TITLE:  Pueblo Environmental Solution, LLC, B-291487; B-291487.2, December 16, 2002
BNUMBER:  B-291487; B-291487.2
DATE:  December 16, 2002
**********************************************************************
Pueblo Environmental Solution, LLC, B-291487; B-291487.2, December 16, 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:   Pueblo Environmental Solution, LLC
    
File:            B-291487; B-291487.2
    
Date:              December 16, 2002
    
Kenneth B. Weckstein, Esq., Raymond B. Fioravanti, Esq., and Shlomo D.
Katz, Esq., Epstein Becker & Green, for the protester.
Marcia G. Madsen, Esq., David F. Dowd, Esq., Cameron S. Hamrick, Esq., and
Michael J. Farley, Esq., Mayer, Brown, Rowe & Maw, for Bechtel National,
Inc., the intervenor.
Joshua A. Kranzberg, Esq., and Bernadine F. McGuire, Esq., Department of
the Army, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  In a negotiated procurement for the design, construction, and
operation of a chemical weapon destruction facility, agency reasonably
assessed a significant weakness in the protester's proposal because the
protester was reasonably found to not provide for total containment in the
event of an explosion, as required by the solicitation.
    
2.  In a cost realism evaluation where the agency evaluated numerous areas
under which the protester's proposed approach was inadequate and
understaffed, the agency properly used its independent government estimate
and prior experience on similar projects as tools to assess the amount of
additional staffing that would be required under the protester's proposed
approach.
    
3.  Protest of agency's cost/technical tradeoff is denied, where the
solicitation stated that technical merit was more important than cost and
the source selection authority reasonably found, with articulated reasons,
that the awardee's technical merit outweighed the protester's cost
advantage.
    
4.  Agency reasonably adjusted protester's proposed costs upward in the
competition for a cost‑reimbursement contract to account for
evaluated understaffing and also reasonably determined in the technical
evaluation that the understaffing was a weakness that adversely reflected
upon the protester's understanding.
DECISION
    
Pueblo Environmental Solution, LLC[1] protests the award of a contract to
Bechtel National, Inc. under request for proposals (RFP) No.
DAAA09-00-R-0156, issued by the Department of the Army for the design,
construction, equipment acquisition and installation, systemization, pilot
testing, operation, and closure of the Pueblo Chemical Agent Destruction
Pilot Plant.  Pueblo Environmental challenges the agency's technical and
cost evaluations and source selection decision.
    
We deny the protest.
    
In 1985, Congress required the Department of Defense (DOD) to destroy the
United States stockpile of chemical agents and munitions and to establish
an organization within the Army to manage the agent destruction program. 
50 U.S.C. S: 1521 (2000); Chemical Weapons:  Lessons Learned, GAO-02-890,
Sept. 10, 2002, at 4.  In accordance with this direction, the Army was
designated as the executive agent to implement the destruction of the
United States stockpile of chemical agents and munitions, which includes
the stockpile at the Pueblo Chemical Depot, Colorado.  The stockpile at
Pueblo Chemical Depot consists of mustard agent stored in projectiles and
mortar rounds.[2] 
    
In 1996, DOD was directed by Congress to identify and demonstrate at least
two alternative processes to incineration for the disposal of assembled
chemical weapons.  Omnibus Consolidated Appropriations Act for Fiscal Year
1997, P.L. 104‑208, S: 8065, 110 Stat. 3009-101 (1996).  As a
result, the Assembled Chemical Weapons Assessment program was established
to demonstrate several alternative technologies, including neutralization
followed by biotreatment.  Report to Congress, Assembled Chemical Weapons
Assessment Program, December 2001, available at .  In July
2002, DOD approved the use of neutralization and biotreatment as the
appropriate technology for the destruction of assembled chemical weapons
at the Pueblo Chemical Depot.[3]  Contracting Officer's Statement at 2.
    
The RFP, issued July 17, 2002, provided for the award of an
indefinite-delivery, indefinite-quantity task order contract to design,
construct, equip, operate, and close the Pueblo Chemical Agent Destruction
Pilot Plant, the purpose of which is to destroy the chemical agents and
munitions in the Pueblo Chemical Depot using neutralization and
biotreatment technology. 
    
A detailed scope of work (SOW) was provided, which, among other things,
identified mandatory codes, regulations, and standards with which offerors
were to comply.  Army Pamphlet 385-61, *Toxic Chemical Agent Safety
Standards,* was one of the mandatory standards identified in the SOW. 
Three phases were identified for contract performance:  Phase I, design,
construction, systemization, and pilot testing of a limited quantity of
mustard agents to demonstrate effectiveness of the process facility; Phase
II, demilitarization of the remaining stockpile of munitions; and
Phase III, decontamination and decommissioning of the facility.  Offerors
were informed that task orders under the contract would be on a
cost-plus-fixed-fee or cost‑plus-incentive-fee basis.
    
The RFP provided for award on the basis of a cost/technical tradeoff and
identified an evaluation scheme that was divided into successively lower
levels of importance.  At the first and highest level were criteria called
*areas*; the second-level criteria
were called *elements*; and the third-level criteria were called
*factors.*  The areas and elements criteria were:[4]
    

   +------------------------------------------------------------------------+
|Area                   |Element                                         |
|-----------------------+------------------------------------------------|
|1.  Technical Approach |                                                |
|-----------------------+------------------------------------------------|
|                       |a.  Technical competence                        |
|                       |------------------------------------------------|
|                       |b.  Innovation focused on program goals         |
|                       |------------------------------------------------|
|                       |c.  Technical risk identification and mitigation|
|-----------------------+------------------------------------------------|
|2.  Management Approach|                                                |
|-----------------------+------------------------------------------------|
|                       |a.  Project management                          |
|-----------------------+------------------------------------------------|
|                       |b.  Teaming and key personnel                   |
+------------------------------------------------------------------------+

    

   +------------------------------------------------------------------------+
|3.  Past Performance          |                                         |
|------------------------------+-----------------------------------------|
|                              |a.  Project risk management performance  |
|                              |-----------------------------------------|
|                              |b.  Cost and schedule management systems |
|                              |performance                              |
|                              |-----------------------------------------|
|                              |c.  Schedule performance                 |
|                              |-----------------------------------------|
|                              |d.  Cost control performance             |
|                              |-----------------------------------------|
|                              |e.  Past performance using proposed key  |
|                              |personnel, corporate team, members, key  |
|                              |subcontractors and outside consultants   |
|------------------------------+-----------------------------------------|
|4.  Small Business Utilization|                                         |
|------------------------------+-----------------------------------------|
|                              |a.  Proposed small business utilization  |
|                              |-----------------------------------------|
|                              |b.  Small business utilization past      |
|                              |performance                              |
|------------------------------+-----------------------------------------|
|5.  Cost                      |                                         |
+------------------------------------------------------------------------+

    
The evaluation area criteria were listed in descending order of
importance, and offerors were informed that the technical approach area
was most important, followed *closely* by the management approach area. 
The listed elements were weighted equally. 
    
With respect to the cost area, the RFP provided for a cost realism and
reasonableness evaluation.  Offerors were also cautioned that
    
any proposal that is unrealistic in terms of technical approach,
management approach, schedule commitment, and/or costs (high or low) will
be deemed reflective of an inherent lack of technical competence or a
failure to comprehend the complexity and risks of the Government's
requirements stated in this solicitation.  Unrealistic proposals may
result in an unacceptable rating, which may render the proposal ineligible
for award.
RFP S: M.2.2.1. 
    
The RFP requested both written proposals and oral presentations, and
detailed instructions for proposal preparation and the oral presentation
were provided.  For example, under the technical approach area, offerors
were instructed to present their *approach to design, construct, and
acquire and install equipment, systemize, pilot test, operate and close a
neutralization/bio-treatment facility for the safe, environmentally
responsible, and timely disposal [of] the mustard material stored at the
Pueblo Chemical Depot.*  RFP S: L.15.2.1.  As part of addressing this
issue, offerors were requested to provide a *Preliminary Design
Description* and *Preliminary Design-Build Plan.*  RFP S: L.15.2.2.  The
RFP also instructed offerors to address the preliminary design-build plan
during oral presentations, at which the offerors were to identify, among
other things, their approach, design concepts, design tools, and
construction methods that would be used in the design and construction of
the facility.  RFP S: L.15.3.1.b.  With respect to cost, offerors were
requested to provide full cost proposals for the design phase, and to
provide weighted labor rate and material cost build-ups for the other
program phases (that is, construction, systemization/pilot test,
operations, and closure).  RFP S: L.15.8.
    
The Army received proposals from Bechtel and Pueblo Environmental, whose
respective proposed solutions were described by the source selection
evaluation board (SSEB) as follows:
    
Bechtel
    
The Bechtel total solution includes [Deleted].[5]
Pueblo Environmental
    
The [Pueblo Environmental] total solution design includes [Deleted].
Agency Report, Tab 17, SSEB Report, Sept. 19, 2002, at 7-8.
    
After the initial evaluation of proposals, discussions were conducted with
each firm.  Questions developed by the SSEB were provided to each offeror
before oral presentations, and these questions were part of the question
and answer sessions that followed the oral presentations.  Further
discussions followed the oral
presentations.  *Interim revised proposals* were received from Bechtel and
Pueblo Environmental and evaluated as follows:[6]
    

   +------------------------------------------------------------------------+
|                                    |Bechtel          |Pueblo Environ.  |
|------------------------------------+-----------------+-----------------|
|Area|Element                        |                 |                 |
|------------------------------------+-----------------+-----------------|
|Technical Approach                  |Excellent        |Good+            |
|------------------------------------+-----------------+-----------------|
|    |Technical Competence           |Excellent        |Good+            |
|    |-------------------------------+-----------------+-----------------|
|    |Innovation                     |Excellent        |Good+            |
|    |-------------------------------+-----------------+-----------------|
|    |Risk Identification and        |Excellent-       |Good-            |
|    |Mitigation                     |                 |                 |
|------------------------------------+-----------------+-----------------|
|Management Approach                 |Good+            |Excellent        |
|------------------------------------+-----------------+-----------------|
|    |Project Management             |Good             |Excellent        |
|    |-------------------------------+-----------------+-----------------|
|    |Teaming and Key Personnel      |Excellent        |Excellent-       |
|    |                               |                 |                 |
|------------------------------------+-----------------+-----------------|
|Past Performance                    |Low Risk         |Low Risk         |
|------------------------------------+-----------------+-----------------|
|    |Project Risk Management        |Low Risk         |Low Risk         |
|    |-------------------------------+-----------------+-----------------|
|    |Cost & Schedule Management     |Low Risk         |Low Risk         |
|    |Systems                        |                 |                 |
|    |-------------------------------+-----------------+-----------------|
|    |Schedule                       |Moderate Low Risk|Moderate Low Risk|
|    |-------------------------------+-----------------+-----------------|
|    |Cost Control                   |Moderate Low Risk|Low Risk         |
|    |-------------------------------+-----------------+-----------------|
|    |Key Personnel                  |Low Risk         |Low Risk         |
|------------------------------------+-----------------+-----------------|
|Small Business Utilization          |Excellent        |Excellent        |
|------------------------------------+-----------------+-----------------|
|Proposed Cost                       |$163.9 million   |$52.4 million    |
|------------------------------------+-----------------+-----------------|
|Evaluated Cost                      |$163.9 million   |$91.4 million    |
+------------------------------------------------------------------------+

    
Agency Report, Tab 21, Source Selection Authority (SSA) Briefing, Sept.
23, 2002, at 5-6, 11, 21.
    
Bechtel's higher rating under the most important technical approach area
reflected the evaluators' judgment that Bechtel had addressed and
demonstrated an exceptional range of competencies for successful
completion of all phases of the Pueblo Chemical Depot pilot program. 
Numerous strengths and few weaknesses were identified in Bechtel's
proposal under this criterion.   For example, the SSEB noted Bechtel's
extensive design experience in all aspects of the process equipment and
facility design, including experience at the Aberdeen Chemical-Agent
Disposal Facility, from which the evaluators found Bechtel demonstrated
*strong understanding of the neutralization and biotreatment processes.* 
Agency Report, Tab 17, SSEB Report, at 46, 48.
    
Pueblo Environmental's lower rating under the technical approach area
reflected the evaluators' judgment that, although the protester's proposal
contained numerous strengths, the proposal also evidenced a number of
weaknesses, including some that were regarded as significant.  For
example, the SSEB was concerned that Pueblo Environmental did not
demonstrate the full range of competencies necessary for successful
completion of the program and that, although Pueblo Environmental had
demonstrated experience in pilot testing, it failed to state a clear plan
for the pilot testing for this program.  Id. at 12.  Two of Pueblo
Environmental's evaluated weaknesses were considered particularly
significant:  first, the SSEB found that Pueblo Environmental did not
fully understand the explosive safety implications in the munitions
demilitarization building and enhanced reconfiguration building (which,
although this could be corrected, the evaluators found could have cost and
schedule implications), and, second, Pueblo Environmental's proposal
showed a lack of understanding relating to the potential for agent
contamination even after decontamination, which could pose an unreasonable
safety risk considering the protester's proposal to bring in *new craft
labor* for closure of the facility.  Id. at 16, 25.
    
Under the second most important management approach area, Pueblo
Enviromental's proposal was rated superior to Bechtel's proposal based
upon the SSEB's judgment that the protester's proposed partnering approach
coupled with the proposed use of an incentive fee pool would *foster a
continuing culture of innovation.*  This approach, the SSEB found, was
better than Bechtel's proposed prime-subcontractor approach.  In addition,
Pueblo Environmental proposed a single location for its design team as
opposed to Bechtel's less favorably viewed proposal to have three
locations for the design effort.  Id. at 33, 70.
    
The cost proposals were evaluated for realism and reasonableness.  The
cost evaluation team requested field pricing support from the Defense
Contract Audit Agency (DCAA) on direct and indirect rates and other direct
costs.  DCAA found the firms' proposed direct and indirect rates to be
reasonable, except in a few minor instances. 
    
In addition, the firms' proposed total costs (of $163.9 million for
Bechtel and of $52.4 million for Pueblo Environmental) were evaluated
using cost analysis techniques and compared to the independent government
estimate (IGE) of $96.9 million.  The agency concluded that the difference
in Bechtel's and Pueblo Environmental's proposed total costs reflected the
firms' differing staffing levels for design completion.[7]  The Army
concluded that the protester's proposal was severely understaffed and that
the awardee's staffing, although higher than estimated in the IGE,
reflected Bechtel's proposed technical and management approaches.  The
judgment that Pueblo Environmental's proposal was severely understaffed
was based upon the agency's evaluation of the protester's technical
approach, comparison of Pueblo Environmental's proposed costs to the IGE,
and the agency's previous experience at similar facilities.  The cost
evaluation team concluded that the protester's understaffing was based
upon *overly optimistic assumptions and a lack of understanding.*  This
conclusion resulted in a $39 million upward adjustment in Pueblo
Environmental's costs to reflect the Army's judgment as to what would be
the protester's probable costs based upon more reasonable staffing. 
Agency Report, Tab 16, Cost/Price Evaluation Report, at 2, 9-13. 
    
After a briefing by the SSEB, the source selection advisory council (SSAC)
prepared analyses that compared the two firms' respective technical
approach, management approach, and past performance ratings.  Agency
Report, Tab 19, Technical/Management Trade-off Analysis; Tab 20, Past
Performance Trade-off Analysis.
    
The SSAC found that under the technical approach area Bechtel's proposal
consistently demonstrated superiority over Pueblo Environmental's. 
Specifically, the SSAC found that:
    
Bechtel consistently showed superiority in each element and in most
factors of the Technical Area.  Bechtel demonstrated a thorough
understanding of the complexity and implications of working with agents
and explosives.  Bechtel's design capitalizes on their experience with and
use of proven and tested equipment.
[Pueblo Environmental] did not demonstrate the same thorough understanding
of the complexity and implications of working with agents and explosives. 
This was evident in the risk area of the proposal, and in their dealing
with the explosive safety issues in the [munitions demilitarization
building] and [enhanced reconfiguration building].
Agency Report, Tab 19, Technical/Management Trade-off Analysis, at 22.
    
With respect to the management approach area, the SSAC found that:
    
[Pueblo Environmental] is slightly superior in the Management Area because
of the single location of its design effort and the seamlessness of its
organizational structure, which should enhance collaboration with the
government.  [Pueblo Environmental] has some significant talent being made
available to the [Pueblo Chemical Agent Destruction Pilot Plant].  This
talent pool could make a very significant difference in terms of the
success of the program.
Bechtel had extensive experience in . . . all facets of [chemical
demilitarization].
Id. at 38.
    
With respect to the past performance area, the SSAC concluded that both
firms presented equivalent project risks and *unless the . . . project is
very closely and well managed by the government, the risk is going to be
moderate for either offeror.*  Agency Report, Tab 20, Past Performance
Trade-off Analysis, at 6.
    
Following a detailed briefing by the SSAC, the SSA accepted the SSEB's and
SSAC's findings.  The SSA concluded that Bechtel's proposal was the best
value to the government as follows:
    
Based on the evaluations, I find that Bechtel's superiority in their
technical approach is of significant benefit to the [Pueblo Chemical Agent
Destruction Pilot Plant] project.  Their demonstrated comprehensive and
detailed understanding of the complexities involved in designing,
operating, maintaining, and closing a facility associated with extremely
toxic chemical agent and explosive munitions is expected to minimize
overall programmatic risk.  [Pueblo Environmental's] significantly less
than full understanding of blast design and explosive safety implications
for explosive containment in the [munitions demilitarization building] and
[enhanced reconfiguration building], and their apparent limited
understanding of working with chemical agent materi[a]l could lead to
design inadequacies that adversely impact the program throughout its life
cycle.  I believe their failure to identify high priority risks and their
low staffing profiles provide further evidence of their lack of
understanding of the unique and complex aspects of performing in an
explosive chemical agent materi[a]l environment.  The unique complexities
of handling aging and deteriorating chemical agent munitions must not be
underestimated.  The need to ensure the facility is designed, constructed,
operated, and maintained to ensure explosive and agent containment is
paramount.  The history of the Chemical Demilitarization Program is
replete with examples where underestimating the unique challenges has
le[]d to significant cost growths and schedule delays.  While [Pueblo
Environmental's] management team and organizational structure are seen as
advantageous to Bechtel's  in the area of Management Approach, these
advantages primarily impact efficiency and do not have the significance of
Bechtel's Technical Approach advantages.  The Bechtel advantage is further
magnified considering the fact that Technical Approach is a higher
weighted factor than Management Approach.  I found both offerors
equivalent in the areas of Past Performance and Small Business
Utilization.  [Pueblo Environmental] has an evaluated Cost advantage. 
However, I do not consider it a significant advantage, based on the
apparent lack of understanding [of] the complexities of the project by
[Pueblo Environmental], which increases the overall performance risk and
associated cost risk.  The weakness of technical understanding reflected
in the [Pueblo Environmental] cost proposal presages a situation where the
government and the contractor will spend significant time and energy
during execution phases re‑baselining an initially under resourced
baseline.  Bechtel's cost while higher do reflect an understanding of the
challenges with a chemical demilitarization project.  When I compare
Bechtel's Technical Approach advantages to [Pueblo Environmental's]
advantages in lesser weighted areas of Management Approach and Cost/Price,
I find Bechtel is the best value.
Agency Report, Tab 22, Source Selection Decision, at 7-8.
    
Award was made to Bechtel, and this protest followed.  Performance of
Bechtel's contract has been stayed pending our decision in this matter.
    
Pueblo Environmental first challenges the Army's evaluation of its
technical proposal.  In reviewing protests against allegedly improper
evaluations, it is not our role to reevaluate proposals.  Rather, our
Office examines the record to determine whether the agency's judgment was
reasonable and in accord with the RFP criteria.  Abt Assocs., Inc.,
B-237060.2, Feb. 26, 1990, 90-1 CPD P: 223 at 4.  The protester's mere
disagreement with the agency's judgment does not establish that an
evaluation was unreasonable.  UNICCO Gov't Servs., Inc., B-277658, Nov. 7,
1997, 97-2 CPD P: 134 at 7.
    
Here, we find that the Army's technical evaluation was reasonable and
consistent with the RFP criteria.  The record shows that both Bechtel's
and Pueblo Environmental's proposals were viewed favorably by the Army. 
However, despite the protester's high technical ratings, the agency
evaluated Bechtel's proposal as being technically superior to Pueblo
Environmental's under the technical approach area.  This assessment was
based in large part upon the agency's judgment that in contrast to
Bechtel's proposal, Pueblo Environmental's proposal contained numerous
weaknesses, including two significant weaknesses, under the most important
technical approach area, and that these significant weaknesses evidenced a
lack of understanding on Pueblo Environmental's part. 
    
Pueblo Environmental argues that the agency's assessment that it lacked
understanding was *arbitrary because the Army's technical evaluators
already had found that [Pueblo Environmental] had a 'High Good' technical
understanding.*  Protester's Comments at 7.  In this regard, the protester
notes that, under the solicitation adjectival evaluation scheme for the
technical and management areas, a *good* rating reflected a *[p]roposal
[that] demonstrates a good understanding of requirements and approach that
exeeds performance or capability standards.*  See RFP S: M.2.4.3. 
    
Adjectival ratings and point scores are only a guide to assist agencies in
evaluating proposals; information on advantages and disadvantages of
proposals is the type of information that source selection officials
should have in addition to ratings and point scores to enable them to
determine whether and to what extent meaningful differences exist between
proposals.  Proposals with the same or similar adjectival ratings are not
necessarily of equal quality and the agency may properly consider specific
advantages that make one proposal of higher quality than another. 
Oceaneering Int'l, Inc., B-287325, June 5, 2001, 2001 CPD P: 95 at 13. 
    
The record shows that this was precisely what the SSAC and SSA did here. 
While acknowledging the strengths in Pueblo Environmental's proposal, the
agency focused on the weaknesses, including the two significant
weaknesses, assessed in Pueblo Environmental's technical proposal, which
the agency found showed a lack of understanding of significant aspects of
the project.  This type of analysis by the SSAC and SSA, giving due
consideration to the evaluation conclusions of the lower‑level
evaluators, was entirely appropriate and reasonable.  See GTE Hawaiian
Tel. Co., Inc., B-276487.2, June 30, 1997, 97-2 CPD P: 21 at 18-19.
    
The protester objects to the evaluation finding that Pueblo
Environmental's approach to explosive containment was a significant
proposal weakness that demonstrated the firm's lack of technical
understanding.  The protester notes in this regard that the RFP only
requested that offerors provide a preliminary design description, which
the protester asserts it did.  Pueblo Environmental also contends that
during discussions, it emphasized that its approach was preliminary.  The
firm also stated during discussions *that the explosive containment
requirements for this project would be much less than for other chemical
demilitarization projects.*  Protester's Comments at 12. 
    
As discussed below, based on review, we find no basis to question the
agency's assessment of the protester's explosive containment approach as a
significant weakness demonstrating a lack of understanding. 
    
Although it is true that the RFP only requested a preliminary design
description, offerors were still required to identify their proposed
*design concepts, design tools, [and] construction methods that will be
used in the design and construction of the Pueblo Chemical Agent
Destruction Pilot Plant.*  See RFP S:S: L.15.2, L.15.3.  This provided the
agency with the means to evaluate these preliminary designs to assess the
relative merits of the offerors' designs and approaches.  See RFP S:
M.2.4.1.
    
Both firms proposed to remove *energetics* (that is, explosives) from the
chemical munitions using PMD machines.  Unlike Bechtel, however,
[Deleted], see Agency Report, Tab 37, Bechtel Technical Proposal, at 8,
Pueblo Environmental proposed to use the PMD machines in [Deleted]. 
Agency Report, Tab 28, Pueblo Environmental Technical Proposal, at 7.  The
Army was concerned that the protester's approach to explosive containment
did not satisfy the *total containment* requirement contained in Army
Pamphlet 385-61, Toxic Chemical Agent Safety Standards (at 25),
incorporated into the RFP, which states:
    
Total containment will be provided by equiment or facility of a tested
design that assures sufficient capacity and strength to contain all
combustion and detonation gases, fragments, and agent from the largest
explosion that could occur based upon the propagation characteristics of
the ammunition. 
Pueblo Environmental disagrees with the agency's assessment of what is
required for total explosive containment, arguing that [Deleted].  The
protester also asserts that its use of *proven* PMD machines mitigates the
risk of explosion in removing energetics from projectiles.
    
The agency recognized the merit in using PMD machines to remove
energetics, but was concerned that there continued to be an explosion
risk.  The agency also found that although [Deleted], explosion risk
remains when the PMD machines are used on munitions such as those to be
processed at the Pueblo Chemical Agent Destruction Pilot Plant.  With
these concerns in mind, the agency determined that Pueblo Environmental's
proposed approach would not satisfy the total containment requirement of
Army Pamphlet 385-61. 
    
Here, not only does Pueblo Environmental admit that it did not
specifically address this requirement in its proposal, Protester's
Comments at 10, but its solution of [Deleted] did not provide the same
level of explosion containment as provided by Bechtel's solution.[8] 
Given the grave consequences presented by a possible leak of chemical
agent, the Army's emphasis on total containment in the event of an
explosion is reasonable.  The agency could reasonably find that Pueblo
Environmental's proposed technical approach using [Deleted], together with
its failure to address Army Pamphlet 385‑61, demonstrated the firm's
lack of understanding of the total explosive containment requirements.[9] 
Although the protester disagrees with the agency's judgment, this does not
demonstrate that the agency's evaluation assessment was unreasonable.  See
UNICCO Gov't Servs., Inc., supra, at 7.
    
In sum, we find that the agency's determination that Pueblo
Environmental's technical proposal contained significant weaknesses that
adversely reflected on that firm's understanding was reasonable.[10]
    
Pueblo Environmental next protests the Army's cost realism adjustment of
its cost proposal to reflect the agency's judgment that the protester's
proposal was understaffed.  The protester complains that the Army did not
*make a reasonable determination that [Pueblo Environmental's] own
approach would require more staffing.*  Protester's Comments at 18. 
Pueblo Environmental argues that the Army's cost realism evaluation did no
more than compare the protester's proposed costs to the IGE and the
agency's cost experience under other contracts.
    
When agencies evaluate proposals for the award of cost-reimbursement
contracts, an offeror's proposed estimated costs are generally not
dispositive because, regardless of the costs proposed, the government is
bound to pay the contractor its actual and allowable costs.  Advanced
Sciences, Inc., B-259569.3, July 3, 1995, 95-2 CPD P: 52 at 11. 
Consequently, a cost realism analysis must be performed by the agency to
determine the extent to which an offeror's proposed costs represent what
the contract should cost, assuming reasonable economy and efficiency.  FAR
S:S: 15.305(a)(1), 15.404-1(d); CACI, Inc.--Fed., B-216516, Nov. 19, 1984,
84-2 CPD P:  542 at 5.  Our review of an agency's judgment in this area 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 P: 64 at 7.
                                                             
Here, we find that the Army reasonably evaluated the cost realism of
Pueblo Environmental's proposal.  The record establishes that the
protester's technical and management approaches and proposed staffing
levels for the protester's design/build plan and design completion
proposal were carefully analyzed by the SSEB.  See Agency Report, Tab 17,
SSEB Report, at 106-17.  From this review, the SSEB identified six
specific areas in which Pueblo Environmental's design/build plan and
design completion proposal were inadequate and understaffed, considering
that firm's proposed technical approach.  Id. at 114. 
    
The protester does not challenge any of these specific SSEB findings.  In
addition, the record shows that Pueblo Environmental received numerous
questions from the agency concerning its proposed staffing, and was
specifically informed that its proposed staffing appeared low in
comparison to the IGE and with the agency's experience on other chemical
demilitarization projects.  See, e.g., Agency Report, Tab 6, Memorandum of
Meeting with Pueblo Environmental, Sept. 10, 2002 (*government's concern
was just to ensure that the [Pueblo Environmental] team had taken a good
hard look at its staffing numbers*).  Although not disputing that its
proposal was reasonably found inadequate in these six specific areas as
evaluated by the SSEB, Pueblo Environmental nevertheless complains that
the Army used only the IGE and the agency's past experience to determine
the amount of additional staffing that would be required to account for
the inadequacies. 
    
We find that the Army appropriately used the IGE and its past experience
as tools in assessing the amount of additional staffing that Pueblo
Environmental would require for contract performance.  An agency may
reasonably use an IGE or its past experience in assessing the realism of
an offeror's approach, and we will not sustain a protest of an agency's
staffing estimate where, as here, the protester does not show that the
agency's estimates are unreasonable.  See, e.g.,  IT Facility Servs.-Joint
Venture,  B‑285841, Oct. 17, 2000, 2000 CPD P: 177 at 6-9; National
Steel and Shipbuilding Co., B-281142, B-281142.2, Jan. 4, 1999, 99-2 CPD
P: 95 at 12-13.
    
In short, contrary to the protester's arguments, the Army reasonably
assessed the cost realism of Pueblo Environmental's proposed approach. 
This assessment resulted in an unrebutted finding that the protester's
proposal was inadequate and understaffed in several specific areas.  To
determine the amount of additional staffing that would be required by the
protester to perform the contract, the Army used the IGE and its prior
experience with other chemical demilitarization projects.  Although the
protester disagrees with the agency's approach and judgment, that
disagreement does not demonstrate that the agency's estimates were
unreasonable.  IT Facility Servs.-Joint Venture, supra, at 7-8.
    
Pueblo Environmental also protests the Army's source selection decision,
complaining that the SSA did not give appropriate (or any) consideration
to the protester's low cost in determining that Bechtel's higher-rated
proposal reflected the best value to the government.  The protester
complains that the SSA did not identify the specific benefits that the
government would obtain in selecting Bechtel's higher-cost proposal.
    
Our review of cost/technical tradeoff decisions is limited to a
determination of whether the tradeoff was reasonable and consistent with
the solicitation's evaluation criteria.  Southwest Marine, Inc.; American
Sys. Eng'g Corp., B-265865.3, B-265865.4, Jan. 23, 1996, 96-1 CPD P: 56 at
10.  Award may be made to a firm that submitted a higher-rated,
higher-cost proposal where the decision is consistent with the evaluation
criteria and the agency reasonably determines that the technical
superiority of the higher cost offer outweighs the cost difference. 
National Toxicology Labs., Inc., B-281074.2, Jan. 11, 1999, 99-1 CPD P: 5
at 7.  There is no requirement, however, that a selection official, in
performing a cost/technical tradeoff, quantify the value of the technical
advantages offered.  TeKONTROL, Inc., B‑290270, June 10, 2002, 2002
CPD P: 97 at 5; Southwest Marine, Inc.; American Sys. Eng'g Corp., supra,
at 19.
    
We find, contrary to the protester's arguments, that the SSA adequately
considered Pueblo Environmental's evaluated cost advantage in his decision
and reasonably articulated the reasons why Bechtel's evaluated technical
advantage was worth the associated cost premium.  The record shows that
the SSA was well aware of the protester's proposed and probable costs, and
that the protester's costs were considerably below Bechtel's proposed and
evaluated costs.  See Agency Report, Tab 22, Source Selection Decision, at
7.  The SSA found, however, that Bechtel's higher proposal rating
reflected a real technical superiority that translated into lower risk in
terms of safety, schedule, and cost.  In this regard, the SSA stressed
*[t]he unique complexities of handling aging and deteriorating chemical
agent munitions* and *the [paramount] need to ensure [that] the facility
is designed, constructed, operated and maintained to ensure explosive and
agent containment.*  Id. at 8.  Assessing the protester's evaluated cost
advantage, the SSA found this advantage was not *a significant advantage,
based on the apparent lack of understanding of the complexities of the
project by [Pueblo Environmental], which increases the overall performance
risk and associated cost risk.*  Id.  Based on the record, we think that
the SSA reasonably concluded that Pueblo Environmental's evaluated cost
advantage did not outweigh Bechtel's technical superiority.  This judgment
is consistent with the RFP's evaluation scheme, which provided for a
cost/technical tradeoff and stated that technical merit was more important
than cost.
    
The protester finally complains that the agency *penalized [Pueblo
Environmental] twice* when it upwardly adjusted the protester's proposed
costs to account for the firm's understaffing and when the SSA in his
source selection document considered the firm's low staffing as evidence
of the protester's lack of understanding.  In the protester's view, *the
Army's cost adjustment represents the cost of erasing [Pueblo
Environmental's] alleged weakness for understaffing.*   Protester's
Comments at 22.
    
We disagree.  An agency is not prohibited from making cost realism
adjustments and also downgrading a technical proposal, where, as here, the
cost adjustments are necessary to reflect the offeror's probable costs of
performance based on its proposal and the weaknesses assessed in the
offeror's technical evaluation reflect the performance risk stemming from
the inadequacy of the technical proposal.  See Basic Contracting Servs.,
Inc., B‑284649, May 18, 2000, 2000 CPD P: 120 at 12.  The Army's
upward adjustment of the Pueblo Environmental's proposed costs did not
*erase* the weakness associated with its technical approach resulting from
its very low staffing level, which the Army reasonably found adversely
reflected upon the firm's understanding of the contract requirements. 
That is, the agency reasonably concluded that the question of the
protester's understanding remained,
even after its staffing was adjusted to a more realistic level in the cost
realism analysis.
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    

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

   [1] Pueblo Environmental is a joint venture of EG&G Defense Materials,
Inc., Fluor Federal Services, Inc., and CH2M Hill Constructors, Inc.
[2] Mustard agent is a persistent blister-causing chemical that can cause
skin burns and blisters and damage to respiratory airways.  See *ToxFAQs,
Blister Agents: Mustard,* Agency for Toxic Substances and Disease
Registry, available at www.atsdr.cdc.gov>; see also Army Pamphlet 385-61,
Toxic Chemical Agent Safety Standards, at 3.
[3] Neutralization and biotreatment entails several non-combustion steps. 
The process involves neutralization of the mustard agent and munitions
energetics (that is, fuzes, bursters, and propellants--all of which could
be contaminated by the mustard agent) using hot water.  This is followed
by biotreatment of process and secondary wastes using bacteria.  See *Fact
Sheets:  Neutralization/Biodegradation for Mustard Agent Disposal,* U.S.
Army Soldier and Biological Chemical Command, available at
.
[4] Numerous equally weighted factors were identified under each of the
elements of the technical approach and management approach areas.
[5] The Army has established different levels for chemical agent
contaminations (e.g., 1X, 3X, and 5X).  Army Pamphlet 385-61, *Toxic
Chemical Agent Safety Standards,* Mar. 27, 2002.  *5X* condition is
identified as where an item has been decontaminated completely of the
indicated agent and may be released for general use or sold to the general
public.  Id. at 72.
[6] Neither offeror made any changes in their final revised proposals.
[7] Bechtel and Pueblo Environmental both proposed approximately $3.9
million to complete the design/build plan.
[8] The Army states that a [Deleted].  Contracting Officer's Statement at
30.
[9] We disagree with the protester's assertion that the agency *accepted*
the protester's design solution during the oral presentation.  Rather, the
portion of the oral presentation referenced by the protester only
evidences that the agency identified its concern with explosive
containment to Pueblo Environmental and agreed with the protester that it
was the protester's responsibility to have some design for explosive
containment.  Pueblo Environmental Oral Presentation Video Tape No. 5.  We
note that Pueblo Environmental does not contend that the agency's
discussions with it were not meaningful or were misleading.
[10] Pueblo Environmental initially protested the agency's determination
that the protester's technical proposal reflected a number of other
weaknesses, including that the protester's proposal showed a lack of
understanding relating to the potential for agent contamination even after
decontamination, which the agency found to be a significant weakness and
one that could pose an unreasonable safety risk.  The Army replied in
detail to these protest allegations, effectively rebutting each
allegation.  Because the protester did not respond to the agency's
position in its comments, we consider these allegations to have been
abandoned.  Uniband, Inc., B-289305, Feb. 8, 2002, 2002 CPD P: 51 at 5-6
n.3.