TITLE: B-311241; B-311241.2, Carahsoft Technology Corporation; Allied Technology Group, May 16, 2008
BNUMBER: B-311241; B-311241.2
DATE: May 16, 2008
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B-311241; B-311241.2, Carahsoft Technology Corporation; Allied Technology Group, May 16, 2008

   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: Carahsoft Technology Corporation; Allied Technology Group

   File: B-311241; B-311241.2

   Date: May 16, 2008

   Frederick W. Claybrook, Jr., Esq., Angela B. Styles, Esq., and James
   Peyster, Esq., Crowell & Moring LLP, for the protesters.

   Kristen M. Nowadly, Esq., General Services Administration, for the agency.

   Paul N. Wengert, Esq., and Ralph O. White, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protests are sustained where, in a competition for human resources
   services Federal Supply Schedule contracts, the contemporaneous record
   fails to adequately document the basis for the agency's decision to
   exclude compensation management services from the awards made to the
   protesters, and the agency's explanation of its reasoning, in its
   responses to the protests, is inconsistent with the limited
   contemporaneous record.

   DECISION

   Carahsoft Technology Corporation and Allied Technology Group protest the
   decision not to include services for compensation management in the award
   of Federal Supply Schedule (FSS) contract modifications to each of them by
   the General Services Administration (GSA) under request for proposals
   (RFP) No. 2FYA-AR-060004-B for human resources and equal employment
   opportunity services worldwide.[1] The protesters object that GSA
   unreasonably excluded compensation management services from their
   contracts based on flawed evaluations.

   We sustain the protests.

   BACKGROUND

   GSA issued the RFP as a solicitation for commercial items on May 21, 2007
   as "Refresh 7" to Schedule 738X, which is the human resources and equal
   employment opportunity services schedule. As part of this latest iteration
   of Schedule 738X, GSA added two new Special Item Numbers (SINs),
   designated as SIN 595-22 and SIN 595-26.

   GSA explained that the objective of the solicitation is to establish FSS
   contracts under which agencies can procure services from private sector
   firms that are capable of establishing and operating human resources (HR)
   shared service centers (SSC). CO Statement at 2. These new SINs covered
   "Private Shared Service Center[s] for Core HR Services" and "Private
   Shared Service Center[s] for non-Core HR Services." Among the new services
   was performance of compensation management (primarily payroll processing,
   frequently referred to as payroll). The RFP anticipated the award of FSS
   contracts with a base period of 5 years, followed by three 5-year option
   periods.

   The RFP provided that personnel action processing, compensation
   management, and benefits management were the three "core" services, and
   that nine other types of services were "non-core" services. RFP at 99-102.

   The proposal process had two stages. First, offerors were required to
   submit written proposals (limited to 150 pages for the technical volume).
   Those offerors whose written proposals were evaluated as acceptable were
   then provided instructions for a "technical and functional operational
   capability demonstration (OCD)." RFP at 134. The purpose of the
   demonstration was to "provide Selected Offerors the opportunity to
   demonstrate the capability of their proposed solution," and to "ask
   Offerors to demonstrate several specific requirements by running specific
   test cases using pre-defined data, and then [have] Offerors . . .
   demonstrate a number of additional requirements at [their] choosing from
   the list of self-evaluation requirements" in 24 hours spread over 3 days.
   RFP at 138. In recognition of the extensive requirements, the RFP also
   addressed the depth and focus of the demonstration:

     [GSA] understands that Selected Offerors may not be able to demonstrate
     all the elements of their solution and technical environment. After
     Offerors demonstrate the mandatory elements specified by the Federal
     government as part of the [demonstration], Selected Offerors are free to
     select elements to demonstrate, and the order in which they are
     presented . . . . At the same time, Selected Offerors should bear in
     mind that in evaluating the risk associated with the Selected Offeror's
     approach and solution, the Federal government will consider that there
     is a greater risk associated with items that are described but not
     demonstrated.

   RFP at 139.

   In addition to setting forth various evaluation factors, the RFP provided
   that "[a]wards will be made to those responsible Offerors whose proposals
   conform to the solicitation and are advantageous to the Federal government
   based on technical merit, cost/price realism and other factors specified
   in this solicitation." RFP at 133; see also RFP at 137 (similar
   statement). In response to offeror questions, GSA later clarified that
   "[a]ll offers that are technically acceptable and meet standard GSA
   Multiple Award Schedule award criteria will be awarded [contracts]."
   Agency Report (AR), Tab 6, Responses to Vendor Questions, June 7, 2007, at
   1.

   Ultimately five offerors submitted proposals, including Carahsoft and
   Allied. Although Carahsoft and Allied were seeking an award of the HR SSC
   services as modifications to their FSS contracts, the firms both submitted
   the same technical approach, and used the same subcontractors: Avue and
   Ceridian. Both proposals described the use of an established bidirectional
   interface with the United States Department of Agriculture, National
   Finance Center (NFC), for many functions, including payroll processing.
   E.g., AR, Tab 26, Allied Proposal, vol. II, at 21; Tab 27, Carahsoft
   Proposal, vol. II, at 21. The proposals also made clear that the firms
   were offering to provide compensation management services through the
   established NFC payroll interface managed by Avue. As an "alternative,"
   both proposals also offered the services of Ceridian, a private payroll
   service provider.[2]

   Consistent with the two-step proposal process in the RFP, GSA concluded
   that both firms had submitted satisfactory written proposals, and the
   firms were then invited to participate jointly in a demonstration, along
   with their subcontractors.

   While there is some dispute about the content of the demonstration,[3]
   there is no dispute that Carahsoft and Allied did not demonstrate the
   payroll processing function using GSA's sample data. The firms did,
   however, spend "two to three hours" of the demonstration establishing the
   functionality of Ceridian's federal payroll processing using other sample
   data, which Ceridian developed for use in demonstrating its systems to
   prospective commercial customers.[4] Protester's Comments at 3;
   Declaration of Avue Chief Executive Officer at 6 & attach. C (screen shots
   of payroll presentation from demonstration).

   After the demonstrations, the CO met with the other members of the
   technical evaluation panel (TEP) from December 5 to 7, 2007. His
   handwritten notes, evidently taken during that meeting, include criticisms
   of the protesters. While somewhat jumbled, on one page the notes refer to
   rejecting the protesters on compensation management, to rating them "red,"
   and to down-selecting them because Ceridian did not perform a
   demonstration. Supplemental (Supp.) AR, Tab 28, Handwritten Notes, at 6
   (dated "12/6/07").

   Approximately 2 weeks later, on December 18, the TEP prepared a "final
   report and award decisions" presentation, consisting of 107 slides. GSA
   emphasizes that the TEP report (the presentation slides) embodies the
   "consensus opinion of the evaluation team" (of which the CO was a voting
   member), and is the "final product of the evaluators' decisions." Letter
   from GSA to GAO, Apr. 24, 2008, at 2.

   In the report, the TEP assigned color ratings (green, yellow, orange,
   red[5]), and risk ratings (high, moderate, low) to each evaluation factor
   and subfactor. Past performance was rated either very good or
   satisfactory. The Carahsoft and Allied proposals (which were rated
   together), received the following ratings:

   +------------------------------------------------------------------------+
   |Factor/Subfactor                           |    Rating     |    Risk    |
   |-------------------------------------------+---------------+------------|
   |Technical Capability & Approach            |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Architecture & Integration              |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Fed Security Standards                  |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Hosting                                 |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Deployment Approach                     |     Green     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Service and Support                     |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Quality Control                         |     Green     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |Management Capability and Approach         |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Project Mgmt Approach                   |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- EVMS                                    |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Compliance & Mgmt Const.                |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |Functional Capability and Approach         |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Features & Functionality                |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Change Management                       |      Red      |  High[6]   |
   |-------------------------------------------+---------------+------------|
   |-- Training                                |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |-- Capability of the Solution              |    Yellow     |  Moderate  |
   |-------------------------------------------+---------------+------------|
   |Corporate Capability & Past Performance    |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Provider Profile/ Corp. Cap.            |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Past Performance                        |     Green     |    Low     |
   |-------------------------------------------+---------------+------------|
   |-- Client references                       | Satisfactory  |    Low     |
   +------------------------------------------------------------------------+

   AR, Tab 21, TEP Report, at 72.

   The ratings were followed by several slides with narrative comments for
   each offeror, and several more slides with issues to be addressed in the
   "get well" period. In the narrative slides, the TEP provided the following
   comments regarding the "Yellow" and "Moderate Risk" ratings for
   "Capability of the Solution: Core HR Functions," including compensation
   management:

     .        Functionality for Avue's proposed Time & Attendance system . .
     . was described with some capability demonstrated; however, no
     Federal-specific requirements were demonstrated.

     .        Though an interface from the . . . Time & Attendance system to
     NFC ePayroll is currently in production for a Federal client, the . . .
     product is currently a stand-alone application, and was not linked to
     Avue's proposed payroll processing solution (Ceridian) at the Functional
     [demonstration].

     .        No operational capability for the Ceridian payroll solution was
     demonstrated at the Functional [demonstration].

   Id. at 95.

   The TEP report then recommended that Carahsoft and Allied[7] receive an
   award (that is, modification of their existing FSS contracts) for
   personnel action processing and benefits management services (under the
   core services SIN 595-22), and all non-core services (under the non-core
   services SIN 595-26). While the TEP report omitted compensation management
   from the award recommendation for the protesters, the report did not
   provide any reasons for the exclusion.

   On December 20, GSA awarded Schedule 738X contract modifications to both
   Carahsoft and Allied, but excluded compensation management services under
   SIN 595-22. Each contract stated that the firm was being awarded personnel
   action processing and benefits management services (under SIN 595-22), and
   all non-core services (under SIN 595-26). However, each award also stated
   that the firm "is not awarded Core Compensation Management services[.]"
   Appended to each award document was a list of "get well" items to be
   completed within 1 year of award, none of which related to the core
   compensation management services. Declaration of Avue Chief Executive
   Officer, attach. D, Contract Award Document, at 4. The record here shows
   that only one offeror received an award for core compensation management
   services.

   When Carahsoft and Allied received the award notification, they were
   informed that compensation management had been excluded from their
   contracts. The firms objected to the exclusions and requested a
   debriefing.

   GSA debriefed Carahsoft and Allied on January 23, 2008. The firms then
   submitted a letter to GSA objecting to the agency's decision to exclude
   compensation management services from their contracts. On January 31,
   2008, GSA denied the protesters' request to have compensation management
   added to their contracts. Specifically, GSA explained:

     The reason that the TEP [Technical Evaluation Panel] recommended that
     your firm not be awarded Compensation Management is that Carahsoft, and
     its subcontractors Avue and Ceridian, failed to properly complete the
     functional Operational Capabilities Demonstration (OCD) for the payroll
     portion, as required in the Functional OCD instructions that were sent
     to you on October 24, 2007, several weeks before the demonstrations were
     scheduled.

     [T]his lack of a payroll demonstration . . . led the TEP to conclude
     there was a high degree of risk in awarding your firm Compensation
     Management.

   AR, Tab 24, Letter from GSA to Carahsoft, Jan. 31, 2008, at 1-2.

   These protests followed.

   DISCUSSION

   Fundamentally, the protesters argue that the contemporaneous record
   provided no support for GSA's positions that their proposals to provide
   compensation management services were evaluated as either high risk or
   technically unacceptable, or otherwise failed to meet the RFP standards
   for award.[8] More specifically, the protesters point to the TEP final
   report, showing that despite the written notes of the TEP meeting on
   December 6, in the final evaluation consensus on December 18 the
   protesters received a yellow rating (the second highest rating) for their
   functional capability and approach, which encompasses compensation
   management.

   In responding to the protest, GSA argues that it was reasonable to exclude
   compensation management services from the protesters' awards. In
   explaining its actions, GSA first argued to our Office that "the TEP . . .
   conclude[d] that there was a high degree of risk in awarding [the
   protesters] Compensation Management," and that the "Contracting Officer
   agreed with the TEP." AR at 3. When the protester questioned the absence
   of support in the record for this position, our Office asked GSA to
   supplement its report. In doing so, GSA produced the CO's handwritten
   notes of the TEP meeting in early December. In its supplemental report,
   GSA argued that after the CO's meeting with the TEP on December 7, the CO
   "then exercised independent judgment in assessing [the protesters as]
   `red,' which translated into technically unacceptable and therefore `high
   risk.'" Supp. AR at 2.

   When the protester continued to challenge GSA's position, GSA asked to
   submit a further response, and our Office agreed. GSA's third response on
   this issue appears to shift the agency position again. In essence, GSA now
   argues that instead of the CO exercising his independent judgment to
   assess the protesters "red" (or unacceptable), the TEP itself had
   implicitly found the protesters technically unacceptable, but without
   explicitly so stating:

     [T]he fact that the TEP did not include Compensation Management in its
     award recommendation can only mean one thing: for that SIN [sic] they
     were not found technically acceptable.

   Letter from GSA to GAO, Apr. 24, 2008, at 3-4.

   In reviewing protests of alleged improper evaluations and source selection
   decisions, it is not our role to reevaluate submissions; 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. However, for our Office to
   perform a meaningful review, the record must contain adequate
   documentation showing the bases for the evaluation conclusions and source
   selection decision. Panacea Consulting, Inc., B-299307.4, B- 299308.4,
   July 27, 2007, 2007 CPD para. 141 at 3-4. Where an agency fails to
   document or retain evaluation materials, it bears the risk that there may
   not be adequate supporting rationale in the record for us to conclude that
   the agency had a reasonable basis for the source selection decision.
   Systems Research & Applications Corp.; Booz Allen Hamilton, Inc., B-299818
   et al. Sept. 6, 2007, 2008 CPD para. 28 at 12.

   In our view, the record here is inadequately documented to show the
   reasonableness of GSA's decision to exclude compensation management from
   the protesters' awards. Additionally, GSA's arguments in this protest
   appear inconsistent with the contemporaneous record of the TEP
   conclusions. While the TEP's conclusions are fairly general, they do not
   assign the protesters a "high risk," a "red" rating, or any other rating
   indicating technical unacceptability for any aspect of compensation
   management. In addition, there is no record that the contracting officer
   arrived at a reasoned independent judgment regarding rating, risk, or
   acceptability of the protesters' proposals under the RFP criteria at any
   time after the December 18 TEP report, which assigned a rating of "yellow"
   and "moderate risk" to these proposals. The TEP report itself is otherwise
   silent on the basis for implicitly excluding compensation management from
   the awards.

   In attempting to address the lack of any discussion of how the TEP
   evaluated the protesters' approach to compensation management, GSA argued
   that "[s]ince there was no demonstration of the protesters' ability to
   perform using GSA supplied data, there was nothing for the TEP to evaluate
   or discuss with respect to the award of Compensation Management." Supp. AR
   at 2-3.

   We think GSA's argument is not supported by the record. In the RFP, and
   again in the additional instructions provided before the demonstration,
   GSA sought significant information about how offerors would provide
   compensation management services. Very simply, while it is undisputed that
   the protesters did not demonstrate the Ceridian product using GSA's sample
   test data, both protesters provided information on their compensation
   management approach in their written proposals, and demonstrated the
   functions of their private payroll processing subcontractor using
   commercial data.[9] In light of this, we fail to see a reasonable basis
   for GSA's position that there was nothing for the TEP to evaluate, and, in
   fact, the contemporaneous summary ratings given in the final TEP report
   suggest that GSA did not find the protesters' approach unacceptable.
   Moreover, we think the argument that these proposals provided nothing to
   discuss or evaluate is both inaccurate and unfair, and is belied by the
   record.[10]

   In summary, we conclude that GSA's decision to exclude compensation
   management services from the protesters' awards is not reasonably
   supported by either the contemporaneous record or the agency's
   explanations during this protest. Accordingly, we need not reach the
   specific issues raised by the protesters concerning the evaluation of
   their proposals and the meaning of specific provisions in the RFP.

   The protests are sustained.

   RECOMMENDATION

   The protesters contend that our Office should recommend that GSA award the
   core compensation management services to the protesters. We disagree with
   the protesters with regard to the proposed remedy. As indicated above, GSA
   has argued here that these proposals are technically unacceptable. While
   we have found this conclusion to be unsupported by the contemporaneous
   record, we will not evaluate proposals anew or substitute our judgment for
   that of the agency. GSA evaluators, not our Office, should determine
   whether the protesters meet the criteria for award, based on a full
   consideration of the written proposals and the demonstrations here.

   We recommend that GSA reevaluate the protesters' proposals consistent with
   this decision, and make a new award decision for each of the protesters,
   adequately documenting the agency's conclusions on these points. In doing
   so, GSA should ensure that its evaluation takes into account the content
   of both the written proposal and the demonstration provided, as measured
   against the instructions provided in the RFP, and the evaluation criteria.
   If the failure to retain documentation of the earlier demonstration leads
   GSA to conclude that an additional partial demonstration is needed in
   order to determine technical acceptability, it should promptly arrange
   one. We also recommend that the agency reimburse the protesters for the
   reasonable costs of filing and pursuing their protests, including
   reasonable attorneys' fees. Bid Protest Regulations, 4 C.F.R.
   sect. 21.8(d)(1) (2008). The protesters' certified claims 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] We recognize that this protest relates to the modification of the
   protesters' existing FSS contracts, and that usually contract
   modifications are matters of contract administration beyond the review of
   our bid protest function. Here, however, the modification involves
   significant changes to the scope of the existing FSS contracts, and these
   requirements have been procured in an open competition under an RFP. In
   addition, GSA has not disputed our jurisdiction to decide these protests.
   In fact, another offeror, whose situation is not otherwise relevant to the
   protest, did not previously hold one of these FSS contracts and received a
   new contract as a result of this competition. Contracting Officer's (CO)
   Statement at 5.

   [2] The proposals referred to Ceridian's services as "an additional
   choice" or "the Ceridian option." AR, Tab 26, Allied Proposal, vol. II, at
   81; Tab 27, Carahsoft Proposal, vol. II, at 81. See also AR, Tab 26,
   Allied Proposal, vol. II, at 80; Tab 27, Carahsoft Proposal, vol. II, at
   80 ("Avue brings the . . . expertise of Ceridian Corporation . . . as an
   alternative payroll solution . . .").

   [3] This dispute exists because there is no contemporaneous documentation
   of the demonstration process: GSA did not record audio or video of the
   demonstration, and the evaluation record is incomplete. GSA "acknowledges
   that not all of the OCD [demonstration] evaluation documents were retained
   because the final product of the evaluators' decisions was the 107-page
   final TEP report." Letter from GSA to GAO, Apr. 24, 2008, at 2.

   [4] The protesters have argued that before the demonstration, they
   informed an unnamed official at GSA that the payroll portion of the
   demonstration would use sample data created for commercial customers,
   rather than GSA's pre-defined sample data. The protesters also contend
   that the GSA official raised no objection to this approach. However, the
   protesters have been unable to identify the GSA official who was
   contacted, and they have produced no record of such a communication. In
   contrast, the GSA officials responsible for this procurement have
   specifically denied that they were told in advance that the protesters
   would not demonstrate the payroll function using GSA's pre-defined sample
   data, and denied that they advised that it would be acceptable to
   demonstrate this function using other data. Under these circumstances, we
   do not believe that the protesters have established that such a
   communication took place.

   [5] The evaluator score sheets provided for four ratings of green
   (acceptable), red (unacceptable), and "NR" (not rated; item was neither
   demonstrated nor discussed). Yellow and orange are not listed. A fourth
   rating, with no color given, was listed as "Needs Improvement," the
   definition of which noted that "Offeror will need to be re-evaluated by
   the end of the `get well' period." Supp. AR, Tab 29, Evaluation Form,
   at 1. The "get well" period was to be the first year after award, in which
   each contractor was required to address identified issues (referred to as
   "deficiencies").

   [6] Although the TEP gave the protesters a "red" rating and "high" risk
   for change management, this issue apparently did not affect the decision
   to exclude compensation management from the protesters' awards. Rather,
   GSA provided the protesters with a "get well" issue requiring them to
   "[p]rovide a written change management plan for customers that includes an
   assessment of [DELETED]." AR, Tab 21, Final TEP Report, at 104;
   Declaration of Avue Chief Executive Officer, attach. D, Contract Award
   Document, at 4.

   [7] The TEP report actually "recommends that Avue be awarded [a] GSA
   schedule." Since Avue was a subcontractor to Carahsoft and Allied, this
   recommendation was understood as a recommendation to award contracts to
   those firms instead. AR, Tab 21, TEP Final Evaluation and Award Decisions,
   at 104.

   [8] Specifically, the protesters argue that the record does not adequately
   document a reasonable basis for: (1) the alleged unacceptability of the
   firms' proposals for compensation management, (2) the application of
   various instructions in the RFP concerning the demonstration, (3) the
   application of the award criteria in the RFP, (4) and the proper use of a
   "get well period." With regard to the technical evaluation, the protesters
   also argue that GSA overlooked their proposal to provide payroll through
   the NFC, and ignored information in their written proposals and
   demonstration.

   [9] We note again that the RFP is a solicitation for commercial items.

   [10] For the record, and at GSA's urging, we have reviewed the CO's
   handwritten meeting notes (created approximately 2 weeks before the TEP
   final report). These notes do not conclusively demonstrate that the CO was
   exercising independent judgment to assess the protesters as "red," or
   explain any reasons for doing so. There is also nothing in the record to
   explain why these notes should take priority over the later-prepared TEP
   consensus report--especially when we note that the CO was a member of the
   TEP.