TITLE:  Wyle Laboratories, Inc., B-288892; B-288892.2, December 19, 2001
BNUMBER:  B-288892; B-288892.2
DATE:  December 19, 2001
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Decision

Matter of: Wyle Laboratories, Inc.

File: B-288892; B-288892.2

Date: December 19, 2001

Richard B. Oliver, Esq., and Jance R. Hawkins, Esq., McKenna & Cuneo, for
the protester.

Michael L. Sterling, Esq., Daniel R. Weckstein, Esq., and Walter T. Camp,
Esq., Vandeventer Black, for the Bionetics Corporation, an intervenor.

Gregory Petkoff, Esq., and Paul S. Davison, Esq., Department of the Air
Force, for the agency.

Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office of
the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

  1. Contracting agency reasonably determined that contractor's performance
     of both a contract for operation of the agency's highest echelon
     calibration laboratory and a contract for operation of lower echelon
     calibration laboratories did not pose an organizational conflict of
     interest where government personnel who are responsible for monitoring
     and measuring contractor performance under both contracts rely
     primarily on information other than feedback from other contractors in
     performing these functions.
  2. Protest alleging that agency unreasonably failed to recognize several
     positive aspects of protester's proposal as strengths is denied where
     protester fails to demonstrate that agency's assessment of the
     significance of these aspects of its proposal was unreasonable.
  3. Protest alleging that agency should have adjusted awardee's cost
     proposal upward to account for its offering of a lower fringe benefit
     rate than the rate paid by the incumbent contractor is denied where
     agency reasonably determined that the awardee's proposed fringe benefit
     rate, which was [deleted] the rate required in the Department of Labor
     wage determination included in the solicitation, was realistic.

DECISION

Wyle Laboratories, Inc. protests the Department of the Air Force's award of
a contract to the Bionetics Corporation under request for proposals (RFP)
No. F09650-01-R-0203, to operate the Air Force Primary Standards Laboratory
(AFPSL) and to develop and distribute calibration technical orders for the
Air Force Metrology Calibration Program. Wyle, who is the incumbent
contractor, contends that the Air Force misevaluated both offerors'
proposals and that Bionetics has a conflict of interest that should have
precluded it from receiving the award.

We deny the protest.

BACKGROUND

The AFPSL, located in Heath Ohio, is the Air Force's highest echelon
metrology and calibration laboratory. As such, it provides a critical link
between the National Institute of Standards and Technology (NIST) and
base-level Precision Measurement Equipment Laboratories (PMEL). The AFPSL
complex consists of laboratories with the rigid environmental controls
necessary for precise measurements.

The RFP, which was issued on March 29, 2001, contemplated the award of a
cost-type contract, with both cost-plus-award-fee and cost-reimbursement
no-fee line items, for a base period of 3 years and up to 17 one-year
options. [1] The solicitation provided for award to the offeror whose
proposal represented the best value to the government. Four factors were to
be considered in the determination of best value: mission capability (which
encompassed five subfactors), [2] proposal risk (which was to be evaluated
at the subfactor level), past performance, and cost. The first three factors
were to be of equal importance in the evaluation, whereas cost was to be of
lesser significance. The RFP provided that offerors' cost proposals would be
evaluated to determine probable cost for the base and all 17 option periods,
with the cost for option periods 8-17 (years 11-20) computed using the
estimated cost of option period 7 (year 10) times an annual escalation rate
of 3.4 percent. RFP at  sect. M.3.4. The solicitation also provided for the
evaluation of cost proposals to determine whether the proposed costs were
realistic and reasonable. Id.

Four offerors submitted proposals by the May 7 closing date. Three of the
proposals were included in the competitive range, and discussions were held
with, and final proposal revisions received from, each of the three
offerors. A technical evaluation team rated the proposals under the mission
capability factor; a Performance Risk Assessment Group (PRAG) evaluated
offerors' past performance; and a cost team evaluated the probable cost of
the proposals over a 20-year period of performance. The evaluators rated the
proposals as follows:

                    Bionetics          Offeror A          Wyle

 Mission
 Capability/
 Proposal Risk
 Subfactors [3]

 Performance plan   Blue               Blue               Green

                    Low Risk           Low Risk           Low Risk

 Sustainment of     Blue               Blue               Green

 capabilities       Low Risk           Low Risk           Low Risk

 Workload           Blue               Green              Green

 Management         Low Risk           Low Risk           Low Risk

 Transition Plan    Green              Blue               Blue

                    Low Risk           Low Risk           Low Risk

 Small Business     Blue               Green              Green

 Strategy           Low Risk           Low Risk           Low Risk

 Past Performance   Exceptional/High   Exceptional/High   Exceptional/High
                    Confidence         Confidence         Confidence

 Evaluated Cost     $186,100,667       [deleted]          [deleted]

Proposal Analysis Report, Aug. 29, 2001, at 28-29; PRAG Report at 17, 24-25,
and 30.

After reviewing the findings of the technical, past performance, and cost
teams, the source selection authority (SSA) determined that Bionetics'
proposal was stronger than the other two under four of the five mission
capability subfactors (performance plan, sustainment of capabilities,
workload management, and small business/small disadvantaged business
strategy), [4] and that overall it represented a technically superior
proposal. The SSA also noted that he was confident of Bionetics' ability to
perform based on its past performance record. He further observed that
Bionetics' total evaluated price was lowest. Based on these factors, the SSA
concluded that Bionetics' proposal represented the best value to the
government. Source Selection Decision Document at 3-6. On September 5, the
Air Force awarded a contract to Bionetics.

Wyle argues that the Air Force's evaluation of proposals under the mission
capability factor was flawed and that the agency unreasonably evaluated
Bionetics' proposal risk and past performance. The protester also argues
that the Air Force failed to conduct a meaningful cost realism analysis and
that it ignored an obvious conflict of interest on the part of Bionetics
that should have precluded award to that offeror.

CONFLICT OF INTEREST

Wyle argues that the Air Force should have prohibited Bionetics, which
operates
13 Air Force PMELs, from competing under this RFP because a single
contractor's operation of both the AFPSL and a substantial number of PMELs
gives rise to an organizational conflict of interest that cannot be
mitigated. PMELs are Air Force laboratories lower in echelon to the AFPSL
that use calibration equipment calibrated and monitored by the AFPSL.
According to the protester, the 13 PMELs that Bionetics operates constitute
approximately 40 percent of the contractor-operated Air Force PMELs and
approximately 20 percent of all Air Force PMELs.

The protester contends that it would be a conflict of interest for Bionetics
to operate both a number of PMELs and the AFPSL because in each role, it
would be expected to provide feedback regarding the quality of its
performance in the other role. That is, in its role as operator of the
AFPSL, it would be expected to furnish feedback on the quality of its
contract performance under the PMELs, while in its role as operator of the
PMELs, it would be expected to provide feedback on the quality and
timeliness of its performance in operating the AFPSL. Wyle contends that in
each role, Bionetics would have an incentive to provide overly positive
feedback regarding its contract performance in the other role.

Wyle argues that Bionetics' operation of both the AFPSL and 13 PMELs raises
other potential conflict of interest issues as well. The protester maintains
that if Bionetics operates both the AFPSL and some PMELs, it will have an
incentive to give work from the PMELs that it operates priority over work
from other PMELs. Wyle further argues that because the PMEL contracts are
fixed-price contracts, while the AFPSL contract is a cost-reimbursement
contract, Bionetics will have an incentive to shift work that should be
performed in a PMEL to the AFPSL in order to obtain double payment. Wyle
also argues that Bionetics, in its role as operator of the AFPSL, would have
an incentive to modify technical documentation improperly to assist or ease
the PMEL operator's contract performance.

An organizational conflict of interest occurs where, because of other
activities or relationships with other persons, a person is unable or
potentially unable to render impartial assistance or advice to the
government, or the person's objectivity in performing the contract work is
or might be otherwise impaired, or a person has an unfair competitive
advantage. Federal Acquisition Regulation (FAR) sect. 9.501; Aetna Gov't Health
Plans, Inc.; Found. Health Fed. Servs., Inc., B-254397.15 et al.,
July 27, 1995, 95-2 CPD para. 129 at 12. Contracting officials are to avoid,
neutralize, or mitigate potential conflicts of interest before contract
award, so as to prevent an unfair competitive advantage or the existence of
conflicting roles that might impair a contractor's objectivity. FAR sect.sect.
9.504(a), 9.505; Johnson Controls World Servs., Inc., B-286714.2, Feb. 13,
2001, 2001 CPD para. 20 at 3. The responsibility of determining whether an
actual or apparent conflict of interest will arise, and to what extent the
firm should be excluded from the competition, rests with the contracting
agency. Aetna Gov't Health Plans, Inc.; Found. Health Fed. Servs., Inc.,
supra, at 12. We will not overturn the agency's determination except where
it is shown to be unreasonable. Id.

Regarding the protester's first argument, the Air Force reports that well
before the RFP was issued, the source selection evaluation team considered
whether a potential conflict of interest problem existed, and determined
that operation of the AFPSL and one or more PMELs by the same contractor
would not constitute a conflict of interest because government personnel are
responsible for monitoring and measuring contractor performance under both
contracts and rely primarily on information other than feedback from other
contractors in performing these functions. Contracting Officer's Statement
of Facts and Findings, Oct. 11, 2001, at 51; Air Force Response to
Protester's Comments at 6-7. We see nothing unreasonable in this
determination. Moreover, Bionetics points out that, even assuming that its
operation of both the AFPSL and several PMELs did pose a conflict of
interest, the conflict would be short-lived because its contract for
operation of the PMELs expires on September 30, 2002 (i.e., less than 1 year
into the 20-year period of performance), and a follow-on contract for nine
of the laboratories has been issued to Yulista Management Services, Inc., a
Native Alaskan Corporation, and a solicitation issued for the remaining
four. Bionetics' Comments, Nov. 26, 2001, at 5-6.

The protester's next argument--that Bionetics will have an incentive to give
work from the PMELs that it operates priority over work from other
PMELs--provides no basis to conclude that Bionetics should be found
ineligible for award. Specifically, the agency points out that it is
immaterial if Bionetics performs work from its PMELs first, so long as it
accomplishes work from other PMELs within the turnaround time specified in
the contract's Service Delivery Schedule. The agency further notes that if
Bionetics is late on work from other laboratories, it will be penalized in
its award fee for not meeting the Service Delivery Schedule.

The protester's final two arguments are essentially allegations that
Bionetics, as operator of both the AFPSL and several PMELs, will be in a
position to defraud the government, and that it will therefore have an
incentive to do so. Not only do we fail to see the link between Wyle's
speculation and any of the definitions of organizational conflict of
interest in the FAR, but we also fail to see how Bionetics' dual roles
operating the AFPSL and a PMEL would increase the likelihood that Bionetics
would attempt to defraud the government. As the agency points out,
government oversight of the contract--and the penalty to the contractor if
it is caught doing something illegal--should be sufficient to mitigate the
risk of illicit activity by Bionetics or any other contractor.

MISSION CAPABILITY

The protester argues that in evaluating proposals under the performance plan
and sustainment of capabilities subfactors of the mission capability factor,
the Air Force overlooked weakness and risks in Bionetics' proposal and
ignored strengths in Wyle's. Wyle maintains that had the agency correctly
recognized the additional strengths of its proposal under the performance
plan subfactor, its proposal would have received a rating of blue, rather
than green, under that subfactor, and that had the Air Force correctly
recognized the weaknesses in Bionetics' proposal under the performance plan
and sustainment of capabilities subfactors, Bionetics' proposal would have
received a rating no higher than green under either subfactor.

The evaluation of technical proposals is a matter within the contracting
agency's discretion, since the agency is responsible for defining its needs
and the best method of accommodating them. Hago-Cantu Joint Venture,
B-279637.2, July 20, 1998, 98-2 CPD para. 99 at 11. In reviewing an agency's
technical evaluation, we will not reevaluate the proposal, but will examine
the record to ensure than it was reasonable and in accordance with stated
evaluation criteria. Id.

In evaluating offerors' proposals under the performance plan subfactor, the
Air Force identified two 2-star and three 1-star strengths in Bionetics'
proposal and three 1-star strengths in Wyle's. [5] Under the sustainment of
capabilities subfactor, the agency identified three 2-star and two 1-star
strengths in Bionetics' proposal and no strengths in Wyle's. Among the
strengths attributed to Bionetics' proposal under the former subfactor were
its hiring plan and its quality plan with respect to retention of technical
(calibration) records and correction of records. [6] The strengths
identified in Wyle's proposal were its commitment letters for over 95
percent of current staff; its quality plan, which showed a thorough
understanding of the performance work statement requirements; and the
offeror's familiarity with Joint Computer-Aided Acquisition Logistics
Support (JCALS) and ways to work around JCALS shortfalls. Debriefing Notes
at 10-11.

Evaluation of Wyle's proposal

Wyle argues that in addition to the foregoing strengths, the evaluators
should have identified the following aspects of its proposal as strengths:

   * The organization and comprehensiveness of its quality program records.
   * Its record retention and correction program.
   * Its plan to establish a [deleted].
   * Its cross-training of its technical order technicians, which allows
     them to be used in the calibration laboratories to address surge
     requirements.
   * Its proposed approach to notifying customers of overdue items for
     calibration.

Quality Program Records

Wyle argues that in evaluating its proposed quality program, the Air Force
failed to consider an excerpt from a recent Air Force audit of its work on
the predecessor contract. The excerpt, which the protester cited in its
proposal, indicated that Wyle's quality program records were comprehensive
and exceptionally well organized; that nonconformities identified during
internal total quality plan reviews were well documented; and that effective
process improvements had been initiated to eliminate deficiencies. Wyle
Proposal at II-19.

The Air Force maintains that it did consider the excerpt, but that it
determined that the findings, "when evaluated along with the overall Wyle
proposed quality plan, did not constitute a strength for the proposed
quality plan." Air Force Response to Protester's Comments at 1-2. In other
words, while this aspect of Wyle's quality plan may have been strong, the
Air Force concluded that the overall plan was not strong enough to merit
identification as a strength. The fact that the protester disagrees with the
agency's judgment as to the significance of a positive aspect of its
proposal does not demonstrate that the agency's judgment was unreasonable.
Keco Indus., Inc., B-261159, Aug. 25, 1995, 95-2 CPD para. 85 at 4-5. In our
view, given that record-keeping is only one of many aspects of an offeror's
quality program, the agency reasonably determined that Wyle's strong
approach to record-keeping, while a positive aspect of its proposal, was
insufficient to render its quality program a strength.

Record Retention and Correction Program

Wyle also argues that it was inconsistent for the Air Force to cite
Bionetics' quality plan with respect to the retention and correction of
records as a strength, while failing to cite the similar approach to
retaining and correcting records set out in its own proposed quality plan.

The Air Force acknowledges that the quality plans proposed by the two
offerors contained virtually identical language regarding the correction of
records, but maintains that the plans differed in their discussions of
technical records management. Bionetics' plan cited Air Force regulations
governing the management of records, while Wyle's proposal cited only its
own internal standard operating procedures for records management, which
were not furnished with the proposal. While the protester contends that the
evaluators should have known that its standard operating procedures reflect
Air Force requirements, the RFP in question explicitly advised the offerors
here that they should assume "that the Government has no prior knowledge of
their facilities and experience, and will base its evaluation on the
information presented in the offeror's proposal." RFP, Amendment No. 0003,
sect. L-900, para. 2.0(b). Because Wyle failed to furnish its standard operating
procedures in its proposal, we think that the evaluators reasonably viewed
the proposal as lacking the level of detail required to identify the
proposed approach as a strength. In any event, the Air Force notes that even
if Wyle had been assigned a 1-star strength for its quality plan with
respect to the retention and correction of records, as was Bionetics, it
would not have been enough to raise Wyle's rating under performance plan
subfactor from Green to Blue. Air Force Response to Protester's Comments
at 3.

[Deleted] Program

Next, Wyle argues that the agency unreasonably failed to recognize as a
strength its plan to [deleted].

The agency responds that it did not view this aspect of the protester's
proposal as rising to the level of a strength because the plan is still very
much at the drawing board stage. For example, Wyle has not yet established
[deleted]. Wyle Proposal at II-10. Given the preliminary nature of the
protester's plans [deleted], we think that the Air Force reasonably declined
to cite this aspect of its proposal as a strength.

Surge Capacity

The protester also argues that the Air Force should have recognized as a
strength its cross-training of its technical order personnel since this
allows them to be used in the calibration laboratories to respond to surges
in the workload.

While it is true that in the section of its proposal addressing the
qualifications of its technical order personnel, Wyle states that their
technical skills are maintained by frequent rotation into the labs to review
procedures, work unscheduled requirements, or test new technical orders, id.
at II-15, in the section of its proposal specifically addressing surge
requirements, the protester makes no mention of cross-trained technical
order personnel. We think that it was reasonable for the evaluators to have
evaluated Wyle's approach to addressing surge requirements on the basis of
information presented in that section of its proposal, without
cross-referencing to the section of its proposal describing personnel
qualifications. Moreover, the agency notes that cross-training of personnel
is not an unusual way of dealing with surge requirements, and thus that
Wyle's cross-training of its technical order personnel would not have been
cited as a strength in any event.

Overdue Notices

Finally, the protester contends that the Air Force should have regarded its
proposed approach to notifying customers of overdue items for calibration as
a strength because it offered more than was requested by the RFP.

Paragraph 5.1.2.2.8.1 of the RFP's performance work statement requires the
contractor to contact customers who fail to deliver Test, Measurement, and
Diagnostic Equipment (TMDE) to the AFPSL within 10 working days after the
scheduled due date. Such notice is to be furnished via telephone, e-mail, or
fax not later than 15 calendar days from the due date. The contractor uses a
government-furnished management information system to identify overdue
items.

In its proposal, Wyle proposed to generate the list within 11 days after the
due date and to notify the customers. The protester contends that its
approach exceeded the minimum required in that notification will be made
earlier than the 15th day. We do not agree that Wyle proposed a more prompt
notification schedule than required by the PWS. The protester proposed to
generate the list of overdue items on the 11th day and to notify the
customer, but it did not specify that the two events would occur on the same
day. Accordingly, we see no basis to conclude that Wyle proposed an approach
that exceeded the government's requirements.

Evaluation of Bionetics' Proposal

In addition to arguing that the Air Force overlooked strengths in its own
proposal, the protester maintains that the agency ignored weaknesses and
risks in Bionetics' proposal. In particular, Wyle argues that Bionetics'
hiring plan and its proposal [deleted] should have been regarded as
weaknesses.

Hiring Plan

The Air Force noted as one of the strengths in Bionetics' proposal its plan
to target incumbent managers first in its hiring, and then to involve them
in the process of staffing the organizations they would lead. Wyle asserts
that rather than viewing this approach as a strength, the agency should have
viewed it as a weakness, because there is a substantial risk that Bionetics
will be unable to hire Wyle's incumbent managers at the compensation rates
that it proposes. In this regard, Wyle notes that its Electronics Laboratory
Department Manager is paid $30.20 per hour, whereas Bionetics proposed to
pay him [deleted] per hour; its Mechanical Laboratory Department Manager is
paid $32.61 per hour, whereas Bionetics proposed to pay him [deleted] per
hour; and its Photonucleonics Department Manager is paid $32.50 per hour,
whereas Bionetics proposed to pay him [deleted] per hour. Protester's
Comments, Oct. 29, 2001, at 8. Wyle further argues that Bionetics will be
unable to hire the remainder of the incumbent work force, as it plans, at
the wage rates that it proposes since these rates are lower than the rates
at which these employees are currently compensated.

While Bionetics did propose lower wage rates for the three managers in
question than Wyle currently pays them, it stated that it did not intend to
cut the salaries of incumbent employees, Bionetics' Response to Evaluation
Notice BIO-MC4-001, and included in its proposal [deleted] to be used to
make up the difference between the rates it proposed and the rates at which
incumbent employees are compensated. Bionetics also proposed, as a back-up
strategy in the event that it is unable to hire laboratory managers from the
incumbent workforce, [deleted]. Given that Bionetics does not intend to cut
the salaries of incumbent managers, and that it has a back-up strategy if it
is unable to hire them, we see no basis to conclude that it was unreasonable
for the evaluators not to have regarded this aspect of Bionetics' hiring
plan as risky.

Regarding the protester's argument that Bionetics will be unable to retain
the incumbent workforce at the wage rates it proposes, again we note that
Bionetics did not propose to cut salaries of incumbent employees; it
proposed wage rates drawn from [deleted], which in many instances were lower
than the wages currently paid by Wyle, but it also proposed to pay incumbent
employees [deleted] to make up the difference between their current hourly
rates and the proposed rates.

Regarding the protester's argument that [deleted] is not large enough to
make up the difference in wage rates for all employees, the agency takes
issue with the protester's assumption that [deleted] will need to be spread
across the entire workforce. In this regard, the Air Force notes that
Bionetics proposed higher salaries for some of its employees (i.e., its
quality manager and engineers) than the amounts currently paid their
counterparts by Wyle; accordingly, payment of [deleted] to these employees
to bring their salaries up to the level paid by the incumbent would not be
required. The agency further notes that it has "no reason to believe that
Bionetics or any other company would have problems hiring non-technical
personnel (i.e., clerks, material handlers, etc.) from the local economy at
[deleted]." Air Force Response to Protester's Comments at 3.

The Air Force saw no reason to question the sufficiency of Bionetics'
[deleted], and the protester has not demonstrated that this was an
unreasonable determination on the agency's part. There is no evidence in the
record that Bionetics would not be able to retain the skilled employees that
it wants to retain at their current salary levels through use of [deleted],
and that it would be unable to hire new personnel at the rates that it
proposed for the other positions.

[Deleted]

Wyle argues that the Air Force should have viewed Bionetics' proposal to
obtain [deleted] as a weakness rather than a strength because it means that
Bionetics will have to satisfy the requirements of both the [deleted] and
the Air Force, which is risky because the two may be in conflict. Wyle
further argues that the proposal to obtain [deleted] is a weakness because
Bionetics has not accounted in its proposal for the costs of maintaining the
[deleted].

The Air Force states that its engineers considered this issue and concluded
that there is "absolutely no conflict in receiving" [deleted] and Air Force
certification, and that "[a]ny minor conflicts, if encountered, could most
certainly be resolved easily without sacrificing either the Air Force
requirements or the [deleted] requirements." Contracting Officer's Statement
of Facts and Findings, Oct. 11, 2001, at 25. The protester has not attempted
to rebut the agency position.

Regarding the protester's assertion that Bionetics only offered to pay the
initial costs of obtaining [deleted], and did not volunteer to cover the
substantial costs of maintaining the [deleted], Protester's Comments, Nov.
26, 2001, at 27, the Air Force notes that since [deleted] compliance is a
requirement of the solicitation, the cost of maintaining compliance is
already built into the proposal. Air Force Response to Protester's Comments
at 5.

PAST PERFORMANCE

Wyle also takes issue with the agency's evaluation of Bionetics' past
performance, arguing that the Air Force misunderstood the nature of
Bionetics' performance under one significant contract and unreasonably
ignored its performance problems under another. The protester also argues
that the agency should have ignored the favorable ratings of Bionetics'
performance furnished by one of its references because the reference was
biased.

The RFP provided for the evaluation of past performance in accordance with
AFFARS sect. 5315.305(a)(2), using the ratings defined therein. The section in
question provides for the assignment of a confidence assessment rating to
each proposal based on an assessment of performance risk, with the highest
possible rating of exceptional/high confidence reflecting an assessment
that, based on the offeror's performance, essentially no doubt exists that
the offeror will successfully perform the required effort. The RFP further
provided that more recent and relevant performance would have a greater
impact on the performance confidence assessment than other performance and
that the performance of critical subcontractors and key personnel would be
taken into consideration.

The solicitation also explained in detail the factors that would be
considered in determining whether a contract would be considered very
relevant, relevant,
semi-relevant, or not relevant. A relevant contract was defined as an effort
including "most of what this solicitation requires, such as operation of
primary echelon calibration laboratories (including calibration of transfer
standards, primary standards, and test measurement and diagnostic equipment,
in at least several measurement areas, [and] maintenance of measurement
capabilities one step below the measurement standard of the National
Institute of Standards and Technology) [and the] authoring/maintaining of
commercial calibration technical data . . . ."

Bionetics submitted information regarding five contracts that it had
performed itself and four contracts that its proposed subcontractor,
Lockheed Martin, had performed. [7] The PRAG rated Bionetics' performance
under contract LSOC-10900-000006 (Shuttle and Calibration Laboratory Support
Services for NASA/Kennedy Space Center) as relevant and noted that the two
references rated the contractor's performance as very good or excellent
under each of the mission capability subfactors. The PRAG rated Bionetics'
performance under contract F44650-97-D0005 for the operation of 13 Air Force
PMELs as semi-relevant and noted that Bionetics had received overall
performance ratings of excellent for performance plan and cost and of very
good for sustainment of capabilities and workload management. The PRAG also
rated a third Bionetics contract for metrology services and TMDE calibration
and repair services for the Naval Warfare Center as

semi-relevant.

The PRAG rated one of Lockheed Martin's contracts, for F-16 technical order
maintenance, as very relevant and noted that it had received a positive
Contractor Performance Assessment Report (CPAR) regarding its performance.
The PRAG rated a second Lockheed Martin contract for operation of a primary
standards laboratory as relevant and noted that the references had rated the
contractor's performance as excellent or very good under all mission
capability subfactors for which ratings were furnished and as satisfactory
for cost. The PRAG rated the two other Lockheed Martin contracts as
semi-relevant and noted that the references had rated the contractor's
performance under both positively.

Based on the foregoing information, the PRAG assigned Bionetics a
performance confidence rating of exceptional/high confidence. The PRAG also
assigned both Wyle and Offeror A performance confidence ratings of
exceptional/high confidence.

Wyle argues that the Air Force incorrectly rated Bionetics' contract
furnishing Shuttle and Calibration Support Services for NASA/Kennedy Space
Center as relevant based on the incorrect understanding that in its
performance of that contract, Bionetics had operated the NASA Primary
Standards Laboratory for
14 years through 1998. The protester asserts that Bionetics has not in fact
operated the laboratory since 1983.

In support of its position, Wyle submitted three declarations from one of
its employees, who has worked in the Kennedy Space Center calibration
laboratories for the past 22 years. This individual states that EG&G took
over operation of the NASA Primary Standards Laboratory from Bionetics in
June of 1983 and that Bionetics has not operated the laboratory since then.
Declaration of Wyle Manager, Nov. 5, 2001, at 1. The declarant further
states that since at least 1993, Bionetics has not performed any work
involving the calibration of primary standards at the laboratory. In this
regard, she notes as follows:

Since about 1993, PFC began operating the NASA Primary Standards Laboratory.
They continued to do so until Wyle took over operation of the NASA Primary
Standards Laboratory in 1998. As one of the requirements of these contracts,
PFC, and then Wyle, were required to provide traceability for reference
standards, working standards and test equipment to the NIST for all KSC
contractors. This task was accomplished by sending the Primary Standards
owned by the PFC/Wyle Primary Standards Laboratory to the NIST for
calibration/certification. The PFC/Wyle Primary Standards Laboratory then
utilized these NIST calibrated reference standards to transfer NIST
traceable measurements to Working Standards used by lower level Calibration
Laboratories, including hundreds of working standards for the laboratory
operated by Bionetics. Thus, the traceability chain to the NIST for KSC was
entirely derived through the PFC/Wyle Primary Standards Laboratory.

Id.

In response to our request for comment on the foregoing assertions,
Bionetics submitted a declaration from a former employee, who served from
1976 until his retirement in 1997 as Chief Engineer (2 years) and Project
Manager (19 years) for Bionetics' metrology operations at the Kennedy Space
Center. He explained that in 1976, Bionetics became the prime (and sole)
contractor to NASA for operation of Standards and Calibration Laboratories,
including the Reference Standards and Calibration Laboratories, at the
Kennedy Space Center. Bionetics' responsibilities under that contract
included maintaining various primary (or reference) standards, which are
standards directly traceable to NIST. In 1983, NASA divided the standards
and calibration work into two contracts, one for base operations and the
other for space shuttle operations. Bionetics became a subcontractor to EG&G
under the base operations contract and the prime contractor on the space
shuttle contract. After approximately 6 months, Bionetics' base operations
subcontract was absorbed by the prime contractor, EG&G.

In 1984, Lockheed Space Operation Company (LSOC) was awarded the space
shuttle operations contract and Bionetics' prime contract with NASA was
converted to a subcontract with LSOC. The subcontract called for Bionetics
to continue to perform essentially the same responsibilities contained in
the prime contract. Bionetics continuously performed the same primary
standard work under its space shuttle operations subcontract without
interruption until completion of the subcontract in 1998. The subcontract
was novated in 1996 to recognize that United Space Alliance had succeeded
Lockheed as the primary contractor. Declaration of Bionetics' Project
Manager, Dec. 6, 2001 at 1-3.

The above declarant's assertion that Bionetics continued to perform primary
standards work for NASA in support of the shuttle program even after EG&G
took over operation of the NASA Primary Standards Laboratory was confirmed
by a statement from the Manager of NASA's Metrology and Calibration Program,
who explained that:

Bionetics actually contracted directly to the Government prior to the
Shuttle Processing Contract (SPC), providing standards laboratory and
calibration laboratory operations. At the beginning of the SPC, the
calibration effort was split and the standards laboratory operations became
part of institutional support, where it remains. As a sub to Lockheed, NIST
traceable standards were provided as a base support function by the
institutional contractor. However, in order to prevent costly duplication of
some facilities, i.e., flow, Bionetics maintained NIST traceability on a few
select disciplines.

GAO Question and Air Force Responses, Dec. 6, 2001, at 3.

While it appears from the foregoing statements that the PRAG's
characterization of Bionetics as the operator of the NASA Primary Standards
and Calibration Laboratory for the past 14 years was in error, it also
appears that Bionetics did in fact perform primary standards work in several
disciplines in support of the space shuttle program up until 1998. In this
regard, we consider the statement from the Manager of NASA's Metrology and
Calibration Program confirming that Bionetics continued to maintain NIST
traceability on a few select disciplines in support of the space shuttle
program to be more authoritative than the statement from the Wyle employee
(asserting that since 1993 the traceability chain to the NIST for the
Kennedy Space Center has been entirely derived through the PFC/Wyle Primary
Standards Laboratory) because the NASA Manager, who performs oversight of
Kennedy Space Center contractors, is in a better position than the Wyle
employee to know the scope of Bionetics' responsibilities under its space
shuttle operations subcontract. In addition, the Air Force notes that one of
the references whom it contacted regarding Bionetics' performance under the
shuttle support contract indicated that Bionetics had provided technical
order support involving the writing and maintaining of procedures, which
provided another basis for determining the contract relevant. Id. at 2.
Given that Bionetics' performance under the NASA contract involved primary
standards work and the authoring and maintaining of relevant technical data,
we think that the evaluators reasonably rated the contract as relevant in
assessing the awardee's past performance. [8]

Wyle further argues that the Air Force unreasonably ignored Bionetics' past
performance problems under its PMEL contract. The Air Force acknowledges
that Bionetics experienced some performance problems at a few of the PMELs,
but maintains that the contractor has taken effective corrective action and
thus that there is no reason to anticipate a recurrence of difficulties. In
this regard, the agency notes that Bionetics' performance was rated as
exceptional or very good in all areas under the most recent CPAR, and that
the assessing official stated that she would definitely award to the
contractor again. Air Force Response to Protester's Comments, at 12.

The protester also argues that the Air Force should not have considered a
reference regarding Bionetics' performance on the [deleted] contract because
the individual who furnished the reference is an employee of [deleted],
which is a "sister" firm to Bionetics' proposed subcontractor, Lockheed
Martin. According to the protester, because award to Bionetics would be in
Lockheed Martin's financial interest, the [deleted] employee had an
incentive to furnish an overly favorable reference.

We see no reason that the Air Force should have disregarded the reference.
There is no evidence in the record--and we see no reason to assume--that the
employee in question was aware at the time he furnished his reference that
Bionetics had proposed Lockheed as a subcontractor for this effort. In
addition, given that, according to the protester, [deleted] is a joint
venture of Lockheed and [deleted], which was also an offeror under this RFP,
even had the employee been aware of which firms were involved in the
competition at the time he was contacted for a reference, he would have had
just as much of an incentive to submit an overly unfavorable evaluation of
Bionetics' performance (which would favor [deleted]) as a favorable one
(which would favor Lockheed.)

COST ANALYSIS

Finally, Wyle contends that the Air Force did not properly evaluate the
probable cost of Bionetics' proposal. The protester maintains that the
agency's cost evaluators failed to adjust the awardee's cost proposal to
account for the disparity between Bionetics' proposed wage and fringe
benefit rates and the substantially higher rates paid by Wyle under its
incumbent contract. According to the protester, Bionetics' wage costs should
have been adjusted upward approximately $6 million and its fringe benefit
costs adjusted upward approximately [deleted] to account for the disparity
over the 20-year period of performance. The protester further argues that
the agency failed to adjust Bionetics' cost proposal to normalize
subcontract repair costs for foreign military sales (FMS) items (which,
according to Wyle, would have required an upward adjustment of approximately
$2.2 million to Bionetics' proposed costs) and to account for the required
calibration laboratory technician effort in addition to the "touch labor"
listed in the RFP's technical exhibit 2a (which, according to the protester,
would have required an upward adjustment of approximately $17 million to the
awardee's proposed costs).

When an agency evaluates proposals for the award of a cost-reimbursement
contract, an offeror's proposed estimated costs of contract performance and
proposed fees are not considered controlling, since the offeror's estimated
costs may not provide valid indications of the final actual costs that the
government is required, within certain limits, to pay. Advanced
Communication Sys., Inc., B-283650 et al., Dec. 16, 1999, 2000 CPD para. 3 at 5.
Accordingly, a cost realism analysis must be performed when a
cost-reimbursement contract is contemplated. FAR sect. 15.404-1(d)(2). A cost
realism analysis is the process of independently reviewing and evaluating
specific elements of each offeror's proposed cost estimate to determine
whether the estimated proposed cost elements are realistic for the work to
be performed, reflect a clear understanding of the requirements, and are
consistent with the unique methods of performance and materials described in
the offeror's technical proposal. FAR sect. 15.404-1(d)(1). Because the
contracting agency is in the best position to make this cost realism
determination, our review is limited to determining whether the agency's
cost evaluation was reasonably based and not arbitrary. NV Servs.,
B-284119.2, Feb. 25, 2000, 2000 CPD para. 64 at 7.

We turn first to Wyle's contention that the Air Force should have adjusted
Bionetics' cost proposal upward to account for the lower fringe benefit rate
it proposed. The protester argues in essence that Bionetics' fringe benefit
rate is unrealistically low because it is substantially lower than the
fringe benefit rate that Wyle has been paying its employees, many of whom
Bionetics hopes to retain, under the predecessor contract. In this regard,
Wyle asserts that its employees receive [deleted] per hour in fringe
benefits, whereas Bionetics has proposed a fringe benefit rate of only
[deleted] per hour.

The RFP included a Department of Labor (DOL) wage determination, which
required a minimum employer contribution of $2.56 per hour for fringe
benefits. [Deleted]. Since comparison to a DOL wage determination is a
reasonable method of assessing the realism of an offeror's labor rates,
Advanced Communication Sys., Inc., supra, at 8 n.9, we see no reason to
object to the agency's conclusion that Bionetics' proposed fringe benefit
rate, [deleted], was realistic. The fact that Wyle, the incumbent
contractor, proposed a higher fringe benefit rate than Bionetics provides no
basis to find that Bionetics' proposed rates are unrealistic. See Calspan
Corp., B-255268, Feb. 22, 1994, 94-1 CPD para. 136 at 8, recon. denied,
B-255268.2, July 5, 1994, 94-2 CPD para. 6. Accordingly, we deny the protester's
argument that Bionetics' evaluated cost should have been adjusted upwards by
[deleted] to account for the lower fringe benefit rates that it proposed.

Given our conclusion that no upward adjustment to the fringe benefit rate is
required, we need not address Wyle's remaining challenges to the cost
evaluation concerning Bionetics' wage rates, subcontractor repair costs for
FMS items, and additional laboratory technician effort, since the upward
adjustments Wyle contends are necessary in these areas would have no impact
on the relative cost standing of the two offerors. In this regard, the
protester estimates that these three items would require upward adjustments
to Bionetics' evaluated cost of $6 million, $2.2 million, and $17 million
respectively, for a total upward adjustment of $25.2 million, which is
insufficient to overcome the disparity of approximately [deleted] between
the probable costs of the two proposals as evaluated by the agency.
Accordingly, given our conclusion that the technical evaluation of the two
proposals was reasonable, Wyle would remain the higher-cost, lower-rated
offeror, and thus would not be in line for award even if we agreed that the
remaining costs should be adjusted as Wyle contends. Competitive prejudice
is an essential element of a viable protest; where, as here, the record
establishes no reasonable possibility of prejudice, we will not sustain a
protest even if a defect in the procurement is found. McDonald-Bradley,
B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see Statistica, Inc. v.
Christopher, 102 F.3d 1577 (Fed. Cir. 1996).

Because Wyle has failed to demonstrate that the Air Force's evaluation of
proposals was unreasonable or that Bionetics had a conflict of interest that
would have precluded it from receiving the award, the protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. The RFP included line items for the base and seven option periods. In
addition, it included a clause providing that the number of option years
might be increased based on contractor performance up to a maximum of 17,
which, when combined with the 3-year base period, would mean a maximum
period of performance of
20 years. RFP at H-900 and I-195.

2. The five mission capability subfactors, listed in descending order of
importance, were performance plan, sustainment of capabilities, workload
management, transition plan, and small business/small disadvantaged business
participation.

3. The RFP provided for evaluation of each mission capability subfactor in
accordance with Air Force Federal Acquisition Regulation Supplement (AFFARS)
sect. 5315.305(a)(3)(i), which provides for the following color/adjectival
ratings: blue--exceptional; green--acceptable; yellow--marginal; and
red--unacceptable. RFP,
sect. L.3.1.

4. The SSA determined that Wyle's proposal was strongest under the fifth
subfactor, transition plan.

5. The evaluation team annotated mission capability subfactor strengths in
accordance with the following definitions:

*** Exceptional Aspect
** Outstanding Aspect
* Significant Aspect

6. Other strengths identified in Bionetics's proposal under the performance
plan subfactor were the organization of its technical order department into
three disciplines; its dedication of a quality assurance specialist for
technical order products; and its organization charts. Strengths identified
under the sustainment of capabilities subfactor were the content of its
Measurement Area Capabilities Document; its funding for accreditation; the
expertise of its Chief Scientific Advisor, its comprehensive training
program; and its technician skills matrix.

7. Although the RFP instructed offerors to submit only four contracts for
consideration, RFP sect. L-900, 7.3, Bionetics requested--and was
granted--permission to submit a fifth contract after it was informed during
discussions that two of its first four had been rated as non-relevant.

8. In any event, the Air Force maintains that a change in its rating of the
relevance of this contract (from relevant to semi-relevant) would not have
affected its overall evaluation of Bionetics' past performance as
exceptional/high confidence. In this regard, the Air Force notes that even
if this contract had been rated as semi-relevant, rather than relevant,
Bionetics/Lockheed would have had one very relevant, one relevant, and five
semi-relevant contracts, almost all with excellent or very good ratings,
which compares favorably with Wyle's one very relevant, one relevant, and
two semi-relevant contracts, which earned it a performance confidence rating
of exceptional/high confidence.