations regarding costs and
fees with the offerors in the competitive range, in accordance with
the guidance set forth in this decision, and allow them to submit
revised cost proposals (including fees). If, upon reevaluation, the
agency determines that BSAS' or another proposal represents the best
value, we recommend that the agency terminate Raytheon's contract for
convenience and award a contract to BSAS. We also recommend that BSAS
be reimbursed the costs of filing and pursuing its protest, including
reasonable attorney's fees. Bid Protest Regulations, 4 C.F.R. sec.
21.8(d)(1) (1997). BSAS' certified claim for such costs, detailing
the time and costs incurred, should be submitted within 60 days after
receipt of this decision. 4 C.F.R. sec. 21.8(f)(1).
The protest is sustained.
Comptroller General
of the United States
1. The protester submitted numerous arguments in support of these and
other protest grounds. This decision will discuss only the more
significant arguments. We have reviewed the entire record and
considered all of the protester's arguments. Those arguments not
specifically addressed in the decision were found non-meritorious.
2. BSAS has protested that it should have been provided discussions in
order to explain the circumstances behind the incidents which led to
the medium risk ratings. The security violations involved were
apparently the fault of subcontractors, and the SSEB report provides a
detailed explanation which downplays the seriousness of the
violations; thus, it is unlikely that BSAS could have provided any
additional information which would have changed the rating. In any
event, BSAS was rated as low overall under the past performance risk
area.
3. We find nothing unreasonable in the evaluators' denomination of
some Raytheon [deleted] ratings as "nondiscriminators," and therefore
no basis for changing an otherwise low rating. Raytheon received
[deleted] ratings in [deleted] other contracts besides the SOFSA
incumbent contract. The evaluators apparently used the term
"nondiscriminator" to mean that, because of the circumstances of the
[deleted] contracts, the risk ratings associated with them were not
significant: [deleted].
4. BSAS also protests the agency's addition of approximately [deleted]
to its labor costs for escalation. The cost model provided for a
3-percent labor rate escalation for each year of the contract. Based
on its own business experience, BSAS proposed in its BAFO to reduce
that factor to [deleted] for professional labor categories. While
Defense Contract Audit Agency reviewers apparently did not take
exception to this proposal, the cost evaluators determined to add in
the additional escalation cost. The evaluators based their assessment
on historical wage rate increases at the SOFSA which indicated that a
3-percent escalation was "conservative at best." While the protester
maintains that the agency should not have added the additional
escalation cost, we believe the agency's determination to conform
BSAS' escalation proposal to the cost model was reasonably based on
its experience with contract performance at the SOFSA.
5. For example, in its initial proposal BSAS identified [deleted]
hours for the position of "Senior Engineer (All Disciplines)" which
was consistent with the cost model, less transition hours. In a
separate section of the cost proposal, BSAS identified [deleted]
senior engineer positions [deleted]. The combined total of these
positions is the same as that proposed for the Senior Engineer. Labor
rates and the burdened cost of labor was detailed elsewhere in the
proposal, denominated as [deleted]. The BAFO contained similar
breakdowns which were also consistent with the cost-model totals. As
part of our review of this issue, an accountant/evaluator from our
Office reviewed the BSAS cost proposal and the arguments on the issues
by the protester and agency. He concurred with BSAS' arguments that
both its initial and BAFO proposals provided for a division of labor
hours and costs into [deleted], the combination of which is consistent
with the cost-model totals.
6. In this regard, we note that cost evaluation spreadsheets used by
the agency contain notations indicating that the evaluators were well
aware that BSAS had proposed the total cost model hours under separate
line items.
7. BSAS also contends that it was misled by the agency during
discussions with regard to its award fee amount and structure.
Because BSAS' maximum fee and incentive fee range were less than the
government's estimate, the agency issued a "significant concern"
discussion question highlighting its concern that BSAS' "proposed
incentive range . . . appears to provide very limited incentive to
perform above the Satisfactory level." BSAS asserts that, in a
subsequent telephone conversation, the contracting officer advised
that BSAS had proposed the highest fee of all offerors and that its
"incentive range for satisfactory performance should be 50 percent of
the amount for an excellent rating." BSAS states that it followed
this advice, significantly lowering its award fee from [deleted],
resulting in a more limited incentive range, and contributing to BSAS'
high risk rating for the award fee subfactor. The contracting officer
denies making the statements attributed to him. In light of our
recommendation that negotiations be reopened, we need not resolve this
dispute.