TITLE: B-309996; B-309996.4, Earl Industries, LLC, November 5, 2007
BNUMBER: B-309996; B-309996.4
DATE: November 5, 2007
************************************************************
B-309996; B-309996.4, Earl Industries, LLC, November 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: Earl Industries, LLC
File: B-309996; B-309996.4
Date: November 5, 2007
Robert M. Tata, Esq., and Carl D. Gray, Esq., Hunton & Williams, LLP, for
the protester.
Michael J. Gardner, Esq., Troutman Sanders, LLP, for the intervenor,
Kelly M. Callahan, Esq., Department of the Navy, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest is sustained in a negotiated procurement for award on a
"best value" basis where the source selection authority (SSA) did not
reasonably assess the protester's evaluated superior technical merit in
the SSA's cost/technical tradeoff assessment.
2. Protest is sustained in a negotiated procurement for the award of
a cost-reimbursement contract, where the agency in its cost realism
assessment accepted the awardee's work allocation in its cost proposal,
but that allocation was inconsistent with the firm's allocation of work in
its technical proposal.
3. Protest is sustained in a negotiated procurement for the award of
a cost-reimbursement contract, where the agency in its cost realism
assessment applied the protester's historic division-wide composite labor
rate rather than the protester's proposed labor rate to perform the
solicitation's notional work package and the agency did not consider the
protester's explanation during discussions that the firm's division-wide
rate included labor categories that the protester would not use in
performing in accordance with its proposed technical approach to meeting
the notional work package.
DECISION
Earl Industries, LLC protests the award of a contract to Marine
Hydraulics, Inc./Tecnico Corporation, a Joint Venture (MTJV), under
request for proposals (RFP) No. N00024-06-R-4409, issued by the Department
of the Navy for execution, planning, maintenance, repair and alterations
of FFG-7 class ships. Earl challenges the agency's cost and technical
evaluations and source selection decision.
We sustain the protest.
The RFP provided for the award of a cost-plus-award-fee contract for
execution, planning, maintenance, repair and alterations of Oliver Hazard
Perry FFG-7 class frigates home-ported in and visiting Mayport, Florida.
Offerors were informed that the contractor would be required to provide
all "material, support (electrical, crane, rigging, etc.) and facilities"
necessary to support 13 identified ships and any visiting FFG-7 class
ships. See RFP, Statement of Work (SOW), at 43, 52-53. The SOW further
informed offerors that "[r]epresentative items to be accomplished are
detailed in the notional work package for the FFG 7 Class provided in
[RFP] Section J."[1] Id. at 53.
The RFP provided for award on a "best value" basis and identified the
following evaluation factors: management capability, resource
capabilities, past performance, and cost. Offerors were informed that the
technical evaluation factors were more important than cost, and that the
management capability factor was more important than the resource
capabilities factor, which was more important than the past performance
factor. RFP sect. M, at 178-80. With respect to the cost factor, the RFP
provided that the agency would assess the realism of the offerors'
proposed costs and develop a projected cost to the government for each
proposal. In this regard, the RFP stated:
The Government will analyze and review the Offeror's cost estimates and
supporting cost data, including comparison to the Government estimate
for the notional and definitized work items in Section L.
Id. at 179.
The RFP provided detailed proposal preparation instructions. With respect
to the management capability factor, offerors were to, among other things,
describe their management organization, "including all teaming partners
and/or significant subcontractors (defined as those contractors providing
effort consisting of five percent (5%) of total direct dollars, AND/OR ten
percent (10%) of total man-hours."
RFP sect. L, at 159. With respect to the resource capabilities factor, the
RFP directed offerors to
[d]escribe the total facility resources available to the organization.
Clearly indicate which facility resources, production and
administrative, are committed [to] the work effort, which facility
resources are committed to other work efforts and any residual facility
resources available. The Offeror must clearly demonstrate that it has
access to facilities required to execute this contract. The Offeror must
demonstrate how it will obtain required production and administrative
facilities, as well as permits and certifications necessary to operate
these facilities and perform the work by contract award for the period
of performance of this contract.
Id.
With respect to the cost factor, the RFP instructed offerors to base their
cost proposals upon the notional work item package, stating that "proposed
estimated cost for the contract line items (CLINs) in Section C shall be
based on the Notional Work Item package provided in Section J-1 of the
Solicitation." Id. at 162 (emphasis in original). In this regard, offerors
were cautioned that their cost proposal staffing estimates must correlate
with their technical proposal staffing estimated under the resource
capabilities factor. Id. The RFP also provided that offerors must "fully
explain the estimating rationale on which [their] proposal[s are] based,
including full supporting rationale for proposed prime and significant
subcontractor[s]." Id. (emphasis in original).
The Navy received proposals from four offerors, including Earl and MTJV,
which were evaluated by the agency's technical evaluation review panel
(TERP) and cost assessment panel (CAP). Discussions were conducted with
the offerors, and revised proposals received. Earl's and MTJV's revised
proposals were evaluated as follows:
+------------------------------------------------------------------------+
| | Earl | MTJV |
|----------------------------+---------------------+---------------------|
|Management Capability | [Deleted] | Satisfactory |
|----------------------------+---------------------+---------------------|
|Resource Capabilities | [Deleted] | Satisfactory |
|----------------------------+---------------------+---------------------|
|Past Performance | [Deleted] | Satisfactory |
|----------------------------+---------------------+---------------------|
|Proposed Cost | [Deleted] | $56,494,108 |
|----------------------------+---------------------+---------------------|
|Projected Cost | [Deleted] | $59,171,174 |
+------------------------------------------------------------------------+
AR at 5.
The protester's higher technical ratings reflected the TERP's judgment
that Earl had "provided the strongest proposal to this solicitation in all
areas because of their well thought out plan and their strong current and
past performance, especially in the area of Resource Capabilities." AR,
Tab 15, TERP Report, at 2. In particular, the TERP noted under the
management capabilities factor that Earl had offered a team of master ship
repair contractors comprised of the largest sector of the industrial base
repairing ships at the Mayport Naval Station, and identified as a minor
strength Earl's proposal to apply its management expertise as the prime
contractor, which would "allow the full FFG7 program and management team
to be dedicated 100% to the [contract]." Id., encl. 3, Earl Evaluation, at
1. Under the resource capabilities factor, the TERP assessed as a major
strength Earl's clear demonstration that the firm had significant
facilities and staffing in Mayport to perform the contract; the TERP also
assessed, as a minor strength under this factor, Earl's many skilled
tradesmen with more than 25 years experience on FFG-7 class ships. Id. at
2-3.
The awardee's lower technical ratings reflected the TERP's judgment that
although MTJV had adequately addressed during discussions the TERP's
concerns with the firm's management and resource capabilities, the firm's
proposal was merely satisfactory. In this regard, the TERP had found that
MTJV's initial proposal was "weak in the local resource capabilities
area," noting that
[Marine Hydraulics] does not have shop resources in the Mayport area and
Tecnico's and the various other subcontractors['] facilities proposed to
be utilized to support the scope of this effort appear to be inadequate.
The offeror has not identified sufficient local facilities and resources
to execute concurrent availabilities or respond to surge requirements.
Id. at 2; encl. 4, MTJV Evaluation, at 1-2. Following discussions, the
TERP accepted MTJV's revised proposal promise to augment existing Mayport
facilities and resources with "new local resources as required to support
this contract." Id. at 3. In addition, the TERP noted that
[t]he required average men per week to support [this contract] in
Mayport will be supplemented with local subcontractors including
Tecnico, Atlantic Marine, Earl Industries, North Florida Shipyards, QED
Systems and Life Cycle Engineering. Work will be awarded based on "Best
Value" to the customer.
Id.
The offerors' cost proposals were evaluated by the agency's CAP, which
compared the firms' proposed staff-hours and material costs with those
estimated by the RFP. Neither Earl nor MTJV proposed to deviate from the
solicitation's staff-hour or material cost estimates. Thus, the CAP's
realism evaluation focused on the offerors' proposed rates. The agency
requested labor rate and indirect cost rate information from the Defense
Contract Audit Agency (DCAA) for the firms and their significant
subcontractors.
With respect to Earl's proposed costs, the CAP noted that Earl's proposed
composite direct labor rate, which was based upon the notional work
package, was lower than the firm's historical division-wide composite rate
and did not account for temporary Florida labor that would be required.
The Navy decided to apply Earl's significantly higher
Florida-division-wide composite labor rate instead of its proposed rate
based on the notional work package. Earl's proposed costs were upwardly
adjusted by $[Deleted], most of which ($[Deleted]) was attributable to the
application of this higher composite rate. See AR, Tab 17, Best Value
Advisory Council (BVAC) Report, at 6.
With respect to MTJV's proposed costs, the CAP accepted the corporate-wide
composite labor rates proposed by the joint venturers, Marine Hydraulic
and Tecnico, but increased MTJV's proposed material costs and general &
administrative rate based upon DCAA's recommendations. MTJV's proposed
costs were upwardly adjusted by $2,677,066, most of which ($2.64 million)
was attributable to applying fee and escalation to MTJV's proposed
material costs. See AR, Tab 16, CAP Report, encl. 4, MTJV Cost Evaluation,
at 31-32.
The TERP's and CAP's respective technical and cost assessments were
provided to the agency's BVAC. The BVAC accepted the TERP's adjectival
technical ratings of the proposals, but concluded that Earl had only a
"slight advantage in technical merit" over MTJV's proposal, which the BVAC
stated was "based upon the difference in the number of predominantly minor
strengths offered" by Earl. AR, Tab 17, BVAC Report, at 8. The BVAC noted
that all of the offerors, including MTJV and Earl, "met the requirements
of the solicitation with no weaknesses." Id. Identifying MTJV's nearly
$[Deleted] cost advantage, the BVAC determined that
award to [MTJV] with its technically satisfactory evaluation and
substantially lower price represents the best value to the Government.
Therefore, the BVAC recommends award to [MTJV].
Id.
The BVAC's findings and recommendation were reported to the source
selection authority (SSA), who also received oral briefings from the TERP
and CAP chairs regarding their respective findings. The SSA noted that the
BVAC had found that Earl's "slight technical advantage" was attributable
to "several predominantly minor strengths" in Earl's proposal that were
not found in MTJV's proposal. In this regard, the SSA stated that the
BVAC's report documented "that all of the offerors met the requirements of
the solicitation." The SSA selected MTJV's proposal as reflecting the best
value to the agency because "the slight technical advantage inherent in
[Earl's proposal]" did not warrant the payment of a [Deleted]-percent
premium associated with Earl's higher evaluated cost. AR, Tab 18, Source
Selection Decision, at 1. Award was made to MTJV, and this protest
followed.
Earl first complains that the Navy did not reasonably assess the relative
technical merit of its and MTJV's proposals. In this regard, Earl argues
that the SSA's conclusion in his selection decision that Earl's proposal
reflected only a "slight technical advantage" over MTJV's proposal was not
consistent with the TERP's evaluation and the solicitation evaluation
criteria.
In reviewing protests of alleged improper evaluations and source selection
decisions, it is not our role to reevaluate proposals. Rather, we will
examine the record to determine whether the agency's judgment was
reasonable and in accord with the stated evaluation criteria and
applicable procurement laws and regulations. See Abt Assocs., Inc.,
B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223 at 4. Such judgments are by
their nature often subjective; nevertheless, the exercise of these
judgments in the evaluation of proposals must be reasonable and must bear
a rational relationship to the announced criteria upon which competing
offers are to be selected. Hydraudyne Sys. and Eng'g B.V., B-241236;
B-241236.2, Jan. 30, 1991, 91-1 CPD para. 88 at 4.
Here, the RFP provided for a comparative assessment of the offerors'
management capability, resource capabilities, and past performance. See
RFP sect. M, at 178. With respect to the resource capabilities factor,
offerors were instructed to identify resources committed to the work
effort. See RFP sect. L, at 159.
The TERP found that Earl provided "the strongest proposal to this
solicitation in all areas because of their well thought out plan and their
strong current and past performance, especially in the area of Resource
Capabilities." AR, Tab 15, TERP Report, at 2. With respect to Earl's
proposed resource capabilities, the TERP noted as a major proposal
strength under the resource capabilities factor that
Team Earl's proposal clearly demonstrates that they have the facilities
and manning to execute the requirements of the FFG7 . . . contract. Team
Earl's available resources are unmatched in the Southeast region. Three
team members--Earl Industries and Atlantic Marine have significant
facilities located on Mayport Naval Station. They previously provided
significant industrial base support for the Navy in Mayport for many
years. Combined, they have almost six acres of land and approximately
120,000 square feet of fully certified facilities dedicated to the Navy.
These facilities have completed the overwhelming majority of maintenance
on over twenty surface ships and an aircraft carrier at Mayport Naval
Station. Team Earl has more than adequate resources and manning to
conduct multiple FFG7 availabilities concurrently.
Id., encl. 3, Earl Evaluation, at 2.
MTJV's final revised proposal, on the other hand, was found by the TERP to
be only satisfactory under the management capability, resource
capabilities, and past performance factors. AR, Tab 15, TERP Report, at 3.
As noted above, with respect to the awardee's resource capabilities, the
TERP assessed MTJV's initial proposal as being "weak" because the firm had
not identified adequate resources to perform the contract, and assigned a
"marginal" rating to MTJV's proposal under this factor. In discussions,
MTJV admitted that the "overwhelming majority" of MTJV's current resources
were located in Norfolk, Virginia, and not in Mayport, Florida. MTJV
promised to augment its existing Mayport facilities and resources with
"new local resources as required" and to solicit all local "master ship
repair agreement" and "agreement for boat repair" contractors (such as
Earl, Atlantic Marine, and QED) to execute various tasks.[2] See AR, Tab
3, MTJV Discussions Reponses, at 11; Tab 15, TERP Report, encl. 4, MTJV
Evaluation, at 3. In addition, MTJV promised to provide the Navy with
MTJV's "Shipyard in a Box," which reflected shipyard resources that MTJV
stated could be shipped to Mayport, as required.[3] Id. at 12. With little
explanation, the TERP changed MTJV's rating for the resource capabilities
factor from marginal to satisfactory based upon these promises.
As noted above, the TERP concluded that Earl had provided a superior
proposal to that of MTJV, particularly in the area of resource
capabilities, under which the TERP documented a major strength. The BVAC
and SSA concluded, however, that Earl's higher technical ratings were
attributable to "several predominantly minor strengths" and that Earl's
technical advantage was "slight."
Although source selection officials may reasonably disagree with the
ratings and recommendations of evaluators, they are nonetheless bound by
the fundamental requirement that their independent judgments be
reasonable, consistent with the stated evaluation scheme and adequately
documented. DynCorp Int'l LLC, B-289863, B-289863.2, May 13, 2002, 2002
CPD para. 83 at 4. Here, the SSA's conclusion with respect to Earl's
technical advantage is unsupported by any meaningful explanation in either
the contemporaneous record or in response to the protest. That is, we have
been provided with no explanation supporting the BVAC's and SSA's judgment
that Earl's proposal of significant resources in Mayport (which the TERP
termed "unmatched in the Southeast region"), as compared to MTJV's promise
to obtain resources as necessary, represented only a slight technical
advantage, where the RFP provided for a comparative evaluation of the
offerors' respective resource capabilities. In this regard, there is no
explanation for the SSA's and BVAC's conclusion that Earl's superior
technical ratings were attributable to minor strengths. Based upon this
record, we do not find that the SSA reasonably assessed, in accordance
with the solicitation's evaluation criteria, the relative technical merit
associated with Earl's and MTJV's proposals in his decision to select
MTJV's proposal on the basis of its lower evaluated costs. Earl's protest
is sustained on this basis.
Earl also challenges the Navy's cost realism evaluation of its and MTJV's
cost proposals. 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 an offeror, the government is bound to pay the
contractor its actual and allowable costs. Hanford Envtl. Health Found.,
B-292858.2, B-292858.5, Apr. 7, 2004, 2004 CPD para. 164 at 9; PADCO,
Inc.--Costs, B-289096.3, May 3, 2002, 2002 CPD para. 135 at 5; see Federal
Acquisition Regulation (FAR) sect. 16.301. As a result, a cost realism
analysis is required to determine the extent to which an offeror's
proposed costs represent the offeror's likely costs in performing the
contract 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 involves 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
Commc'n Sys., Inc., B-283650 et al., Dec. 16, 1999, 2000 CPD para. 3 at 5.
Based on the results of the cost realism analysis, an offeror's proposed
costs should be adjusted when appropriate. FAR sect. 15.404-1(d)(2)(ii).
The evaluation of competing cost proposals requires the exercise of
informed judgment by the contracting agency. We review an agency's
judgment in this area only to see that the agency's cost realism
evaluation was reasonably based and not arbitrary. Jacobs COGEMA, LLC,
B-290125.2, B-290125.3, Dec. 18, 2002, 2003 CPD para. 16 at 26. An
agency's cost realism analysis need not achieve scientific certainty;
rather, the methodology employed must be reasonably adequate and provide
some measure of confidence that the agency's conclusions about the most
probable costs under an offeror's proposal are reasonable and realistic in
view of other cost information reasonably available to the agency as of
the time of its evaluation. See Metro Mach. Corp., B-295744, B-295744.2,
Apr. 21, 2005, 2005 CPD para. 112 at 10-11.
Here, Earl argues that the Navy's realism evaluation of MTJV's cost
proposal was unreasonable because, although the Navy accepted MTJV's
allocation in its revised cost proposal of [Deleted] percent of the
production hours to Tecnico, see AR, Tab 8, MTJV Revised Cost Proposal, at
Supporting Data Breakdown #1, Cost Summary of All CLINs, MTJV, in its
revised technical proposal, stated tha t it would allocate [Deleted]
percent of Tecnico's productive hours to "Miscellaneous Specialty
Contractors & other [master ship repair contractors] Earl Ind., [Atlantic
Marine], QED, etc."[4] See AR, Tab 3, MTJV Revised Technical Proposal, at
22. This was unreasonable, Earl argues, because Tecnico's evaluated
productive direct labor rate was significantly lower than that of Earl and
its subcontractors, Atlantic Marine and QED. Earl contends that if the
Navy had assessed MTJV's proposal to allocate [Deleted] percent of
Tecnico's productive hours to other contractors this would require an
upward adjustment in MTJV's evaluated costs in the agency's cost
evaluation. Earl "conservatively" estimates that MTJV's proposed costs
would be increased by at least $[Deleted] to account for Earl's and its
subcontractor's higher rates and for the use of their facilities. See Earl
Comments, exh. C, Declaration of Cost Consultant, at 3.
The Navy admits that MTJV proposed to have [Deleted] percent of the
anticipated contract work performed by "miscellaneous specialty
contractors," but argues that a cost realism adjustment was not necessary
because Tecnico's evaluated labor rates were reasonably assumed to be
representative of the prevailing Mayport area labor rates.[5] See Navy's
Response to Earl's Comments at 2-3. In this regard, the Navy contends that
it treated Earl equally, because Earl also stated in its technical
proposal that [Deleted] percent of its future work would be performed by
undefined "surge/specialty contractors," and the Navy also did not adjust
Earl's proposed costs to account for this. The Navy also argues that, in
any event, Earl has not demonstrated that it was prejudiced because,
according to the agency, the Navy's source selection decision would not
change even accepting Earl's argument that MTJV's proposed costs should be
upwardly adjusted by $[Deleted]. See Navy's Response to Earl's Comments
at 6 n.6.
An agency may not reasonably award a cost-reimbursement contract to an
offeror whose cost proposal evidenced a different technical approach than
that presented in the technical proposal, without resolving the
inconsistency. See TRW, Inc., B-254045.2, Jan. 10, 1994, 94-1 CPD para. 18
at 8-9. Here, the agency failed to resolve the inconsistency presented in
MTJV's cost and technical proposals.
In any case, we find no reasonable basis in the record for the Navy's
"assumption" that Tecnico's rates were "representative of prevailing
Mayport area labor rates." As noted by the protester, Tecnico's burdened
labor rate of $[Deleted] was significantly lower than all but one of the
other offerors' and their subcontractors' burdened labor rates. In fact,
we calculate the average burdened labor rate for offerors and their
subcontractors to be $[Deleted].[6] More specifically, Tecnico's burdened
labor rate was significantly lower than the rates proposed by Earl
($[Deleted]), Atlantic Marine ($[Deleted]), and QED ($[Deleted]), which
were the firms specifically identified by MTJV for possible performance of
[Deleted] percent of the contract work. Although the Navy provided the
declaration of the CAP chairperson, who generally states that he found
that Tecnico's rate was comparable to rates of other contractors working
in the Mayport area, see Navy's Response to Earl's Comments, attach. D,
Declaration of CAP Chair, at 2, this declaration does not explain with any
specificity how he determined this, nor does the Navy otherwise address or
rebut the protester's arguments concerning Tecnico's lower rate compared
to the offerors' rates in this competition. We also note that allowing
MTJV to propose subcontracting a significant amount of the contract to
unnamed subcontractors appears to also be inconsistent with the RFP's
requirements to identify and provide cost proposals for significant
subcontractors, which the RFP defined, in part, to be contractors that
were providing effort consisting of 5 percent of total direct dollars. See
RFP sect. L, at 154, 159.
With respect to the Navy's contention that Earl similarly proposed to
perform [Deleted] percent of the contract with subcontractors other than
those it proposed in its cost proposal, we fail to see how, even if this
were true, this demonstrates that the agency's cost realism evaluation was
reasonable. In any event, as noted above, MTJV stated in its technical
proposal that it would allocate [Deleted] percent of its productive hours
assigned to Tecnico at that firm's low labor rate to other "miscellaneous
specialty contractors," which all appear to have higher labor rates than
Tecnico's. Earl, on the other hand, stated in its technical proposal that
[Deleted] percent of the contract work would be performed by its
identified team of subcontractors (whose labor rates were considered in
the agency's cost realism analysis), and that Earl would "accomplish the
remaining work with the assistance of our Surge/Specialty Subcontractors"
(all of which were also specifically identified in Earl's proposal). See
AR, Tab 5, Earl Technical Proposal, at 25-26. There is no evidence in the
record, nor has the agency provided any argument, that indicates that any
of the surge/specialty subcontractors identified by Earl in its proposal
have higher rates than Earl. In any event, unlike MTJV's unequivocal
statement that work allotted to Tecnico would be performed by others, Earl
stated it would perform [Deleted] percent of the contract work, albeit
with the assistance of the identified surge/specialty subcontractors.[7]
We also do not agree with the Navy that Earl has failed to demonstrate
that it was prejudiced by the Navy's unreasonable cost realism evaluation.
Because the RFP provided for a cost/technical tradeoff basis for award,
the protester, to demonstrate prejudice, is not required to show, as the
Navy apparently believes, that the protester's evaluated cost would be
lower than that of MTJV; rather, Earl need only show a reasonable
possibility that, but for the agency's actions, it would have had a
substantial chance of receiving the award. See Magellan Health Servs.,
B-298912, Jan. 5, 2007, 2007 CPD para. 81 at 17. Here, given our decision
above that the Navy did not reasonably consider the firm's relative
technical merit in its source selection, we find a reasonable possibility
that a reasonable cost realism assessment of MTJV's proposal could result
in a different award decision. In this regard, we note that in making our
decision we afforded little weight to the Navy's post-protest argument
that MTJV's proposal would be selected for award even if its evaluated
costs were increased by $[Deleted]. See Boeing Sikorsky Aircraft Support,
B-277263.2, B-277263.3, Sept. 29, 1997, 97-2 CPD para. 91 at 15.
In short, we find that the Navy failed to reasonably assess the realism of
MTJV's proposed costs, as required by the RFP, and that Earl was
prejudiced by this failure. Earl's protest is also sustained on this
basis.
Earl also protests that the Navy unreasonably ignored Earl's proposed
labor rate based upon performing the RFP's notional work package and
applied the firm's higher, historical Florida-division-wide rate. In this
regard, Earl complains that its division-wide labor rate includes "trades
and skilled manpower" that are not required under its technical approach
to perform the notional work package. See Earl's Comments at 12-13. The
Navy responds that the CAP determined that the work under the contract
would be broader than the items contained in the notional work package and
therefore "the most appropriate rate to accurately predict the actual cost
of performance would be Earl's Florida Division yard-wide rate."[8] AR at
7. There is no evidence in the record that the Navy meaningfully
considered Earl's explanations during discussions that the firm's
division-wide rate included labor categories that the protester would not
use in performing in accordance with its proposed technical approach. In
the absence of such consideration, what the Navy did was nothing more than
a verification of the firm's historical rate, and not an adequate cost
realism analysis assessing the firm's probable cost of performing the
contract in accordance with its proposed technical approach.
In any event, as noted above, because the agency did not know the exact
work to be performed, the Navy provided the notional work package to
represent the work items typically performed. See AR at 3 n.1. Earl relied
upon the notional work package to calculate its composite labor rate to
perform the contract work, as would be expected given the solicitation's
instructions that offerors base their estimated costs upon the notional
work package. In assessing the realism of each offeror's proposed costs,
the agency was required to determine the extent to which the offeror's
proposed costs represent the offeror's likely costs in performing the
contract under that offeror's technical approach, assuming reasonable
economy and efficiency. See FAR sections 15.305(a)(1), 15.404-1(d)(1),
(2); The Futures Group Int'l, supra, at 3. Assuming that the notional work
package reflects the likely work to be performed under the contract, the
agency should have assessed Earl's approach (including its labor mix) to
performing the notional work package. If the agency believes that the
notional work package does not reflect the likely work to be performed
under the contract, we think the agency should consider amending the RFP
to inform offerors of the work the agency believes would be required.
The protest is sustained.[9]
We recommend that the Navy consider whether the RFP should be amended to
reflect the work the agency believes would likely be performed under the
contract, and if the RFP is amended, to obtain revised technical and cost
proposals from the offerors. In the event that the agency does not amend
the RFP, we recommend that, consistent with this decision, the Navy
perform a new cost realism evaluation, reopen discussions, if necessary,
and make a new source selection decision that reasonably considers the
evaluated technical differences in the firms' proposals. If a firm other
than MTJV is selected for award, the agency should terminate MTJV's
contract and make award to that other firm. We also recommend that the
agency reimburse the protester for its reasonable costs of filing and
pursuing the protests. Bid Protest Regulations, 4 C.F.R. sect. 21.8(d)(1)
(2007). The protester's certified claim for costs, detailing 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).
Gary L. Kepplinger
General Counsel
------------------------
[1] The Navy states that the notional work package, which consists "of a
representative sample of work items typically performed," was used
"[b]ecause the exact work to be accomplished" was not known. Agency Report
(AR) at 3-4 n.1.
[2] Atlantic Marine and QED, two local contractors, were proposed by Earl
as significant subcontractors. Earl states that neither Earl nor Atlantic
Marine and QED consented to MTJV's representation that they would perform
work as subcontractors to MTJV. See Earl's Comments at 18.
[3] MTJV informed the Navy that the "Shipyard in a Box" provided resources
that were available to this contract on an average of 50 to 90 percent of
the time. See AR, Tab 3, MTJV Discussions Response, at 12. As noted by the
protester, the costs of transporting the Shipyard in a Box resources to
Florida were apparently not included in MTJV's cost proposal, although
those costs would appear to be considerable.
[4] In response to the Navy's question concerning the size of the on-site
MTJV production management and execution staff, MTJV also stated that
"[a]pproximately [Deleted]% of the workload for this contract will be
executed by other local [master ship repair agreement] and [agreement for
boat repair] holders that we will solicit to perform work on a competitive
basis, as the work is identified and scheduled." AR, Tab 3, MTJV Revised
Technical Proposal, at 1.
[5] The Navy also suggests that OPNAV Note 4700, which was incorporated in
the RFP, allows offerors to allocate staffing differently between their
technical and cost proposals; the agency, however, has failed to direct to
us any part of this document, nor have we found any part, that allows an
offeror to propose one allocation of work in its technical proposal but to
estimate costs in its cost proposal based upon a different allocation of
work. In this regard, the RFP required offerors to ensure that their
proposed staffing estimates in their technical and cost proposals
correlated. RFP sect. L, at 162.
[6] The record did not provide a burdened labor rate for one
subcontractor, and we therefore did not include this subcontractor in our
calculation. Also, the record provided only an unburdened labor rate for
another subcontractor, which we applied in calculating an average burdened
labor rate, although we recognize that doing so artificially decreased the
average burdened rate that we calculated.
[7] To the extent that the Navy believes that this may be a problem, this
is a matter that should have been raised with Earl during discussions. See
TRW, Inc., supra, at 11.
[8] The Navy, citing our decision in Metro Mach. Corp., B-297879.2, May 3,
2006, 2006 CPD para. 80, argues that the agency was required to look
beyond Earl's proposed composite labor rate for the notional work package
because that rate may not reflect the actual rate that would be applied in
contract performance. In Metro Mach., we found that the agency could not
accept, as a part of its realism evaluation, an offeror's promise in its
cost proposal to perform all the contract work where that offeror stated
in its technical proposal that it would subcontract a portion of that work
to other firms. Id. at 12-15. Unlike in Metro Mach., Earl's cost proposal
is consistent with its technical approach to performing the notional work
package. In this regard, the Navy has provided no evidence that the
notional work package does not reflect the contract work that the agency
expects to be performed.
[9] Earl raised a number of other protests allegations concerning the
Navy's evaluation of MTJV's technical proposal and past performance. We do
not find a sufficient basis in the record to conclude that the agency's
evaluation was unreasonable in these respects. However, given our
recommendation below, the Navy may wish to revisit these allegations.