TITLE:	Integrity Management Enterprises, Inc.
BNUMBER:	    B-290193; B-290193.2
DATE:		    June 25, 2002
**********************************************************************
Integrity Management Enterprises, Inc., B-290193; B-290193.2, June 25, 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:   Integrity Management Enterprises, Inc.

File:            B-290193; B-290193.2

Date:              June 25, 2002

Robert E. Korroch, Esq., Michael J. Gardner, Esq., Francis E. Purcell, Jr.,
Esq., and James J. Reid, Esq., Williams Mullen Clark & Dobbins, for the
protester.
Robert J. McMullen, Esq., Department of the Navy, for the agency.
John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Agency conducting a commercial activities study under Office of
Management and Budget Circular A-76 did not act improperly in amending the
performance work statement (PWS) during its review of the in-house
management plan where the agency determined at that time that the PWS did
not accurately reflect its minimum needs and the changes to the PWS were
provided to the private-sector offerors through amendment of the request for
proposals.

2.  Agency reasonably determined, during a commercial activities study under
Office of Management and Budget Circular A-76, that the in-house management
plan reasonably established the ability of the government to perform the
requirements of the performance work statement (PWS), and identified and
included all costs necessary to perform the PWS requirements.

3.  Agency, which during its evaluation of private-sector proposals
submitted as part of a commercial activities study under Office of
Management and Budget Circular A?76 found that the selected "best value"
proposal merely met the requirements of the request for proposal's
performance work statement (PWS) and did not identify any strengths in the
proposal, was not required to make any adjustments to the
in-house management plan, which also was found to meet the minimum PWS
requirements.

DECISION

Integrity Management Enterprises, Inc. (IME) protests the Department of the
Navy's determination, pursuant to Office of Management and Budget (OMB)
Circular A?76, that it would be more economical to retain the performance of
central support services for the Pensacola Naval Regional Complex (PNRC)
in-house, rather than contract for these services with IME under request for
proposals (RFP) No. N00140?00-R-G514.[1]

We deny the protest.

BACKGROUND

The RFP, issued February 24, 2000 as a small business set-aside, provided
for the award of a fixed-price contract, with certain cost reimbursement
provisions, for a base period with four 1-year options.  Offerors were
informed that the solicitation was issued as part of a Circular A-76
commercial activities study to determine whether accomplishing the support
services set forth in the solicitation's PWS under contract or by government
performance was more economical.  If government performance was determined
to be more economical, then no award under the RFP would be made and the
solicitation would be canceled.[2]  RFP amend. No. 0011, at 29.  The
solicited central support services included general, central administrative,
supply, postal, and emergency dispatch services.  The PWS specified the
requirements for each of these service areas, and set forth estimated
average annual workloads and minimum performance standards.

The RFP provided that the successful private-sector offeror would be
selected on the basis of which offeror's proposal represented the best value
to the government.  The solicitation informed offerors that technical merit
would be considered more important than price in determining which proposal
represented the best value to the government, and listed the following
technical evaluation factors in descending order of importance:

(a)  Past Performance
(b)  Management Plan
(i)                Staffing Plan
(ii)              Quality Control Overview
(c)  Corporate Experience

The quality control overview subfactor to the management plan factor was to
be "evaluated on a pass/fail basis."  Id. at 33.

The RFP provided detailed proposal preparation instructions, and requested
that offerors submit separate technical and price proposals.  With regard to
technical proposals, the solicitation requested that each offeror provide,
for example, a management plan, consisting in part of a staffing plan
demonstrating the firm's ability to perform the work set forth in the PWS.
The solicitation also specified that while a quality control plan would not
be required until 45 days after award, offerors were to submit a quality
control overview, providing "examples of critical quality processes, process
metrics, service delivery metrics, and flow?charting or other graphical
techniques to be utilized in effecting the offeror[']s Quality Control
Plan."  Id. at 32.

Certain Navy personnel, with contractor support (hereinafter the management
plan (MP) team), were tasked with the development of the in-house management
plan, including the development of the in-house plan's most efficient
organization (MEO), technical performance plan (TPP), in-house cost estimate
(IHCE), and transition plan.  The in-house plan was developed, and forwarded
to the IRO for certification.  To assist the IRO in reviewing and certifying
the in-house plan, the Navy contracted with a private-sector contractor that
performed much of the analysis on which the IRO based his judgment.  The
record reflects that during this review process, the Navy issued 206 "Action
Item Transmittal Forms" (AITF), each of which posed a question or questions
regarding the in-house plan.  Agency Report (AR), vols. 8-9.

Although many of the AITFs resulted in an explanation from the MP team as to
how or why the in-house plan satisfied the PWS requirements, the Navy
responded to some of the AITFs by amending the PWS as well as the RFP issued
to the private sector offerors.  Id.; Agency Supplemental Report (ASR) at
2.  For example, in response to an AITF that questioned whether the in-house
plan provided for the drug testing of employees, as required by the PWS, the
agency found that none of the positions under study "were drug testing
positions."  Accordingly, the requirement for drug testing was deleted from
the PWS (and the RFP was so amended).  AR, vol. 8, AITF 0048; compare PWS
(as initially issued) at 6 with PWS, as amended, and included in RFP amend.
no. 11 (Aug.17, 2000).

The IRO ultimately certified that the in-house plan, which provided for a
staffing level of 47.1 full-time equivalents (FTE) at a total cost of
$9,756,320, was in accordance with Circular A-76 and reasonably established
the ability of the in-house plan to satisfy the PWS requirements.  AR, Tab
17, IRO Certification (Sept. 12, 2000); Tab 18, Revised In-House Plan, at 2,
7; Tab 20, Revised IRO Certification (June 11, 2001).

The agency received eight proposals, including IME's, by the RFP's closing
date of September 29, 2000.  AR, Tab 5, Technical Evaluation Board (TEB)
Report for Initial Proposals, at 1.  IME's initial proposal received ratings
of "acceptable" under the past performance factor, "unacceptable" under the
management plan and corporate experience factors, and "unacceptable"
overall, at an evaluated price of $10,853,810.[3]  Id. at 1, 10-15; Tab 6,
Pre-Negotiation Contract Review Board Presentation, at 4.  Under the
management plan factor, IME's proposal received ratings of "unacceptable"
and "pass" under, respectively, the staffing plan and quality control
overview subfactors.  AR, Tab 5, TEB Report for Initial Proposals, at 1.
The proposals of IME and another offeror were included in the competitive
range.[4]  AR, Tab 6, Pre-Negotiation Contract Review Board Presentation
(July 25, 2001), at 17.

The agency conducted oral discussions with IME on July 24 and 25, 2001.  By
letter dated July 25, the agency confirmed these discussions, informed IME
that its proposal was considered capable of being made acceptable "if
additional information is provided," and requested that IME submit its final
proposal revisions (FPR) by August 6.  The agency's letter also provided IME
with a detailed explanation of the agency's evaluation of IME's initial
proposal.  AR, Tab 7, Contracting Officer's Letter to IME (July 25, 2001).

The protester timely submitted its FPR.  The agency upgraded its evaluation
of IME's proposal under the staffing plan subfactor to acceptable, and
accordingly, found IME's proposal acceptable under the management plan
evaluation factor.  However, because the agency again found IME's proposal
unacceptable under the corporate experience factor, it evaluated IME's
revised proposal as unacceptable overall.  AR, Tab 9, Supplemental TEB
Report, at 1-6.  The agency nevertheless again determined that IME's
proposal, at its revised evaluated price of $12,237,320, was susceptible of
being made acceptable if additional information regarding its corporate
experience was provided.  AR, Tab 10, Pre-Negotiation Contract Review Board
Presentation (Sept. 27, 2001), at 4, 12.

The agency conducted a second round of oral discussions with IME on October
4, and IME submitted additional information regarding its corporate
experience on October 4 and 5.  By letter dated October 10, the agency
confirmed these discussions, and informed IME that its proposal, as revised,
was "considered acceptable."  This letter added that in evaluating IME's
proposal, the agency had found "nothing notable with respect to any of the
[evaluation] factors that would contribute to a rating higher than
acceptable."  The agency's letter included a summary of its evaluation of
IME's proposal as revised, and concluded, consistent with the previous
statements in the letter, that "[t]here is nothing in your proposal to
indicate that you are offering performance or performance quality that
differs from that required by the PWS."  The letter finally advised IME that
it was being "afforded an opportunity to improve any aspect of [its]
technical proposal and to submit a revised FPR."  AR, Tab 11, Contracting
Officer's letter to IME (Oct. 10, 2001), at 3.  IME responded to the agency,
by letter dated that same day, confirming that the agency had evaluated its
proposal as acceptable overall, and that IME had "elected to have" its
technical and price proposals "remain the same."  AR, Tab 12, IME's Letter
to the Contracting Officer (Oct. 10, 2001).

The contracting officer, acting as the source selection authority (SSA),
selected IME's proposal as the only acceptable proposal for use in the cost
comparison.  AR, Tab 13, SSA's Memorandum for File (Oct. 17, 2001).  The
record contains a detailed memorandum written by the SSA, noting among other
things that IME's "proposal was rated acceptable overall based on acceptable
ratings in each of the evaluation factors," and specifically concurring with
the TEB's findings that the proposal did not provide for "improvements to
the level of performance and performance quality beyond that which is
required by the PWS."  AR, Tab 21, SSA's Memorandum for Record (Nov. 14,
2001), at 1.  The SSA proceeded to describe the minimum standards set forth
in the RFP in each of the required PWS service areas, and concluded that
IME's proposal did not provide that any of these services would be performed
at a level exceeding that required by the RFP's PWS.  Id. at 2.

In the memorandum, the SSA noted that the in-house plan did not provide for
"improvements to the level of performance and performance quality beyond
that which is required by the PWS."  Id. at 1.  However, the memorandum
further provided that the SSA "reviewed the [in-house plan] to ensure that
it has accounted for the workload established by the RFP," forwarded "a list
of concerns regarding the [in-house plan] to the [MP] team for comment," and
requested that the TEB review the "process times established in the
Government's MEO to determine if they are reasonable."  Id. at 2-3.

As a result of these reviews, a number of minor errors were found in the
in-house plan.  For example, the SSA found during this review that although
the PWS estimated the time to process each travel order at 1 hour, the
in-house plan was based upon an estimated time to process each travel order
of 40 minutes; this concern was forwarded to the MP team, which concurred
that the in-house plan was in error and that the impact on the in-house plan
would be an increase of approximately 360 hours.  Id. at 3.

The reviews also found that the in-house plan was based in some instances
upon workload estimates that were in excess of those set forth in the PWS.
For example, the SSA found that the section of the in-house plan addressing
the provision of central administrative services was based, in part, upon an
estimated workload of 41,000 incoming messages whereas the PWS provided for
an estimated 22,000 messages.  Id.  The net result of these reviews was a
finding that the in-house plan had overstated the hours required to perform
the services set forth in the PWS by 1,350 hours.  However, the MP team
declined the SSA's offer to amend the IHCE to reflect the reduced number of
hours required, citing the time necessary to perform the change and the
minimal overall effect it would have on the IHCE.  Id. at 3-4.

The SSA stated in the memorandum that he "considered that the [in-house
plan] and IME['s proposal] have very different staffing levels," with IME's
proposal offering "a total of 76.3 full-time equivalents, while the
[in-house plan] offers 47.1 FTE[s]."  The SSA noted here that, in his view,
differing proposed staffing levels were "not unusual in response to a
performance-based statement of work," and that the seven other private
sector offerors proposed staffing levels that ranged from a low of 22 FTEs
to a high of 116 FTEs.  Id. at 1.

Based upon the above reviews and analyses, the IRO's certification of the
in-house plan's ability to perform the requirements of the PWS, and the fact
that IME's proposal had been found only capable of meeting (and not
exceeding) the requirements of the PWS, the SSA ultimately concluded in the
memorandum "that the [in-house plan] will achieve the same level of
performance and performance quality as the contractor proposal, albeit with
differing staffing complements."  Id. at 4.

The agency completed its study by comparing the in-house plan's estimated
cost of $9,756,320 to IME's proposed price, with adjustments for contract
administration costs, one-time conversion costs, and the minimum conversion
differential, of $14,395,817.  Because of the $4,639,497 difference, the
agency determined to perform the requirements in-house.  AR, Tab 22, Cost
Comparison (Nov. 15, 2001).  By letter dated November 15, the agency
notified IME of the outcome of the cost comparison, and that the agency
would make the cost comparison form and supporting documentation (including
the MEO) available for IME's review.  AR at 8; ASR at 7.

IME reviewed the available information, and timely filed an administrative
appeal.  AR, Tabs 24, IME's Administrative Appeal.  The agency's
administrative appeal authority made minimal adjustments to both the
in-house plan's costs (adding $49,875) and the costs of contracting with IME
(subtracting $32,284), but ratified the determination to perform the
requirements in-house, given the now $4,557,338 difference.  AR, Tab 25,
Final Decision of on the Administrative Appeal of A-76 for Administrative,
Central Supply, Postal and Emergency Dispatch Services, PNRC, at 29.  This
protest followed.

PROTEST

IME protests that the agency erred in allowing changes to be made to the PWS
during and as a result of the IRO's review of the in-house plan.  The
protester also argues that the in-house plan fails to meet certain PWS
requirements and fails to include certain required costs, and that the
in-house plan does not provide for a level of performance and performance
quality that is comparable to that provided for by IME's proposal.

ANALYSIS

Where, as here, an agency has conducted a cost comparison under Circular
A-76, thus using the procurement system to determine whether to contract out
or to perform the work in-house, our Office will consider a protest alleging
that the agency has not complied with the applicable procedures in its
selection process or has conducted an evaluation that is inconsistent with
the solicitation criteria or is otherwise unreasonable.  To succeed in its
protest, the protester must demonstrate not only that the agency failed to
follow established procedures, but also that its failure could have
materially affected the outcome of the cost comparison.  BAE Sys., B-287189,
B-287189.2, May 14, 2001, 2001 CPD ï¿½ 86 at 19.  As explained below, we
believe that the agency's actions were neither inconsistent with Circular
A-76 nor inappropriate under the circumstances.

Propriety of Amending the PWS/RFP During the IRO's Review of In-House Plan

The protester points to the sections of the record that reflect that while
many of the AITFs issued by the IRO resulted in an explanation from the MP
team, the Navy responded to some of the AITFs by amending the PWS (and
amending the RFP issued to the private sector offerors).  The protester
complains that the AITFs "identified a number of significant shortcomings in
the [in-house plan]," and that the agency "often resolved those shortcomings
by . . . amending the PWS so that the [in?house plan] solution was
acceptable."  Protester's Comments at 5.  As a specific example, the
protester points out that, as discussed previously, the AITF questioning
whether the in-house plan provided for drug testing resulted in the deletion
of the drug testing requirement from the PWS.  Id. at 6.  The protester
notes (without explanation) that although this requirement was deleted from
the RFP, its proposal nevertheless provided for the drug testing of its
employees.  The protester concludes that the agency's actions were
inconsistent with Circular A-76, and appears to argue that they reflected
agency bias towards the in-house plan.  Id. at 5; Protester's Supplemental
Comments at 2-3.

However, the record simply does not indicate that the agency deleted
requirements from the PWS (and RFP) during its evaluation of the in-house
plan because of any bias.  Rather, the record reflects that the agency
amended the PWS because it learned, during its evaluation of the in-house
plan, that certain sections of the PWS did not adequately state the agency's
minimum needs.  The deletion of the PWS's requirement that employees be drug
tested is an example of this.  In this regard, and as discussed previously,
the IRO found when reviewing the in-house plan that it did not provide for
the drug testing of employees.  When questioned about this, the MP team
checked and found that none of the positions that were subject to the
commercial activity study were positions for which drug testing was
required.  Accordingly, the agency deleted the drug-testing requirement from
the PWS (and RFP).

The fact that the agency deleted a provision in the PWS that was both
unnecessary and potentially costly (to the selected private-sector offeror,
the in-house plan, and thus the government) cannot be construed, in our
view, as evidence that the agency was biased in favor of retaining the
performance of the services in-house.  See RONCO Consulting Corp., B-280113,
Aug. 11, 1998, 98-2 CPD ï¿½ 41 at 5 (government officials are presumed to act
in good faith; we will not attribute unfair or prejudicial motives to
procurement officials on the basis of inference or supposition).  Rather, it
appears to reflect sound judgment on the part of the agency and a desire to
comply with procurement law and regulations, by ensuring not only that its
minimum needs were met, but also that the private-sector offerors and the MP
team competed on the basis of the same scope of work.[5]  See RSH, part I,
ch. 3, ï¿½ H.3.e; BAE Sys., supra, at 19-20.

Another example raised by the protester of the agency's amending the PWS
(and RFP) because of the IRO's discussions with the MP team relates to the
PWS provision regarding central administrative services that requires that
the service provider "process, provide, and track vehicle gate passes and
base identification cards to eligible military and civilian personnel for
the [PNRC] excluding NASWF."[6]  PWS at 18; PWS, as amended, at 28.  The
protester complains here that the agency "changed the PWS requirement for
processing and tracking vehicle gate passes and base identification cards to
match the [in-house plan's] proposal to track and maintain the databases."
Protester's Comments at 7.

The record reflects that the IRO, upon reviewing the in-house plan,
questioned the in-house plan's statement that it "will continue to maintain
and update database that tracks the status of vehicles registered and passes
issued."  AR, vol. 10, Final AITF, at 36.  The IRO was informed that
although the PWS did not reference this database, one was indeed in use by
the government.  Accordingly, the PWS was amended to ensure that the service
provider maintained the database and underlying systems.  Id.; PWS, as
amended, at 36.  The agency explains that this change was made simply to
"reflect the realities at the PNRC."  ASR at 3.  The protester does not
assert, and there is nothing in the record to suggest, that the maintenance
of the database and underlying systems is not an actual agency requirement.
As such, we fail to see how the agency's actions here--amending the PWS to
more accurately reflect its needs--can be viewed as somehow improper or
indicative of bias; indeed, it was the proper action for the agency to take
in the circumstances.  BAE Sys., supra.

We note that the protester makes no mention (with the exception of its
apparent argument regarding bias) as to how it was prejudiced by the
agency's amendment of the PWS during the IRO's review of the in-house plan.
For example, while the protester refers to the fact although the PWS was
amended, its proposal nevertheless provided for the drug testing of its
employees, it fails to state the impact of this on its proposal, or
otherwise explain how the amendment of the RFP in this regard, or any other
regard, adversely affected it in the cost comparison.  Again, as pointed out
by the agency, IME and the MP team "proposed on the same requirements," so
no prejudice is apparent, and it was incumbent upon IME, when pursuing this
basis of protest, to establish how it was prejudiced.[7]  BAE Systems,
supra, at 19; Symvionics, Inc., B-281199.2, Mar. 4, 1999, 99-1 CPD ï¿½ 48 at
5-6 (protester not prejudiced where it failed to show, and the record did
not reflect, how it was prejudiced by the agency's failure to seal the
in-house plan prior to its receipt of private-sector proposals as required
by the RSH, part I, ch. 3, ï¿½ F.2).

IRO's Certification of the Government's Ability to Perform the PWS

The protester argues that the government cannot satisfy the minimum
requirements of the PWS with the resources set forth in the in-house plan.
In reviewing an agency's evaluation of whether the in-house offer
establishes the ability to perform the PWS within the resources provided by
the plan, we will not reevaluate the in?house plan, but instead will examine
the agency's evaluation to ensure that it was reasonable and consistent with
applicable procedures.  Jones/Hill Joint Venture, B?286194.4 et al., Dec. 5,
2001, 2001 CPD ï¿½ 194 at 17.

For example, the protester contends that the IRO unreasonably determined
that the in-house plan included sufficient resources to accomplish the work
set forth in the PWS regarding the sorting, slotting, picking-up and
distributing of official mail.  The PWS provided as follows:

The [service provider] shall sort, slot, pick-up and distribute official
mail directly to [service provider] operating sites and PWC [public works
center].  Mail includes letter mail, [United States Postal Service] parcels,
courier packages, and registered mail picked-up or delivered to the
[consolidated mail facility] or [service provider] operating sites.  Less
than 1% of average workload is parcel or courier packages.
PWS at 33-34.  The PWS continued by setting forth average annual workloads
for administrative (39,000 pieces), security (5,200 pieces), fire (18,500
pieces), supply (20,000 pieces) and PWC (2,000 pieces).  Id.

The in-house plan included, for each of the service areas listed above, a
table that in relevant part provided the work required (sort, slot, pick-up
and distribute official mail), estimated time to perform the work required,
workload, and total time to perform the work based upon the total workload.
AR, Tab 14, In-house Plan, MEO, attachs. 1-1 through 1-4.  The protester
argues that the in-house plan "has enormously understated the PWS workload
requirements for [the] Administration and Supply operations."  Protest at
11.  In this regard, the protester points out that according to the tables
in the in-house plan, the in?house plan used workloads of "248" for both the
central administrative and supply service areas, rather than the workloads
provided in the PWS of 39,000 and 20,000 pieces, respectively.  The
protester calculates that "[b]ased on the MEO's staffing standard of 1776
[hours] per FTE, the MEO is short more than 27 FTEs just in relation to this
one task."  Protest at 12.

The agency, while essentially conceding that the disputed tables in the
in-house plan are not models of clarity, explains that the "248" entry under
"workload" refers to "number of workdays per year," and argues that the
in-house plan is, in fact, adequately staffed, in that the in-house plan
provides for 60 minutes and 30 minutes per day to perform, respectively, the
central administration and supply mail workloads.  The agency justifies the
in-house plan's staffing in this regard by explaining that the estimated
annual workloads of 39,000 and 20,000 pieces of mail for, respectively,
central administration and supply, divided by 248 workdays per year, results
in daily workloads of 157 and 81 pieces of mail.  The daily estimates,
divided by the time allotted in the in-house plan to perform the mail
function, provide for the processing of approximately 2.7 pieces of mail
every minute or a piece of mail every 22 seconds.  AR at 19.  The agency
maintains that this is a sufficient amount of time to process the mail.  The
agency also points out that IME's proposal provided for a total of 7 FTEs to
perform the required mail function (while the in-house plan provided for 5
FTEs), and that if the tables were read as IME's argues in its protest, the
tables would provide for the in-house plan's staffing of the mail function
with 32 FTEs.  AR at 18.

In our view, the agency's explanation regarding the methodology used to
determine the number of FTEs required (essentially, the time required to
process each piece of mail multiplied by the estimated workload) is
reasonable, and we note, as does the agency, that IME, at no point during
this protest, argues otherwise.  Rather, IME simply continues to argue that
the MP team erred by basing its estimates on annual workloads of 248 pieces
of mail for the central administrative and supply functions as indicated in
the in-house plan's tables, and that the in-house plan's staffing must be
raised to 32 FTEs.  Given the agency's credible explanation here, and what
we view as IME's overly simplistic, unpersuasive position, we find no basis
to object to the agency's conclusion that the in-house plan provided for
adequate staffing to perform the requirements of the PWS regarding the
processing of mail.

The protester also asserts that the in-house plan fails to comply with the
requirements of the PWS because it does not include a quality control plan.
The protester contends that what appears to be the in-house plan's quality
control plan is actually a "representation[] regarding what attributes
'will' be included in a future plan."  Protest at 18.

As mentioned previously, the PWS required the submission of only a quality
control overview, with the submission of the actual quality control plan not
being required until 45 days after award (or completion of the cost
comparison).  RFP amend. 11,
at 32.  The record reflects that the in-house plan included a quality
control overview as required, regarding which the IRO issued a number of
AITFs.  The AITFs resulted in the MP team's submission of a considerably
revised quality control overview that was reasonably accepted as adequate by
the IRO.[8]  AR vol. 9, AITFs 0142-0149; vol. 10, Final AITF at 42-43.

The protester, while apparently conceding that the solicitation did not
require the submission of a quality control plan, nevertheless complains in
its comments (without reference to anything specific in the record) that the
"[in-house plan's] approach appears to have been the result of coaching from
the IRO."  Protester's Comments at 18.  This argument reflects a
misunderstanding of the Circular A-76 process.

According to the RSH, the IRO, among other things, is to review the in-house
plan and supporting documentation to reasonably ensure the in-house plan's
compliance with the requirements of the PWS.  RSH, part II, ch. 2, ï¿½ A.1.b;
BAE Sys., supra.  This process contemplates that, should the IRO have
questions concerning the adequacy of the in-house plan, the IRO may
communicate these questions to the MP team for resolution, given that it is
the IRO's responsibility to ensure that the in?house plan satisfies the
minimum PWS requirements and that any adjustments necessary to satisfy the
PWS requirements are made.  BAE Sys., supra, at 19-20; see RSH, part I, ch.
3, ï¿½ï¿½ H, I, J.  The record here provides that the IRO did nothing more than
pose questions to the MP team regarding its quality control overview, or
inform the team of the sections of the overview that, in the IRO's view, did
not meet the requirements of the PWS.  In sum, our review of the record
indicates that the IRO's actions were consistent with the requirements of
the RSH by reasonably ensuring that the in?house plan, as certified, met the
requirements of the PWS.

Costs Associated with the Government's Performance of the PWS Requirements

The protester argues that the in-house plan did not include all costs
associated with its performance of the work required.  The RSH requires that
the in-house plan include all labor and costs associated with the
performance of the tasks required, and the agency is to ensure, during its
review of the in-house plan, that those costs are completely and properly
accounted for.  RSH, part I, ch. 3, ï¿½ I; part II, ch. 2; Jones/Hill Joint
Venture-Costs, B-286194.3, Mar. 27, 2001, 2001 CPD ï¿½ 62 at 13.

Specifically, IME points out here that the MEO states the following with
regard to its "mission:"

To provide quality Administrative, Supply, Postal and Emergency Dispatch
services to the [PNRC].  In doing so, the Central Support Business Unit will
continually reinvent itself through innovations in business practices and
technology.  The organization will focus on the needs of the customer and
strive to achieve 100% customer satisfaction in every aspect of its
operations and services.
AR, Tab 14, In-House Plan, MEO, at 22 (emphasis added).  The protester
argues that the agency erred in not requiring that the IHCE identify
specific costs associated with the MEO's intended use of "innovations in
business practices and technology."  The protester points out in this regard
that when the IRO questioned "what technology" would be used with regard to
another general reference set forth in the in-house plan that provided for
the use of "technology" to reduce staffing, the MP team responded by
deleting the reference.  Protest at 19; Protester's Comments at 18?19.

The protester also points out that the in-house plan elsewhere refers to the
"cross?utilization of personnel" in introducing its technical approach to
accomplishing the requirements of the PWS.  The protester argues here that
the IHCE was deficient in that it assumed "that multifunctional skills may
be gotten without any associated costs."  Protest at 21.  The protester
concludes here that the MP team "simply cannot 'design' its force of super
workers without implementing an extensive and expensive training program."
Id. at 21-22.

The Navy responds by arguing that "[w]hile better use of technology and
re?engineering processes should improve efficiency of either the MEO or
IME's proposed workforce, the amounts cannot be quantified."  The agency
asserts that in its view "[e]very part of the PWS is accounted for" with the
in-house plan's proposed staffing.  AR at 23.  The agency further notes
that, as found during IME's administrative appeal, "initial training costs
to implement the MEO are non?existent because all personnel will need to
meet the requirements required by the Position Description . . . that they
are to fill."  AR at 25; Tab 25, Final Decision on the Administrative Appeal
of A-76 for Administrative, Central Supply, Postal and Emergency Dispatch
Services, PNRC, at 26.  The agency explains that, notwithstanding IME's
assertions in its protest, the in-house plan "does not require a 'force of
super workers,'" and "[t]here simply is no government provided training
required to meet the requirements of the PWS."  AR at 25.

We find reasonable the IRO's certification of the in-house plan without
requiring detailed costs to account for the in-house plan's general
references to "innovations in business practices and technology" and
"cross-utilization."  Although the protester asserts that the IRO's position
was not sufficiently documented, the record reflects that the IRO conducted
a detailed and thorough review of the in-house plan, and ultimately
concluded that the in-house plan, as revised, reasonably established the
government's ability to perform the PWS with the resources provided.[9]  In
our view, the protester has failed to establish that any aspect of the IRO's
judgment in this regard was unreasonable or inadequately documented.
Specifically, the protester has not pointed to any specific technological or
business practice innovations set forth in the in-house plan that were not
costed in the IHCE.  Moreover, although IME clearly disagrees with the
agency's view that the in-house plan is not based upon the employment of
"super workers," but on retaining certain current agency personnel, the
protester simply has not shown that the in-house plan's position
descriptions are unrealistic with regard to the skills required.[10]

Comparable Level and Quality of Performance

The protester argues that the in-house plan does not provide a level of
performance that is comparable to that offered by IME's proposal.
Specifically, the protester points to the TEB's evaluation of IME's proposal
under the staffing plan subfactor to the management plan factor, where the
TEB found, for example, that "IME's proposed staffing plan reflected a
complete understanding of Supply staffing structure and functional
grouping."  The TEB noted here that IME proposed to
"cross-train/cross-utilize personnel from other functional areas/geographic
sites," and that "[t]his was considered an acceptable approach."  The
protester quotes another section of the TEB report in support of its
argument that the in-house plan does not provide a level of performance that
is comparable to that offered by IME's proposal, where the TEB found that
IME's "innovative approach [with regard to supply staffing] is considered
acceptable."  Protester's Comments at 12-13; AR, Tab 5, TEB Report, Initial
Proposals, at 11.

The RSH provides that where, as here, a best-value approach is taken in
evaluating private-sector proposals, the agency must compare the in-house
plan to the successful private-sector proposal to determine "whether or not
the same level of performance and performance quality will be achieved,"
and, if not, make "all changes necessary to meet the performance standards
accepted [in the private sector proposal]."  RSH, part 1, ch. 3, ï¿½ï¿½ H.3.d,
e.  This "leveling of the playing field" is necessary because a best-value
solicitation invites submission of proposals that exceed the RFP
requirements, together with the higher prices that often accompany a
technically superior approach.  Failure to ensure that the in-house plan
offers the same level of performance as the best-value private-sector
proposal selected to be compared with the in-house plan can lead to the
unfair situation where the very technical superiority that led to the
private-sector proposal's selection would cause it to lose the
public/private cost comparison.  Jones/Hill Joint Venture--Costs, supra, at
10.  The starting point for this analysis is the agency's own evaluation,
during the private-sector competition, of the proposal that is ultimately
selected for comparison with the in-house plan.  If an agency identifies
strengths in that proposal, or if it identifies areas in which that proposal
exceeds the RFP requirements, the agency should consider those strengths in
comparing that proposal with the in-house plan.  RSH, part I, ch. 3, ï¿½ï¿½
H.3.d, e; BAE Sys., supra, at 27.

Here, contrary to IME's assertions, any reasoned review of the agency's
evaluation of IME's proposal under the staffing plan subfactor to the
management plan factor demonstrates that the agency did not identify any
strengths for IME's staffing plan.  First, it is notable that the statements
of the TEB, referred to by IME in support of its assertion that the agency
failed to account for the evaluated strengths in IME's proposal, appear in
the TEB's evaluation of IME's initial proposal that was evaluated as
unacceptable under the staffing plan subfactor.  More importantly, the
statements referenced by IME, as set forth above, provide that the most
positive comments made by the TEB with regard to IME's staffing plan were
that its "innovative approach [with regard to supply staffing] is considered
acceptable," and that its proposal to "cross-train/cross-utilize personnel
from other functional areas/geographic sites . . . was considered an
acceptable approach."  AR, Tab 5, TEB Report, Initial Proposals, at 11-12
(emphasis added).  We simply fail to see how IME can claim that the agency
erred because it failed to account for the evaluated strengths in IME's
staffing plan, where the record reflects that the agency simply did not
evaluate IME's staffing plan as having any strengths.[11]

Contentions That Do Not Affect the Cost Comparison Result

IME asserts that the agency overstated the number and grade levels of the
contract administrators that would be required to administer IME's contract
in performing the cost comparison (the cost of which was added to IME's
contract price for purposes of the cost comparison), arguing that "the
proper estimate for the costs of administering the commercial contract
should be the cost of one GS-12 and one GS?11," rather than "a GS-13
Contracting Officer and a GS-12 Contract Negotiator/Administrator" as
estimated by the agency for the purposes of the cost comparison.
Protester's Comments at 19; AR at 24.  The protester also contends that the
in-house plan failed to provide adequate staffing with regard to the PWS
requirements that the service provider create, edit, proofread and formalize
certain written material, or to provide certain "Storefront Operations."

The agency has provided detailed responses to each of these arguments,
explaining why in its view its estimate that it would need one GS-12 and one
GS-13 to administer IME's contract was reasonable, and why in its view the
IRO reasonably determined that the in-house plan met the PWS's written
material and storefront operations requirements.  AR at 15-17, 24; ASR at
6.  Additionally, the agency calculated, based upon IME's arguments, the
adjustments that would have to be made to the cost comparison if IME were to
prevail with regard to each of these arguments (as well as certain other
arguments raised by the protester that we have discussed and denied
previously in this decision) would be approximately $2.8 million.  AR at
27-28.  Given the agency's calculations, which appear reasonable and have
not been challenged by the protester, we need not address the protester's
arguments here in view of the in-house plan's approximate $4.5 million cost
advantage.

Conflict of Interest

Finally, IME argues that, according to the record, at least one Navy and one
employee of a private-sector contractor participated in writing the PWS and
then the in-house plan.  The protester argues that the procurement is
fatally flawed by these conflicts of interest, and cites, as support, our
decision in Jones/Hill Joint Venture, supra, at 7-14 (conflict of interest
existed in a Circular A-76 study where a Navy employee and a private sector
consultant wrote and edited the PWS and prepared the in-house plan).[12]

In Department of the Navy-Recon., B-286194.7, May 29, 2002, 2002 CPD ï¿½ ___,
we affirmed our view that having the same agency and contractor employees
write both the PWS and in-house plan creates an impermissible conflict of
interest under Federal Acquisition Regulation ï¿½ 3.101.  We found in this
regard that

where one competitor [the agency] has established the ground rules
applicable to all competitors by developing and drafting the PWS, there is a
significant risk of at least a perception that the ground rules were written
in a manner that skews the competition or that . . . the unique access to
information required to develop the PWS provides the competitor with an
unfair advantage.
Department of the Navy-Recon., supra, at 10.  However, we recognized the
practical reality that without prospective application of our decision in
Jones/Hill Joint Venture, supra, multiple ongoing A-76 studies (such as this
one) may have to be cancelled, and that the disruption or cancellation of
large numbers of studies would not serve the interests of the private-sector
firms, the agencies conducting the A-76 studies, or the A-76 process
overall.  Department of the Navy-Recon., supra, at 13.  Accordingly, we
stated that:

[w]ith regard to an A-76 study in which, prior to the public release of our
initial decision, an agency had already completed the PWS or invested
substantial time and/or resources (a determination that we leave to the
agency's reasonable exercise of discretion) in preparing the MEO in-house
plan, we will not consider a protest ground alleging a conflict of interest
based on the Jones/Hill decision.
Department of the Navy-Recon., supra, at 14 (footnote omitted).  Because the
Jones/Hill decision was publicly released on December 10, 2001, and the
agency here, by that date, had completed its PWS, the in-house plan, the
private-sector proposal selection and evaluation, and cost comparison, we
will not consider this aspect of IME's protest further.

The protest is denied.

Anthony H. Gamboa
General Counsel


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

[1] The PNRC includes Naval Air Station Pensacola (NASP), Saufley Field,
Corry Station, Naval Air Station Whiting Field (NASWF), and tenant
commands.  Performance Work Statement (PWS) at 1.
[2] The procedures for determining whether the government should perform an
activity in-house or by a contractor are set forth in Circular A-76 and the
Revised Supplemental Handbook (RSH) to it, which have been made expressly
applicable to the Department of Defense (DOD) and its military departments.
See 32 C.F.R. ï¿½ 169a.15(d) (2002).  The process set out in the Circular and
the RSH broadly encompasses the following steps in conducting the
public/private competition.  First, after the PWS has been drafted, agency
officials develop an in-house management plan describing how the government
can most efficiently perform the work required by the PWS.  The agency's
Independent Review Officer (IRO) then ensures that the in-house plan has
been prepared based on the PWS, and that the in-house plan reasonably
establishes the government's ability to perform the PWS with the resources
provided.  RSH, part I, ch. 3, ï¿½ï¿½ E.3., I.  Second, there is a competition
among private-sector offerors, which is conducted much as any competed
federal procurement is conducted.  Third, if that competition is done on the
basis of a comparative evaluation (that is, a cost/technical tradeoff is
contemplated), the government's in-house management plan is compared with
the winning private?sector offer to assess whether or not they are based on
a comparable level of performance and performance quality--and if not, to
make all changes necessary to make the level of the in-house plan comparable
to that of the private-sector proposal.  Id. ï¿½ï¿½ H.3.d, e.  Finally, once the
playing field is leveled, there is a cost comparison between the
private-sector offer and the in-house plan.  Id. ï¿½ï¿½ H, J.
[3] The following adjectival ratings were used in the evaluation of
proposals:  highly acceptable, acceptable, unacceptable (a) (capable of
being made acceptable through discussions without extensive changes),
unacceptable (b) (not capable of being made acceptable without the
submission of what would constitute a new proposal), and neutral (for past
performance).  AR, Tab 5, Source Selection Plan at 10.  As indicated above,
the quality control subfactor was rated on a pass/fail basis.
[4] Each of the eight initial proposals received was evaluated as
"unacceptable" overall, with evaluated prices that ranged from $3.8 million
to $20.8 million.  AR, Tab 6, Pre?Negotiation Contract Review Board
Presentation (July 25, 2001), at 4.
[5] Where an agency discovers that a solicitation overstates its needs, the
proper remedy generally is revision of the solicitation to reflect the
agency's actual needs, affording offerors an opportunity to respond to the
revision.  Brisk Waterproofing Co., Inc., B-256138.3, June 30, 1994, 94-1
CPD ï¿½ 394 at 3-4; California Bus. Interiors, B-250963.2, Apr. 19, 1993, 93-1
CPD ï¿½ 331 at 3.

[6] The agency used the "neutral" term "service provider" in the PWS to
avoid the appearance that it was biased towards either "contractor" or
"in-house" performance.  AR, vol. 8, AITF No. 0055; vol. 10, Final AITF at
19.
[7] As we begin to address the remainder of the protester's contentions, we
are mindful of the agency's arguments that the protester has failed to show
how, if the protester is correct, the agency's alleged failures could have
materially affected the outcome of the cost comparison in light of the $4.5
million difference between the costs associated with the in-house plan's and
IME's proposed price.  Agency Request for Summary Dismissal; AR at 22,
27-28.  In this regard, whereas the agency has provided detailed cost
breakdowns and calculated what are, in its view, the potential cost impacts
to the in-house plan if we were to find in the protester's favor, the
protester has responded with little more than the general assertion that
"[t]he cumulative [e]ffect of the agency's failures materially have affected
the outcome of the competition."  Protester's Supplemental Comments at 10.
Nevertheless, all of the protester's contentions have been considered, even
if not specifically addressed in this decision, and the majority of these
contentions, particularly those that would have the greatest impact on the
cost comparison, are addressed.
[8] The document ultimately submitted by the MP team and accepted by the IRO
appears to be a quality assurance survellance plan, containing more detail
than would be expected in a quality control overview.
[9] An agency is required to adequately document its evaluation of whether
the government can perform the PWS with resources provided in the in-house
offer.  Jones/Hill Joint Venture, supra, at 18.  Here, the IRO's
determinations in this respect were thoroughly documented.
[10] The protester also complains for the first time in its comments on the
agency report that the in-house plan's "use of intermittent [workers] . . .
is not vaguely realistic and presents a substantive risk for the government
in terms of workforce availability and stability."  Protester's Comments at
21.  Our Bid Protest Regulations do not contemplate the piecemeal
presentation of protest issues, and in this regard, a protester may not
delay raising additional protest issues where, as here, the protester should
have been aware of those grounds at the time of filing its initial protest.
Robbins-Gioia, Inc., B-274318 et al., Dec. 4, 1996, 96-2 CPD ï¿½ 222 at 19
n.20; Hung Myung (USQ) Ltd., Inc.; Containertechnik Hamburg GmbH & Co.,
B-244686 et al., Nov. 7, 1991, 91-2 CPD ï¿½ 434 at 7.  Accordingly, we decline
to consider this protest basis on the merits.
[11] IME also complains that the in-house plan does not provide a level of
performance comparable to that offered in IME's proposal with regard to
IME's proposed use of:  (1) an "illustrator," rather than a management
assistant as proposed by the in-house plan, to perform the design and
printing/reproduction support services required by the PWS; (2) two FTEs,
rather than one as proposed by the in-house plan, to provide certain safety,
security and quality control services required by the PWS; and (3) the
overall greater number of FTEs provided by IME's proposal (76.3)
(particularly in certain areas) in comparison to the number of FTEs set
forth in the in-house plan (47.1).  Protester's Comments at 11-13.  In
contrast to IME's argument (discussed above) regarding the alleged
"strengths" identified by the TEB with regard to IME's staffing plan, the
bases of which only became apparent upon the protester's receipt of the
agency report, IME's arguments based upon IME's review of its own proposal
and the in-house plan could and should have been raised in its initial
protest to our Office.  As mentioned previously, our Bid Protest Regulations
do not contemplate the piecemeal presentation of protest issues, and we
decline to consider these protest bases on the merits.  Robbins-Gioia, Inc.,
supra; Hung Myung (USQ) Ltd., Inc.' Containertechnik Hamburg GmbH & Co.,
supra.  In any event, with regard to the protester's second and third
arguments here, we note that a higher level of staffing does not necessarily
offer any commesurate increase in performance or performance quality.  Just
as two competing private-sector offerors may reasonably propose different
levels of staffing, depending on each offeror's technical approach and
proposed efficiencies, so, too, the in-house plan may be based on a level of
staffing different from that offered by the private sector proposal.
Accordingly, an agency should not impose the private-sector proposal's
staffing level on the in-house team as IME appears to argue was required
here.  BAE Sys., supra, at 20.
[12] The protester also argues that, according to its view of the record, an
agency employee served on the TEB and also participated in writing the
in-house plan.  However, the record includes the Conflict of Interest and
NonDisclosure Certificate executed by the Navy employee in which he
certified, among other things, that he "did not participate[] in the
development of the Government's Management Plan (which includes the [MEO],
[TPP], [IHCE] and Transition Plan) and [has] not had access to the [in-house
plan]."  Agency Request for Summary Dismissal (May 31, 2002), attach.  The
Navy has also explained that the entries in the record upon which the
protester's allegations are based reflect only that the employee
participated in drafting the PWS.  In our view, the protester's assertion
here is based entirely on inference and supposition, not substantial facts
or hard evidence, and accordingly, will not be considered further.  RMG
Sys., Ltd., B-281006, Dec. 18, 1998, 98-2 CPD ï¿½ 153 at 4.