TITLE:  Wackenhut International, Inc., B-286193.2, May 18, 2001
BNUMBER:  B-286193.2
DATE:  May 18, 2001
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Wackenhut International, Inc., B-286193.2, May 18, 2001

Decision

Matter of: Wackenhut International, Inc.

File: B-286193.2

Date: May 18, 2001

Richard J. Webber, Esq., and Matthew S. Perlman, Esq., Arent Fox Kintner
Plotkin & Kahn, for the protester.

Hugh O'Neill, Esq., for U.S. Defense Systems, Inc./Armor Group, an
intervenor.

Dennis J. Gallagher, Esq., Department of State, for the agency.

Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest of evaluation of offerors' compensation plans is denied where
evaluation was reasonable and consistent with solicitation terms.

DECISION

Wackenhut International, Inc. protests the award of a contract to U.S.
Defense Systems, Inc./Armor Group (USDS) under request for proposals (RFP)
No. SOTH200-99-R-0001, issued by the Department of State for guard services
at the American Embassy in Bangkok, Thailand. Wackenhut challenges the
adequacy of the agency's evaluation of the offerors' compensation plans
performed in response to our decision of December 11, 2000, in which we
sustained Wackenhut's earlier protest of the agency's failure to properly
review the plans prior to award. [1]

We deny the protest.

The RFP, issued on September 27, 1999, contemplated the award of a
time-and-materials contract, with fixed prices for vehicles and equipment,
for a base year and 4 option years, to the technically acceptable offeror
with the lowest evaluated price. RFP sect.sect. F.4.1, L para. 52.216-1, M.1.2. Offerors
were to propose prices for the guard services in terms of fixed hourly rates
for an estimated number of labor hours for stated labor categories,
including guard; guard/driver; senior guard; surveillance detection (SD)
specialist; SD supervisor; and supervisor. RFP sect.sect.  B.3, C.1.2.1-1.2.4.

Each offeror was to include in its business management proposal a
compensation plan of anticipated employee wage rates and benefits. The
agency was to review each plan to assess the offeror's understanding of the
performance requirements and its ability to provide uninterrupted
high-quality work. The RFP did not, however, provide guidance as to the
degree of detail required for the offeror's plan or instruct the agency as
to any particular method or scope of review. Rather, the RFP generally
recognized the possibility that a follow-on procurement of services with
lower compensation levels than previously paid for the work could indicate a
lack of understanding of performance requirements or hinder the contractor's
ability to obtain the quality of services needed for adequate contract
performance. Accordingly, the RFP advised each offeror that the compensation
plan would

be considered in terms of its impact upon recruiting and retention . . . [so
that] compensation levels proposed . . . should indicate the capability . .
. to obtain and keep suitably qualified personnel. . . . Additionally,
proposals envisioning compensation levels lower than the current contractor
for the same work will be evaluated on the basis of maintaining program
continuity, uninterrupted high-quality work, and availability of required
competent service employees. Offerors are cautioned that lowered
compensation for essentially the same work may indicate lack of sound
management judgment and lack of understanding of the requirement. . . .
Failure to comply with these provisions may constitute sufficient cause to
justify rejection of the proposal.

RFP sect. L.1.3.4(2)(a)-(d).

Each of the three final revised proposals was considered technically
acceptable. The USDS final proposal (at an evaluated price of 167,858,600
bahts or approximately $4,399,848) offered the lowest evaluated price;
Wackenhut's final proposal (at 175,689,101 bahts or approximately
$4,605,098) was the highest priced. [2] Price Negotiation Memorandum at 3.
On August 11, 2000, a contract was awarded under the RFP to USDS. [3]
Following a debriefing, Wackenhut, the incumbent contractor of the services,
filed a protest with our Office challenging, among other things, the
adequacy of the agency's evaluation of the offerors' compensation plans.
Having found that the agency failed to compare the offerors' plan rates with
wage rates paid under Wackenhut's incumbent contract, as required by the RFP
to assess the ability of the offeror to obtain competent personnel for
successful performance, we sustained the protest and recommended that the
agency conduct an adequate review of the compensation plans.

By letter of February 12, 2001, the agency advised that it had adopted our
corrective recommendation, completed a review of the compensation plans, and
confirmed its award to USDS as the lowest-priced, acceptable offeror. The
agency stated that most of the starting wage rates listed in the USDS
compensation plan are only slightly lower than rates Wackenhut has most
recently paid its guards under its incumbent contract, and that USDS
demonstrated its understanding of the requirements and an ability to obtain
suitable personnel, especially in light of a local labor surplus and
depressed economy. This protest, challenging the adequacy of the agency's
review of the compensation plans, followed.

The agency reports that, in response to our Office's recommendation to
assess the offerors' compensation plans to determine if lower than current
rates would inhibit successful contract performance, current wage rate
information was requested from the incumbent contractor, Wackenhut, and a
market survey of local entities involved with guard service contracts was
conducted. The agency contacted at least 11 local entities--these included
other embassies, large businesses contracting with local guard service
providers, and local guard services companies. Compensation Plan Analysis at
6-9. Most of the guard service customers contacted did not have knowledge of
specific wages paid, since the determination of wages to be paid and the
payment of those wages were responsibilities of the guard service
contractor; each confirmed, however, that payments and benefits were at
least in accordance with minimum amounts set by Thai labor law. Id. The only
source of directly relevant wage information, a local guard services
provider, reported that it pays its guards and senior guards in ranges that
include some of the challenged rates provided in the USDS proposal's
starting pay scales. Id. at 8-9. Based on its survey and knowledge of local
market conditions gained through administration of numerous other contracts
using local personnel, the agency expected wages for the guard services to
equal or slightly exceed the local minimum wage set by Thai labor law.

The USDS compensation plan's starting pay scales for the guard, senior
guard, and guard supervisor labor categories (constituting the vast majority
of the total labor hours under the contract) were found to be only [deleted]
below the rates paid under the protester's incumbent contract. Id. at 4. The
stated starting USDS rate for the guard category, however, was 4 percent
below the Thai minimum wage applicable to the contract. Since the USDS
compensation plan included information about the firm's successful
performance of similar contracts and a management policy of meeting or
exceeding all local labor laws, including minimum wages, the USDS plan was
also evaluated by the agency at the minimum wage applicable to the contract.
The Thai minimum wage rate for guards is only 2 percent lower than the guard
wages paid under the incumbent contract. Due to the slight difference in the
USDS plan rates and the incumbent contractor's wages, and market research
which showed USDS's rates to be in line with local rates paid for similar
guard services, the agency found no reason to question the contract or the
firm's ability to obtain qualified personnel for the labor
categories--especially given the labor surplus conditions in Thailand, where
highly educated individuals are available for employment at relatively low
rates.

In its evaluation report, the agency gave separate and detailed
consideration to the fact that USDS's starting rates for its SD specialists
and SD supervisors were only [deleted] of the wage rates paid by the
incumbent contractor for the SD positions. While the USDS SD rates parallel
the USDS senior guard and guard supervisor rates in that they provide
additional compensation for supervisory responsibilities, the agency noted
that USDS did not provide higher wages for SD personnel, who need to have
slightly higher English language proficiency than the senior and supervisory
guard positions. After a detailed consideration of the matter, described
below, the agency ultimately determined that USDS's SD rates did not warrant
rejection of the proposal.

In reviewing the SD specialist and SD supervisor rate differentials, the
agency first recognized that the higher SD rates paid under Wackenhut's
prior contract appeared to be of limited comparative value, because the SD
work performed under that contract had been negotiated noncompetitively with
Wackenhut and had been added to the contract for emergency security
enhancements in response to international embassy bombing incidents.
Contracting Officer's Reconsideration of Award, Feb. 9, 2001, at 2. Although
it was noted that USDS did not provide a rate differential between labor
categories (e.g., senior guard and SD specialist) requiring slightly
different language proficiency requirements, the agency concluded that this
compensation structure alone did not show a failure to understand
requirements or a lack of ability to perform. Rather, the agency found that
the USDS technical proposal fully demonstrated the firm's familiarity with
the SD positions' language and training requirements, as well as the firm's
successful performance of numerous other international guard service
contracts entailing the provision of qualified personnel. Id. Moreover, the
agency reasoned that since USDS had emphasized in its proposal (in bold
type) that its plan's summarized rates were only starting pay scales, it was
reasonable to expect USDS to provide increased rates if deemed necessary and
warranted to recruit qualified personnel. Id. Since the SD labor hours
constitute only 14 percent of the total contract hours, the agency
determined that, even if USDS were faced with the need to pay rates higher
than the starting rates cited in its plan, it could readily absorb the
additional cost to do so, without the need for a contract price adjustment.
Id. Lastly, the agency considered that the area's labor surplus suggests an
availability of personnel at wages lower than would be sought by the
incumbent contractor's personnel. The agency thus concluded that although
the USDS rates were lower than had previously been paid in compensation for
the services, they would not be detrimental to successful performance of the
contract.

Wackenhut contends that the agency should have rejected the USDS proposal
due to its lower wage rates. The protester primarily argues that the agency
incorrectly applied the Thai minimum wage rate to the USDS guard category
and thus improperly concluded that the awardee's rates were only 2 percent
less than the incumbent's contract rates. Wackenhut instead contends that
the agency must evaluate the USDS proposal at the firm's stated starting
scale rate for guards, which is [deleted] lower than Wackenhut's incumbent
contract rate for the guard category. Wackenhut argues that, since the
differential in pay rates presents a noticeable reduction in wages, the
agency should have found that USDS would be unable to retain Wackenhut's
incumbent staff; consequently, Wackenhut contends that the USDS proposal
should have been rejected. [4]

An agency's method for evaluating proposals is a matter within the agency's
discretion, since the agency is responsible for defining its needs, and the
best method for accommodating them. Arctic Slope World Servs., Inc.,
B-284481, B-284481.2, Apr. 27, 2000, 2000 CPD para. 75 at 5. Where an evaluation
is challenged, we will examine the record to determine whether the agency's
judgment was reasonable and consistent with stated evaluation criteria and
with procurement statutes and regulations. AmClyde Eng'rd. Prods. Co., Inc.,
B-282271, B-282271.2, June 21, 1999, 99-2 CPD para. 5 at 5. A protester's mere
disagreement with the agency's judgment does not establish that an
evaluation was unreasonable. Id.

We have reviewed Wackenhut's contentions and find that they provide no basis
to question the adequacy of the agency's evaluation of the USDS proposal's
compensation plan or the reasonableness of the award. As the agency points
out, the contractor is bound by the terms of the solicitation to adhere to
all local labor law minimum wage standards under any resulting contract and
provide evidence of actual payment of wages with its invoice submissions.
Since the USDS proposal's compensation plan discusses that firm's management
policy and practice to meet or exceed all local minimum wage requirements,
it was reasonable for the agency to evaluate the USDS plan at the minimum
wage rate for guards, especially since USDS's starting pay scale for the
guard category--which is only slightly lower than the minimum wage--can
reasonably be viewed as offering a range of increasing rates to include the
slightly higher minimum wage amount used in the evaluation. In any event, to
the extent the protester argues that a more reasonable evaluation would
compare the [deleted] differential between USDS's stated starting rate and
the rate paid under the incumbent's contract, our review of the record,
discussed further below, confirms the reasonableness of the agency's
determination that the challenged rates, even at a [deleted] differential,
do not require rejection of the USDS proposal.

Wackenhut essentially argues that a reduction in the wage rates paid to
personnel under the incumbent contract will hinder USDS's ability to retain
personnel from the incumbent contract. Wackenhut apparently interprets the
compensation plan evaluation terms as creating a preference or requirement
for the new contractor to retain the incumbent contractor's personnel. The
clause does not do so. Instead, the compensation clause more generally
requires consideration of the firm's ability to "obtain and keep" competent
personnel (i.e., the ability to recruit and then retain personnel once they
are hired); there is no mention of retention of incumbent personnel. [5] RFP
sect. L.1.3.4(2)(b). The matter for review, therefore, is the ability of the
firm to adequately staff the contract and maintain successful performance of
the contract.

The greatest differential in rates is related to the SD positions. Our
review of the record, however, shows that even if Wackenhut is correct in
its assertion that its incumbent staff would not be interested in working
for USDS at the lower rates, there are other factors in the record that
support the agency's determination that USDS would be able to adequately
staff the contract. The agency's analysis reasonably considered, for
example, that the awardee's proposal otherwise demonstrated an understanding
of the requirements, including the language and training requirements for
the SD positions; the SD rates previously paid by Wackenhut were not based
on any competition, suggesting that the work may be able to be performed at
a more competitive rate; and the USDS proposal contemplates increasing rates
per labor category beyond the stated starting pay scale rates to allow the
firm to offer higher rates to obtain suitable personnel. In light of the
extensive experience of this contractor, its demonstrated understanding of
the requirements and flexible compensation plan, the agency's comprehensive
market survey, as well as the labor surplus and depressed economic
conditions in Thailand, we see no basis to question the reasonableness of
the agency's determination that the USDS proposal indicated the ability to
obtain competent personnel at the scaled rates contemplated by the USDS
proposal, as well as the ability to maintain

program continuity consistent with the RFP's terms for evaluation of the
offerors' compensation plans. [6]

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. In that decision, we concluded that the agency failed to perform any
review of the plans comparative to wages paid under the incumbent contract,
as required by the RFP. Accordingly, we sustained the protest and
recommended that the agency conduct an adequate evaluation of the plans
consistent with the RFP. Wackenhut Int'l, Inc., B-286193, Dec. 11, 2000,
2001 CPD para. 8 at 7-9.

2. Monetary figures expressed in bahts, the currency in Thailand, were
converted to U.S. dollars for this procurement at an exchange rate of 38.151
bahts to a dollar, which was the exchange rate on the date final proposal
revisions were submitted. Price Negotiation Memorandum at 5.

3. The agency reports that there has been no suspension of performance of
the August 11 contract, and that USDS continues to perform the guard
services successfully.

4. In its protest, Wackenhut also states that it and USDS provided "melded"
rates for each labor category (encompassing rates for each category of
services at three locations where differing minimum wage amounts apply to
performance of the services). Accordingly, Wackenhut suggests that a melded
minimum wage rate (i.e., similarly derived by considering the percentage of
estimated hours per category and location, at the applicable minimum wage
for each location) should have been used in the evaluation of the offerors'
compensation plans. We see no reason to discuss this line of argument in
detail, since the RFP did not provide for evaluation of melded rates. We
note, however, that, as the protester concedes, the USDS melded rates
clearly exceed the melded minimum wage rate suggested by Wackenhut as an
appropriate measure for review of the offerors' compensation plans.

5. The RFP requires only that the new contractor offer personnel from the
incumbent contract a right of first refusal for employment for an available,
similar position and, even then, the RFP does not offer incumbent personnel
any wage protection. RFP sect. I.3.

6. The protester also challenges the agency's failure to perform a more
detailed analysis of fringe benefits referenced in the offerors'
compensation plans. The record shows that both Wackenhut and USDS proposed
lower fringe benefits than those required by local labor laws, but because
both firms' proposals indicated an intention to meet required local minimum
labor benefits, both were evaluated as meeting those minimum benefits. Since
both offerors benefited from the agency's actions, and, since competitive
prejudice is an essential element of a viable protest, we will not consider
the matter further. 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).