TITLE: B-296946.6, University of Dayton Research Institute, June 15, 2006
BNUMBER: B-296946.6
DATE: June 15, 2006
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B-296946.6, University of Dayton Research Institute, June 15, 2006

   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: University of Dayton Research Institute

   File: B-296946.6

   Date: June 15, 2006

   Daniel A. Bellman, Esq., and William R. Wernet, Esq., for the protester.

   Lt. Col. Sharon K. Sughru, and Brett J. Swanson, Esq., Department of the
   Air Force, for the agency.

   Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency's communications with awardees following submission of initial
   proposals, during which awardees made multiple changes to the evaluated
   rates on which the agency's source selection decision was based,
   constituted discussions and required that the agency establish a
   competitive range and conduct discussions with all competitive range
   offerors.

   DECISION

   University of Dayton Research Institute (UDRI) protests various actions of
   the Department of the Air Force taken in connection with request for
   proposals (RFP) No. FA8222-04-R-1000 to provide design, engineering and
   technical support services. Among other things, UDRI protests that the
   agency failed to conduct meaningful discussions.

   We sustain the protest.

   BACKGROUND

   The Air Force issued RFP No. FA8222-04-R-1000 in October 2004, seeking
   proposals to "provide design and engineering/technical support services
   for the Department of Defense weapon systems, components, and support
   equipment."[1] Agency Report I,[2] Tab 8, Performance Work Specification
   (PWS), at 7. The solicitation contemplated multiple awards of
   indefinite-delivery, indefinite-quantity contracts,[3] with 5-year
   ordering periods and 7-year performance periods and an aggregate ceiling
   value of $1.9 billion. The solicitation also provided that the source
   selection decision would be made on a "best value" basis, and established
   the following evaluation factors: mission capability,[4] past performance,
   proposal risk, and cost/price.[5] RFP at 92-94. The solicitation stated
   that, although cost/price was less important than the other evaluation
   factors, "[consideration of] cost/price will contribute substantially to
   the selection decision."[6] Id. at 94.

   With regard to mission capability, the solicitation identified 43
   particular capabilities for which offerors were required to discuss
   acceptable technical approaches.[7] More specifically, the RFP stated that
   each offeror's proposal was required to demonstrate the offeror's
   capability in "at least one sub-element for each systems/applications
   grouping (A through I) for each functional category (1 through 5)." RFP at
   81.

   With regard to evaluation of cost/price, the solicitation stated, "A TEP
   [total evaluated price] will be developed and used as a tool to evaluate
   rates and burden factors, as a consideration to select the awardees in the
   best value decision-making process for the basic contract." RFP at 97. In
   establishing a total evaluated price, offerors were directed to complete
   various rate tables, identifying both prime and subcontractor labor rates
   for various labor categories, by contract type (that is,
   cost-reimbursement, time-and-materials, or fixed-price), and by location
   of performance (that is, contractor site or government site). Regarding
   evaluation of cost/price, the solicitation provided that the "evaluated"
   rate tables would form the basis for the agency's cost/price evaluation
   and source selection decision, stating:

     The total composite price for all years for each prime contractor table
     will be summed and entered into the appropriate cell on the Total
     Evaluated Price worksheet. . . . The total composite price for all years
     for each subcontracting table will be summed and entered into the
     appropriate cell on the Total Evaluated Price worksheet. . . .

     Eventually, everything will feed into the worksheet tab named "Total
     Evaluated Price." This value will be used for evaluation/selection
     purposes only and is not to be construed as a minimum or maximum
     awardable amount. Minor formula adjustments and clerical errors may be
     added/corrected in the TEP by the government for situations that may
     occur during the evaluation process that are necessary to reflect an
     accurate TEP. These will not require a proposal revision.

   RFP at 88-89.

   Under the heading "Instructions for Proposal Preparation," the RFP advised
   offerors, among other things, that "compliance with these instructions is
   mandatory," and similarly provided that, "[i]n order for a proposal to
   result in an awardable contract, it must . . . conform to all required
   terms and conditions." RFP at 75, 92-93.

   On or before the November 8, 2005 closing date, proposals were submitted
   by 28 offerors, including UDRI. The proposals were subsequently evaluated
   against the various evaluation factors.[8]

   In evaluating UDRI's proposal, the agency concluded that although UDRI's
   proposal successfully demonstrated ability to perform [deleted], Agency
   Report I, Tab 5, at 339; accordingly, UDRI's proposal was rated as
   [deleted] under the technical capability subfactor of the mission
   capability evaluation factor.[9] UDRI's proposal offered a total evaluated
   price of $[deleted] million. Agency Report I, Tab 4, at 17.

   In evaluating the offerors' cost/price proposals, the agency found that "a
   number of proposals had failed to follow the instructions provided by the
   government [in the solicitation]." Agency Response to GAO Request for
   Information, May 16, 2006, at 2.[10] Specifically, in populating the
   "evaluated" rate tables, which formed the basis for each offeror's total
   evaluated price, the agency found that several offerors had provided
   various rates for evaluation purposes that were inconsistent with the
   "official" rate tables.[11] The agency determined that the offerors'
   failure to follow the RFP instructions, resulting in inconsistency between
   their "evaluated" rate tables and their "official" rate tables, "would not
   allow the government to validate the final TEP value." Agency Response to
   GAO Request for Information, May 16, 2006, at 2.[12] Accordingly, the
   agency concluded that the evaluated rate tables "needed to be corrected"
   to enable the government to "ensure price reasonableness of the submitted
   data." Agency Comments, Sept. 13, 2005, at 2.

   Because of the conflicting data within the rate tables of several
   offerors, the agency sent "Evaluation Notices" to those offerors,
   requesting "clarifications" regarding their cost/price. For example, with
   regard to one offeror (subsequently selected as an awardee) the agency's
   "Evaluation Notice" stated:

     Section L [of the RFP] provides the following instruction for completion
     of Evaluated Sub Rates Tables, "The offeror shall enter in each cell,
     the average of all DESP II subcontractor rates for the applicable
     contract type, labor category, calendar year, and location
     (Government-site or contractor-site). This value is referred to as the
     Average Subcontractor Rate." It has been determined that contrary to
     these instructions contained in Section L and Attachment 6 of the RFP,
     the Offeror did not use the simple average technique as required (but
     calculated and applied a weighted average which could allow a contractor
     to skew the Total Evaluated Price relative to the other offerors).
     Request you refer to Attachment 6 instructions and make the needed
     changes to the proposal to arrive at the correct Total Evaluated Price
     and submit two corrected hardcopies and two corrected electronic copies
     of Attachment 6.

   Agency Report II, Tab 16, [deleted] Evaluation Notice, at 1.

   Similarly, with regard to another offeror (also subsequently selected as
   an awardee) the agency sent an "Evaluation Notice" stating:

     The rates entered in the Evaluated Prime Rates Tables are inflated from
     the rates proposed in the Offical Prime Rates Tables. Request you
     correct the Evaluated Prime Rates Tables to exclude profit/fee and other
     non-labor related factors in the evaluated rates so that the Evaluated
     Rates Tables reconciles with the Official Prime Rates Tables.

   Agency Report II, Tab 14, [deleted] Evaluation Notice, at 1-2.

   With regard to yet a third offeror (also subsequently selected as an
   awardee) the agency sent an "Evaluation Notice" stating:

     There is a difference between the printed and electronic versions of the
     proposal for the subcontractor rates. [The offeror's] electronic version
     of Attachment 6 . . . does not represent a copy of the printed version
     of this attachment . . . . The discrepancy between the printed copy and
     electronic copy of Attachment 6 . . . is most obvious in the Total
     Evaluated Price tab of the printed proposal and the accompanying Excel
     spreadsheet. However, discrepancies between the printed and electronic
     copies have also been found in the Evaluated Subcontracting Rates
     Tables. Request you submit two copies of the electronic version . . .
     that is a copy of the printed version.

   Agency Report I, Additional Documents, [deleted] Evaluation Notice, at 1.

   In June 2005, the agency's source selection authority selected 10
   proposals for award, characterizing the selections as having been made
   "without discussions."[13] Agency Report I, Tab 4, Source Selection
   Decision, at 29. UDRI's proposal was not selected for award. Thereafter,
   UDRI filed an initial protest with our Office.[14]

   DISCUSSION

   UDRI protests, among other things, that the agency conducted discussions
   with various offerors regarding their failure to comply with the RFP
   instructions concerning their total evaluated price--yet declined to
   similarly conduct discussions with UDRI regarding the limited areas of its
   proposal in which the agency concluded UDRI's proposal did not adequately
   demonstrate certain technical capabilities. That is, UDRI maintains that
   the agency improperly declined to conduct meaningful discussions with
   UDRI, notwithstanding its discussions with other offerors. We agree.

   Communications between a procuring agency and an offeror that permit the
   offeror to materially modify its proposal generally constitute
   discussions. FAR sect. 15.306(d); Lockheed Martin Simulation, Training &
   Support, B-292836.8 et al., Nov. 24, 2004, 2005 CPD para. 27;
   4^th Dimension Software, Inc.; Computer Assocs. Int'l, Inc., B-251936,
   B-251936.2, May 13, 1993, 93-1 CPD para. 420. Where an agency obtains
   information from an offeror that makes a previously unacceptable proposal
   acceptable for award, such information generally constitutes a material
   change to the proposal. Aquasis Servs., Inc., B-240841.3, July 26, 1991,
   91-2 CPD para. 94; J. A. Jones/IBC Joint Venture; Black Constr. Co.,
   B-285627, B-285627.2, Sept. 18, 2000, 2000 CPD para. 161. Further,
   communications that permit an offeror to correct a mistake constitute
   discussions unless the mistake is minor and both the existence of the
   mistake and what was actually intended are clearly apparent from the face
   of the proposal. Matrix Int'l Logistics, Inc., B-272388, B-272388.2, Dec.
   9, 1996, 97-2 CPD para. 89; Stacor Corp., B-231095, July 5, 1988, 88-2 CPD
   para. 9. When an agency conducts discussions with one offeror, it must
   conduct discussions with all competitive range offerors, and provide all
   those offerors an opportunity to submit revised proposals. KPMG Peat
   Marwick, LLP, B-259479, May 9, 1995, 95-2 CPD para. 13; Paramax Sys.
   Corp., B-253098.4, B-253098.5, Oct. 27, 1993, 93-2 CPD para. 282.

   Here, as discussed above, the solicitation specifically provided that each
   offeror's total evaluated price, derived from the "evaluated" rate tables,
   would be relied upon for purposes of the evaluation and source selection
   determinations. RFP at 88-89. Consistent with this clear solicitation
   provision, in defending against UDRI's protest, the agency expressly
   acknowledged that the rates contained in the evaluated rate tables were
   necessary "to ensure price reasonableness," and that the agency "could not
   allow a source selection decision to be made" on the basis of the rates
   initially submitted in those tables. Agency Comments, Sept. 13, 2005, at
   2.

   The record clearly establishes that in responding to the agency's
   evaluation notices requesting "clarifications" of their proposals, several
   offerors made changes to dozens of rates that had been initially submitted
   in their "evaluated" rate tables. Agency Report II, Tabs 14, 15, 16;
   Agency Response to GAO Document Production Request, May 18, 2006. The
   multiple changes to the evaluated rates included both increases and
   decreases, and the overall effect of the changes was to alter the total
   evaluated price of several offerors by millions of dollars. For example,
   one awardee's total evaluated price decreased by more than $6 million,
   while another awardee's total evaluated price increased by more than $6
   million. Agency Response to GAO Document Production Request, May 18, 2006,
   attach. 1, at 9, 20; attach. 2, at 7, 17.

   As noted above, communications that permit an offeror to correct a
   proposal mistake constitute discussions unless the mistake is minor and
   both the existence of the mistake and what was actually intended are
   clearly apparent from the face of the proposal. Here, the flaws in the
   awardees' proposals were not minor; as noted, "correction" of the
   evaluated rate tables resulted in significant increases and decreases in
   the evaluated cost/price of the ultimate awardees. Further, while the
   internal inconsistency of the offerors' proposals reasonably put the
   agency on notice regarding the existence of errors (which, by the agency's
   own admission, rendered the proposals unacceptable for award), it is clear
   the agency could not determine, from the face of the proposals, what the
   various offerors' intent was with regard to each of the multiple rate
   changes effected in response to the agency's evaluation notices. Further,
   as the agency states, identification of the particular rates proposed was
   necessary for the agency to ensure price reasonableness,[15] and to make
   source selection decisions. Because these altered rates were evaluated by
   the agency and relied upon for the source selection decision, the
   communications between the agency and offerors clearly constituted
   discussions. Accordingly, the agency was obligated to conduct meaningful
   discussions with all competitive range offerors.

   The protest is sustained.

   RECOMMENDATION

   We recommend that the agency establish a competitive range on the basis of
   the initial proposals submitted, conduct meaningful discussions with all
   competitive range offerors, request revised proposals, evaluate those
   submissions consistent with the provisions of the solicitation, and make
   new source selection determinations regarding the proposals offering the
   best overall value to the government. We also recommend that the agency
   reimburse UDRI for its costs of filing and pursuing its protest, including
   reasonable attorneys' fees. Bid Protest Regulations, 4 C.F.R. sect.
   21.8(d)(1) (2006). UDRI's certified claim for costs, detailing the time
   expended and costs incurred, must be submitted directly to the agency
   within 60 days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1).

   Anthony H. Gamboa

   General Counsel

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

   [1] This procurement is the second conducted under the Air Force's Design
   and Engineering Support Program (DESP); the procurement is frequently
   referred to as "DESP II." UDRI held a contract under the first DESP
   procurement.

   [2] In July 2005, UDRI filed its initial protest challenging the agency's
   actions in this procurement. In August 2005, the agency submitted a report
   in response to that protest; in this decision we refer to the August 2005
   report as "Agency Report I." Thereafter, the agency took "corrective
   action" to address certain issues raised in UDRI's July 2005 protest. In
   February 2006 the agency "reaffirm[ed]" its initial source selection
   decision, triggering another protest filed by UDRI in March 2006. The
   agency responded to UDRI's March 2006 protest with a second agency report,
   referenced in this decision as "Agency Report II."

   [3] The solicitation stated that the agency intended to award
   "approximately fourteen contracts." RFP at 93.

   [4] Under mission capability, the solicitation identified the following
   four subfactors, listed in descending order of importance: technical
   capability, program management, organization, staff and subcontractor
   management, and participation of small/disadvantaged/minority businesses.
   RFP at 93.

   [5] The solicitation stated that, in issuing individual task orders under
   the contracts, the agency would select one of various cost/price
   arrangements; the alternative cost/price arrangements included
   cost-reimbursement task orders, time-and-materials task orders, and
   fixed-price task orders. RFP at 12. The agency's estimates indicate that
   approximately 60 percent of the total contract effort will be performed on
   a cost-reimbursement basis, approximately 20 percent will be performed on
   a time-and-materials basis, and approximately 20 percent will be performed
   on a fixed-price basis. Agency Report I, Tab 5, at 14.

   [6] The solicitation provided, under the heading "Evaluation Factors,"
   that each offeror's cost/price would be evaluated to determine if it was
   "unrealistically high or low." RFP at 94.

   [7] The PWS contained a matrix of required capabilities. The matrix listed
   five functional categories across the horizontal axis--(1) technical
   documentation/courseware development; (2) systems design engineering,
   development; (3) software/firmware; (4) maintenance repair, operational
   support; and (5) environmental, health & safety--and nine
   systems/applications along the vertical axis--(A) aircraft/air vehicle
   systems; (B) ground equipment/ground transportation;
   (C) munitions/missiles; (D) gas generating, dispensing & handling systems;
   (E) applicable to multiple applications; (F) industrial engineering &
   infrastructure; (G) ground systems; (H) environmental research; and (I)
   space systems. Agency Report, Tab 8, PWS attachs. 4, 5. The 45
   intersections between the numbered functional categories and the lettered
   systems/applications represented mandatory capabilities, with the
   exception of two intersections (identified as "D.3" and "I.4"), which the
   solicitation specifically stated were not mandatory. Agency Report I, Tab
   8, PWS attach. 5.

   [8] Regarding proposal evaluation under the mission capability factor, the
   agency employed a color/adjectival rating system under which the agency
   assigned ratings of "Blue/Exceptional," "Green/Acceptable,"
   "Yellow/Marginal," and "Red/Unacceptable." RFP at 94; Contracting
   Officer's Statement at 4. In this regard, a "Blue/Exceptional" rating
   reflected a proposal that "[e]xceeds specified minimum . . . capability
   requirements"; a "Green/Acceptable" rating reflected a proposal that
   "[m]eets specified minimum . . . capability requirements"; a
   "Yellow/Marginal" rating reflected a proposal that "[d]oes not clearly
   meet some specified minimum . . . capability . . . but any proposal
   inadequacies are correctable"; and a "Red/Unacceptable" rating reflected a
   proposal that "[f]ails to meet specified minimum performance or capability
   requirements." RFP at 94; Air Force Federal Acquisition Regulation
   Supplement sect. 5315.305, Table 5315-3.

   [9] UDRI's proposal was also rated [deleted] under all of the mission
   capability subfactors, and received a [deleted] rating under the past
   performance evaluation factor. Agency Report I, Tab 4, at 17.

   [10] The agency elaborates that "approximately 39% (eleven out of
   twenty-eight [offerors]) did indeed have trouble following the
   instructions." Agency Response to GAO Request for Information, May 16,
   2006, at 5.

   [11] The solicitation stated:

     [T]here will be two sets of Pricing Tables. One is the set of "official"
     tables and the other is the set of "evaluated" tables. The offeror must
     propose their own labor rates, burden factors (which shall not include
     profit), and NTE profit/fee factors in Official Prime Rates Tables P-1
     through P-16. The offeror must propose each DESP II Subcontractor's
     rates in Official Sub X Rates Tables SX-1 through SX-6 (note, that "X"
     will be replaced with a number assigned to each DESP II Subcontractor).
     These official tables will be the tables that will be incorporated into
     the resulting contract, if an offeror is selected for award. The offeror
     will also complete Evaluated Prime Rates Tables EP-1 through EP-6 with
     the appropriate rate from the Official Prime Rates Tables P-1 through
     P-6. If there is no Prime Contractor rate for a particular category, the
     offeror will enter the Average Subcontractor Rate. If there are no DESP
     II Subcontractor rates for a particular cell, the offeror will enter the
     prime rate. Every cell in these tables must have a value entered.

   RFP at 88.

   [12] The agency similarly states that "[t]he evaluation team could not
   allow a source selection decision to be made based upon TEPs that they
   knew were incorrectly calculated." Agency Comments, Sept. 13, 2005, at 2.

   [13] The total evaluated prices for the 10 awardees ranged from $[deleted]
   million to $[deleted] million. Agency Report I, Tab 4, Source Selection
   Decision, at 17. As noted above, UDRI's total evaluated price was
   $[deleted] million.

   [14] In October 2005, the agency advised our Office that, with regard to
   UDRI's initial protest, the agency would "take corrective action to
   reevaluate [UDRI's] proposal." Agency Report II, Tab 5. Accordingly, we
   dismissed UDRI's initial protest pending completion of the agency's
   actions. University of Dayton Research Inst., B-296946.2, Oct. 19, 2005.
   Thereafter, the SSA established a team of evaluators to reevaluate UDRI's
   proposal and directed that "[t]he corrective action shall be . . .
   completed no later than Thursday, 10 November 2005." Agency Report II, Tab
   7. As documented in a briefing dated November 9, the re-evaluation team
   initially concluded that UDRI's proposal successfully demonstrated the
   [deleted]. Agency Report I, Tab 5; Agency Report II, Tab 8. Thereafter,
   the SSA directed that the re-evaluation team be combined with the initial
   evaluation team. Agency Report II, Tab 2, Contracting Officer's Statement,
   at 2. Following the SSA-directed combination of the two evaluation teams,
   the agency [deleted]. Agency Report II, Tab 12. Based on the combined
   evaluation teams' final re-evaluation of UDRI's proposal (which was not
   completed until February 2006) the SSA "reaffirm[ed]" his initial source
   selection decision. Id. Following the SSA's affirmation of the original
   award decision, UDRI again filed a protest with this Office.

   [15] As noted above, the solicitation provided that each offeror's
   cost/price would be evaluated to determine whether it was "unrealistically
   high or low." RFP at 94. While the agency acknowledges that it was
   necessary for the evaluated rate tables to accurately reflect the
   offerors' proposed rates in order for the agency to "ensure price
   reasonableness," the record does not clearly establish whether the various
   proposed rates were also evaluated to establish cost realism. In light of
   the specific solicitation provision quoted above, along with the fact
   that, as noted above, the agency anticipates that a majority of the total
   contract effort will be performed on a cost-reimbursement basis, a cost
   realism assessment was required. See Federal Acquisition Regulation
   sect. 15.305(a)(1).