TITLE:  Honeywell Technology Solutions, Inc.; Wyle Laboratories, Inc., B-292354; B-292388, September 2, 2003
BNUMBER:  B-292354; B-292388
DATE:  September 2, 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: Honeywell Technology Solutions, Inc.; Wyle Laboratories, Inc.

   File: B-292354; B-292388

   Date: September 2, 2003

   Richard Vacura, Esq., Holly Emrick Svetz, Esq., John R. Zitko, Esq., and
Peter C. Sales, Esq., Morrison & Foerster, for Honeywell Technology
Solutions, Inc., and Richard L. Moorhouse, Esq., James P. Gallatin, Jr.,
Esq., David T. Hickey, Esq., and Kurt D. Ferstl, Esq., for Wyle
Laboratories, Inc., the protesters.

   Robert J. Symon, Esq., and Christyne K. Brennan, Esq., Spriggs &
Hollingsworth, for Sverdrup Technology, Inc., the intervenor.

   Sumara M. Thompson-King, Esq., and Sandra M. Wozniak, Esq., National
Aeronautics & Space Administration, for the agency.

   John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency's evaluation of proposals was not reasonable where the agency,
during the cost realism evaluation, made significant adjustments to the
protester's proposed staffing levels in calculating the most probable cost
associated with the proposal that were inconsistent with the agency's view
during the technical evaluation of the proposal that the proposed staffing
level was appropriate, and where the record casts serious doubts on the
reasonableness of the government estimate and the mechanical way it was
used in the cost realism evaluation.

   DECISION

   Honeywell Technology Solutions, Inc. and Wyle Laboratories, Inc. protest
the award of a contract to Sverdrup Technology, Inc. under request for
proposals (RFP) No. 13SSC-O-02-38, issued by the National Aeronautics &
Space Administration (NASA), for test operations services at the John C.
Stennis Space Center and George C. Marshall Space Flight Center.  The
protesters primarily argue that the agency's cost realism evaluation of
proposals was unreasonable.

   We sustain the protests.

   The solicitation is for the consolidation of services for the Stennis and
Marshall centers that had previously been acquired under separate
contracts.  The record reflects that NASA chose to consolidate the
contracts in order to obtain, among other things, improvements in
efficiency and safety, more competition and lower costs to the government,
and flexibility in staffing and management across the two centers.  Agency
Report (AR), Tab 3, Acquisition Strategy Meeting Presentation, at 15; RFP
at 69.

   The RFP provided for the award of a cost-plus-award-fee contract for a
base period of 2 years with two 2-year options.  The successful contractor
will furnish the management, labor, facilities, materials and equipment
(except for that to be furnished by the government) and "do all things
required to provide Test Operations Services" for the Stennis and Marshall
centers.  RFP at 24.  The bulk of this contract is for labor hours. 
Hearing Transcript (Tr.) at 28. 

   The RFP contained a detailed performance work statement (PWS) divided into
three sections.  Section one of the PWS provided for the "management and
administration functions . . . necessary to successfully execute testing"
at Stennis and Marshall, with the "focus on accomplishing safe test
operations using sound business practices."  RFP at 70.  Section two of
the PWS provided for the "test and engineering core capabilities" at
Stennis and Marshall, which required the maintenance of a test capability
at the centers "independent of whether there is an active test program or
not."  RFP at 78.  The third section of the PWS was for "test
capabilities" work "necessary to develop, construct, and operate test
systems required for successful completion of a test program."  RFP at 86.

   The RFP stated that award would be made to the offeror submitting the
proposal representing the best value to the government, considering the
essentially equally weighted evaluation factors of mission suitability,
past performance, and cost.  The mission suitability factor was comprised
of the following four subfactors (with the relative weight of each of the
subfactors being disclosed in the RFP):  technical performance (450
points); management (300 points); safety, health, and mission assurance
(SH&M) (150 points); and small disadvantaged business (SDB) participation
(100 points).  RFP at 301. 

   The RFP specified that the agency would evaluate proposals for cost
realism, and noted that because "the proposed cost of the work (and rates
proposed) may be a significant indicator of an offeror's understanding and
ability to perform the PWS," the proposals' "Mission Suitability scores
may be adjusted for lack of cost realism."  RFP at 301.  The RFP included
a table detailing the point deductions that would be made to mission
suitability scores based on the percentage difference between the proposed
costs and the most probable costs as calculated by the agency (e.g., an
adjustment of 6 to 10 percent to an offeror's proposed costs to arrive at
a most probable cost as calculated by the agency would result in a
deduction of 50 points from the proposal's mission suitability score). 
RFP at 301-02. 

   The RFP required offerors to submit detailed staffing plans, and provided
for the evaluation of the plans under the technical performance subfactor
of the mission suitability factor.  In this regard, offerors were to
"[p]rovide a Staffing Plan for obtaining and maintaining a qualified
workforce for the contract, including all subcontractors."  This staffing
plan, among other things, was to "[d]etail the number of personnel per
skill category and by organizational element for the total work force" and
address the "selection of skill levels and job qualifications and their
relationship to the PWS for the total workforce."  Offerors were also to
"[i]nclude qualification standards for all positions proposed," and
"[a]ddress fluctuating work force requirements, cross-utilization of
multi-skilled personnel and retention of qualified personnel."  RFP at
276-77.

   The RFP (at 303) provided detailed information regarding the agency's
intended evaluation of each offeror's staffing plan under the technical
performance subfactor, stating in part that:

   [t]he proposed Staffing Plan will be evaluated for soundness and adequacy
for obtaining and maintaining a qualified workforce, including
subcontractors.  The numbers, skill categories, (particularly critical
skills), and qualifications of personnel for each organizational element
will be evaluated for the ability to perform assigned tasks, flexibility
of approach and overall understanding of the requirements.  The offeror's
staffing plans and procedures will be evaluated for realism, particularly
in terms of fluctuating work force requirements, cross-utilization of
multi-skilled personnel and retention of qualified personnel.  The
offeror's Staffing Plan should identify retention of key personnel, and
should identify by name and position or classification of all additional
personnel.  The offeror's sources and indicated availability of personnel
will be evaluated for realism in providing the staffing compatible with
the approach.

   After issuing the RFP, the agency determined that because of questions
raised by potential offerors regarding the consistency of the workload as
it relates to actual testing, it would be "unreasonable to have offerors
predict the staffing requirements" for section three of the PWS. 
Contracting Officer's Statement at 13; see AR at 21.  Accordingly, the RFP
was amended to provide a staffing estimate that included job titles as
well as level and actual numbers of personnel for section three of the
PWS, which estimated a total of 103 and 50 positions for Stennis and
Marshall, respectively.  RFP amend. No. 1, at 12-13.

   Finally, the RFP "cautioned" each offeror "to submit its most realistic
and competitive offer initially, since the Government intends to award a
contract based on initial offers received."  The RFP added here that
"[d]iscussions will be held only if award on the basis of initial offers
is determined not to be in the Government's best interest."  RFP at 270.

   The agency received proposals from five offerors, including Honeywell,
Wyle, and Sverdrup.  The mission suitability, past performance, and cost
proposals were evaluated by the source evaluation board (SEB). 

   Honeywell's proposal was evaluated as "excellent" with a total score of
920 out of 1,000 points under the mission suitability factor, with
evaluations of "excellent" under the technical performance, management,
and SH&M subfactors, and "very good" under the SDB participation
subfactor.[1]  Honeywell's proposal was also evaluated as "very good"
under the past performance factor, with a proposed total cost of
$114,416,312.  AR, Tab 14, Source Selection Authority (SSA) Initial
Briefing, at 45-46, 48.  Although the SEB found in its technical
evaluation of Honeywell's proposal that "staffing levels for all areas
appear to be appropriate," AR Tab 14, Honeywell Proposal's Strengths and
Weaknesses, at 7,[2] the SEB found, in evaluating Honeywell's cost
proposal, that Honeywell's proposed staffing of a total of 248 full time
equivalent (FTE) positions was not adequately justified, and adjusted
Honeywell's staffing up to 291 FTEs (within 2 FTEs of the agency's
independent government staffing estimate (IGSE) of 293 FTEs) in
calculating the most probable cost of Honeywell's proposal.  AR, Tab 44,
Honeywell's Cost Evaluation Process & Results (June 12, 2003); Agency's
Post-Hearing Comments, exh. B, Cost Proposal Evaluation Results (July 22,
2003).  This resulted in an upward cost adjustment of $15,426,351 to
Honeywell's proposed cost for a most probable cost of $129,842,663.  AR,
Tab 14, SSA Initial Briefing, at 48.  Additionally, because Honeywell's
proposed cost differed from NASA's estimated most probable cost by 13.5
percent, Honeywell's evaluated score under the mission suitability factor
of 920 points was downwardly adjusted by 100 points (to 820 points) in
accordance with the solicitation.  Id. at 45, 48.  Honeywell's proposal
was ultimately considered by the SEB as "very good" under the mission
suitability and past performance factors, at a most probable cost of
$129,842,663.  Id. at 87.

   Wyle's proposal was evaluated as "good" with a total score of 600 out of
1,000 points under the mission suitability factor, with evaluations of
"good" under the technical performance, management, and SH&M subfactors,
and "very good" under the SDB participation subfactor.  AR, Tab 14, SSA
Initial Briefing, at 80.  Wyle's proposal was also evaluated as "good"
under the past performance factor, with a proposed total cost of
$95,321,282.  Id. at 81-82.  The SEB noted as a "weakness" in Wyle's
proposal under the technical performance subfactor that "Wyle['s] approach
of 241 full time employees appears to be insufficient to handle the
projected NASA workload."  AR, Tab 14, Wyle Proposal's Strengths and
Weaknesses, at 6.  In the cost evaluation, the SEB adjusted Wyle's
staffing up to 291 FTEs in calculating Wyle's proposal's most probable
cost.[3]  AR, Tab 48, Wyle's Cost Evaluation Process & Results (June 12,
2003); Agency's Post-Hearing Comments, exh. B, Cost Proposal Evaluation
Results (July 22, 2003).  This resulted in an upward cost adjustment of
$20,511,749 to Wyle's proposed cost for a most probable cost of
$115,833,031. AR, Tab 14, SSA Initial Briefing, at 82.  Additionally,
because Wyle's proposed cost differed from its evaluated most probable
cost by 21.5 percent, Wyle's evaluation under the mission suitability
factor was adjusted downward by 200 points (to 400 points).  Id. at 80,
82.  Wyle's proposal was ultimately considered by the SEB as "fair" under
the mission suitability factor and "good" under the past performance
factor, at a most probable cost of $115,833,031.  Id. at 87.

   Sverdrup's proposal was evaluated as "excellent" with a total score of 983
points under the mission suitability factor, with evaluations of
"excellent" under each of the subfactors to the mission suitability
factor, and "very good" under the past performance factor, with a proposed
total cost of $126,060,425.  AR, Tab 14, SSA Initial Briefing, at 69, 87. 
The SEB found in its cost evaluation that Sverdrup's proposed staffing of
a total of 287 FTEs was not adequately justified and adjusted Sverdrup's
staffing up to 297 FTEs.  AR, Tab 50, Sverdrup's Cost Evaluation Process &
Results (June 12, 2003); Agency's Post-Hearing Comments, exh. B, Cost
Proposal Evaluation Results (July 22, 2003).  This resulted in an upward
cost adjustment of $3,387,718 to Sverdrup's proposed cost for a total most
probable cost of $129,448,143.  AR, Tab 14, SSA Initial Briefing, at 72. 
Given that there was only a 2.7 percent difference between Sverdrup's
proposed cost and most probable cost, no adjustment was made to Sverdrup's
evaluation under the mission suitability factor.  Id. at 69, 72. 
Sverdrup's proposal was ultimately considered by the SEB as "excellent"
under the mission suitability factor and "very good" under the past
performance factor, at a most probable cost of $129,448,143.  Id. at 87.

   The SSA was briefed as to the results of the SEB's evaluation of
proposals.  The SSA noted in his source selection decision "that Sverdrup
was the only company not to receive a cost realism adjustment to its
Mission Suitability score."  AR, Tab 15, Source Selection Decision, at 9. 
The SSA ultimately determined that Sverdrup's proposal represented the
best value to the government, and "that award, without discussions, was in
the Government's best interest."  Id.  The offerors were informed that a
contract under the solicitation had been awarded to Sverdrup, and after
requesting and receiving debriefings, Honeywell and Wyle filed these
protests.

   The protesters argue that the agency's cost realism evaluation was
unreasonable.  They argue that the IGSE is unreasonable and that the
agency used the IGSE in an overly mechanical manner, with the result being
that the offerors' proposed staffing levels were adjusted upwards to
approximate the IGSE, with concomitant increases in the most probable
costs associated with their proposals, even though the protesters'
proposed staffing levels were reasonable and consistent with the RFP.

   Where agencies evaluate proposals for the award of cost-reimbursement
contract, an offeror's proposed costs are generally not dispositive
because, regardless of the costs proposed, the government is bound to pay
the contractor its actual and allowable costs.  Pueblo Envtl. Solution,
LLC, B-291487, B-291487.2, Dec. 16, 2002, 2003 CPD paragraph 14 at 13. 
Consequently, a cost realism analysis must be performed by the agency to
determine the extent to which an offeror's proposed costs represent what
the contract should cost, assuming reasonable economy and efficiency. 
Federal Acquisition Regulation (FAR) Sections 15.305(a)(1), 15.404-1(d);
CACI, Inc.-Fed., B-216516, Nov. 19, 1984, 84-2 CPD paragraph 542 at 5.  In
reviewing an agency's evaluation of proposals and source selection
decision, our review is confined to a determination of whether the agency
acted reasonably and consistent with the stated evaluation factors. 
Pueblo Envtl. Solution, LLC, supra.

   Although the FAR does not specify what is required to be "documented in
the contract file" in support of an agency's evaluation of proposals, FAR
Section 15.305(a), the fundamental principle of government accountability
dictates that an agency maintain a record adequate to allow for the
meaningful review of the merits of a protest.  Checchi and Co. Consulting,
Inc., B-285777, Oct. 10, 2000, 2001 CPD paragraph 132 at 6; Matrix Int'l
Logistics, Inc., B-272388, B-272388.2, Dec. 9, 1996, 97-2 CPD paragraph 89
at 5.  An agency which fails to adequately document its evaluation of
proposals or source selection decision bears the risk that its
determinations will be considered unsupported, and absent such support,
our Office may be unable to determine whether the agency had a reasonable
basis for its determinations.  Matrix Int'l Logistics, Inc., supra.  That
is not to say that our Office, in determining the reasonableness of an
agency's evaluation and award decision, limits its review to the
contemporaneous evaluation and source selection documentation.  Rather, we
will consider, in addition to the contemporaneous documentation, all
information provided to our Office for consideration during the protest,
including the parties' arguments and explanations, and testimony elicited
at a hearing, so long as the information is credible and consistent with
the contemporaneous record.  Id.; NWT, Inc.; PharmChem Labs., Inc.,
B-280988, B-280988.2, Dec. 17, 1998, 98-2 CPD paragraph 158 at 16.  In
considering the entire record, we accord greater weight to contemporaneous
evaluation and source selection material than to the parties' later
explanations, arguments, and testimony.  Matrix Int'l Logistics, Inc.,
supra. 

   Here, as discussed more fully below, the record before us, which includes
both the contemporaneous written record as well as testimony of three
members of the SEB, is inconsistent or incomplete to such an extent that
we cannot find the agency's evaluation of proposals to be reasonable.  
Specifically, the SEB found in the technical evaluation of Honeywell's
proposal that its proposed staffing level was appropriate and warranted a
"strength," and then determined in the cost realism evaluation that
Honeywell's proposed staffing level was significantly inadequate.  The
agency did not reasonably reconcile this anomaly in the contemporaneous
record or at the hearing.  Moreover, the record raises serious questions
concerning the reasonableness of the agency's development and use of the
IGSE in the cost evaluation to determine the reasonableness of the
offerors' proposed staffing levels.

   Regarding Honeywell's proposed staffing, the SEB identified nine
"strengths" in Honeywell's proposal and one "weakness" in evaluating
Honeywell's proposal under the technical performance subfactor paragraph
relating to the staffing plans."[4]  Among the strengths noted by the SEB
were "Honeywell has provided [DELETED]."  AR, Tab 14, Honeywell's
Proposal's Strengths and Weaknesses, at 7.  Additionally, the record
reflects that, based upon its review of two exhibits in Honeywell's
proposal pertaining to its proposed staffing plan (detailing Honeywell's
staffing by, among other things, PWS section, skill category, number of
personnel, and minimum qualification standards proposed), the SEB found
that one exhibit "demonstrates that Honeywell has thought through the
critical skill mix required to operate the [centers]," and that the other
exhibit "further demonstrates a strong knowledge of the qualification
standards required by each permanent member of the [contract work team]." 
Id.  As mentioned previously, Honeywell's proposal received an overall
rating of "excellent" under the technical performance subfactor.  AR, Tab
14, SSA Initial Briefing, at 40.

   However, during its cost realism evaluation of Honeywell's proposal, the
same SEB found that the proposal had "limited supporting rationale for
being 45 FTE's below the Government estimate from day one."  AR, Tab 43,
Honeywell Cost Realism Rationale, at 1.  The contemporaneous documentation
of the agency's cost realism evaluation of Honeywell's proposal with
regard to proposed staffing is two pages long, with only one page actually
addressing the agency's "rationale" for the adjustments made.[5]  On this
page, the agency identified each of the specific skill categories where
adjustments were found to be necessary in the proposed staffing, typically
concluding in each case, with little further elaboration, that Honeywell
had not provided "sufficient rationale" for its proposed staffing.[6] 
This evaluation resulted in a significant increase in the evaluated most
probable cost of Honeywell's proposal, as well as a significant deduction
from the proposal's mission suitability score, such that Honeywell's
proposal score fell from the "excellent" range to the "very good" range.

   The contemporaneous record, however, does not discuss or attempt to
reconcile the SEB's conclusions in the cost evaluation, where Honeywell's
staffing plan was deemed "inadequate" by 43 FTEs, with the evaluation of
the staffing plan under the technical performance subfactor, where
Honeywell's plan was found to contain "strengths" and an "appropriate"
number of proposed personnel.  Thus, the contemporaneous record provides
no basis to conclude whether the SEB's evaluation of Honeywell's proposed
staffing under the technical performance subfactor or with regard to cost
realism, or either, was reasonable.

   The agency was afforded an opportunity to explain this inconsistency at a
hearing conducted at our Office, yet failed to do so.  For example, one
member of the SEB testified that the SEB performed a comprehensive
evaluation of the offerors' (including Honeywell's) proposals under the
technical performance subfactor with regard to staffing.  Tr. at 132,
148.  This individual also testified that the SEB in the technical
evaluation evaluated the positions and labor mix proposed.  Tr. at 110,
112, 128.  This same individual testified that although he was very
familiar with the IGSE, given that he had prepared it with regard to the
requirements for the Marshall center, Tr. at 135, and had "looked at . . .
the numbers" of staff proposed by the offerors at this time, Tr. at 115,
128, neither he nor the SEB specifically evaluated the staffing levels
proposed under the technical performance subfactor.  Tr. at 129, 151-52. 
Rather, according to this individual's testimony here, the SEB actually
evaluated the offerors' proposed staffing levels only when performing its
cost evaluation, Tr. at 115, 137-39, even though the solicitation
expressly provided that the "numbers, skill categories, (particularly
critical skills), and qualifications of personnel for each organizational
element" would be evaluated under the technical performance subfactor. 
See RFP at 303.

   Another member of the SEB also testified that the SEB had performed a
comprehensive evaluation of the offerors' staffing plans under the
technical performance subfactor, Tr. at 300, and that he was aware of the
IGSE while evaluating proposals under the technical performance subfactor,
given that he had prepared the IGSE with regard to the Stennis center
requirements.  Tr. at 296.  This individual testified that Honeywell's
staffing plan was detailed, that he knew during the evaluation of
Honeywell's proposal under the technical performance subfactor that the
staffing level Honeywell proposed differed from the IGSE, and that during
the evaluation under the technical performance subfactor the SEB looked at
the general staffing levels in the proposals.  Tr. at 296-98.  This
individual also testified, however, that it was not until the SEB
performed its cost realism evaluation that the SEB actually considered
Honeywell's staffing levels in detail.  Tr. at 295-96. 

   The Chairperson of the SEB conceded that the evaluation record was
inconsistent with regard to Honeywell's staffing plan.  Tr. at 361.  He
also testified that "the Honeywell staffing was not unreasonable."[7]  Tr.
at 359.  The Chairperson added later in his testimony, however, that
Honeywell's proposed staffing level was inadequate, and that the SEB
ultimately concluded that Honeywell "could not do the job without risk
with the number that they proposed."  Tr. at 365.

   As indicated, the SEB members' post-protest explanations as to why
Honeywell's detailed staffing plan was found by the SEB under the
technical performance subfactor to provide a number of "strengths" and an
"appropriate" staffing level, yet was found during the cost realism
evaluation to have a significantly understated staffing level, center on
their assertion that the SEB did not actually evaluate the staffing levels
proposed by offerors until the SEB performed its cost realism evaluation. 
These post-protest explanations are inconsistent with the
contemporaneously documented technical evaluation conclusions regarding
the strength of Honeywell's staffing plan and the adequacy of Honeywell's
proposed staffing levels.  As mentioned previously, the contemporaneous
record demonstrates that SEB specifically found Honeywell's "[s]taffing
levels for all areas appear to be appropriate."  AR, Tab 14, Honeywell
Proposal Strengths and Weaknesses, at 7.  Moreover, the record shows that
the SEB evaluated and reached conclusions regarding staffing levels
proposed by other offerors during the SEB's evaluation of proposals under
the technical performance subfactor.  In this regard, as noted above, the
SEB concluded in its evaluation under the technical performance subfactor
that Wyle's "approach of 241 full time employees appears to insufficient
to handle the projected NASA workload," Wyle Proposal's Strengths and
Weaknesses, at 6, and the contemporaneous record of the SEB's evaluation
of another offeror's proposed staffing level under the technical
performance subfactor includes a detailed discussion as to why the SEB
determined that the particular staffing level proposed constituted a
"significant weakness."  AR, Tab 14, Second Subtab, at 7.  Further,
notwithstanding the post-protest denials by the SEB members that staffing
levels were considered in the technical performance subfactor evaluation,
these individuals testified that the SEB performed a "comprehensive"
evaluation of the offerors' proposals, including staffing plans, under the
technical performance subfactor.  Given the inability of the agency to
credibly explain the apparent inconsistency between its evaluation of
Honeywell's staffing plan under the technical performance subfactor and
its cost realism evaluation, we cannot find the agency's determinations
here to be reasonable with regard to either its technical performance
subfactor evaluation or its cost realism evaluation.

   Moreover, as discussed below, the record also raises serious questions as
to both the development of the IGSE and its use during the evaluation
process.  Turning to the development of the IGSE, we note first by way of
background it is the sum of the separately prepared estimates for Marshall
and Stennis.

   With regard to the Marshall portion of the IGSE, which totaled 70 FTEs,
the SEB member who prepared this portion of the IGSE explained that the
estimate was developed in part through a "bottoms up" examination of the
agency's needs based upon the requirements set forth in the RFP.  Tr. at
36-40, 75-76.  In this regard, the contemporaneous record includes a
matrix providing a staffing estimate for Marshall setting forth the number
of FTEs required by labor category and work to be performed.  AR, Tab 36,
Government Staffing Estimate Worksheets, at 5.  The SEB member who
prepared the Marshall estimate testified that Marshall actually needed 70
FTEs in the labor categories set forth in the estimate, that is, that the
70 FTE estimate represented Marshall's actual needs and that any lesser
number of FTEs would have been considered "[c]ompletely unacceptable." 
Tr. at 77-78, 80-81, 100, 107.  This SEB member also testified that the
Marshall estimate was prepared without any consideration of any
efficiencies that may be gained through the consolidation of the Marshall
and Stennis requirements into one contract, or through the
cross-utilization or cross-training of personnel, as encouraged by the
solicitation.  Tr. at 96, 229-30.

   The SEB member who prepared the Stennis estimate testified that the
estimate was prepared based upon his extensive knowledge of the Stennis
requirements, information he received regarding staffing from various
Stennis personnel, as well as input from the various knowledgeable members
of the SEB, including the chairperson.  Tr. at 250, 253-54, 264.  This SEB
member added that he also used the organizational chart for the "entire
Stennis contract," which lists positions in addition to those needed to
perform the services requested by this solicitation.  Tr. at 252; see AR,
Tab 60, Stennis Contractor Operations Programs Staffing. 

   The record reflects that this SEB member also considered a list of all
positions covered by the RFP here that was received from the incumbent
contractor at Stennis in preparing this portion of the estimate.  Tr. at
274-77; AR, Tab 62, Incumbent Contractor's Extension Estimate and Test
Operations Monthly Staffing.  Although the contractor-provided data listed
only 182 positions, the SEB member testified that he made no adjustments
to the Stennis estimate of 223 FTEs.  Tr. at 277.  The SEB member
explained that the Stennis contract included much more than the test
services included under this RFP, and that the staffing list for test
services provided by the incumbent therefore did not include
positions--such as general manager--that would be in common for the
combination of this RFP's services and the remainder of the services which
will be provided under a separate contract.[8]  Tr. at 273-77.  Although
the SEB member characterized his review of the incumbent
contractor-provided data as a "detailed analysis," he also conceded that
he only "glanced" at the actual positions set forth in the data.  Tr. at
281.  He added that he looked at the total number of positions listed by
the incumbent contractor (182) to see if it was "close" to the Stennis
center estimate of 223 positions, and that the contractor-provided data
had acted as a "sanity check," because the total of 182 FTEs as provided
by the incumbent contractor was, in the SEB member's view, "pretty close"
to the IGSE for the Stennis of 223 FTEs.  Tr. at 276-77. 

   This individual added that, in his view, the 223 FTE estimate for the
services needed at Stennis was not a requirement, but rather, only an
estimate of the number of personnel needed to perform the work required. 
Tr. at 262-63.  Finally, this individual testified that the estimate for
the Stennis center was prepared "based upon the statement of work and how
we know it would be done today" without consideration of any efficiencies
that may be gained, for example, through the consolidation of the Marshall
and Stennis requirements into one contract.  Tr. at 286.

   The record reflects that NASA chose to consolidate the Stennis and
Marshall requirements into one contract in order to obtain, among other
things, improvements in efficiency and safety, more competition and lower
costs to the government, and flexibility in staffing and management across
the two centers, AR, Tab 3, Acquisition Strategy Meeting Presentation, at
15; RFP at 69.  Consistent with this, the RFP specifically "encouraged"
offerors "to propose innovative techniques and methods that would benefit
the Government," and advised offerors that they "should not limit proposed
methods to processes currently used."  RFP at 270.  However, the IGSE of
293 FTEs is the sum of two distinct, separate staffing estimates (i.e.,
Marshall's and Stennis's) that were prepared with no consideration of the
efficiencies that NASA intended to achieve through the consolidation, Tr.
at 96, 229-30, 286, or proposed cross-utilization of personnel (which was
also encouraged by the RFP).  Tr. at 230; see RFP at 70. 

   This problem with the way the IGSE was developed is significant because
the IGSE was used in what appears to be a mechanical way in the cost
realism evaluation.  A reasonably derived estimate of labor hours and
material costs can provide an objective standard against which the realism
of proposed costs can be measured.  IT Facility Servs.-Joint Venture,
B-285841, Oct. 17, 2000, 2000 CPD paragraph 177 at 6-7; Theta Eng'g, Inc.,
B-271065, B-271065.2, June 12, 1996, 96-2 CPD paragraph 76 at 6.  However,
an agency may not mechanically apply that estimate to determine the most
probable costs associated with proposals, without regard to the individual
proposal's technical approach.  The Jonathan Corp.; Metro Mach. Corp.,
B-251698.3, B-251698.4, May 17, 1993, 93-2 CPD paragraph 174 at 11;
Kinton, Inc., B-228260.2, Feb. 5, 1988, 88-1 CPD paragraph 112 at 4.  This
is so because in some instances an estimate has limited applicability to a
particular proposal due to, for example, the skill of the labor force or
innovative work methods proposed.  In those cases, any rigid reliance on
the government estimate could have the effect of arbitrarily and unfairly
penalizing (or rewarding) one firm and depriving the government of the
benefit available from the different approaches of the various offerors. 
Accordingly, in order to undertake a proper cost realism evaluation, the
agency must independently analyze the realism of an offeror's proposed
costs based upon its particular approach, personnel, and other
circumstances.  The Jonathan Corp.; Metro Mach. Corp., supra. 

   Here, the record does not indicate that the agency engaged in an
absolutely rigid application of the IGSE to the offerors' proposals. 
There do appear to be instances where the agency accepted proposed
staffing for a particular function or labor category that was less than
that reflected in the IGSE, and in other instances, the agency made
adjustments to an offeror's proposed staffing that put the probable
staffing associated with the proposal at a level between that set forth in
the proposal and that provided by the agency in its IGSE. 

   Nevertheless, the record also reflects that in the vast majority of
instances where an offeror proposed a staffing level that differed from
the IGSE, the staffing level was adjusted during the cost evaluation to
the IGSE staffing level, with the primary documented reason by the agency
being that the proposal did not provide "sufficient rationale" for the
proposed staffing, with little further elaboration.  See AR, Tab 43,
Honeywell Cost Realism Rationale; at 2; Tab 47, Wyle Cost Realism
Rationale, at 2; Tab 49, Sverdrup Cost Realism Rationale, at 2.  As the
protesters point out, the consistency of the agency's approach in this
regard is readily apparent when the offerors' varying proposed staffing
levels are compared to their staffing levels as adjusted by the agency and
the IGSE.  That is, although the agency found "that there was a wide range
of disparate approaches from the offerors," with the five offerors
proposing staffing levels that varied considerably (i.e., 198, 241, 248,
260, and 287 FTEs), the SEB adjusted the staffing levels proposed by all
five offerors to within 4 FTEs of the IGSE of 293.  Agency's Post-Hearing
Comments at 10; exh. B, Cost Proposal Evaluation Results (July 22, 2003). 
This, along with the sparse evaluation documentation, suggests that the
IGSE was used in a mechanical way in the cost realism evaluation,
notwithstanding the encouragement in the RFP for proposing innovative
approaches. 

   That the agency used the IGSE in the cost realism evaluation in a
mechanical way is supported by other evidence in the record.  For example,
before this issue became the gravamen of the protests, the agency stated
in its initial report on the protests that "[u]niformly, NASA base lined
[the offerors'] FTEs against the government staffing estimate." AR at 22,
25.  Moreover, given the testimony of the SEB member that the Marshall
estimate was essentially inflexible and any proposed staffing plan that
did not comport precisely with the Marshall estimate would be
"[c]ompletely unacceptable," the fact that variances from the estimate
were not tolerated was understandable.[9]  Tr. at 78, 80-81, 100, 107.  Of
most significance in showing that the IGSE was used in a mechanical way is
the fact that Honeywell's proposed staffing was characterized as
"appropriate" during the evaluation of its proposal under the technical
performance subfactor, but was then adjusted upwards by 43 FTEs to within
2 FTEs of the IGSE during the cost realism evaluation.

   In sum, we find the agency's cost realism evaluation unreasonable.

   As a final matter, the agency and the intervenor argue that, in any event,
neither Honeywell nor Wyle was prejudiced by the agency's flawed
evaluation.  Our Office will not sustain a protest unless the protester
demonstrates a reasonable possibility that it was prejudiced by the
agency's actions, that is, unless the protester demonstrates that but for
the agency's action, it would have had a substantial chance of receiving
the award.  McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD paragraph
54 at 3; Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir.
1996).

   Although we agree that Honeywell would not have been prejudiced by the
agency's actions, if the only flaw in the record had been that Honeywell's
proposal was overrated under the technical performance subfactor because
it proposed an inadequate staffing level (so it should not have been
evaluated as "excellent"), we simply cannot determine from this record
which aspect of the agency's evaluation was reasonable and which was
unreasonable.  That is, if the SEB's evaluation of Honeywell's proposal
under the technical performance subfactor was reasonable, where the SEB
found that "[s]taffing levels for all areas appear to be appropriate,"
there may have been no need for any adjustment to Honeywell's proposed
costs, such that Honeywell's proposal should have been considered during
the source selection as "excellent" (rather than "very good") under the
mission suitability factor, at its proposed cost of $114,416,312 (rather
than $129,842,663).  In that case, Honeywell would clearly have a
reasonable possibility of being selected for award.

   With regard to Wyle (as well as Honeywell), we believe that the numerous
inconsistencies in the record are indicative of systemic problems that
undermine the reasonableness of the agency's evaluation.  Again, we simply
cannot determine from this record which aspect of the agency's evaluation
was reasonable and which was unreasonable, or whether the agency's
evaluation of the technical merit or cost realism of proposals was
reasonable at all.  Moreover, we believe that questions raised by this
record regarding the development of the IGSE and its use in what appears
to be a mechanical way during the costs realism evaluation also
demonstrate a reasonable possibility that Wyle was prejudiced by the
agency's actions, given the significant upward adjustment made by the
agency to Wyle's proposed cost, and the concomitant downward adjustment
made by the agency to Wyle's evaluation score under the mission
suitability factor.

   We recommend that the agency review the IGSE to determine whether or not
it is reasonably accurate and review the solicitation to determine whether
it accurately reflects the agency's actual staffing requirements.  If the
solicitation is amended, revised proposals should be obtained and a new
source selection made.  If the solicitation is not revised, the agency
should reevaluate proposals, conduct discussions if appropriate, and make
a new source selection.[10]  If a proposal other than Sverdrup's is
selected for award, the agency should terminate Sverdrup's contract and
make award to the successful offeror.  We also recommend that the
protesters be reimbursed the reasonable costs of filing and pursuing their
protests, including reasonable attorneys' fees.  4 C.F.R. Section 21.8(d)
(2003).  The protesters should submit their claims for costs, detailing
and certifying the time expended and costs incurred, to the contracting
agency within 60 days after receipt of this decision.  4 C.F.R. Section
21.8(f)(1).

   The protests are sustained.

   Anthony H. Gamboa

   General Counsel

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

   [1] The proposals were evaluated under the mission suitability and past
performance factors, and each of the mission suitability subfactors, as
"excellent" (percentile range of 91-100), "very good" (percentile range of
71-90), "good" (percentile range of 51-70), "fair" (percentile range of
31-50), and "poor" (percentile range of 0-30).  AR, Tab 14, SSA Initial
Briefing, at 20.

   [2] The agency's evaluation record of the technical performance subfactor
consists primarily of the SEB's consensus as to the strengths and/or
weakness in the offerors proposals. 

   [3] The SEB noted during its cost realism evaluation of Wyle's proposal
that the "rationale [in the proposal] was insufficient to support being 52
FTE's below the Government estimate on the first day of the contract." 
AR, Tab 47, Wyle Proposal Cost Realism Rationale, at 1. 

   [4] The identified weakness referred to one of Honeywell's proposed
subcontractors  [DELETED], which in the SEB's view, among other things,
[DELETED].  AR, Tab 14, Honeywell Proposal's Strengths and Weaknesses, at
8.  Thus, this weakness has nothing to do with Honeywell's proposed
staffing levels.

   [5] This sparse documentation is consistent with the cost realism
evaluation documentation for the other proposals.

   [6] As a typical example, [DELETED] has not provided sufficient rationale
to support needing [DELETED], therefore; proposal will be increased by
[DELETED].  AR, Tab 43, Honeywell Cost Realism Rationale, at 2.

   [7] Because the chairperson used the phrases "I still feel like" and "we
feel like" in the same sentence, it is difficult to discern from his
testimony regarding the continuing belief that "the Honeywell staffing was
not unreasonable" whether he was testifying regarding only his belief or
that of the SEB as a whole.  Tr. at 359.

   [8] The general manager position was the only example provided by the SEB
member of these common positions, who did not estimate how many such
common positions were not in the incumbent-provided staffing list for
testing services.

   [9] On the other hand, the use of the IGSE as a "baseline" to which the
offerors' staffing levels were adjusted for cost realism analysis purposes
appears inconsistent with the view of the SEB member who prepared the
Stennis estimate that the total number of positions listed by the
incumbent contractor (182) was "pretty close" to his estimate of 223
positions.  Tr. at 276-77.  It seems incongruous that the SEB member who
prepared this estimate was not troubled by its significant variance from
the incumbent's staffing estimate, yet when the estimate was used in the
evaluation, proposals with different staffing levels were adjusted to
approximate the IGSE.

   [10] The decision that discussions are not necessary must be reasonably
based on the particular circumstances of the procurement, including
consideration of the proposals received and the bases for the evaluation
judgments and selection decision.  For example, where the proposals
deviate from the government estimate, the agency should consider the
possibility that the proposals that deviate from the government estimate
may nevertheless be advantageous to the government, such that discussions
should be conducted to address this discrepancy.  See The Jonathan Corp.;
Metro Mach. Corp., supra.