TITLE:  TyeCom, Inc., B-287321.3; B-287321.4, April 29, 2002
BNUMBER:  B-287321.3; B-287321.4
DATE:  April 29, 2002
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TyeCom, Inc., B-287321.3; B-287321.4, April 29, 2002

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:   TyeCom, Inc.
    
File:            B-287321.3; B-287321.4
    
Date:              April 29, 2002
    
Howard Stanislawski, Esq., and Richard L. Larach, Esq., Sidley Austin
Brown & Wood, for the protester.
Moses Harvin, for American Services Technology, Inc., an intervenor.
Joseph A. Lenhard, Esq., and Timothy Fischer, Esq., Department of Energy,
for the agency.
Paul I. Lieberman, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protest against proposal reevaluation is denied where the reevaluation was
performed by the agency in response to, and consistent with, corrective
action suggested during alternate dispute resolution conducted in
conjunction with a predecessor protest of the same procurement to the
General Accounting Office, and the protester has not provided any
persuasive evidence that the reevaluation was improper or unreasonable.
DECISION
    
TyeCom, Inc. protests the award of a contract to American Services
Technology, Inc. (ASTI), under request for proposals (RFP) No.
DE-RP09-00SR22183, issued by the Department of Energy (DOE) as an 8(a)
small disadvantaged business (SDB) set‑aside for administrative
facility support services at DOE's Savannah River Operations Office. 
TyeCom contends that the agency's most recent technical and cost
evaluation is *fatally flawed.*  Protest at 1. 
    
We deny the protest.
    
BACKGROUND
    
This procurement has had a protracted history, commencing with DOE's
issuance of the solicitation on March 18, 2000.  On February 15, 2001, the
agency initially selected [deleted] proposal for award from amongst a
final competitive range consisting of three proposals, the others of which
were the TyeCom and ASTI proposals.  TyeCom protested the award
determination to our Office on February 26, whereupon the agency
determined to reopen discussions and, on March 6, TyeCom withdrew this
protest.[1]   After conducting additional discussions and providing the
offerors an opportunity to submit final proposal revisions (FPR), the DOE
source evaluation panel (SEP) evaluated TyeCom's proposal as *acceptable*
with a proposed cost-plus-fee of $8,003,798.  ASTI's proposal was
evaluated as *exceptional* with a proposed cost-plus-fee of $8,921,239. 
Agency Report, B-287321.2, Aug. 10, 2001 (AR.2), Tab 4, Source Selection
Decision, at 1-2.  The two offerors had proposed virtually the identical
existing workforce, with the exception of three managers.  The SSO
reasoned that since TyeCom's proposal had been evaluated as *acceptable*
by the SEP, *from a technical standpoint, TyeCom should be successful in
performance,* and also believed that *[since] TyeCom has accepted indirect
rate ceiling rates, which protect the Government against increased
indirect costs (an eventuality I consider likely), cost risk is reduced to
an acceptable level.*  Id. at 2.  In these circumstances, the SSO decided
that *[i]n terms of the evaluation criteria of the RFP, Tyecom would be in
line to receive the award.*  Id. 
    
However, the SSO questioned TyeCom's responsibility based on other
available information, including that TyeCom had done very little business
during the [deleted] years that it had been in the 8(a) program, had been,
[deleted], essentially dormant for the past [deleted], had no [deleted]
for the year [deleted], and had [deleted] current business and only
[deleted] employee, [deleted].  Id. at 2-3.  As a result, the SSO
requested the Small Business Administration (SBA) to review TyeCom's
responsibility under SBA's certificate of competency (COC) procedures. 
SBA issued a COC for TyeCom on July 2, 2001, after which DOE determined to
make award to TyeCom.  In particular, the SSO determined that TyeCom's
lower technically rated, lower cost proposal was in line for award on the
basis that: *the overall advantage the 'Exceptional' rated proposal of
ASTI represents over the 'Acceptable' rated proposal of Tyecom is one of
degree. . . . [T]he incremental increase in overall performance potential
represented by the ASTI offer does not warrant the increased cost of
$917,441.*  AR.2, Tab 8, Source Selection Decision Addendum, July 17,
2001, at 4.  On July 27, after receiving a debriefing, ASTI protested this
award determination to our Office. 
    
    
    
    
Alternative Dispute Resolution Disposition of ASTI's Protest
    
As a result of ASTI's protest, our Office conducted an *outcome
prediction* alternative dispute resolution (ADR) conference with the
parties.[2]  During this conference, the GAO attorney handling the protest
explained to the parties that ASTI's protest was likely to be sustained
because the agency had awarded to TyeCom, which had submitted a
substantially lower-rated technical proposal, on the basis of TyeCom's low
proposed cost under a cost-reimbursement contract, without performing any
meaningful cost realism analysis on TyeCom's proposed costs, which the
record established were subject to serious question.  As a result of the
ADR conference, the agency determined to take corrective action in the
form of conducting probable cost analysis of all proposals and making a
new award determination based on consideration of the resulting cost and
technical evaluations, along with a documented cost/technical tradeoff, if
appropriate.  Thereupon, on September 4, our Office dismissed ASTI's
protest as academic.
    
ADR Rationale
    
During the ADR conference, the GAO attorney pointed out that the
solicitation provided that technical was more important than cost, which
was being proposed on a cost-reimbursement-plus-fee basis.  The
solicitation further provided that the agency would evaluate offerors'
cost data to assess the accuracy and reasonableness of the proposed cost
and the probable cost to the government.  RFP S: M.3(2).  ASTI's proposal
had received an overall technical rating of *exceptional* while TyeCom's
overall technical rating was *acceptable*; TyeCom's proposed cost
(including fee) was $8,003,798, while ASTI's proposed cost was
$8,921,239.  The offerors were proposing substantially the same labor
force, and the most significant cause for the cost difference was that
TyeCom had applied a flat 2.5 percent per year direct wage escalation rate
over the life of the contract, including options, while ASTI had applied a
significantly higher wage escalation rate which substantially reflected
the rates contained in an independent survey conducted by Data Resource
Inc. (DRI) of labor escalation rates for the industry.  The Defense
Contract Audit Agency (DCAA), which reviewed the proposed costs for DOE,
had used DRI data as a measure of likely direct labor cost escalation, and
during discussions DOE had asked TyeCom about its flat, low proposed
direct labor escalation rate, requesting supporting documentation.  Agency
Report, B-287321.3, B-287321.4, Mar. 8, 2002 (AR.3), Tab 12, TyeCom
Discussion Questions, encl. 1, at 1.   In response, TyeCom acknowledged
that its proposed escalation rate was below the DRI estimates used by
DCAA; noted that it had used a *conservative* 2.5 escalation rate *in the
interest of being price competitive*; stated that it desired to *retain
the current work force in place,* and had *proposed to pay current
prevailing wages, an excellent fringe benefits package and will offer
competitive annual adjustments*; and indicated its willingness to discuss
a higher rate during contract negotiations.  AR.3, Tab 14, TyeCom
Discussion Response, Aug. 28, 2000, at 5-6. 
    
The agency eventually accepted TyeCom's flat 2.5 percent escalation rate,
without making a probable cost adjustment, despite the fact that nothing
in the record provided any basis to conclude that TyeCom would be able to
achieve this low wage escalation rate, beyond the fact that its initial
wages exceeded the Service Contract Act wage determination rates for the
local area.  During the ADR conference, TyeCom was provided an opportunity
to point to anything in the record which supported the artificially low
escalation rate.  TyeCom's only response was that the proposals should be
individually evaluated and that TyeCom's low escalation rate was supported
by the fact that its initial wage rates exceeded the wage determination
rates.  However, this was also true, and, indeed, to a greater extent for
ASTI, which proposed the identical workforce at initial wage rates which
exceeded the wage determination rates, in some cases by more than TyeCom;
thus, TyeCom's initial rates did not provide a reasonable basis to
distinguish between the respective proposed direct wage escalation rates. 
    
Nonetheless, DOE had not made any adjustments to TyeCom's proposed cost,
noting only that *[i]n as much as TyeCom has accepted indirect rate
ceiling rates, which protect the Government against increased indirect
costs (an eventuality I consider likely), cost risk is reduced to an
acceptable level.*  AR.2, Tab 4, Source Selection Decision, at 2. 
However, the indirect rate ceilings are completely unrelated to the direct
wage rates and thus cannot reduce the government's risk with respect to
the direct wage escalation rate.  In addition, the indirect rate ceiling
rates that TyeCom had proposed to accept were below the indirect ceiling
rates it had actually proposed in its cost proposal.  That is, TyeCom
could escalate its indirect rates by amounts that would result in a cost
increase that DOE conceded was in excess of $200,000 before the ceilings
were reached.  Accordingly, the ceilings provided limited protection even
with respect to the indirect rates. 
    
The GAO attorney noted during the ADR session that DOE had improperly
accepted TyeCom's apparently unrealistic proposed cost, without performing
an adequate cost realism analysis, and without making the required
probable cost adjustment.  Accordingly, the GAO attorney suggested that,
since TyeCom's low cost had been determinative, and the record showed that
there was no basis to conclude that this cost was realistic, the agency
reevaluate proposed cost and make a new award determination taking into
consideration this reevaluation.
    
Reevaluation and New Award Determination
    
DOE subsequently decided to take this corrective action, and in so
notifying TyeCom, DOE advised that *[w]ith respect to labor escalation
rates, DOE intends to apply the appropriate Data Resource, Inc. (DRI)
labor escalation rates as the realistic measure of labor escalation to
each of the offerors' cost proposals.*  Protester's Comments, Mar. 18,
2002, attach. 1, SSO Letter to TyeCom, Aug. 30, 2001.  TyeCom, after
having fully participated in the ADR conference, and having received this
specific explanation of the specific method of cost reevaluation that the
agency would be implementing, did not protest either the agency's decision
to conduct the reevaluation, or the specified methodology for conducting
the reevaluation.
    
As a result of the agency's revised cost evaluation, in large measure
because of the imposition of DRI wage escalation rates to both proposals,
TyeCom's final evaluated cost-plus-negotiated-fee was increased to
$8,889,202, and ASTI's evaluated cost was increased to $9,154,834. 
TyeCom's *acceptable* technical proposal evaluation remained unchanged, as
did ASTI's *exceptional* evaluation.  Based on the results of this
reevaluation, the agency determined that the relatively small, $265,632,
total cost advantage (less than 3 percent of the cost total) associated
with TyeCom's proposal was outweighed by ASTI's substantial technical
superiority under the most important technical areas.  In particular, the
SSO noted that there was a major technical difference in the strengths
between the offerors under the three most heavily weighted technical
criteria and subcriteria, under each of which ASTI's proposal was
substantially higher rated.  AR.3, Tab 33, Source Selection Decision,
at 6-7.  Accordingly, DOE awarded ASTI the contract on January 10, 2002. 
After receiving a debriefing from the agency, TyeCom filed this protest
with our Office on January 18, 2002, and later filed a supplemental
protest after receiving documents from the agency.   
    
While TyeCom styles its protest as an objection to a wide array of
technical and cost evaluation, the real core of the protest is TyeCom's
objection to the agency's implementation of the corrective action
suggested during the ADR conducted in conjunction with the predecessor
ASTI protest.  In our view, TyeCom has not provided any persuasive
evidence that the reevaluation and award are unreasonable or improper, and
the protest is entirely without merit.
    
PROBABLE COST EVALUATION
    
During ADR, the GAO attorney advised the agency that it appeared to have
failed to perform an appropriate and required cost evaluation, and
suggested that in the circumstances presented here, a normative
application of the DRI wage escalation percentages would be a reasonable
step, at least as a starting point.  Because a GAO attorney will inform
the parties through outcome prediction ADR that a protest is likely to be
sustained only if he or she has a high degree of confidence regarding the
outcome, the willingness to do so is a sufficiently clear indication that
the protest is meritorious such that, absent persuasive evidence to the
contrary, such a prediction satisfies the requirement that we conclude
that a protest was *clearly meritorious* for purposes of recommending
reimbursement of protest costs.  National Opinion Research Center--Costs,
B‑289044.3, Mar. 6, 2002, 2002 CPD P: 55, at 3.  Similarly, an
agency may reasonably rely on such a prediction in implementing corrective
action.
    
Here, DOE implemented corrective action that was precisely consistent with
GAO's ADR analysis, including the specific nature of the suggested
corrective action, after notifying TyeCom of its specific proposed
evaluation methodology.  The cost realism analysis and the resulting
upward adjustments applied by DOE were reasonable and consistent with both
applicable regulatory guidance under Federal Acquisition Regulation (FAR)
S: 15.404‑1(d)(2), and with the GAO attorney's suggestion during
ADR.  TyeCom's protest does not provide any basis to question the agency's
action since TyeCom has merely recapitulated essentially the same argument
it presented during ADR, and has not provided any persuasive evidence that
the reevaluation was unreasonable.   Similarly, the new cost/technical
tradeoff determination resulting in selection of ASTI's proposal is
reasonably based on the corrected cost evaluations, and TyeCom has not
provided any meaningful basis to question the propriety of the
determination.
    
TECHNICAL EVALUATION
    
TyeCom has also raised a broad array of objections regarding various
aspects of the agency's evaluation of its own and of ASTI's technical
proposals, which is unchanged from the initial evaluation, all of which we
have considered and find without merit.  We will limit our discussion in
this decision to a representative example of these arguments.
    
Experience of TyeCom's President
    
In evaluating TyeCom's proposal as neutral for past performance, and
*acceptable* overall under the most important technical criterion of
Experience of Organization--Past Performance, the agency concluded that
TyeCom did not have demonstrated past performance related to the statement
of work.  TyeCom asserts that it was entitled to an exceptional rating
under this evaluation factor based on the past performance of its company
president, and that DOE improperly failed to credit this experience. 
TyeCom cites FAR 15.305(a)(2)(iii) as requiring that *the evaluation take
into account past performance information regarding predecessor companies,
key personnel who have relevant experience, or subcontractors that will
perform major or critical aspects of the requirement when such information
is relevant to the instant acquisition.*  Protest at 6.  While, in fact,
the FAR language cited by the protester is precatory rather than
mandatory, the simple and undisputed answer is that for purposes of
evaluation as key persons under section L-14 of the RFP, the solicitation
designated only the program manager and assistant program manager.  AR.3
at 6.  TyeCom's company president was not proposed to fill either position
and therefore does not fall within the purview of the key person
requirement. 
    
The agency also correctly points out that while, in appropriate
circumstances, an agency properly may consider the experience of
supervisory personnel in evaluating the experience of a new business,
there is no legal requirement for an agency to attribute employee
experience to the contractor as an entity.  Hard Bodies, Inc.,
B‑279543, June 23, 1998, 98‑1 CPD P: 172 at 4.  Accordingly,
the agency was under no obligation to credit TyeCom as a corporate entity
with the individual experience or past performance of the company's
president; TyeCom's protest allegation is misplaced as to both fact and
law. 
    
COST EVALUATION VERSUS COC
    
Finally, TyeCom asserts that because the agency's cost reevaluation
included an adjustment of TyeCom's proposed indirect rates, it constituted
a *de facto nonresponsibility determination,* thus, the agency *usurp[ed]
SBA's legal authority to make responsibility determinations for small
businesses.*  Protest at 10.  This argument patently misconstrues the
nature and effect of both the COC determination and the probable cost
evaluation.  Under FAR 15.305(a)(1), when contracting on a
cost-reimbursement basis, an agency is required to perform a cost realism
analysis to determine what the government should realistically expect to
pay for the proposed effort when contracting.  SBA's issuance of a COC
constitutes an affirmative determination of responsibility with respect to
responsibility elements such as capability, competency, credit, integrity,
perseverance, tenacity and limitations on subcontracting.  FAR 19.601.  An
affirmative determination with regard to these kinds of responsibility
considerations is separate from and unrelated to a probable cost
adjustment, as required by the FAR and specifically called for here under
the RFP, in conjunction with performing a cost realism analysis. 
Accordingly, this allegation provides no basis to question the agency's
probable cost adjustment or reevaluation. 
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    
    
    
    
    
    

   ------------------------

   [1] Performance under each of the contract award decisions from February
15, 2001, until the present has been stayed by DOE because of the
protests.  As a result, performance of the work at issue has continued by
the incumbent, Madison Research Group (MRG), a non-SDB, with Systems
Support Alternatives, Inc. (SSA), another non-SDB, performing as MRG's
subcontractor for certain of the operations.  In the current SDB set-aside
competition, TyeCom has proposed SSA as its subcontractor, and ASTI has
proposed MRG as its subcontractor.
[2] In outcome prediction ADR, the GAO attorney handling a protest
convenes the parties, at their request or at GAO's initiative, and informs
the parties what the GAO attorney believes the likely outcome will be, and
the reasons for that belief, including the form of corrective action that
our Office would likely recommend where the protest is likely to be
sustained.  A GAO attorney will engage in this form of ADR only if she or
he has a high degree of confidence regarding the outcome.  Where the party
predicted to lose the protest takes action obviating the need for a
written decision (either the agency taking corrective action or the
protester withdrawing the protest), our Office closes the case.