TITLE: B-298912, Magellan Health Services, January 5, 2007
BNUMBER: B-298912
DATE: January 5, 2007
***************************************************
B-298912, Magellan Health Services, January 5, 2007

   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: Magellan Health Services

   File: B-298912

   Date: January 5, 2007

   Howard J. Stanislawski, Esq., Patrick K. O'Keefe, Esq., Joel Singer, Esq.,
   and Patrick F. Linehan, Esq., Sidley Austin LLP, for the protester.

   Joseph J. Petrillo, Esq., and Karen D. Powell, Esq., Petrillo & Powell,
   P.L.L.C.; and John S. Pachter, Esq., Jonathan D. Shaffer, Esq., Stephanie
   D. Capps, Esq., and Mary Pat Gregory, Esq., Smith Pachter McWhorter PLC,
   for Ceridian Corporation, an intervenor.

   Douglas Kornreich, Esq., Department of Health and Human Services, for the
   agency.

   Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest challenging agency's evaluation of technical proposals is
   denied where the record establishes that the evaluation was reasonable and
   consistent with the evaluation criteria.

   2. Agency's cost realism evaluation of awardee's proposal was unreasonable
   where agency failed to take into account cost adjustments made by its own
   cost analyst to awardee's proposal, and instead utilized awardee's
   proposed costs as the basis for its source selection decision.

   3. Agency's cost realism evaluation of awardee's proposal was improper
   where, although knowing that awardee had proposed to recruit the incumbent
   workforce and match all existing salaries but had also failed to propose
   direct labor rates consistent with existing salaries, agency failed to
   adjust awardee's proposed labor rates as part of its cost realism
   evaluation.

   4. Protest challenging adequacy of agency's "best value" source selection
   decision is sustained where there is insufficient information and analysis
   in the record, which includes both a contemporaneous source selection
   document and a post-protest statement, to determine that the selection
   official's key conclusion of technical equality, notwithstanding the
   higher technical rating assigned to the protester's proposal, was
   reasonable.

   DECISION

   Magellan Health Services protests the award of a contract to Ceridian
   Corporation under request for proposals (RFP) No. 05FOHEAP, issued by the
   Division of Federal Occupational Health (FOH), Department of Health and
   Human Services (HHS), for employee assistance program (EAP) services.
   Magellan, the incumbent contractor, argues that the agency's evaluation of
   offerors' technical proposals, as well as the agency's evaluation of
   Ceridian's cost proposal, were unreasonable. Magellan also protests that
   the agency's source selection decision was improper, insofar as the agency
   failed to document the basis for its conclusion that the higher-rated
   Magellan proposal and the lower-rated Ceridian proposal were technically
   equal as part of its "best value" determination.

   We sustain the protest.

   BACKGROUND

   FOH, a component of HHS, is the federal agency with responsibility for
   developing and maintaining prevention, intervention, and rehabilitation
   programs and services for federal employees who have alcohol and/or other
   problems. To fulfill this mission, FOH designs various occupational health
   services, including workplace-based behavioral health services, to promote
   and maintain the physical and mental health of federal employees. RFP
   Statement of Work (SOW) sect. C.I.A. EAP is the occupational health
   program by which FOH provides behavioral health services to approximately
   400 federal agencies, departments, and other governmental organizations,
   and the estimated 1,350,000 employees of those entities and their family
   members, at locations throughout the United States, as well as certain
   international locations. Agency Report (AR), Nov. 1, 2006, at 2; Protest
   at 2.

   The RFP, issued on September 8, 2005, contemplated the award of a
   cost-plus-fixed-fee contract for a base year, together with four 1-year
   options, for the required EAP services. RFP sect. L.1. In general terms,
   the SOW required the contractor to provide all personnel and equipment
   necessary to perform the EAP services needed to assist employees in their
   efforts to resolve personal problems that may adversely affect work
   performance "in the quickest, least restrictive, most convenient, and
   least costly manner while strictly respecting clients' confidentiality."
   SOW sect. C.I.D.1.

   The RFP established three evaluation factors: technical; small
   disadvantaged business (SDB) participation plan; and cost. RFP sect.
   M.3.4. The technical factor in turn consisted of four subfactors, with
   various assigned point weights: technical approach and management plan (40
   points); key personnel and personnel management (25 points); past
   performance (20 points); and continuous quality improvement process (15
   points). RFP sect. M.5.A. The SDB participation plan factor was worth 5
   points. RFP sect. M.4. The RFP expressed the relative importance of the
   evaluation factors as follows:

     The technical proposal (including the Small Disadvantaged Business (SDB)
     Plan) will receive paramount consideration in the selection of the
     Contractor(s) for this acquisition, although estimated cost will also be
     considered. In the event that the technical evaluation reveals that two
     or more Offerors are approximately equal in technical ability, then the
     estimated cost, and SDB Plan of the Offeror will become paramount.

   RFP sect. M.2. Award was to be made to the responsible offeror whose
   proposal was determined most advantageous to the government based on
   consideration of all evaluation factors. RFP sect. M.3.4.

   Five offerors, including Magellan and Ceridian, submitted proposals
   (consisting of separate technical and business proposals) by the November
   9 closing date. An agency technical evaluation panel (TEP) evaluated
   offerors' technical proposals and determined that four, including
   Magellan's and Ceridian's, were technically acceptable. AR, Tab 6, TEP
   Technical Report, Dec. 19, 2005, at 3. The TEP later also reviewed
   offerors' business proposals, while other agency employees evaluated
   offerors' past performance, SDB participation plans, and proposed costs.
   Based on consideration of all evaluation factors, the contracting officer
   determined that four offerors' proposals, including those of Magellan and
   Ceridian, were within the competitive range. Id., Tab 14, Competitive
   Range Determination, Mar. 15, 2006. The agency held discussions with the
   offerors whose proposals were in the competitive range.

   HHS received revised proposals from only three offerors. The agency
   evaluated the revised proposals and made a second competitive range
   determination consisting of the proposals of Magellan and Ceridian. Id.,
   Tab 23, Competitive Range Determination, June 1, 2006. HHS held additional
   discussions with Magellan and Ceridian, and both offerors submitted final
   proposal revisions (FPR) by the August 11, 2006, closing date. The agency
   then evaluated the offerors' FPRs, with final ratings and proposed costs
   for Magellan and Ceridian as follows:

   +------------------------------------------------------------------------+
   |             Factor              |     Magellan      |     Ceridian     |
   |---------------------------------+-------------------+------------------|
   |Technical                        |                   |                  |
   |---------------------------------+-------------------+------------------|
   |Technical Approach (40)          |       39.66       |      35.92       |
   |---------------------------------+-------------------+------------------|
   |Key Personnel (25)               |       24.42       |      22.66       |
   |---------------------------------+-------------------+------------------|
   |Past Performance (20)            |       20.00       |      19.00       |
   |---------------------------------+-------------------+------------------|
   |Quality Improvement (15)         |       15.00       |      15.00       |
   |---------------------------------+-------------------+------------------|
   |Overall (100)                    |       99.08       |     92.58[1]     |
   |---------------------------------+-------------------+------------------|
   |SDB Participation Plan (5)       |       5.00        |       4.75       |
   |---------------------------------+-------------------+------------------|
   |Total Point Score                |      104.08       |      97.33       |
   |---------------------------------+-------------------+------------------|
   |Proposed Cost                    |   $170,090,773    |   $150,163,847   |
   +------------------------------------------------------------------------+

   Id., Tab 33, TEP Technical and Business Review Report, Aug. 28, 2006; Tab
   31, SDB Participation Plan Evaluation, Aug. 15, 2006; Tab 35, Source
   Selection Decision.

   The contracting officer subsequently determined that Ceridian's
   lower-rated, lower-cost proposal represented the best value to the agency
   and made award to Ceridian. Id., Tab 35, Source Selection Decision, at 28.
   This protest followed.

   DISCUSSION

   Magellan's protest raises numerous issues regarding the agency's
   evaluation of proposals and subsequent source selection determination.
   Magellan alleges that the agency's evaluation of Ceridian's technical
   proposal was improper,[2] and that HHS's cost realism evaluation of
   Ceridian's proposal was unreasonable. Magellan also argues that the
   agency's source selection decision was improper because, as part of the
   determination that Ceridian's lower-rated, lower-cost proposal represented
   the best value to the government, the agency failed to document its
   apparent key conclusion that the proposals of the two offerors were
   technically equal notwithstanding the difference in technical ratings.

   As detailed below, we find no basis to question the agency's evaluation of
   Ceridian's technical proposal. However, with regard to the agency's cost
   realism evaluation of Ceridian's proposal, the record shows that the
   evaluation was unreasonable in several ways. Further, the record indicates
   that HHS failed to document how, as part of its source selection decision,
   it determined the lower-rated proposal of Ceridian to be technically
   equivalent to the higher-rated proposal of Magellan.

   Technical Evaluation of Ceridian's Proposal

   Magellan argues that the agency's evaluation of Ceridian was not
   adequately documented, that Ceridian's proposal failed to meet mandatory
   RFP requirements, and that Ceridian's proposal had various deficiencies
   that were not properly reflected in its point score. Although we do not
   here specifically address all of Magellan's arguments about the evaluation
   of Ceridian's technical proposal, we have fully considered all of them and
   find that they afford no basis to sustain the protest.

   In arguing that Ceridian's technical proposal was not adequately
   documented, the protester contends that the evaluation record provides no
   explanation as to how the TEP evaluators translated their findings of
   strengths and weaknesses into point scores. We disagree.

   In reviewing an agency's evaluation, we will not reevaluate technical
   proposals; instead, we will examine the agency's evaluation to ensure that
   it was reasonable and consistent with the solicitation's stated evaluation
   criteria and procurement statutes and regulations, and adequately
   documented. Urban-Meridian Joint Venture, B-287168, B-287168.2, May 7,
   2001, 2001 CPD para. 91 at 2. When utilizing a point score evaluation
   rating system, an agency need not demonstrate with mathematical certainty
   how the rating was derived, but rather need only show that the rating was
   consistent with the solicitation's stated evaluation criteria and
   supporting documentation. An offeror's mere disagreement with the agency's
   evaluation is not sufficient to render the evaluation unreasonable.
   Ben-Mar Enters., Inc., B-295781, Apr. 7, 2005, 2005 CPD para. 68 at 7. Our
   review of the record here shows the agency's evaluation of Ceridian's
   technical proposal to be unobjectionable.

   The TEP conducted its evaluation by having each evaluator separately
   assess each offeror's proposal under the technical subfactors. The record
   indicates that the TEP members had a narrative description of each
   technical subfactor criterion, including a list of discrete SOW
   requirements, when conducting their evaluations. Each TEP evaluator
   documented his or her findings (i.e., strengths and weaknesses) for each
   offeror's proposal by evaluation subfactor, and assigned point scores in
   relation to the maximum points available. A TEP consensus determination of
   evaluation findings and ratings of each proposal was then developed. AR,
   Tab 6, TEP Technical Report, Dec. 19, 2005, at 3, 9-15. For example, the
   TEP found a total of 34 strengths and 12 weaknesses in Ceridian's initial
   proposal under the technical approach and management plan subfactor as
   part of determining the offeror's assigned rating here. Id.

   The TEP evaluated Ceridian's revised proposal, and later its FPR, in a
   similar fashion (on these occasions the TEP noted only the proposals' new
   strengths as well as new and/or continued weaknesses). Again the record
   includes the worksheets showing how each evaluator rated Ceridian's
   revised proposal and FPR under each technical subfactor, including where
   the offeror's proposal responded to previously-identified weaknesses. Id.,
   Tab 19, TEP Technical Report, May 2, 2006; Tab 33, TEP Technical and
   Business Review Report, Aug. 28, 2006.

   We find that the TEP evaluation ratings of Ceridian's proposal were
   adequately documented and consistent with the identified strengths and
   weaknesses. First, the protester's focus on the offerors' ratings is
   misplaced, as point scores and adjectival ratings are but guides to, and
   not substitutes for, intelligent decision-making. TPL, Inc., B-297136.10,
   B-297136.11, June 29, 2006, 2006 CPD para. 104 at 17. Further, there is
   simply no requirement that the record contain an explanation, as Magellan
   contends here, of how the agency evaluators translated individual
   strengths and weaknesses into point scores, only that the point scores be
   adequately supported in order to determine their reasonableness.

   Magellan also argues that Ceridian's technical proposal failed to meet
   numerous RFP requirements and should have been rejected as technically
   unacceptable. For example, Magellan alleges that Ceridian's proposal
   failed to address SOW sect. C.II.A.2.b ("The Contractor shall identify
   qualified SAPs [substance abuse professionals] who are conveniently
   located to employee worksites. A complete list of all SAPs shall be
   submitted . . . within thirty (30) days of contract award . . . ."), as
   well as sect. C.II.A.14 ("The Contractor shall design and conduct a
   promotional campaign . . . . The promotional campaign is to be designed
   and submitted . . . within 60 days after contract award and updated
   annually thereafter").[3] The protester also argues that the agency's
   evaluation of Ceridian's proposal ignored various deficiencies that the
   agency had itself identified and that the awardee failed to address.

   As a preliminary matter, the record indicates that all of the specific SOW
   provisions to which Magellan refers apply to "contractor" requirements.[4]
   For example, as noted above, the relevant SOW provision states only that
   the contractor is to identify qualified substance abuse professionals who
   are conveniently located to employee worksites, and submit a complete
   listing within 30 days of contract award. Rather than establishing a
   proposal requirement, this language establishes that the provision was
   intended only to require designation of the substance abuse professionals
   after award. See Citrus College; KEI Pearson, Inc., B-293543 et al.,
   Apr. 9, 2004, 2004 CPD para. 104 at 3.

   In any event, we find Magellan's assertion that Ceridian's technical
   proposal failed to address various SOW requirements to be factually
   inaccurate. The record clearly establishes that Ceridian's revised
   proposal and/or FPR addressed each of the SOW requirements that Magellan
   claims were lacking. For example, Ceridian's FPR stated in relevant part
   that "Ceridian will submit a complete list of all SAPs . . . within
   30 days of contract award,"[5] AR, Tab 29, Ceridian's FPR, Vol. I,
   Technical Proposal, at 1-25, and that Ceridian will work with FOH to
   develop annual promotional plans and materials. Id. at 1-110 to 1-115; see
   also Tab 4, Ceridian's Proposal, Vol. I, Technical Proposal, attach. B,
   FOH EAP Program Deliverable Schedule, at 11 (Ceridian shall "design a
   promotional campaign and update it annually . . . and submit [it] within
   60 days after contract award"). Similarly, the record also indicates that,
   contrary to the protester's assertions, Ceridian fully addressed the
   weaknesses identified in its initial technical proposal, and the TEP took
   this information into account when evaluating the awardee's FPR. The fact
   that Ceridian's initial proposal had various perceived weaknesses is
   simply not determinative of whether the agency's technical evaluation of
   Ceridian's final proposal was reasonable, since Ceridian addressed those
   weaknesses in its subsequent submissions.

   Cost Realism Evaluation of Ceridian's Proposal

   Magellan asserts that HHS failed to perform a reasonable cost realism
   evaluation of Ceridian's proposal. As the protester points out, the
   solicitation required the agency to perform a cost realism analysis to
   determine the extent to which an offeror's proposed costs represent what
   the government realistically expects to pay for the proposed effort. By
   contrast, Magellan alleges, HHS did not take into account the fact that
   Ceridian's cost proposal failed to propose the required level of effort,
   and understated its direct labor rates while also proposing to pay
   existing employee salaries. The protester maintains that the agency's
   failure to reasonably determine Ceridian's realistic costs adversely
   affected the agency's resulting source selection decision.

   The RFP instructed offerors to base their cost proposals on cost tables
   included with the solicitation. RFP sect. L.9. The cost tables, one for
   the base year and each option year, included various direct labor
   categories as well as estimated quantities of hours for each labor
   category. For example, the Field Consultant labor category had an
   estimated quantity of 256,495 hours per year, and the Field Counselor
   labor category had an estimated quantity of 91,416 hours per year.[6] RFP
   amend. 1, attach. 7, Pricing Tables for Section B, at 2. The RFP also
   advised offerors that the levels of effort set forth in the cost tables
   represented HHS's current estimates for the base year and option year
   requirements for the required EAP services, and that as part of their
   proposals, offerors were required to propose costs for the levels of
   effort stipulated in each of these tables. RFP sect. B.1.a.

   The RFP also informed the offerors how the agency planned to evaluate cost
   proposals:

     The Offeror, at a minimum, must submit a cost proposal fully supported
     by cost and pricing data in sufficient detail to allow the Government to
     complete a cost analysis which establishes the reasonableness of the
     proposed costs. A complete cost and complete cost breakdown in support
     of Section B Tables shall be furnished by the Offeror.

   RFP sect. L.9.

   Ceridian, as part of its revised proposal, generally accepted the agency's
   estimated levels of effort for the various labor categories with the
   exception of the field consultant and field counselor categories. Here,
   Ceridian proposed levels of effort that were somewhat lower than the HHS
   estimates.[7] AR, Tab 18, Ceridian's Revised Proposal, Vol. II, Business
   Proposal, at Tables I -- V. Ceridian's revised proposal also utilized base
   year direct labor rates of $[DELETED] per hour for field consultants and
   $[DELETED] per hour for field counselors. Id. at Table I.

   The agency performed several cost evaluations of Ceridian's revised
   proposal. An FOH business review found that Ceridian's failure to use the
   RFP-specified direct labor hours in its cost proposal necessitated an
   evaluated cost increase of $1,106,799.[8] Id., Tab 20, FOH Business
   Report, May 15, 2006, at 4-5. Additionally, the TEP completed a business
   review of each offeror's revised cost proposal, and with regard to
   Ceridian's proposed labor rates stated:

     FOH has knowingly approved, under the current contract, average labor
     rates for the Key Personnel categories of counselors and consultants
     that are higher than industry standard. This is in recognition of
     demonstrated capabilities and performance of high quality that are
     difficult to find. If Ceridian is to recruit and retain these staff, it
     is likely that Ceridian will have to pay higher rates than proposed.
     Consequently, direct labor costs may be significantly higher than
     proposed or Ceridian may not successfully recruit sufficient staff
     experienced in serving FOH customers in the highly specialized manner
     required. Ceridian then would have to recruit and train more
     inexperienced staff than projected in the proposal. The more new staff
     recruited, the greater the risk of decreased quality of service that is
     unacceptable to customer organizations.

     FOH notes that Ceridian has not provided letters of commitment from
     current experienced consultants and counselors at the proposed rates of
     pay, and recommends that Ceridian reconsider what rates will be
     necessary to attract and retain sufficient numbers of these experienced
     high performing staff and/or adequately describe how the high quality of
     service required by FOH's customer organizations will be ensured.

   Id., Tab 24, TEP Business Review Report, June 13, 2006, at 4.

   The TEP also directed comments to the agency's cost analyst regarding the
   shortcomings it perceived in Ceridian's proposed labor rates, stating:

     Direct Labor rates will need to be adequate for the successful offeror
     to recruit/retain sufficient numbers of the highly capable and highly
     performing current Counselors and Consultants for the services to be
     acceptable to FOH's customer organizations. Customer organizations have
     demonstrated exceptional loyalty to the FOH EAP because of their
     recognition of the exemplary service they have received from these
     critical staff, who were designated as Key Personnel for this contract.
     A significant factor in the successful offeror's ability to
     recruit/retain these key staff is the ability to pay staff reasonably
     commensurate with their performance and historical reimbursement they
     have received. The IGCE [independent government cost estimate] was based
     on FOH's extensive experience in developing budgets that are required to
     recruit and retain sufficient numbers of high performing Counselors and
     Consultants. Ceridian is not knowledgeable of current staff performance
     levels or their current rates of pay and thus has proposed direct labor
     rates that are inadequate as indicated below by the variances from the
     IGCE. For this comparison, the IGCE has been adjusted upward by 2% to
     account for the delay in start date since the IGCE anticipated a start
     date in 2005:

     Base year (where retention is key):

      a. a. Field consultants -- Ceridian $[DELETED]/hr; IGCE $[DELETED].
         Ceridian expects to offer one time signing bonuses and to hire
         [DELETED] of the 199 consultants and counselors. Total cost
         difference for Base Year = $[DELETED].
      b. b. Field counselors -- Ceridian $[DELETED]/hr; IGCE $[DELETED].
         Total cost difference for Base Year = $[DELETED].

     Based on the RFP specified level of effort for these two categories of
     Key Personnel, the total difference in proposed Base Year direct costs
     is $1,154,701.[9]

     Overhead and G&A costs would need to be added to these direct costs to
     calculate the total difference in proposed costs. Additionally, since
     the above calculation only considers the Base Year, these costs would be
     significantly higher over the five year life of the contract. The
     proposed signing bonus is not likely to be sufficient incentive to
     recruit these Key Personnel because of the significant reduction in pay
     they would be offered.

     This review team believes that Ceridian would need to significantly
     increase the direct labor costs proposed for these two categories of Key
     Personnel if they are to successfully deliver the performance required
     under this contract.

   Id. at 10-11.

   In its FPR, Ceridian responded to the agency's expressed concern regarding
   its ability to attract and retain high quality staffing. The agency's
   specific inquiry and Ceridian's response thereto are as follows:

     1. FOH notes that Ceridian has not provided letters of commitment from
     current experienced consultants and counselors at the proposed rates of
     pay, and recommends that Ceridian reconsider what rates will be
     necessary to attract and retain sufficient numbers of these experienced
     high performing staff and/or adequately describe how the high quality of
     service required by FOH's customer organizations will be ensured.

     Ceridian understands that there are top performers that FOH wants to
     retain, and that in order to ensure a smooth transition of the services,
     we would want/need to retain as many existing field employees as
     possible.

     In order for this to occur, Ceridian will match all existing salaries of
     the field employees plus increase them by [DELETED]% for the standard
     merit increase.

   Id., Tab 29, Ceridian's FPR, Vol. II, Business Proposal, at 29.

   Ceridian's cost proposal, however, did not adjust the proposed direct
   labor rates for field consultants and field counselors. Rather, as with
   its revised proposal, Ceridian's FPR set forth base period direct pay
   rates of $[DELETED] per hour for field consultants and $[DELETED] per hour
   for field counselors. Ceridian's FPR also did not alter the number of
   hours proposed for the field consultant and field counselor labor
   categories. Additionally, Ceridian proposed that its overhead rate
   ([DELETED] percent) and general and administrative expenses (G&A) rate
   ([DELETED] percent) would be ceilings, or caps. Id. at 29, Table I.

   The agency was aware that Ceridian's proposed pay rates (of $[DELETED] per
   hour for field consultants and $[DELETED] per hour for field counselors)
   were not in fact the existing salaries for these field employees.
   Specifically, HHS knew that Magellan's FPR had proposed its incumbent
   workforce using current salary levels, which were $[DELETED] per hour for
   field consultants and $[DELETED] per hour for field counselors.[10] Id.,
   Tab 28, Magellan's FPR, Vol. II, Business Proposal, at sections 3.1.4,
   3.3.1, Table I. Further, the agency verified the accuracy of Magellan's
   proposed direct labor rates against employee earning statements. Id., Tab
   32, Cost Evaluation of Magellan's FPR, at 9, 27. These pay rates were even
   higher than those in the IGCE used by the TEP as part of its business
   review to determine that Ceridian's pay rates were too low to successfully
   deliver the performance required by the RFP.

   HHS then performed a cost evaluation of Ceridian's FPR. As with previous
   cost reviews, the cost evaluation found that Ceridian had not proposed
   sufficient levels of effort for the field consultant and field counselor
   labor categories. The cost analyst determined that Ceridian's understated
   levels of effort should result in an adjustment of $[DELETED] in direct
   costs and $[DELETED] in associated overhead.[11] Id., Tab 34, Cost
   Evaluation of Ceridian's FPR, at 2. The HHS cost evaluation did not,
   however, make any adjustments to Ceridian's proposed direct labor rates,
   including those for the field consultant and field counselor labor
   categories. In support of this decision the cost analyst stated:

     The offeror provided a copy of his 2006 salary rate structure which
     shows the targeted reference point for employees' salaries. We verified
     the proposed rates to the ranges shown in the salary rate structure
     provided by the offeror, matching each labor category to the zone and
     grade shown in the documentation. We consider the offeror's proposed
     labor rates to be acceptable for the purpose of establishing a budget
     for direct labor.

   Id. at 3. While having made various adjustments to Ceridian's proposed
   costs, the agency's cost analyst nevertheless did not develop a total,
   bottom-line evaluated cost for the offeror's proposal. Id. at 2.

   The contracting officer subsequently reviewed Magellan's and Ceridian's
   proposed costs by major cost element (i.e., direct labor, other direct
   costs, overhead) and performance period as part of her source selection
   decision. Id., Tab 35, Source Selection Decision, at 8-19. While expressly
   accepting the cost analyst's finding that Ceridian's FPR had failed to
   propose the government-estimated levels of effort for the field consultant
   and field counselor labor categories as part of its direct labor costs,
   id. at 9, the contracting officer did not consider the corresponding cost
   adjustment to Ceridian's proposal, or address the concerns expressed by
   the TEP business review that Ceridian's direct labor rates for the two key
   field labor categories needed to be "significantly increase[d]." Id., Tab
   24, TEP Business Review Report, June 13, 2006, at 11. Instead, for
   purposes of the agency's award determination the contracting officer
   considered only the offerors' proposed costs.[12] Id., Tab 35, Source
   Selection Decision, at 2, 8, 15, 28.

   When an agency evaluates proposals for the award of a cost-reimbursement
   contract, an offeror's proposed estimated cost of contract performance is
   not considered controlling since, regardless of the costs proposed by the
   offeror, the government is bound to pay the contractor its actual and
   allowable costs. Metro Mach. Corp., B-295744, B-295744.2, Apr. 21, 2005,
   2005 CPD para. 112 at 9; Hanford Envtl. Health Found., B-292858.2,
   B-292858.5, Apr. 7, 2004, 2004 CPD para. 164 at 9; see FAR sect. 16.301.
   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 costs are likely to be under the offeror's technical
   approach, assuming reasonable economy and efficiency. FAR sections
   15.305(a)(1), 15.404-1(d)(1), (2); The Futures Group Int'l, B-281274.2,
   Mar. 3, 1999, 2000 CPD para. 147 at 3.

   A cost realism analysis is the process of independently reviewing and
   evaluating specific elements of each offeror's cost estimate to determine
   whether the estimated proposed cost elements are realistic for the work to
   be performed, reflect a clear understanding of the requirements, and are
   consistent with the unique methods of performance and materials described
   in the offeror's proposal. FAR sect. 15.404-1(d)(1); Advanced Comms. Sys.,
   Inc., B-283650 et al., Dec. 16, 1999, 2000 CPD para. 3 at 5. An offeror's
   proposed costs should be adjusted when appropriate based on the results of
   the cost realism analysis.[13] FAR sect. 15.404-1(d)(2)(ii). Our review of
   an agency's cost realism evaluation is limited to determining whether the
   cost analysis is reasonably based and not arbitrary. Jacobs COGEMA, LLC,
   B-290125.2, B-290125.3, Dec. 18, 2002, 2003 CPD para. 16 at 26. For the
   reasons set forth below, we find that the agency failed to conduct a
   proper cost realism analysis of Ceridian's proposal.

   As a preliminary matter, although Ceridian's proposal included a fixed fee
   amount of $[DELETED] (based on a rate of [DELETED] percent of the
   offeror's proposed costs), the cost analyst removed the offeror's entire
   proposed fee amount from his cost analysis, believing that "[t]he
   determination of an acceptable fee is left to the discretion of the
   Contracting Officer." AR, Tab 34, Cost Evaluation of Ceridian's FPR, at 7.
   As the purpose of a cost realism analysis is to determine how well the
   proposed costs and profit represent the cost of the contract, FAR
   sect. 15.404-1(c)(1), it was improper to omit Ceridian's proposed fixed
   fee from the cost realism analysis. Similarly, the agency's cost analysis
   removed $[DELETED] in employee signing bonuses and $[DELETED] in
   educational materials from Ceridian's FPR because "the offeror was unable
   to provide supporting documentation" for these amounts. [14] AR, Tab 34,
   Cost Evaluation of Ceridian's FPR, at 5. An agency's cost realism
   evaluation is to consider whether an offeror's proposed costs
   realistically reflect the costs to perform the work as proposed, and
   proposed costs should be adjusted downward only if the agency concludes
   that actual costs will likely be lower than proposed, not because the
   proposed costs are insufficiently supported by invoices or other means.
   Accordingly, these downward adjustments to Ceridian's proposed costs were
   also improper.

   Further, HHS's cost realism evaluation of Ceridian's proposal was
   unreasonable because the contracting officer failed to take into account
   the cost adjustments recommended by the agency's own cost evaluation, and
   instead considered only the offeror's proposed costs in the source
   selection decision. As shown above, the contracting officer accepted the
   cost analyst's finding that Ceridian had failed to propose sufficient
   levels of effort for the field consultant and field counselor labor
   categories as part of its direct labor costs. The contracting officer,
   however, failed to consider the corresponding cost adjustments of more
   than $1 million to Ceridian's proposed cost.[15] In fact, the contracting
   officer failed to consider anything other than the offerors' proposed
   costs in her source selection decision.[16] When an agency determines that
   adjustments to an offeror's proposed costs are in fact necessary, the
   agency must then base its source selection decision on the offeror's
   adjusted cost. FAR sect. 15.404-1(d)(2)(i) ("The probable cost shall be
   used for purposes of evaluation to determine the best value"); see Eigen,
   supra (holding that an agency's source selection decision must be based on
   the actual cost difference between offerors' proposals).

   Even more significantly, the agency's cost realism evaluation of
   Ceridian's proposal was also unreasonable with regard to the offeror's
   proposed direct labor rates for the field consultant and field counselor
   labor categories. As detailed above, Ceridian's FPR expressly agreed to
   match existing salaries as part of its effort to attract and retain as
   many existing EAP field employees as possible. Nevertheless, Ceridian's
   proposed direct labor rates (of $[DELETED] per hour for field consultants
   and $[DELETED] per hour for field counselors) did not reflect the
   incumbent employees' existing salaries (of $[DELETED] per hour for field
   consultants and $[DELETED] per hour for field counselors). Moreover, HHS
   was aware of both the existing salary rates and the discrepancy between
   these rates and Ceridian's proposed labor rates (which were also
   substantially lower than the rates in the agency's own IGCE, for that
   matter). On this record, the agency's failure to make any adjustment here
   to Ceridian's proposed costs was improper.

   The agency argues that its cost evaluation of Ceridian's proposal here was
   reasonable. HHS points to the fact that the agency cost analyst
   specifically reviewed Ceridian's proposed direct labor rates and
   determined that no adjustments were necessary. AR, Nov. 1, 2006, at 4-5.
   We disagree.

   As set forth above, HHS's cost evaluation did not take exception to any of
   Ceridian's proposed direct labor rates because it determined that
   Ceridian's proposed rates were supported by the offeror's current salary
   structure. There is no evidence in the record, however, that the agency
   cost analyst also considered what Ceridian had actually proposed to do
   here--to "match all existing salaries of the field employees plus increase
   them by [DELETED]% for the standard merit increase." Id., Tab 29,
   Ceridian's FPR, Vol. II, Business Proposal, at 29. Since Ceridian had
   proposed to match all existing field employee salaries, a proper cost
   realism analysis would compare Ceridian's proposed hourly rates to the
   incumbent employees' current pay rates, and adjust accordingly.[17] Quite
   simply, an offeror's current salary structure is irrelevant to its
   probable costs if, as is the case here, the current salary structure is
   not what the offeror is proposing to use.

   The HHS cost evaluation of Ceridian's FPR also fails to explain how the
   offeror's proposed labor rates were realistic when the agency's own
   business review of proposals recognized that Ceridian's labor rates were
   not sufficient to permit it to perform as proposed. As set forth above,
   the TEP clearly recognized the internal inconsistency between what
   Ceridian was proposing (i.e., being able to attract and retain a
   high-performance organization) and what Ceridian's cost proposal
   represented. Id., Tab 24, TEP Business Review Report, June 13, 2006, at 4.
   The TEP then expressly pointed out to the agency cost analyst that
   Ceridian's labor rates here were substantially below the IGCE--amounts
   which the TEP believed were required to recruit and retain a sufficient
   number of high performing counselors and consultants. The TEP also
   concluded that Ceridian would need to substantially increase the direct
   labor rates proposed for these two key personnel categories if the offeror
   was to successfully deliver the performance required under this contract.
   Id. at 10. Notwithstanding the TEP's realism analysis of Ceridian's
   proposal here, the record indicates that the HHS cost analyst and
   contracting officer do not appear to have considered this information in
   the cost evaluation of Ceridian's FPR and source selection decision,
   respectively.

   The agency does not deny that Ceridian's FPR failed to reflect the
   existing salaries for the field employees that it expressly agreed to
   match. Nevertheless, HHS also argues that Ceridian's cost proposal was
   reasonable because it was based on the best information available to the
   offeror. Specifically,

     the rate of compensation offered by Magellan was not publicly available
     to other offerors. . . . An offeror must find an acceptable method to
     estimate labor costs based on its most probable cost. Here, Ceridian
     used its own actual cost experience for the same type of staff, as the
     government cost analyst found.

   AR, Nov. 27, 2006, at 5.

   The agency's argument here reflects a fundamental misunderstanding of what
   is required as part of a cost realism evaluation. A cost realism
   evaluation implements an agency's obligation to guard against unsupported
   claims of cost savings by determining whether the costs as proposed
   represent what the government realistically expects to pay for the
   proposed effort, based on the information reasonably available to the
   agency at the time of its evaluation. See Metro Mach. Corp., B-297879.2,
   May 3, 2006, 2006 CPD para. 80 at 9. HHS was fully aware of the incumbent
   employees' existing salaries, and that Ceridian's proposed pay rates were
   substantially less than the existing salaries (as well as the agency's own
   IGCE). The agency's contention here that Ceridian's proposed costs were
   based on the best information available to the offeror is simply not
   relevant, and does not relieve the agency from conducting a reasonable
   cost realism evaluation based on the information readily available to it.

   Further, a proper cost realism evaluation prevents an offeror from
   improperly "having it both ways"--that is, from receiving a technical
   evaluation rating based on its proposed performance but failing to propose
   costs that reasonably reflect that performance. Here, Ceridian's technical
   evaluation rating was in part based on its representation that it would
   attract and retain as many existing field employees as possible by
   matching existing salaries; however, the firm did not propose direct labor
   rates that reflected existing pay rates. In such a circumstance, it is the
   government's cost realism analysis that should ensure that an offeror's
   evaluated costs properly reflect its proposed performance. The failure to
   undertake such action here made the HHS cost realism evaluation of
   Ceridian unreasonable.

   HHS argues that Magellan has not been prejudiced by any defects in the
   agency's cost realism evaluation of Ceridian's proposal, since Ceridian's
   overall cost would remain lower than Magellan's in any event. Our Office
   will not sustain a protest unless the protester demonstrates 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). Here, we recognize that the identified errors in the
   agency's cost realism evaluation of Ceridian's proposal do not alter the
   offerors' relative cost rankings (i.e., Ceridian's evaluated cost would
   apparently still be lower than Magellan's). However, based on our
   conclusion, discussed below, that the contracting officer's determination
   of technical equivalency was without any supporting documentation (and
   that, as a result, the agency may have to undertake a cost/technical
   tradeoff as part of its best value determination), and the RFP award
   language which provided that the technical proposal was of paramount
   importance, we find the cost realism analysis defects here--totaling more
   than $10 million--to be clearly prejudicial to the protester.[18]

   Source Selection Decision

   Magellan asserts that the agency's source selection decision was
   unreasonable. Specifically, the protester argues that the contracting
   officer's determination that Magellan's and Ceridian's FPRs were
   technically equal is not supported by any documentation that demonstrates
   a reasonable basis for such a determination. Magellan contends that HHS's
   failure to provide a basis for its conclusions that the offerors'
   proposals were technically equal, notwithstanding the difference in
   technical ratings, resulted in an improper award decision. We agree.

   As set forth above, the RFP established that offerors' technical
   proposals, including SDB participation plans, would be of paramount
   consideration here, and that award would be made to the offeror whose
   proposal was determined to be the best value to the government based on
   consideration of all evaluation factors.

   The TEP evaluated Magellan's and Ceridian's FPRs and made various
   adjustments to its previous technical evaluation ratings. As part of its
   final evaluation the TEP recommended that award be made to Ceridian,
   stating, "Federal Occupational Health recommends award to Ceridian as the
   vendor offering the best combination of value and price to the
   Government." AR, Tab 33, TEP Technical and Business Review Report, Aug.
   28, 2006, at 1. The TEP report, however, contained no discussion regarding
   the relative technical merits of the two offerors' proposals.

   In making the source selection decision here, the contracting officer
   premised her determination on review and acceptance of the evaluation
   findings and ratings of the offerors' proposals under the stated
   evaluation factors as follows:

   +------------------------------------------------------------------------+
   |    Offeror    |Technical Score |SDB Participation Plan| Proposed Cost  |
   |---------------+----------------+----------------------+----------------|
   |Magellan       |     99.08      |         5.00         |  $170,090,773  |
   |---------------+----------------+----------------------+----------------|
   |Ceridian       |92.75[19]       |         4.75         |  $150,163,847  |
   +------------------------------------------------------------------------+

   Id., Tab 35, Source Selection Decision, at 4-5, 8, 15. The contracting
   officer then set forth her rationale for the selection of Ceridian as
   follows:

     Ceridian Corporation has submitted a proposal which has been determined
     to offer the best value to the Government. Therefore [it] is considered
     to be in the best interest of the Government to award a contract to [the
     offeror] which has been determined to be responsible and otherwise
     qualified and eligible to receive an award under applicable laws and
     regulations. Award, cost plus fixed fee, in the amount of $29,573,143.00
     is recommended with four one-year options in the amounts of
     $29,247,528.00, $29,540,129.00, $30,311,643.00, and $31,491,404.00
     respectively, for a total contract award amount including options of
     $150,163,847.00.

   Id. at 28.

   At the time of her contract award decision, the contracting officer
   prepared no contemporaneous documentation that in any way discussed the
   relative technical merits of the offerors' proposals. Subsequently, along
   with the agency report filed in response to Magellan's protest, the
   contracting officer stated that the agency had determined that the
   offerors' proposals were "technically equal," or "essentially technically
   equal."[20] Contracting Officer's Statement at 5, 8. While this
   post-protest declaration asserted repeatedly that the two offerors'
   proposals were technically equal, it contained no discussion of the basis
   for this conclusion.

   In reviewing an agency's evaluation of proposals and source selection
   decision, we examine the supporting record to determine whether the
   decision was reasonable, consistent with the stated evaluation criteria,
   and adequately documented. University Research Co., LLC, B-294358 et al.,
   Oct. 28, 2004, 2004 CPD para. 217 at 8; Johnson Controls World Servs.,
   Inc., B-289942, B-289942.2, May 24, 2002, 2002 CPD para. 88 at 6; AIU N.
   Am., Inc., B-283743.2, Feb. 16, 2000, 2000 CPD para. 39 at 7. An agency
   which fails to adequately document its source selection decision bears the
   risk that our Office may be unable to determine whether the decision was
   proper. Johnson Controls World Servs., Inc., supra.

   While source selection officials may reasonably disagree with the
   evaluation ratings and results of lower-level evaluators, Verify, Inc.,
   B-244401.2, Jan. 24, 1992, 92-1 CPD para. 107 at 6-8, they are nonetheless
   bound by the fundamental requirement that their independent judgments be
   reasonable, consistent with the stated evaluation factors, and adequately
   documented. AIU N. Am., Inc., supra, at 8-9 (protest sustained because
   selection official did not document the basis for concluding that
   proposals were technically equal, after the evaluation panel concluded
   that one proposal was superior to the other); see University Research Co.,
   LLC, supra (protest sustained where source selection official failed to
   state any basis for rejecting the award recommendation of the agency
   project officers). In reviewing an agency's evaluation, we will consider
   the entire record, including documentation prepared after the source
   selection decision was made; however, we will accord greater weight to
   contemporaneous materials rather than judgments made in response to
   protest contentions. Beacon Auto Parts, B-287483, June 13, 2001, 2001 CPD
   para. 116 at 6.

   As shown above, the contracting officer prepared no contemporaneous
   documentation indicating that Ceridian's and Magellan's proposals were
   technically equal as part of the agency's best value award determination.
   Nothing in the TEP report shows that the agency evaluators concluded the
   proposals were technically equal; in fact, the point scores suggest
   otherwise. Notwithstanding the fact that Magellan's FPR was scored higher
   than Ceridian's FPR, as documented by the TEP, the source selection
   decision is devoid of any discussion as to how, or even if, the
   contracting officer determined before award that the offerors' proposals
   were technically equal.

   The contracting officer's post-protest statement also fails to meet the
   fundamental requirement that a selection official's judgments be
   reasonable, consistent with the stated evaluation factors, and adequately
   documented. Rather, she simply stated in conclusory form that the two
   offerors' proposals were "technically equal" or "essentially technically
   equal"--despite the TEP's assessment that Magellan's proposal merited a
   higher overall rating as well as higher ratings under three of four
   technical subfactors. Like the source selection decision, the post-protest
   statement is also devoid of any substantive consideration as to how the
   contracting officer determined that the offerors' proposals were
   technically equal, and its conclusory statement falls far short of the
   requirement to adequately document source selection judgments. AIU N. Am.,
   Inc., supra.

   In its report to our Office, HHS argues that the contracting officer was
   justified in concluding that the technical proposals of Magellan and
   Ceridian were approximately equal, and cites generally to the source
   selection decision and evaluation documents in support thereof. The agency
   also argues that the technical proposals of Ceridian and Magellan
   indicated that both offerors could perform the required work very well.
   AR, Nov. 1, 2006, at 3.

   The agency's arguments here are misplaced. First, while arguing that the
   contracting officer was justified in concluding that the technical
   proposals of Magellan and Ceridian were approximately equal,
   notwithstanding Magellan's higher technical rating, HHS points to no
   specific documents in the record, contemporaneous or otherwise, which
   support that conclusion. We note that the TEP never concluded that
   offerors' proposals were technically equal, but only that Ceridian's
   proposal offered the best combination of value and price to the
   government. Further, the fact that the technical proposals of Ceridian and
   Magellan demonstrated that both offerors would be able to perform the work
   requirements very well is not relevant to the determination which the
   agency made here without explanation--that the proposals of Magellan and
   Ceridian were technically equivalent.

   In light of the absence of any documentation or support for the purported
   technical equality of the offerors' proposals, the RFP award language that
   the technical proposal would receive paramount consideration, and the fact
   that Magellan's technical proposal was higher-rated, we view the selection
   decision here as unsupported.

   RECOMMENDATION

   In summary, we find that HHS's cost realism evaluation of Ceridian's
   proposal was unreasonable, and that the reliance on the offeror's proposed
   cost (as opposed to the government's evaluated cost) as the basis for the
   agency's award determination was improper. We also find that the
   contracting officer's conclusion that the offerors' proposals were
   technically equal lacked any supporting documentation and was, therefore,
   improper.

   We recommend that the agency perform a proper cost realism evaluation of
   Ceridian's FPR, and then rely on that cost realism evaluation as part of
   its source selection determination. We also recommend that HHS make a new
   source selection decision containing a sufficient and documented
   comparative analysis of the offerors' proposals and the rationale for any
   cost/technical tradeoffs. If, upon reevaluation of FPRs, Magellan is
   determined to offer the best value to the government, HHS should terminate
   Ceridian's contract for the convenience of the government and make award
   to Magellan. We also recommend that Magellan be reimbursed the costs of
   filing and pursuing this protest, including reasonable attorneys' fees. 4
   C.F.R. sect. 21.8(d)(1) (2006). Magellan should submit its certified claim
   for costs, detailing the time expended and cost incurred, directly to the
   contracting agency within 60 days after receipt of this decision. 4 C.F.R.
   sect. 21.8(f)(1).

   The protest is sustained.

   Gary L. Kepplinger
   General Counsel

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

   [1] While the source selection decision states that the TEP's overall
   technical score for Ceridian's FPR was 92.75, a review of the TEP
   evaluation worksheets indicates that Ceridian's overall technical score
   was 92.58. Id., Tab 33, TEP Technical and Business Report, Aug. 28, 2006;
   Tab 19, TEP Technical Report, May 2, 2006.

   [2] Magellan originally protested that the agency's evaluation of its
   technical proposal was also unreasonable and that it should have received
   a higher technical rating. Protest at 7. The agency specifically addressed
   this issue in its report to our Office, discussing the minor perceived
   weaknesses in Magellan's technical proposal that resulted in a less than
   perfect rating. Contracting Officer's Statement at 6-7. As the protester's
   comments offered no rebuttal to the agency position here, see Comments,
   Nov. 13, 2006, at 4-5, we regard the argument as abandoned. Remington Arms
   Co., Inc., B-297374, B-297374.2, Jan. 12, 2006, 2006 CPD para. 32 at 4
   n.4; L-3 Comms. Westwood Corp., B-295126, Jan. 19, 2005, 2005 CPD para. 30
   at 4.

   [3] Magellan cites approximately 12 SOW requirements that it alleges
   Ceridian's proposal left unaddressed. Comments, Nov. 13, 2006, at 7-8.

   [4] The solicitation explicitly defined the term "contractor" as a
   post-award business entity with whom a contractual relationship had been
   established, and distinguished it from the term "offeror," which was
   defined as a preaward entity that submits a proposal. SOW sect. C.I.I.

   [5] Ceridian's FPR also included a listing of SAPs that indicated among
   other things, proximity to employee worksites. Id., Tab 29, Ceridian's
   FPR, Vol. I, Technical Proposal, attach. D, List of Network Providers.

   [6] The field consultant and field counselor categories represented the
   solicitation's two largest estimated labor categories, and together
   comprised 347,911 of the total 537,971 estimated labor hours for each
   performance period. RFP amend. 1, attach. 7, Pricing Tables for Section B,
   at 2.

   [7] Ceridian proposed a total of [DELETED] hours for field consultants
   while the HHS estimate was 1,282,475 hours (a difference of [DELETED]
   hours). Similarly, Ceridian proposed a total of [DELETED] hours for field
   counselors in comparison to the HHS estimate of 457,080 hours (a
   difference of [DELETED] hours).

   [8] The agency cost analyst also determined that Ceridian's revised cost
   proposal was not based on the field consultant and field counselor levels
   of effort as specified in the RFP. Id., Tab 22, Cost Evaluation of
   Ceridian's Revised Proposal, at 2-3.

   [9] This figure is apparently the product of the government's estimated
   levels of effort for the field consultant and field counselor labor
   categories for the base year, and the difference between the IGCE and
   Ceridian hourly rates for these labor categories ([DELETED]).

   [10] We note that with each proposal submission (i.e., initial, revised,
   and FPR), Magellan updated its proposed direct labor rates, including
   those for field consultants and field counselors, based upon then-current
   salary data.

   [11] Together with the offeror's rate for G&A ([DELETED] percent), the
   total cost associated with Ceridian's understated levels of effort for
   field consultants and field counselors is approximately $1,026,611
   ([DELETED]).

   [12] The contracting officer also considered only Magellan's proposed cost
   in her source selection decision; we note, however, that the cost analysis
   of Magellan's FPR found that an upward adjustment of only $80,098 was
   warranted.

   [13] Further, the end product of an agency's cost realism analysis should
   be a total evaluated cost of what the government realistically expects to
   pay for the offeror's proposal effort, as it is the agency's evaluated
   cost and not the offeror's proposed cost that must be the basis of the
   source selection determination. FAR sect. 15.404-1 (d)(2)(i); Eigen,
   B-249860, Dec. 21, 1992, 92-2 CPD para. 426 at 5.

   [14] As mentioned above, as part of its proposed effort to retain the
   incumbent workforce, Ceridian proposed to pay signing bonuses to a
   specified number of employees in various amounts. Similarly, Ceridian
   proposed various educational materials as part of the EAP promotional
   campaign mandated by the SOW.

   [15] The agency argues that its cost realism evaluation properly examined
   Ceridian's proposal and made adjustments as necessary. AR, Nov. 1, 2006,
   at 4. The agency report fails to mention or recognize, however, that
   notwithstanding the cost adjustments that the agency's cost analyst
   determined appropriate, the contracting officer never took these
   adjustments into account in her source selection decision.

   [16] Similarly, in her post-protest declaration, the contracting officer
   continued to view the existing cost differential between Magellan's and
   Ceridian's proposals only in terms of the offerors' proposed costs.
   Contracting Officer's Statement at 16.

   [17] Based on the total agency-estimated levels of effort for the field
   consultant and field counselor labor categories, and the difference
   between the existing and Ceridian hourly labor rates, plus overhead and
   G&A, the adjustment here is approximately $9,209,633 ([DELETED]). This
   amount does not include the additional [DELETED] percent standard merit
   increase that Ceridian also proposed.

   [18] Magellan also argues that the agency's cost realism evaluation of
   Ceridian's proposed overhead and G&A rate caps was unreasonable. The
   protester does not contest the acceptability of Ceridian's indirect cost
   caps per se. Rather, Magellan argues that because HHS found the "price
   concession" (under which Ceridian agreed to reduce its recovery at the
   rate of [DELETED] percent of its incurred costs) proposed by Ceridian in
   its revised proposal to be improper, and because Ceridian merely replaced
   its price concession with overhead and G&A rate ceilings, those indirect
   rate ceilings must also be improper. Comments, Nov. 13, 2006, at 15-16.
   When an offeror agrees to cap certain cost items--including by means of
   indirect rate ceilings--then that cap can reasonably be used by the agency
   as the probable cost for purposes of a cost realism analysis, BNF Techs.,
   Inc., B-254953.3, Mar. 14, 1994, 94-1 CPD para. 274 at 12, even where the
   indirect rate caps replace some other cost limitation device that the
   government deems improper.

   [19] As mentioned above, Ceridian's actual technical score was 92.58.

   [20] The contracting officer's statement also implies, without expressly
   stating, that because the agency found the offerors' proposals to be
   technically equal, the selection of Ceridian's lower-cost proposal did not
   involve a cost/technical tradeoff determination.