TITLE:  Northrop Grumman Technical Services, Inc.; Raytheon Technical, B-291506; B-291506.2; B-291506.3; B-291506.4, January 14, 2003
BNUMBER:  B-291506; B-291506.2; B-291506.3; B-291506.4
DATE:  January 14, 2003
**********************************************************************
Northrop Grumman Technical Services, Inc.; Raytheon Technical, B-291506;
B-291506.2; B-291506.3; B-291506.4, January 14, 2003

   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:    Northrop Grumman Technical Services, Inc.; Raytheon
Technical Services Company
    
File:             B-291506; B-291506.2; B-291506.3; B-291506.4
    
Date:              January 14, 2003
    
John W. Chierichella, Esq., Richard A. Sauber, Esq., James J. McCullough,
Esq., Anne B. Perry, Esq., Jonathan S. Aronie, Esq., Suzette E. Gordon,
Esq., Franklin M. Rubinstein, Esq., Timothy K. Halloran, Esq., and
Brittney R. Nystrom, Esq., Fried, Frank, Harris, Shriver & Jacobson, for
Northrop Grumman Technical Services, Inc.; and Mark D. Colley, Esq., David
P. Metzger, Esq., Paul E. Pompeo, Esq., David S. Black, Esq., Michele M.
Brown, Esq., Caitlin K. Cloonan, Esq., and Stuart Turner, Esq., Holland &
Knight, for Raytheon Technical Services Company, the protesters.
Thomas L. McGovern, III, Esq., Michael F. Mason, Esq., Joy E. Sturm, Esq.,
Gary J. Campbell, Esq., and Maureen K. James, Esq., Hogan & Hartson, for
Kwajalein Range Services, LLC, the intervenor.
Raymond M. Saunders, Esq., Lt. Col. Daniel K. Poling, Maj. Leslie A.
Nepper, Maj. Kateni T. Leakehe, Maj. Robert B. Neill, Capt. Timothy J.
Ryan, and Capt. Peter G. Hartman, Department of the Army, for the agency.
Sharon L. Larkin, Esq., 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 contemplating award based upon a
cost/technical tradeoff, protest that the agency abandoned the
point-scoring feature of an evaluation tool identified in the solicitation
is denied, where the point scoring feature was not required by the award
evaluation scheme announced in the solicitation and the agency's use of an
adjectival evaluation comported with the solicitation's *best value*
scheme.
    
2.     Protest asserting that protester's proposal was unreasonably
downgraded for low proposed staffing level is denied where the agency
reasonably determined, consistent with the solicitation, that the proposed
staffing level, although acceptable, was low and posed performance risks.
    
3.     Protest objecting to agency's cost evaluation and assessment of
weaknesses and risk in protester's technical proposal relating to the
protester's proposed personnel based upon the cost evaluation analysis of
protester's labor rates is denied, where the agency's assessment was
reasonably based upon information provided by protester in its proposal
and during discussions, and the solicitation provided that the agency may
consider the cost evaluation in the evaluation of technical proposals.
    
4.     Protest challenging awardee's *excellent* past performance rating
is denied where, in evaluating the past performance of a joint venture,
the agency, consistent with the solicitation, reasonably considered the
past performance of the awardee's joint venture members and major
subcontractor.
DECISION
    
Northrop Grumman Technical Services, Inc. and Raytheon Technical Services
Company protest the award of a contract to Kwajalein Range Services, LLC
(KRS),[1] under request for proposals (RFP) No. DASG60-01-R-0002, issued
by the U.S. Army Space and Missile Defense Command for the operation of
the U.S. Army Kwajalein Atoll/Ronald Reagan Ballistic Missile Defense Test
Site (also known as the Reagan Test Site (RTS)) in the Republic of the
Marshall Islands.  The protesters challenge the agency's evaluation of
proposals and source selection decision.
    
We deny the protests.
    
BACKGROUND
    
The RTS is located in the Kwajalein Atoll in the Marshall Islands and is
approximately 2,136 nautical miles west-southwest of the Hawaiian
Islands.  The Kwajalein Atoll is a crescent loop of coral islands
(including Kwajalein and Roi‑Namur Islands), whose attendant reef
encloses the world's largest lagoon (an area of 1,100 square miles).  The
RTS, whose missions include missile and missile defense testing and space
observation, identification, and tracking, is operated as a
government-owned, contractor-operated installation, under the direction of
the Army.  RFP, Performance Work Statement (PWS) S: 1, P:P: 1.3, 1.4;
Raytheon Hearing Exh. No. 9, *Master Plan:  United States Army Kwajalein
Atoll/Kwajalein Missile Range* (Jan. 2001), at 1-1.
    
The RFP, issued November 2, 2001, provides for the award of a single or
multiple cost-plus-award-fee/award-term contract(s) for the operation of
the RTS for up to 15 years.  The contract requirements include both
integrated range engineering support and test site logistics services.[2] 
Offerors were informed that, in the area of integrated range engineering
support services, the agency had a continuing need for *research,
development, test and evaluation . . . efforts for on-site [that is,
on-island] and off-site engineering, technical support services, and
materials required to operate, maintain, analyze, and modify the RTS
instrumentation and related support systems.*  PWS S: 1, P: 4.1.  The RTS
systems to be maintained, operated, and supported include radar,
telemetry, optics, mission control centers, communications, and rocket
launching equipment.  See PWS S:S: 14-18.  Included in the RTS systems to
be supported is the Kiernan Reentry Measurements Site (KREMS), which
consists of four instrumentation radar systems and is stated to be the
government's most sophisticated and important research and development
radar site.[3]  Contracting Officer's Statement (Nov. 8, 2002) at 4.  The
logistics services to be furnished under the contract include all aspects
of base maintenance and support, including in the areas of aviation,
automotive, marine, utilities (i.e., electrical power generation, water
and wastewater systems), facilities engineering, housing, community
services (i.e., dental, medical, educational, and religious services),
food services, merchandising, fire prevention and protection, supply, and
management.  PWS S:S: 3‑13.
    
Offerors were informed that the technical programs to be performed under
the contract would
    
require precision operations by highly-skilled and specially-trained
technical personnel.  Likewise, the construction, logistics support, and
security and law enforcement activities at [the RTS] require a cadre of
professional specialists, technicians, and trade personnel.
PWS S: 1, P: 4.2.  The PWS also stated that
    
[a] streamlined, highly effective, and cost efficient contractor
organization is imperative.  The costs associated with relocating
personnel to [the RTS], coupled with the limited housing available and
other infrastructure limitations, make it extremely important that each
contractor hold staffing to the minimum essential.[[4]]   Accordingly, it
is important that each contractor recruit personnel with a high level of
expertise and experience and who are multi-talented to the extent
feasible.  Although the isolation and substandard housing exacerbate the
problem of recruiting personnel, a reasonable and realistic
benefits/compensation package is an effective means of overcoming these
obstacles.  Accordingly, it is important that the source selection and/or
negotiation process ensure that potential contractors' proposed wages and
other benefits be realistic, as well as reasonable, and will be effective
in both recruiting and retaining personnel.  Cross training and cross
utilization of personnel to the maximum extent practicable is a desirable
operational objective.  The proposed acquisition requires the contractor
to provide personnel in many varied disciplines to perform the functional
areas of the PWS.  Employees will include unskilled and semi-skilled
laborers, technicians, skilled tradesmen, professionals, and managers. 
Maximum effective utilization of the indigenous Marshallese population and
training to enhance and facilitate the advancement of Marshallese
employees into managerial/supervisory positions are important short and
long[-]term goals.
PWS S: 1, P: 6.6.
    
The RFP provided for award on the basis of a cost/technical tradeoff,
specifically informing offerors that the agency might select a proposal
whose total evaluated probable cost was *not necessarily the lowest, but
whose technical and/or management proposals are sufficiently more
advantageous to the government so as to justify the payment of additional
costs.*  RFP amend. 1, S: M, at 63.  The RFP also stated that it would
employ *alternate source selection procedure[s] for highly complex
[research development test and evaluation] requirements,* and that these
alternate procedures included conducting detailed negotiations with one
source or
sources after a source selection had been made.  Id.  The RFP identified
the following evaluation criteria:
    

   +------------------------------------------------------------------------+
|      Areas|      Factors                    |      Subfactors          |
|-----------+---------------------------------+--------------------------|
|Technical  |                                 |                          |
|-----------+---------------------------------+--------------------------|
|           |Integrated range engineering     |                          |
|           |---------------------------------+--------------------------|
|           |                                 |Mission support           |
|           |                                 |--------------------------|
|           |                                 |Instrumentation           |
|           |                                 |maintenance               |
|           |                                 |--------------------------|
|           |                                 |Instrumentation           |
|           |                                 |modifications             |
|           |                                 |--------------------------|
|           |                                 |Communications            |
|           |                                 |--------------------------|
|           |                                 |RTS support               |
|           |---------------------------------+--------------------------|
|           |Logistics support                |                          |
|           |---------------------------------+--------------------------|
|           |                                 |Public works              |
|           |---------------------------------+--------------------------|
|           |                                 |Supply and transportation |
|           |                                 |--------------------------|
|           |                                 |Marine services           |
|           |                                 |--------------------------|
|           |                                 |Automotive services       |
|           |                                 |--------------------------|
|           |                                 |Aviation services         |
|           |                                 |--------------------------|
|           |                                 |Merchandise services      |
|           |                                 |--------------------------|
|           |                                 |Food services             |
|           |                                 |--------------------------|
|           |                                 |Community services        |
|           |                                 |--------------------------|
|           |                                 |Medical and dental        |
|           |                                 |services                  |
|           |                                 |--------------------------|
|           |                                 |Education services        |
|           |                                 |--------------------------|
|           |                                 |Environmental             |
|-----------+---------------------------------+--------------------------|
|Management |                                 |                          |
|-----------+---------------------------------+--------------------------|
|           |Past performance/experience      |                          |
|           |---------------------------------+--------------------------|
|           |Management plan                  |                          |
|           |---------------------------------+--------------------------|
|           |Marshallese training and         |                          |
|           |employment                       |                          |
|           |---------------------------------+--------------------------|
|           |Subcontracting plan              |                          |
|-----------+---------------------------------+--------------------------|
|Cost       |                                 |                          |
|-----------+---------------------------------+--------------------------|
|           |Cost realism                     |                          |
|           |---------------------------------+--------------------------|
|           |Total evaluated probable cost    |                          |
+------------------------------------------------------------------------+

    
Id. at 60-62.  The technical area was stated to be *very much more
important* than the management area, which was stated to be slightly more
important than the cost area.  Together the technical and management areas
were stated to be *extremely more important* than the cost area.[5]  Id.
at 62.
    
With respect to the cost area, offerors were informed that, under the cost
realism factor, the proposal would be
    
analyzed to assess the likelihood that the technical and management
approaches proposed can be accomplished at the cost proposed.  This is a
measure of the programmatic risk based on the technical/management
approach.  The results of the cost realism assessment will be applied to
the evaluation of the technical and management areas to aid in assessing
the offeror's understanding of the magnitude and complexity of the
contract requirements.
Id. at 61.  The RFP also warned that
    
Cost realism is a very important consideration in the assessment of the
programmatic risk associated with the Technical and Management Areas. 
Poor cost realism may result in a lower evaluation of the technical and
management areas.  Offerors submitting cost proposals that are so
unrealistically high or low as to preclude a reasonable chance of being
selected for award will be excluded from the competitive range.
Id. at 63.  The RFP also provided for the evaluation of proposals to
determine the most probable cost to the government of successfully
completing the contract *using the technical and management approaches
proposed.*  Id. at 62.
    
The RFP's proposal preparation instructions required offerors to prepare
proposals using Tabular Format (TF!) software.[6]  Offerors were also
informed that
    
Both Technical Area sub-factors and the [management plan and Marshallese
training/employment subfactors] under the Management Area will be
evaluated using the Tabular Format System (TF!)*.
Id. at 60.  In addition, the PWS was structured in a TF! format.  Among
the TF! spreadsheets required to be completed was the Specific Resource
Allocation Listing (SRAL) spreadsheet, which would identify, among other
things, the offeror's proposed labor hours, staffing, and skill mix per
year to satisfy the PWS requirements.  RFP amend. 1, S: L, at 44-48. 
    
Offerors were required to propose in their cost proposals a direct labor
rate for *wage year 1* for each proposed labor category.  This proposed
labor rate was required to be escalated based upon an RFP-provided
escalation rate for each year following *wage year 1.*  Id. at 38-42. 
    
By the February 25, 2002 closing date, the Army had received proposals
from Raytheon, Northrop Grumman, and KRS.  Initial technical proposals
were evaluated by the agency's source selection evaluation board (SSEB),
and the evaluation results reported by the source selection advisory
committee (SSAC) to the source selection authority (SSA), as follows:
    

   +------------------------------------------------------------------------+
|                                 |Raytheon  |Northrop Grumman|KRS       |
|---------------------------------+----------+----------------+----------|
|Technical                        |          |                |          |
|---------------------------------+----------+----------------+----------|
| |Integrated range engineering   |Good      |Acceptable      |Acceptable|
| |-------------------------------+----------+----------------+----------|
| |Logistics support              |Good      |Acceptable      |Acceptable|
|---------------------------------+----------+----------------+----------|
|Management                       |          |                |          |
|---------------------------------+----------+----------------+----------|
| |Past performance/experience    |Acceptable|Acceptable      |Good      |
| |-------------------------------+----------+----------------+----------|
| |Management plan                |Acceptable|Acceptable      |Acceptable|
| |-------------------------------+----------+----------------+----------|
| |Marshallese training/employment|Acceptable|Acceptable      |Acceptable|
| |-------------------------------+----------+----------------+----------|
| |Subcontracting plan            |Good      |Acceptable      |Acceptable|
+------------------------------------------------------------------------+

    
Agency Report, Tab 7c, SSAC Briefing, at 14-15.  All three proposals were
included in the competitive range.  With respect to Raytheon's proposal,
the SSEB expressed concern that Raytheon's proposed labor rates were low,
and stated that although no probable cost adjustment was made in
Raytheon's initial proposed costs, the firm's rates were considered a
minor cost risk, which the agency would address during discussions. 
Agency Report, Tab 7c, SSEB Initial Evaluation Report, at 10.
    
The Army conducted three rounds of discussions with the offerors and
received oral presentations.  During the first round of discussions, the
agency inadvertently disclosed all of the agency's technical questions for
each firm to the offerors as a group.  To mitigate the disclosure, the
Army received certifications from each of the offerors promising that the
firms would not use in subsequent submissions and proposal revisions any
information regarding another offeror's proposal that was acquired as a
result of the inadvertent disclosure.  Contracting Officer's Statement
(Nov. 8, 2002) at 75.  In addition, offerors were cautioned that
    
The government will carefully scrutinize subsequent submissions/revised
proposals to assure compliance with these certifications.  Any offeror
found to have violated such certification will be eliminated from the
competition.
RFP amend. 3, S: M, at 3. 
    
Final revised proposals were received and evaluated as follows:
    

   +------------------------------------------------------------------------+
|                              |Raytheon      |Northrop   |KRS           |
|                              |              |Grumman    |              |
|------------------------------+--------------+-----------+--------------|
|Technical                     |Acceptable    |Acceptable |Acceptable    |
|------------------------------+--------------+-----------+--------------|
| |Integrated range engineering|Acceptable    |Acceptable |Acceptable    |
| |----------------------------+--------------+-----------+--------------|
| |Logistics support           |Acceptable    |Acceptable |Acceptable    |
|------------------------------+--------------+-----------+--------------|
|Management                    |Acceptable    |Acceptable |Exceptional   |
|------------------------------+--------------+-----------+--------------|
| |Past performance/experience |Acceptable    |Acceptable |Exceptional   |
| |----------------------------+--------------+-----------+--------------|
| |Management plan             |Acceptable    |Acceptable |Good          |
| |----------------------------+--------------+-----------+--------------|
| |Marshallese                 |Acceptable    |Acceptable |Exceptional   |
| |training/employment         |              |           |              |
| |----------------------------+--------------+-----------+--------------|
| |Subcontracting plan         |Good          |Acceptable |Acceptable    |
|------------------------------+--------------+-----------+--------------|
|Total proposed cost           |$2.364 billion|$2.055     |$2.661 billion|
|                              |              |billion    |              |
|------------------------------+--------------+-----------+--------------|
|Total evaluated probable cost |$2.378 billion|$2.084     |$2.685 billion|
|                              |              |billion    |              |
+------------------------------------------------------------------------+

    
Agency Report, Tab 7r1, SSEB Final Evaluation Report, at 18-20, 28. 
    
KRS's proposal was the highest technically rated by the SSEB, primarily
based upon KRS's exceptional management approach.  KRS's proposal was also
evaluated at the high end of acceptable under the integrated range
engineering factor.  Id. at 5. 
    
Raytheon's proposal was also assessed as being at the high end of
acceptable under the integrated range engineering factor.  This, however,
was a lower technical rating than that received by Raytheon's proposal in
the initial technical evaluation, and reflected the evaluators' concern
with Raytheon's proposed labor rates.  Specifically, the SSEB found that
    
A majority of the proper technical skill mixes can probably be hired at
the proposed rates, but the competency and retention levels would be
questionable and these personnel would most likely require additional
training.  Further, expected high turnover of personnel increases training
requirements and the risk of degraded system performance in the face of
non‑nominal test incidents. 
Id. at 10.
    
Northrop Grumman's proposal received the lowest technical ratings.  Its
proposal received an *overall medium acceptable rating,* under the
integrated range engineering factor, and was otherwise viewed as merely
acceptable.  Among a number of weaknesses assessed in Northrop Grumman's
proposal was the SSEB's concern that the firm's staffing levels were too
low and reflected a heavy reliance upon cross-utilization, cross-training
and matrixing of personnel to accomplish the contract tasks.  Id. at 8-10,
15-16.
    
The SSA was briefed on the SSEB's evaluation results by the SSAC and
reviewed the SSEB's Final Evaluation Report.  The SSA accepted the SSEB's
conclusion that KRS had submitted the superior technical proposal, and
noted that KRS offered several
    
very significant strengths includ[ing] a good understanding of most phases
of mission support, good corporate reach-back resources, a superior
project control system allowing real-time access to cost estimates and
billing data, highly applicable overall experience with past performance
success verified by previous customers, a proven contract transition
process, realistic wages and benefits structured for retention of existing
employees and recruitment of future employees, and an exceptional
Marshallese Training and Employment Plan which responds directly to the
spirit and intent of the RFP. 
Agency Report, Tab 8, Source Selection Decision, at 5.
    
With respect to Raytheon's proposal, which the SSA considered to be the
second highest-rated offer, the SSA recognized Raytheon's *very
significant strengths,* which *include understanding of each phase of
mission support, an attractive instrumentation maintenance and
modification approach, and a systems engineering support approach that
primarily utilizes on-site personnel for quick response.*  The SSA also
noted, as a *very significant strength,* that Raytheon, as the incumbent
contractor, had *received high performance ratings in [the firm's] current
[integrated range engineering] performance evaluations.*  Id. at 7. 
However, the SSA found Raytheon's proposal had several *very significant
weaknesses,* including
    
a wage structure and work-hour proposal that will severely restrict the
ability of the offeror to recruit and retain high quality engineering and
technician personnel and a proposed personnel benefits package that
reduces current employees['] benefits and eliminates some current benefits
for new-hires, thereby further exacerbating the situation.  The effect of
these weaknesses is considered sufficient to degrade the technical
capability of the contractor to perform the PWS requirements to a level
that would insure success in both normal and abnormal circumstances. 
Further, the offeror's past performance as reported by previous customers
indicates problems in controlling overhead costs that severely affected
the award fee earned.  Lastly, [Raytheon's] Marshallese Training and
Employment Plan provides for very significant initial cuts in Marshallese
employment and is not consistent with the RFP's objective to maximize the
number of Marshallese employees.  The risk inherent in these rapid initial
cuts is that the reduction could create labor and political problems. 
Id. at 7-8.  The SSA noted that, although Raytheon had
    
proposed sufficient overall [integrated range engineering] and Logistics
[services] hours, an in-depth analysis of [Raytheon's] cost proposal
indicates that [the firm is] also proposing a large percentage of new
hires to replace their current Off-Island hire personnel [that is,
personnel hired off-island to work at the RTS], especially in the
[integrated range engineering] area, but also in the Logistics Area. 
Id. at 8.  In this respect, the SSA found that Raytheon had *made it clear
to the government [during discussions] that [the firm's] philosophy in
this regard was to reduce the current skill levels and therefore
wages/benefits as part of their plan to transition [the RTS] from an R&D
[research & development] environment to more of an O&M [operation &
management] environment.*  Id. at 10.
    
The SSA noted that Northrop Grumman's proposal had received generally
acceptable ratings with few evaluated significant strengths.  The only
*very significant strength* evaluated in Northrop Grumman's proposal was
the firm's instrumentation maintenance approach, which involved the
innovative cross-utilization of personnel to achieve an efficient
organization.  *Very significant weaknesses* evaluated in Northrop
Grumman's proposal *included lack of experience in management of large,
remote, multi-activity contracts such as the current effort, which risks
misallocation of resources due to a lack of understanding of the
significance of each element of the contract, and their apparent complete
lack of understanding of airfield operations.*  Id. at 6.  The SSA also
noted that Northrop Grumman's proposed staffing level was *judged to be
only minimally adequate to meet contract requirements.*  Id. at 9.
    
The SSA concluded that KRS's proposal offered the best value to the
government.  The SSA found that *[h]aving the right mix and number of
people is key to mission success at [the RTS]; and KRS has the best
overall proposal for recruiting and training the high‑tech workforce
needed for optimum performance at [the RTS].*  In this regard, the SSA
found that KRS's *[b]etter wages, benefits and human resource systems*
gave KRS a clear advantage over Raytheon in this area, and that KRS's much
higher proposed labor hours, more robust staffing in the technical areas,
and superior Marshallese training and employment plan gave KRS a clear
advantage over Northrop Grumman in this area.  Id. at 9.  Although
Raytheon and Northrop Grumman had lower evaluated probable costs than KRS,
the SSA noted that the protesters' cost proposals were less realistic than
KRS's and that *[l]esser cost realism on the part of [Raytheon] and
[Northrop Grumman] means a greater risk of cost overruns and degraded
technical performance for these offerors.*  Id. at 11.  In particular, the
SSA noted that the cost factor was significantly less important than the
technical and management areas.  *The reason for this relative order of
importance among [the] evaluation criteria is the critical importance and
extremely high cost of the customer programs supported by [the RTS].* 
Id.  In short, the SSA concluded that KRS's superior technical proposal
and more realistic cost estimates were worth the cost differential between
KRS  and the other offerors.  Id. at 11-12.  Award was made to KRS, and
these protests followed.
    
ANALYSIS
    
Tabular Format
    
The protesters first complain that the Army changed the evaluation scheme
announced in section M by using the TF! point score feature to establish
the competitive range, and then *abandoning* it thereafter.  According to
the protesters, point scores are a crucial aspect of the TF! software, and
a unique feature of the TF! point-scoring system employed here was that it
provides the same number of points for exceptional and good ratings.[7] 
Therefore, the protesters argue, TF! induced them to maximize points by
striving only to achieve good ratings while containing costs, and
discouraged them from striving for exceptional ratings.  The protesters
argue that they were further induced to take this approach by the TF!
vendor, ASC, during a pre-solicitation industry briefing and various TF!
training sessions.  As a result, the protesters allegedly eliminated
costly items from their proposals that could have raised their technical
ratings because they believed this would have had no effect on their
overall scores. 
    
For the reasons discussed below, we do not find the protesters' arguments
persuasive.
    
TF! is a proposal formatting tool with many informational, organizational,
and evaluation features.  Among other things, TF! permits an agency to
align proposals with the numerous PWS sections and PWS-related evaluation
criteria, assign adjectival ratings to these criteria, and convert these
adjectival ratings to numerical scores for informational or evaluation
purposes.  An agency can modify the many features of TF! and tailor its
use to a particular procurement or agency need.  See Agency Report, Tabs
5d-5f, TF! Training Materials; see also Tab 10, Declaration of ASC Vice
President (in ASC's training classes, participants are *always* informed
*that agencies that use [the TF!] will almost always tailor [the TF!]
generic model to meet their specific needs*).
    
As previously noted, the RFP specified that *Technical Area sub-factors
and the [management plan and Marshallese training/employment subfactors]
under the Management Area will be evaluated using the [TF!].*  RFP amend.
1, S: M, at 60.   
Here, the Army used TF! throughout the evaluation as an *organizational
and informational tool,* but customized its use of TF!.  That is, the Army
used TF! to align proposals to the PWS sections, line items, and
PWS-related evaluation criteria; to assign adjectival ratings to these
areas; and to generate issues for discussion.  The agency also used the
TF! scoring feature, along with other information gathered, to make a
rough comparison of proposals for establishing the competitive range.  The
Army did not, however, use the scoring feature during the final phase of
the evaluation, other than as background information.  In completing its
best-value analysis, the Army relied, instead, on its substantive
findings, adjectival ratings, and narrative evaluations.  Contracting
Officer's Statement (Nov. 8, 2002) at 33-35. 
    
A procuring agency has broad discretion to determine the evaluation scheme
it will use.  Once offerors are informed of the criteria against which
their proposals will be evaluated, however, the agency must adhere to
those criteria or inform all offerors of any significant changes to them. 
Marquette Med. Sys., Inc., B-277827.5, B‑277827.7, Apr. 29, 1999,
99-1 CPD P: 90 at 5-6.
    
Contrary to the protesters' assertions here, the Army did not change, or
abandon, its evaluation scheme or selection criteria.  Instead, the agency
used TF! to evaluate the technical and management area factors in a manner
that was consistent with the RFP's best-value scheme.  Specifically, the
RFP announced only that the Army would use TF! in the evaluation of
proposals.  It did not dictate how TF! would be used or limit the agency's
flexibility to customize its use to this procurement.[8]  Nor did the RFP
mandate the use of TF! scoring, or any other particular TF! feature, for
that matter.  
    
Furthermore, although there was an RFP provision mandating the use of TF!
as an evaluation tool, this solicitation provision must be read
considering the RFP as a whole and in a manner that gives effect to all of
the solicitation provisions.  See Brown & Root, Inc. and Perini Corp., a
joint venture, B‑270505.2, B‑270505.3, Sept. 12, 1996, 96-2
CPD P: 143 at 8.  In this regard, the RFP required a *best value*
analysis, which contemplated that the proposals would be qualitatively
evaluated under the technical and management areas, which were considered
*extremely more important* than cost.  RFP amend. 1, S: M, at 62.  The
agency's use of the TF!, without the feature that numerically equated good
ratings to exceptional ratings, to assess the qualitative differences
between competing proposals was entirely consistent with the RFP's
evaluation scheme.
    
The protesters nevertheless claim that their proposal approaches were
influenced by instructions ASC provided at the pre-solicitation industry
briefing and TF! training sessions, where ASC allegedly told them to
maximize TF! points rather than strive for exceptional ratings.  We find,
however, that any reliance on such guidance allegedly provided at these
meetings would not have been reasonable. 
    
At the beginning of the industry briefing, the contracting officer
specifically instructed offerors to rely solely on the RFP and to ignore
any contradictory information provided by ASC or any other outside
source.  Agency Report, Tab 4b, Contracting Officer's Industry Briefing
Statement, at 4-5.  Offerors were further instructed that the TF! training
sessions were *general and not specifically for this acquisition,* and
that the Army was *not involved with the TF! contractor* in the conduct of
these sessions.  Agency Report, Tab 4a2, Commerce Business Daily Notice
(Mar. 15, 2002); see also Agency Report, Tab 10, Declaration of ASC
Vice‑President (ASC always cautions attendees that training is based
on generic model and that agency will tailor).  When the RFP was
issued--which was after the industry briefing and most of the training had
occurred--it specified that the Army would undertake a best-value
analysis, with the technical and management factors *extremely more
important* than cost.  Nothing the Army did or said at any point during
the procurement altered that approach.  Even if we were to believe that
ASC somehow encouraged offerors to adopt a particular proposal
approach--and we are not convinced of this--offerors were amply cautioned
that the RFP controlled.  If the protesters chose a proposal approach
contrary to the RFP, they did so at their peril, inasmuch as ASC had no
authority to change the terms of the RFP.[9]  See Digital Imaging
Acquisition Networking Assoc., Inc., B-285396.3, Nov. 8, 2000, 2000 CPD
P: 191 at 5 n.6 (*To the extent the protester believed that something said
at the pre‑proposal conference misled the firm, oral advice, even if
given, does not operate to amend the solicitation or otherwise legally
bind the agency*).  
    
In sum, we find the Army's use of the TF! unobjectionable because it was
consistent with the RFP.
    
Evaluation of Northrop Grumman's Staffing
    
As noted above, the agency considered Northrop Grumman's proposed staffing
level, which was significantly lower than that proposed by KRS, to be a
significant weakness.  Northrop Grumman's low staffing level was one of
the discriminators cited by the SSA in his cost/technical tradeoff
analysis. 
    
Northrop Grumman complains that the PWS required offerors to reduce
on-island staff (including the Marshallese workforce) and to employ
cross-training and cross‑utilization of personnel to the maximum
extent practicable.  In this regard, Northrop Grumman argues that the
Army's announced policy objective for the RTS was to reduce personnel and
costs associated with running the Kwajalein Missile Range, citing the
*Kwajalein Missile Range Users Conference:  Direct Cost Reimbursable (DCR)
Briefing (2 May 2001),* which Northrop Grumman asserts discusses *the need
to remedy Kwajalein's 'death spiral'* caused by the high levels of RTS
costs.  Northrop Grumman's Comments at 37.  Northrop Grumman complains
that the Army's favorable evaluation of KRS's proposed higher staffing
levels, including maintaining the current level of Marshallese employment,
demonstrates that the agency used an unstated evaluation criterion--that
is, maintenance of the current contract staffing levels.
    
Based upon our review of the record, we do not think the Army's evaluation
conclusions were unreasonable or were based upon unstated criteria.  It is
true that the PWS informed offerors of the need to provide a *streamlined,
highly effective, and cost efficient contractor organization* and that
*[c]ross training and cross utilization of personnel to the maximum extent
practicable is a desirable operational objective.*  PWS S: 1, P: 6.6.  The
PWS did not, however, announce a requirement that offerors should propose
staffing levels below that of the incumbent contract, as Northrop Grumman
apparently contends.[10]  Nor does the PWS or RFP require offerors to
maintain the current contract staffing levels.  Rather, offerors were
requested to propose their own technical approaches and staffing levels to
perform the contract requirements.  See RFP amend. 1, S: L, at 44-48; S:
M, at 60  (proposals to be evaluated under the technical area for, among
other things, the amount of personnel proposed to perform each PWS
section/line item).
    
To perform the RTS contract requirements, offerors would need a broad
range of personnel in a variety of disciplines.  Instrumentation and
equipment at the RTS, as well as the technical missions to be supported,
are highly sophisticated and technically complex.  In addition, the
logistics support functions encompass the broad range of support
activities.  Thus, offerors were specifically informed that
    
The technical  programs conducted at [the RTS] require precision
operations by highly-skilled and specially-trained technical personnel. 
Likewise, the construction, logistics support, and security and law
enforcement activities at [the RTS] require a cadre of professional
specialists, technicians, and trade personnel.
PWS S: 1, P: 4.2.  However, the amount of staffing required to perform the
PWS requirements was left to the offerors' judgment, as was their proposal
approach.  Offerors were informed that, in assessing the relative merits
of the offerors' proposed approaches (which would include the offerors'
proposed staffing levels), the Army would give *extremely greater weight*
to the technical and management areas than to cost.  RFP amend. 1, S: M,
at 62. 
    
Here, the Army concluded from its review of Northrop Grumman's proposal
that the firm's staffing level, although at an acceptable level, was low
and posed performance risks.  The agency also expressed concern with
Northrop Grumman's proposed cross-training and cross-utilization of
personnel, because (although the Army, as expressed in the PWS, supported
cross-training and cross-utilizing personnel) Northrop Grumman simply did
not propose enough staff to allow the effective and optimal use of
cross-training and cross-utilization.[11]  Based on our review, we do not
find the agency's determination in this regard to be unreasonable or
inconsistent with the RFP.[12]  Although Northrop Grumman disagrees with
the Army's judgment, the protester's mere disagreement does not establish
that the agency's evaluation conclusion was unreasonable.[13]  See UNICCO
Gov't Servs., Inc., B-277658, Nov. 7, 1997, 97‑2 CPD P: 134 at 7.
    
Evaluation of Raytheon's Proposed Staffing
    
Raytheon challenges the Army's evaluation of its cost proposal,
complaining that the Army improperly downgraded Raytheon's technical
proposal based upon the agency's unreasonable assessment of Raytheon's
proposed labor rates.  Specifically, Raytheon asserts that the Army
*mistakenly treated the 'Composite Hourly Rates,' which [Raytheon]
employed to estimate direct labor costs, as representing an annual average
of the actual wages [Raytheon] would pay each year.*  Raytheon's
Post‑Hearing Comments at 1-2.  This alleged error resulted, Raytheon
argues, in the Army's faulty determination that Raytheon proposed to pay
lower wages and/or hire new, less-skilled and less-experienced employees
as its contract performance approach.  In this regard, Raytheon notes that
the Army initially praised Raytheon's technical proposal for the firm's
proposed staffing and planned transition from *an R&D to an O&M
environment.*  Raytheon argues that, to the extent that the agency
believed that Raytheon's cost proposal did not propose realistic costs for
the performance of the contract, the Army should have upwardly adjusted
Raytheon's proposed costs in the agency's total evaluated probable cost
evaluation and not downgraded Raytheon's technical proposal.
    
The Army responds that downgrading Raytheon's technical proposal, rather
than adjusting the firm's probable costs, was appropriate because the
agency reasonably determined that Raytheon's proposed costs reflected the
firm's *low‑cost/less-skilled approach* to performing the contract,
which was rated acceptable.  Army's Post‑Hearing Comments at 3-4. 
In this regard, the agency states that it provided Raytheon with numerous
opportunities during three rounds of discussions to explain its low
composite labor rates, and that the firm chose to *defend its proposed
wages/benefits by insisting that higher wages/benefits were not necessary
under [the firm's] philosophy of transitioning [the RTS] from a[n] [R&D]
environment to more of an [O&M] environment.*  Contracting Officer's
Statement (Nov. 8, 2002) at 20-21.  The Army further notes that Raytheon,
as the incumbent contractor, has historical labor costs reflecting the
firm's past performance, but that Raytheon's composite labor rate
estimates were substantially below the firm's historical costs.  See
Tr. at 677 (testimony of the Army's cost/price analyst).[14]  The agency
concluded that Raytheon could recruit *inexperienced, minimally qualified
workers* at Raytheon's proposed labor rates, *but could not recruit and
retain the kind of skilled and experienced workforce which would assure
high-quality technical performance.*  Contracting Officer's Statement
(Nov. 8, 2002) at 21.  In short, the Army found that Raytheon's proposed
approach was acceptable, but that its use of lower-skilled, junior
employees posed performance risks.
    
The crux of this dispute is that Raytheon and the Army do not agree as to
what Raytheon's proposal reflects for contract performance.  That is,
Raytheon argues that it proposed a technical approach that relied upon the
firm's current, incumbent workforce and proposed minimal changes among its
higher‑skilled staff.  The Army argues, however, that reading
Raytheon's technical, management and cost proposals together with the
firm's responses during discussions indicated to the Army that Raytheon
proposed replacing many of its higher-skilled, more expensive staff with
more junior, less expensive staff as part of the firm's R&D to O&M
transition strategy. 
    
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.  It is an offeror's obligation to submit an adequately
written proposal for the agency to evaluate.  United Defense LP,
B-286925.3 et al., Apr. 9, 2001, 2001 CPD P: 75 at 19.
    
From our review of the record, including the parties' arguments and
hearing testimony, we find, as explained below, that the Army reasonably
concluded that Raytheon had proposed an approach to performing the
contract that was based upon lowering the firm's overall labor rates and
that this approach posed performance risks.  In order to appreciate the
nature of the Army's concern, we must first discuss some details of
Raytheon's proposal, the discussions, and the Army's evolving evaluation
of Raytheon's personnel.
    
We first note that, apart from key personnel, offerors did not propose the
actual personnel the firm would use in contract performance.  Rather, the
RFP required offerors to propose staffing positions grouped into labor
categories, and offerors were free to define their own position titles,
descriptions and labor categories.[15]  Also, as indicated above, the RFP
required offerors to provide in their cost proposal an estimated labor
rate for *wage year 1* for each of the firms' proposed labor categories,
and to escalate that labor rate over 15 years, based upon the escalation
factors provided in the RFP.  In response to this requirement, Raytheon
proposed composite labor rates for each of its proposed labor categories.
    
Before discussions were conducted with the offerors, the agency's
cost/price analyst reviewed audit reports of the Defense Contract Audit
Agency (DCAA) for each of the offerors.[16]  See Tr. at 515.  Raytheon had
been asked by DCAA to explain the basis of its proposed composite labor
rates, and Raytheon informed DCAA that its *proposed direct labor rates
are based on a [deleted].*[17]  Supplemental Agency Report, Tab 13,
Declaration of Army's Cost/Price Analyst, attach. 1, DCAA Audit Report
(Mar. 29, 2002), at 2.  The cost/price analyst also reviewed Raytheon's
responses to
DCAA regarding the firm's labor rates, in which Raytheon informed DCAA:
    
The compensation structure developed for this contract is based on [the]
[deleted] representing the [deleted] for the jobs slotted into a given
range.  However, [the] [deleted] represents the [deleted] wage for an
incumbent who is fully competent in the job.  Utilizing the [deleted]
percentile as the hire salary for the majority of our new hires allows us
to pay a competitive wage while at the same time recognizing that the new
hire is not yet fully competent in the specific task for which they are
being hired.
New hire codes were established for the majority of the positions proposed
by taking the [deleted] percentile of the appropriate grade range.  In
some cases where the current salaries of the incumbents were
[significantly above the] [deleted] of the range was proposed.  In
general, new hire rates are established at a level that is lower than the
current rates of the incumbents.  As mentioned in a previous response[,]
this is consistent with our compensation strategy of establishing the new
hire rate below the [deleted], which represents the appropriate rate for a
fully competent incumbent.
Army Hearing Exh. No. 5, Raytheon's Response to DCAA (Mar. 8, 2002). 
Similarly, in another response to DCAA, Raytheon stated:
    
A given labor category can encompass a number of levels, but the new hire
would normally be a person at the lower grade level.  This does not mean
that we would only hire new people at the low grade, [deleted].
Army Hearing Exh. No. 5, Raytheon Response to DCAA (Mar. 18, 2002).
    
In reviewing Raytheon's cost proposal, the agency's cost/price analyst
noted that Raytheon had proposed composite labor rates for a number of
labor categories that were equal to Raytheon's stated new hire rates.  Tr.
at 557.  Moreover, the cost/price analyst found that Raytheon's new hire
rates *were often lower than the lowest paid current employee that
[Raytheon] listed for a particular skill category.*  Supplemental Agency
Report, Tab 13, Declaration of Army's Cost/Price Analyst, at 3.  The
cost/price analyst also found that the [deleted] percentile rate Raytheon
mentioned to DCAA for the firm's new hires actually applied only to new
hires that were hired  *on‑island* (that is, primarily spouses and
children of employees based on the island).  Raytheon's proposed new hire
rates for employees hired off-island to work at the RTS were actually at
the [deleted] of Raytheon's salary range table, considerably below the
[deleted] percentile.  The cost/price analyst also noted that Raytheon had
proposed stationing a number of engineers in Huntsville, Alabama and
Lexington, Massachusetts.  She found that Raytheon's proposed labor rate
for engineers to be employed in Massachusetts was based upon the [deleted]
rate (new hire rate) of the salary range table for Alabama, although, due
to the prevailing market conditions, the agency believed that the salary
range for engineers to be employed in Massachusetts would normally be much
higher than the salary range in Alabama.[18]  Tr. at 547-49.
    
Given this evaluation and Raytheon's response to DCAA, the Army asked
Raytheon in the first round of discussions to explain the firm's statement
to DCAA that new hires were not yet fully competent for the specific task
for which they were hired, and to address the fact that the agency's
historical information indicated that in the past new hires were paid
*more in the range of the [deleted] [percentile] to [deleted] salary range
to attract new hires.*  Raytheon responded by explaining that *not yet
fully competent* reflected Raytheon's judgment that new hires *would not
yet have the relevant direct, hands-on experience that renders them fully
competent.*  Agency Report, Tab 7f2b2, Raytheon's Response to 1st Round
Discussion Question No. 27.  Raytheon did not address the agency's concern
that the new hire rates were not consistent with the agency's historical
data for Raytheon's labor costs at the RTS.
    
The cost/price analyst testified that she was *bothered* by Raytheon's
response because Raytheon's new hire and composite rates appeared to be
below the firm's historical costs and Raytheon had failed to respond to
the agency's request for an explanation of its experience in this regard. 
Tr. at 556‑58.  The cost/price analyst then compared Raytheon's
proposed composite labor rates with the rates proposed by KRS and Northrop
Grumman.  The cost/price analyst found that KRS's and Northrop Grumman's
proposed labor rates were generally higher than Raytheon's.  Tr. at
563-68; Supplemental Agency Report, Tab 13, Declaration of Army's
Cost/Price Analyst, attach. 4. 
    
The cost/price analyst shared Raytheon's discussion response and her
analysis with the technical members of the SSEB.[19]  Tr. at 562-63.  The
lead technical evaluator for integrated range engineering reviewed the
cost/price analyst's comparison of the three firms' proposed labor rates,
and testified that he found, based on his own significant engineering
experience and specific experience at the RTS, that many of Raytheon's
rates for the labor categories for the integrated range engineering tasks
were low.  Tr. at 817-19. 
    
The Army conducted further discussions with Raytheon as follows:
    
[Question No. 1:]  It appears that you are proposing all new hire rates
for engineers other than managers (especially note Sections 15, 14-1,
14-3, 14-4, 15, and 18-1.)[[20]]  Please confirm that you plan to hire all
new personnel for those areas.  If that is not the plan, explain why you
priced these categories at the new hire rate rather than use actual wage
rates.
Response:  Raytheon does not plan to hire all new engineering personnel in
the sections noted.  After careful review of our rate calculations related
to this question, we acknowledge that in a majority of the cases current
employees will fill these positions.  We have recalculated the proposed
rates for our engineering positions by adding the actual rates of
employees to the composite rate calculations.
In order to accurately price our technical approach in this area, Raytheon
Human Resources established a hiring control point (rate) for each
engineering category based on skill requirements and complexity.  In
certain cases, our existing employees exceed these skill requirements
associated with our technical approach (transition from R&D to O&M
approach).  In these cases, Raytheon will make every effort to relocate
the affected personnel to various engineering opportunities within the
Company.  In the cases where employees exceeded the hiring control point
by more than [deleted]%, these employees['] labor rates were excluded from
the composite rate calculations. 
Agency Report, Tab 7j2c, Raytheon's Response to 2nd Round Discussion
Question No. 1.
    
This response indicated to the Army that Raytheon's proposed technical
approach was to reduce its estimated costs by proposing to hire
less-experienced, lower-paid employees.  Specifically, the cost/price
analyst noted that, although Raytheon stated it would fill the specific
sections identified in the discussion question with a *majority* of
current employees, this indicated that only something more than half of
the positions might be incumbent personnel.  Furthermore, although
Raytheon recalculated its proposed rates for seven labor categories to
reflect actual labor rates of incumbent personnel, the firm continued to
offer composite rates that were equal to new hire rates for numerous other
engineering categories for the identified PWS sections,[21] and did not
include the rates of some of the highest paid incumbent engineers in
calculating its composite rates.  Also troublesome to the cost/price
analyst was Raytheon's statement that, in keeping with the firm's proposed
transition from an R&D environment to an O&M one, the firm contemplated
removing from the RTS contract those Raytheon employees whose skill level
exceeded the firm's proposed technical approach.  Supplemental Agency
Report, Tab 13, Declaration of Army's Cost/Price Analyst, at 15-17. 
    
Although Raytheon now argues that its transition from an R&D to an O&M
environment would take effect gradually over 15 years, the Army found that
Raytheon's proposal did not demonstrate such a gradual transition.  For
example, the agency found that there was little proposed change in
Raytheon's level of staffing for integrated range engineering throughout
the proposed 15 years of contract performance.  See Supplemental Agency
Report, Tab 13, Declaration of Army's Cost/Price Analyst, at 24; Tab 21,
Declaration of Army's Lead Technical Evaluator for Integrated Range
Engineering, at 5-6; see also Tr. at 180-81 (Raytheon's lead integrated
range engineering technical proposal manager testified that Raytheon
*pretty much steady‑stated the staff, from year 1 [in the Specific
Resource Allocation Listing]*). 
    
The Army's belief that Raytheon's proposed transition would begin
immediately with contract award was also consistent with Raytheon's
statements during the oral presentation regarding its proposed transition
to an O&M environment at which Raytheon stated:
    
Historically the range was staffed with numerous engineers to support
modifications as well as missions.  Transforming the range from an R&D to
an O&M environment is consistent with the concept of operations and our
staffing approach, enabled by [the RTS], whereby the modernized sensors
can be maintained effectively by fewer, less skilled personnel.  So we
want to perform the bulk of the O&M activities on site, move a majority of
the [improvement and modernization] modification activities off site for
all of the benefits I described there.  So it really is just a change in
demographics of the on site and off site staffing.
Supplemental Agency Report at 59; Raytheon Oral Presentation Videotape
(May 21, 2002). 
    
Also consistent with the Army's understanding that Raytheon was proposing
an immediate R&D to O&M transition, Raytheon stated, for the seven labor
categories for which Raytheon recalculated the composite labor rate, that
it established a *hiring control point,*[22] and where labor costs for
current employees exceeded the hiring control point by more than [deleted]
percent, those employees were excluded from the *wage year 1* composite
labor rate calculations.  This also confirmed for the agency that, even
though Raytheon planned to use incumbent personnel in a number of its
proposed labor categories, Raytheon was not proposing its higher paid
personnel, but would provide less-experienced, lower-skilled personnel. 
Tr. at 580‑83.
    
After the second round of discussions, the Army's cost/price analyst
performed a number of additional analyses of Raytheon's rates, including
comparisons of Raytheon's new hire rates with its actual rates for current
employees and comparisons of Raytheon's new hire and current rates with
the rates proposed by KRS and Northrop Grumman.  See Supplemental Agency
Report, Tab 13, Declaration of Army's Cost/Price Analyst, at 18.  The
cost/price analyst found that Raytheon's proposed rates were generally
lower than those proposed by the other offerors.  Id. at 22.
    
The Army conducted another round of discussions with Raytheon, asking the
firm yet again about its *new hire rate* philosophy.  Specifically, the
Army asked Raytheon:
    
When you lose a higher paid employee in, for example, the engineering
category, and you look to replacing that employee, are you proposing to
hire a similarly qualified person at approximately the same rate, or will
you hire an engineering employee at your proposed new hire rate?
Agency Report, Tab 7n1, 3rd Round Discussion Question No. 1 (emphasis in
original).  Raytheon responded that *qualified personnel will be hired at
approximately the same rate of pay when necessary.*  Agency Report, Tab
7n2, Raytheon Response to 3rd Round Discussion Question No. 1.  The
qualified nature of this response also indicated to the Army that Raytheon
anticipated hiring less-expensive replacement employees, except *when
necessary.*[23]
    
Turning to the merits of the protest, we first disagree with Raytheon's
contention that the agency could use the results of its cost evaluation
only in evaluating the offerors' probable costs of performance and could
not use the results in assessing the merits of the offerors' technical
proposals.  As mentioned above, the RFP required that offerors ensure that
information contained in the cost proposal was *consistent with the
information contained in the other proposal volumes and the TF! Software
spreadsheets.*[24]  RFP amend. 2, S: L, at 12.  Additionally, the RFP
specifically informed offerors that the agency could consider the results
of its cost evaluation in the evaluation of technical and management
proposals, and warned that *[p]oor cost realism may result in a lower
evaluation of the technical and management areas.*  RFP amend. 1, S: M, at
63.  In similar cases, we have found that an agency may make both a cost
realism adjustment for unrealistic proposed personnel rate costs and
assess the impact the proposal of unrealistic rates could have upon
technical performance.  See, e.g., Source One Mgmt., Inc.,
B‑278044.4, B‑278044.6, June 12, 1998, 98-2 CPD P: 11 at 7-8;
Serv-Air, Inc.; Kay and Assocs., Inc., B-258243 et al., Dec. 28, 1994,
96-1 CPD P: 267 at 10-11.  Furthermore, we have found that an agency may
not reasonably award a cost-reimbursement contract to an awardee, whose
cost proposal evidenced a different technical approach than that presented
in the technical proposal, without considering the technical approach
reflected in the cost proposal.  See TRW, Inc., B‑254045.2, Jan. 10,
1994, 94-1 CPD P: 18 at 8-9.
    
Raytheon complains that the Army's cost/price analyst misunderstood the
firm's composite labor rates, which Raytheon argues are no more than a
mere cost estimating tool.  We find that the cost/price analyst accurately
understood that Raytheon's proposed composite labor rates were not actual
proposed wages, but were the firm's estimated costs for direct labor. 
See, e.g., Tr. at 504-05, 746.  Indeed, the rates were submitted in
response to the RFP requirement to provide an estimated labor rate for
*wage year 1* for each proposed labor category, and ultimately formed the
basis for Raytheon's proposed costs to perform this contract.  Although
these proposed labor rates are cost estimates (as is the case for all
contents of cost proposals submitted under solicitations for
cost‑reimbursement contracts), we agree with the Army that the rates
were required to reflect the offeror's best, good-faith estimate of its
anticipated wage rates, inasmuch as these were the basis for the firm's
overall proposed costs.  In any case, as indicated above, these rates were
the subject of repeated discussions, yet Raytheon did not further explain
these rates as mere cost estimating tools that had nothing to do with
Raytheon's technical proposal.[25] 
    
Raytheon also complains that the agency's cost/price analyst's alleged
misunderstanding of Raytheon's composite rates was based upon *her utter
disregard of [Raytheon's] salary range tables . . . which set forth
[Raytheon's] salary ranges for employees under the new contract.* 
Raytheon's Post-Hearing Comments at 41.  Contrary to Raytheon's
contention, these tables do not reflect Raytheon's cost proposal for the
new contract, but merely the firm's estimated range of possible labor
rates for the various labor categories.  In this regard, the salary range
tables were prepared prior to the development of Raytheon's technical
proposal and staffing plan.  Tr. at 260-61.  These tables encompass the
range of rates that could be paid in a given labor category.  Although the
salary range tables were used in the development of Raytheon's composite
labor rates, the tables do not themselves identify the anticipated quality
(that is, experience and skill level) of personnel used to calculate the
composite labor rates.  Thus, in our view, the cost/price analyst
appropriately focused on the proposed composite rates in performing her
analysis.
    
Raytheon nevertheless argues that its technical proposal clearly informed
the Army that Raytheon would be providing its incumbent workforce with
minimal change.  In this regard, Raytheon notes that its proposal
identified by name more than 50 *essential personnel* for performance of
the integrated range engineering and logistics support tasks, which
Raytheon asserts should have demonstrated to the Army that Raytheon was
proposing its incumbent engineer and technical workforce.  See Raytheon's
Proposal, vol. IV, Management Proposal, Final Submission, at IV-54, figure
2.2-7. 
    
We do not agree that Raytheon's technical and management proposals clearly
indicated that the firm would be providing its incumbent workforce in
performance of the contract.  Although it is true that Raytheon stated in
a number of places that it anticipated minimal changes and would fill
positions with its incumbent workforce, see, e.g., Raytheon's Proposal,
vol. IV, Management Proposal, Final Submission, at IV-126 (*[w]e
anticipate a minimal requirement for new hires*), its proposal stressed
that the firm's approach was based upon its proposed transition from an
R&D to an O&M environment and was replete with references to a changing
workforce.  For example, in the executive summary to its proposal,
Raytheon stressed that it would *capitalize on the new environment and
contract vehicle to structure a support approach that materially reduces
cost and enhances quality.*  See Raytheon's Proposal, vol. II, Executive
Summary, Final Submission, at II-1.  Also, in its Executive Summary,
Raytheon identified a number of staffing initiatives that would allow the
firm to satisfy the need for change and transformation.  See, e.g., id. at
II-1 through II-3.  In its management proposal, Raytheon stated that
*[t]ransition activities will begin immediately on contract award.* 
Raytheon's Proposal, vol. IV, Management Proposal, Final Submission, at
IV-126.
    
With regard to the more than 50 individuals that were identified as
*essential personnel* in Raytheon's management proposal, we do not agree
that this indicated to the Army that Raytheon would be providing its
incumbent workforce.  Not only is this group of employees a small number
of the overall workforce to be provided, but also Raytheon's proposal does
not specifically state that the firm will use the named individuals in
performing the contract. 
    
Reading Raytheon's entire proposal together with the firm's responses to
the discussion questions, as identified above, we find that the Army could
reasonably conclude that Raytheon's estimated composite labor rates
reflected a technical approach that would provide the Army with
less-experienced, less-skilled personnel.  That is, these rates,
applicable from the beginning of the contract, were less than those
currently paid, which reasonably was understood to mean that
less‑experienced, less-skilled personnel would be employed.  As
discussed above, the agency repeatedly brought its concern to Raytheon
during discussions in an effort to understand the basis for Raytheon's
labor rates and how they may affect Raytheon's technical approach. 
However, Raytheon did not, during these discussions, clearly state what
level of personnel it intended to provide, or credibly state that it
intended only a gradual transition from R&D to O&M at its proposed
personnel rates, such that it would continue to offer the same high level
of personnel as are currently on-site; to the contrary, the discussion
responses confirmed and exacerbated the agency's concerns.[26]  Based on
the foregoing, the agency reasonably concluded that the low labor rates
were indicative of what personnel would be used in Raytheon's technical
approach, which the agency reasonably determined was less desirable than
an approach employing a more experienced and skilled workforce.
    
Although Raytheon has offered numerous explanations throughout the
development of the protest record (such as, for example, its explanation
that its *wage year 1* labor rates were based upon an algorithmic formula
[deleted]), these additional explanations were not provided to the Army
during the evaluation of proposals, despite the agency's repeated requests
during discussions.  In this regard, Raytheon provided the declaration of
a cost expert, who performed his own analysis of Raytheon's cost proposal
and disagreed with the Army's cost evaluation.  See Raytheon's
Supplemental Protest, attach. A, Declaration of Cost Expert.  Raytheon's
cost expert's analysis is based upon his own assumptions, including that
Raytheon's proposed changes in engineering staff would occur over a
10-year transition period.  Id. at 23-24.  As noted above, we found that
the Army reasonably found that Raytheon's proposal indicated that
transition from an R&D environment to an O&M environment would begin
immediately.
    
Furthermore, these explanations, set out in Raytheon's supplemental
protest and comments, are themselves inconsistent with the arguments and
declarations Raytheon provided in its initial protest, in which Raytheon
stated that, based upon Raytheon's recognition that the
*highly-specialized [R&D] function of the Kwajalein technical mission had
matured to an [O&M] function, requiring less advanced technical and
scientific support,* Raytheon proposed less senior and less expensive
engineers.  Raytheon Protest at 16.  Also, Raytheon's senior financial
analyst (the person identified as being primarily responsible for the
firm's cost proposal strategy) stated in a declaration attached to
Raytheon's initial protest:
    
In the case of wages and benefits, we made some changes through the
process, but always ensured that our cost proposal remained as accurate as
possible in relation to our technical proposal, and reflected our
technical approach.
*     *     *     *     *
    
The perceived risk concern related to low wages in the engineering
categories directly contradicts the otherwise [initial] *Good* rating in
the [integrated range engineering] technical area.  [Raytheon] proposed
lower grade engineering labor categories to accomplish the [PWS] in
[integrated range engineering] in accordance with our strategy of
transition from an R&D environment to an O&M environment.
*     *     *     *     *
[I]n the debriefing the Government referenced a long list of specific
names of current engineers that [Raytheon] excluded from the wage
calculations in the lower wage categories.  The names cited were all
specifically noted in our proposal and in our current contract as residing
in the higher, more skilled labor categories not used in the technical
approach that was rated [initially] *Good.*  The [integrated range
engineering] rating adjustment is thus in direct conflict with the
technical evaluation, which endorsed the proposed use of the lower skill
mix labor categories.
Raytheon's Protest, attach. E, Declaration of Senior Financial Analyst, at
1, 4-5.  Although inconsistent with its subsequent protest arguments,
these statements in Raytheon's initial protest are consistent with the
Army's conclusion that Raytheon was proposing less-senior and
less-experienced engineers than its incumbent workforce.
    
In sum, the Army reasonably found, based upon Raytheon's proposal and
discussion responses, that Raytheon's low estimated rates reflected the
firm's proposed performance approach, and reasonably took this into
account in the technical evaluation.[27] 
    
Raytheon's and KRS's Proposed Personnel Benefits
    
Raytheon contests the Army's evaluation of its proposed personnel
benefits.  Alleging disparate treatment, Raytheon contends that the Army
unreasonably found weaknesses and risk in Raytheon's proposed benefits,
but did not similarly find fault with KRS's allegedly inferior benefits. 
    
The record shows that KRS adopted a single‑tier approach where all
employees received similar benefits, whereas Raytheon adopted a
multi-tiered approach offering different levels of benefits for different
categories of employees.  The record also shows that the Army performed a
detailed comparison of the benefit plans (Agency Report, Tab 7k1i,
Benefits Comparison Table), fully considering the offerors' proposed
benefits, including those Raytheon alleges are superior to KRS's (e.g.,
[deleted]).  The Army provided Raytheon with credit for these allegedly
superior benefits, but it also considered their relative importance. 
Furthermore, the Army noted other areas where Raytheon's proposed benefits
were viewed as inferior to KRS's.  Contracting Officer's Statement (Nov.
27, 2002) at 42-44.  In our view, the Army reasonably concluded that
    
there are areas where [Raytheon's] benefits are preferable (although not
always available to all of their employees) and other areas where KRS has
preferable benefits.  The agency, in a reasoned comparison and judgment,
determined that KRS'[s] benefits provided the most good for the most
people at [Kwajalein]; whereas [Raytheon's] reduction in current benefits
when coupled with their reduced wages created potential recruitment and
retention problems with corresponding risk to technical performance.
Id. at 45.  We also find that the Army reasonably concluded that KRS's
proposed uniform benefits were better for *overall island morale and
community harmony* on Kwajalein--a small and close-knit island
community--and would pose less risk to recruitment and retention.[28]  Id.
at 39, 45.  
    
Raytheon nevertheless complains that KRS's benefits were not compared to
the current benefits of the incumbent workforce, as were Raytheon's. 
Specifically, Raytheon complains that it was assessed a weakness because
it proposed reductions to the current benefit plan, whereas KRS was not
assessed a weakness, even though it similarly proposed reductions in
benefits from those available to the current workforce.  However, the Army
did not find a weakness in Raytheon's plan based solely on benefit
reductions; rather, the Army determined that this reduction, coupled with
Raytheon's proposed low wages, posed a risk to recruitment and retention. 
Agency Report, Tab 7r1, SSEB Final Report at 12.  Since KRS offered more
realistic wage rates, and also offered a more uniform benefits approach,
the Army reasonably determined that these same risks to recruitment and
retention did not exist.
    
We find that, on balance, the Army reasonably concluded that KRS offered
the better personnel benefits plan.
    
Past Performance/Experience
    
The protesters make various contentions concerning the evaluation of their
and KRS's past performance and experience. 
    
Specifically, Northrop Grumman challenges the Army's evaluation of KRS's
past performance.  KRS received an *excellent* rating for past performance
based on the experience of each of the members of its joint venture team
as well as its major subcontractor.  Northrop Grumman contends that it was
improper for the Army to attribute each member's past performance to the
entire joint venture, and argues that the Army should have considered a
member's or subcontractor's past performance only for portions of work
that the member or subcontractor was proposed to perform.  We disagree.
    
An agency may properly consider the relevant experience and past
performance history of the individual joint venture partners in evaluating
the past performance of the entire joint venture, so long as doing so is
not expressly prohibited by the RFP.[29]   MVM, Inc., B-290726 et al.,
Sept. 23, 2002, 2002 CPD P: 167 at 4.  Here, the RFP does not limit the
Army's consideration of past performance to a particular joint venture
member, but instead contemplates that the Army will evaluate relevant
contracts and subcontracts that are similar in nature to the PWS.  RFP
amend. 1, S: L, at 51.
    
Northrop Grumman's complaint that the individual members lack experience
directly relevant to the PWS section they were proposed to perform is also
without merit.[30]  For example, Northrop Grumman contends that Bechtel
lacks relevant overseas experience.  However, Bechtel's past performance
record reveals at least five major multi-discipline, multi‑location,
multi-activity contacts--three of which were performed overseas or
included substantial overseas components.  KRS's Revised Proposal, vol.
IV, Management Proposal, at 2.1-15 through 2.1-17.  Additionally, Lockheed
Martin and Chugach have successful overseas experience, which the Army
properly considered.[31]  Id. at 2.1-9; see MVM, Inc., supra, at 4.
    
Northrop Grumman also contends that its own overseas experience was not
reasonably considered because the Army allegedly disregarded positive
comments (made during the initial evaluation) about Northrop Grumman's
experience at [deleted].  The record does not support this contention. 
After review of the positive evaluator comments concerning Northrop
Grumman's contract in [deleted], the Army posed the following discussion
question:
    
It is difficult to deduce from information provided, the exact extent of
requirements you have met for the recruitment, retention and management of
a skilled workforce in foreign and remote locations.  Can you provide
additional details as to the quantity, locations, and types of labor
Northrop Grumman has provided under similar government contracts over the
past five years.
Agency Report, Tab 7e2b, Northrop Grumman's Response to 1st Round
Discussion Question No. 1.  Based upon Northrop Grumman's response, the
Army was able to ascertain that, of the experience specifically referenced
in Northrop Grumman's proposal, no more than [deleted] personnel were at
[deleted], and there were fewer than [deleted] total personnel at
[deleted] overseas locations.  Agency Report, Tab 7r1, SSEB Final Report
at 25; Contracting Officer's Statement (Nov. 27, 2002) at 12.  Thus, it
became apparent that the [deleted] effort and Northrop Grumman's other
overseas experience were relatively small in comparison to the proposed
effort here.  As noted by the Army, overseas experience was only part of a
larger PWS requirement to demonstrate *[r]ecruitment, retention and
management of a skilled workforce in foreign and remote locations.*  RFP
S: L, at 111.  Therefore, despite the positive comments in the initial
evaluation concerning [deleted], the Army reasonably determined that
Northrop had *only limited experience with the recruitment, retention and
management of a skilled workforce in foreign and remote locations.* 
Agency Report, Tab 7r1, SSEB Final Report at 25.  We see no basis to
object to this evaluation. 
    
Raytheon complains, with regard to its evaluation under this factor, that
it did not have an opportunity to address adverse past performance
information relating to a contract that Raytheon is currently performing
for the Department of the Navy in Guam.  Specifically, Raytheon points to
a Navy past performance survey criticizing Raytheon's performance during a
performance period on this contract from July 2001 to January 2002, and
contends that it was not provided a meaningful opportunity to respond to
the Navy's concerns regarding lack of innovation and responsiveness.  The
Army explains that it was not required to discuss this information with
Raytheon because the firm had previously been afforded an opportunity to
respond to the Navy's concerns.  See Federal Acquisition Regulation (FAR)
S: 15.306(d).  In this regard, the Army references Raytheon's response in
a Contractor Performance Appraisal Report (CPAR), as well as information
provided in Raytheon's proposal regarding this contract.[32]  Raytheon
disagrees that its response to the CPAR satisfies the Army's obligation to
discuss this matter because the CPAR covers a period of performance that
preceded the Navy survey.
    
We do not address the merits of Raytheon's arguments here because Raytheon
has not demonstrated any reasonable possibility of prejudice as a result
of this alleged error.  Raytheon provided an affidavit describing the
information it allegedly would have provided the Army had the Army held
discussions concerning the Guam contract.  Raytheon's Comments, attach. K,
Declaration of Raytheon's Senior Vice President.  However, the information
contained in this affidavit is not materially different from that
contained either in the CPAR or in Raytheon's proposal.  Since Raytheon
failed to demonstrate how discussions would have improved its competitive
standing, we deny this ground of protest.  See Microeconomic Applications,
Inc., B‑258633.2, Feb. 14, 1995, 95‑1 CPD P: 82 at 10-11.
    
Evaluation of Northrop Grumman's Proposed Helicopter
    
Northrop Grumman objects to its evaluated weakness concerning the
helicopters it proposed, and to the Army's pre-award decision to provide
helicopters to KRS as government-furnished property (GFP) for the entire
contract period.
    
The RFP provided that the Army would furnish four existing UH-1
rotary-wing aircraft (i.e. helicopters) as GFP through fiscal year
2004.[33]  However, because these helicopters are very old, continued
support (for example, availability of parts) is uncertain.  Therefore, the
RFP included a requirement that offerors propose commercial
rotary‑wing aircraft sufficient to satisfy the PWS requirements,
along with sufficient support to maintain both the UH-1 aircraft and the
proposed commercial fleet.  RFP S: L, at 90. 
    
All offerors proposed commercial helicopters.  After completing an
extensive comparative evaluation, the Army concluded that both KRS and
Raytheon proposed commercial helicopters that were more rugged and better
suited to the harsh Kwajalein environment than the helicopter proposed by
Northrop Grumman, which the agency found to be technically complex and
likely to be difficult to maintain in the harsh, corrosive Kwajalein
environment.  Agency Report, Tab 7r1, SSEB Final Report at 14.  Offerors
were warned by the PWS that the *highly corrosive maritime conditions [at
the RTS] are a major factor in the level and nature of maintenance
required.*  PWS S: 1, P: 6.3.  Although Northrop Grumman disagrees with
the agency's judgment, it does not provide evidence establishing that the
agency's evaluation was unreasonable.[34]
    
After KRS was selected for award, but before the contract was executed,
the Army received assurances that short-term logistical support would be
available for the UH‑1 helicopter at least through 2004.  Therefore,
the Army identified one additional UH-1 helicopter as GFP.  Because there
was some possibility that longer-term support would be available, the Army
also decided to include the five UH‑1 helicopters in the contract as
GFP for the life of the contract.  For administrative ease, the Army
planned to implement its transition from UH-1 to
commercial helicopters through the use of the Government Property
clause.[35]  Contracting Officer's Statement (Nov. 27, 2002) at 17. 
Therefore, the final contract provides for five UH-1 helicopters as GFP
for the life of the contract, rather than four UH-1 helicopters until FY
2004 as stated in the RFP.[36]   KRS Contract at 43.
    
Northrop Grumman complains that this contract change demonstrates that the
Army knew prior to award of the contract that its actual needs had
changed, and the Army was therefore required to amend the RFP and evaluate
proposals on the basis of the agency's changed needs.
    
Where an agency's requirements change after a solicitation has been
issued, it must issue an amendment to notify offerors of the changed
requirements and afford them an opportunity to respond.  FAR 15.206(a);
Symetrics Indus., Inc., B-274246.3 et al., Aug. 20, 1997, 97-2 CPD P: 59
at 6.  An agency must amend the solicitation to reflect a significant
change in the government's requirements, even after the submission of
final proposal revisions, up until the time of award.  See United Tel. Co.
of the Northwest, B-246977, Apr. 20, 1992, 92-1 CPD P: 374 at 7-9, aff'd,
Department of Energy et al., B‑246977.2 et al., July 14, 1992, 92-2
CPD P: 20.  Amending the solicitation provides offerors an opportunity to
submit revised proposals on a common basis reflecting the agency's actual
needs.  Dairy Maid Dairy, Inc., B‑251758.3 et al., May 24, 1993,
93‑1 CPD P: 404 at 7-9.  
    
We are not convinced here that the Army's decision to extend the use of
the UH-1 helicopters and to provide an additional UH-1 helicopter as GFP
represents a significant change in the government's requirements, such
that a solicitation amendment was required.  Considering the more than $2
billion overall value of the contract, the competitive impact of providing
one additional UH-1 helicopter and extending the possible use of the
helicopters seems minimal.  Moreover, with respect to the extension of GFP
beyond 2004, the Army reasonably explains why it chooses to rely on the
Government Property clause to transition from UH-1 to commercial
helicopters; that is, the agency made this decision because of questions
remaining about the timing of transition from UH-1 to commercial
helicopters due to the uncertain life expectancy of UH-1 helicopters.
    
In any event, Northrop Grumman has not shown how it was prejudiced by the
Army's failure to amend the RFP.  That is, Northrop Grumman has not shown
that it would or could have materially improved its competitive position,
even if it had amended its proposal presuming the elimination of the
commercial helicopter requirement and the provision of the UH-1
helicopters as GFP.  Accordingly, we deny this ground of protest.  See
NV Servs., B‑284119.2, Feb. 25, 2000, 2000 CPD P: 64 at 18‑20
(protest that agency failed to amend solicitation to accurately reflect
needs was denied where the protester failed to show prejudice).
    
Disclosure of Source Selection Sensitive Information
    
Northrop Grumman also complains that the Army failed to ensure that KRS
did not use the source selection sensitive information that was
inadvertently released during the competition.  However, the protester
does not identify any specific source selection information that KRS
allegedly used or anything in KRS's proposal or discussions responses that
indicates KRS's use of this information.  In this respect, the Army
reports none of the offerors changed their proposals in any way during the
competition that reflected an idea or approach used by the other firms. 
See Contracting Officer's Statement (Nov. 8, 2002) at 74-76.  We also note
that none of the offerors objected to the Army's announced plan for
mitigating the inadvertent release of source selection information during
the competition.  In sum, we view this ground of protest as meritless.
    
Cost/Technical Trade-Off
    
Northrop Grumman and Raytheon also challenge the cost/technical tradeoff
made by the SSA in selecting KRS's higher-rated/higher-cost proposal for
award.  Both protesters complain generally that their proposals should
have been selected on the basis of their lower evaluated costs.  In the
protesters' views, the benefits offered by KRS's proposal are not worth
that proposal's much higher evaluated cost.[37]
    
Selection officials retain considerable discretion in making
cost/technical tradeoff decisions.  Their judgments in these tradeoffs are
by their nature subjective; nevertheless, the exercise of these judgments
in the evaluation of proposals and source selection must be reasonable and
must bear a rational relationship to the announced criteria upon which
competing offers are to be selected.  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-priced offer outweighs the cost difference. 
National Toxicology Labs., Inc., B-281074.2, Jan. 11, 1999, 99-1 CPD P: 5
at 7.
    
Here, the contemporaneous record evidences a thorough evaluation and
best-value analysis by the Army's evaluators, which provided the SSA with
a substantial basis upon which to weigh the relative merits of the firms'
proposals.  We find from our review of the SSA's detailed 12-page source
selection decision document that the SSA's decision was reasonable and
consistent with the evaluation criteria.  That is, the SSA was well aware
of the relative cost standing of the offerors, and that KRS's proposed and
evaluated cost was substantially higher than that of Raytheon and Northop
Grumman.  Nevertheless, the SSA determined that KRS's proposal reflected
the best value to the government based upon its evaluated technical
superiority. 
    
KRS was found to offer many significant strengths and few weaknesses.  In
this regard, the SSA found that KRS offered the best overall proposal for
recruiting and retaining the workforce required for optimum performance at
the RTS.  The SSA found that *[c]ombined with KRS'[s] superior ratings in
past performance and management approach, KRS'[s] 'people' advantage will
equate to superior technical performance by KRS over the overall contract
period.*  Agency Report, Tab 8, Source Selection Decision, at 9.  In
contrast, the SSA found that Raytheon (*the closest contender to KRS in
overall Technical/Management quality*) offered several impressive
strengths, but that Raytheon's proposal to reduce current skill levels and
thus labor rates, as part of Raytheon's proposed transition of the RTS to
an O&M environment, posed serious performance risks.  Furthermore, the SSA
noted that Raytheon offered the least realistic and therefore the riskiest
cost proposal.  Northrop Grumman, the SSA noted, offered less numerous and
less significant strengths, as compared to the other offerors, and
Northrop Grumman's proposal was based upon *only minimally sufficient
labor to perform* the contract, which the SSA found posed a threat to
successful performance and *more than offset* Northrop Grumman's proposed
lower cost.  Id. at 10.
    
Consistent with the relative importance of the evaluation criteria, under
which the technical and management areas were *extremely more important*
than cost, the SSA found that KRS's technical superiority was worth the
additional cost.  In this regard, the SSA noted that the reason that
technical and management criteria were of so much more importance than the
cost criterion was because of *the critical importance and extremely high
cost of the customer programs supported by [the RTS].*  Individual tests
and missions at the RTS for customers, such as the Missile Defense Agency,
the U.S. Space Command, and the National Aeronautics and Space
Administration, often cost in excess of $100 million, and are considered
critical to national security.  Id. at 11.  Although Raytheon and Northrop
Grumman disagree with the SSA's judgment, the protesters have not shown it
to be unreasonable.
    
The protests are denied.
    
Anthony H. Gamboa
General Counsel
    
    

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

   [1] KRS is a joint venture of Bechtel National, Inc. and Lockheed Martin,
with Chugach Development Corporation as a major subcontractor. 
[2] For nearly 10 years until the award of a contract to KRS, Raytheon had
performed support service for the RTS under separate contracts for
integrated range engineering support and for logistics services.
[3] The KREMS radar systems *are very complex, very sophisticated,
one-of-a-kind radars . . . [and] each [radar system has] its own
character, its own software, its own hardware, and required a dedicated
set of engineers to operate and maintain it.*  Hearing Transcript (Tr.) at
90-91.
[4] Offerors were informed that government-furnished family and
unaccompanied-personnel housing was available, but that the *substandard
housing available, particularly for unaccompanied personnel, will
adversely impact a contractor's ability to recruit and retain qualified
personnel.*  PWS S: 1, P: 6.1.  In this respect, the RFP also stated that
for personnel in the integrated range engineering area there were only
119 housing units available, a reduction of 66 units from the prior
contract.  RFP amend. 2, S: H, at 8.
[5]  Within the technical area, integrated range engineering was stated to
be more important than logistics support.  Within the management area,
past performance/experience was stated to be slightly more important than
the management plan, which was slightly more important than Marshallese
training and employment, which was more important than the subcontracting
plan.  RFP amend. 1, S: M, at 62.
[6] TF!, a software system developed by Acquisition Services Consulting
Group, Inc. (ASC), uses Microsoft Excel spreadsheets to assist in the
preparation and evaluation of proposals.  See .  In a
pre-solicitation industry briefing attended by the protesters, the agency
explained the use of the TF! software, and it was suggested that offerors
obtain training in its use from ASC.  Northrop Grumman's Comments, attach.
A, Declaration of Northrop Grumman's Capture Manager, at 6.
[7] The TF! scoring feature converts adjectival ratings to scores.  Using
TF!, each PWS section and line item (which correspond to evaluation
factors in section M of the RFP) can be assigned a maximum number of
points based on relative importance.  Where a factor receives either a
good or an exceptional rating, that factor receives 100 percent of the
available points.  Similarly, acceptable ratings receive 80 percent of
available points, questionable ratings receive 40 percent, and
unacceptable ratings receive 0 percent.  Agency Report, Tab 7g3b, TF!
Rating Sheet.  The actual scoring scheme employed by the Army and the
number of points assigned to each PWS section were not disclosed to the
offerors.  See Raytheon's Comments, attach. I, Declaration of Raytheon's
Base and Range Systems Director, at 5.
[8] The protesters suggest that the RFP should have more specifically
explained the use of TF!, that the Army should have disclosed how it
intended to use TF!, and/or that the RFP is unclear or ambiguous in this
regard.  However, these allegations concern an alleged defect in the RFP
that should have been raised prior to the proposal due date.  These
post-award complaints are therefore untimely under our Bid Protest
Regulations.  4 C.F.R. S: 21.2 (a)(1) (2002).
[9] The protesters, intervenor, and the Army have all provided our Office
with affidavits from the various attendees of these sessions and from
ASC.  These affidavits paint very different pictures as to whether ASC
actually said or did anything to encourage offerors to maximize points and
not strive for exceptional ratings.  However, even accepting the
protesters' version of events, we find that any  reliance by the
protesters on such statements would have been unreasonable for the reasons
discussed above.
[10] With respect to the proposed Marshallese workforce, the PWS informed
offerors that pursuant to agreements with the Republic of the Marshall
Islands the RTS would seek
to foster the economic development of the [Republic of the Marshall
Islands].  A primary tool to accomplish this objective is to provide
employment for Kwajalein Atoll indigenous residents when feasible. 
PWS S: 1, P: 6.5.
[11] Northrop Grumman claims that its proposal was unequally evaluated as
compared to KRS's proposal, which also proposed use of multi-tasked,
cross-trained personnel.  In contrast to Northrop Grumman's proposal, the
agency found that KRS's proposed cross-utilization and cross-training was
not a weakness because, unlike Northrop Grumman's proposal, KRS proposed
what the agency viewed as a sufficient number of skilled personnel to
allow the effective use of cross-training and cross-utilization of
personnel to perform the required tasks.  Based on our review, we find
this determination was reasonable and not based upon unequal evaluation. 
[12]  We also note that Northrop Grumman was informed by the Army during
discussions that the agency considered the firm's proposed staffing levels
to be inadequate for various PWS requirements.  See, e.g., Agency Report,
Tab 7e2b, Northrop Grumman's Response to 1st Round Discussion Questions,
at 2-5 (political and morale implications of firm's proposed reduction of
Marshallese workforce); Tab 7i2b, Northrop Grumman's Responses to 2nd
Round Discussion Questions, at 2-3 through 2-6, 5-4 through 5-5, 5-9
through 5-10.  Northrop Grumman chose not to increase its proposed
staffing levels in response to the discussions.
[13] Northrop Grumman complains that the agency's evaluation of the firms'
proposed staffing levels and cost was per se unreasonable because the Army
did not prepare or use an independent government estimate for the
procurement.  Northrop Grumman has cited no statutory or regulatory
requirement, nor are we aware of any, that an agency must prepare an
independent government estimate in a negotiated procurement for the award
of a cost-reimbursement contract based upon full and open competition.  We
have found reasonable an agency's cost realism evaluation of the awardee's
proposed costs, although the agency did not compare the awardee's costs to
the government's estimate; rather, the agency was permitted to employ
various types of analyses in determining an offeror's realistic cost to
perform.  See, e.g., ELS Inc., B-283236, B‑283236.2, Oct. 25, 1999,
99-2 CPD P: 92 at 10.  The case cited by the protester, Satellite Servs.,
Inc., B-286508, B-286508.2, Jan. 18, 2001, 2001 CPD P: 30, where no
independent government estimate was used in the evaluation, does not
support the proposition that an agency must always prepare and use an
independent government estimate in evaluating proposals under a
cost‑reimbursement procurement; in that case, unlike the case here,
we sustained the protest because the agency had not reasonably analyzed
the competitors' differing staffing levels.
[14] The agency's cost/price analyst was the Army's lead cost evaluator
and a member of the SSEB.
[15] Thus, for example, Raytheon proposed various engineering labor
categories such as systems engineer I, systems engineer II, senior systems
engineer I, and senior systems engineer II, see generally Agency Report,
Tab 6e, Book 3, Raytheon Cost V Final Tabular Format Submission, SRAL
Staffing Input, while KRS proposed categories such as systems engineer I,
systems engineer II, systems engineer III, systems engineer IV, and
systems engineer leader.  See generally Agency Report, Tab 6a, KRS Final
TF! Spreadsheet, Staffing Input.
[16] The Army requested that DCAA review the firms' proposed direct and
indirect cost rates and other direct costs.  Supplemental Agency Report,
Tab 13, Declaration of Army's Cost/Price Analyst, at 3.
[17] The salary structure tables for various labor categories and
geographic locations were compiled by Raytheon's cost proposal team prior
to the drafting of the technical proposal.  Tr. at 260-62. 
[18] Raytheon's senior financial analyst admitted that the market wage for
an engineer based in Massachusetts would be higher than that for an
engineer in Alabama.  Tr. at 445.  Raytheon's Kwajalein technical manager
testified, when asked if he would be surprised if Raytheon's cost proposal
used salary tables for Alabama to compute the estimated salary range for
an engineer in Massachusetts, as follows:
Surprise would be one way to express that.  Shock or disbelief would be
another.  Because Lexington, Massachusetts has a higher cost of living. 
Our geographic salary tables--I can't quote them to you, sir, but I do
know that Huntsville is lower than the northeast. 
Tr. at 153-54.
[19] The SSEB had initially evaluated Raytheon's proposed staffing levels
and skill mix as *good* based upon its review of the technical and
management proposals.
[20] These sections of the PWS relate to integrated range engineering
services.
[21] This included labor categories such as electrical engineers I and II,
senior electrical engineers I and II, mechanical engineers I and II,
senior software engineer I, principal software engineer, senior systems
engineer I, field engineer I, and multi‑discipline engineer I.
[22] Although not defined in its discussion response, Raytheon's *hiring
control point* reflects the firm's new hire rate for a particular labor
category.  Tr. at 289 (testimony of Raytheon's senior financial analyst).
[23] Raytheon's proposal was based upon a [deleted]-percent attrition
rate, which accurately reflects the firm's historical attrition rate in
the performance of the incumbent contract.  The Army wondered why
Raytheon's historic labor costs do not already reflect the costs of new
hires, given this historical attrition rate.  Raytheon's senior financial
analyst testified at the hearing, however, in response to a question on
cross‑examination, asking why the firm's normal attrition rate did
not take into account senior engineers leaving the island or retiring,
that: 
The only thing different, and it's only a slight difference, is the normal
attrition rate would assume on the balance you had to replace employees
that attritted with comparably qualified and comparably, competent, if you
will--competency levels of the levels you're replacing.  And the situation
on [Kwajalein] today, you've got a group of overqualified engineers.
Tr. at 425.
[24] The RFP required offerors to provide sufficient cost or pricing
information within the TF! spreadsheet format and cost explanation to
allow the agency to evaluate the bases for the offerors' proposed costs. 
RFP amend. 2, S: L, at 12-14.
[25] If Raytheon had disclosed during discussions that the basis for its
proposed cost did not reflect its technical approach, the agency would
have been required to resolve this matter before it could make award based
on this approach.  See TRW, Inc., supra.
[26] Raytheon complains that it was not apprised during discussions of the
agency's concern that Raytheon's proposed transition from an R&D to an O&M
environment would be effective immediately.  The Army's concern about
Raytheon's transition schedule relates to the Army's concerns with
Raytheon's proposed composite labor rates, which the Army raised during
discussions.  In any event, the record shows that the Army also
specifically questioned Raytheon about its proposed transition.  See,
e.g., Raytheon Oral Presentation Videotape (May 21, 2002).
[27] Raytheon also complains that KRS's cost proposal was not subjected to
the same *level of scrutiny* that Raytheon's proposed labor rates
received.  See Raytheon's Supplemental Comments at 56-58.  We have
reviewed the record and do not find that the firms were treated unequally,
as Raytheon asserts.  The fact is that Raytheon proposed composite labor
rates that were below what the agency expected, and KRS did not.  On this
basis, the agency conducted discussions with Raytheon and performed
additional cost analyses to understand the basis for Raytheon's proposal. 
We have no basis to object to the Army's actions in this regard.
[28]  Raytheon argues that its multi-tiered approach actually encourages
job satisfaction and retention.  However, this argument reflects only its
disagreement with the Army's conclusions and does not render them
unreasonable.  See UNICCO Gov't Servs., Inc., supra, at 7.
[29] The two cases cited by Northrop Grumman, MCS of Tampa, Inc.,
B-288271.5, Feb. 8, 2002, 2002 CPD P: 52, and Strategic Res., Inc.,
B-287398, B-287398.2, June 18, 2001, 2001 CPD P: 131, in support of this
protest contention are distinguishable.  Neither case involves the
evaluation of joint ventures, nor do they limit consideration of past
performance as espoused by Northrop Grumman.  Both cases stand only for
the unremarkable proposition that a key consideration in determining
whether a subcontractor's past performance should be considered is whether
the experience is reasonably predictive of the offeror's (i.e., prime
contractor's) performance.  Measured against this standard, the Army's
analysis appears reasonable here.  Bechtel, Lockheed Martin, and Chugach
are major participants in performing the KRS contract.  The agency was
well within its discretion in considering the past performance of these
participants, as the past performance of each was a reasonable predictor
of KRS's performance. 
[30] KRS provided past performance information relating to each member's
area of responsibility.  See KRS's Revised Proposal, vol. IV, Management
Proposal, at 2.1-1 and 2.1-15.
[31] Raytheon also challenged the evaluation of KRS's past performance and
experience, complaining that the Army failed to consider prior financial
difficulties of Chugach.  The Army responds that those difficulties
occurred prior to the date requested for relevant past performance
information.  Since that time, Chugach has been fiscally sound and
financially prosperous, as illustrated by a number of trade articles and a
March 2002 DCAA audit report (which the Army reviewed).  Furthermore, the
Army reviewed relevant past performance surveys, which indicated that
Chugach had an outstanding past performance record.  Raytheon has not
substantively responded to this explanation.
[32] The Army also notes that Raytheon receives performance reviews from
the Navy as part of its quarterly award fee evaluations to which Raytheon
had the opportunity to respond. 
[33] The Army UH-1 rotary-wing aircraft, also known as the *Huey,* is best
known for its Vietnam service.
[34] Because offerors' proposals were evaluated against the same
evaluation criterion, we do not think that offerors were treated
disparately, as Northrop Grumman contends.
[35] The Government Property clause, incorporated by reference in RFP S: I
at 64, provides, in pertinent part:
(b) Changes in Government-furnished property.  (1) The Contracting Officer
may, by written notice, (i) decrease the [GFP] under this contract or (ii)
substitute other [GFP] for the property to be provided by the Government
or to be acquired by the Contractor for the Government under this
contract.  The Contractor shall promptly take such action as the
Contracting Officer may direct regarding the removal, shipment, or
disposal of the property covered by this notice.
[36] The Army implemented this change through post-selection negotiations
with KRS, as contemplated by the RFP.  RFP S: M, at 122; Price Negotiation
Memorandum (Sept. 5, 2002) at 4.  
[37] Raytheon also argued that the SSA's cost/technical tradeoff could not
be reasonable because it was based upon the Army's determination that
Raytheon's low composite labor rates posed performance risks.  Given our
finding above that the Army's evaluation of Raytheon's labor rates was
reasonable, this argument provides no basis to object to the SSA's
cost/technical tradeoff decision.