TITLE:  Summit Research Corporation, B-287523; B-287523.3, July 12, 2001
BNUMBER:  B-287523; B-287523.3
DATE:  July 12, 2001
**********************************************************************
Summit Research Corporation, B-287523; B-287523.3, July 12, 2001

Decision

Matter of: Summit Research Corporation

File: B-287523; B-287523.3

Date: July 12, 2001

Patricia H. Wittie, Esq., Kurt D. Ferstl, Esq., and David T. Hickey, Esq.,
Reed Smith, for the protester.

James H. Roberts, III, Esq., Manatt, Phelps & Phillips, for AverStar, Inc.,
an intervenor.

Robert C. Peterson, Esq., Space and Naval Warfare Systems Center, Department
of the Navy, for the agency.

Ralph O. White, Esq., Office of the General Counsel, GAO, participated in
the preparation of the decision.

DIGEST

1. Protest challenging an agency's conclusion that an evaluation of small
business participation should reflect only the offeror's reliance on small
business subcontractors--and not also whether the offeror is itself a small
business--is sustained where the record shows that the evaluation clause at
issue, on its face, advised that the agency would assess small business
participation, not small business subcontracting, and where the solicitation
and the agency's own evaluation forms, request information about, and
reflect consideration of, the aggregate use of small business in performance
of the total contract.

2. Protest alleging that agency evaluators unreasonably ignored information
received from the Defense Contract Audit Agency (DCAA) advising that one of
an offeror's proposed key personnel was no longer employed by the company is
sustained where the record shows that the DCAA advised the agency of the
employee's departure more than a month before contract award, and the agency
took no steps to change its evaluation or consider the impact of the
employee's departure, despite acting on several other recommendations
provided in the same communication.

DECISION

Summit Research Corporation protests the award of a contract to AverStar,
Inc. by the Space and Naval Warfare Systems Center, Department of the Navy
pursuant to request for proposals (RFP) No. N65236-00-R00523, issued to
procure training for mid- and senior-level operators of sensor-based
intelligence gathering equipment used in support of patrol and
reconnaissance forces (and other operational Naval commands) of the Atlantic
and Pacific fleets. Summit argues that the Navy unreasonably selected
AverStar for award due to errors in the agency's technical evaluation and
cost realism review.

We sustain the protest.

BACKGROUND

The Space and Naval Warfare Systems Center in Charleston, South Carolina, is
responsible for providing systems training and sensor data library support
for users throughout the Navy fleet. This training is termed All-Sensor
Advanced Analysis Training, while the support functions are termed All
Sensor related technical services; both are provided as part of readiness
training and support for Navy Command Control Communications Computer and
Intelligence (C4I) personnel to ensure a high level of proficiency in sensor
analysis skills. RFP at 9. Summit, a small business, is the incumbent
contractor providing these training services since the inception of this
readiness training program in 1984. Protest at 4.

The RFP was issued on June 13, 2000, and anticipated award of a
cost-plus-fixed-fee, indefinite-delivery/indefinite-quantity (ID/IQ) task
order type contract, for a base year, followed by four 1-year options, "to
the acceptable offeror whose total offer on all items is the most
advantageous to the Government considering price and other factors." RFP at
7, 30, 88. To determine the most advantageous proposal, the RFP identified
four evaluation factors, which it termed "other factors," presumably in
contrast to the cost factor. These other factors were: (1) experience, (2)
past performance, (3) personnel qualifications, and (4) small business,
small disadvantaged business, HUBZone small business, and women-owned small
business participation (hereinafter "small business participation"). Id. at
89-90, RFP amend. 0003 at 2. The RFP advised offerors that the evaluation
factors of experience, past performance, and personnel qualifications were
equal in importance, and each was significantly more important than the
small business participation factor; it also advised that the evaluation
factors above would be significantly more important than cost, but that cost
would be an important factor in this evaluation scheme. RFP at 88-89. While
the role of cost was downplayed, potential offerors were also warned that
the agency reserved the right to award to a lower cost offeror, if the
offers were considered essentially equal in terms of technical capability.
RFP at 89.

Since experience and past performance are not at issue in this protest, we
need not set forth further detail regarding the solicitation's requirements
in these areas; under the personnel qualifications evaluation factor,
however, there are several RFP requirements relevant to this decision. To
permit review of an offeror's personnel qualifications, each proposal was
required to identify candidates for each of 11 key personnel positions
spread across 4 key labor categories. For each candidate for a key position,
proposals were to include a resume, a letter of commitment, and an
indication of the percentage of time the identified candidate will be
dedicated to performance of this contract. RFP at 82-84. In addition, the
RFP stated:

Offerors are reminded the Letters of Commitment must be current, and
offerors are responsible for conforming their offer to reflect changes in
the status of any contingency hire or current employee, which makes their
prior commitment suspect, i.e., death, illness, relocation, or acceptance of
other employment.

RFP at 83. While the RFP permitted submission of a resume for more than one
position, it advised that an individual resume would count for the required
number of resumes in only one category. Further, offerors were cautioned
that

[i]f more than the required number of resumes are submitted for a particular
category, the offeror shall specify which of them shall be evaluated. No
credit will be given for additional resumes over the required amount.

Id.

Under the small business participation evaluation factor, the RFP advised
that proposals would be evaluated on the extent of participation of small
businesses in performing the contract. Id. at 84. To facilitate this
assessment, the RFP required all offerors (both large and small businesses)
to provide information concerning their intended subcontracting, teaming, or
joint venture arrangements. This information was collected on a data form
appended to the solicitation. RFP, attach. 4 at 6. Among other things, the
data form specifically required an offeror to identify the percentage of the
total acquisition value that would be performed by small business. Id.
(question 5).

With respect to cost, the RFP advised that cost proposals would be subjected
to a cost realism review that could result in adjustments, for purposes of
evaluation, to the proposed costs. RFP at 91.

After receiving three proposals in response to the RFP by the July 20
closing date, including proposals from Summit and AverStar, the agency
convened a technical evaluation board (TEB) to review proposals under the
first three evaluation factors (experience, past performance, and personnel
qualifications). Evaluation of the fourth factor, small business
participation, was assigned to the contract negotiator. The source selection
plan, not provided to offerors, set the value of the first three evaluation
factors at 50 points each, and the small business participation evaluation
factor at 5 points, for a total available point score of 155 points.
Evaluation of cost proposals was assigned to a contract award review panel
(CARP), which was also responsible for reviewing and integrating the TEB
report with the contract negotiator's evaluation of small business
participation and the cost realism review, and for making an award
recommendation to the source selection authority (SSA). Agency Report (AR)
at 3-4. Cost proposals were not scored.

The final TEB report was provided to the CARP on March 7, 2001, although it
reflects a date of August 1, 2000. AR at 4. The final evaluation report and
decision document is the Business Clearance Memorandum (BCM), approved on
March 17. The ultimate scores assigned to the three initial proposals (the
agency did not hold discussions) under each of the four evaluation factors
is set forth below, together with evaluated costs:

                    Summit              AverStar           Offeror A

 Experience         [deleted]           [deleted]          [deleted]

 (50 possible
 pts.)

 Past Performance   [deleted]           [deleted]          [deleted]

 (50 possible
 pts.)

 Key Personnel      [deleted]           [deleted]          [deleted]

 (50 possible
 pts.)

 Small Business     [deleted]           [deleted]          [deleted]
 Participation

 (5 possible pts.)

 TOTAL SCORE        137.19              136.67             115.65

 TOTAL EVALUATED    $9,171,877          $9,166,015         [deleted]
 COST

BCM at 13, 15, 17-18.

After first concluding that award to Offeror A could not be justified
(despite the lower evaluated cost of its proposal) because of certain risks
and weaknesses associated with its proposal, the SSA turned to selecting
either Summit or AverStar for award. BCM at 21. With respect to Summit, the
SSA first noted that Summit's total score was only one-half point higher
than AverStar's, and that the higher score was due to Summit's [deleted].
She also noted that Summit's evaluated price was slightly higher than
AverStar's (by approximately $5,800) because of a cost realism adjustment
associated with Summit's proposed [deleted]. Further, she explained that the
reason for this adjustment--i.e., [deleted]--created a higher performance
risk for Summit (than presumably exists for AverStar). Id.

With respect to AverStar, the SSA again first discounted AverStar's
half-point lower technical rating due to the small business participation
factor, then noted that AverStar "offers significant strengths and no
deficiencies in the technical evaluation." Id. In addition, the SSA stated
that AverStar's proposal provides "a high level of confidence for successful
contract execution with a very low risk factor." Id. Further, the SSA noted
that "AverStar's evaluated price incorporates the labor rates they are
currently experiencing as of February 2001," and that this reduces the risk
of major cost growth in the offer. Id. at 22.

With respect to her tradeoff decision, the SSA concluded:

Based on the details shown in the business proposal and [the] other factors
proposal evaluations and the trade-off analysis above, the TEB and CARP have
recommended AverStar, Inc. for award. The highest technical rating in the
most significant other factors received by AverStar and the lowest evaluated
cost realism price represents the Best Value for the Government.

Id. This protest followed.

DISCUSSION

Summit argues that the Navy's technical evaluation was flawed in two areas,
and raises several challenges to the agency's cost realism review. Turning
first to the technical evaluation, Summit contends that the Navy's
assessment of its proposal under the small business participation evaluation
factor unreasonably excluded its own participation as a small business
offeror, and instead assessed only Summit's use of small business
subcontractors. In addition, Summit argues that the Navy's assessment of
AverStar's proposal under the key personnel factor improperly includes an
individual whose employment with AverStar ended approximately 1 month after
proposals were submitted, and seven months before the contract was awarded.

Our standard in reviewing challenges to an agency's evaluation of technical
proposals is to examine the record to determine whether the agency's
judgments were reasonable and consistent with stated evaluation criteria and
applicable statutes and regulations. ESCO, Inc., B-225565, Apr. 29, 1987,
87-1 CPD para. 450 at 7. Here, based on a review of the solicitation, the
proposals, the evaluation materials, Summit's arguments, and the Navy's
specific responses to these arguments, we conclude that Summit is right on
both counts. We reach these conclusions for the reasons set forth below.

Small Business Participation

With respect to the small business participation evaluation factor, the Navy
argues that Summit should not receive credit for its status as a small
business, and that awarding credit for such status is inconsistent with the
face of the solicitation, and with instructions provided on the form used to
gather information for the evaluation of this factor. According to the Navy,
if an offeror could receive a perfect score under this evaluation factor for
simply being a small business, the solicitation would have sought no
information beyond a company's status from small business offerors.

The RFP here, as mentioned above, advises that "[o]ffers will be evaluated
on the extent of participation of [small business] in performance of this
contract," and requires that all offerors (large and small) provide
information concerning their subcontracting, teaming, or joint venture
arrangements. RFP at 84. In addition, the small business participation
evaluation factor identifies five subfactors, including the extent to which
small businesses have been identified for use in contract performance; the
extent of the offeror's commitment to those businesses, including
enforceability of that commitment; identification of the percentage of
aggregate small business participation in the total value of the contract;
and the realism of the proposed approach for using small businesses. Id. Of
relevance here, the source selection plan anticipated awarding [deleted]
points under the subfactor used to assess the percentage of aggregate small
business participation in the total value of the contract. Source Selection
Plan, Attach. 4, Form 3B. Specifically, the plan anticipates a score of
[deleted]. Id.

In response to this requirement, Summit's proposal identified itself as a
small business, identified a small business subcontractor responsible for
[deleted] percent of the value of the contract, and explained that the
resulting arrangement would result in 100 percent performance by small
business. Summit Proposal, Vol. 1, Tab D at 1-3. In evaluating this
approach, the Navy disregarded Summit's participation, considered only the
participation of Summit's subcontractor, concluded that this approach would
result in less than [deleted] percent small business participation, and
awarded Summit a score of [deleted] under this subfactor. For the record,
AverStar also received a score of [deleted] under this subfactor. [1]
Otherwise, Summit received [deleted]. See BCM at 18. Thus, as shown above,
Summit received a score of [deleted] for small business participation, and
AverStar a score of [deleted].

Our view of the small business participation evaluation factor is that the
provision, on its face, advises that proposals will be evaluated on the
extent of participation of small business in performance of the contract. We
also disagree with the Navy's argument that instructions printed on a form
appended to the RFP for collecting data from offerors about small business
participation should have put the protester on notice that the Navy was
evaluating only participation by small business subcontractors. The
instructions at issue state:

Note: This information applies to large and small business proposals to
subcontract, team, or joint venture with other small businesses, small
disadvantaged businesses, and women-owned small businesses.

RFP, attach. 4 at 6. These instructions convey only that small businesses,
as well as large, must provide the requested information about their
reliance on other small business subcontractors, and hence must identify (in
response to question 5 on the form) the extent to which small business, in
the aggregate, participates in the total contract.

As a final matter, we disagree with the Navy's assertion that the
protester's interpretation of this evaluation factor results in small
business offerors receiving a perfect score by virtue of their status alone.
In this regard, the Navy's argument is inconsistent with its own
scoresheets. Specifically, the data form appended to the RFP required all
offerors (including small business offerors) to identify the aggregate small
business participation in the total value of the contract. Id. at question
5. In the event a small business offeror intended to subcontract 75 percent
of the value of the contract to large businesses, it would be required to
disclose on the form that only 25 percent of the total contract would be
performed by small business. [2] In this circumstance, the Navy's scoresheet
for rating this factor provides for a score of [deleted]. Source Selection
Plan, Attach. 4, Form 3B. Thus, under the Navy's evaluation scheme, small
business offerors do not receive a perfect score based solely on their
status as small businesses.

Accordingly, we conclude that the Navy's assessment of Summit under the
small business participation evaluation factor was unreasonable, and that
Summit's score should be raised from [deleted] points to [deleted] points to
reflect the proposal's 100 percent small business participation in the total
value of the contract, consistent with the agency's evaluation scheme and
materials.

Key Personnel

With respect to the evaluation of key personnel, Summit argues that the Navy
improperly gave credit to AverStar for a key employee whose employment ended
approximately 1 month after proposals were submitted, and seven months
before the contract was awarded. Summit contends that AverStar was required
by the RFP to advise the Navy of this employee's departure and failed to do
so, despite extending the time for acceptance of its offer on three
different occasions after the departure of the employee. In addition, Summit
contends that the Navy received notice of the employee's departure from DCAA
approximately 1 month prior to award.

While the Navy acknowledges that the departure of one of AverStar's key
employees was mentioned in DCAA materials it received analyzing AverStar's
proposed labor rates, it states that the evaluators did not share this
information with the SSA until after award, and it argues that there should
be no effect on the evaluation from this employee's departure and that
details regarding the substitution of key employees are matters of contract
administration. Before addressing these arguments, we set forth below
additional factual material on the RFP, the proposals, and the Navy's
evaluation.

The RFP designated four key labor categories and required offerors to
identify, and provide resumes for, 11 individuals spread across these key
labor categories as follows: program manager, 1 resume; senior
analyst/instructor, 3 resumes; analyst/instructor, 6 resumes; and inverse
synthetic aperture radar analyst/database manager, 1 resume. RFP at 17-18,
84. For each of these 11 positions, the RFP specified the number of labor
hours required for the base period, and for each option period. Id. at 75.
With the exception of the program manager position, the specified labor
hours for each position in each annual period--i.e., 1,976 hours--required
offerors to propose one full-time equivalent employee (FTE) for each
position. Id. The program manager position involved only 988 labor hours for
the base year, and for each option period--indicating, in essence, that the
job of program manager requires half of one FTE. Id.

The RFP also required a showing that the individuals identified were
available and the percentage of their time dedicated to performing this
contract. Id. at 82. To demonstrate availability, the RFP required letters
of commitment from each of the 11 individuals offered as key personnel, and
required that

Letters of Commitment must be current, and offerors are responsible for
conforming their offer to reflect changes in the status of any contingency
hire or current employee, which makes their prior commitment suspect, i.e.,
death, illness, relocation, or acceptance of other employment. CAUTION: If a
letter of commitment is not provided for all key personnel as required, the
applicable resume(s) for which a letter of commitment is not received will
not be evaluated and automatically receive an "unacceptable" rating.

RFP at 83. Finally, of relevance here, the RFP indicated that if more than
the required number of resumes were provided for any labor category, "the
offeror shall specify which of them shall be evaluated," and advised that
offerors would not get credit for additional resumes over the required
amount. Id.

In a proposal approach apparently not anticipated by the Navy (other than
for the half-time program manager position), offerors proposed a mix of
full- and part-time employees for the 11 key personnel positions. For
example, and of relevance here, AverStar proposed [deleted]. AverStar
Proposal, Vol. 1, Tab C at iv. AverStar provided resumes for each of these
[deleted] individuals. Id. at 4-15. In keeping with the RFP's admonition
that no more than 11 resumes would be evaluated (and its requirement that if
more than 11 resumes were provided, the offeror should indicate which
resumes were submitted for evaluation), AverStar's proposal indicated that
[deleted]. Id. at iv. As coincidence would have it, the [deleted] employee
whose resume was not submitted for evaluation is the very individual who
left employment with AverStar one month after the proposal was submitted. We
will refer to this individual as Mr. Jones.

In evaluating AverStar's proposal, the record shows that the Navy assigned
adjectival ratings to all [deleted] of the resumes provided for the
[deleted] position. AR Tab 13b. In scoring the proposal under the key
personnel factor, however, the evaluators assigned a numerical score to only
[deleted] of the resumes. Despite the proposal's indication that Mr. Jones'
resume was not submitted for evaluation, the evaluators scored resumes in
the order they were listed in the proposal, thus including a numerical score
for Mr. Jones in their assessment of the proposal's key personnel. Id. As a
result, the numerical score assigned was based on a review of [deleted].

In its protest, Summit argues that the Navy erred in its technical
assessment of AverStar (and in its cost realism assessment, as discussed in
the next section of this decision), when it based its key personnel
evaluation on an employee the Navy knew was no longer employed by AverStar.
We agree, although, as discussed below, the flaws in this evaluation are not
limited to those identified by Summit.

As a preliminary matter, with respect to Summit's contention that AverStar
compromised the validity of this technical evaluation by not advising the
Navy of the departure of one of its key personnel, we disagree. While we
agree that the RFP here imposed an obligation on offerors to keep the agency
apprised of any information that called into question the commitment of the
proposed key employees, RFP at 83, AverStar's proposal clearly indicated
that Mr. Jones' resume was not submitted for evaluation. Thus, regardless of
its obligation, AverStar had no reason to expect that its omission would
result in a flawed evaluation. Simply put, we cannot fault AverStar for the
Navy's mistake.

Rather, the record here shows that the Navy received detailed rate
information from DCAA, via e-mail, on February 7, 2001--more than five weeks
prior to the March 17 BCM tradeoff decision, and almost two months prior to
the March 30 award date--that indicated that Mr. Jones had ended his
employment at AverStar on August 25, 2000. AR, Tab 22. In addition, the
record shows that other items of information included with this transmission
were incorporated into the Navy's evaluation. Compare AR, Tab 22 (DCAA's
e-mail message) with BCM at 14. The fact that the evaluators had this
information and did not provide it to the SSA, in no way supports the
reasonableness of the source selection decision. We conclude that the agency
acted improperly when it elected to ignore information it received from DCAA
that should have raised questions about the accuracy of the evaluation upon
which the selection decision was eventually based. See AAA Eng'g & Drafting,
Inc., B-250323, Jan. 26, 1993, 93-1 CPD para. 287 at 6. The failure to raise
these questions was unfair to both the agency and other competitors, and
violated the Navy's obligation to reasonably evaluate proposals. Id.

Before ending this analysis, and turning to the cost realism issues raised
by the protester, we recognize that in many protests, the addition of a
point or two, or a fraction of a point, to the score of one offeror or
another, is not itself sufficient to support a decision to overturn an
agency procurement. See Textron Marine Sys., B-243693, Aug. 19, 1991, 91-2
CPD para. 162 at 13 n.8. Our Office will not sustain a protest unless the
protester demonstrates a reasonable possibility of prejudice, that is,
unless the protester demonstrates that, but for the agency's actions, it
would have had a substantial chance of receiving the award.
McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996).

Here, this competition was decided with a 0.52 point spread (in Summit's
favor), out of 155 available points, and a $5,862 cost difference (in
AverStar's favor), between two proposals with evaluated costs in excess of
$9 million. Under the small business participation evaluation factor alone,
our review indicates that Summit's proposal should receive the [deleted]
additional available points in that category. While we cannot pinpoint with
similar precision the impact of the Navy's decision to ignore the departure
of AverStar's Mr. Jones, our review of the evaluation scoresheets leaves no
doubt that AverStar's score under key personnel would have been lowered by
removing Mr. Jone's resume and replacing it with the resume of the [deleted]
proposed by AverStar. [3] Under these circumstances alone, we conclude that
Summit has shown a reasonable possibility that it was prejudiced by these
errors.

There is, however, another matter highlighted by our review of this protest
issue that leads us to conclude that, at this point, the Navy cannot
reasonably rely on the point scores generated here to distinguish between
the key personnel proposals of Summit and AverStar. Specifically, in our
review of the record to ascertain the impact of the Navy's failure to remove
Mr. Jones from its assessment of AverStar's proposed key personnel, it
became apparent that the Navy's approach of reviewing only
11 resumes--regardless of whether the resume was offered for a full-time
position, or for some portion of the required hours less than
full-time--means that the Navy did not assess equal numbers of key personnel
for the different offerors, and did not assess all of the personnel offered
for the 11 key positions. [4]

For example, in scoring the first three resumes identified in the AverStar
proposal for the [deleted] position ([deleted]), the TEB omitted from its
review one full-time position. It thus based its overall assessment on 9.5
FTEs, rather than the 10.5 FTEs it intended to evaluate. [5] Since, as
explained above, one of these [deleted] employees was Mr. Jones, and since
[deleted], AverStar's score is doubly inflated by this error--once by the
agency's failure to remove Mr. Jones' resume and replace it with the
[deleted] resume of the other [deleted], and again by disproportionately
reflecting in AverStar's score Mr. Jones' higher-rated resume, even though
he was offered for [deleted]. This difference between the intended
evaluation and the actual evaluation will be larger to the extent this
approach was repeated in the assessment of other positions in the AverStar
proposal.

The evaluation complications arising from the offerors' use of part-time
employees were not confined to the Navy's assessment of AverStar's proposal.
For example, Summit proposed [deleted] for the half-time program manager
position--[deleted]. Summit Proposal, Vol. 1, Tab C at Table C-1 (between
pages 2 and 4). Since this was a half-time position, the Navy interpreted
this offer as a [deleted] of the 988 labor hours required by the RFP. BCM at
16. One of these [deleted] employees--[deleted]. Summit Proposal, Vol. 1,
Tab C at Table C-1. In keeping with the RFP's admonition that resumes would
count towards the evaluation of only one key labor category, Summit's
proposal indicated that the resume of this individual offered for [deleted],
should be evaluated for the [deleted]. Id. [6]

Upon review, the Navy concluded that the individual offered for [deleted] of
the time required for [deleted] did not meet the experience requirement for
this position in the RFP. For this reason, the Navy concluded that Summit's
approach [deleted]. BCM at 16, 21. On the other hand, since the Navy
evaluated only one resume for each position, its assessment of Summit is
based on the score given [deleted]. For this reason, the score given Summit
for the [deleted] position may be inflated.

In addition, the TEB's assessment of Summit's proposal under the [deleted]
position does not score resumes in the order in which they were identified
in the proposal, as the TEB did when reviewing AverStar's proposal. Rather,
the TEB: (1) scored the resume for the individual offered for [deleted]
position; (2) skipped the resume for the individual offered for the
[deleted] position (as Summit requested in its proposal); and (3) scored the
resumes for the remaining [deleted]. Thus, the evaluation of Summit in this
area is based on [deleted].

Given the agency's uneven approach to evaluating key personnel, we conclude
that the evaluation here has not been done equally, is irrational, and
cannot be used to make meaningful distinctions between two proposals that
appear to be almost equal in technical merit and in evaluated cost.

Cost Realism

With respect to the evaluation of proposed costs, Summit raises five
separate challenges to the Navy's evaluation of costs proposed by it and by
AverStar, including an argument, based upon the facts discussed above, that
the agency should have removed the [deleted] labor hour costs associated
with AverStar's Mr. Jones (and used [deleted] labor hour rate) upon learning
that Mr. Jones had ended his employment with AverStar. In addition, Summit
argues that the Navy erred in using an artificially low labor escalation
rate for AverStar, and wrongly permitted AverStar [deleted]. With respect to
its own proposal, Summit argues that the Navy wrongly rejected the G&A rate
included in its proposal, and used a higher provisional rate, without
realizing that the provisional rate was calculated on a different, and
smaller, cost base than the rate in its proposal.

When an agency evaluates proposals for the award of a cost-reimbursement
contract, an offeror's proposed estimated costs are not dispositive, because
regardless of the costs proposed, the government is bound to pay the
contractor its actual and allowable costs. Federal Acquisition Regulation
sect. 15.305(a)(1). Consequently, a cost realism analysis must be performed by
the agency to determine the extent to which an offeror's proposed costs
represent what the contract should cost, assuming reasonable economy and
efficiency. CACI, Inc.--Fed., B-216516, Nov. 19, 1984, 84-2 CPD para. 542 at 5.
Our review of any agency's exercise of judgment in this area is limited to
determining whether the agency's cost evaluation was reasonably based and
not arbitrary. General Resesarch Corp., B-241569, Feb. 19, 1991, 91-1 CPD
para. 183 at 5, recon. denied, American Management Sys., Inc.; Dep't of the
Army--Recon., B-241569.2, B-241569.3, May 21, 1991, 91-1 CPD para. 492 at 7-8;
Grey Adver., Inc., B-184825, May 14, 1976, 76-1 CPD para. 325 at 27-28.

We need not discuss again the issue of Mr. Jones' employment. Summit's
argument (that Mr. Jones' [deleted] hourly rate should have been removed
from AverStar's proposed costs and replaced with [deleted] rate), and the
Navy's response (that it views the rate as reasonable, and can point to at
least one other individual proposed for this position by another offeror
with a similar rate), have been rendered academic by our decision sustaining
the protest. While Summit may not have been prejudiced by the Navy's failure
to remove the rate, the preferred practice would be to use the actual
verified rate of an employee proposed in place of Mr. Jones, or to make an
independent assessment about the likely cost of filling this position. Since
AverStar will presumably replace Mr. Jones with someone else when given an
opportunity to revise its proposal, we need not discuss this matter further.

With respect to Summit's four remaining challenges to the cost realism
evaluation, which have not been rendered academic by our decision, we have
reviewed each of the contentions raised by Summit, the responses of the
Navy, and the record, and we conclude that the agency's decisions were
reasonable in each area. For example, we do not agree that the Navy
unreasonably accepted AverStar's proposed escalation rate of [deleted]
percent per year. On this issue, AverStar's argument, in its entirety, is
based on the wording of the DCAA review provided to the Navy in response to
its request for assistance. Specifically, DCAA stated, "The [deleted]%
factor is considered reasonable, however, AverStar has been experiencing a
rate more in line with [deleted]%." AR, Tab 22 at 2. Based on this
information alone, we will not conclude that the Navy improperly accepted
the proposed [deleted] percent rate, rather than using the higher rate that
DCAA noted the company had been experiencing.

As a second example, we also disagree with Summit's claim that the Navy
unreasonably rejected its proposed G&A rate of [deleted] percent and instead
used a DCAA-provided provisional rate of [deleted] percent. Summit's
proposal, on this subject, explained that it was using "its current DCAA
submitted provisional rates, adjusted for fiscal year 2001." Summit
Proposal, Tab E, Pt. II at 2. Its proposal, however, does not explain how
its provisional rate was adjusted for the coming year, or why. In
addition--and separate from any adjustment related to a new fiscal year--the
proposal does not explain that the provisional rate has been [deleted] by
the addition of [deleted] to the cost base Summit uses to calculate its G&A
rate (rather than excluded from the cost base, as they are in the DCAA
provisional rate--a matter Summit argues the Navy should have been able to
discern).

As the Navy points out, with no explanation from Summit about how it
adjusted its provisional rate, and thus, no mechanism by which the Navy
could assess the realism or reasonableness of the adjustment, the Navy
decided to continue using the provisional rate. In addition, our review of
Summit's proposal leads us to conclude that the proposal did not adequately
provide notice to the Navy that the cost base used to calculate the G&A rate
in the proposal was different from the cost based used to calculate the DCAA
provisional rate. Id. at 1-10. In summary, we see nothing unreasonable about
the Navy's decision to use Summit's provisional G&A rate provided by DCAA
when the agency calculated Summit's most likely cost of performance.

RECOMMENDATIONS

We recommend that the Navy reopen the procurement, and consider amending the
solicitation to permit review of additional key personnel resumes for
offerors who propose a mix of full- and part-time people for the 11 key
positions. After final proposal revisions have been received and evaluated,
the agency should make a new award determination. If AverStar's proposal is
not selected for award, we recommend that the agency terminate its contract
with AverStar, and make award to the offeror whose proposal is considered
most advantageous to the government.

We also recommend that the protester be reimbursed the reasonable costs of
filing and pursuing its protest, including attorneys' fees. 4 C.F.R.
sect. 21.8(d)(1) (2001). The protester should submit its certified claim for
such costs, detailing the time expended and the costs incurred, directly to
the agency within 60 days after receipt of this decision.

The protest is sustained.

Anthony H. Gamboa

General Counsel

Notes

1. AverStar's proposal identified it as a large business that, [deleted],
would perform [deleted] percent of the value of the contract, while
[deleted]. AverStar Proposal, Vol. 1, Tab D at 1-2.

2. As the solicitation here is not set aside for small business, there is no
bar to a small business offeror submitting a proposal based upon
subcontracting 75 percent of the value of the contract to a large business.

3. The agency report at Tab 13b included all of the evaluator scoresheets.
As mentioned above, in reviewing AverStar's proposal, the five TEB members
completed evaluation worksheets for [deleted] of the individuals proposed
for the three FTE positions in the senior analyst/instructor key labor
category. Numerical ratings, however, were assigned only to the first three
individuals listed in the proposal (even though [deleted]). On a scale of 50
available points, with a score between 43 and 50 considered exceptional, the
average score given Mr. Jones by the five TEB members was [deleted]. In
addition, in four areas where key personnel candidates could be rated as
excellent, very good, satisfactory, marginal, or unstatisfactory, the five
TEB members handed out [deleted] excellent ratings, and [deleted] very good
ratings for Mr. Jones. For the individual who was not given a point score,
but for whom the TEB members did complete the adjectival worksheets, the
results are strikingly different. Four of the five TEB members (one
evaluator rated this candidate [deleted] in all four areas) rated this
individual [deleted]. Our comparison of the TEB's adjectival ratings and
narrative comments for Mr. Jones and for the individual who was rated (but
not numerically scored), and the results of a rough attempt to quantify the
assessment for the individual who was not scored, leave us with no doubt
that AverStar's key personnel score would have been lower if it had not
included Mr. Jones. AR, Tab 13b.

4. Our review also leads us to note that, given the complexities raised by
evaluation of these proposals, the Navy might have identified some of the
problems here, and avoided them, by holding discussions with the offerors.

5. As noted earlier, all 11 of the key personnel positions were for 1 FTE
per year, with the exception of the program manager position, which was for
one-half the full complement of annual hours.

6. For completeness, we note for the record that Summit's [deleted] of this
individual means that it, too, offered [deleted] for the [deleted] position.
They were: [deleted]. Id. In keeping with the RFP's admonition that only 11
resumes would be evaluated, Summit advised the agency not to evaluate the
resume of the individual offered for [deleted] of the [deleted] position.