TITLE: Shaw Infrastructure, Inc., B-291121, November 19, 2002
BNUMBER: B-291121
DATE: November 19, 2002
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Shaw Infrastructure, Inc., B-291121, November 19, 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: Shaw Infrastructure, Inc.
File: B-291121
Date: November 19, 2002
Richard L. Moorhouse, Esq., Patricia H. Wittie, Esq., and Stephen M.
Sorett, Esq., Reed Smith, for the protester.
Capt. Ronald D. Sullivan, Raymond M. Saunders, Esq., Gerald Krimbill,
Esq., and Kim Judd, Esq., Department of the Army, for the agency.
Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency reasonably concluded that protester's proposal was unacceptable and
that it would not engage in further negotiations with the protester, where
protester's final proposal submission, following repeated, extensive
discussions and submission of multiple proposal revisions, contained
multiple errors and inconsistencies and failed to comply with the
solicitation requirements.
DECISION
Shaw Infrastructure, Inc. protests the Department of the Army's
determination that Shaw's proposal to perform base operation support
services at Fort Sam Houston, Texas, was unacceptable. Shaw's proposal
responded to request for proposals (RFP) No. DADA10-00-R-0013, which the
Army issued in connection with an Office of Management and Budget (OMB)
Circular A-76 commercial activities study. Shaw protests that the agency
unreasonably found Shaw's proposal to be unacceptable and improperly
declined to engage in further negotiations with Shaw.
We deny the protest.
BACKGROUND
On July 31, 1998, the Department of the Army publicly notified Congress
that the Army intended to perform an A-76 commercial activities study with
regard to base operations support activities at Fort Sam Houston. Between
July 1998 and January 2001, the agency engaged in various activities
necessary for performing an A-76 study, including identification of the
specific tasks to be covered by the study and creation of a work statement
under which private-sector offerors could prepare proposals and the
government could prepare an in-house management plan, or *most efficient
organization* (MEO).[1] Hearing Transcript (Tr.) at 5-29 (testimony of
former Fort Sam Houston deputy garrison commander).[2]
On January 31, 2001, the agency issued solicitation No. DADA10-00-R-0013,
seeking private-sector proposals to compete with the MEO management plan.
As amended, the solicitation contemplated award of a cost-reimbursement
award fee contract, identified sixteen performance functions to be
evaluated, [3] provided that the lowest priced technically acceptable
proposal would be selected for comparison with the MEO management plan,
and established the following primary evaluation factors: technical
approach/methodology, management, past/present performance, and cost.[4]
Agency Report, RFP S: M, at 3803-05.
With regard to evaluation of proposed costs, section M of the RFP provided
that proposals would be evaluated on the basis of four subfactors --
*reasonableness,* *realism,* *accuracy,* and *completeness,* -- and
further advised as follows:
An unacceptable rating will be assessed if the costs and/or support is
presented with major omissions or misunderstanding or has been completely
omitted and has inadequate detail to assure the evaluator of an
understanding of the proposed approach. . . .
Any significant inconsistency, left unexplained[,] will raise a
fundamental question of the offeror's understanding of the nature and
scope of work required and the offeror's ability to perform the contract
within fiscal constraints and may render the proposal unacceptable.
Agency Report, RFP S: M, at 3805, 3808.
As amended, the solicitation required submission of initial proposals by
October 5, 2001. On that date, the agency received a single proposal,
submitted by IT Corporation.[5] Upon receipt of IT's proposal, the agency
established an evaluation team for each of the four evaluation factors and
began its initial proposal evaluation. As the evaluation progressed, the
evaluation teams expressed concerns regarding various aspects of the
technical, management and cost proposals. Agency Report, Contracting
Officer's Statement at 6. For example, IT's technical proposal expressed
an intent to use [deleted] as a staffing tool; however, the cost proposal
did not reflect any premium for [deleted] costs. Id. Similarly, there
were inconsistencies between IT's organizational flowcharts, process flow
charts, and staffing tables. Id. In late October 2001, at the agency's
request, IT personnel met with the agency evaluators to provide an oral
*walk-through* of IT's proposal. Following this walk-through, the agency
evaluators expressed increased concerns regarding proposal
inconsistencies, noting that various verbal statements made by IT
personnel conflicted with the written proposal. Id. at 7.
The agency completed its initial proposal evaluation in December 2001, and
the contracting officer summarized the results of that evaluation in a
prenegotiation objective memorandum (POM) dated December 28. Agency
Report, Tab F, at 6020‑33. The POM noted that, *[a]fter the first
round of evaluations[,] the offeror was acceptable in only 66 of the 667
factors.* Id. at 6032. The contracting officer elaborated on the
deficiencies, referring to *lack of sufficient detail in the [proposal's]
narrative to properly explain their processes and procedures,* and
summarizing the cost evaluation team's *major concerns in the
under-estimation in [deleted] labor, [deleted] labor, [and] [deleted]
labor,* as well as concerns regarding *specific tasks that the technical
team deemed to be significantly under-estimated.* Agency Report, Tab F,
at 6032.
In early February 2002, the contracting officer initiated face-to-face
discussions with the offeror. At the outset of these discussions, IT
personnel informed the contracting officer that IT had previously filed
for bankruptcy protection.[6] IT personnel also advised the contracting
officer that Shaw was interested in purchasing IT's assets.[7] Based on
this representation, the contracting officer opted to go forward with
discussions.
As part of the February 2002 discussions, the contracting officer provided
IT's representatives with a list of questions reflecting approximately
2,000 agency concerns and/or proposal deficiencies. Contracting Officer's
Statement at 9; Agency Report, Tab G. Following extensive discussions
regarding the agency's multiple concerns, the contracting officer
requested submission of revised technical and management proposals by
April 8.[8] Upon receipt of the revised technical and management
proposals, the agency undertook another round of evaluations. In
performing this evaluation, the evaluators noted that the offeror had
responded to agency concerns regarding staffing levels in particular areas
by adding staffing in the area identified -- but simultaneously decreasing
staffing in other areas that the agency had previously determined to be
adequately staffed.[9] This approach by Shaw required the agency to
completely reevaluate the entire proposal -- including all areas
previously found acceptable -- following proposal revisions.
In an effort to expedite the evaluation process, the agency engaged in
e-mail exchanges with the IT personnel during the month of April. As a
result of these ongoing communications, many of the agency's concerns were
resolved. Accordingly, the agency requested that IT/Shaw submit revised
technical, management and cost proposals by May 17. Agency Report, Tab I,
at 6363. The revised proposals were submitted as requested and,
thereafter, evaluated.
Upon evaluation, the agency, again, had various concerns regarding
inconsistencies between the costs reflected in the cost proposal and the
proposed technical/management approach. Accordingly, the agency conducted
yet another round of discussions via telephone on May 29. During these
discussions, the agency
advised Shaw of specific staffing inconsistencies between its management
and cost proposals, stating:
[It] appears there are discrepancies between your latest cost proposal and
your management proposal on the net available hours on some efficiency
codes. It looks like you may have changed some of the codes themselves.
It appears you changed the net available hours in the code itself. . . .
[W]hat's in the cost model does not agree with the table in the cost
proposal.
Agency Report, Tab J, at 6366.
In addition, the agency advised Shaw, among other things, that it had
failed to comply with the solicitation's requirements regarding other
direct costs (ODCs).[10] Specifically, the agency stated: *We put [the
ODCs] in [the] solicitation to keep a level playing field between the
government and contractor proposals. . . . You need to apply your burden
to those costs.* [11] Id.
By letter dated June 28, the agency requested that Shaw submit final
revised proposals by July 12.[12] Agency Report, Tab K. In the letter,
the contracting officer again identified various specific aspects of
Shaw's technical and cost proposals that needed to be addressed, including
particular areas in which Shaw had reduced or revised its staffing levels
in areas the agency had previously evaluated as being acceptable.
Specifically, the contracting officer warned: *Any changes to position
descriptions, standards or labor hours not specifically addressed above
could render your proposal unacceptable. Those areas have already been
evaluated and accepted.* Agency Report, Tab K, at 6370.
On July 10, Shaw submitted a hard-copy version of its final revised cost
proposal.[13] On July 13, Shaw submitted revisions to its July 10
hard-copy submission.[14] On July 13, Shaw submitted a CD-ROM containing
a complete electronic version of its final revised cost proposal. Upon
examination, the agency found that the electronic version and the
hard-copy versions did not match.[15]
On July 16, the contracting officer telephoned Shaw's representatives,
advising them of the inconsistencies between the hard-copy and electronic
versions. During this conversation, it became clear that all of Shaw's
final submissions contained various, differing errors. Thereafter, the
agency declined to accept any further proposal revisions, and evaluated
the complete electronic version submitted on July 13 on the basis that
this version was the final complete version submitted by Shaw. [16]
The cost evaluation team documented its final evaluation of Shaw's cost
proposal, identifying nine specific errors or inconsistencies. Agency
Report, Tab E‑18, at 5962‑6019. These errors/inconsistencies
included: failure to apply G&A to the ODC amounts specified in the
solicitation; inconsistencies between Shaw's summary spreadsheet for
subcontractor costs and the individual subcontractors' own cost
spreadsheets; failure to escalate labor and fringe benefit costs in the
option years; inconsistencies between Shaw's cost spreadsheet and its
staffing chart for the transition period; and failure to apply applicable
formulas to calculation of travel and training hours.[17] Id. at
5986-87. Based on these nine errors/inconsistencies, the cost evaluation
team concluded: *It was impossible to determine price realism due to the
inconsistencies and errors in the proposal.* Agency Report, Tab E-18, at
5984.
The agency's source selection authority (SSA) reviewed the evaluation
record and, on July 25, concluded that Shaw's cost proposal was
unacceptable on the basis that it contained *major omissions or
misunderstandings,* and *would clearly require major revisions in order to
meet the solicitation's requirements that the proposal be reasonable,
realistic, accurate, and complete.* Agency Report, Tab X, Source
Selection Decision Memorandum, July 25, 2002. Accordingly, the A-76 study
was terminated. By letter dated July 26, the agency advised the protester
that its proposal had been evaluated as unacceptable and that no further
negotiations would be conducted. This protest followed.
DISCUSSION
Shaw protests that the Army's determination of unacceptability, along with
its decision not to engage in further negotiations, was arbitrary and
unreasonable. More specifically, Shaw maintains that the agency was
required to permit Shaw to submit further revisions to its proposal. We
disagree.
When an agency engages in discussions with an offeror, such discussions
must be meaningful. Training and Mgmt. Res., Inc., B- 234710, June 29,
1989, 89‑2 CPD P: 12. However, this requirement for meaningful
discussions does not create an obligation for agencies to continue to
conduct successive rounds of discussions and proposal revisions until all
proposal defects have been corrected. OMV Med., Inc., B‑281490,
Feb. 16, 1999, 99-1 CPD P: 38 at 7. Similarly, an offeror's creation of a
proposal defect which first appears in a proposal revision following
discussions does not trigger an obligation to engage in another round of
discussions and proposal revisions to advise the offeror of the
newly-created defect and permit attempted correction. Mark Dunning
Indus., Inc., B‑230058, Apr. 13, 1988, 88-1 CPD P: 364 at 5-6.
Here, as discussed above, the agency engaged in multiple rounds of
discussions over the 10-month period following submission of the initial
proposal. During this period, the agency repeatedly advised IT/Shaw of
multiple inconsistencies between its technical, management, and cost
proposals, including multiple concerns regarding the staffing levels that
had been proposed. The record establishes that these multiple rounds of
discussions clearly communicated agency concerns and were meaningful.
Further, the record shows that, following submission and evaluation of
initial proposals, the agency twice requested and evaluated revisions to
Shaw's cost proposal, and three times requested and evaluated revisions to
Shaw's technical and management proposals.
Additionally, the record establishes that Shaw did not facilitate
efficient resolution of the agency's concerns. Specifically, in
situations where Shaw disagreed with the agency's perception of required
staffing, rather than pursuing the merits of the issue to resolution, Shaw
attempted to create the appearance of acquiescence, increasing staffing in
the particular area identified -- but it then made offsetting staff
reductions in other areas that had not been the subject of discussions and
that the agency had previously evaluated as acceptably staffed. This
practice effectively lengthened the agency's evaluation process, requiring
that it completely reevaluate Shaw's proposals following each proposal
revision. As noted above, Shaw does not dispute its practice in this
regard but, rather, suggests that its approach was appropriate based on
what it asserts was the agency's *white glove* evaluation. Shaw Comments
on Agency Report, Sept. 25, 2002, at 5. Significantly, throughout its
pursuit of this protest, Shaw has not identified a single example within
its proposal where Shaw was required to propose staffing over and above
that necessary to meet the solicitation's performance requirements.
Finally, the record establishes that, notwithstanding the extensive
discussions, multiple proposal revisions, and the agency's complete
reevaluation of those revisions, Shaw's final proposal contained multiple
errors and inconsistencies and, with regard to ODCs, clearly failed to
comply with the solicitation requirements that it apply its G&A burden to
the RFP-specified ODC amounts. We have reviewed the errors,
inconsistencies and failure to comply with the solicitation requirements
identified as the basis for the cost evaluation team's determination that
it could not accurately perform the necessary cost analyses on Shaw's
final cost proposal. Based on our review, we find no basis to question
this determination, nor the agency's determination that Shaw's proposal
was unacceptable. Further, in light of the multiple meaningful
opportunities Shaw had previously been afforded to revise its proposal,
and Shaw's failure to adequately address the agency's concerns and follow
agency directions, we find reasonable the agency's decision not to engage
in further negotiations.
In pursuing this protest Shaw has argued that the agency was improperly
affected by its perception that it was statutorily required to complete
this multi-function cost study by July 31, 2002, that is, 48 months after
the Army reported to Congress that it intended to perform the study. [18]
In light of our conclusion above, that the agency afforded Shaw ample
opportunity to submit an acceptable proposal, that Shaw failed to do so,
and that the agency had no continuing obligation to engage in additional
negotiations with Shaw, we need not reach any conclusion regarding the
impact of the statutory limitation.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] The procedures for performing commercial activity studies are
established in OMB Circular A-76 and that Circular's Revised Supplemental
Handbook (RSH), which are applicable to the Department of Defense (DOD)
and its military departments. See 32 C.F.R. S: 169a.15(d) (2002).
[2] In resolving this protest, GAO conducted a hearing on the record,
during which testimony was taken from the former deputy garrison commander
at Fort Sam Houston, the contracting officer, contracting specialist, and
cost evaluators, as well as the protester's accounting manager and
proposal manager.
[3] The functions were: information management, administrative services,
human resources, operations and maintenance, engineering services,
housing, environmental, supply services, transportation services, plans
programs operations and mobilization, logistics, active component/reserve
component training, training land management, public affairs office,
resource management, and provost marshall support services. Agency
Report, RFP, at 3803-04.
[4] The solicitation required submission of separate proposals for each
evaluation factor, that is, offerors were required to separately submit a
technical proposal, a management proposal, past/present performance
information, and a cost proposal. Agency Report, RFP S: L, at 3795. With
regard to technical proposals, offerors were required to provide staffing
charts identifying proposed labor by category, along with a narrative
explanation regarding the proposed approach for performing each functional
requirement. Id. at 3796.
[5] As discussed below, IT Corporation was a predecessor corporate entity
to Shaw.
[6] The record indicates that IT's bankruptcy filing occurred in November
2001. Contracting Officer's Statement at 9.
[7] Shaw's counsel has advised our Office that Shaw did, in fact, acquire
IT's assets on May 3, 2002.
[8] The contracting officer explains that he did not request submission of
a revised cost proposal at this time due to the large number of technical
and management issues to be resolved. Contracting Officer's Statement at
9.
[9] The protester does not dispute its practice in this regard,
summarizing the situation as follows:
[T]he Army would insist that Shaw increase its proposed manning level in a
particular area. Shaw generally would make the adjustment even though it
believed the Army's position as to the necessity for increased manning was
not supportable. At the same time, in order not to price itself out of
the cost study, Shaw would seek to achieve efficiencies [described
elsewhere by Shaw as reduced staffing] in other areas of its proposal.
Protester Comments on Agency Report, Sept. 25, 2002, at 6; Tr. at 56.
[10] The solicitation listed specific amounts for various ODCs
(parts/materials and supplies, travel, transportation and printing) and,
above the table which listed specific amounts for each, stated: *offerors
shall include in their proposals the other direct cost elements as shown
below.* Agency Report, RFP, at 3742, 3917.
[11] More specifically, the agency noted that Shaw had decreased the
specified ODC costs by amounts equal to its applicable general &
administrative (G&A) burden. The agency noted that, for example, *[I]f we
said [an ODC] was [deleted], you backed out G&A and said it was [deleted]
cost and [deleted] G&A.* Id.
[12] The agency subsequently extended the deadline to July 13.
[13] The solicitation required offerors to submit both hard-copy versions
and electronic versions of proposals. Agency Report, RFP, at 3795-96.
[14] Shaw explains that the hard-copy version submitted on July 10
*contained errors in the Attachment 10 spreadsheets.* Protest at 4.
[15] This was true with regard to the electronic version and both the
hard-copy version submitted on July 10 and the hard-copy revisions
submitted on July 13. That is, neither hard-copy version matched the
final complete electronic version.
[16] Shaw acknowledges that each of its final submissions contained
errors. Tr. at 295 (testimony of Shaw's proposal manager). Nonetheless,
it complains that the agency should have relied on the hard-copy version,
as revised on July 13, as Shaw maintains that it advised the agency that
the errors contained in that version were the least significant. Shaw
Comments on Agency Report, Sept. 25, 2002, at 10.
[17] With regard to this matter, the evaluators explained *there was a
series of numbers (to reflect labor hours), that had been inserted in
[spreadsheet] cells, overriding the formulas.* Id. at 5987.
[18] With regard to multi-function cost studies, section 8024 of the
Department of Defense Appropriations Act for Fiscal Year 2001 provides:
*None of the funds appropriated by this Act shall be available to perform
any cost study pursuant to the provisions of OMB Circular A-76 if the
study being performed exceeds a period of . . . 48 months after initiation
of such study.* Pub. L. No. 106-259, 114 Stat. 656 (2000).