BNUMBER: B-281453; B-281453.2; B-281453.3
DATE: February 17, 1999
TITLE: Orbital Technologies Corporation, B-281453; B-281453.2; B-
281453.3, February 17, 1999
**********************************************************************
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:Orbital Technologies Corporation
File: B-281453; B-281453.2; B-281453.3
Date:February 17, 1999
S. Gregg Kunzi, Esq., and Thomas L. McGovern III, Esq., Hogan &
Hartson; and David F. Grams, Esq., David F. Grams & Associates, for
the protester.
John E. Lariccia, Esq., Department of the Air Force, for the agency.
Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest challenging the agency's evaluation of technical proposals
submitted in response to solicitation for research and development
support services is denied where the protest evidences the protester's
mere disagreement with the results of the evaluation and there is no
basis on which to find that the evaluation was unreasonable.
2. Allegation that agency conducted an unreasonable evaluation of
past performance is denied where the record shows that the agency
evaluation was proper and in accordance with the solicitation's stated
evaluation factors.
3. Protester's arguments that the cost realism adjustments made to
the awardee's proposed labor costs were improper are denied where the
record shows that the agency had a reasonable basis for its cost
evaluation.
DECISION
Orbital Technologies Corporation protests the award of a contract to
ERC, Inc. under request for proposals (RFP) No. F04611-98-R-0025,
issued by the Department of the Air Force, as a total small business
set-aside, for research in propulsion sciences (RPS) at Edwards Air
Force Base, California.[1] The protester argues that the agency's
evaluation of proposals and selection decision were unreasonable or
inconsistent with the solicitation.
We deny the protests.
A draft RFP, consisting of a statement of work (SOW) and sections L
and M, was issued on March 17, 1998 to potential offerors. The draft
RFP advised that a reference library had been established by the
agency to help prospective offerors prepare their proposals and that
site observations would be provided, and solicited industry comments.
The final RFP, issued on July 21, provided for the award of a
multi-year (9-year) cost-plus-fixed-fee contract to provide RPS
services to support the Air Force Research Laboratory Propulsion
Directorate in the area of space and missile rocket propulsion
technologies. RFP sec. L-I, L-II, M.
As amended, the RFP provided for award on a best value basis and
informed offerors that the non-cost factors combined were more
important than cost. The following evaluation factors and subfactors,
listed in descending order of importance, were identified:
1. Mission Capability
a. Employee retention/attraction
b. Communications/coordination
c. Value added cost reduction processes
d. Program management
e. Scenario
2. Proposal Risk
3. Price/Cost
4. Past Performance
RFP sec. M-3.
Mission capability and proposal risk factors were of equal importance
and of greater importance than the past performance and cost factors.
The cost factor was of greater importance than past performance and
all three non-cost factors when combined were significantly more
important than cost; however, cost was considered a substantial factor
in award. Id.
Detailed instructions were provided for the preparation of technical
and cost proposals. RFP sec. L-II. The RFP provided for a cost realism
analysis and authorized the government to adjust offerors' proposed
costs to reflect the government's estimate of the most probable cost
(MPC) of performance. The cost realism analysis would consider
whether the costs proposed reflected the offeror's understanding of
the requirement and were realistic in relation to the services to be
provided. RFP sec. M-3(e). Offerors were required to provide a detailed
breakdown of costs, including labor rates, labor escalation rates,
indirect costs, and personnel relocation costs; in computing their
proposed labor costs, offerors were directed to use the RFP's
estimated labor hours. RFP sec. L-II, at 12-15.
Nine firms, including Orbital and ERC, submitted offers by the amended
closing date for receipt of proposals. As relevant here, Orbital's
total proposed costs were [deleted] and ERC's were $35.1 million.
Proposals were evaluated under the mission capability subfactors using
a color/adjectival system to reflect how well the offeror's proposal
met the specified performance or capability requirements.[2] Proposal
risk was evaluated to assess the risks associated with the offeror's
proposed approach, weakness in the proposed approach, and weaknesses
in the proposal itself; the risk ratings assigned were high, moderate,
or low. Performance risk was evaluated as a measure of the
government's confidence in the offeror's ability to successfully
complete the proposed effort based on the offeror's relevant present
and past performance history. RFP sec. M-3. Proposals were also
evaluated for cost realism and downward adjustments were made to ERC's
and Orbital's proposed costs. In performing the cost realism
evaluation, the contract negotiator reviewed the firms' proposals and
obtained rate verification, and other cost information from the
Defense Contract Audit Agency (DCAA).
The results of the evaluation of initial offers from Orbital and ERC
were as follows:
FACTORS ORBITAL ERC
Mission Capability
a. Employee retention
Proposal risk
Past Performance
[deleted]
[deleted]
[deleted]
Blue
Low
Great Confidence
b. Communications/Coord.
Proposal risk
Past Performance[deleted]
[deleted]
[deleted] Blue
Low
Great Confidence
c. Value added cost
reduction processes
Proposal risk
Past Performance
[deleted]
[deleted]
[deleted]
Blue
Low
Confidence
d. Program Mgmt.
Proposal risk
Past performance[deleted]
[deleted]
[deleted] Green
Low
Confidence
e. Scenario
Proposal risk [deleted]
[deleted] Yellow
LowPrice/Cost
(in millions)
Proposed Cost
MPC
[deleted]
[deleted]
$ 35.1
[deleted]
Source Selection Authority Decision Briefing Report, Oct. 13, 1998, at
24-35.
The source selection evaluation team summarized its evaluation
findings in a decision briefing report for the source selection
authority (SSA), that detailed the strengths, weaknesses, and risks
presented by each offeror's proposal. The SSA reviewed the evaluation
findings and concluded that ERC's proposal represented the best value
to the government, given the qualitative differences among the
offerors' approaches.[3]
In specifically comparing ERC's proposal to Orbital's, the SSA stated:
While I find both ERC and [Orbital] to have exceptional merit
that substantially exceeds capability requirements in employee
retention/attraction and value added cost reduction processes, as
demonstrated by their strengths, I find ERC's proposal superior
to [Orbital] in communication/coordination. ERC has clearly
demonstrated their ability to quickly, effectively and
efficiently communicate and coordinate through their team
initiative to explore new communication methods/avenues,
including numerous automated/diverse communication methods, which
will enhance the ability of researchers to conduct
state-of-the-art research. Furthermore, ERC has an exceptional
Contract Performance Management/Measurement System and
understanding of the required level and type of communications
necessary to successfully perform the RPS effort. I find ERC's
delegation of authority to the area managers for the quick
reallocation of resources and their joint
Government/Contractor/On-site Contractor weekly meetings of
particular benefit to RPS. Although [Orbital's] communication/
coordination is good and has merit which exceeds capability
through numerous diverse communication methods, daily
interactions with Government and other on-site contractors with
an in-depth understanding of the Air Force Research Laboratory
(AFRL) environment, it is my assessment that ERC's approach to
communication/coordination is superior to that of [Orbital].
Source Selection Decision, Oct. 13, 1998, at 1-2.
In addition, the SSA found that ERC "has [deleted] price/cost, which I
find affordable for successful performance" of the solicitation
requirements and he considered "the [deleted] difference between the
lower most probable cost (MPC) and ERC's proposed price/cost
insignificant and, should the MPC be realized, of even greater
affordability to the RPS effort." Id. at 2. Following this
determination, a contract was awarded to ERC. After receiving notice
of the award and a debriefing, Orbital filed these protests. The
agency has stayed performance of the contract pending our resolution
of the protests.
EVALUATION OF PROPOSALS
Orbital argues that the agency failed to follow the evaluation scheme
in its evaluation of the proposals.[4] For example, Orbital protests
that it was unreasonable for the agency to assign [deleted] high
rating, blue/excellent with low proposal risk, to [deleted] the ERC
proposal under the employee retention/attraction subfactor because
[deleted] the ERC proposal included no express employment commitments
or resumes from the incumbent employees.[5] Since ERC merely stated
its intention to hire the incumbent personnel if the firm was awarded
the contract, Orbital maintains that the ERC proposal should have been
rated lower [deleted] and assigned a higher proposal risk rating.
Where an evaluation is challenged, we will examine the agency's
evaluation to ensure that it was reasonable and consistent with the
stated evaluation factors and applicable statutes and regulations,
since the relative merit of competing proposals is primarily a matter
within the contracting agency's discretion. 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
itself render the evaluation unreasonable. Medland Controls, Inc.,
B-255204, B-255204.3, Feb. 17, 1994, 94-1 CPD para. 260 at 3. We find the
evaluation here reasonable and consistent with the solicitation and
the stated evaluation factors.
The RFP at issue here provided that the agency would evaluate
proposals under the employee retention/attraction subfactor in
relation to each offeror's demonstrated approach to effectively
attract, retain, and motivate its proposed research personnel. This
requirement is met when an offeror's proposal contains specific
information regarding employee benefit packages and other forms of
compensation, and demonstrates the offeror's management practices and
resources in providing an environment that promotes effective and
efficient pursuit of research. RFP sec. M-3(c)(1). The RFP did
not preclude proposing prospective incumbent hires nor provide that an
offeror proposing firm commitments and resumes from incumbent
employees would be given a higher rating for evaluation purposes than
an offeror whose proposal did not include similar employment
commitments. Indeed, as the protester points out, the agency, in
question 21 of the preproposal questions and answers, specifically
recognized that proposals that did not include express employment
commitments or resumes from the incumbent staff, would be "considered
responsive." Air Force Letter to Potential Offerors, July 30, 1998,
at sixth unnumbered page.[6]
Since the RFP did not require commitments from incumbent personnel, we
see no basis to conclude that the agency was required to downgrade
ERC's proposal because it did not obtain employment commitments or
resumes from the incumbent staff. In our view, the agency reasonably
could conclude, based on ERC's presentation--including its proposal to
hire the incumbent staff or other senior non-incumbent research staff
who possess the experience and qualifications required by the
solicitation to perform the contract services--that ERC's presentation
warranted a "blue" rating. Indeed, the record shows that the ERC
proposal was evaluated as proposing a highly competitive employee
benefit package that included profit sharing, health insurance
reimbursement option, and transfer of seniority for benefit purposes;
and as demonstrating an excellent history of retaining employees on
contract changeover which, in the evaluators' judgment, indicated a
strong likelihood that ERC could attract and retain research personnel
for this RPS effort. Further, ERC was evaluated as proposing an
outstanding process for creating an environment to motivate
researchers in their pursuit of research by providing a formula for
sharing royalties with the inventor and the research team. The
evaluators favorably viewed ERC's proposal of a local purchase
authority to provide the research personnel with material and
equipment in a timely and efficient manner. The evaluators also
considered the outstanding qualifications and experience of ERC's
chief executive officer as indicative of the firm's ability to attract
and retain world-class researchers.
We also note that ERC included in its proposal a copy of an e-mail
message from the chairman of the Raytheon employee committee (who was
also the program manager under the Raytheon contract). [deleted]
The protester insists that the best indicator of ERC's inability to
attract and retain world-class researchers is the fact that ERC was
not one of the five offerors who obtained commitments and resumes from
the Raytheon employees, and it disagrees with the evaluators' judgment
that ERC's proposed employee benefits and compensation package was
highly competitive to attract and retain world-class researchers. As
shown above, however, the record establishes the reasonableness of the
agency's evaluation under this subfactor. In our view, the fact that
the ERC proposal did not include employment commitments or resumes
from the Raytheon employees does not render improper the agency's
evaluation findings, given that employment commitments or resumes were
not required.[7] Nor does the protester's disagreement with the
evaluators' conclusion that the ERC benefits and compensation package
together with the firm's demonstrated employee retention and royalty
sharing plan reflected an exceptional approach to attract, retain and
motivate world-class research personnel render the evaluation
unreasonable.
Likewise, the record does not support Orbital's related argument that
ERC's proposal should have been assigned either a moderate or high
proposal risk rating under this subfactor simply because ERC did not
obtain incumbent employee commitments. As discussed previously, there
was no requirement that an offeror obtain letters of commitment and
the evaluators found that ERC's approach demonstrated an understanding
of the solicitation requirements and contained specific information as
to its ability to attract and retain world-class research personnel
and we see no basis to conclude that the agency's low proposal risk
rating assigned to the ERC proposal was not warranted.
Orbital next complains that under the second most important subfactor,
communications/coordination, the agency's rating of the ERC proposal
as blue/exceptional with low proposal risk was undeserved. The
protester asserts that since ERC was not one of the five offerors to
whom the Raytheon employees "provided resumes and other information
(including information regarding communications at the site), ERC
simply had no institutional knowledge of how government personnel,
contractor personnel, and other on-site contractors communicated and
coordinated with each other in practice." Protester's Comments, Dec.
23, 1998, at 13.
The RFP stated that this subfactor would be evaluated by assessing
offerors' "ability to effectively communicate and coordinate
management activities to all team members including government
personnel, contractor personnel, and other on-site contractors within
a team environment." RFP sec. M-3(c)(2). Offerors were instructed to
describe in their proposal how they would implement internal
communication between the technical areas within the organization as
well as communication with the research community. In addition,
offerors were to demonstrate their approach to coordinating key
activities. Id.; sec. L-II.4.2.2.
From our review of the record, ERC addressed each of these
requirements in detail, and the agency determined that ERC's proposal
provided a detailed integration plan for effective communication and
coordination. For instance, the evaluators favorably considered ERC's
proposal to initially adopt the current communication techniques and
to then institute a team initiative to explore new communication
avenues. They believed that ERC's approach would be nondisruptive to
current operations and would present an opportunity for the government
personnel to be directly involved in any subsequent communication
improvements. The evaluators also noted the sound communication
methods proposed by ERC; the delegation of authority to ERC's area
manager to coordinate and allocate resources; and its exceptional
understanding of the required level and types of communication. The
evaluators concluded that under this subfactor, the ERC proposal
warranted a rating of blue/excellent with low proposal risk. The
record supports the agency's evaluation ratings. Although Orbital
argues that the ERC proposal could not exceed the solicitation
requirements because the firm did not obtain inside information from
the incumbent employees, no such inside knowledge was either required
or necessary. As previously stated, at least 5 months prior to the
receipt of initial proposals, the agency provided on-site observations
for all prospective offerors which included meetings with the Raytheon
employees and agency personnel and access to an extensive reference
library that included project publications, the existing contract with
all modifications, and historical information for materials and
supplies. Thus, the agency provided ample opportunity for prospective
offerors to obtain the "institutional knowledge" necessary to prepare
their proposals. Orbital's allegations provide no basis to object to
the agency's evaluation in this regard.
In a similar vein, Orbital argues that the agency erred in evaluating
ERC's proposal as green/good with low proposal risk under the program
management subfactor of the mission capability factor. Based on our
review of the record, we believe the evaluation in this area was
reasonable. Under this subfactor, offerors were required to
demonstrate that their on-site, dedicated program manager has the
experience and capabilities to understand the technologies identified
in the SOW. RFP, sec. L.4.2.4, M-3(c)(4). Orbital takes issue with the
fact that [deleted] ERC's [deleted] rated green/good with low
proposal risk although ERC, unlike Orbital which had the commitment of
the Raytheon program manager, had not furnished a personal commitment
from the incumbent program manager nor from an otherwise qualified
program manager with the requisite experience and capability.[8] The
record shows that ERC's proposal was rated green/good because the
evaluators reasonably believed that ERC would be able to hire the
current Raytheon program manager to fill this key position. While the
Raytheon program manager had provided his written employment
commitment to Orbital and four other offerors, as discussed above, he
had expressed an interest in working for ERC should that firm be the
successful offeror. Furthermore, this subfactor asked offerors to
provide additional information, including an organizational chart,
lines of authority, chain of command, and the program manager's
ability to transition resources and personnel into the program, see
RFP sec. L-II.4.2.4, and the record indicates that the agency concluded
that ERC's approach to meeting the program management requirements was
good. For instance, the evaluators found ERC's proposed on-site
management and organizational approach would promote rapid response to
agency needs, and that its transition plan--that included establishing
a transition team, recruiting off-site during after-work hours, and
detailed orientation briefings--was well thought out. Contrary to
Orbital's contentions, the agency's evaluation of ERC's proposal as
green/good under this subfactor was reasonable.
In any case, Orbital's argument overstates the importance of the
color/adjectival ratings in relation to the source selection process.
While adjectival ratings may be useful as guides to intelligent
decision-making, they are not binding on the source selection
official, who has discretion to determine the weight to accord such
scores in making an award decision. Porter/Novelli, B-258831, Feb.
21, 1995, 95-1 CPD para. 101 at 4-5. Of concern to our Office is whether
the record as a whole supports the reasonableness of the evaluation
results and source selection decision. PCL/Am. Bridge, B-254511.2,
Feb. 24, 1994, 94-1 CPD para. 142 at 5-6. Here, the evaluation record
shows that, consistent with the terms of the final RFP, the SSA
reasonably decided not to weigh Orbital's proposal more heavily than
ERC's simply because it offered firm commitments and resumes from the
incumbent employees. Instead, as discussed previously, the SSA (and
evaluators) examined how well the ERC proposal met the evaluation
factors and subfactors. The SSA ultimately concluded that ERC's
proposal offered the better overall value and provided greater
confidence of successful performance because of its relative
superiority and higher performance risk assessment under the
communication/coordination subfactors, the second most important
subfactor of the mission capability factor. This determination is
supported by the evaluation record.
PAST PERFORMANCE
The RFP provided that the agency would evaluate the past performance
of offerors who demonstrated that they had performed at least four
relevant contracts or subcontracts of a similar size and nature within
the past 5 years. In addition, offerors were required to explain what
aspects of these four contracts/subcontracts they considered to be
relevant to the proposed effort. RFP sec. L-II.7.0, M-3(f). To
determine relevance, the agency would consider such things as product
similarity, product complexity, contract type, program phase, contract
environment, division of company proposing and subcontractor
interaction. Draft AFFARS 5315.305 (a)(2)(iii).
Orbital challenges the Air Force's past performance review, asserting
that the agency (1) unreasonably concluded that two of the four
contracts identified in its past performance proposal were not
relevant to the proposed effort and were not further considered, and
(2) improperly considered a NASA contract awarded to ERC which was too
remote in time to be relevant. Protester's Comments, January 15,
1999, at 5-7. Where a solicitation requires the evaluation of
offerors' past performance, the agency has discretion to determine the
scope of the offerors' performance histories to be considered,
provided all proposals are evaluated on the same basis and the
evaluation is consistent with the terms of the solicitation. Wind Gap
Knitwear, Inc., B-261045, June 20, 1995, 95-2 CPD para. 124 at 3; Federal
Envtl. Servs., Inc., B-250135.4, May 24, 1993, 93-1 CPD para. 398 at 12.
Orbital claims that the Air Force improperly determined that Orbital's
contract [deleted] was not relevant because it was more production
oriented than the RPS effort. Likewise, Orbital's [deleted] was
considered more operational in nature than the research and
development effort required under this solicitation. Protester's
Comments, December 23, 1998, at 20-23.
We have no basis to disagree with the evaluators' judgment that these
two Orbital contracts were not relevant. The record indicates that
relevance was judged on the basis of contract type, period of
performance, contract value, and type of effort using
offeror-provided documentation or information from other sources.
With regard to Orbital's [deleted] The evaluators concluded, based on
the protester's explanation as to the relevance of this contract, that
the contract involved production and hardware development, rather than
basic and applied research, or other research related disciplines that
could be applied to this RPS program.
As to [deleted] the record further shows that the evaluators deemed
the information presented in Orbital's proposal for this contract bore
little correlation to the basic and applied research activities
required under the RPS contract. [deleted] We think the agency could
reasonably decide this contract was not relevant to a contract for
basic and applied research activities. The fact that Orbital
characterizes its performance under these two prior contracts as very
successful and states that the contract effort performed under both
contracts is very similar to the type of effort required by this RFP
does not, in our view, make the agency's conclusion here unreasonable.
With regard to ERC, Orbital argues that the contracts selected as
relevant and evaluated under the past performance factor impermissibly
included NASA Contract No. NAS8-97278 (Contract 97278) which was
awarded in April 1993, more than 5 years prior to the date the
instant solicitation was issued. We find no merit to this allegation.
While ERC had identified the period of performance for this contract
as April 1993 through September 30, 1998, the narrative discussion
makes it clear that it is Phase III of Contract 97278, a fixed-price
task order, which was listed as one of ERC's four relevant contracts.
ERC Proposal, Vol. V, at V-5-8. The past performance survey
responses received from NASA contract officials indicate that the
responses relate to a task order which was issued in June 1997; this
task order was clearly within the past 5 years. In short, this record
provides us no basis upon which to object to the Air Force's
evaluation of proposals under the past performance factor.
COST EVALUATION
The protester alleges that the agency improperly based the downward
adjustment of ERC's proposed labor costs on the incumbent's current
rates rather than accept the higher rates proposed by ERC. Orbital
notes in this regard that ERC proposed to hire the incumbent Raytheon
staff and proposed to pay them at labor rates equal to ERC's corporate
salary rates for the [deleted] area, increased by approximately
8 percent to reflect the higher prevailing rates in the Edwards AFB
area. Since nothing in the ERC proposal indicated that the firm
planned to pay its employees the incumbent rates, the protester
insists that the agency's downward adjustment to the exact level of
those incumbent rates was unreasonable. Protester's Comments on
Second Supplemental Agency Report, January 15, 1999, at 2-4.
We need not address the propriety of the agency's decision to adjust
downward ERC's proposed labor rates. As discussed above, the SSA
found ERC's proposal to offer the best overall value to the
government. In our view, since even ERC's proposed (that is,
unadjusted) cost is lower than [deleted] we do not see that ERC's MPC
adjustment had any impact on the award decision. In fact, as noted
above, the SSA specifically considered ERC "affordable" even at its
proposed cost. In these circumstances, we do not see how Orbital was
prejudiced by the agency's cost evaluation. See Conwal, Inc.,
B-279260, B-279260.2, May 26, 1998, 98-1 CPD para. 153 at 3.
The protests are denied.
Comptroller General
of the United States
1. This acquisition was conducted under the test case program for the
proposed draft Air Force Federal Acquisition Regulation Supplement
(AFFARS) sec. 5315.1, entitled "Source Selection Processes and
Techniques," dated November 21, 1997, and the draft AF Source
Selection Procedures, dated November 14, 1997 (both hereinafter
referred to as Draft AFFARS). RFP sec. M-2.
2. The color/adjectival ratings are: (1) blue/excellent, reflecting
that the offer has exceptional merit and substantially exceeded the
solicitation requirements; (2) green/good, the offer has merit and
exceeded the solicitation requirements; (3) yellow/satisfactory, the
offer met minimum solicitation requirements; and (4)
red/unsatisfactory, the offer does not meet one or more of the
solicitation requirements. Proposals assigned a "red" rating would
not be considered for award. Draft AFFARS sec. 5315.305.
3. Federal Acquisition Regulation sec. 52.215-1(f) (Oct. 10, 1997),
incorporated in the RFP, informed offerors that the agency might award
a contract without discussions. RFP sec. L-I.
4. Orbital identifies a number of examples of unreasonable evaluation
ratings and other flaws in the evaluation of proposals. We have
examined them all and find that none has any substantive merit. This
decision will address only the more significant allegations.
5. The research and development support services had been provided to
the Air Force by Raytheon, a large business. When the agency decided
to set aside the procurement for small business, the Raytheon research
employees who wanted to continue working at the AFB Rocket Propulsion
Laboratory contacted prospective offerors and obtained a variety of
information from each offeror, including information on wages and
fringe benefits. Thereafter, the Raytheon employees decided to submit
resumes and give firm employment commitments to only five offerors.
Orbital was one of these five offerors; ERC was not.
6. Question 21: Would a proposal that bids incumbents as key
personnel without personal commitments from the incumbents or the
inclusion of their resumes in the proposal be considered responsive .
. . under Subfactor D?
Response 21: Yes. Reference page L-10 of the RFP,
section 4.2.4, Subfactor D: Program Management, paragraph
d., "If you propose a key position for which you have not,
or cannot at this time, identify a specific employee,
state the qualifications for the position and the
recruitment approach you will use to fill it."
7. The protester had alleged that either ERC had misrepresented in its
proposal that the firm had received commitments from Raytheon
personnel when in fact it had not, or the agency improperly rated the
ERC proposal blue/excellent because ERC had not obtained letters of
commitments from the incumbent staff. [deleted]
8. As relevant here, the ERC proposal stated that:
[deleted]