TITLE: B-294910; B-294910.2; B-294910.3; B-294910.4; B-294910.5; B-294910.6; B-294910.7, EPW Closure Services, LLC; FFTF Restoration Co., LLC, January 12, 2005
BNUMBER: B-294910; B-294910.2; B-294910.3; B-294910.4; B-294910.5; B-294910.6; B-294910.7
DATE: January 12, 2005
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B-294910; B-294910.2; B-294910.3; B-294910.4; B-294910.5; B-294910.6; B-294910.7, EPW Closure Services, LLC; FFTF Restoration Co., LLC, January 12, 2005

   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: EPW Closure Services, LLC; FFTF Restoration Co., LLC

   File: B-294910; B-294910.2; B-294910.3; B-294910.4; B-294910.5;
   B-294910.6; B-294910.7

   Date: January 12, 2005

   Richard B. Oliver, Esq., and Charles H. Pomeroy, Esq., McKenna Long &
   Aldridge, for EPW Closure Services, LLC; and Kenneth B. Weckstein, Esq.,
   Shlomo D. Katz, Esq., and Michael D. Maloney, Esq., Epstein, Becker &
   Green, for FFTF Restoration Co., LLC, the protesters.

   Pamela J. Mazza, Esq., Andrew Hallowell, Esq., Philip M. Dearborn, III,
   Esq., Jennifer M. Morrison, Esq., and Jennifer M. Seeley, Esq., Piliero,
   Mazza & Pargament, for SEC Closure Alliance, LLC, an intervenor.

   Gena E. Cadieux, Esq., Mary M. McKnight, Esq., Judith A. Sukol, Esq., and
   Joseph B. Schroeder, Esq., Department of Energy, for the agency.

   David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest against award for deactivation and decommissioning of nuclear
   reactor is sustained where, although solicitation provided that agency was
   committed to achieving an accelerated closure of the site, agency accorded
   little or no weight in the evaluation to the degree to which offerors
   proposed to accelerate completion ahead of required site closure date.

   2. Protest against award for deactivation and decommissioning of nuclear
   reactor is sustained where, because agency was unable to conclude that
   proposed allowances for contingencies reasonably reflected the likely
   risks of offerors' proposed approaches, there was no basis for agency to
   conclude that the cost figures upon which source selection decision was
   based reasonably represented the differences in costs to be incurred under
   competing proposals.

   DECISION

   EPW Closure Services, LLC and FFTF Restoration Co., LLC (FRC) protest the
   Department of Energy's (DOE) award of a contract to SEC Closure Alliance,
   LLC (SCA), under request for proposals (RFP) No. DE-RP06-04RL 14600, for
   deactivation and decommissioning of the Fast Flux Test Facility (FFTF).
   EPW and FRC protest the evaluation of proposals.

   We deny EPW's protest and sustain FRC's protest.

   BACKGROUND

   The FFTF is a 400-megawatt (thermal) liquid-metal (sodium) cooled fast
   neutron flux nuclear test reactor owned by DOE and located in the 400 Area
   of DOE's Hanford Site in southeastern Washington State. The FFTF complex
   consists of equipment and several support buildings arranged around the
   central reactor containment building. The reactor is located in a shielded
   cell at the center of the containment building. During reactor operations,
   heat was removed from the reactor through three heat transfer system (HTS)
   loops. The three primary loops, which include pumps, piping, and an
   intermediate heat exchanger, carried liquid sodium through the reactor
   vessel and circulated the heated sodium to the intermediate heat
   exchanger, where the heat was transferred to a secondary sodium loop. The
   secondary loops, which include pumps, piping, flow meters, and heat
   exchangers, removed the heat from the secondary loops by circulating
   sodium to air-cooled dump heat exchangers, which transferred the heat to
   the ambient air. Source Evaluation Board (SEB) Report sect. 1.0.

   FFTF currently is being managed and operated by Fluor Hanford, Inc., DOE's
   primary contractor at the Hanford Site. Fluor Hanford currently (and at
   the time the solicitation was issued) is proceeding with deactivation of
   the FFTF. The sodium coolant is being maintained in a molten state in the
   reactor vessel and fuel storage vessels. Fuel has been removed from the
   reactor vessel and has been transferred to two sodium-filled fuel storage
   vessels or to above-ground dry, interim storage casks. The primary and
   secondary HTS loops and a portion of the reactor vessel have been drained
   of sodium, and this sodium inventory (166,000 gallons) has been
   transferred to the sodium storage facility and allowed to cool/solidify.
   However, sodium residuals remain throughout the primary and secondary HTS
   loops and radioactive sodium remains in the reactor vessel. RFP sect. C.2;
   DOE Report, EPW Protest, Nov. 9, 2004, at 3.

   The RFP contemplated award of a cost-plus-incentive-fee contract to a
   small business concern "to safely accelerate the deactivation and
   decommissioning [of] the FFTF and its support structures." SOW sect. C.1.
   The solicitation provided for six major contract activities: (1) maintain
   a safe and compliant FFTF complex; (2) deactivate the FFTF complex,
   including, among other tasks, cleaning and packaging FFTF fuel for
   approved storage, draining sodium and NaK (sodium potassium) inventories
   from the primary systems and reactor vessel to the maximum extent
   practical, and deactivating and preparing the FFTF plant, associated
   support buildings, and associated operating systems and equipment for
   decommissioning; (3) dispositioning FFTF sodium, sodium potassium, and
   cold traps (filters); (4) decommissioning and demolishing the FFTF and
   support buildings, including entombment of the below-grade portion of the
   reactor containment building with the defueled reactor; (5) FFTF Closure
   Project management; and (6) offsite FFTF Closure Project support.[1]
   Although Fluor Hanford's current baseline calls for completing the Hanford
   Closure Project by 2018, Hearing Transcript (Tr.) at 255, the RFP
   instructed offerors that "DOE expects physical completion not later than
   September 30, 2012." RFP sect. L.7(a)(5)(ii).

   Award was to be made to the responsible offeror whose proposal represented
   the "best value" based upon consideration of cost/fee and five
   technical/management evaluation criteria: (1) technical approach (with a
   disclosed weight of 30 percent); (2) key personnel, with the project
   manager weighted significantly higher than other key personnel (15
   percent); (3) experience and past performance (each worth 10 percent, for
   a total 20 percent); (4) environment, safety, and health (ESH)
   (15 percent); and (5) business management, including "the degree to which
   the Offeror demonstrates how its business management approach will
   effectively and efficiently execute and complete the project in accordance
   with the contract terms, including the schedule and cost" (20 percent).
   RFP sect. M.3. The technical/ management proposal was significantly more
   important than the cost/fee proposal.

   As part of their cost/fee proposal, offerors were required to propose a
   target cost for each activity shown on the work breakdown statement (WBS),
   completion date, target fee, minimum fee, maximum fee, share line (ratio)
   for cost overruns or underruns, and detailed basis of estimates. The cost
   and financial data were to be "fully supported and organized in a manner
   that facilitates review," with the basis for the development of the data
   identified. RFP sect. L.8. In addition, the RFP required that offerors
   include in the target cost an allowance for contingencies, as well as
   furnish a discussion that includes "a treatment of the components of the
   proposed contingency and how they are individually developed," and "a
   treatment of how the contingency has been applied to the estimate." RFP
   sect. L.8(c). Offerors were cautioned that the total contract target cost
   and target fee could not exceed a specified funding profile of $43.5
   million in fiscal year 2005 and $46.1 million per fiscal year thereafter.

   Initial proposals were received from five offerors by the February 17,
   2004 closing time. Three proposals--those of SCA, EPW and FRC--were
   included in the competitive range; following discussions, all three
   offerors were requested to submit final proposal revisions. The results of
   the final evaluation were as follows:

   +------------------------------------------------------------------------+
   |                                    |    SCA    |    FRC    |    EPW    |
   |------------------------------------+-----------------------------------|
   |Technical/Management                |                                   |
   |------------------------------------+-----------------------------------|
   ||Technical                          |    300    |    300    |    240    |
   |+-----------------------------------+-----------+-----------+-----------|
   ||Key Personnel                      |    120    |    150    |    150    |
   |+-----------------------------------+-----------+-----------+-----------|
   ||Experience/Past Performance        |    160    |    160    |    160    |
   |+-----------------------------------+-----------+-----------+-----------|
   ||ESH                                |    150    |    120    |    150    |
   |+-----------------------------------+-----------+-----------+-----------|
   ||Business Management                |    200    |    200    |    200    |
   |+-----------------------------------+-----------+-----------+-----------|
   ||Total Score (1,000 possible points)|    930    |    930    |    900    |
   |------------------------------------+-----------------------------------|
   |Proposed Cost/Fee                   |                                   |
   |------------------------------------+-----------------------------------|
   ||Cost/Fee                           | $[DELETED]| $[DELETED]| $[DELETED]|
   |+-----------------------------------+-----------+-----------+-----------|
   ||Contingency                        |$14,275,050|$26,115,000|$25,836,000|
   |+-----------------------------------+-----------+-----------+-----------|
   ||Total Proposed                     | $[DELETED]| $[DELETED]| $[DELETED]|
   |------------------------------------+-----------------------------------|
   |Evaluated Cost/Fee                  |                                   |
   |------------------------------------+-----------------------------------|
   ||Cost/Fee                           | $[DELETED]| $[DELETED]| $[DELETED]|
   |+-----------------------------------+-----------+-----------+-----------|
   ||Contingency                        |$14,275,050|$26,115,000|$25,836,000|
   |+-----------------------------------+-----------+-----------+-----------|
   ||Total Evaluated                    | $[DELETED]| $[DELETED]| $[DELETED]|
   +------------------------------------------------------------------------+

   Based upon the evaluation results, DOE determined that SCA's proposal
   represented the best value. Although SCA's and FRC's proposals received
   the same adjectival rating (outstanding) and point score under technical
   approach, the most important technical/management criterion, the source
   selection official (SSO) determined that SCA's proposal had a "slight
   advantage" over FRC's under this criterion "because of its schedule and
   its approaches to the other technical issues." Source Selection Decision
   (SSD) at 8. In this regard, the SSO noted in the SSD that, while FRC and
   EPW (whose proposal received only a good technical rating) proposed
   aggressive schedules, leading to scheduled project completion in December
   2009 and June 2010, respectively, both of their approaches utilized the
   maximum funding allowed. In contrast, SCA's approach called for a
   scheduled completion in September 2011, but would utilize maximum funding
   for only the first 3 years, with reduced funding for each year thereafter.
   Notwithstanding FRC's and EPW's proposed earlier completion dates, the SSO
   determined that SCA's schedule represented a moderate discriminator in
   SCA's favor, concluding that SCA's "schedule provides more flexibility for
   additional acceleration or the necessity to accommodate changes in the
   project should problems arise, and is over one year faster than the
   December 2012, target completion date stated in the RFP." Id. at 6-7. The
   SSO went on to note that

     SCA does accelerate the removal of fuel and sodium faster than the other
     two offerors, and thereby eliminates the high-risk elements of the work
     scope, along with the associated surveillance and maintenance costs.
     Once the high risks are eliminated, schedule acceleration becomes less
     significant because there is no other Hanford work that depends upon
     accelerated completion of the Hanford [decontamination and
     decommissioning], nor are there any other substantial risks remaining at
     the facility. As described below, SCA's proposal has the lowest proposed
     and evaluated price, such that the longer schedule does not impact the
     costs of the project.

   Id. at 7. In addition, among other technical considerations, the SSO found
   the following to be significant or moderate discriminators giving SCA and
   FRC an advantage over EPW: (1) SCA and FRC, but not EPW, proposed to
   remove essentially all the sodium residuals from the FFTF; and (2) both
   SCA and FRC proposed advantageous approaches to dispositioning the bulk
   sodium, with FRC proposing [DELETED], and SCA proposing [DELETED].

   Under the key personnel criterion, the agency's SEB rated EPW's and FRC's
   proposals as outstanding and SCA's as only good, in large part because of
   EPW's and SCA's proposed project managers, whom the SEB found had
   significant experience in managing large similar projects. However, the
   SSO found that EPW's and FRC's advantage over SCA was only slight, and not
   moderate as found by the SEB. According to the SSO, SCA's project manager
   has over 20 years of management and experience in nuclear facility
   decommissioning and demolition such that he, as well as the other proposed
   project managers, all were excellent candidates. Under the ESH criterion
   (where EPW's and SCA's proposals were rated outstanding and FRC's only
   good), the SSO agreed with the SEB that EPW's and SCA's proposed
   integrated safety management systems represented a moderate advantage over
   FRC's approach.

   The SEB rated all proposals outstanding under the business management
   criterion, but the SSO determined that SCA held a "slight advantage" based
   on its oral presentation, finding that SCA presented an "outstanding
   approach to risk management, which was rigorous and comprehensive,"
   identifying 105 separate risks with a mitigation approach for each.
   According to the SSO, "although the two other offerors' approaches to risk
   management were comprehensive, SCA's presentation was superior." SSD at
   10. The agency found no discriminators under the experience/past
   performance criterion.

   The SSO concluded that, while SCA's and FRC's technical/management
   proposals received the same overall score and were similar in merit,
   "there are more discriminators favoring the SCA Technical and Management
   proposal than the FRC or EPW proposals," and that SCA's
   technical/management proposal was "slightly better" than the other two.
   SSD at 12-13. The SSO found that SCA's proposal not only offered the
   lowest evaluated price, but that, as discussed above, SCA had "conducted a
   comprehensive risk assessment, which resulted in SCA proposing the lowest
   amount of contingency funding necessary to address its identified risks
   and achieve an 80% confidence level." SSD at 11. The SSO further noted
   that FRC's higher minimum fee ([DELETED] percent) resulted in a more
   limited incentive than did SCA's ([DELETED] percent) and EPW's ([DELETED]
   percent) minimum fees, that FRC's and EPW's proposals had substantial
   unsupported costs, and that SCA's proposal had a lower amount of probable
   cost adjustment.

   Upon learning of the resulting award to SCA, FRC and EPW filed these
   protests with our Office.

   FRC PROTEST

   Accelerated Schedule

   FRC asserts (as does EPW) that DOE's failure to credit its proposal for
   offering an earlier completion date than SCA was inconsistent with the
   terms of the RFP. According to FRC, it was led to believe by the terms of
   the solicitation that the agency desired acceleration of the overall
   completion of the project, that is, the deactivating and decommissioning,
   or "closure," of FFTF. FRC states that it was on this basis that it
   proposed an accelerated, albeit less efficient, approach and a contingency
   allowance that was appropriate for an accelerated approach.

   DOE maintains that its evaluation of the offerors' proposed schedules was
   consistent with the focus on optimization reflected in the definition of
   the technical approach criterion in section M of the RFP, which provides,
   in relevant part, as follows:

     The DOE will evaluate each offeror's performance-based technical
     approach and methods to perform the SOW elements described in Section C.
     This includes evaluating the offeror's approach to deactivation,
     decommissioning, and demolition for feasibility, reasonableness,
     sequencing, and the extent to which it optimizes project execution and
     schedule.

   RFP at M.3(a). According to the agency, nothing in section M indicated
   that a schedule with the earliest proposed completion date would receive
   the highest rating in the evaluation. DOE Comments, Dec. 23, 2004, at 28;
   Tr. at 521.

   Where an evaluation is challenged, our Office will not reevaluate
   proposals; rather, we will examine the record to determine whether the
   agency's judgment was reasonable and consistent with stated evaluation
   criteria and applicable statutes and regulations. U.S. Facilities, Inc.,
   B-293029, B-293029.2, Jan. 16, 2004, 2004 CPD para. 17 at 6. We find that
   the evaluation of proposed schedules was inconsistent with the RFP.

   The record, including testimony at the hearing our Office conducted in
   this matter, indicates that DOE evaluated the proposed schedules in two
   steps. First, DOE considered whether the proposed schedule: (1) reflected
   a logical sequencing of work that recognized the relationships between the
   various activities and WBS elements; (2) accelerated removal of fuel and
   sodium, thereby eliminating the high-risk elements of the work scope,
   along with the associated surveillance and maintenance costs; and (3)
   accelerated closure relative to the Fluor Hanford 2018 baseline (rather
   than to the 2012 closure date established by the RFP), so as to achieve
   closure by 2012. SSD at 7; Tr. at 295, 302-03, 313-14, 507, 513, 1033.
   According to the testimony of the SEB chairman, all three offerors'
   schedules were rated outstanding in this regard, having offered both a
   logical sequencing of work and accelerated removal of fuel and sodium and
   accelerated closure relative to the 2018 baseline. Tr. at 303-04, 507,
   528-29.

   In particular, while the SSO stated in the SSD that "SCA does accelerate
   the removal of fuel and sodium faster than the other two offerors," the
   SSO testified that his statement was based on information furnished by the
   SEB, and that "[b]ased on what we know now in terms of looking at the
   detailed schedules, clearly, the information I was given was incomplete
   and oversimplified." Tr. at 1030. In this regard, the record indicates
   that EPW would essentially complete the sodium drain 1 week prior to SCA
   (September 5 versus September 12, 2006). Although SCA would essentially
   remove the fuel (so as to significantly reduce risk) earlier than EPW
   (November 9 versus December 30, 2005), and would complete both the sodium
   drain and fuel removal earlier than FRC (which would complete them in
   February 2007 and on April 4, 2006, respectively), the SEB chairman
   testified that all three offerors utilized the maximum available funding
   in the first 3 years of the contract; all offered the same approach to
   deactivation; all accelerated by removing the fuel and sodium; and that
   all were "in the same ballpark" in this regard. Tr. at 182-92, 303-05,
   343-44; SCA Revised Proposal at 133-34, 13 of 47, 18 of 47; EPW Revised
   Proposal at A-III-108, A-III-117 to A-III-118, Att-1-7; FRC Revised
   Proposal at 28. According to the SSEB chairman, there was "no meaningful
   difference" between the offerors in completing deactivation. Tr.
   at 304-05.

   In the second step of the evaluation of the proposed schedules, DOE looked
   to whether there were any discriminators in this area. In this regard, as
   discussed in detail above, SCA's schedule--which, unlike FRC's and EPW's,
   did not utilize the maximum available funding after the deactivation
   phase--was viewed as representing a moderate discriminator because it
   provided more flexibility for additional acceleration or the necessity to
   accommodate changes in the project should problems arise. The fact that
   SCA's schedule provided for completion of the FFTF Closure Project
   significantly later than FRC and EPW (September 2011 versus December 2009
   and June 2010, respectively) was not viewed as significant. According to
   the SEB chairman, once the high-hazard fuel and sodium have been removed,
   there is "no longer the time criticalness." Tr. at 345. Likewise,
   according to the SSO, "whether it's 2010 or 2011 or September 3, 2012, did
   not have a lot of importance"; what was important was optimizing the work
   plan relative to schedule. Tr. at 1034, 1097, 1128. The record indicates
   that the agency focused in the evaluation on the fact that it was
   receiving "the benefit of the relaxed schedule . . . as well as the lowest
   evaluated price." Tr. at 174; cf. SSD at 7.

   It appears that the agency accorded little or no weight to the degree to
   which offerors proposed to accelerate completion ahead of the 2012
   required site closure date, instead evaluating the acceleration aspect of
   the proposed schedules solely in comparison to Fluor Hanford's ultimate
   2018 closure date. The agency's disregarding the differences in the
   offerors' proposed completion dates was inconsistent with the
   solicitation. While it may be the case that SCA's more relaxed proposed
   schedule after the deactivation phase offered more flexibility to deal
   with transitions in the project work, potential problems or unexpected
   decreases in agency funding, the fact is that the solicitation made it
   clear that acceleration of the project was desired. In this regard, the
   solicitation schedule stated that "DOE is committed to achiev[ing]
   accelerated closure that does not jeopardize safety and protection of
   workers, the public, or the environment." RFP sect. B.1. Likewise, the SOW
   advised that "[t]he purpose of the FFTF Closure Project is to safely
   accelerate the deactivation and decommissioning [of] the FFTF and its
   support structures." SOW sect. C.1. Lest offerors be unclear as to the
   role of the contemplated contract in meeting that goal, the SOW added that
   "[t]he contractor has the flexibility to develop the project structure and
   to sequence the work, subject to [National Environmental Policy Act]
   requirements, to optimize the project schedule to achieve safe,
   cost-effective and accelerated closure of the site." RFP sect. C.3.
   Likewise, section H of the solicitation stated that "[t]he FFTF Project
   and this contract have a mission of accelerated closure." RFP
   sect. H.1(a). In this context, we think the reference in section M (quoted
   above) to evaluating "the extent to which" an "offeror's approach to
   deactivation, decommissioning, and demolition . . . optimizes project
   execution and schedule" could reasonably be understood by the offerors as
   including consideration of how soon closure of the site would be
   accomplished.[2] Indeed, all three offerors apparently read the RFP in
   this manner, as reflected by the fact that all proposed accelerated
   completion, ahead of the 2012 mandatory completion date. While the agency
   may have intended to limit the extent to which greater acceleration would
   be rewarded in the evaluation, this intent was not reflected in the RFP.

   Further, we agree with the protesters that, because the evaluation
   criterion in question concerned evaluation of an offeror's technical
   proposal, and evaluation of the offeror's cost proposal was already
   accounted for under another criterion, it was improper for the agency to
   consider SCA's low cost in its evaluation under the technical approach
   criterion. This is especially significant in light of the fact that the
   technical/management proposal was to be significantly more important in
   the source selection than the cost/fee proposal. RFP sect. M.2.

   We conclude that the agency's evaluation of schedule--which furnished a
   moderate discriminator in SCA's favor and was specifically cited by the
   SSO in the SSD in concluding that SCA's proposal had an advantage over
   FRC's under the technical approach criterion, the most important
   technical/management evaluation criterion--failed to take into account the
   fact that FRC's schedule offered what could be viewed as significantly
   greater acceleration of FFTF site closure than SCA's. Further, while DOE
   may be correct that FRC would be less likely to meet its aggressive
   schedule, the agency does not show, nor does the record furnish any basis
   for concluding, that FRC would not be likely to complete closure earlier
   than SCA. (In contrast, as discussed below, while EPW's proposed scheduled
   also offered greater acceleration than SCA's, the agency evaluated EPW's
   schedule as being premised on an essentially unacceptable technical
   approach.) Accordingly, we conclude that the agency did not reasonably
   evaluate the proposals in this area.

   Contingency

   FRC asserts that DOE improperly evaluated SCA's proposed contingency
   allowance. In this regard, as indicated above, proposals were to include
   contingency costs in the target cost, as well as a discussion of how the
   components of the proposed contingency allowance were developed and
   applied to the estimate. In its business management presentation, SCA
   presented an approach to risk management that identified 105 separate
   risks; rated each risk for probability and cost and/or schedule impact;
   denoted the owner for each risk, some of which were owned exclusively by
   DOE; and proposed a mitigation approach for each risk. In addition, using
   proprietary software and running a "Monte Carlo" simulation to evaluate
   the risks statistically, SCA calculated for each risk the expected cost
   overrun or schedule delay, if any, after application of the mitigation
   approach. Based on these calculations, SCA arrived at a total contingency
   allowance of $14,274,050 to be added to its target cost to achieve an 80
   percent confidence level (that is, an 80 percent likelihood that the
   project cost would not exceed its proposed cost). DOE accepted SCA's (and
   the other offerors') proposed contingency allowance for purposes of
   calculating evaluated cost. DOE Contingency Analysis at A5-1.

   FRC asserts that DOE's evaluation in this regard, specifically, the
   agency's acceptance of SCA's proposed contingency allowance without
   adjustment, was unreasonable.

   Agencies generally are required by the Competition in Contracting Act of
   1984 (CICA) to include cost or price as a significant factor in the
   evaluation of proposals. 41 U.S.C. sect. 253a(c)(1)(B) (1994); Federal
   Acquisition Regulation (FAR) sect. 15.304(c)(1); Kathpal Techs., Inc.;
   Computer & Hi-Tech Mgmt., Inc., B-283137.3 et al., Dec. 30, 1999, 2000 CPD
   para. 6 at 9. While agencies have considerable discretion in determining
   the particular method used in evaluating cost or price, that method
   should, to the extent possible, accurately measure the cost to be incurred
   under competing proposals. Eurest Support Servs., B-285813.3 et al., July
   3, 2001, 2003 CPD para. 139 at 7; Lockheed, IMS, B-248686, Sept. 15, 1992,
   92-2 CPD para. 180 at 6. Where a source selection decision is based on
   figures that do not reasonably represent the difference in costs to be
   incurred under competing proposals, the source selection is not reasonably
   based. See Preferred Sys. Solutions, Inc., B-292322 et al., Aug. 25, 2003,
   2003 CPD para. 166 at 9; Gemmo Impianti SpA, B-290427, Aug. 9, 2002, 2002
   CPD para. 146 at 5-6.

   DOE's evaluation did not reasonably assess the contingency costs likely to
   be incurred under the competing proposals. As noted by FRC, while SCA's
   proposed contingency allowance amounted to only $14,275,050, or an
   evaluated approximately [DELETED] percent of proposed direct and indirect
   costs, FRC's proposed contingency allowance, accepted by DOE, amounted to
   $26,115,000, or approximately [DELETED] percent (since this allowance was
   based on only 56 percent confidence, the comparable number for FRC at
   80 percent confidence, absent any realism adjustment, actually would be
   approximately $30.1 million. DOE Contingency Analysis at A5-1); EPW's
   amounted to $25,836,000, or approximately [DELETED] percent; and the
   agency's independent cost estimate included an 18.3 percent contingency
   allowance. DOE Comments, Nov. 23, 2004, at 9; Tr. at 244.[3] This
   difference between SCA's proposed (and evaluated) contingency rate and
   that of the other offerors is significant, since it accounts for the
   majority of the difference in the proposals' evaluated costs.

   The wide gap between SCA's and the other offerors' proposed contingency
   allowances (and the allowance used in the agency's independent cost
   estimate) is problematic because, by the agency's own admission, it was
   unable to verify the costs. In this regard, the agency's contingency
   analysis noted as follows:

     The determination of the appropriate level of contingency for a project
     is dependent upon the appropriate characterization of the variability
     (i.e., uncertainty) in the basic elements of the project. This can be
     very subjective. Each of the three offerors utilized sound project
     simulation methodologies to analyze the variability in the Project.
     However, the techniques used to arrive at the elemental contribution to
     the Project's uncertainty and the amount of information that was
     provided varied, making it difficult to assess whether any of the three
     offerors assessed the variability more accurately than the others.

   DOE Contingency Analysis at A5-1. With specific respect to SCA, which,
   unlike FRC, did not present its analysis in terms of the solicitation's
   WBS, the agency's contingency analysis noted as follows:

     It appears, by the sheer number of identified risks, that the analysis
     was comprehensive; however, a crosswalk to the WBS was not provided to
     demonstrate thoroughness (it is not clear how the risk assessment data
     was correlated to the simulation uncertainty input).

   Id. at A5-4. Likewise, after finding that SCA (like FRC) overestimated the
   risks to the project, the agency's contingency analysis concluded as
   follows:

     The accuracy in characterizing the variability in the project will
     influence the accuracy of the project simulation output (it is unclear
     how the risk assessment results translated into characterizing the
     uncertainty/variability in the simulation input). Even though the
     evaluators are not able to validate the level of contingency with the
     information provided, SCA's detailed approach of determining risk
     exposure and subsequent application of project simulation to determine
     the resulting level of confidence is sound.

   Id. at A5-6.[4] Thus, while the DOE contingency analysis recommended that
   no adjustment be made to SCA's contingency allowance, id. at A5-1, the
   document made clear the limitations inherent in the agency's analysis.

   Likewise, testimony by the SEB chairman emphasized the limitations
   inherent in the agency's evaluation of contingency costs. For example:

     Question: . . . did you look at the dollar impacts, the schedule impacts
     to evaluate whether what they saw as a dollar impact or schedule impact
     was, in fact, a reasonable estimate?

     WITNESS: No, we didn't. I mean, I -- we had some discussion about, for
     example, scheduler impact, and, you know, if you're looking at a hundred
     different categories, I mean, it requires a lot of analysis to be able
     to go through and say, okay, if this event happens here, this is the
     impact on the schedule.

     So we accepted the information that was provided by the offerors in the
     way that they conducted their evaluation. We did not do a detailed
     evaluation risk by risk or WBS by WBS to say, okay, we've now convinced
     ourselves that this is a reasonable approach.

     We did evaluate them in terms of the significance of the risk . . . .

     . . . .

     Yeah, in other words, what they did--well, what--I'll give you FRC's
     example, what FRC and EPW did was they took, by WBS element, they made a
     determination from one to five as to what the level of risk was. And
     then they applied this parametric model to that risk based upon whether
     it was one through five.

     We looked at the one through five and said, we believe that this is the
     right kind of risk level or not. But we then didn't go through and say,
     okay, well, if that happens here, here's the impact of the scheduler, if
     that happens here, here's what potentially could go wrong. We didn't do
     that kind of a detailed analysis.

   Tr. at 236-38. Similarly, the SEB chairman agreed that the agency was
   unable to determine whether SCA had included all of the risks in its
   contingency analysis that FRC did. Tr. at 241-42.

   One example of how the agency's limited review may have led to acceptance
   of a questionable contingency cost was SCA's allowance for the possibility
   that if sodium pools were encountered during the removal of residual
   sodium, a strong sodium/hydrated sodium hydroxide reaction would occur.
   SCA listed the "owner" of this risk as SCA and Framatone ANP, a proposed
   subcontractor that would be involved in removing residual sodium. Although
   SCA rated the probability of this occurring as very low, that is, 0 to 20
   percent, it recognized that the cost overrun that would result in the
   event that it occurred would total between $7,140,000 and $16,660,000, and
   the probable schedule impact would be between 7.3 and 18.2 weeks of delay.
   Nevertheless, presumably as the anticipated result of its proposed
   mitigation approach, SCA allocated no contingency allowance either in
   terms of dollars or weeks of delay. SCA Revised Proposal, fig. C-21, C-23,
   C-24. That this result may not fully reflect the likely risks is supported
   by the testimony of the FFTF project director (who was not involved in
   evaluating SCA's contingency allowance in this regard, but was the
   agency's leading technical expert on sodium removal at the hearing), who
   answered in the affirmative when asked whether he would be surprised to
   learn that the risk analysis in this regard resulted in zero risk (and
   thus had no effect on the contingency allowance0. Tr. 919-20.

   While it appears that the agency concluded that SCA's method for
   calculating contingency was sound, it is clear from the limitations
   acknowledged by the agency that it was unable to conclude that SCA's
   significantly lower contingency allowance, and the resulting difference in
   evaluated cost, reasonably represented the difference between the costs
   that actually would be incurred under SCA's and FRC's proposals. The
   evaluation in this area therefore was unreasonable.

   Prejudice

   Our Office will not sustain a protest absent a showing of a reasonable
   possibility of prejudice, that is, unless the protester demonstrates that,
   but for the agency's actions, it would have had a substantial chance of
   receiving the award. McDonald Bradley, B-270126, Feb. 8, 1996, 96-1 CPD
   para. 54 at 3; see Statistica, Inc. v. Christopher, 103 F.3d 1577, 1581
   (Fed. Cir. 1996). Given the closeness of the evaluation of SCA's and FRC's
   technical/management proposals and the significance of the difference in
   contingency allowances relative to the evaluated cost difference between
   the proposals, we cannot conclude that, but for the deficiencies in the
   evaluation, FRC would not have had a substantial chance of receiving the
   award. We therefore find that FRC suffered competitive prejudice and
   sustain FRC's protest on the two grounds discussed above.

   EPW PROTEST

   Sodium Residuals

   EPW challenges DOE's determination that its proposed approach to the
   sodium residuals in FFTF's primary systems was very unlikely to be
   accepted by environmental regulators, and therefore represented a
   significant weakness under the technical approach criterion.

   As noted in the solicitation, FFTF is subject to the decommissioning
   process delineated in the Hanford Federal Facility Agreement and Consent
   Order (Tri-Party Agreement, or TPA), which is an agreement between DOE,
   the Washington State Department of Ecology (Ecology), and the
   Environmental Protection Agency. In this regards, the solicitation
   provided that "[t]he contractor is responsible for performing its
   activities in compliance with all TPA requirements and for meeting the TPA
   milestone commitments." RFP sect. J, app. 5 at J-25. Ecology has been
   designated the lead agency under the TPA with respect to the transition of
   FFTF to a safe and stable surveillance and maintenance configuration. TPA
   at D-36.

   Offerors were to propose on the basis that the reactor end state would be
   entombment, RFP sect. L.7(a), which the SOW defined, in part, as "the
   containment building below the 550' [--i.e., ground--] level filled with
   grout or other material(s) that immobilizes the remaining radiological and
   chemical hazards to the maximum extent practical." SOW sect. C.3(d). The
   record indicates that the residual sodium at FFTF is a reactive and
   ignitable hazardous material, such that an explosion may occur in the
   event that it comes into contact with water. Tr. at 28, 30, 770, DOE
   Comments, EPW Protest, Nov. 19, 2004, at 10. The SOW further provided with
   respect to deactivation of FFTF that the contractor shall: "Drain sodium
   and [sodium potassium] inventories from the primary systems and reactor
   vessel to the maximum extent practical. For sodium residual disposition
   see Section C.3(c)(2)." Section C.3(c)(2) of the SOW, in turn, provided
   that the contractor shall: "Remove and disposition sodium and [sodium
   potassium] residuals from the FFTF plant, [fuel storage facility], [sodium
   storage facility] vessels, Hallam tanks and [sodium reactor experiment]
   containers." In addition, the solicitation instructions with respect to
   proposal preparation required offerors to describe their "method for
   confirming removal of the sodium residuals (i.e., proof that the sodium
   systems are sufficiently cleaned)." RFP sect. L.7(a)(5)(ii)(a).

   DOE's expectations with respect to removal of sodium residuals were
   further communicated to offerors in the publicly-available redacted
   version of its independent cost estimate, which stated as follows:

     Sodium/[sodium potassium] Cleanup and Disposition: The scope entails
     draining sodium where possible, cleanup of pockets of sodium, removal of
     cold traps, cesium traps and vapor traps, and the cutup of small
     diameter piping with sodium and cleanup in the Maintenance and Storage
     Facility (MASF). . . . Cleanup of sodium from FFTF systems is a well
     documented process but a key assumption is that no verification will be
     required of the residual sodium contamination after cleanup with moist
     nitrogen and that cleaned components will meet acceptance criteria for
     on-site low-level waste disposal.

   Independent Cost Estimate, sect. 1.2. The redacted version of the
   independent cost estimate further described the basis of the "sodium
   residue removal" estimate as reflecting the fact that: "Sodium residue
   removal is performed currently from components in two stages; reacting
   with wet nitrogen gas stream finally followed by water rinse." Id., sect.
   3.3.2.

   SCA proposed to remove sodium residuals in the reactor vessel, primary
   piping, secondary piping, and fuel storage facility vessel at FFTF using
   [DELETED] one of the two internationally recognized approaches to removing
   sodium residuals. Under this approach, [DELETED]. SCA proposed a final
   water flush to react and remove any remaining residual pockets of sodium.
   FRC proposed to remove sodium residuals using [DELETED] internationally
   recognized approach (this was the approach on which [DELETED]). Under this
   approach, [DELETED]. FRC proposed a final water flush to react and remove
   any remaining residual pockets of sodium. DOE expected that if these
   approaches were carried to completion, they would essentially remove from
   the areas in question the elemental sodium capable of reaction. Tr. at
   114-16, 823-48; DOE Sodium Residual Disposition Table.

   In contrast, while EPW, like the other offerors, proposed to drain the
   primary system, it did not propose [DELETED]. Instead, EPW proposed
   [DELETED], leaving, by EPW's calculation, 350 gallons or less of sodium
   residuals on the inside of the vessels and piping. According to EPW's
   proposal, its [DELETED] approach would accelerate the project schedule by
   12 months and eliminate 80,000 staff hours of potential exposure to
   hazards. EPW Initial Technical Proposal at II-8/9 to II-11, and II-43; EPW
   Final Proposal Revision at A-23, A-48, Att1-4 to Att1-5; DOE Sodium
   Residual Disposition Table.

   Although DOE recognized in its evaluation of initial proposals that EPW
   was offering `innovative approaches . . . to significantly reduce the
   residual sodium removal workload," it also noted that "whether regulatory
   acceptance can be obtained will remain undetermined until formal
   negotiations are held with the regulators." SEB Interim Report at 3.1,
   A2-6 to A2-7. In this regard, under EPW's approach, [DELETED]. Tr. at
   100-15. DOE explored the regulatory implications of EPW's approach during
   an initial meeting with Ecology after the receipt of initial proposals.
   Ecology expressed the view at that meeting that the EPW approach to sodium
   residuals potentially could be acceptable, but that additional regulatory
   analysis would be required. Tr. at 73-74, 79-82, 779-81, 922.

   DOE advised EPW during subsequent discussions that "[m]ore information is
   needed to determine whether [DELETED] meets regulatory requirements." EPW
   Discussion Questions, May 28, 2004, Other Aspects of the Proposal That
   Could Enhance the Proposal's Potential for Award, Technical Approach, No.
   4. DOE specifically asked EPW to address four questions in this regard,
   including: "[DELETED]?" Id.

   After receiving EPW's revised proposal, DOE met again with Ecology and
   furnished it a copy of EPW's response to the discussion questions
   concerning sodium residuals. Ecology thereafter advised DOE that a waiver
   would be required under the Comprehensive Environmental Response,
   Compensation, and Liability Act in order to leave [DELETED] sodium
   residuals in place, and that such a waiver would only be issued if there
   were a compelling reason to do so. Since the technology to remove the
   sodium residuals existed, and there were no substantial cost savings
   associated with EPW's approach that might justify leaving the sodium
   residuals in place, Ecology indicated that it did not believe there was a
   basis for such a waiver. Tr. at 121-25, 781-82, 922. Based on Ecology's
   position, the SSO concluded that EPW's proposal to leave sodium residuals
   in place, while potentially a significant innovation, "was very risky
   because of the necessity of a regulatory waiver and the high potential
   that a waiver would not be granted." SSD at 7. Noting also that EPW had
   not detailed an alternative approach in the event that regulatory approval
   could not be obtained, the SSO determined that EPW's proposed approach
   represented a significant weakness compared to SCA's and FRC's proposals
   to remove the sodium residuals.[5]

   EPW asserts that it was unreasonable for DOE to rely on Ecology's views in
   determining that EPW's approach to the sodium residuals was a significant
   weakness. According to EPW, its approach is consistent with applicable
   environmental statutes and regulations, so that no waiver is required, and
   Ecology's position was influenced by concerns as to public reaction to
   leaving residual sodium at FFTF.

   The evaluation was reasonable. As noted, FFTF is subject to the
   decommissioning process delineated in the Hanford TPA, and the contractor
   must perform in compliance with all TPA requirements. Since, under the
   TPA, Ecology is designated the lead regulatory agency for the deactivation
   and decommissioning of FFTF, any regulatory issues associated with
   deactivation and decommissioning would first need to be decided by
   Ecology. Tr. at 999-1000; see TPA at D-36. While a multi-level disputes
   process under the TPA would govern in the event that Ecology and DOE did
   not agree on the regulatory issues with respect to the deactivation and
   decommissioning, the record indicates that this disputes process could
   take months or years to run its course. Tr. at 126-28, 1157. In these
   circumstances, given Ecology's lead role with respect to the deactivation
   and decommissioning of FFTF, we think it was reasonable for DOE to take
   Ecology's position into account in evaluating EPW's approach. In this
   regard, DOE points out that EPW itself conceded in its proposal that the
   consequences of Ecology's not approving its approach to sodium residuals
   would be "large," including extending the closure schedule by 1 year. EPW
   Revised Proposal at Att-1-15/1-16. Moreover, in light of the obstacles to
   regulatory approval of EPW's [DELETED] approach, DOE reasonably could
   consider EPW's failure to detail in its risk analysis an alternative
   approach to removing the sodium residuals. We conclude that DOE reasonably
   determined that EPW's approach to sodium residuals represented a
   significant weakness.

   EPW asserts that DOE did not meaningfully advise it during discussions of
   the agency's concern with the firm's approach in this area. This argument
   is without merit. When an agency engages in discussions with an offeror,
   the discussions must be meaningful, that is, they must lead the offeror
   into the areas of its proposal that require correction or amplification.
   Hanford Envtl. Health Found., B-292858.2, B-292858.5, Apr. 7, 2004, 2004
   CPD para. 164 at 8. As noted, DOE advised EPW during discussions that more
   information was needed to determine whether its proposed [DELETED] of
   sodium residuals met regulatory requirements, and specifically inquired
   whether [DELETED]. EPW Discussion Questions, May 28, 2004, Other Aspects
   of the Proposal That Could Enhance the Proposal's Potential for Award,
   Technical Approach, No. 4. While DOE did not expressly characterize this
   aspect of EPW's proposal as a weakness or a deficiency, these discussions
   clearly indicated the nature of the agency's concern. Discussions in this
   regard therefore were meaningful.[6]

   We have also reviewed EPW's remaining challenges to the evaluation. None
   of these challenges furnishes a basis for concluding that, but for the
   agency's improper or unreasonable actions, the protester would have had a
   reasonable chance of receiving the award. See McDonald-Bradley, supra. In
   particular, while EPW, like FRC, challenges the evaluation of schedule and
   risk management/contingency, there is no basis for concluding that EPW
   would have had a reasonable chance for award but for the unreasonable
   evaluation in these areas. Again, EPW's proposal was evaluated as less
   advantageous under the technical/management criteria, which were
   significantly more important than cost/fee. While we have found that DOE
   acted unreasonably in not considering the offerors' proposed schedule
   acceleration, EPW concedes, as noted above, that Ecology's rejection of
   its approach to sodium residuals would extend the closure schedule by 1
   year, thus largely eliminating EPW's schedule advantage relative to SCA.
   Further, DOE has calculated that the cost impact of an additional year in
   schedule and 80,000 staff hours (the amount EPW claimed would be saved by
   its approach) would be between $5 and $46 million. Tr. at 157-58. In these
   circumstances, we find no basis for concluding that EPW was prejudiced by
   the deficiencies in the evaluation. Accordingly, EPW's protest is denied.

   RECOMMENDATION

   We recommend that the agency amend the solicitation to reflect its actual
   needs with respect to acceleration, reopen discussions with offerors whose
   proposals are determined to be in the competitive range, obtain revised
   proposals, and evaluate the revised proposals in a manner consistent with
   the solicitation requirements.[7] We recognize that evaluating the costs
   associated with contingencies here may be difficult. To the extent that
   the agency concludes that a more accurate assessment of contingency costs
   may not be possible, it may decide to amend the solicitation to eliminate
   consideration of contingency as a separate element of evaluated cost. In
   the event that DOE continues to evaluate contingencies, the agency should
   ensure that the evaluated contingency allowances reasonably reflect the
   likely costs. DOE should then make a new source selection decision. If DOE
   determines that an offeror other than SCA has submitted the best value
   proposal, the agency should terminate SCA's contract and make award to
   that other offeror. We also recommend that the agency reimburse FRC its
   costs of pursuing this protest, including reasonable attorneys' fees. 4
   C.F.R sect. 21.8(d) (2004). The protester should submit its certified
   claim for costs, detailing the time expended and the costs incurred,
   directly to the contracting agency within 60 days of receipt of this
   decision. 4 C.F.R. sect. 21.6(f)(1).

   FRC's protest is sustained and EPW's protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] Although the RFP provided for the possibility of a different approach
   ultimately being selected, proposals were to be evaluated on the basis
   that the reactor end state would be entombment. RFP sect. L.7((a).

   [2] Further, as acknowledged by the SSO in his testimony, the stated focus
   of the RFP was to achieve acceleration of closure of the FFTF site, and
   not merely acceleration of the initial deactivation phase. Tr. at 1095-96.

   [3] The independent cost estimate was prepared for DOE by a contractor.

   [4] Similarly, DOE concluded that, while FRC's proposal demonstrated
   "uncertainty characterization" at the WBS level, resulting in an
   assessment that was comprehensive in that it covered the entire project,
   "it is difficult to say that the characterization of project variability
   is accurate at this level of detail," and "[i]t is not possible to
   validate the offeror's contingency level based on the amount of
   information provided." DOE Contingency Analysis at A5-3 to A5-4.

   [5] EPW merely noted in its initial proposal that in the event that
   regulatory approval could not be obtained for its proposed approach, it
   would "remove more residuals in the primary systems." EPW Initial Proposal
   at II-21/II-22. EPW did not detail an approach to removing "more" residual
   sodium.

   [6] The protester maintains that discussions in this area were misleading,
   since DOE allegedly advised the firm that its approach was innovative and
   could be a discriminator. The SEB chairman, who was present at the
   discussions, denies that DOE made such a statement. However, even if we
   accept the protester's account, the agency's alleged statement did not
   affect the adequacy of discussions, since it nevertheless remains that EPW
   was also on notice of the agency's concerns regarding its approach to
   sodium residuals. Tr. at 91-95, 924-26.

   [7] Although we have denied EPW's protest on the basis that it was not
   prejudiced by the deficiencies in the evaluation, nevertheless, because of
   the relative closeness of the evaluation scores and evaluated costs, the
   agency may decide to retain EPW in the competition.