TITLE: ITT Federal Services International Corporation, B-283307; B-283307.2, November 3, 1999
BNUMBER: B-283307; B-283307.2
DATE: November 3, 1999
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ITT Federal Services International Corporation, B-283307; B-283307.2,
November 3, 1999
Decision
Matter of: ITT Federal Services International Corporation
File: B-283307; B-283307.2
Date: November 3, 1999
C. Stanley Dees, Esq., Alison L. Doyle, Esq., and Arleigh Closser, Esq.,
McKenna & Cuneo, for the protester.
William A. Roberts III, Esq., Rand L. Allen, Esq., William Lieth, Esq.,
Daniel A. Silien, Esq., and David O. Ferry, Esq., Wiley, Rein & Fielding,
for Combat Support Associates, an intervenor.
Nicholas P. Retson, Esq., Raymond M. Saunders, Esq., and Richard B.
O'Keeffe, Esq., Department of the Army, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest challenging the validity of a source selection decision where the
selection official chose the awardee's technically equal, higher cost
proposal based on his conclusion that the protester's lower proposed costs
were not reliable (in the SSA's view, they either would increase over time
or would reflect reduction in quality of services provided), is sustained
where (1) the selection decision is not adequately documented under the
revised Part 15 Federal Acquisition Regulation requirements that
documentation of tradeoff decisions include the benefits associated with
additional costs; (2) the decision is improperly based on proposed, rather
than evaluated, costs, because the agency did not perform a cost realism
analysis of final costs; and (3) the concerns raised by the selection
official about the protester's costs were shown during a hearing to be
unsupported by the facts in the record.
DECISION
ITT Federal Services International Corporation protests the award of a
contract to
Combat Support Associates (CSA) by the Department of the Army, pursuant to
request for proposals (RFP) No. DASA02-98-R-5000, issued to procure base
operations and combat support at Camp Doha, Kuwait. ITT argues that the
Army's selection of CSA was unreasonable and violated the terms of the
solicitation because CSA's and ITT's proposals were essentially equal
technically, while CSA's costs were significantly higher than ITT's costs.
In addition, ITT argues that the Army's evaluation of past performance was
unreasonable.
We sustain the protest.
BACKGROUND
Camp Doha, Kuwait, is a large logistics base located 20 miles west of Kuwait
City that serves as the Army's forward presence in the Middle East. Camp
Doha has a working population of over 2,000 personnel including U.S.
military personnel, as well as U.S., Kuwaiti, and third-country national
contractor personnel. This RFP, for Camp Doha's base operations and
management support services, was issued October 30, 1998, and anticipates
the award of a cost-plus-award-fee contract for a base year, followed by
nine 1-year options. RFP sect. B. Among other things, the contractor is required
to provide and maintain supplies and equipment for military exercises, and
for contingency and combat operations, including heavy combat vehicles,
tactical vehicles, and related armaments, ammunition, electronics and repair
parts. Initial Agency Report, Aug. 25, 1999, at 1-3.
The RFP's evaluation scheme advised that award would be made to the offeror
whose proposal represented the best overall value to the government. RFP
sect. M.3. To determine which proposal offered the best value, the RFP
identified three evaluation factors, in descending order of importance:
quality (also referred to in the record as technical), past performance, and
cost. RFP sect. M.5. Under the quality and past performance evaluation factors,
the RFP identified subfactors, elements, and subelements; however, most of
these details are not relevant to this decision and will be set forth below
only as needed. With respect to proposed costs, the RFP advised that the
government would calculate a most probable cost (MPC) estimate for each
proposal. RFP sect. M.5.4.c.1. In addition, offerors were advised that the
"degree of importance of the Cost/Price factor will increase as the quality
differences in the proposals decrease." RFP sect. M.5.3.
The Army received four proposals in response to the RFP, and evaluated each
under the factors of quality and past performance. [1] Under these factors,
each of the initial proposals received an adjectival rating and point score
on the following scale: outstanding, 93-100 points; good, 85-92 points;
fair, 78-84 points; poor, 70-77 points; and unacceptable, 0-70 points. In
addition, the agency evaluated each offeror's proposed costs and calculated
an MPC estimate for each proposal. Also, because each offeror had a
different understanding of the solicitation's requirement for contractor
acquired property (CAP), the agency elected to evaluate proposed costs both
with and without CAP costs. [2] At the conclusion of the initial evaluation,
all four proposals were included in the competitive range, discussions were
conducted, and each offeror was asked to submit a final revised proposal.
Upon receipt of the final revised proposals (referred to at most points in
the record--and hence in this decision--as best and final offers (BAFO)),
the Army reevaluated each proposal under the quality and past performance
evaluation factors. The agency did not, however, calculate a BAFO MPC
estimate for the proposals. The final overall scores and cost information
for all the offerors are set forth below:
CSA ITT OFFEROR OFFEROR
"BLUE" "YELLOW"
OVERALL Outstanding Outstanding Fair Good
SCORE [deleted] [deleted] [deleted] [deleted]
Initial [deleted] [deleted] [deleted] [deleted]
Proposed
Costs
MPC w/ CAP [deleted] [deleted] [deleted] [deleted]
MPC w/o CAP [deleted] [deleted] [deleted] [deleted]
BAFO [deleted] [deleted] [deleted] [deleted]
w/ CAP
Change from [deleted] [deleted] [deleted] [deleted]
Initial to
BAFO w/ CAP
BAFO [deleted] [deleted] [deleted] [deleted]
w/o CAP
Initial Agency Report, supra, at 8.
On June 18, the contracting officer and several members of the evaluation
team provided the source selection authority (SSA) with a briefing on the
results of the competition. In addition to the briefing slides, the SSA was
presented with two proposed source selection statements--one selecting CSA,
one selecting ITT.
The SSA did not make his selection decision at the end of the June 18
briefing, but instead left the meeting and considered his decision for
several days. Tr. at 40, 42. During that time, he sought additional
information from Army staff regarding the cost of the current contract, Tr.
at 43-44, and studied the briefing slides, the alternate selection
statements, and a list of the strengths and weaknesses of the offerors that
he also took from the briefing. Tr. at 40-43. At a hearing convened by our
Office to consider this protest, the SSA testified that he eventually
concluded that CSA had the best technical proposal, and a realistic MPC
estimate. Tr. at 44.
On June 29, the SSA selected CSA for award, and signed the selection
statement provided during the briefing 11 days earlier, without making
substantive changes to its text. Tr. at 50-51. With respect to ITT, the
selection decision states:
[ITT]'s overall quality proposal was outstanding and was determined to be
technically equal to [CSA]. However, [ITT]'s Most Probable Cost (MPCE)
without Contractor Acquired Property (CAP) at $[deleted] was lower than both
[CSA] and Yellow. [ITT]'s revised proposal lowered proposed costs which was
of concern since as [sic] [ITT]'s cost pricing discussion were [sic] mainly
centered on items (to include apparent non compliance with a portion of
Kuwait Labor Law) that should have increased costs. [ITT]'s proposal also
offered no significant weaknesses and no performance risks.
Selection Statement, June 29, 1999, at 2. With respect to CSA, the selection
statement indicated that CSA was the only offeror whose proposal was
outstanding in both quality and past performance, [3] that the technical
proposal was detailed and included an excellent analysis of the contract's
requirements, that CSA's proposed costs were reasonable, and, that the
quality of the CSA proposal outweighed its higher cost. Id. at 1-2. Thus,
the SSA selected CSA for award, and these protests followed.
ITT'S CHALLENGE TO THE SELECTION DECISION
ITT argues that the SSA did not have a reasonable basis for selecting CSA's
significantly higher-cost proposal over ITT's, given the SSA's finding that
the two proposals were technically equal. [4] ITT complains that: (1) the
SSA's concern about ITT's costs is not reflected in the underlying cost
analysis materials; (2) the Selection Statement fails to identify any
particular technical differences that might have merited the cost difference
between the proposals; and, (3) the SSA wrongly concluded that ITT's BAFO
costs should have increased, rather than decreased, as a result of
discussions.
The Army disputes each of ITT's contentions about the selection decision
here, even though the SSA readily admits that many of his concerns are not
reflected in the decision document he signed. Tr. at 50, 98-99. The Army
responds, however, that the basic principle underlying the decision is
identified by the Selection Statement--i.e., that the SSA considered ITT's
costs to be too low, and that he expected ITT's BAFO costs to increase,
rather than decrease, as a result of the issues covered during discussions,
including the requirement for compliance with Kuwaiti labor law.
Before turning to a substantive analysis of the SSA's reasons for selecting
CSA over ITT, we must first address a series of threshold issues raised by
the parties and the record. First, given the relative paucity of analysis in
the Selection Statement, the Army seeks consideration of additional
materials and testimony to further explain the selection decision; ITT
argues that this supplemental information should be given little weight in
our review. Indeed, ITT argues that our Office should uphold its protest
based on the Army's failure to adequately document the selection decision.
Finally, we also consider the impact on the selection decision of the
evaluation team's failure to calculate an MPC estimate for ITT's BAFO.
Supplemental Materials and Testimony
To buttress the written Selection Statement, the Army urges our Office to
consider information found in: (1) a price negotiation memorandum prepared
by the contracting officer 1 day after the selection decision; (2) a
declaration from the SSA, dated August 18, 1999, provided to the protester
as part of the agency's document production; and (3) testimony from the SSA
at a hearing before our Office on October 5, 1999, in which the SSA further
explains his rationale for the selection decision. ITT responds that our
review should be limited to the Selection Statement itself, and that our
holding in Boeing Sikorsky Aircraft Support, B-277263,
B-277263.2, Sept. 29, 1997, 97-2 CPD para. 91, bars consideration of any of
these other materials. As set forth below, we conclude that, in most areas,
ITT misreads our decision in Boeing, although we agree that Boeing does
control our consideration of a hypothetical redetermination of the award
decision offered by the Army during the course of this protest.
Our decision in Boeing involved an agency's post-protest hypothetical
cost/technical tradeoff presented to demonstrate a lack of prejudice from
any alleged agency errors. Prejudice to the protester is critical to our
decisionmaking, since our Office will not sustain a protest unless the
protester demonstrates a reasonable possibility of prejudice, 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). In
responding to Boeing's challenges to the propriety of the technical and cost
evaluations, the agency there answered that even if Boeing were to prevail
on its protest grounds it would still not be awarded the contract because of
the awardee's superior management evaluation. In this regard, the agency
submitted a new cost/technical tradeoff analysis prepared during the
pendency of the protest which assumes the validity of many of Boeing's
allegations, but concluded that the award decision would not change. Boeing
Sikorsky Aircraft Support, supra, at 14.
In deciding what weight to accord the agency's reevaluation, our Office held
that "[w]hile we consider the entire record, . . . 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." Id. at 15. We further reasoned that 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." Id.
A counterpoint to Boeing is our decision in NWT, Inc.; PharmChem Labs.,
Inc., B-280988, B-280988.2, Dec. 17, 1998, 98-2 CPD para. 158, where we
distinguished post-protest reevaluation and redetermination from
memorialization of contemporaneous analysis. In NWT; PharmChem, we stated
that "[p]ost-protest explanations that provide a detailed rationale for
contemporaneous conclusions, as is the case here, simply fill in previously
unrecorded details, and will generally be considered in our review of the
rationality of selection decisions, so long as those explanations are
credible and consistent with the contemporaneous record." Id. at 16.
In analyzing the challenged documents and testimony in the instant protest
within the context of Boeing and NWT; PharmChem, the easiest document to
address is the negotiation memorandum prepared the day after the SSA signed
the Selection Statement. Of relevance here, this document contains a
contemporaneous recitation of the Army's understanding of the reasons ITT
lowered its BAFO costs, and reflects the same concern as the Selection
Statement regarding the fact that ITT's BAFO costs went down rather than up.
Since this document is, in effect, contemporaneous, and was not prepared in
the "heat of the adversarial process," we have none of the concerns we
expressed in Boeing.
With respect to the SSA's declaration prepared in response to the protest,
we view the bulk of the information here as similar to the statements at
issue in NWT; PharmChem. The declaration addresses the lapse of time between
the selection briefing and the date on the decision document, and provides
information regarding the contemporaneous concerns of the SSA. Specifically,
the SSA recounts his concern about the drop in ITT's BAFO costs against the
backdrop of an orientation briefing he received at Camp Doha in August 1998,
where he was advised that the new contractor would have to add aviation
support services not currently contained in the contract, and begin
complying with Kuwaiti labor law. Declaration of Maj. Gen. Robert D.
Shadley, Aug. 18, 1999, at 2. Thus, he states that he was concerned that
ITT's drop in proposed costs meant that it "intended to either reduce the
quality of the services to be provided, or to seek a contract price increase
after award." Id. This information is consistent with the written Selection
Statement, and in our view, constitutes further explanation of the SSA's
contemporaneous thought process, not memorialized there. [5]
Consistent with our approach to the SSA's declaration, we convened a hearing
in this protest to further explore the SSA's rationale for his decision. As
in NWT; PharmChem, we concluded that the SSA's testimony was credible and
generally consistent with the underlying evaluation materials and the
Selection Statement. Notwithstanding the SSA's credibility, however, we
conclude, for the reasons set forth below, that the selection of CSA over
ITT lacked a reasonable basis.
Failure to Adequately Document the Selection Decision and to Calculate a
BAFO MPC Estimate
ITT contends that the selection decision document here is inadequate, on its
face, to support the cost/technical tradeoff it purports to make. Where a
cost/technical tradeoff is made, the selection decision must be documented,
and the documentation must include the rationale for any tradeoffs made,
"including benefits associated with additional costs." Federal Acquisition
Regulation (FAR) sect. 15.308; Opti-Lite Optical, B-281693, Mar. 22, 1999, 99-1
CPD para. 61 at 5. The FAR language quoted above, requiring identification of
the benefits associated with a decision to pay additional costs, was added
by the recent rewrite of Part 15 of the FAR and became effective January 1,
1998, thus it applies here. The earlier language, FAR sect. 15.612(d)(2) (June
1997), required only that the documentation include the basis and reasons
for the selection decision.
The selection decision document here fails to meet the standard set forth in
the FAR for explaining the rationale for tradeoffs that lead to incurring of
additional costs. As quoted above, the document first concludes that overall
the proposals were technically equal, then that CSA's costs were reasonable,
and that the quality of CSA's proposal outweighs its higher cost. Not only
are these findings inconsistent, but there is no explanation of the benefits
associated with the allegedly higher costs of the CSA proposal.
We have a second concern about the adequacy of the selection decision here
that transcends any of the specific arguments raised by the
protester--although the concern is best illustrated by a quick review of one
of ITT's contentions. Specifically, ITT argues in its supplemental protest
that the selection decision lacks a rational basis because the decision, in
effect, rejects ITT's proposal after concluding that its costs are not
realistic. ITT argues that the SSA had no reasonable basis for this
conclusion since the cost review team raised no concerns about ITT's
proposed BAFO costs.
The Army responds, and we agree, that the lack of stated concerns by the
cost team does not bar the SSA from reaching his own--and
different--conclusions, so long as those conclusions have a rational basis.
Loral Aeronutronic, B-259857.2, B-259858.2, July 5, 1995, 95-2 CPD para. 213 at
8. Our review of this issue, however, revealed a more serious matter than
simply adding new concerns to those of the evaluators. At no point in this
record did the cost evaluators prepare a probable cost estimate for ITT's
BAFO--which dropped more than $[deleted] from its initial proposed costs.
Instead, all of the evaluation materials include only the MPC estimates
calculated for the initial proposals.
When an agency evaluates a proposal for the award of a cost reimbursement
contract, an offeror's proposed estimated costs are not dispositive, because
regardless of the costs proposed, the government is bound to pay the
contractor its actual and allowable costs. FAR sect.sect. 15.305(a)(1); 15.404-1(d).
Consequently, a cost realism analysis must be performed by the agency to
determine the extent to which an offeror's proposed costs represent what the
contract should cost, assuming reasonable economy and efficiency. FAR
sect. 15.404-1(d)(2); CACI, Inc.-Fed., B-216516, Nov. 19, 1984, 84-2 CPD para. 542
at 5. In addition, the recent rewrite of Part 15 of the FAR now expressly
provides that "[t]he probable cost shall be used for purposes of evaluation
to determine the best value." FAR sect. 15.404-1(d)(2)(i).
Here, having been provided with no probable cost for ITT's BAFO, [6] the SSA
had only two choices: rely on the most probable cost calculated for the
initial proposals--prepared before ITT reduced its proposed costs by
$[deleted] in its BAFO--or compare the offerors' unevaluated proposed BAFO
costs, which are not dispositive of the costs the government will be bound
to pay. Neither approach yields a reasonable best value comparison based on
a valid cost realism analysis, given the significant changes made in BAFO
costs by ITT and others. Thus, the SSA's conclusions--whether included in
the selection statement, or found in any of the supplemental materials
generated before or during this protest--are improperly based on comparisons
of either initial MPC estimates, or unevaluated BAFO costs. This error
reverberates throughout the analysis below.
Analysis of the SSA's Specific Concerns
With respect to the specific concerns outlined by the SSA, we note first his
view, memorialized in the written selection decision, that ITT's compliance
with Kuwaiti labor law would cause its BAFO costs to increase, not decrease.
This concern was broadened during the course of this protest. While the
selection decision focused on the drop in ITT's BAFO cost from its initial
proposed cost, the SSA stated in the hearing and in the Army's pleadings,
that he also believed compliance with Kuwaiti labor law would cause ITT's
costs to be higher than the costs of the last year of the previous contract.
The SSA further explains that he believed costs should be higher than in the
last year of the previous contract because the current procurement adds
aviation support services to the workload. We will address all three issues
below.
Regarding the issue of Kuwaiti labor law, there is no dispute among the
parties that the previous contract for base operations at Camp Doha did not
require that all contract employees be paid in accordance with Kuwaiti labor
law, and that the new contract does. For purposes of this dispute, the Army
explains that the relevant Kuwaiti laws limit the work day to 8 hours, limit
the work week to 48 hours, limit overtime to 2 hours a day, and limit annual
overtime to 180 hours; in addition, the laws require overtime compensation
of at least 25 percent above the normal wage. Memorandum of Law, Dept. of
the Army, Sept. 16, 1999, at 1 n.1. As the incumbent contractor, ITT, until
recently, had been allowed not to pay overtime to certain of its on-site
American salaried professional employees. Protester's Comments at 32.
With respect to the drop in its BAFO costs, ITT vigorously disputes that
compliance with Kuwaiti labor law was a factor in estimating costs for its
BAFO. Instead, ITT argues that it understood from the beginning of this
procurement the Army's intent to require that all contract employees be
covered by Kuwaiti labor law. Our review of the record shows that ITT's
intent to comply was set forth on the first page of its initial cost
proposal, which stated:
This proposal has been priced in accordance with Kuwaiti labor law. As such,
all employees will be compensated at (1.25 x base salary) for every hour
worked over the basic 48-hour workweek.
Agency Report, Tab F, Vol. IV, at 1. During discussions, ITT was asked to
reconfirm its understanding of this issue after its representative, during
the course of ITT's oral presentation, stated that all of ITT's third
country nationals would be paid in accordance with Kuwaiti labor law. ITT
did so, and there is no further evidence in the underlying evaluation record
of any concern about ITT's compliance with this requirement. Accordingly, we
conclude that the SSA's concern that ITT's compliance with Kuwaiti labor law
should have increased its BAFO costs was unfounded, and cannot reasonably
support the selection decision here.
With respect to whether ITT's costs should have been higher in its proposal
than they were in the last year of its previous contract, this concern is
first set forth in a declaration prepared by the SSA, and filed with the
initial agency report. Therein, the SSA explains that he asked for, and was
provided, the past 5 years of costs for this effort. Declaration of Maj.
Gen. Shadley, supra, at 2-3. The table below identifies the previous cost
information provided to the SSA:
Cost (with CAP) Cost (without CAP)
Base Year [deleted] [deleted]
First Option Year [deleted] [deleted]
Second Option Year [deleted] [deleted]
Third Option Year [deleted] [deleted]
Fourth Option Year [deleted] [deleted]
(most recent year)
Initial Agency Report, supra, at 10. Using this information, the SSA divided
ITT's proposed BAFO costs by 10--as the instant procurement anticipates a
10-year performance period--and concluded that ITT's proposed costs were
approximately $[deleted] lower than in the last year of the previous
contract. [7] Declaration of Maj. Gen. Shadley, supra, at 3; Tr. at 87-88.
Our review of this analysis raises several questions. First, while we see
nothing unreasonable about the SSA's belief that requiring compliance with
Kuwaiti labor law should increase personnel costs above those in the
previous contract, [8] this analysis, applied to all of the competitive
range offerors, shows that all of them estimated their BAFO proposed costs
(with CAP) significantly lower than the cost experienced in the last year of
the previous contract. While ITT is approximately $[deleted] lower annually
than the previous contract, CSA is $[deleted] lower, Offeror "Blue" is
almost $[deleted] lower, and even the highest-cost offeror (Yellow) is
$[deleted] lower. Given this range of lowered costs, it is hard to
understand why this analysis led the SSA to "conclude that [ITT] did not
have a firm understanding of the Government's requirements," Declaration of
Maj. Gen. Shadley, supra, at 3, while CSA's proposed costs did not. [9] In
short, the record shows that regardless of the agency's credible expectation
that offerors would propose increased costs compared to the last year of the
previous contract, in fact, none of them did; and, to date, there is nothing
in the record to support a reasonable conclusion that ITT's failure to
propose higher costs than last year raises any issue not raised by the other
proposals.
The SSA's concerns discussed above are also undercut by the fact that they
are based on proposed, not evaluated, costs. This error particularly infects
the SSA's comparison of BAFO costs with the last year of contract
performance, as illustrated below. ITT's initial proposed costs with CAP
were adjusted upwards by more than $[deleted] by the Army's cost evaluators.
While we have no way of knowing the amount of the adjustment that should be
applied to ITT's BAFO, if the same adjustment were applied as was applied to
ITT's initial proposal, ITT's annual comparative costs would be
approximately $[deleted] below the cost of the last year of the previous
contract, rather than $[deleted], as the SSA calculated. Given the SSA's
apparent comfort with CSA's proposed costs with CAP (which were $[deleted]
lower than the last year of the previous contract), the use of adjusted
costs for ITT could well have alleviated his concern. [10]
The third specific concern raised by the SSA is his understanding that
aviation support services would be added to the Camp Doha workload by this
RFP, and that such services were not included in the earlier contract.
Declaration of Maj. Gen. Shadley, supra, at 2; Tr. at 48-49. ITT disputes
the SSA's understanding about aviation support services and claims that the
services were, in fact, added to its earlier contract in late 1998--after
the SSA's visit to and briefing at Camp Doha. In our view, the dispute
between ITT and the Army over the amount of aviation support services that
were included in the last year of the previous contract is largely
immaterial. As discussed above with respect to the new requirement for full
compliance with Kuwaiti labor law, the record shows that none of the four
offerors proposed annual costs--using the analysis adopted by the SSA
here--that were higher than the last year of the previous contract. Given
that all of the offerors proposed lower costs, that there is [deleted]
between the annual costs proposed by ITT and CSA, and that the Army
improperly used unadjusted cost figures to make these comparisons, there is
nothing in this record to support the selection of CSA's proposal over ITT's
in a best value tradeoff decision because aviation support services have
been added to this workload.
A more general concern raised by the SSA in his declaration and again at the
hearing, is that ITT's proposed BAFO costs are simply too low to ensure
successful contract performance. In his words, ITT's low cost meant that the
company "intended to either reduce the quality of services to be provided,
or to seek a contract price increase after award. Either of these
eventualities was unacceptable." Declaration of Maj. Gen. Shadley, supra, at
2. Supplementing this concern, the SSA explained that cost growth would be
problematic because the Kuwaiti government is reimbursing the Army for the
cost of this contract. Id. Specifically, the SSA stated that allowing "an
increase in the contract price following a binding price agreement" would
cause strains in U.S.-Kuwaiti relations. Id.; see also Tr. at 45-46.
With respect to whether ITT's BAFO costs were simply too low to support the
quality of services the Army is seeking, we note that ITT's proposal
contains a performance approach that the Army's evaluators termed
outstanding overall. The purpose of a cost realism review is to ensure that
the costs of delivering an offeror's proposed approach are accurately
reflected in the cost proposal. FAR sect. 15.404-1(d); AmerInd, Inc., B-248324,
Aug. 6, 1992, 92-2 CPD para. 85 at 6. Without an underlying review of probable
costs, and without specific enumerated concerns about why the proposed costs
are too low, the SSA's general concern about ITT's costs provides no basis,
under these circumstances, for rejecting the ITT proposal. See FAR
sect.sect. 15.308, 15.404-1(d)(2)(i).
In addition, while we fully accept the validity of the SSA's concerns about
the problems that might arise in U.S.-Kuwaiti relations over increasing
costs for these services, the selection decision in this record does not
rationally advance these interests. First, we note that notwithstanding the
SSA's anticipation of a "binding price agreement," this is a cost
reimbursement contract--there will be no binding price agreement. Instead,
the SSA's concerns seem to be that BAFO proposed costs were not realistic.
In this regard, CSA's initial proposed costs of $[deleted] were adjusted
upwards significantly in the MPC estimate prepared by the Army's
evaluators--to $[deleted] with CAP (an increase of $[deleted]), and to
$[deleted] without CAP (an increase of $[deleted]). On the other hand, ITT's
initial proposed costs of $[deleted] were adjusted to $[deleted] with CAP
(an increase of $[deleted]) and to $[deleted] without CAP (a decrease of
$[deleted]). Thus, the Army's own analysis indicates that CSA's proposed
costs are likely to increase by a larger amount than ITT's.
Moreover, the record here suggests that if the analysis of initial proposals
was valid, the changes to ITT's BAFO should not alter the conclusion that
CSA's proposal is more likely to experience cost growth than ITT's proposal.
In this regard, if the Army were to conclude that every dollar by which ITT
reduced its BAFO costs should be rejected as unrealistic (and thus returned
to ITT's initial MPC estimate), ITT's most probable BAFO costs would remain
unchanged from its initial evaluated costs (and significantly lower than
those of CSA), and its proposed costs would still be adjusted by a smaller
amount than would CSA's. [11]
PAST PERFORMANCE
ITT argues that the Army's evaluation of past performance was unreasonable
and should be overturned. Specifically, ITT contends that: (1) CSA should
not have received an outstanding rating under the past performance
evaluation factor because CSA is a new joint venture composed of several
entities who have never performed together; (2) the good rating given ITT
was unreasonable because, among other reasons, ITT's performance of the
predecessor contract here has been excellent; and (3) the Army was required
to discuss with ITT the adverse information that caused its past performance
to be assessed as good, rather than outstanding. The Army disputes each of
these arguments.
The past performance evaluation factor identified five subfactors, in
descending order of importance: quality of performance, timeliness, cost
control, business relations, and customer satisfaction. RFP sect.sect. M.5.3,
M.5.4.b.(2). Each of these subfactors were identified as separate scoring
criteria on the Contractor Past Performance Evaluation Report used by an
offeror's past performance references to rate the contractor's performance.
Agency Report, Tab K. The individuals completing this report were asked to
rate each of these five scoring criteria on a scale of 1 to 5, as follows:
1, unsatisfactory; 2, marginal; 3, satisfactory; 4, very good; and 5,
exceptional. These ratings were reviewed by the agency evaluators, who then
assigned ratings consistent with the evaluation scheme used to assess
quality--i.e., outstanding, 93-100 points; good, 85-92 points; fair, 78-84
points; poor, 70-77 points; and unacceptable, 0-70 points. At the conclusion
of evaluations here ITT received an overall past performance score of 92
(good), while CSA received a past performance score of 94 (outstanding).
Price Negotiation Memorandum, June 30, 1999, at 5-6.
With respect to ITT's contention that CSA could not reasonably be given a
score of outstanding because of its status as a new joint venture, we
disagree. The evaluation record shows that the evaluators were well aware of
CSA's status as a joint venture, and aware that the various entities that
comprise CSA had not all worked together previously. Agency Report, Tab K.
To address their concerns, the evaluators sought legal guidance on
evaluating joint ventures, which was provided in the form of a memorandum,
and included as part of the agency report. Id. In particular, the evaluators
were pointed to prior decisions of our Office holding that they could
appropriately consider the experience of the joint venture's individual
teaming members, and at the same time, consider the lack of experience of
the joint venture itself. E.g., Global Eng'g & Constr. Joint Venture,
B-275999.4, B-275999.5, Oct. 6, 1997, 97-2 CPD para. 125 at 9.
In the final analysis--and using the guidance on evaluating joint ventures
that had been provided to them--the evaluators noted that the majority of
the joint venture members have outstanding past performance references and
that the majority partner specializes in joint ventures, while noting some
risk for one minority joint venture partner who had not previously worked as
part of a joint venture. Agency Report, Tab T-2, Revised Past Performance
Evaluation Workbook, at 5, 8. Accordingly, the evaluators assigned CSA a
rating of 94, which they considered a "low outstanding rating." Agency
Report, Tab T-2, supra, at 8. In our view, there is nothing about this
analysis that is unreasonable, and ITT's mere disagreement with these
conclusions does not make them wrong. UNICCO Gov't Servs., Inc., B-277658,
Nov. 7, 1997, 97-2 CPD para. 134 at 7-8.
ITT also contends that the Army improperly assigned its proposal a rating of
92 (good), and acted improperly in failing to advise ITT of this rating
during discussions. ITT received its rating of 92--one point short of an
outstanding rating--because two of its past performance references rated ITT
as [deleted] by giving the company a rating of [deleted] under certain
criteria on the 1 to 5 rating scale established on the Contractor Past
Performance Evaluation Report. In addition, ITT's references provided two
comments that ITT argues were adverse. These were that: (1) on a similar
contract, ITT had experienced [deleted] in 1998; and, (2) on the previous
[deleted] contract, there may have been some issues of [deleted].
With respect to whether the evaluation rating was reasonable, ITT argues
that the evaluators misunderstood the underlying comments, and interpreted
them to mean that ITT was responsible for causing [deleted]. In fact, the
record clearly reflects the panel's recognition that the source of the
problems may have been the Army, not ITT. Specifically, the consensus report
prepared on ITT's past performance noted with respect to the cost subfactor
that [deleted]. Agency Report, Tab K, Consensus Report, at 5. In our view,
these materials clearly indicate that the evaluators were making an informed
judgment about ITT's role in the [deleted] issue, and together with the
knowledge of the [deleted] also mentioned, the evaluators nonetheless
assigned ITT a score of [deleted] under the cost control subfactor. Nothing
in this record shows that this rating was unreasonable, or based on a
failure to properly understand the underlying reference responses.
With respect to the adequacy of discussions, ITT argues that its receipt of
scores of good from some evaluators, together with the arguably adverse
information regarding a 1998 [deleted] on one of its contracts and the
general question of [deleted] contract, had to be raised during discussions.
In response, the Army provided a declaration from the contracting officer in
which she stated that she considered raising these two issues, but did not
because I did not consider the matter to reflect a significant weakness
which ITT could improve to enhance its chances for award. Further, I did not
believe that ITT could say anything to dispute the [deleted]--it either
happened or it didn't.
Declaration of Bette Jean S. Kinsey, Aug. 24, 1999, at 6.
ITT's contention that the Army was required to raise these matters during
discussions was initially based on FAR sect. 15.610(c)(6) (June 1997)--a
regulatory provision that ITT now acknowledges was removed from the FAR
prior to the issuance of this solicitation. The new revised FAR part 15
provision governing discussions no longer contains the provision upon which
ITT relied. Instead, the new provision provides, in relevant part, that
contracting officers shall
indicate to, or discuss with, each offeror still being considered for award,
significant weaknesses, deficiencies, and other aspects of its proposal
(such as cost, price, technical approach, past performance, and terms and
conditions) that could, in the opinion of the contracting officer, be
altered or explained to enhance materially the proposal's potential for
award.
FAR sect. 15.306(d)(3). As it indicates on its face, this provision applies to
past performance information. See MCR Fed., Inc., B-280969, Dec. 14, 1998,
99-1 CPD para. 8 at 11 n.11. In addition, we see nothing unreasonable about the
contracting officer's determination that she need not raise with ITT during
discussions the generally very favorable past performance information she
received from the references. First, some of the information was that ITT
was simply good, rather than outstanding. With respect to the comments about
the [deleted] and the [deleted] concern, the [deleted] information was
largely factual, while the [deleted] comment was ambiguous and not clearly
negative. In addition, both comments were made in evaluating a subfactor for
which ITT was evaluated as outstanding. Under these circumstances, and given
that decisions like these are made during the course of the procurement (and
before it can be known that the two offerors will end up with almost
identical overall scores), we conclude the contracting officer reasonably
decided that ITT's overall past performance rating of good did not contain
the kind of significant weakness or "other aspects" that could be addressed
to improve materially ITT's potential for award.
RECOMMENDATION
We recommend that the Army reopen the procurement, and reevaluate the BAFO
cost proposals submitted--to include an appropriate cost realism analysis
pursuant to FAR sect. 15.404-1(d) and calculation of a BAFO MPC estimate for
those offerors who revised their proposed costs in their BAFOs, in
accordance with the stated evaluation scheme. We also recommend that the
agency perform a new best value determination. If, after reevaluation, CSA's
proposal does not represent the best value to the government, we recommend
that the agency terminate the award to CSA, and award to the offeror whose
proposal presents the best value under the evaluation scheme.
We also recommend that the protester be reimbursed the reasonable costs of
filing and pursuing its protest, including attorneys' fees. 4 C.F.R.
sect. 21.8(d)(1) (1999). In accordance with 4 C.F.R. sect. 21.8(f)(1), ITT's
certified claim for such costs, detailing the time expended and the costs
incurred, must be submitted directly to the agency within 60 days after
receipt of this decision.
The protest is sustained.
Comptroller General
of the United States
Notes
1. The Army opted to assign each offeror's proposal a color code; this color
code appears throughout the evaluation materials, rather than the offeror's
actual identity. For ease of reference, this decision will refer to ITT and
CSA by their names. We will use the color code for the other two offerors.
2. Contractor acquired property is property purchased by the contractor for
performance of the contract, which will become the property of the
government at the end of contract performance. Hearing Transcript (Tr.) at
35.
3. Athough ITT was rated outstanding overall, its underlying past
performance rating was good. Initial Agency Report, supra, at 8. The SSA's
statement, therefore, is observing that only CSA received a rating of
outstanding on both of the underlying non-price factors.
4. As shown above, CSA's unadjusted final proposed cost (without CAP) was
$[deleted] higher than ITT's ($[deleted] vs. $[deleted]), and CSA's most
probable cost (without CAP) from its initial proposal was $[deleted] than
ITT's ($[deleted] vs. $[deleted]). As also mentioned above, the only MPC
estimates are those from the initial proposal, thus the comparison of most
probable costs above does not include the fact that ITT lowered its proposed
costs in its final revised proposal by $[deleted].
5. There is, however, one statement in the SSA's declaration that, as with
the hypothetical post-protest cost/technical tradeoff in Boeing, we accord
little weight. Specifically, the SSA's declaration states that "even if the
[ITT] cost proposal were increased so that my concerns about [ITT's]
understanding of our requirements were allayed, and even if the [ITT] cost
proposal was less than the [CSA] cost proposal, I would still select [CSA]
for award because of its superior non-price factors scores." Declaration of
Maj. Gen. Shadley, supra, at 3. As we have stated, "we accord little weight
to agency efforts to defend, in the face of a bid protest, a prior source
selection through submission of new analyses, which the agency itself views
as merely hypothetical, because such reevaluations and redeterminations
prepared in the heat of the adversarial process may not represent the fair
and considered judgment of the agency." Possehn Consulting, B-278579.2, July
29, 1998, 98-2 CPD para. 33 at 5 n.3 (citing Boeing).
6. CSA's BAFO did not change its proposed costs, thus the MPC estimate for
its initial proposal is presumably sufficient for this comparison.
7. As shown above, ITT's BAFO's proposed costs with CAP were $[deleted].
This figure, divided by 10, yields an annual performance cost of
$[deleted]--which is almost $[deleted] below the cost of the last year of
ITT's previous contract.
8. In fact, the record includes a letter from ITT's Project Director,
written prior to this dispute, in which he admits that full compliance with
Kuwaiti labor law will result in significant cost increases. Letter from
James A. Smith, Project Director, ITT, to the Contracting Officer, at 2
(Apr. 11, 1999).
9. When asked this question in a hearing before our Office, the SSA's only
answer was that ITT's costs were dropped in its BAFO, while CSA's were not.
Tr. at 87-89. We fail to see how the difference in timing could reasonably
lead to a different conclusion about an offeror's understanding of the
government's requirements.
10. This figure is calculated as follows: [deleted], which is $[deleted]
less than the $[deleted] used for the last year of contract performance.
11. In approximate terms, rejecting every dollar of ITT's BAFO cost
reduction, and thus adding $[deleted] to the amount of the adjustments made
to ITT's MPC estimates, with and without CAP, would result in an adjustment
from ITT's BAFO of $[deleted] with CAP (compared to CSA's $[deleted]
adjustment), and $[deleted] without CAP (compared to CSA's $[deleted]
adjustment). Thus, under this analysis, CSA remains more likely to
experience cost growth than ITT.