TITLE: BAE Systems, B-287189; B-287189.2, May 14, 2001
BNUMBER: B-287189; B-287189.2
DATE: May 14, 2001
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BAE Systems, B-287189; B-287189.2, May 14, 2001
Decision
Matter of: BAE Systems
File: B-287189; B-287189.2
Date: May 14, 2001
Kenneth M. Bruntel, Esq., Joseph W.C. Warren, Esq., Daniel R. Forman, Esq.,
and Amy Laderberg, Esq., Crowell & Moring, and D. Mark Baker, Esq., BAE
Systems, for the protester.
Raymond M. Saunders, Esq., Maj. John B. Alumbaugh, and Maj. David T.
Crawford, Department of the Army, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protester challenging a cost comparison conducted pursuant to Office of
Management and Budget Circular No. A-76 was not required to file or
participate in an appeal to the agency's administrative appeals board
(AAB) as a prerequisite to filing a protest at the General Accounting
Office, where the protester's private-sector offer had been determined
to be more economical than performance in-house before this
determination was reversed by the AAB and where the revisions made by
OMB Transmittal Memorandum No. 22 to the Circular's Revised
Supplemental Handbook that arguably require protester to file an appeal
were not applicable to this cost comparison.
2. Protest challenging a cost comparison conducted pursuant to Office of
Management and Budget Circular No. A-76 is sustained, where the agency
did not reasonably determine that the in-house plan satisfied the
performance work statement's requirements.
3. Protest of the agency's administrative appeals board's decisions, which
reversed the original cost comparison determination in favor of the
protester, is sustained where the board's determination as to how much
staffing was required to be added to the in-house "most efficient
organization" to perform the performance work statement requirements
lacked a reasonable basis.
4. In a negotiated procurement conducted pursuant to Office of Management
and Budget Circular No. A-76, in which the private-sector offer was to
be selected on the basis of a cost/technical trade-off, the agency
improperly failed to consider the protester's offer to meet a
performance standard that appeared to exceed the performance work
statement requirements.
DECISION
BAE Systems protests the decision of the Department of the Army under
request for proposals (RFP) No. DAPC50-98-R-0012 to retain in-house (rather
than contract-out) performance of logistics support and services for the
U.S. Army Garrison in Hawaii. The decision to retain the services in-house
was as a result of a cost comparison pursuant to Office of Management and
Budget (OMB) Circular No. A-76, which compared BAE's proposal to perform the
work against the government's in-house offer. [1] BAE challenges the
decisions of the agency's administrative appeals board (AAB) that reversed
the agency's initial decision to contract out this work to BAE. BAE contends
that the government's in-house offer did not satisfy the RFP's minimum
performance requirements or offer the same level of performance and quality
as offered by BAE.
We sustain the protest.
BACKGROUND
1. The Performance Work Statement and the Solicitation
2. The RFP was issued by the Army's Directorate of Contracting (DOC), Fort
Shafter, Hawaii, on December 28, 1999, and provided for the award of a
cost-plus-award-fee contract to provide all resources and management
necessary to perform logistics support and services in accordance with
the solicitation's performance work statement (PWS) for the U.S. Army
Garrison in Hawaii. Offerors were informed that the RFP was issued as
part of a government cost comparison to determine whether accomplishing
the specified work under contract or by government performance was more
economical. If government performance was determined to be more
economical, then no award under the RFP would be made and the
solicitation would be canceled. [2]
The PWS identified the services to be performed and stated performance
standards. Generally, the required services were in four functional
areas: supply and services, transportation, maintenance operations, and
Island of Hawaii satellite operations. PWS sect. C.5. Among other things,
the PWS, as amended, required, as part of the transportation
operations, the provision of personal property shipment services at
Schofield Barracks and Fort Shafter on the Island of Oahu, and at Hilo
on the Island of Hawaii. PWS sect. C.5.2.1. These services included
counseling and preparation of paperwork for movement of household goods
and baggage and for shipment of privately owned vehicles. With respect
to personal property counseling, the PWS provided:
The Contractor shall provide pre-counseling for appointments and
walk-in customers. The Contractor shall service customers with an
appointment within 10 minutes of the appointment time and walk-in
customers within 30 minutes of arrival. The Contractor shall provide
customer counseling on shipment and/or storage of personal property
household goods (HHG) and unaccompanied baggage (UB). The Contractor
shall inform customers of entitlements and responsibilities during
counseling sessions . . . .
PWS sect. C.5.2.6.1.
The PWS identified a number of other performance requirements. For
example, the PWS identified a project manager, assistant project
manager, and environmental protection specialist as key personnel. With
respect to the project manager and assistant project manager, the PWS,
as amended, required that these personnel "have a minimum of five years
experience in the management of a similar or related multi-function
operation within the last 8 years" and that resumes for key personnel
be provided as part of a required management operations plan. PWS sect.
C.1.6.2.
The PWS also required offerors to submit a quality control plan with
their proposals. The PWS, as amended, provided:
The Contractor [quality control plan] shall be independent of the
on-site Contractor's organization. Additionally, the Quality control
Administration shall report directly to the Contractor's Corporate
Headquarters. The [quality control plan] shall address overall project
management and provide a comprehensive plan to deliver quality
services. The [quality control plan] shall describe an acceptable
method of identifying deficiencies in quality of service performed
under this contract. The Contractor shall address and initiate
processes for corrective actions without dependence upon Government
direction.
PWS sect. C.1.13.1. With respect to quality control, the PWS required the
establishment of an inspection system covering all required services
and required that "[t]his plan shall specify areas to be inspected on
both a scheduled or unscheduled basis and the title of the individual
who will do the inspection." The PWS also contained requirements for a
customer complaint feedback system and for reports of quality control
inspections and corrective actions. PWS sect. C.1.13.2.
The RFP provided that the successful private-sector offeror could be
selected on the basis of a cost/technical tradeoff. The following
evaluation factors were identified: technical, management, past
performance, small business program support, and cost. Offerors were
informed that the management factor (which included evaluation of the
management operations plan, quality control plan, and other planning
and control documents) would be evaluated on a go/no-go basis. Of the
remaining factors, the technical factor was stated to be more important
than the past performance and small business program support factors,
and these three factors were together equally important to cost. RFP sect.sect.
L.7, M.2.
Detailed proposal preparation instructions were provided, requiring the
submission of separate technical, management, past performance, small
business program support, and cost volumes. RFP sect. L.6. In addition, the
RFP identified information that must be provided for each of the
evaluation factors. For example, under the management evaluation
factor, offerors were directed to provide a quality control plan
addressing "a complete and comprehensive quality control system to
support performance of the contract." RFP sect. L.7.2.b(3). The RFP also
required the submission of resumes for key personnel (such as the
project manager and assistant project manager) demonstrating compliance
with the PWS requirements. RFP sect. L.7.2.a.(4); PWS sect. C.1.6.2. Finally,
the RFP encouraged new and innovative approaches in the proposals, and
required offerors to identify where the proposed level of performance
was above the acceptable level in the PWS. RFP sect. L.7.1.a.
3. Preparation and Review of the In-House Plan
4. Prior to the closing date for receipt of proposals under the RFP, the
agency's Directorate of Logistics (DOL) Study Team prepared a "most
efficient organization" (MEO), technical performance plan (TPP), and
in-house cost estimate for performing the work in-house. These
documents were reviewed by the Army Audit Agency, which, as the
independent review officer (IRO), certified that the agency's MEO/TPP
and in-house cost estimate were in accordance with OMB Circular No.
A-76 requirements and reasonably established the agency's ability to
perform the PWS requirements. Hearing Transcript (Tr.) at 652; [3]
Agency Report, Tab 24, Certification of the In-House Cost Estimate, at
13,229. After the Army Audit Agency's review, the MEO and TPP were
sealed on February 3. Tr. at 653.
On February 14, 2000, the RFP was amended, changing a number of PWS
requirements, including, as pertinent here, the requirements concerning
personal property services and quality control. RFP amend. 3. This
amendment was provided to the DOL Study Team, but not to the Army Audit
Agency (the IRO). Tr. at 621, 641-42. The agency's MEO/TPP and in-house
cost estimate were not revised as a result of the solicitation
amendment. Tr. at 737. On February 24, the sealed MEO, TPP, and
in-house cost estimate were delivered to the contracting officer.
Contracting Officer's Statement at 2.
5. Evaluation of BAE's Offer
6. On February 25, BAE submitted the only private-sector offer in response
to the RFP. BAE's proposal was evaluated by the agency's SSEB as
follows:
Management Plan Go
Technical Acceptable
Past Performance Excellent
Small Business Program
Support
Small Disadvantaged Excellent
Business Participation
Small Business Concern Acceptable
participation
Agency Report, Tab 8, SSEB Summary of Findings for Contracting Officer,
at 3,927-41. Some individual evaluators noted strengths in BAE's
proposal under the technical evaluation factor--notably, that BAE had
proposed to service walk-in customers within the personal property
offices within 15 minutes as opposed to the 30 minutes required by the
RFP. The evaluators' consensus judgment, however, was that BAE's
proposal was only acceptable overall, with no strengths or weaknesses.
[4] Tr. at 13, 125.
Cost discussions were conducted with BAE, and revised cost proposals
received. [5] On August 1, the SSEB provided its evaluation report and
briefed the SSA on BAE's proposal. Agency Report, Tab 16A, SSEB
Briefing to SSA (Aug. 1, 2000), at 8,773-99, SSEB Report of Findings
for the SSA, at 8,801-21. The SSA was informed that BAE's proposal was
acceptable and satisfied the PWS requirements. Agency Report, Tab 16A,
SSEB Briefing to SSA (Aug. 1, 2000), at 8,783. The SSA selected BAE's
proposal to compete against the government's in-house offer, finding
that
BAE Systems was the only contractor to submit a proposal for this
requirement. Since there was only one proposal, I could not make a best
value decision or make any trade-offs.
The SSA concluded that BAE's offer met "but does not exceed the level
of performance and quality required by the [PWS] in any of the factors
or sub-factors evaluated." Agency Report, Tab 40A, SSA Decision
Memorandum (Aug. 3, 2000), at 20,179.
7. The SSEB's Evaluation of the In-House Offer
8. On August 1, after the SSA's briefing, the in-house TPP was unsealed
and provided to the SSEB (the technical evaluators). [6] Tr. at 21-22.
The evaluators found that the TPP was not prepared in accordance with
the RFP proposal preparation instructions, and advised the DOL Study
Team that it failed to provide sufficient data to demonstrate that the
technical approach and staffing were sufficient to satisfy the PWS
requirements. Agency Report, Tab 16B, Contracting Officer's Memorandum
to DOL Study Team, at 8,823-77. Moreover, the SSEB noted a number of
other problems, including that the TPP did not show that the MEO
project manager and assistant project manager would satisfy the PWS
experience requirements. Id. at 8,825. The SSEB's comments, as well as
detailed instructions for writing an "acceptable" TPP, were sent to the
DOL Study Team. Id. at 8,855.
On August 21, the SSEB received a revised TPP. Tr. at 32. Whereas the
original TPP was approximately 60 pages in length, the revised TPP
exceeded 200 pages.
The SSEB then evaluated the supplemented TPP. At the hearing, the SSEB
Chair stressed that the benchmark, against which the evaluators
compared the TPP to ascertain its acceptability, and whether
adjustments should be made, was BAE's proposal and not the PWS. Tr. at
39, 122, 161. As a result of its evaluation, the SSEB prepared a
written request for clarification, which was delivered to the DOL Study
Team on August 24. Agency Report, Tab 16C, Contracting Officer's
Request for Clarification of the TPP from the DOL Study Team (Aug. 24,
2000), at 8,879-85. Among other things, the SSEB requested resumes for
key personnel and the identification of quality control personnel
referenced in the TPP. Id. at 8,881, 8,883. With respect to personal
property services, the SSEB asked the DOL Study Team how the PWS
requirements were going to be performed with the staffing proposed and
for an explanation of the revised TPP's apparent limitation of walk-in
customers to "emergencies." Id. at 8,883, see Revised TPP, vol. I,
Technical Proposal, at 113.
On August 30, the evaluators received and evaluated the DOL Study
Team's responses to the SSEB's questions and revised TPP pages. The
SSEB found that the DOL Study Team had answered only approximately half
of the clarification questions posed. Tr. at 40; Agency Report, Tab
16D, SSEB Evaluation of DOL Study Team Responses, at 8,887-905. For
example, the DOL Study Team did not provide resumes for key personnel,
asserting that resumes for specific personnel could not be provided
prior to the determination to retain performance of the services
in-house. Id. at 8,887. Also, the response to the question concerning
the personal property services function indicated that the in-house
offer provided for operating a personal property shipment office only
at Schofield Barracks and not at Fort Shafter, as required by the
revised PWS. [7] Id. at 8,897. In response to the SSEB's inquiry
regarding the limitation of walk-in customers to "emergencies," the DOL
Study Team stated that "emergencies" meant "rush orders, deaths,
confinement, hardship, medical, and DUI/Chapter 16." Id. at 8,899. The
response to the question concerning the identity of quality control
personnel indicated that these personnel were the MEO key personnel and
supervisors (not a separate or independent quality control group).
Id. at 8,903.
Subsequently, in response to further queries by the SSEB, the DOL Study
Team provided two sets of resumes for the project manager and assistant
project manager positions. The SSEB concluded that neither set of
resumes satisfied the PWS's 5-year experience requirement. The SSEB did
not resolve this concern because it was informed that it was not the
SSEB's responsibility to evaluate the TPP against the go/no-go
management evaluation factor. Tr. at 61-62, 133-34.
9. The SSA's Evaluation of, and Changes Directed in, the In-House Offer
On September 8, the results of the SSEB's evaluation of the in-house offer
were provided to the SSA. [8] Agency Report, Tab 16E, SSEB Briefing to SSA
(Sept. 8, 2000), at 9,051-121; SSEB Comparison of Offeror to Government MEO,
at 9,123-37; SSEB Consensus Evaluation of TPP, at 9,139-53. The SSA was
informed by the SSEB that he needed to compare the TPP to BAE's proposal "to
ensure that the TPP will provide the same level of performance and quality
as offered by the contractor." Agency Report, Tab 16E, SSEB Briefing to SSA
(Sept. 8, 2000), at 9,095. The SSA was also informed by the SSEB that there
were a number of areas in which the staffing offered by the TPP needed to be
increased to provide the level of performance and quality offered by BAE's
proposal. Tr. at 304-05.
More specifically, the SSEB informed the SSA that the in-house offer's
staffing to perform personal property services must be increased by nine
full-time equivalents (FTE) to the level offered by BAE's proposal to
provide for seeing walk-in customers within 30 minutes and for the operation
of personal property shipment offices at Schofield Barracks and Fort Shafter
at the level offered by BAE. [9] Agency Report, Tab 16E, SSEB Briefing to
SSA (Sept. 8, 2000), at 9,099, 9,107. The SSA was also informed in this
regard that the in-house offer's approach of consolidating the Fort Shafter
and Schofield Barracks operations appeared to conflict with the PWS
requirements requiring personal property shipment offices at both locations.
Agency Report, Tab 16E, SSEB Comparison of Offeror to Government MEO, at
9,127, 9,129; SSEB Consensus Evaluation of TPP, at 9,143. In addition, the
SSA was informed that the TPP appeared to limit walk-in customers to
emergencies, which was not consistent with the PWS or BAE's proposal. Agency
Report, Tab 16E, SSEB Briefing to SSA (Sept. 8, 2000), at 9,107; SSEB
Consensus Evaluation of TPP, at 9,143.
Similarly, the SSA was informed that, whereas BAE had proposed an
independent quality control section staffed with three FTEs, the in-house
offer did not propose an independent quality control function. Agency
Report, Tab 16E, SSEB Briefing to SSA (Sept. 8, 2000), at 9,113. The SSEB
noted that the revised PWS required a quality control plan "independent of
the on-site Contractor's organization." [10] Agency Report, Tab 16E, SSEB
Comparison of Offeror to Government MEO, at 9,135. The SSEB recommended,
based on BAE's proposal, that the in-house offer be revised to require an
independent quality control section consisting of three FTEs. Tr. at 54. In
the SSEB's view, BAE's proposal satisfied only the minimum PWS requirements
in this respect, and the recommended changes were needed to raise the
in-house offer to the minimum PWS level. See Tr. at 52.
The SSA issued a memorandum to the DOL Study Team on September 8, directing
the Study Team to "make the following changes to their bid to bring the
in-house bid up to the same level of performance and quality offered by the
contractor's proposal." Agency Report, Tab 22C, Memorandum of SSA to DOL
Study Team (Sept. 8, 2000), at 10,935-37; see Tr. at 306. The SSA directed
nine changes to the in-house offer, including the following ones relevant
here:
You will increase the number of non-supervisory FTEs currently provided to
perform Personal Property (PPTY) Services by 9 FTEs.
1. You will staff and operate a Personal Property (PPTY) Services Office
at Fort Shafter.
2. You will distribute the hours on the following basis. Fort Shafter 39%
& Schofield 61%.
3. You will see walk-in customers at both locations [within] 30 minutes of
arrival.
4. You may not restrict walk-in customers to "emergencies."
Agency Report, Tab 22C, Memorandum of SSA to DOL Study Team (Sept. 8, 2000),
at 10,935.
Also, the SSA directed:
You will create a Quality Control section staffed with a minimum of three
FTEs. This section will report directly to [the Directorate of Resource
Management].
Id.
On October 2, the DOL Study Team submitted revised pages to the TPP. The DOL
Study Team initially added no additional staffing to the MEO in response to
the SSA's September 8 direction, but only shifted staffing already proposed.
Tr. at 718-19. After reviewing the revised TPP pages, the DOL Study Team was
directed to make additional changes to the TPP. Specifically, the DOL Study
Team was directed to return the two FTEs the team had taken from the MEO's
supply support function to supplement the staff of the personal property
services function and to add two new FTEs to the personal property services
function. Also, the team was directed to return the three FTEs it had moved
from the project management function to staff the quality control function
and to add three new FTEs to create a quality control function. Agency
Report, Tab 39C, Memorandum of the Deputy Garrison Commander to DOL Study
Team, (Oct. 5, 2000), at 19,865.
On October 19, the SSEB provided a final briefing and its report, including
supporting documentation, to the SSA concerning the in-house offer. [11]
Agency Report, Tab 16G, SSEB Briefing to the SSA (Oct. 19, 2000), at
9,163-91. The SSA was informed that the DOL Study Team had complied with the
SSA's September 8 directive, and that the in-house offer was now at the same
level of performance and quality as BAE's proposal. [12] Id. at 9,169.
Specifically, the SSEB informed the SSA that the MEO now offered 218 FTEs,
representing 389,688 productive hours, and BAE offered 209 FTEs,
representing 391,457 productive hours. Id. at 9,191. The SSA accepted the
SSEB's recommendation to proceed to the cost comparison. Agency Report,
Tab 40C, Memorandum of SSA Directing Cost Comparison, (Oct. 23, 2000),
at 20,185-89.
1. Initial Cost Comparison
2. The agency determined that, even after appropriate adjustments were
made, performance by BAE would cost less than performance in-house, as
shown by the following table:
In-House Cost Estimate BAE
Total proposed costs $60,426,010 $49,650,712
Contract 0 1,963,495
administration
One-time conversion 0 2,390,520
costs
Federal income tax 0 <297,904>
Total adjusted costs 60,426,010 53,706,823
Minimum conversion 0 5,312,253
differential
Final adjusted costs $60,426,010 $59,019,076
See Contracting Officer's Statement at 4; Agency Report, Tab 24, Cost
Comparison Form (Oct. 24, 2000), at 12,765.
The cost comparison was forwarded to the Army Audit Agency to certify,
as the IRO. The Army Audit Agency did not agree with the SSA's directed
changes to the in-house offer, believing that it was inappropriate to
direct an increase in the staffing level of the in-house offer where
there was no showing that BAE had offered a level of quality exceeding
the PWS requirements. Tr. at 660-61. The Army Audit Agency issued a
qualified certification that certified that the costs were properly
calculated, but asserted that the changes directed by the SSA were not
in accordance with OMB Circular No. A-76 requirements. [13] Tr. at
661-62; Agency Report, Tab 24, Memorandum of the Army Audit Agency to
Garrison Commander (Oct. 20, 2000), at 13,211-15.
3. Appeals of Cost Comparison Results
4. Public announcement of the cost comparison results was made on October
25, and a conditional award made to BAE. Following the public review
period, the agency received six appeals from affected employees and
employee unions. Among other things, a number of the appeals challenged
the addition of nine FTEs to the in-house offer to perform the personal
property services function and of three FTEs to perform the quality
control function. A number of appeals argued that relocation and
retraining costs (which were added to BAE's cost proposal as a one-time
conversion cost) were understated and that the number of contract
administrators required to oversee BAE's contract was also understated.
[14] Agency Report, Tabs 27A, C, E, G, I, and K, Appeals. The protester
did not file its own appeal or intervene in the employees' and unions'
appeals.
A three-member AAB was appointed by the agency. Agency Record, Tab 38D,
Memorandum of Commander, U.S. Army, Pacific, (Nov. 8, 2000), at
18,097-99; Tr. at 183. As an initial matter, the AAB requested and
received general information from the installation (the U.S. Army
Garrison) addressing the appeals. Tr. at 187. The installation
appointed an "installation appeals team" to provide information and the
installation's position to the AAB; this team consisted of
representatives from the SSEB, the DOL Study Team, the Directorate of
Resource Management, the DOC, and the Staff Judge Advocate's Office.
Tr. at 607, 609. The AAB also requested and received specific
information from, and conducted interviews with, representatives of the
SSEB, the Army Audit Agency, the DOL Study Team, the contracting
officer, and the staff judge advocate responding to the specific appeal
issues. See Agency Report, Tab 38D, AAB Chair Notes, at 18,067-69; Tr.
at 187-88.
In reviewing the personal property services and quality control issues,
the AAB was "puzzled" by an apparent "disconnect" in the record;
specifically, the AAB noted that BAE's proposal was found to meet, but
not exceed, the levels of performance and quality required by the PWS,
but the SSA had directed changes to the in-house offer to bring the
government's in-house offer up to the same level of performance offered
by BAE. Tr. at 193-94, 332-33. In addition, the Army Audit Agency
informed the AAB that, as the IRO, it had certified that the original
in-house offer satisfied the PWS requirements. Tr. at 194.
Nevertheless, the AAB agreed with the SSA and SSEB that the in-house
offer, as revised during discussions with the SSEB, did not provide the
PWS-required level of performance in areas such as maintaining property
services offices at both Schofield Barracks and Fort Shafter and having
an independent quality control process. The AAB disagreed, however,
with the SSA's (and SSEB's) analysis as to the amount of staffing
required to perform these functions. Tr. at 278.
Specifically, with respect to the personal property services area, a
number of appeals challenged the SSA's direction to add nine FTEs of
staffing to the in-house offer to bring the government's in-house offer
up to the level of quality and performance offered by BAE. See, e.g.,
Agency Report, Tab 27A, Appeal No. 1, at 13,965; Tab 27C, Appeal No. 2,
at 14,123; and Tab 27E, Appeal No. 3, at 14,215. The AAB found that the
PWS required the staffing of personal property services offices at both
Schofield Barracks and Fort Shafter, but that the TPP had proposed
closing the Fort Shafter office, which was not consistent with the
amended PWS requirements. See, e.g., Agency Report, Tab 27B, Appeal No.
1 Decision, at 14,089.
The question addressed by the AAB was what amount of staffing was
required to provide services at both Fort Shafter and Schofield
Barracks. One appellant (Appeal No. 1) asserted that an additional two
FTEs were sufficient to perform all the PWS requirements, while another
(Appeal No. 2) asserted that an additional four FTEs would be required.
The AAB asked the SSEB for its analysis supporting the addition of nine
FTEs to perform the PWS requirements; the SSEB informed the AAB that
the additional nine FTEs was based only upon BAE's proposed staffing.
Tr. at 336, 381. In addition, the AAB asked the SSEB for its analysis
supporting its staffing allocation of 61 to 39 percent at Schofield
Barracks and Fort Shafter, in response to which the SSEB informed the
AAB that this "was an educated guess." Tr. at 336. Although, as
indicated above, the SSEB chair had done additional analysis supporting
its staffing and allocation calculations, the SSEB chair did not inform
the AAB of this analysis. Tr. at 73-74, 100. The AAB concluded that the
SSA's directed addition of nine FTEs was not based upon "appropriate
rigor or substance" and that the directed allocation of staffing at 61
percent at Schofield Barracks and 39 percent at Fort Shafter was not an
auditable estimate and was without credibility. See, e.g., Agency
Report, Tab 27B, Appeal No. 1 Decision, at 14,089.
The AAB asked others for their analysis of the number of FTEs that
would be required to perform the PWS requirements, including operating
an office at Fort Shafter. The Army Audit Agency informed the AAB that
no additional FTEs would be required to perform the PWS requirements,
but that if the AAB found that operating an office at Fort Shafter was
required, only one additional FTE would be necessary. The Director of
the DOL informed the AAB that an additional two FTEs could perform the
PWS requirements.
The AAB concluded that only an additional two FTEs were needed to
satisfy the requirement to staff personal property offices at both Fort
Shafter and Schofield Barracks. This judgment was essentially based
upon the opinions provided by the Army Audit Agency and the Director of
the DOL. [15] Specifically, the AAB accepted the opinion of the Army
Audit Agency because the Army Audit Agency was the IRO and "had timed
how long things take." Tr. at 458, 503-04. The board accepted the
opinion of the DOL Director because he was disinterested and "was an
objective source of information." Tr. at 335, 459-60. The AAB also
noted that although the PWS had been amended to require a staffed
office at Fort Shafter, the PWS workload data for the personal property
services function were not adjusted, which suggests that few additional
FTEs would be required. Tr. at 202. Also, one AAB member noted that the
personal property services had most recently been performed at
Schofield Barracks and Fort Shafter with only seven FTEs and that his
family had personal experience with using the personal property
services office and had been satisfied. Tr. at 458-59. This board
member also noted that prior to closing the personal property services
office at Fort Shafter the installation had staffing of two FTEs at
that office and had to "farm work down [there] to keep those people
occupied." Tr. at 460. In addition, the AAB noted that the Army's
standard installation plan indicated that an allocation of staffing at
Schofield Barracks and Fort Shafter should be approximately 73/27
percent (as opposed to the 61/39 percentage split estimated by the
SSEB); applying this percentage allocation to the nine FTEs the TPP
proposed for Schofield Barracks, the AAB members stated that it
confirmed that the addition of two FTEs to staff Fort Shafter was
reasonable. Tr. at 337, 457.
With respect to the quality control area, a number of appeals
challenged the SSA's direction to add three FTEs of staffing to the TPP
to bring the government's in-house offer up to the level of quality and
performance offered by BAE. See, e.g., Agency Report, Tab 27A, Appeal
No. 1, at 13,965; Tab 27E, Appeal No. 3, at 14,215; Tab 27G, Appeal No.
4, at 14,267. Here, too, the AAB agreed with the SSA that the in-house
offer did not satisfy the requirement to have an independent quality
control function; the question was what amount of staffing would
satisfy the RFP requirements for quality control. See, e.g., Agency
Report, Tab 27B, Appeal No. 1 Decision, at 14,097; Tr. at 278, 341-42,
473. The AAB concluded that the SSA's decision to rely upon BAE's
proposed level of staffing to determine the level of staffing the
government must provide to satisfy the quality control requirements was
inappropriate, finding
[a]lthough expedient, this action lacks the requisite link with
associated workload data and does not consider in-house [quality
control plan] efficiencies which rely upon embedded installation
management processes.
Agency Report, Tab 27B, Appeal No. 1 Decision, at 14,097. The AAB thus
decided to rely upon its own experience to determine the amount of
staffing required to perform the quality control function, Tr. at
215-17, 474-75, because the board concluded that there was no workload
data available regarding the provision of quality control services. Tr.
at 216, 343. From this experience, the AAB was aware that the Army had
a variety of quality and performance processes embedded in management
systems, such as the Army performance improvement criteria, to ensure
quality, [16] and included within these embedded processes was the
generation of reports concerning quality. Tr. at 344-45; Agency's
Post-Hearing Comments at 8. In the board's judgment, the independent
quality control envisioned by the RFP provided for a person who would
be "nothing more than a giant collector of data." Tr. at 217. Thus, the
board concluded, based upon a "technical estimate of the required
workload," that a staffing level of one FTE would satisfy the required
quality control function. [17] Agency Report, Tab 27B, Appeal No. 1
Decision, at 14,097.
Several appeals argued that the number of contract administrators
estimated to administer BAE's contract was understated. [18]
Specifically, the in-house cost estimate provided for only five FTEs
for the contract administration function, and the appeals asserted that
the RSH authorized eight FTEs to perform contract administration where
the MEO is of the size envisioned here. [19] See Agency Report,
Tab 27C, Appeal No. 2, at 14,117; Tab 27G, Appeal No. 4, at 14,257-59;
Tab 27H, Appeal No. 5, at 14,416; see also RSH, Part II, ch. 3,
table 3-1, at 26. The AAB found that the RSH required eight FTEs to
perform contract administration where the MEO staffing was estimated to
be between 201 and 250 FTEs, as here. See, e.g., Agency Report,
Tab 27D, Appeal No. 2 Decision, at 14,199. Although the RSH states the
contract administration figure as a ceiling, RSH, part II, ch. 3, sect. C,
the board found that the guidance provided by the RSH was "mandatory"
and "should be adhered to." Tr. at 246, 359-60, 485.
In a number of appeals, it was argued that the costs for retraining and
relocation of affected employees, which are included as a one-time
conversion cost added to the cost of BAE's offer for the purposes of
the cost comparison, were understated. [20] Agency Report, Tab 27C,
Appeal No. 2, at 14,119; Tab 27G, Appeal No. 4, at 14,261; Tab 27I,
Appeal No. 5, at 14,417. From its review, the AAB concluded that the
amount applied for retraining costs was a "fairly conservative number"
and that relocation costs were probably understated. Tr. at 357.
Nevertheless, the AAB concluded that it would not require increasing
these costs because of "evolving departmental policy in [the one-term
conversion costs] area to keep those costs down." Tr. at 348. In this
regard, the interim version of the DOD A-76 Costing Manual, para.para. C10.2.2
and C10.2.3, provided that retraining and relocation costs should be
included in a general severance pay calculation (which the manual
stated would be 4 percent of the annual basic pay of all government
civilian positions included in the MEO in the first full period of
performance). See DOD A-76 Costing Manual, Interim Guidance (Mar. 14,
2001) at 80-81 (found at ). Although
the AAB concluded that this interim guidance was not binding, the board
found persuasive the stated policy to contain those cost adjustments.
See, e.g., Agency Report, Tab 27H, Appeal No. 4 Decision, at 14,388-90.
5. Revised Cost Comparison
As noted, the AAB's decisions on the six appeals sustained some of the
appeal issues and denied others. As a result of the board's decisions, a new
cost comparison was performed and certified by the Army Audit Agency.
Performance in-house was determined to cost less than performance by BAE, as
shown by the following table (revisions are in bold):
In-House Cost Estimate BAE
Total proposed costs $58,606,530 $49,650,712
Contract 0 3,073,056
administration
One-time conversion 0 2,287,710
costs
Federal income tax 0 <297,904>
Total adjusted costs 58,606,530 54,713,574
Minimum conversion 0 5,167,955
differential
Final adjusted costs $58,606,530 $59,881,529
See Agency Report, Tab 38A, Revised Cost Comparison Form (Jan. 17, 2001),
at 16,707. The revised cost comparison reflected the following changes: the
in-house cost estimate's total proposed costs were reduced by $1.8 million,
primarily reflecting the reduction in staffing of the personal property
shipment offices and the quality control function from those directed by the
SSA; contract administration costs (added to BAE's offer) were increased by
$1.1 million; one-time conversion costs (added to BAE's offer) were
decreased by approximately $100,000 to reflect a decrease in the MEO's
overall staffing. As a result of this cost comparison, the cost of in-house
performance (after adjustments) was determined to be $1,274,999 lower than
performance by BAE.
BAE was notified of the results of the revised cost comparison and requested
and received a debriefing. [21] This protest followed.
THRESHOLD ISSUE: EXHAUSTION OF REMEDIES
As an initial matter, the Army requests that we dismiss BAE's protest
because the protester failed to exhaust its administrative remedies by
filing an appeal with the agency. Army Motion to Dismiss (Feb. 12, 2001) at
4-10. In this regard, the Army argues that the RSH, as revised by
Transmittal Memorandum No. 22, 65 Fed. Reg. 54,568 (Sept. 8, 2000), requires
all interested parties to review the tentative cost comparison decision and
bring potential errors to the attention of the AAB.
With respect to challenges to cost comparisons under Circular A-76
procedures, we have adopted a policy, for the sake of comity and efficiency,
of requiring protesters to exhaust the available administrative appeal
process. Thus, we have held that where there is a relatively speedy appeal
process for the review of an agency's cost comparison decision, we will not
consider objections to the cost comparison that were not appealed to the
agency. See Professional Servs. Unified, Inc., B-257360.2, July 21, 1994,
94-2 CPD para. 39 at 3; Direct Delivery Sys., B-198361, May 16, 1980, 80-1 CPD para.
343 at 2. Nevertheless, there is no statutory or regulatory requirement that
an offeror exhaust available agency-level remedies before protesting to our
Office, and it is our view that we retain discretion to waive the policy
requiring the exhaustion of the Circular A-76 appeals process where good
cause is shown--for example, where we find that application of the policy in
a particular case would not serve its intended purpose of promoting the
efficient review of challenges to the cost comparison. Here, we need not
decide whether this is an appropriate case for waiving our policy because,
as explained below, the applicable agency A-76 appeals procedures did not
require BAE to file an appeal.
We reach that conclusion because Transmittal Memorandum No. 22, which is the
basis for the Army's dismissal request, did not apply to this cost
comparison. [22] That memorandum states that it is applicable only to cost
comparisons "where the in-house offer remains sealed as of the date of this
publication" (here, September 8). 65 Fed. Reg. at 54,570. As of September 8,
the TPP and MEO had already been unsealed and provided to the SSEB. Tr. at
21-22. The Army argues that the in-house cost estimate remained sealed until
October 24. See Army Supplement to Dismissal Request (Feb. 15, 2000);
Tr. at 593. In our view, however, OMB's reference to the "in-house offer" in
the transmittal memorandum did not mean the in-house cost estimate alone;
rather, the RSH makes clear that the "in-house offer" refers to the agency's
management plan, that is, the TPP and the MEO. [23]
The RSH, prior to the effective date of Transmittal Memorandum No. 22, did
not require BAE to file its own appeal. Rather, the applicable RSH section
provided that appeals of the cost comparison to the AAB "must" be filed by
an eligible appellant and "[d]emonstrate that the items appealed,
individually or in the aggregate, would reverse the tentative decision."
[24] RSH, part I, ch. 3, para. K.1.e. DOD's implementation of Circular No. A-76
and the RSH also provide that for an appeal to be "eligible for review under
the DOD component appeals procedures, [it] shall: . . . (iii) [d]emonstrate
that the result of the appeal may change the decision." 32 C.F.R.
sect. 169a.18(a)(5)(iii). Under that rule, BAE was not required, and may not be
permitted, to file a "defensive" appeal with the AAB to preserve its right
to protest in the event that the agency revised the cost comparison as a
result of the appeals on behalf of the MEO team.
BAE'S PROTEST GROUNDS
BAE challenges numerous aspects of the agency's conduct of the cost
comparison and of the AAB's decisions, including the government's in-house
offer's failure to satisfy the PWS's minimum experience requirements for
certain key personnel; the AAB's judgment regarding the amount of staffing
required by the in-house offer to perform the personal property services and
quality control functions in accordance with the PWS requirements; the
Army's failure to consider the evaluated strength in BAE's offer to see
walk-in customers in the personal property shipment office within 15
minutes; and the calculations regarding contract administration and
retraining/relocation costs made in the cost comparison.
ANALYSIS
1. Summary of Agency's Errors in Conducting Cost Comparison
2. Where, as here, an agency has conducted a cost comparison under OMB
Circular No. A-76, thus using the procurement system to determine
whether to contract out or to perform work in-house, our Office will
consider a protest alleging that the agency has not complied with the
applicable procedures in its selection process or has conducted an
evaluation that is inconsistent with the solicitation criteria or is
otherwise unreasonable. See Trajen, Inc., B-284310, B-284310.2, Mar.
28, 2000, 2000 CPD para. 61 at 3. To succeed in its protest, the protester
must demonstrate not only that the agency failed to follow established
procedures, but also that its failure could have materially affected
the outcome of the cost comparison. Aberdeen Tech. Servs., B-283727.2,
Feb. 22, 2000, 2000 CPD para. 46 at 5.
Here, we find that the record reflects numerous errors and
misunderstandings of the requirements governing cost comparisons under
OMB Circular No. A-76 procedures. We address several key flaws in this
procurement before turning to the specific grounds on which we sustain
the protest.
First, to preserve the integrity of the A-76 cost comparison,
private-sector offerors and the government must compete on the basis of
the same scope of work. See RSH, part I, ch. 3, para. H.3.e; see also
Aberdeen Tech. Servs., supra, at 8. In the first instance, the RSH
requires that both the in-house offer and the private-sector proposals
must comply with the minimum PWS requirements. RSH, part II, ch. 2, para.
A.1.b. This determination must be made before there is any
consideration as to whether the successful private-sector proposal
offers quality and performance exceeding the PWS requirements, such
that the in-house offer must be brought up to the private-sector
proposal's level of performance and quality. RSH, part I, ch. 3, para.
H.3.d.
It is the IRO's responsibility prior to sealing the government's
in-house offer to ensure that the in-house offer satisfies the minimum
PWS requirements and that the adjustments necessary to satisfy the PWS
requirements are made. See RSH, part I, ch. 3, para.para. H, I, J. Here, the
record indicates that the IRO failed to properly carry out its
responsibility.
Secondly, the PWS was significantly revised after the in-house offer
was certified by the IRO and sealed. The IRO did not consider whether
the in-house offer complied with the revised PWS, although that was the
basis on which BAE's proposal was prepared and evaluated. See, e.g.,
Tr. at 672, 678, 697-98. Because of the PWS revisions, the TPP should
have been opened prior to the receipt of private-sector offers,
examined against the revised requirements and adjusted, as required,
and certified anew as satisfying the revised PWS requirements. This was
not done here.
Thirdly, the agency apparently believed that no revisions could be made
to the in-house offer once it was initially sealed, except to the
extent necessary to bring it up to the level of the private-sector
offeror's proposal. However, even after completion of the
private-sector competition, the agency must ensure the compliance of
the in-house offer with the PWS requirements (unless these requirements
are also waived for the private-sector offeror). Yet here, even though
they found the in-house offer was noncompliant with the PWS
requirements, the SSEB and SSA apparently believed that it was
inappropriate for them to compare the in-house offer to the PWS
requirements to determine what was needed to make the in-house offer
compliant. [25] See, e.g., Tr. at 39, 122, 161, 320-22. In our view,
there was no reasonable basis for this belief; once the SSEB or the SSA
determined that the in-house offer did not satisfy the PWS
requirements, that deficiency needed to be resolved before the agency
could proceed to the public/private cost comparison.
Fourthly, the failure to focus on the in-house offer's compliance with
the PWS requirements led to a further deficiency. In our view, the SSEB
and SSA erred in simply adopting the private-sector offeror's proposed
staffing levels to determine the amount of staffing required by the
in-house offer to comply with the PWS requirements. Just as two
competing private-sector offerors may reasonably propose different
levels of staffing, depending on each offeror's technical approach and
proposed efficiencies, so, too, the in-house offer may be based on a
level of staffing different from that offered by the private-sector
proposal. Neither the SSEB nor the SSA should impose the private-sector
proposal's staffing level on the in-house team.
Finally, the agency unreasonably failed to determine the in-house
offer's compliance with the PWS key personnel experience requirements
in the face of evidence indicating noncompliance.
Turning now to the bases on which we sustain BAE's protest, we agree
with BAE that the record does not demonstrate that the in-house offer
satisfied the minimum PWS requirements. That is, the record does not
establish that the in-house offer complies with the PWS key personnel
requirements or that the TPP staffing (as adjusted by the AAB) could
reasonably satisfy all of the PWS requirements for personal property
services. We also find that the record does not establish that the
agency considered whether BAE's offer to service walk-in customers to
the personal property services offices within 15 minutes offered a
level of performance that the in-house offer should have been required
to meet. Given the number and extent of the errors made in this
procurement and the closeness of the competition, we find that the
protester has established that the failure to comply with OMB Circular
No. A-76 requirements materially affected the outcome of the cost
comparison.
3. In-House Offer's Failure to Meet Key Personnel Experience Requirements
4. As noted, BAE argues that the in-house offer did not satisfy the PWS
requirements concerning key personnel. Supplemental Protest at 11-13.
Specifically, BAE states that the PWS required, as a part of the
proposal, the submission of resumes for key personnel, such as the
proposed project manager and assistant project manager, who were stated
to be "essential for successful accomplishment of the services to be
performed under this contract." The project manager and assistant
project manager were required to "have a minimum of five years
experience in the management of a similar or related multi-function
operation within the last 8 years." PWS sect. C.1.6.2. The TPP initially
did not provide resumes for the project manager and assistant project
manager. In response to the SSEB's repeated requests, resumes for these
positions were twice provided, but these resumes (including those of
the current Director and the Deputy Director of the DOL) did not show
the requisite 5 years of experience. Tr. at 61-62. Although the SSEB
concluded that the resumes did not demonstrate compliance with this PWS
requirement, the SSEB was informed that they should "not worry about
them, that that wasn't our -- it wasn't our responsibility to evaluate
those." Tr. at 133. As BAE notes, it was required to propose highly
experienced (and therefore higher paid) personnel to satisfy this
mandatory solicitation provision, which raised the cost of its
proposal. Protester's Post-Hearing Comments at 20.
The Army does not contend that either of the two sets of resumes for
the project manager and assistant project manager positions submitted
by the DOL Study Team satisfied the minimum experience requirements
stated in the PWS. Rather, the Army argues that federal personnel law
does not permit the agency to offer specific individuals for positions
within the MEO (and that the agency could not know exactly who would
occupy spaces within the MEO) until after selection of the in-house
offer as most economical, and therefore the in-house offer could not
contain resumes for key personnel. [26] Army's Post-Hearing Comments at
17-18.
We need not decide whether the Army was permitted to designate specific
individuals for inclusion in the MEO because answering this question
does not resolve BAE's fundamental complaint, that is, that BAE and the
MEO were not competing on the same basis. Although BAE was required to
propose a project manager and assistant project manager satisfying the
PWS experience requirements, the government's in-house team provided no
evidence that it could provide a project manager and assistant project
manager who will satisfy these requirements; to the contrary, the
record indicates that the government cannot comply with these
requirements. This is not a question of designating a specific
individual for inclusion within the MEO, but establishing the in-house
team's capability of providing key personnel with the requisite
experience. See Aberdeen Tech. Servs., supra, at 9-10 (the in-house
offer, like the private-sector offer, must comply with personnel
requirements stated in the RFP).
Here, the original TPP did not provide resumes for key personnel, nor
state that the project manager and assistant project manager to be
ultimately provided would satisfy the PWS requirements. The revised TPP
also did not include resumes, but stated that the project manager would
satisfy the PWS 5-year experience requirement (the revised TPP did not
state that the assistant project manager would satisfy the PWS
requirements). Also, none of the four resumes provided in response to
the SSEB's requests show that any of these four individuals satisfy the
experience requirements. Significantly, the second set of resumes
submitted are those of the DOL's Director (as project manager) and
Deputy Director (as assistant project manager); although these
individuals are responsible for directing and managing all of the
installation's logistics functions, these resumes do not show the
requisite 5 years of experience. Although the Army now states that,
when these positions are filled, individuals meeting the PWS
requirements will be provided, the agency does not provide any evidence
establishing its capability to do so.
BAE argues that, because the in-house offer did not satisfy this
minimum PWS requirement, even after repeated clarifications from the
SSEB, the in-house offer should have been rejected as unacceptable.
[27] Protester's Post-Hearing Comments at 15. We disagree. In a cost
comparison under Circular No. A-76, the government's in-house offer
cannot simply be rejected as unacceptable, even where it does not
satisfy the PWS requirements. Rather, unless it concludes that a
private/public cost comparison is not appropriate, it is the agency's
obligation either to ensure that the in-house offer is adjusted to
satisfy the minimum PWS requirements, see Symvionics, Inc., B-281199.2,
Mar. 4, 1999, 99-1 CPD para. 48 at 10-11, or, if the minimum requirements
are relaxed or waived, to revise the PWS requirements and allow the
private-sector offeror an opportunity to meet the relaxed requirements.
See Aberdeen Tech. Servs., supra, at 8 (to preserve the integrity of
the cost comparison, the government and private-sector offeror must
compete on the same scope of work). Here, the record shows that the
PWS's key personnel experience requirements were essentially relaxed or
waived for the in-house offer, and BAE was prejudiced by not being
given an opportunity to address these less stringent requirements.
5. AAB's Authority to Review SSA's Decision
6. BAE also complains that, as adjusted by the AAB, the in-house offer's
proposed staffing is insufficient to satisfy the minimum PWS
requirements for the personal property services and quality control
functions. In this regard, BAE contends that the AAB improperly usurped
the SSA's authority by substituting the board's judgment for that of
the SSA. In BAE's view, the AAB could disagree with the SSA's judgment
only if the SSA's determinations were found to be unreasonable.
Protester's Post-Hearing Comments at 44-46. BAE also asserts that the
SSA's determinations as to the amount of staffing required to perform
the personal property services and quality control function are
management decisions to which the appeals process does not apply. See
RSH, part I, ch. 3, para. K.6.c ("Agency A-76 Administrative Appeal
procedures do not apply to questions concerning: . . . (c) Government
management decisions involving the Government's certified in-house
MEO.")
We disagree with BAE that the AAB was barred by the RSH from reviewing
these appeals issues and making its own judgments as to the amount of
staffing required for the in-house offer to satisfy the minimum PWS
requirements. The very purpose of the appeal process is to provide
affected parties with an opportunity for a higher-level administrative
review of the agency's cost comparison decision prior to that decision
becoming final. See, e.g., 32 C.F.R. sect. 169a.18(a) (DOD Administrative
Appeal Procedures); see also Diebold v. United States, 947 F.2d 787,
806 (6th Cir. 1991) (A-76 administrative appeals process provides for
final agency action). Given this purpose, we do not think that the
restriction in the RSH cited by BAE was intended to apply to the
decisions made by the SSA that were the subject of the appeals here. In
this context, the SSA is not making management decisions but is part of
the evaluation process, and therefore we see no basis why the SSA's
decisions, like any other evaluation determination, cannot be reviewed
by the AAB.
Our standard for reviewing the decisions of the AAB with respect to the
issues raised by BAE is the same as that employed in reviewing other
challenges to an agency's procurement decisions. That is, we will
disturb the AAB's decision only where it is shown to be unreasonable,
inconsistent with applicable law or regulations, or not in accord with
the solicitation criteria. See Trajen, Inc., supra, at 3.
7. In-House Offer's Failure to Meet Personal Property Services Requirement
8. With respect to the personal property services area, as indicated
above, the AAB agreed with the SSA that the in-house offer did not
satisfy all of the PWS requirements. That is, the AAB concluded that
the in-house offer did not offer to maintain personal property services
offices at both Schofield Barracks and Fort Shafter, as required by the
PWS. Instead of the nine FTEs required by the SSA, the AAB determined
that an additional two FTEs of staffing to be based at Fort Shafter
would satisfy all of the PWS requirements. In making this
determination, however, the AAB did not adequately consider the
in-house offer's compliance with the PWS requirement to service walk-in
customers within 30 minutes.
As noted by the SSA and SSEB, the in-house offer did not comply with
the revised PWS requirements for these services at either Schofield
Barracks or Fort Shafter, since the in-house offer did not commit to
servicing walk-in customers within 30 minutes as required by the PWS,
but limited walk-in customers to emergencies. See Agency Report, Tab
16E, SSA Briefing (Sept. 8, 2000), at 9,105, 9,107. Notwithstanding
this determination, the AAB did not perform a reasoned analysis as to
what personal property services were required by the PWS and whether
the staffing proposed by the in-house offer could reasonably satisfy
these minimum requirements. Instead, the AAB accepted the initial
staffing included in the in-house offer for performance of personal
property services at Schofield Barracks and sought to determine only
what additional staffing would be necessary to provide personal
property services at Fort Shafter. Such an analysis does not account
for satisfying the 30-minute customer walk-in service requirement at
either Schofield Barracks or Fort Shafter, as required by the PWS. [28]
In their hearing testimony, the AAB members expressed confidence that
the in-house offer could meet the 30-minute walk-in customer service
requirement with its proposed staffing, but indicated no understanding
of what was actually required. Rather, the AAB members believed that
the requirement to service walk-in customers within 30 minutes could be
limited to emergencies or that the requirement would be met by seeing a
walk-in customer within 30 minutes for the purpose of scheduling a
later appointment for that customer. [29] See Tr. at 425, 518-19.
The PWS did not, however, restrict servicing walk-in customers to
emergencies, and we do not think that the PWS can be reasonably read to
provide that "servicing" walk-in customers means merely scheduling
later appointments for the customers to return. The PWS provides in the
same sentence that the "Contractor shall service customers with an
appointment within 10 minutes of the appointment time and walk-in
customers within 30 minutes of arrival." See PWS sect. C.5.2.6.1. The next
sentence of this PWS section states the services to be provided, that
is, customers will be counseled as to their rights and responsibilities
concerning the shipment and storage of personal property. In light of
that language in the PWS, and because the PWS refers to servicing
customers who already have appointments, "servicing" (whether for
walk-in customers or others) cannot reasonably be read to mean merely
scheduling appointments.
The AAB attempted to support its flawed analysis with opinions from the
Army Audit Agency and the Director of the DOL, to little avail, in our
view. [30] The AAB believed that the Army Audit Agency had done its own
analysis as to the time required to perform the personal property
services transactions and determined how many FTEs would be required.
One board member testified that the Army Audit Agency, as the IRO, had
"timed how long things take. They had, based upon that workload data,
they had done an audit of the particular organization. So they had good
data there." Tr. at 458. In fact, the Army Audit Agency had not done
any time studies of the historical personal property services function,
as the AAB apparently believed, but instead had simply verified the DOL
Study Team's mathematical calculations; the Army Audit Agency did not
evaluate or verify the DOL Study Team time estimates at all. [31] See
Tr. at 672, 678-80, 702-03, 706. Indeed, the Army Audit Agency
representative testified that it was not until the appeals were filed
that the Army Audit Agency "realized that there were time standards
associated with the workload for personal property." Tr. at 678. The
Army Audit Agency's judgment as to the amount of FTEs required to
perform the PWS requirements was apparently based upon its
determination that the in-house offer's original staffing estimate
could handle the expected work at Schofield Barracks and that any
additional workload required to service an office at Fort Shafter could
be handled on an "on-call basis." Tr. at 677.
The AAB also gave great weight to the opinion of the DOL Director
because he was seen as an unbiased, knowledgeable source of information
concerning these functions. [32] Tr. at 198, 335, 365, 459-60. There is
no documentation in the record of the DOL Director's opinion, which was
provided orally to the AAB. Nor is there any evidence as to whether
this opinion is based upon meeting all of the PWS requirements (such as
the requirement to service walk-in customers within 30 minutes) or as
to the DOL Director's knowledge of the PWS requirements. Given the lack
of support for the Army Audit Agency's and the DOL Director's opinions
of the amount of staff required for the personal property shipment
offices, we think the AAB's reliance upon these opinions was
unreasonable.
9. Agency's Failure to Consider Whether BAE's Offer Exceeded the PWS
Requirements
10. We are also concerned that neither the AAB nor the SSA/SSEB gave any
real consideration to BAE's offer to service walk-in customers within
15 minutes.
Where an agency identifies strengths in a proposal ultimately selected
under an A-76 best value procurement where award is based upon a
cost/technical tradeoff, or if it identifies areas in which that
proposal exceed the PWS requirements, the agency must consider those
strengths in comparing that proposal with the in-house offer. RSH, part
I, ch. 3, para.para. H.3.d, e; The Jones/Hill Joint Venture-Costs, B- 286194.3,
Mar. 27, 2001, 2001 CPD para. __ at 10. An agency's determination that
certain identified strengths are not important or of no value must have
a reasonable basis. The Jones/Hill Joint Venture-Costs, supra, at 10.
This must be done even where, as here, only one offer is received in
response to a best value solicitation. 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 costs or prices that often accompany a technically superior
approach. Id.
Here, BAE proposed to make
the Customer base aware of group counseling opportunities through unit
bulletins, recorded phone messages, an Internet based home page, and
during direct Customer inquiry. The use of group counseling frees
Section personnel to more efficiently handle walk-in Customers and
enables us to define a waiting time goal of no more than 15 minutes.
Agency Report, Tab 7, BAE Technical Proposal, at 1,639. This appears to
exceed the PWS requirement to service walk-in customers within 30
minutes. This was noted as a real proposal strength by one SSEB member,
who observed that BAE had a "[h]igh probability of success" in meeting
this goal. Agency Report, Tab 8K, Consensus Subfactor Rating, Technical
Team, at 4,203; Tr. at 126. The fact that BAE offered to service
walk-in customers within 15 minutes was not presented to the SSA, who
received only summary evaluation findings that did not mention this
point. There is no other contemporaneous documentation in the record
indicating the SSEB's or SSA's consideration of BAE's offer to service
walk-in customers within 15 minutes or why this was not important or of
no value to the agency.
The Army now argues, however, that BAE's offer was not a real strength
because it was stated to be only a goal. [33] Contracting Officer's
Statement at 6; Tr. at 171. This explanation does not appear in the
contemporaneous evaluation record and appears inconsistent with the
evaluator's statement that this "goal" was highly achievable. The
Army's current position fails to address whether BAE's proposal exceeds
the PWS requirements. [34] While we recognize that the Army may
ultimately conclude that BAE's offer to service walk-in customers
within 15 minutes does not exceed the PWS requirements in a meaningful
way, the record does not indicate that the agency considered this
issue. If BAE's proposal does exceed the PWS requirements in this
regard, in order to level the playing field, the Army was required
either to reasonably determine why this was of no value to the
government or to ensure that the in-house offer provided a comparable
level of quality and performance. See Rice Servs., Ltd., B-284997,
June 29, 2000, 2000 CPD para. 113 at 7; Aberdeen Tech. Servs., supra, at
14-15.
11. Conclusion
In sum, we find that the record does not establish that the in-house offer
satisfied the minimum PWS requirements regarding key personnel and personal
property services. [35] We also find that the record does not indicate that
the agency considered whether BAE's offer to service walk-in customers to
the personal property services offices within 15 minutes exceeded the PWS
requirements and offered a level of performance that the in-house offer
should have been required to meet. We also conclude that BAE was prejudiced
by these errors, and accordingly we sustain the protest.
OTHER ISSUES
BAE raised a number of other protest arguments that we need not specifically
address. For example, BAE asserts that the in-house offer's staffing to
perform quality control, after the AAB's decisions, is insufficient to
perform all the PWS requirements. Although we do not resolve this issue, we
note that the parties' arguments reflect a basic disagreement as to what was
required. That is, BAE, as well as the SSA and SSEB, clearly believed, not
without some justification, that the requirement for an independent quality
plan required an independent quality control staff, while the AAB and the
Army believe that this independence can be obtained by having oversight
(over an internal quality control process) by an independent person. In any
case, we think that the PWS requirements concerning quality control are far
from a model of clarity and suggest that, given our protest recommendation,
the Army review this matter to ensure that the PWS clearly states the
government's actual requirements. [36]
BAE also challenged the agency's calculation of one-time conversion
(specifically, relocation and retraining) costs and contract administration
costs. Although we do not resolve these issues, we note that, with respect
to relocation and retraining costs, the record reflects a number of
conflicting calculations. Tr. at 243 . Given the DOD's interim guidance to
restrict the amount of relocation and retraining costs added to the cost of
the private-sector proposal to ensure that these costs are not overstated,
this is a matter that the agency may again wish to review. [37] With respect
to contract administration, while the additional contract administrators
required by the AAB's decisions may have been warranted, the record shows
that the AAB misread the RSH as requiring eight FTEs of staffing for
contract administration for an MEO of the staffing size presented here, see
Tr. at 246, 359-60, 485, when in fact the RSH presented this number as a
ceiling and provided for the agency to perform a reasoned analysis of the
amount of contract administration staffing required. RSH, part II, ch. 3,
table 3-1, at 26. The agency may also wish to review this matter.
We sustain the protest.
RECOMMENDATION
Since it appears that the PWS does not accurately and unambiguously state
the Army's actual requirements and this caused the competition to be on an
unequal basis, we recommend that the agency review its needs and revise the
PWS accordingly. After revising the PWS, a new in-house offer should be
prepared, a revised proposal solicited from BAE, and a new evaluation and
cost comparison performed. Given the length of time that this procurement
has already taken, we recommend that the agency implement this as
expeditiously as possible. We also recommend that the protester be
reimbursed the reasonable costs of filing and pursuing the protest,
including reasonable attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2001). The
protester's certified claim for costs, detailing the time spent and costs
incurred, must be submitted to the agency within 60 days of receiving this
decision. 4 C.F.R. sect. 21.8(f)(1).
Anthony H. Gamboa
General Counsel
Notes
1. For the sake of convenience and consistency with the record, we use the
term "in-house offer" to refer to the government's management plan, as does
the OMB Circular No. A-76 Revised Supplemental Handbook (RSH), even though
the government's plan to perform the work in-house is not, in fact, an
offer. American Fed'n of Gov't Employees, AFL-CIO et al., B-282904.2, June
7, 2000, 2000 CPD para. 87 at 3-4.
2. The procedures for determining whether the government should perform an
activity in-house, or have the activity performed by a contractor, are set
forth in OMB Circular No. A-76 and the RSH, which have been made expressly
applicable to the Department of Defense (DOD) and its military departments
and agencies. See 32 C.F.R. sect. 169a.15(d) (2000). The process set out in the
Circular and the RSH broadly encompasses the following steps in the conduct
of a public-private competition. First, after the PWS has been drafted, the
agency ensures that the government's in-house offer has been prepared based
on the PWS. RSH, part I, ch. 3, para. I. Second, there is a competition among
private-sector offerors, which is conducted much as any competed federal
procurement is conducted. Third, if that competition is done on the basis of
a cost/technical tradeoff, the government's in-house offer is compared with
the winning private-sector offer to assess whether or not the same level of
performance and performance quality will be achieved--and if it will not, to
make all changes necessary to meet the performance standards of the
private-sector proposal. Id., para.para. H.3.d, e. Finally, once the playing field
is thus leveled, there is a cost comparison between the private-sector offer
and the in-house offer. Id. para.para. H, J.
3. At the hearing that our Office conducted in connection with this protest,
testimony was elicited from the source selection authority (SSA), the source
selection evaluation board (SSEB) Chair, the three AAB members, the Army
Audit Agency Audit Manager, the DOL Study Team leader, the contracting
officer, and a personnel officer.
4. The contemporaneous evaluation record does not further discuss BAE's
offer to see walk-in customers within 15 minutes, and the SSA was not
informed of this feature of BAE's proposal.
5. No technical discussions were conducted with BAE. Tr. at 20, 642.
6. The TPP consisted of two volumes: volume one was the technical proposal
and volume two was the management operations plan.
7. The initial PWS, upon which the in-house offer was based, provided for a
personal property shipment office only at Schofield Barracks. Fort Shafter
was added as another personal property shipment office location by amendment
No. 3 to the RFP.
8. The original SSA left the command after the selection of BAE's proposal
to compete against the public offer. The new SSA was appointed just before
the September 8 briefing. Tr. at 43, 303.
9. BAE offered to staff the personal property offices at Fort Shafter and
Schofield Barracks with 18 FTEs, all of which were "workers." The TPP
offered to staff a personal property office at Schofield Barracks with 1
"nonworking" supervisor and 9 "actual workers," and proposed closing the
existing Fort Shafter office. Tr. at 46, 48.
10. The requirement that the quality control function be independent was one
of the requirements that, as explained above, had been added by amendment
No. 3 to the RFP after the in-house offer had been certified and sealed.
11. After the September 8 briefing to the SSA, the SSEB Chair had prepared
analyses to confirm the SSEB's judgment to add nine FTEs for personal
property services, three FTEs for quality control, and 5,328 hours for
maintenance to the MEO. Agency Report, Tab 16G, SSEB Analyses, 9,303-57,
9,379-419; Tr. at 71-73, 76. For reasons not clear in the record, the
information concerning the quality control and personal property services
were not presented to, or seen by, the SSA or the AAB. Tr. at 72-74, 100.
The SSEB Chair's methodology supporting the additional maintenance hours was
provided to the AAB, which (presumably relying on that analysis) denied the
appeals challenging the addition of 5,328 hours for maintenance.
12. The SSEB Chair testified that the SSEB's consensus judgment was that
after the in-house offer was revised it satisfied all of the "requirements."
Tr. at 60.
13. The Army Audit Agency was not aware until after the appeals were filed
that the PWS had been amended after the in-house offer had been certified
and sealed. Tr. at 666, 676.
14. The six appeals raised a variety of other issues that are not relevant
to the issues raised in BAE's protest.
15. Although the Army asserts that the AAB independently determined that two
additional FTEs would satisfy the PWS requirements, the record establishes
that the AAB did not perform its own analysis of what was required to
perform the PWS requirements, but rather assessed the reasonableness of the
opinions of the various groups presenting information to the board. See,
e.g., Tr. at 337-38, 461-62.
16. The Army performance improvement criteria system was described as being
patterned after the Malcolm Baldrige Criteria for Performance Excellence.
Tr. at 345. This system is described by the Army's web site as providing a
framework for in-depth organizational assessment and measurement of the
continuous improvement efforts that are the hallmark of "Total Army
Quality." It is also said to guide Army managers through seven categories,
which examine all aspects of the Army's organization and determine how well
it is meeting its goals.
See .
17. This "technical estimate" was not documented but consisted of the
board's "estimate of the scope of responsibility of the logistics mission
defined in the PWS." Tr. at 344.
18. The government is permitted to add to the proposed price of the proposal
of the most advantageous commercial offeror the costs that would be incurred
in administering the contract. RSH, part II, ch. 3, para. C.1.
19. It is not clear why the RSH bases the number of contract administrators
necessary to administer the private-sector contract upon the size of the
staffing of the MEO, rather than the proposed staffing level of the
private-sector offer.
20. The government is also permitted to add to the proposed price of the
proposal of the most advantageous commercial offeror certain "one-time
conversion" costs that would be incurred "as a result of the conversion"
from in-house to contractor performance. One-time conversion costs may
include such things as relocation and retraining costs. RSH, part II, ch. 3,
para.para. E.1, E.3.
21. After performing this new cost comparison, the agency determined that
BAE's revised cost proposal had not addressed the hazardous pay differential
and requested that BAE address this in a response to be submitted by January
26, 2001. Agency Report, Tab 30, Letter from Contracting Officer to BAE
(Jan. 19, 2001), at 14,779. BAE responded with a revised cost proposal that
changed more than that part dealing with the hazardous pay differential; the
Army rejected that proposal and requested that BAE submit changes for the
hazardous pay differential only. The Army is currently reviewing that
submission, but the agency apparently believes this would not affect the
results of the revised cost comparison. Tr. at 603-04.
22. We do not decide whether Transmittal Memorandum No. 22, if applicable,
would have required or permitted BAE to appeal.
23. RSH, part I, ch. 3, para. H.3.d, provides:
With the selection of the competitive offer, the contracting officer submits
to the [SSA] the Government's in-house Management Plan, which must comply
with the technical proposal requirements of the solicitation. The [SSA]
evaluates the in-house offer and assesses whether or not the same level of
performance and performance quality will be achieved. The [SSA] should not
review or have access to the in-house cost estimate. [Emphasis added.]
24. Transmittal Memorandum No. 22 rescinded this paragraph of the RSH. 65
Fed. Reg. 54,568 (2000).
25. Although the SSA and SSEB Chair recognized that the in-house offer did
not fully satisfy minimum PWS requirements, they insisted that they only
compared (and could only compare) the in-house offer to the level of quality
and performance of BAE's proposal. Tr. at 39, 122, 161, 320-22.
26. The Army also argues that this protest allegation (which was first
raised in BAE's supplemental protest) is untimely because the original and
revised TPP were available during the public review period after the
tentative selection of BAE's offer and these documents do not contain
resumes for key personnel. We find the protest allegation timely. Although
the Army characterizes BAE's protest as merely asserting that the TPP did
not contain key personnel resumes, BAE's actual complaint is that the
belatedly provided resumes do not satisfy the minimum experience
requirements. BAE did not discover the basis of this complaint until it
received the agency's report on its initial protest; BAE timely raised this
new complaint within 10 days of receiving the agency's report. 4 C.F.R. sect.
21.2(a)(2) (2001).
27. BAE also argues in its Supplemental Protest (at 13-16) that the TPP did
not comply with the PWS requirement to address, at a minimum, in its
management operations plan "the Contractor's project office autonomy, i.e.,
show how the Contractor plans to provide on-site decision authority and
independence from the Contractor's corporate headquarters commensurate with
project office responsibility," see PWS sect. C.1.7.1.1, and that the in-house
offer should therefore have been rejected. BAE does not show that the
revised TPP failed to demonstrate on-site decision authority and
independence commensurate with project office autonomy. From our review of
the revised TPP, we also find no basis to question the in-house offer's
compliance with this requirement and deny this aspect of the protest.
28. The AAB used an allocation formula for services that indicated that 73
percent of the services would be performed at Schofield Barracks and 27
percent at Fort Shafter. The AAB applied this formula to the in-house
offer's original staffing for Schofield Barracks, and concluded that
approximately two FTEs of additional staffing would be required to perform
the personal property services at Fort Shafter. Tr. at 201-02. This
allocation formula fails to account for the fact that the staffing at
Schofield Barracks was not based upon satisfying the PWS requirements
regarding walk-in customers.
29. The DOL Study Team Leader also testified that the walk-in customer
requirement could be satisfied by making an appointment for that person to
return later. Tr. at 763-64.
30. We also find of little probative value the one board member's anecdotal
observation that his family had been happy with services rendered by one of
the personal property shipment offices when that function was being staffed
with as few as seven FTEs, as this does not address the PWS requirements,
and there is no evidence in the record that the PWS requirements, such as
servicing walk-in customers within 30 minutes, were historically provided by
the personal property shipment offices.
31. At the time the Army Audit Agency reviewed the original in-house offer
for compliance with the PWS requirements, prior to the in-house offer being
sealed, it did not focus its attention on the personal property services
area because this was not a "high risk area." Tr. at 672.
32. The DOL Director holds what the Army refers to as a "government in
nature" position within the function under study here.
33. The Army also argues that this protest argument is untimely because BAE
was informed in a written debriefing letter, dated December 20, 2000, after
BAE was selected as the tentative winner of the competition and before the
AAB had decided the appeals, that its offer of this "strength" did not
contribute to a rating higher than acceptable, and BAE did not protest
within 10 days of that date. Agency Legal Memorandum at 4. BAE timely
protested this issue, however, when there was adverse agency action, that
is, when BAE learned that performance of the work would stay in-house.
34. The SSEB Chair also testified that BAE's offer was not a real strength
because it only offered to do group counseling within 15 minutes. Tr.
at 167. This is a misreading of BAE's proposal, which, as indicated above,
proposed group counseling as a means of freeing its staff to service walk-in
customers.
35. Testimony elicited at the hearing, as well as the in-house offer's
response to the revised PWS requirements, indicates that the Army may well
not need to staff a personal property shipment office at Fort Shafter nor
require that walk-in customers to the personal property shipment offices be
seen within 30 minutes. Given our recommendation to revise the PWS and
obtain revised offers from BAE and the in-house team, the Army should
consider whether these, in fact, represent its actual needs. There is also a
suggestion that the AAB may have reviewed data more current than was
available in the PWS. In this regard, the AAB noted in a number of its
decisions on the appeals that Army Pamphlet 5-20 para. 4-12d provides that
"[c]ommanders will ensure that the solicitation and MEO are based on the
most current workload data." See, e.g., Agency Report, Tab 27B, Appeal No. 1
Decision, at 14,085. To the extent that there is more current workload data
available, it would be appropriate to make this data available to BAE and
the preparers of the in-house offer.
36. This would appear to be particularly advisable given that the "embedded
management processes" for quality control, upon which the AAB relied, would
have the effect of reducing the amount of staff necessary to perform this
function and that these processes would also be available to a contractor in
its performance of the contract. Tr. at 382-83, 433.
37. "It is DoD policy that relocation costs (for civilians) are included in
the 4% severance factor since current Department-wide statistics indicate
that relocation costs paid to civilians are minimal and do not support
additive costs in a cost comparison." DOD A-76 Costing Manual, Interim
Guidance para. C10.2.3.