TITLE:  Imaging Systems Technology, B-289262, February 1, 2002
BNUMBER:  B-289262
DATE:  February 1, 2002
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Decision

Matter of: Imaging Systems Technology

File: B-289262

Date: February 1, 2002

Donald K. Wedding, Esq., Donald K. Wedding Law Office; and Claude P.
Goddard, Jr., Esq., Wickwire Gavin, for the protester.

John D. Inazu, Esq., and John C. Gatlin, Esq., Department of the Air Force,
for the agency.

Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest that agency failed to conduct an adequate cost comparison under
10 U.S.C.

sect. 2462 (2000) is denied, where record shows that comparison was fair and
realistic; primary reason for protester's higher cost was its proposal of
higher-cost staffing, which did not reflect significant changes in the
statement of work from previous contracts and solicitations.

DECISION

Imaging Systems Technology (IST) protests the Department of the Air Force's
cancellation of request for proposals (RFP) No. F34601-01-R-0067, issued to
acquire logistics support services for the programmable indicator data
processor (PIDP), a worldwide standardized automated radar display,
tracking, and flight data processing system. The RFP contemplated a cost
comparison to determine whether the government or a contractor could perform
the work more cost effectively; the Air Force canceled the RFP based on its
determination that the cost of in-house performance would be lower than
performance by IST. IST argues that the cost comparison was improper because
the agency's in-house cost estimate was understated.

We deny the protest.

The agency conducted this acquisition pursuant to 10 U.S.C. sect. 2462, which
requires defense agencies to acquire goods or services from a private sector
concern if such a source can provide the requirement at a cost that is lower
than the cost to perform the same requirement in-house. The statute further
provides that, in ascertaining whether a private sector source or the
government can perform the requirement at a lower cost, the acquiring
activity is required to ensure that all costs considered are realistic and
fair.

The current protest is the latest in a protracted dispute between the
parties regarding the adequacy of the agency's cost comparison in connection
with its decision to perform the requirement in-house rather than by
contract. IST had performed the requirement under contract prior to 1999.
Our Office sustained a protest by IST against cancellation of a follow-on
RFP, finding that the agency had failed to conduct a fair and reasonable
comparison of the costs of in-house and contract performance. Imaging Sys.
Tech., B-283817.3, Dec. 19, 2000, 2001 CPD para. 2. Among other findings, we
held that the cost comparison was flawed because the agency had calculated
the cost of in-house performance using a level of effort that was
significantly lower than that outlined in the solicitation. Id. at 10.

The current RFP was prepared in the wake of our prior decision, and reflects
the agency's revised views regarding its requirements. It contemplates
either the award of a contract to the lowest priced, technically acceptable
offeror or, if the government cost estimate showed that the requirement
could be performed in-house for a lower cost, cancellation of the
solicitation. RFP sect. M-800. There are four primary areas of performance.
First, under technical assistance, technical support must be provided to
field personnel maintaining PIDP systems in numerous locations worldwide.
Technical assistance (in the form of responding to telephonic or e-mail
requests for assistance) was required 8 hours a day, 5 days a week, and
requests had to be responded to within 1 business day (excluding weekends
and holidays). Technical Performance Requirements Specification (TPRS) sect.
3.2. The RFP advised that, on average, the requirement was for a response to
46 requests for technical assistance per month.

Second, under emergency on-site technical assistance, personnel are required
to travel to the PIDP installation to troubleshoot or diagnose and correct a
system outage. TPRS sect. 3.3. The RFP estimated that there would be a need to
respond to approximately six emergency on-site assistance requests per year,
four within the continental United States and two in other locations.
Offerors were required to provide labor rates for whatever skill
classifications they intended to use. The agency then would use an average
of the proposed rates, and multiply that rate by a specified number of hours
to arrive at a price for this element of the requirement. RFP Contract Line
Item Nos. (CLIN) 3, 9.

Third, depot-level repair of failed system components requires personnel to
repair failed parts from field locations. TPRS sect. 3.1. As with the emergency
on-site technical assistance, offerors were to provide hourly labor rates
for the skill levels it intended to use for these CLINs; the rates would be
averaged and multiplied by a stated number of hours. CLINs 4, 10.

Fourth, offerors were to have available the capacity to respond to
unanticipated "over and above" requirements (for example, the preparation of
engineering change proposals) which might arise under the TPRS. This element
of the requirement was unpriced, and therefore not a part of the cost
comparison; individual task orders would be negotiated at the time
requirements (if any) arose. CLINs 6, 12.

In response to the RFP, the agency received two private sector offers; IST's
was determined to be the low, technically acceptable offer at a cost of
$374,640. Since the government's total cost estimate was $118,570, the Air
Force determined that it would cost less to perform the requirement in-house
and, accordingly, canceled the solicitation. This protest followed.

The principle reason for the disparity between the two cost proposals is
that the protester proposed to perform the work largely with engineers,
while the agency proposed performing with a technician. [1] Agency Report
(AR), exh. 6. With regard to the technical assistance work (by far the
largest element of the requirement), for example, IST's proposal stated as
follows:

IST will provide one exceptionally well qualified PIDP engineer who will be
the technical lead on the program and will be responsible for the routine
day to day requests for assistance and who will respond to any emergency
requests, including overseas site visits. We will also have available a
second qualified PIDP engineer, experienced in handling telephone requests
for PIDP II assistance and depot repair tasks who will be the back up
engineer. This PIDP technical staff is in turn augmented by experienced
technicians and senior engineers for design tasks or assistance.

IST Technical Proposal at 6. Noting that the solicitation is for the
provision of "full logistics support," IST asserts that the work under the
RFP cannot be performed solely by technicians; engineering expertise is
needed to solve technical problems, such as the preparation of engineering
change proposals (ECPs) which may arise that are beyond the competence of a
technician. The protester further notes that the RFP provided numerous
spaces under the CLINs calling for labor rates, thereby indicating that more
than one skill classification was being called for.

The agency responds that the solicitation's requirements and, in particular,
those relating to technical assistance, emergency on-site repair and
depot-level repair (that is, those CLINs for which pricing was required),
can in fact be accomplished by a technician, as shown by the fact that it
has successfully been meeting its requirements for the solicited services
using a technician located at Tinker Air Force Base since 1999 when IST's
contract expired.

We find nothing improper in the costing of the agency's in-house cost
estimate; rather, it appears that the protester misread or ignored the
requirements as stated in the RFP and, as a result, proposed higher-cost
staffing than was necessary to perform the work. In this regard, the TPRS
called only for "technical assistance," TPRS sect.sect. 3.2, 3.3; it made no
reference to engineering assistance. Moreover, the RFP included a skill
level description that stated as follows:

The contractor personnel performing work under the terms of the . . .
contract shall have been trained in the electronics technology typical of
those associated with the PIDP system hardware and software, to the level of
Craftsman . . . . Related civilian occupations . . . are (a) Data Processing
Equipment Repairman . . . (b) Electronics Mechanic . . . (c) Electronics
Repair, Commercial and Industrial Equipment . . . and (d) Electronics
Systems Maintainer . . . .

TPRS sect. 4.8.

The TPRS contrasted sharply with the prior version of the agency's
requirement (referred to as the work description document (WDD)), which did
not include the quoted skill level description, and consistently called for
"engineering technical assistance" and "engineering analysis." WDD sect.sect. 3.4,
3.7 and 3.8. There thus was nothing on the face of the TPRS expressly
stating that engineering services were being solicited, and the skill level
description and other changes from the prior WDD suggested that engineering
services were not required.

The testimony at the hearing that our Office conducted in connection with
the protest further tends to show that the solicited work could be performed
by a technician. The Air Force offered extensive testimony from its lead
technician to show that he is capable of accomplishing the technical
assistance and depot-level repair functions; he testified, for example, that
in the approximately 14 months he has been performing the function, there
have been no instances where a technical problem was beyond his competence.
Hearing Transcript (Tr.) at 32, 33, 37-38. The protester's own
representatives did not show otherwise; they testified that the routine
functions called for under the RFP could be handled by a technician, and
conceded that the technician being used by the agency has additional
PIDP-specific training that would enable him to perform better than a more
generally trained technician. Tr. at 48-50.

The agency does not deny that engineering services may be required at some
point during performance of the requirement. However, the agency states that
such services, if ever required, would be covered, not by the priced CLINs,
but by the RFP's "over and above" CLIN, which, as discussed, was not part of
the cost comparison because it was not priced by offerors (or the
government). Tr. at 34-35. This approach appears to be consistent with the
agency's approach under prior PIDP contracts of which the protester was
fully aware. In this regard, the protester states that:

Over the life of [the PIDP] program, from 1992 to 1999 there were 121
Engineering Task Orders generated by the Air Force . . . Program Office.
There were also at least four ECPs in the latter years. These Task Orders
and ECPs were over and above the Depot Repairs and Telephone Technical
Assistance Tasks.

IST Post-Hearing Comments at 12 (emphasis supplied).

We conclude that the TPRS did not contemplate performance of engineering
services within the priced CLINs (as indicated by the skill level
description provision of the RFP), and that the record shows that the
services described in the TPRS can be performed by a technician. [2] It
follows that the disparity between the protester's and the agency's costs
resulted largely, not from the agency's failure to propose staff qualified
to perform the work, but from the protester's proposing overqualified,
high-priced staff in disregard of the terms of the RFP. We note in this
regard that the protester's representatives testified that at least part of
the reason IST proposed using engineers was the fact that the firm's PIDP
system expertise resided with its engineers as opposed to its technicians.
Tr. at 49. To the extent that engineering expertise may be required, it will
be a minor element of the overall cost of performance, and one that neither
party was required to price under the terms of the RFP, and thus was not
part of the cost comparison. [3]

IST also argues that the agency's cost estimate improperly was based on the
use of part-time personnel, omitted several minor cost elements (for
example, the cost of preparing purchase requests and invoices, or the cost
of maintaining configuration control over drawings where a change has been
made), and was based on certain level-of-effort information not disclosed to
the protester. Given our conclusions above, even if the protester were
correct regarding these elements, the result of the cost comparison would
not change. Since the agency's cost advantage is due primarily to the
disparity in hourly rates for staffing, even if we found that IST's
arguments warranted adjustments to its and the agency's costs to ensure that
they were based on an identical level of effort, the agency's cost
necessarily would remain substantially lower. We conclude that IST was not
prejudiced by these additional alleged deficiencies; we therefore need not
consider them. See EastCo Bldg. Servs., Inc., B-275334, B-275334.2, Feb. 10,
1997, 97-1 CPD para. 83 at 7.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. For CLINs 1 and 7 (the technical assistance element of the requirement)
IST used a loaded hourly rate of [deleted] for engineer services. For CLINs
3, 4, 9 and 10, IST's cost was calculated based on an hourly rate of
[deleted], which was an average of three different hourly rates it proposed
based on the skill level of the employee. The government cost proposal used
a technician services hourly rate of $29.48 for the base year and $30.63 for
the option year.

2. As noted, in our prior decision we recommended that the Air Force review
its requirements and revise its statement of work to reflect its actual
requirements. Imaging Sys. Tech., supra, at 10. It appears this is precisely
what the Air Force did.

3. To the extent IST's protest arguments can be seen as an assertion that
certain engineering work should have been included in the cost comparison,
its protest is untimely. The protester knew or should have known from the
changes in the current, as compared to the prior, statement of work (as well
as the agency's ordinary course of dealing under prior contracts) that
engineering services were not covered by the priced CLINs, and thus not part
of the cost comparison; if the protester believed this was improper, it was
required to protest on this ground prior to the deadline for submitting
proposals. 4 C.F.R. sect. 21.2(a)(1) (2001).