TITLE:  The Jones/Hill Joint Venture--Costs, B-286194.3, March 27, 2001
BNUMBER:  B-286194.3
DATE:  March 27, 2001
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The Jones/Hill Joint Venture--Costs, B-286194.3, March 27, 2001

Decision

Matter of: The Jones/Hill Joint Venture--Costs

File: B-286194.3

Date: March 27, 2001

William A. Roberts III, Esq., Phillip H. Harrington, Esq., William S. Lieth,
Esq., and Janet L. Eichers, Esq., Wiley, Rein & Fielding, for the protester.

Marvin Norman, Esq., and Vicki E. O'Keefe, Esq., Department of the Navy, for
the agency.

John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest challenging the propriety of the Department of the Navy's
determination, pursuant to Office of Management and Budget Circular
No. A-76, that the most efficient organization/management study (MEO/MS) for
in-house performance offered the same level of performance and performance
quality as the selected private-sector proposal was clearly meritorious,
where certain strengths in the selected private-sector proposal that were
identified during the best value competition were not considered by the
agency in determining that the MEO/MS offered the same level of performance
and performance quality, the agency accepted without adequate analysis
unsupported claims made by the MEO/MS team regarding the MEO/MS's ability to
achieve the same level of performance and performance quality as the best
value private-sector proposal, and the MEO/MS provided for the performance
of a certain task by individuals who were not part of the MEO/MS and whose
labor costs were not accounted for in the MEO/MS.

2. General Accounting Office recommends that the protester be reimbursed for
the costs of filing and pursuing its protest challenging the Department of
the Navy's determination, pursuant to Office of Management and Budget
Circular No. A-76, that it would be more economical to perform base
operations and support services in-house, rather than contract for these
services with the protester, where the protest was clearly meritorious and
the contracting agency did not take corrective action in response to the
protest until after the submission of an agency report, the protester's
comments, a supplemental agency report, supplemental comments, and an
alternative dispute resolution conference during which the GAO attorney
assigned to the protest informed the agency that it had significant
litigation risk with regard to a number of issues raised by the protest.

DECISION

The Jones/Hill Joint Venture requests that our Office recommend that it be
reimbursed the costs, including attorneys' fees, incurred in filing and
pursuing its protest challenging the Department of the Navy's determination,
pursuant to Office of Management and Budget (OMB) Circular No. A-76, that it
would be more economical to perform base operations and support services
in-house at the Naval Air Station, Lemoore (NASL), California, rather than
contract for these services with Jones/Hill under request for proposals
(RFP) No. N62474-98-R-2069.

We recommend that the Navy reimburse Jones/Hill the reasonable costs of
filing and pursuing its protest.

The Navy issued the RFP on May 5, 1999, as part of an OMB Circular No. A-76
cost comparison study, to determine whether it would be more economical to
perform base operations support and real property maintenance and operations
services for the NASL in-house, using government employees, or under
contract with a private-sector firm. The solicitation provided that a best
value offer would be selected in accordance with the terms of the RFP, and
"compared to the government's ‘in-house' proposal" in accordance with
the terms of OMB Circular No. A-76 and its supplements, to determine if
contractor or in-house performance of the services was more economical. RFP
sect. A.

The RFP explained that the best value private-sector offer proposal would be
selected according to a three-step process. RFP at M-2. In the first step,
responding firms would submit proposals detailing their respective past
performance, corporate capabilities, and past commitment to small business,
which would be evaluated under corresponding evaluation factors, each
considered equal in importance. RFP at L-14-16, M-2. The RFP provided that
the three most qualified offerors, as determined by the agency during step I
of the evaluation process, would be invited to participate in step II of the
evaluation process. RFP at M-2.

Step II of the evaluation process required the offerors to submit a written
technical proposal, consisting of three volumes, and give an oral
presentation. RFP at L-17, M-2. The RFP provided that volume I of the
technical proposal was to include the contractor's statement of requirements
(SOR), prepared in accordance with a workbook provided by the agency as part
of the solicitation package. [1] The solicitation specified that each
contractor's SOR was to include, among other things, "the contract
sub-requirements their firm[] shall perform to achieve the required
mandatory requirement and the stated outcome" provided in the RFP, as well
as the performance metrics "by which successful accomplishment of every
mandatory and proposed contract requirement and sub-requirement can be
measured to determine that it has been successfully met." Each offeror's SOR
was also to include the applicable units of work, quantities and frequencies
for performance of the units of work, and quality performance standards that
the contractor proposed to meet (such as "[r]espond within 30 minutes"). The
RFP noted here that the selected best value proposal's SOR "will be reviewed
and used in adjusting the Government's [in-house] Technical Performance Plan
to ensure it offers the same level of performance and performance quality
which is equivalent to the best value commercial proposal." RFP at L-17-18.

Volume II of the technical proposal was to include the offeror's "technical
and management approach to be used to achieve and/or exceed the Government's
required outcomes." This volume was to address, among other things, the
offeror's strategic plan, technical approach, management approach, and
proposed subcontracting goals. RFP at L-18-22. Volume III was to include the
offeror's price proposal. RFP at L-22.

The solicitation explained that step III of the evaluation process would
consist
of the agency's evaluation of the offerors' step II technical proposals
under the following factors: management and technical approach, small
business commitment, and price. The RFP stated that the management and
technical approach, and small business commitment factors were equal in
importance, and that the step I and III ratings would be combined into one
overall technical rating that would be considered approximately equal in
importance to price. RFP at M-2.

The agency received proposals from six offerors, including Jones/Hill, by
the RFP's closing date. AR, Tab 4, Qualifications Report (July 14, 1999),
at 1. Jones/Hill's step I proposal was [DELETED] ranked of the proposals
received with ratings of [DELETED] under the past performance factor,
[DELETED] under the corporate capabilities factor, [DELETED] under the past
commitment to small business factor, and [DELETED] overall. Id. at 11-13.
Jones/Hill and two other offerors were invited to submit step II proposals.
AR, Tab 4, Business Clearance Memorandum (Feb. 11, 2000), at 6.

The step II proposals were received and evaluated by the agency. The record
reflects that the agency determined the proposals' ratings under the
management and technical approach factor through the assessment of the
proposals' approaches under each of the 13 "outcomes" set forth in the RFP's
work statement. AR, Tab 4, Value Assessment Team (VAT) Report for Technical
Proposals (Feb. 7, 2000). Jones/Hill's proposal received ratings under the
management and technical approach and small business commitment factors of
[DELETED] and [DELETED], respectively, for an overall rating of [DELETED],
at a proposed price of [DELETED]. AR, Tab 4, Business Clearance Memorandum
(Feb. 11, 2000), at 8-9. Discussions with Jones/Hill and the other two
offerors were conducted, and final revised proposals were submitted.

Jones/Hill's final revised proposal was evaluated as [DELETED] under the
management and technical approach factor. AR, Tab 4, Business Clearance
Memorandum (Apr. 19, 2000), at 6. Specifically, Jones/Hill's final revised
proposal received ratings of [DELETED] under three of the outcomes,
[DELETED] under one outcome, [DELETED] under two of the outcomes, [DELETED]
under one outcome, and [DELETED] under the remaining five outcomes. AR, Tab
4, VAT Report for Technical Proposals, (Apr. 12, 2000), at 16-20. The agency
supported each of these ratings with explanations identifying the proposal's
specific strengths, weaknesses, and deficiencies. For example, the agency
rated Jones/Hill's proposal as [DELETED] under the transportation services
outcome, noting that [DELETED]. Id. at 19.

The agency evaluated Jones/Hill's final revised proposal as [DELETED] under
the small business commitment factor for an overall final revised proposal
rating of [DELETED]. AR, Tab 4, Business Clearance Memorandum (Apr. 19,
2000), at 6. Given that Jones/Hill's step I and II proposals received
ratings of [DELETED], the agency rated Jones/Hill's proposal as [DELETED]
overall. Id. at 9. The agency determined that Jones/Hill's proposal, with a
final proposed price of [DELETED], represented the best value to the
government. Id.

In accordance with the terms of the RFP (at L-5-6) and the OMB Circular No.
A-76 Supplemental Handbook, part I, ch. 3, para. H.3.d., the NASL Most Efficient
Organization/Management Study (MEO/MS) and Jones/Hill's proposal were
provided to the cognizant quality comparison panel (QCP) to ensure that the
MEO/MS and Jones/Hill proposal offered the same level of performance and
performance quality. AR at 3-4. The record reflects that the QCP compared
the MEO/MS's SOR with Jones/Hill's SOR, determined that a number of
clarifications or revisions were required regarding the level of performance
and performance quality reflected in the MEO/MS's SOR, and requested that
the MEO/MS team clarify these matters and respond as appropriate. AR, Tab 5,
attach. 1, Letter from Source Selection Authority (SSA) to MEO/MS Team
regarding Quality Comparison Items for Clarifications/Revisions (May 3,
2000).

The MEO/MS team responded to the QCP's request by identifying each "leveling
issue" raised, the MEO/MS team response, and the required changes to the
MEO/MS and the in-house cost estimate. AR, Tab 5, attach. 2, MEO/MS Team
Response to Leveling Issues. The record reflects that the QCP accepted the
MEO/MS team's responses in all but two areas. The QCP informed the MEO/MS
team by telephone of these areas, and the MEO/MS team submitted a narrative
response providing in part that it would adjust the MEO/MS to address the
QCP's concerns. AR, Tab 5, attach. 4, MEO/MS Memorandum to SSA on Additional
Information on Leveling. The QCP then determined that the adjusted MEO/MS
and Jones/Hill proposal would provide for the same level of performance and
performance quality. The QCP's determination was subsequently reviewed and
approved by the SSA. AR, Tab 5, SSA Decision Document.

The MEO/MS was next forwarded to the cognizant Independent Review Authority
for re-certification. AR at 4; Tab 7, Commercial Activity Cost Comparison
Review of NASL Base Operating Services. After the re-certification of the
MEO/MS, the agency conducted the cost comparison by first adding the
"minimum conversion differential and costs of conversion" to Jones/Hill's
proposed price, for an adjusted total cost to contract for services of
[DELETED]. Because the revised MEO/MS's costs totaled $137,614,706, the
agency determined to perform the requirements in-house. AR at 4-5.

Jones/Hill filed an administrative appeal. The agency's administrative
appeal authority ratified the determination to perform the requirements
in-house, making only a minimal increase in the costs associated with
in-house performance to a total of $137,921,286. Id. at 5; Tab 8, Memorandum
from the Commander in Chief, U.S. Pacific Fleet to the Chief of Naval
Operations, NASL Final Decision Summary Report; Tab 9, Decision of
Administrative Appeal Authority on NASL Cost Comparison Decision.

Jones/Hill then filed its protest with our Office on September 1, 2000,
challenging the adequacy of the agency's comparison of the performance
reflected in the NASL MEO/MS with the performance reflected in Jones/Hill's
proposal, and the reasonableness of the agency's determination that the
revised MEO/MS and Jones/Hill's proposal offered the same level of
performance and performance quality. Jones/Hill also contended during the
course of the protest that the agency improperly failed to inform the
offerors of certain changes to the agency's requirements, as well as of the
existence and terms of an interservice support agreement (ISSA) between the
Navy and the General Services Administration (GSA), and a memorandum of
agreement (MOA) between NASL and GSA that, according to the protester,
adversely affected its competitive position overall and specifically with
regard to its provision of transportation services and the related costs.

The Navy filed its report in response to Jones/Hill's protest on October 5.
The report denied the protest allegations, and provided documentation in
support of its position. On October 16, Jones/Hill submitted comments on the
agency report that responded in detail to the agency's positions, and
refined many of the arguments raised in its initial protest based upon the
information provided in the agency report.

The agency subsequently requested the opportunity to submit a supplemental
report. The General Accounting Office (GAO) attorney assigned to the case
agreed, and, in a telephone conference with the parties, requested that the
agency include in its supplemental report responses to certain issues that,
in our Office's view, had been inadequately addressed in the initial report.
In this regard, the GAO attorney specifically requested that the agency
address in more detail its determination that the MEO/MS and Jones/Hill
proposal offered the same level of performance and performance quality, and
the propriety of the agency's decision to inform only the MEO/MS team (and
not the private sector offerors) of the ISSA between the Navy and GSA, and
the MOA between NASL and GSA.

Our Office received the supplemental report on October 25. In this report,
the agency explained for the first time the manner by which the QCP
determined that the MEO/MS and Jones/Hill's proposal would provide the same
level of performance and performance quality. For example, the protester had
pointed out in its comments that 68 strengths in its proposal identified by
the VAT during the private sector best value competition were not considered
by the QCP during its consideration of whether Jones/Hill's proposal and the
MEO/MS would provide the same level of performance and performance quality.
Protester's Comments at 28-29. The agency explained in its supplemental
report that this was so because the results of the best value determination
were not provided by the VAT to the QCP, and in the agency's view,
"[n]either the solicitation nor logic requires such ‘strengths' to be
accounted for by the QCP." Supplemental Report at 3. The supplemental report
also responded to the protester's assertion that the agency's determination
that the MEO/MS and Jones/Hill proposal offered the same level of
performance and performance quality was unreasonable by referring, as
examples, to a number of areas in the record that, in the agency's view,
established the reasonableness of its determination.

After receiving Jones/Hill's supplemental comments disputing the Navy's
positions, the Navy contacted our Office and requested that the GAO attorney
assigned to the protest participate in alternative dispute resolution (ADR)
in an attempt to resolve the protest. The GAO attorney agreed to conduct an
ADR conference, and during this conference, held on November 14, the issues
presented in the protest were discussed at length with the parties. The GAO
attorney informed the parties that in his view the agency faced significant
litigation risk regarding its determination that the MEO/MS and Jones/Hill
proposal offered the same level of performance and performance quality, and
with regard to the propriety of the agency's decision to inform only the
MEO/MS team of the ISSA between the Navy and GSA and the MOA between NASL
and GSA.

The agency notified our Office and the protester in its comments dated
November 16 that it intended to take corrective action in response to the
protest. Specifically, the agency stated that the QCP would examine each of
the 68 strengths in Jones/Hill's proposal that had been identified by the
VAT (but which were previously not considered by the QCP), and would have
the MEO/MS adjusted as necessary to account for those strengths "that
predict a higher quality performance (as opposed to ‘strengths' such
as a well-written proposal)." Agency's Post-ADR Comments at 10. The agency
added that it would review the Jones/Hill and MEO/MS approaches regarding
the maintenance and repair of streetlights (one of the areas specifically
discussed at the ADR session that had been considered by the QCP) and
"determine whether the different approaches offer a comparable level of
quality of performance." Id. at 11. The agency stated that the MEO/MS would
be adjusted as necessary, and added that "[i]n any event, the QCP will
prepare a detailed written justification on its conclusion." Id. The agency
added that it would follow a similar approach to respond to the protester's
concerns regarding the maintenance and cleaning of the Fire Fighting School
(another area specifically discussed at the ADR session that had been
considered by the QCP). Id.

In response to the protester's contention that the agency had improperly
failed to inform the offerors of certain changes to the agency's
requirements during the conduct of the procurement, the agency conceded that
"it should have amended the solicitation." Id. The agency concluded,
however, that it would not take any corrective action to address this
shortcoming because in its view "the protester has not suffered any
prejudice thereby." Id. The agency also declined to take any action in
response to Jones/Hill's protest of the propriety of the agency's
determination to inform only the MEO/MS team, and not the private sector
offerors, of the ISSA between the Navy and GSA and the MOA between NASL and
GSA, arguing that its actions in this respect were reasonable. Id. at 6-10.

Our Office concluded that the agency's proposed corrective action, although
not addressing all of the protester's concerns, nevertheless rendered the
protest academic. In this regard, we found that because the agency was going
to reassess its determination that the NASL MEO/MS would provide the same
level of performance and performance quality as Jones/Hill's proposal, and
if needed, would request that the MEO/MS be further adjusted, and inasmuch
as it appeared, based upon the record, that these adjustments may be
significant, it was possible that Jones/Hill's proposal would be determined
low under the cost comparison. Accordingly, on November 22, 2000, we
dismissed the protest as academic. [2]

Jones/Hill subsequently filed this request for reimbursement of its protest
costs, arguing that the Navy had unduly delayed taking corrective action in
response to Jones/Hill's clearly meritorious protest.

When a procuring agency takes corrective action in response to a protest,
our Office may recommend that the agency reimburse the protester its protest
costs where, based upon the circumstances of the case, we determine that the
agency unduly delayed taking corrective action in the face of a clearly
meritorious protest, thereby causing the protester to expend unnecessary
time and resources to make further use of the protest process in order to
obtain relief. A protest is clearly meritorious when a reasonable agency
inquiry into the protest allegations would show facts disclosing the absence
of a defensible legal position. York Bldg. Servs., Inc.; Olympus Bldg.
Servs., Inc.--Costs, B-282887.10, B-282887.11, Aug. 29, 2000, 2000 CPD para. 141
at 4.

The Navy first responds to Jones/Hill's request for costs by contending that
the specific process by which the QCP determined that the NASL MEO/MS would
provide the same level of performance and performance quality as
Jones/Hill's proposal was consistent with the terms of the solicitation. The
Navy thus argues that Jones/Hill's protest challenging the QCP's failure to
consider the strengths in Jones/Hill's proposal as identified by the VAT
during the best value competition is untimely. Agency Response to
Protester's Request for Costs at 2. Specifically, the agency points out that
the solicitation stated that volume I of the step II proposal (which was to
include the offeror's SOR) would "be reviewed and used in adjusting the
Government's Technical Performance Plan to ensure that it offers the same
level of performance and performance quality which is equivalent to the best
value commercial proposal." RFP at L-17. The agency next points out that
according to the RFP, volume II of the step II proposal (which was to
include the offeror's "technical and management approach to be used to
achieve and/or exceed the Government's desired outcomes") was "for Source
Selection Board use only and [would] not be provided to the [MEO/MS] Team at
any time during the A-76 review process." RFP at L-18. The agency argues
that because of these provisions, "the solicitation expressly warned
offerors that to the extent ‘quality adjustments' were to be made in
the quality comparison process, it would only include comparisons with
respect to information contained in Volume I." Agency's Response to
Protester's Request for Costs at 2. The agency thus concludes that
Jones/Hill's protest was an untimely challenge to the evaluation methodology
identified in the RFP. Id.

The agency's argument here is without merit. Contrary to the agency's
position, the RFP simply does not state that volume II of the selected
private-sector step II proposal (setting forth the technical and management
approach) would not be considered by the agency in its comparison of the
MEO/MS's and selected proposal's levels of performance and performance
quality. Moreover, since the agency was required by the Supplemental
Handbook to ensure that the MEO/MS would achieve the same level of
performance and performance quality as Jones/Hill's proposal, to somehow
read the RFP's statement that volume I of the step II proposal (setting
forth the proposed SOR) would be used in determining whether the MEO/MS and
selected private-sector proposal offered the same level of performance and
performance quality, as also precluding the agency's consideration of
Jones/Hill's proposed technical and management approach set forth in volume
II (which was part of the agency's best value selection of Jones/Hill's
proposal), would render the RFP inconsistent with the provisions of the
Supplemental Handbook; such a reading is simply not reasonable.

The agency, in contesting the protester's request that it be reimbursed its
protest costs, next contends that "it is well recognized that the guiding
rules [of the OMB Circular No. A-76 process] are murky at best," and that
"because OMB Circular A-76 and other guidance is unclear, [Jones/Hill's]
protest is far from ‘clearly meritorious.'" Agency's Response to
Request for Costs at 1-3. As explained below, we disagree.

The Supplemental Handbook clearly provides, as recognized by the Navy, that
where, as here, a best value approach is taken in evaluating private-sector
proposals, the agency must compare the MEO/MS to the successful
private-sector proposal to determine "whether or not the same level of
performance and performance quality will be achieved," and, if not, make
"all changes [to the MEO/MS] necessary to meet the performance standards
accepted [in the private sector proposal]." [3] Supplemental Handbook, part
I, ch.3, para.para. H.3.d, e.

This "leveling of the playing field" is necessary because a best value
solicitation invites submission of proposals that exceed the RFP
requirements, together with the higher prices that often accompany a
technically superior approach. Failure to ensure that the MEO/MS offers a
level of performance comparable to that of the best value private-sector
proposal selected to compete with the MEO/MS can cause the very technical
superiority that led to the private-sector proposal's selection to become
the cause for losing the public/private cost comparison. Aberdeen Tech.
Servs., supra, at 14.

The starting point for this analysis is the agency's own evaluation, during
the private/private competition, of the proposal that was selected for
comparison with the MEO/MS. If the evaluators identified strengths in that
proposal, or if they identified areas in which that proposal exceeded the
RFP requirements, the agency must consider those strengths in comparing that
proposal with the MEO/MS. See Rice Servs., Ltd., supra, at 8-9. The agency
may ultimately conclude that the two offer comparable levels of performance
and performance quality, despite some differences. See, e.g., NWT, Inc.;
PharmChem Labs., Inc., B-280988; B-280988.2, Dec. 17, 1998, 98-2 CPD para. 158
at 14-17. The agency may decide that certain strengths identified in the
private-sector proposal are important and that others are not, a judgment
that our Office would review for reasonableness if a protest were filed.
Here, for example, the Navy advised our Office that it intended to limit its
corrective action to strengths in Jones/Hill's proposal "that predict a
higher quality performance (as opposed to ‘strengths' such as a
well-written proposal)." That distinction appears reasonable.

What the agency cannot do is ignore, in reviewing the levels of performance
and performance quality, the strengths that were identified by the agency's
own evaluators in the private-sector proposal. Our Office sustained the
protest in Rice because the agency there appeared to set aside, without a
reasonable basis, the strengths that had been identified in Rice's proposal
during the private/private competition.

In sustaining the Rice protest, we relied on the language in the
Supplemental Handbook that, in our view, unambiguously sets out the required
process. In any event, at least since we issued the Rice decision in June
2000, it should have been clear that we would view a protest as clearly
meritorious if it alleged, and the record established, that an agency had
identified strengths in the selected private-sector proposal during the best
value private-sector competition, but then failed to consider those
strengths during the comparison of the protester's proposal and the MEO/MS
(absent a reasonable explanation of why the strengths were not required to
be considered in determining whether a comparable level of performance and
performance quality would be achieved in the MEO/MS). Because that was what
happened here, we view Jones/Hill's protest as clearly meritorious.

Specifically, as was noted by the protester as well as the GAO attorney at
the ADR conference, here the VAT identified 68 strengths in Jones/Hill's
proposal during the private-sector best value competition. These strengths,
however, were not considered by the QCP in making its determination that the
MEO/MS would provide the same level of performance and performance quality
as Jones/Hill's proposal. The record contains no reasonable explanation for
the QCP's failure to consider the 68 strengths that the agency itself had
identified in Jones/Hill's proposal. Because the agency failed to consider
those strengths in determining that the MEO/MS and Jones/Hill proposal would
provide the same level of performance and performance quality, or in the
alternative, reasonably explain why these strengths were not considered,
this aspect of Jones/Hill's protest was clearly meritorious.

Even when the record reflected some consideration by the QCP of the level of
performance and performance quality offered by Jones/Hill's proposal, we
find, as we did in Rice, that the agency accepted, based upon unsupported
assumptions and without adequate analysis, claims by the MEO/MS regarding
its ability to achieve the same level of performance and performance quality
offered in the private-sector offeror's proposal. Failure to perform an
adequate analysis in this regard can result in giving one side (in this
case, the MEO/MS) an unfair competitive advantage, because it is
unreasonably freed of the cost burden associated with the other side's
higher level of performance. We set out two examples here to illustrate why,
in our view, Jones/Hill's protest was clearly meritorious in this regard,
even if the record does not establish the precise cost implications of these
issues.

First, as described in the utilities outcome section of its proposal,
Jones/Hill proposed to maintain the NASL's street and parking lights through
"both a proactive PM [preventive maintenance] program and a program to
replace lights when they burn out." Supplemental Comments at 19; Jones/Hill
Technical Proposal, vol. II, at 59-60. The agency, in comparing the MEO/MS
and Jones/Hill's proposal, noted that the MEO/MS "did not adequately address
street/parking [light] repair," and pointed out this inadequacy to the
MEO/MS team. Agency Report, Tab 5, attach. 2, at 9. The MEO/MS team
responded that its "maintenance concept for the street and parking lights at
[NASL] is to run to failure and repair lights as required," and because of
this, no adjustments to the MEO/MS were required. Id. Although there is
nothing in the record setting forth the agency's views on this matter, the
MEO/MS team's response was apparently considered acceptable by the agency
with regard to the level of performance and performance quality, and no
adjustment was made to the MEO/MS.

In its comments on the agency report, Jones/Hill questioned the
reasonableness of the agency's apparent determination that the MEO/MS's
"repair" approach would provide the same level of performance and
performance quality as Jones/Hill's proposed preventive maintenance and
repair approach. Protester's Comments at 26-27. The agency, while
recognizing that Jones/Hill's proposal offered a preventive maintenance and
repair approach, while the MEO/MS offered a "failure/replacement approach,"
responded in its Supplemental Report at 3-4 that

[e]ven with the best preventive maintenance approach, some percentage of
lights will probably fail before their scheduled replacement. If the
[MEO/MS's] approach of having nighttime boiler operators replace lights from
a ready stock immediately results in a probable outage rate of essentially
the same percent, the end result is the same probable performance value and
quality to the customer.

As noted by the GAO attorney at the ADR conference, the record did not
include any contemporaneous explanation as to why the QCP had concluded that
the MEO/MS "repair" approach would provide the same level of performance and
performance quality as Jones/Hill's proposed preventive maintenance and
repair approach, which may well have driven up the private firm's proposed
cost. Moreover, the position advanced by the agency in its supplemental
report (as set forth above) was by its own terms predicated on an analysis
of the "probable outage rate" associated with each approach, and there was
no indication that any such analysis had ever been done. Thus, with regard
to this outcome, the record failed to reflect a reasonable basis for the
agency's determination that the level of performance and performance quality
that would be obtained under the MEO/MS would be the same as the level and
quality of performance that would be obtained under Jones/Hill's proposal.
See Supplemental Handbook, part I, ch. 3, para. H.3.e. Indeed, the agency agreed
to take corrective action by reevaluating the different approaches to this
outcome.

Second, with regard to the Fire Fighting School outcome, the record
reflected that the QCP had noted that Jones/Hill's proposal included certain
cleaning and maintenance services not provided for by the MEO/MS, and that
the MEO/MS team had been informed of this apparent difference. AR, Tab 5,
Letter from Source Selection Authority to the MEO/MS team regarding Quality
Comparison Items for Clarifications/Revisions (May 3, 2000), encl. 1
at C.5.7-Fire Fighting School. In response, the MEO/MS team stated that
"[t]he current MEO provides this service," explaining, among other things,
that "[t]he majority of cleaning will be performed by the students following
completion of each class" and "[m]inor touch-up cleaning is performed by the
instructor." AR, Tab 5, attach. 2, MEO/MS Response to Leveling Issues, at
19. The students, however, were not included in the MEO/MS (the record is
less clear about the instructors), and their labor costs were not otherwise
accounted for in the MEO/MS.

Again, although there is nothing in the record setting forth the agency's
views on this matter, the MEO/MS team's response was apparently considered
acceptable. As pointed out by the GAO attorney at the ADR conference, the
record did not reasonably support the agency's determination that the
revised MEO/MS, which apparently provided for much of the maintenance at the
Fire Fighting School to be performed by students, offered the same level of
performance and performance quality as Jones/Hill's proposal, which provided
for the same maintenance services to be performed by dedicated personnel.

In addition, the MEO/MS's approach shifted whatever costs were involved
outside the MEO/MS, while Jones/Hill's proposal included the costs for those
personnel, thus rendering the resulting cost comparison unfair. See Imaging
Sys. Tech., B-283817.3, Dec. 12, 2000, 2001 CPD para. ___ at 9 (in a
public/private cost comparison, it is neither realistic nor fair to treat
work as cost-free to the government merely because the work will be
performed by government personnel outside the framework being studied). The
Supplemental Handbook unambiguously requires that the MEO/MS include "all"
labor and costs associated with the performance of the tasks required, and
the agency is required to ensure, during its review of the MEO/MS, that
those costs are accounted for. [4] Supplemental Handbook, part I, ch. 3,
para. I; part II, ch. 2.

In sum, we believe that the Supplemental Handbook clearly informed the
agency of two of its obligations in conducting a cost comparison under OMB
Circular No. A-76: (1) to compare the MEO/MS with the selected best value,
private-sector proposal and determine "whether or not the same level of
performance and performance quality will be achieved," and, if not, make
"all changes [to the MEO/MS] necessary to meet the performance standards
accepted [in the private-sector proposal]"; and (2) to ensure that the
MEO/MS includes the costs associated with the performance of the tasks
required. Supplemental Handbook, part I, ch. 3, para. H.3.d, e; part II, ch. 2.
Here, a reasonable inquiry would have promptly disclosed to the agency the
absence of a legally defensible position to Jones/Hill's protest challenging
the adequacy of the agency's comparison of the performance reflected in the
NASL MEO/MS with the performance reflected in Jones/Hill's proposal, and the
reasonableness of the agency's determination that the revised MEO/MS and
Jones/Hill's proposal offered the same level of performance and performance
quality. Thus, we regard Jones/Hill's protest as clearly meritorious, and
find that the agency unduly delayed taking corrective action in response to
the protest, given that it did not do so until after the submission of an
agency report, the protester's comments, a supplemental agency report,
supplemental comments, and an alternative dispute resolution conference
during which the GAO attorney assigned to the protest informed the agency
that it had significant litigation risk with regard to a number of issues
raised by the protester. See York Bldg. Servs., Inc.; Olympus Bldg. Servs.,
Inc.--Costs, supra, at 5.

Accordingly, we recommend that Jones/Hill be reimbursed the reasonable costs
of filing and pursuing its protest, including those incurred here, i.e.,
requesting a recommendation for costs. York Bldg. Servs., Inc.; Olympus
Bldg. Servs., Inc.--Costs, supra, at 6. Jones/Hill should submit its claim
for costs, detailing and certifying the time expended and costs incurred,
directly to the Navy within 60 days of receipt of this decision. 4 C.F.R. sect.
21.8(f)(1) (2000).

Anthony H. Gamboa

General Counsel

Notes

1. The RFP's "work statement" set forth, under its technical requirements
section, 13 "outcomes," each of which listed a number of "mandatory contract
requirement[s]" and a corresponding "metric" by which contractor performance
would be measured. RFP sect.sect. C.5.1-13. The agency explains that in an
outcome-based solicitation, such as this RFP, the "contractors design the
approach to accomplish the desired outcome by developing the performance
requirements and the levels to which they propose to perform." The
contractor's resultant SOR becomes the statement of work upon award of the
contract, and provides "the what, when, where, how and how often and to what
quality level [the contractor] intend[s] to do those things necessary to
accomplish the Government's desired outcomes." As explained by the agency,
this is in contrast to "a traditional performance-based [performance work
statement] in which the Government specifies the performance requirements it
wants the contractor to achieve." Agency Report (AR) at 2.

2. Jones/Hill filed a request for reconsideration with our Office on
December 4, 2000, contending that our Office was without authority to
dismiss its protest unless the corrective action addressed each of the
protest issues raised. We denied this request for reconsideration in
Jones/Hill Joint Venture--Recon., B-286194.2, Dec. 8, 2000, 2000 CPD para. 203.
We explained that even though the Navy's proposed corrective measures may
not have addressed all of the issues raised by Jones/Hill in its protest,
the measures may affect the cost comparison and the attendant determination
whether to perform the requirements in-house or by contract with Jones/Hill.
Accordingly, we found that the dismissal of Jones/Hill's protest as academic
was appropriate under the circumstances because our Office does not consider
matters that may well make no difference in a procurement's outcome.

3. Although the Supplemental Handbook requires that the MEO/MS achieve "the
same level of performance and performance quality," we recognize that it may
not be feasible to precisely match the level and quality of performance of
the MEO and the private-sector offer. Rice Servs., Ltd., B-284997, June 29,
2000, 2000 CPD para. 113 at 11. Accordingly, we believe that this requirement is
satisfied by ensuring that a comparable level of performance and performance
quality is achieved. See Aberdeen Tech. Servs., B-283727.2, Feb. 22, 2000,
2000 CPD para. 46 at 15.

4. As noted above, this issue related to the Fire Fighting School was one of
the areas regarding which the agency agreed to take corrective action.