TITLE: National City Bank of Indiana, B-287608.3, August 7, 2002
BNUMBER: B-287608.3
DATE: August 7, 2002
**********************************************************************
National City Bank of Indiana, B-287608.3, August 7, 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: National City Bank of Indiana
File: B-287608.3
Date: August 7, 2002
Rand Allen, Esq., Philip J. Davis, Esq., Timothy W. Staley, Esq., and
Derek A. Yeo, Esq., Wiley Rein & Fielding, for the protester.
Eugene D. Gulland, Esq., Alan A. Pemberton, Esq., Jennifer L. Plitsch,
Esq., and Timothy J. Keefer, Esq., Covington & Burling, for Bank of
America, an intervenor.
John F. Ruoff, Esq., Defense Finance and Accounting Service, for the
agency.
Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. In implementing prior GAO recommendation to amend solicitation and
request revised proposals, agency properly permitted awardee to change
various portions of its cost and technical proposal where solicitation
amendment specifically advised all offerors that they were permitted to
*change any or all portions of their proposal.*
2. In performing past performance evaluation, agency reasonably declined
to attribute the past performance of an offeror's affiliate to that
offeror where, based on the agency's independent research, it determined
that the affiliate was a separate legal entity, that the two entities had
substantially differing workforces, management, and facilities, and that
the offeror's affiliate was not likely to be involved in performing the
contract being competed.
3. Agency's cost realism analysis of awardee's proposed staffing costs is
not supported where the record is devoid of any meaningful explanation
from the agency evaluators of their basis for accepting as realistic the
awardee's proposed [deleted] reduced staffing levels.
DECISION
National City Bank of Indiana (NCB) protests the award of a contract by
the Department of Defense (DOD), Defense Finance and Accounting Service
(DFAS), to Bank of America (BOA) under request for proposals (RFP) No.
MDA210-00-R-CPB3 to provide banking services for United States personnel
stationed overseas. NCB protests that DFAS improperly permitted BOA to
revise its proposal, improperly evaluated BOA's past performance,
improperly evaluated BOA's proposed costs, and failed to perform an
appropriate cost/technical trade‑off.
We sustain the protest because the cost realism evaluation is unsupported.
BACKGROUND
On January 13, 2000, DFAS published the solicitation at issue, seeking
proposals to provide commercial banking services to U.S. personnel
stationed overseas under the authority of DOD's Overseas Military Banking
Program (OMBP).[1] The solicitation contemplated award of a multi-year,
cost-reimbursement contract for a 5-year base period with five 1-year
option periods.[2] The RFP provided that award would be based on the
proposal offering the best value to the government considering cost, past
performance, and technical factors, and stated that technical factors were
more important then either cost or past performance, which were of equal
importance.
In April 2001, the agency selected NCB for contract award. Following that
selection, BOA filed a protest with our Office challenging the source
selection decision on several bases. In July 2001, we sustained BOA's
protest based on the agency's failure to conduct meaningful discussions.
Bank of Am., B-287608, B-287608.2, July 26, 2001, 2001 CPD P: 137. [3]
Our decision also noted that the agency had apparently applied certain,
undisclosed technical evaluation *standards,* and had made various errors
in evaluating cost proposals. Id. at 12 n.23. We recommended that the
agency amend the solicitation to disclose all evaluation criteria, conduct
meaningful discussions with the offerors, request final proposal revisions
(FPR), evaluate those proposals consistent with the terms of the amended
solicitation, and make a source selection decision based on that
evaluation. Id. at 14.
By letters dated September 21, the agency advised the offerors that it was
implementing our recommendations. With those letters, the agency provided
the offerors with RFP amendment No. 10,[4] and asked various questions
regarding each offeror's proposal.
On October 3, the agency issued RFP amendment No. 11, formally notifying
both offerors that they would be permitted to change *any or all* portions
of their prior proposals.[5] Specifically, this amendment published
various questions and the agency's response to those questions, including
the following:
Question: Is it the Government's plan to re-evaluate the entire technical
proposal or to evaluate only the changes made?
Answer: The Government will evaluate the response to the questions and
any impact they may have to the technical proposal. The Government may
re-evaluate other areas of the proposal as deemed necessary.
[Question:] Will DFAS allow the contractor to change any or all portions
of their existing proposals as deemed appropriate prior to award?
Answer: Yes, the offeror will be afforded the opportunity to submit a
final proposal upon the government[']s call for final proposal revision.
At this time the contractor can change any or all portions of their
proposal.
Agency Report (AR), Tab H, RFP amend. 11 (emphasis added).
The agency engaged in ongoing discussions with both offerors regarding
various aspects of their cost and technical proposals, and both offerors
responded by submitting various proposal revisions. Among other things,
NCB's submissions indicated that it intended to perform the contract using
staffing levels roughly equivalent to the current levels. In contrast,
BOA's submissions indicated that it intended to [deleted] decrease current
[deleted] staffing levels [deleted]. BOA explained that it had
successfully decreased staffing levels during recent years, and that its
proposed staffing reduction *[deleted].* AR, Tab T-2, BOA Updated Cost
Proposal, Nov. 20, 2002, at 9.
The offerors' cost submissions were reviewed and evaluated by the agency's
cost review board (CRB); technical submissions were reviewed and evaluated
by the agency's technical evaluation board (TEB). By letter dated
November 30, the agency asked BOA to provide additional information
regarding its reduced staffing approach. Among other things, the agency
asked:
1. What is the basis for the assigned salaries and wages
reduction from [deleted] to [deleted] in CY01 and please provide
rationale?
2. Please specify the efficiencies planned that would offset
increases due to inflation and provide calculations by expense account?
(Reference Page 11 of the Narrative Discussion)
3. What are the proposed FTEs [full time equivalents] for
CY04 thru CY11 for the overseas staff by location?
4. Actual overseas FTEs at September is 1,037, the proposed
FTEs for Y01 is [deleted], but the proposed salaries increase from Actual
2001 to proposal CY01. What is the basis for this difference?
5. Year 3 Appendix C [staffing table] does not reconcile to
the summary on Cost proposal YR-03 for salaries and wages [deleted].
6. In Appendix C [staffing table] what does the FTE CHNG
mean? The year to year FTE changes do not appear to have a relationship
with the FTE CHNG column.
. . . . .
8. Provide the staffing reductions/change [deleted] by
location by year. In addition please explain how [deleted] to decrease
staffing?
AR, Tab P, Letter form DFAS to BOA, Nov. 30, 2001, at encl. 1.
On December 7, BOA provided responses and some supporting information.
Regarding the agency's request that BOA identify proposed staffing
reductions *[deleted] by location by year,* BOA listed only [deleted]
positions, by location, that would be eliminated; further, BOA
acknowledged that only [deleted] of these position reductions could be
[deleted]. AR, Tab T-1, Cost Proposal Questions & Answers, at 23.
On December 12, the CRB conducted a telephone conference with members of
the TEB, seeking input from the TEB regarding various matters, including
the feasibility of BOA's proposal to reduce staffing. The TEB responded
that, although it had been able to account for a portion of the reductions
from the face of BOA's proposal, BOA should be required to explain its
approach in greater detail. AR, Tab O, Memo to File, at O.3.a.1.
By letters dated December 21, the agency sought FPRs from both offerors.
In the letter to BOA, the agency stated *you propose to eliminate over
[deleted] FTEs [deleted]. We have identified the following reductions:
[deleted] FTEs in [deleted], [deleted] FTEs [deleted] and [deleted] FTEs
for the [deleted].* The agency again directed BOA, among other things, to
*provide a summary of the planned reductions detailed as follows: (i)
identify the position/functions [deleted] by bank location by country that
are eliminated plus the [deleted].* AR, Tab P, Letter from DFAS to BOA,
Dec. 21, 2001, attach. 1.
Both offerors submitted FPRs by the January 11, 2002 due date. Consistent
with the solicitation requirements, both offerors discussed various
technologies and/or innovations they were proposing to implement.[6] In
its FPR, BOA also provided a staffing table [deleted]. AR, Tab T‑3,
BOA FPR, app. C, at C-9 through C-176. BOA summarized its proposed
staffing approach as resulting from *[deleted],* and
maintained that its staffing plans *are credible (realistic) in light of
[deleted].* AR, Tab T-6, Updated Technical Proposal, Jan. 11, 2002, at
2-72; AR, T-3, BOA FPR Response to Cost Questions, at 2. Although BOA
tied some of the proposed reductions to [deleted], it also indicated that
the majority of the proposed reductions would be based on *[deleted].*
AR, Tab T‑6, BOA FPR, Response to Final Cost Questions, at 14.
In evaluating BOA's FPR, the CRB again consulted with the TEB regarding
the realism of BOA's proposed staffing.[7] The record contains no
documentation created by the TEB or its designated representative
regarding the realism of BOA's proposed staffing approach. Rather, the
record contains an undated, unsigned *Memo to File,* that states: *The
CRB asked [the designated TEB member] if [BOA's proposed] cuts were
realistic. He answered that given the [deleted] the proposed FTE
reductions were realistic and reasonable.* AR, Tab O, Memo to File, at
O.1.a.a. Based on this TEB input, along with BOA's history of successful
staff reductions in performing the incumbent contract,[8] the agency
concluded that BOA's proposed staffing costs were reasonable and
realistic. AR, Tab N, Final Cost Evaluation Report, at A-3, A-4.
Overall, the agency evaluated both offerors' proposals as resulting in
positive income for the government, as reflected in the following summary
of proposed income, expenses, fees, and CRB adjustments[9]:
+------------------------------------------------------------------------+
| |BOA |NCB |
|----------------------------+--------------------+----------------------|
|Total [Gross] Income | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|Total Expenses | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|Total Operating Income | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|Proposed Fixed Fee | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|Total [Net] Income | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|CRB Adjustments | [deleted] | [deleted] |
|----------------------------+--------------------+----------------------|
|Evaluated [Net] Income | [deleted] | [deleted] |
+------------------------------------------------------------------------+
AR, Tab K, Comparative Summary, at 17-18.
In sum, the final evaluated costs reflected a [deleted] cost advantage for
BOA's proposal.[10]
In evaluating the technical proposals, the TEB used an adjectival rating
scheme applying the terms *outstanding,* *better,* *acceptable,*
*marginal,* and *unacceptable,* along with the risk assessment ratings of
*high,* *moderate,* and *low.* The FPR ratings were as follows:
+-----------------------------------------------------------------------------------+
|Factors/Subfactors |BOA |NCB |
|-------------------------------------------------------------+----------+----------|
|1. Banking Operations and Delivery of Products |Better |Better |
| and Services |Low Risk |Low Risk |
|-------------------------------------------------------------+----------+----------|
| A. Timely and accurate updates to accounts |Acceptable|Acceptable|
|-------------------------------------------------------------+----------+----------|
| B. Timelines of rendering statements |Better |Better |
|-------------------------------------------------------------+----------+----------|
| C. Method used to process checks and |Acceptable|Acceptable|
|financial | | |
|papers | | |
|-------------------------------------------------------------+----------+----------|
| D. Float management |Better |Better |
|-------------------------------------------------------------+----------+----------|
| E. Management of staffing |Better |Better |
|-------------------------------------------------------------+----------+----------|
| F. Risk management |Acceptable|Acceptable|
|-------------------------------------------------------------+----------+----------|
| G. Quality control |Acceptable|Better |
|-------------------------------------------------------------+----------+----------|
| H. Expertise in managing foreign currencies |Better |Better |
|-------------------------------------------------------------+----------+----------|
| I. Quality of key personnel |Acceptable|Acceptable|
|-------------------------------------------------------------+----------+----------|
| J. Customer service |Better |Better |
|-------------------------------------------------------------+----------+----------|
| K. Employee development programs |Better |Better |
|-------------------------------------------------------------+----------+----------|
| L. Loan processing |Acceptable|Acceptable|
+-----------------------------------------------------------------------------------+
+------------------------------------------------------------------------+
|2. Proposal of New and Relevant Products, |Better |Better |
| Technologies and Processes |Low Risk |Low Risk |
|----------------------------------------------+------------+------------|
| A. Web banking |Better |Better |
|----------------------------------------------+------------+------------|
| B. Imaging |Acceptable |Better |
|----------------------------------------------+------------+------------|
| C. Credit card |Better |Better |
|----------------------------------------------+------------+------------|
| D. Full range of investment products |Better |Better |
|----------------------------------------------+------------+------------|
| E. OMBP telecommunication upgrade |Acceptable |Acceptable |
|proposal | | |
|----------------------------------------------+------------+------------|
|3. Plan to Standardize Worldwide |Better |Better |
|Infrastructure |Med. Risk |Med. Risk |
| | | |
|----------------------------------------------+------------+------------|
| A. Teller system |Better |Better |
|----------------------------------------------+------------+------------|
| B. General ledger |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
| C. Customer service |Better |Better |
|----------------------------------------------+------------+------------|
| D. Property book |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
|4. Transition Approach |Acceptable |Acceptable |
| |Low Risk |Med. Risk |
|----------------------------------------------+------------+------------|
| A. Level of management |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
| B. Detailed transition plan |Better |Better |
|----------------------------------------------+------------+------------|
| C. Retention of personnel |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
| D. Alternative plan for all major |Acceptable |Acceptable |
|processes | | |
|----------------------------------------------+------------+------------|
| E. Programming and data conversion |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
|5. Permanent Operations Center |[Acceptable]|[Acceptable]|
| |Low Risk |Low Risk |
|----------------------------------------------+------------+------------|
| A. Permanent operations center |Acceptable |Acceptable |
|----------------------------------------------+------------+------------|
|6. Investment Strategy |Better |Better |
| |Low Risk |Low Risk |
|----------------------------------------------+------------+------------|
| A. Alternative investment diversification|Better |Better |
|strategy | | |
+------------------------------------------------------------------------+
AR, Tab K, Comparative Summary of Technical Evaluation, at 14.
Under the past performance factor, both proposals were rated
*better.*[11] Based on the overall ratings, the agency concluded that the
two proposals were *essentially equal* under the non-cost evaluation
factors. AR, Tab J, Source Selection Decision, Apr. 15, 2002.
Accordingly, BOA's proposal was selected for award on the basis of its
evaluated cost advantage. This protest followed.
DISCUSSION
NCB first protests that, in implementing GAO's recommendations under the
prior protest, the agency improperly permitted BOA to change any and/or
all portions of its cost and technical proposals. NCB maintains that,
contrary to such unlimited revisions, the agency had instructed offerors
that only a *narrow* re-evaluation would occur, and that offerors were
limited to *only provide answers to the narrow and offeror-specific
questions [the agency] posed.* Protest at 2, 35. The record does not
support NCB's position.
As discussed above, in implementing the recommended corrective action, the
agency rejected NCB's suggestion that responses be limited in the manner
NCB now asserts was required. Specifically, in response to the question,
*Will DFAS allow the contractor to change any or all portions of their
existing proposal as deemed appropriate prior to award?* the agency
unambiguously stated: *Yes . . . the contractor can change any or all
portions of their proposal.* [12] RFP amend. 11. In light of this
explicit language, formally incorporated by amendment to the RFP, we fail
to see any basis for NCB to assert that offerors were required to limit
their proposal revisions in any way.
NCB also protests that the agency improperly evaluated BOA's proposal
under the past performance evaluation factor because the agency *ignored
BOA's poor past performance on the highly relevant Government Travel Card
contract.* Protest at 46.
The record shows that, in evaluating BOA's proposal under the past
performance factor, the agency specifically considered whether performance
of the travel card contract was relevant to the evaluation of BOA's past
performance. On January 19, the agency advised BOA that *[t]he government
is aware of what may be considered adverse past performance information
concerning Bank of America . . . . That information pertains to the
General Services Administration Travel Card Contract.* AR, Tab Y,
Evaluation Summary, Tab Y-2.
BOA responded by advising the agency that the contract in question had
been awarded to NationsBank of Delaware in 1998 and, subsequently, that
bank had merged with another wholly-owned subsidiary of BOA's parent
corporation to become Bank of America, N.A. (USA). BOA stated that Bank
of America, N.A. (USA) was a separate legal entity from BOA, and provided
information indicating that the two entities did not share workforce,
management, facilities or other resources.
In determining whether one company's performance should be attributed to
another, the agency must consider not simply whether the two companies are
affiliated, but the nature and extent of the relationship between the
two--in particular, whether the workforce, management, facilities, or
other resources of one may affect contract performance by the other. ST
Aerospace Engines Pet. Ltd., B-275725, Mar. 19, 1997, 97-1 CPD P: 161 at
3. In this regard, while it is appropriate to consider an affiliate's
performance record where the affiliate will be involved in the contract
effort or where it shares management with the offeror, Fluor Daniel, Inc.,
B-262051, B‑262051.2, Nov. 21, 1995, 95-2 CPD P: 241 at 12, it is
inappropriate to consider an affiliate's record where that record does not
bear on the likelihood of successful performance by the offeror. ST
Aerospace Engines Pet. Ltd., supra.
Here, the record establishes that DFAS performed its own research
regarding the status of BOA and Bank of America, N.A. (USA), concluding
that, although both companies were wholly-owned subsidiaries of Bank of
America Corporation, they are, in fact, separate legal entities. AR, Tab
Y, Evaluation Summary, Tab Y-4. The agency further determined that the
two entities have substantially different workforces, management, and
facilities. Id. Finally, based on these considerations, along with the
fact that DFAS has been responsible for administering both the travel card
contract and the OMBP contract and has interfaced with different legal and
managerial entities for the two contracts in the past, the agency
concluded that Bank of America, N.A. (USA) would not be involved in
performing the OMBP contract and that it would be inappropriate to
consider performance of the travel card contract in connection with the
evaluation of BOA's past performance for the OMBP contract. On this
record, we have no basis to question the reasonableness of the agency's
determination.
NCB next protests that the agency failed to perform a reasonable cost
realism analysis of BOA's proposal. NCB points out that the CRB made only
a few adjustments to each offeror's cost, and asserts that the agency's
analysis was *cursory* and *inadequate.* Protest at 22. Focusing
specifically on BOA's proposal to reduce staffing, NCB asserts that *[t]he
fundamental flaw in the CRB's cost realism analysis is that it failed to
undertake any hard look at BOA's proposed numbers.* NCB Comments, June
10, 2002, at 6. We agree that the record lacks any meaningful
documentation supporting the agency's cost realism analysis.
A procuring agency is generally required to perform a cost realism
analysis in connection with award of a cost-reimbursement contract, such
as the one at issue here. In performing such analysis, an offeror's
proposed costs are not controlling since, regardless of the costs
proposed, the government is bound to pay the actual and allowable costs
incurred. Although an agency need not verify each and every cost item, it
must take reasonable, documented, steps to assess what costs are likely to
be incurred under each offeror's technical approach, assuming reasonable
economy and efficiency. See Federal Acquisition Regulation S:
15.404-1(d)(2). Our Office will review an agency's cost realism analysis,
when it has been protested, to determine whether it is reasonably based
and not arbitrary. The Warner/Osborn/ G&T Joint Venture,
B‑256641.2, Aug. 23, 1994, 94-2 CPD P: 76 at 5.
Here, the agency had before it two technical proposals that received
virtually identical technical evaluations. [Deleted.] In view of these
evaluations, where BOA's claimed cost savings could be expected to be, and
were, in fact, dispositive in the award determination, and BOA's proposed
savings were justified, in part, by [deleted], it was particularly
important that the agency perform and document a meaningful realism
assessment regarding the proposed savings. The record before our Office
does not establish that the agency had a reasonable basis to accept BOA's
proposed staffing costs as realistic.
The agency clearly recognized that BOA needed to provide more support for
its proposed staff reductions than it initially did; as discussed above,
the agency repeatedly asked BOA to provide additional, detailed
explanation regarding the bases for its proposed reductions. The agency
did not, however, satisfy the requirement for a meaningful cost realism
analysis simply by asking, repeatedly, for such support.
The fact is that, despite the agency's repeated requests, BOA failed to
provide the information requested. While BOA did provide a [deleted] of
its proposed staffing reductions, it failed to provide any link between
the majority of these reductions and any particular aspect of its
technical approach. Rather, as the protester accurately points out, BOA's
proposal revisions, including its FPR, contain, primarily, vague and
cursory explanations for its proposal to dramatically eliminate staff.
For example, BOA's proposal states the following:
[For Year 1], we will implement [deleted] and continually assess the
staffing levels of all banking locations in view of [deleted]. We
estimate current staffing levels can be reduced by [deleted] FTEs.
[For Year 2], continued evaluation of [deleted], combined with [deleted]
will allow for further staffing reductions. In addition, [deleted]. This
action will contribute to the ability to reduce staff [deleted]. In all,
[deleted] FTEs will be eliminated from [deleted].
[For Year 3], realization of the full benefits of [deleted] will
contribute to the ongoing staff reductions in the [deleted]. Other
reductions will be made possible by [deleted]. A total of [deleted] FTEs
will be eliminated from [deleted].
[For Year 4], we will reduce staffing at [deleted] by [deleted] FTEs.
This is related to the [deleted].
[For Year 5], we will reduce staffing at [deleted] by [deleted] FTEs, and
reduce [deleted] in [deleted] by [deleted] FTEs. This is related to
[deleted].
[For Years 6-10], an additional [deleted] FTEs will be eliminated in the
[deleted] meeting management's goal of reducing staff by [deleted].
AR, Tab T-6, BOA FPR, Response to Final Cost Questions, at 13-18.
The BOA proposal also contains the following summarizing statement
regarding its proposed staffing:
In summary, [deleted] will eliminate [deleted] FTEs from the [deleted] and
[deleted] FTEs in [deleted]. This reduction is less than [deleted].
These reductions are based upon [deleted].
. . . . .
[E]xperience [deleted] provides management with confidence it can attain
targeted reductions presented in this proposal.
Id.
Regarding the agency's evaluation of BOA's FPR, the record contains no
evidence of any meaningful analysis regarding the likelihood that BOA
would actually achieve the significant staff reductions that were
proposed.[13] As noted above, neither the TEB as a whole, nor the TEB
member designated to address this matter, created a single document
discussing any aspect of BOA's proposed staffing reduction. Rather, as
noted above, the evaluation record contains only an unsigned, undated
*Memo to File* indicating that the CRB asked the TEB whether the proposed
cuts were realistic, and stating that the designated TEB member answered
that, *given [deleted], [BOA's] proposed FTE reductions were realistic and
reasonable.* AR, Tab O, Memo to File, at O.1.a.a. The CRB's final cost
evaluation report does little more than repeat this representation,
stating:
The CRB thoroughly reviewed and analyzed the proposed costs and revenues
of each offeror and found the majority of proposed costs and revenues to
be reasonable, realistic and complete. The CRB realized that because this
will be a Cost Plus Fixed Fee contract that actual costs and revenues are
likely to vary during contract performance. The CRB consulted with a
member of the [TEB] designated by the Source Selection Authority regarding
the feasibility of the proposed FTE reductions by BOA. The TEB
representative indicated that the reductions are realistic considering the
[deleted].
AR, Tab N, Executive Summary of CRB Final Evaluation Report, at 2.
While it is true that BOA's FPR discussed BOA's achievement of significant
cost cutting [deleted], and the CRB relied on this past performance, the
record also suggests that BOA's cost cutting was the result of a number of
other factors outside of BOA's control, including a decrease in customer
accounts. Protester Comments, June 10, 2002, at 18. Moreover, it is not
clear that BOA would actually reduce materially more staff than NCB.[14]
As the CRB noted, *NCB stated that they could not identify any FTE
reductions at this time, however, they indicated that . . . some
reductions could be realized and they would work with the Government to
achieve them.* [15] AR, Tab N, CRB Executive Summary, at 2.
In sum, the record does not contain adequate support for the agency's
acceptance of BOA's claim that it would [deleted] reduce staffing
[deleted]. That defect is critical here, because the selection decision
was entirely premised on BOA's evaluated cost advantage. Accordingly, we
sustain NCB's protest and recommend that the agency perform and document a
proper cost realism analysis, including a documented assessment regarding
the feasibility of BOA's proposed reductions. If the agency believes that
it has an adequate record on hand to perform and document a proper cost
realism analysis, it need not reopen the competition to permit further
discussions.
After a documented cost realism analysis has been performed, the SSA
should make a new source selection decision. If NCB is selected for
award, DFAS should terminate the award to BOA. We also recommend that NCB
be reimbursed the reasonable costs of filing and pursuing the protest,
including attorneys' fees. Bid Protest Regulations, 4 C.F.R. S:
21.8(d)(1) (2002). The protester should submit its
certified claim for costs, detailing the time expended and the costs
incurred, directly to the contracting agency within 60 days after receipt
of this decision.
The protest is sustained.
Anthony H. Gamboa
General Counsel
------------------------
[1] Under the OMBP, DOD provides banking services overseas for military
members, civilian employees of DOD and other government agencies, and
authorized dependent family members. The OMBP includes approximately 110
military banking facilities and 240 automated teller machines, with
operations in nine countries. The OMBP contractor is expected to maintain
approximately 170,000 customer accounts, valued at over $650 million and
to annually process approximately $30 billion in monetary transactions.
[2] The solicitation also contemplated two 6-month extension options for
transition and contract administration closeout.
[3] As discussed in that decision, we found that the solicitation
contained conflicting provisions regarding the permissible length of
technical proposals, that BOA apparently interpreted the solicitation as
limiting the length of its proposal to half the proposal length permitted
for NCB, that the agency was clearly aware of BOA's apparent
misinterpretation, and that the agency's evaluation repeatedly criticized
BOA's proposal for containing informational deficiencies--yet the agency
advised BOA during discussions that its proposal contained *no
identifiable technical weaknesses.* Bank of Am., supra.
[4] Among other things, RFP amendment No. 10 replaced the prior technical
evaluation criteria, identifying 28 standards/subfactors that would be
applied under 6 primary technical evaluation factors, and eliminated the
prior page limitation on technical proposals.
[5] This RFP amendment appears to respond to--and reject*-an NCB
suggestion that responses be limited. The record contains correspondence
from NCB's outside counsel to the agency, dated July 23, 2001 (3 days
before GAO's decision sustaining BOA's protest), in which counsel
suggested: *If the [BOA] protest is sustained,* the agency *can limit the
information that BOA can provide in its second [FPR],* adding that *BOA
should not be free to make substantive modifications to its proposal,* and
*should not be permitted to revise its cost proposal.* Letter from NCB
Counsel to DFAS, July 23, 2001, encl. 1 at 1-2.
[6] Under the heading *Proposal of New and Relevant Products,
Technologies, and Process (Innovation),* the solicitation stated: *At a
minimum, the following technologies or products to support the OMBP are
required to be addressed in the offeror's proposal: a. Web banking[;] b.
Imaging[;] c. Credit card[;] d. Full range of investment products [;]
e. Worldwide OMBP telecommunications upgrade proposal.* RFP S: L-2(5).
[7] The TEB designated one of the TEB members to respond to the CRB on
this matter. Agency Response to Protester Comments, June 20, 2002, at 5
n.4. That individual had extensive experience with the OMBP and with
BOA's performance as the OMBP contractor.
[8] BOA's past performance evaluation states, in part, that *[BOA] did an
outstanding job in reducing Program full-time employees (FTE) and
implementing other significant cost reducing measures through
consolidation of workload and streamlining of operations.* AR, Tab K,
Contractor Performance Evaluation, at 4. However, under the heading,
*Areas for Improvement,* that same evaluation also states: *[BOA] has
been reluctant to implement new product offerings. . . . [I]n meetings
with the government . . . [BOA] strongly supports (verbally) the
introduction of new products or services with zeal. The reality is once a
. . . modification is issued . . . [BOA] loses the 'can do' attitude and
builds roadblocks preventing timely implementation.* Id. at 11-12.
[9] In evaluating cost proposals, the CRB made some, relatively minor,
adjustments to each offeror's proposed costs and/or projected income.
These adjustments resulted in a slight decrease in BOA's proposed total
income and a small increase in NCB's proposed total income. The protest
does not challenge the validity of any of these adjustments.
[10] Under the terms of the RFP, the net income realized by the contractor
is paid over to the government. Thus, the higher net income constitutes
a cost advantage to the government.
[11] As discussed below, in evaluating BOA under the past performance
factor, the agency considered whether to include potentially adverse past
performance information related to a BOA affiliate's performance of a
contract with the General Services Administration to provide travel card
services, but ultimately did not rely on this information.
[12] This provision in RFP amendment 11 is clearly consistent with GAO's
recommendation. As discussed above, GAO specifically recommended that the
agency amend the solicitation to disclose all evaluation criteria, conduct
meaningful discussions, and seek revised proposals.
[13] We note that the record contains various *sensitivity analysis
worksheets* regarding aspects of the offerors' proposed costs. These
documents reflect the CRB's attempts to project the impact on proposed
costs if certain cost reductions are not actually achieved. However, in
response to various criticisms regarding the accuracy of this CRB
analysis, the DFAS adamantly maintains that its *sensitivity analysis* was
*immaterial* to the ultimate acceptance of BOA's proposed staffing cuts.
Specifically, DFAS states: *[T]he Agency stresses that it accepted BOA's
proposed overseas staffing costs as complete, realistic, and reasonable.
Because of that fact, it is immaterial whether NCB, DFAS, and GAO come to
a meeting of the minds as to the optimal approach to accomplishing a
staffing sensitivity analysis.* Agency Response to Protester Comments,
June 20, 2002, at 19. Similarly, DFAS states, *GAO should not look to
NCB's [criticisms of the agency's 'sensitivity analysis'] to gauge where a
break even point might be if BOA, for whatever reason, does not implement
proposed FTE reductions.* Id. at 21. Accordingly, our decision does not
consider the agency's *sensitivity analysis.*
[14] [Deleted], the evaluation record regarding BOA's performance under
the predecessor contract reinforces our concern with the agency's
undocumented, conclusory acceptance of BOA's proposed staff reductions.
As noted above, in evaluating BOA's past performance, the agency stated:
*[BOA] has been reluctant to implement new product offerings. . . . [I]n
meetings with the government . . . [BOA] strongly supports (verbally) the
introduction of new products or services with zeal. The reality is once a
. . . modification is issued . . . [BOA] loses the 'can do' attitude and
builds roadblocks preventing timely implementation.* AR, Tab K,
Contractor Performance Evaluation, at 11-12.
[15] While it may not have been legally obligated to do so, the agency
could have addressed this matter with NCB during discussions, since the
record does not identify any unique technology or innovation in BOA's
proposal that justified its dramatic staff reductions. This is
particularly true in light of the award-determinative nature of BOA's
proposed staff reductions and the extensive discussions the agency
conducted with BOA regarding this matter.