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B-205242, MAY 24, 1982

B-205242 May 24, 1982
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DIGEST: PROTEST THAT ESTIMATES OF IN-HOUSE PERFORMANCE COSTS WERE TOO LOW IS DENIED WHERE PROTESTER HAS NOT SHOWN THAT COST COMPARISON WAS INACCURATE OR VIOLATED OMB CIRCULAR NO. TGS WAS SELECTED FOR A COST COMPARISON OF CONTINUED IN-HOUSE PERFORMANCE VERSUS CONTRACTING OUT. THE RFP WAS CANCELED AFTER THE CONTRACTING OFFICER DETERMINED THAT THE WORK COULD BE PERFORMED AT A LOWER COST TO THE GOVERNMENT THROUGH CONTINUED USE OF GOVERNMENT PERSONNEL RATHER THAN BY TGS. THE ADVANTAGE OF IN -HOUSE PERFORMANCE FOR THE 3-YEAR CONTRACT PERIOD WAS REDUCED FROM $636. THE APPEAL WAS ULTIMATELY DENIED. SINCE THE ADJUSTED FIGURES STILL SHOWED IN-HOUSE PERFORMANCE WAS LESS COSTLY THAN CONTRACTING OUT.

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B-205242, MAY 24, 1982

DIGEST: PROTEST THAT ESTIMATES OF IN-HOUSE PERFORMANCE COSTS WERE TOO LOW IS DENIED WHERE PROTESTER HAS NOT SHOWN THAT COST COMPARISON WAS INACCURATE OR VIOLATED OMB CIRCULAR NO. A-76.

TECHNICOLOR GRAPHIC SERVICES, INC.:

TECHNICOLOR GRAPHICS SERVICE, INC. (TGS), PROTESTS THE DEPARTMENT OF AGRICULTURE'S (DOA) DECISION TO CANCEL REQUEST FOR PROPOSAL (RFP) NO. 42-A -SEA-81, FOR THE OPERATIONS, MAINTENANCE, REPAIR AND SERVICES FOR FACILITIES EQUIPMENT, SECURITY, SAFETY AND SUPPLY ACTIVITIES AT THE NATIONAL ANIMAL DISEASE CENTER (NADC), AMES, IOWA.

TGS WAS SELECTED FOR A COST COMPARISON OF CONTINUED IN-HOUSE PERFORMANCE VERSUS CONTRACTING OUT. THE RFP WAS CANCELED AFTER THE CONTRACTING OFFICER DETERMINED THAT THE WORK COULD BE PERFORMED AT A LOWER COST TO THE GOVERNMENT THROUGH CONTINUED USE OF GOVERNMENT PERSONNEL RATHER THAN BY TGS.

TGS TIMELY FILED AN ADMINISTRATIVE APPEAL OF DOA'S DECISION. IN RESPONSE TO TGS'S APPEAL, DOA FOUND ERRORS IN ITS ESTIMATE, AND THE ADVANTAGE OF IN -HOUSE PERFORMANCE FOR THE 3-YEAR CONTRACT PERIOD WAS REDUCED FROM $636,172, TO $211,171.

THE APPEAL WAS ULTIMATELY DENIED; HOWEVER, SINCE THE ADJUSTED FIGURES STILL SHOWED IN-HOUSE PERFORMANCE WAS LESS COSTLY THAN CONTRACTING OUT, TGS TIMELY FILED A PROTEST WITH OUR OFFICE, AND ESSENTIALLY CONTENDS THAT, DESPITE DOA ADJUSTMENTS AS A RESULT OF ITS APPEAL, THE COMPARISON REMAINS INACCURATE AND IS NOT CONSISTENT WITH OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-76 (A-76) POLICY AND PROCEDURES.

WE DENY THE PROTEST.

INITIALLY, WE POINT OUT WITH REGARD TO A PROTEST INVOLVING A DISPUTE OVER AN AGENCY DECISION TO PERFORM WORK IN-HOUSE RATHER THAN TO CONTRACT OUT THE SERVICES, WE WILL ONLY CONSIDER ALLEGATIONS OF A FAULTY OR MISLEADING COST COMPARISON. MIDLAND MAINTENANCE, INC., B-202977.2, FEBRUARY 22, 1982, 82-1 CPD 150; D-K ASSOCIATES, B-201503, B-201625, SEPTEMBER 10, 1981, 81-2 CPD 208. IN THE COURSE OF OUR REVIEW, WE WILL QUESTION ONLY WHETHER MANDATED PROCEDURES WERE FOLLOWED AND NOT THE PROCEDURES THEMSELVES, SINCE THE PROCEDURES ARE MATTERS OF POLICY WITHIN THE PROVINCE OF THE EXECUTIVE BRANCH. D-K ASSOCIATES, B-201625, SEPTEMBER 10, 1981, 81-2 CPD 208.

TGS ALLEGES THAT THE GOVERNMENT HAS NOT COMPLIED WITH THE REQUIREMENTS OF THE A-76 COST COMPARISON HANDBOOK (CCH) THAT BOTH THE IN-HOUSE ESTIMATE AND THE CONTRACTOR'S ESTIMATE SHOULD BE BASED ON THE SAME WORK ESTIMATE. TGS SPECIFICALLY CONTENDS THAT THE GOVERNMENT DID NOT INCLUDE THE COST OF A FULL-TIME SUPERVISORY FACILITIES ENGINEER (ENGINEER) AND THREE FOREMEN, REQUIRED IN THE STATEMENT OF WORK (SOW), BUT ONLY COSTED THESE JOBS ON A PART-TIME BASIS.

AGRICULTURE CONCEDES THAT IT HAS NOT INCLUDED THE COST OF A FULL TIME ENGINEER AND FOREMEN AS A DIRECT COST. HOWEVER, IT STATES THAT THE GOVERNMENT'S COST AND ASSOCIATED PERSONNEL FOR FULFILLING THE SCOPE OF WORK AND LEVEL OF PERFORMANCE IS SHOWN AS INDIRECT SUPPORT COSTS CHARGED TO FUNCTIONS WHICH WOULD REMAIN IN-HOUSE. IN OTHER WORDS, BECAUSE OF AN INHERENT ADVANTAGE TO THE GOVERNMENT, SOME OF THE WORK DONE BY THE ENGINEER AND FOREMEN CAN BE DONE BY THE GOVERNMENT OPERATION WHICH WILL REMAIN EVEN IF THE OPERATION UNDER THIS RFP WAS CONTRACTED OUT. THUS, THE COST IS SHOWN AS INDIRECT COST BUT, IN EFFECT, "THE SERVICES, AVAILABILITY AND COSTS" OF AN ENGINEER AND FOREMEN AS REQUIRED BY THE SOW HAVE BEEN INCLUDED IN THE IN-HOUSE ESTIMATE.

THIS OFFICE HAS RECOGNIZED THAT THE GOVERNMENT MAY HAVE INHERENT ADVANTAGES IN ORGANIZING ITS MANPOWER THAT A CONTRACTOR CANNOT ACHIEVE IN AN A-76 EXERCISE, SUCH AS USING RESOURCES OUTSIDE THE CONTRACT AREA TO PERFORM SOME CONTRACT FUNCTIONS WHICH THE CONTRACTOR MUST STAFF WITH ITS OWN PERSONNEL. SEE D-K ASSOCIATES, SUPRA. HOWEVER, THIS DOES NOT OBVIATE THE NEED TO SATISFY THE REQUIREMENT THAT BOTH THE GOVERNMENT AND CONTRACTOR ARE COSTED TO PROVIDE THE SAME WORK. HERE, AGRICULTURE ADVISES THAT THE COST OF PROVIDING FOR THE FUNCTIONS OF AN ENGINEER AND FOREMEN ARE INCLUDED AS AN INDIRECT COST IN THE IN-HOUSE ESTIMATE, AND THAT BOTH IN-HOUSE AND CONTRACTOR ESTIMATE TOTALS CONTAIN THE COST OF THE WORK AT ISSUE. TGS HAS NOT SHOWN THAT THIS IS NOT THE CASE AND, THEREFORE, HAS NOT SHOWN THIS APPROACH VIOLATES THE CCH. SEE ACMAT CORPORATION, B-197589, MARCH 18, 1981, 81-1 CPD 206.

WE ALSO POINT OUT THAT THE USE OF A CORE UNIT, A CONTINUED IN-HOUSE PRESENCE, CONSISTING OF THE NADC'S CENTRAL RESEARCH UNIT WHICH PERFORMS FACILITIES OPERATIONS, MAINTENANCE, AND REPAIR ACTIVITIES WITHIN RESTRICTED AREAS, IS NOT PROHIBITED BY A-76. THE RFP CLEARLY ADVISED OFFERORS THAT THE CORE UNIT WOULD CONTINUE TO PERFORM FUNCTIONS IN THE SAME MANNER AS IN THE PAST IN RESTRICTED AREAS AND WOULD BE INVOLVED IN ALL AREAS WHERE BIOLOGICAL SAFETY IS AN ISSUE. IN TRANSMITTAL MEMORANDUM NO. 4 TO CIRCULAR NO. A-76, OMB RECOGNIZED THAT A "CORE UNIT" FOR RESEARCH AND DEVELOPMENT FACILITIES WAS A PERMISSIBLE "METHOD OF DOING BUSINESS" AND WAS A "GOVERNMENT FUNCTION." HOWEVER, OMB EXPRESSED ITS CONCERN ABOUT THE SIZE OF THE CORE CAPABILITY AND HOW IT AFFECTED THE COST COMPARISON; IN EFFECT, THE ISSUE RAISED BY TGS CONCERNING THE CAPABILITY OF THE CORE UNIT TO PROVIDE SUPERVISION AND SUPPORT FOR THE FUNCTIONS TO BE CONTRACTED OUT. OMB IS STUDYING THIS ISSUE, BUT HAS NOT ISSUED GUIDANCE CONCERNING PROPER USE OF "CORE CAPABILITY" IN THE A-76 CONTEXT. SINCE USE OF A CORE UNIT WAS PERMITTED UNDER THE CIRCULAR WITHOUT RESTRICTION AS TO USE, WE CANNOT SAY THAT DOA VIOLATED THE CIRCULAR BY CREATING A CORE UNIT FOR THIS PROCUREMENT WITH THE CAPABILITY TO SUPERVISE AND SUPPORT THE CONTRACT FUNCTIONS.

TGS ARGUES THAT GOVERNMENT BOILER PLANT STAFFING BASED ON 3.2 MAN HOUR AVERAGE FOR SERVICE ORDERS IS INADEQUATE. THE GOVERNMENT'S ORIGINAL STAFFING PROJECTION WAS FOR TWO BOILER PLANT OPERATORS. THE APPEAL BOARD IN RESPONSE TO TGS'S APPEAL AGREED, IN PART, WITH TGS, AND INCREASED STAFFING BY ONE-HALF AN OPERATOR. TGS STILL QUESTIONS THE ADEQUACY OF THE STAFFING TO PERFORM THE WORK REQUIRED INCLUDING BOILER INSPECTION, MAINTENANCE, AND REPAIR. TGS CONSIDERS THE LACK OF PROPER STAFFING TO BE A THREAT TO BIOLOGICAL SECURITY, A STATED CONCERN OF AGRICULTURE WHEN ISSUING THE RFP. HOWEVER, DOA REPORTS THAT, BASED ON ITS EXPERIENCE, THE REVISED STAFFING IS ADEQUATE TO COVER CONTINUOUS BOILER PLANT OPERATIONS AND INCLUDES OVERTIME FOR EMERGENCIES. WE HAVE NO BASIS TO OBJECT TO DOA'S DETERMINATION THAT ITS REVISED STAFFING FOR ITS BOILER PLANT OPERATIONS ARE ADEQUATE NOR HAS TGS SUBSTANTIATED ITS ALLEGATION THAT DOA'S STAFFING ESTIMATES VIOLATE THE GUIDANCE AND ARE A THREAT TO BIOLOGICAL SECURITY.

IN THIS CONNECTION, TGS PROTESTS DOA'S FAILURE TO PROVIDE TO THE OFFERORS EITHER THE HISTORICAL AVERAGE OF MAN-HOURS NEEDED PER SERVICE CALL AT THE FACILITY OR THE UNITED STATES ARMY FACILITIES SUPPORT AGENCY (ARMY) STUDY WHICH THE DOA APPEALS BOARD USED TO SUPPORT ITS 3.2 MAN-HOURS AS THE APPROXIMATE TIME REQUIRED TO HANDLE SERVICE CALLS. APPARENTLY, TGS, BASED UPON ADVICE GIVEN AT THE PREBID CONFERENCE THAT NO SINGLE CALL EXCEEDED 16 HOURS, USED ONE-THIRD OF THAT FIGURE OR 5.3 MAN-HOURS AS A BASIS FOR CALCULATING STAFFING NEEDS.

TGS STATES THAT AS A RESULT OF THE USE OF THE 3.2 AVERAGE, DOA'S STAFFING, FOR THE BOILER PLANT, AS AN EXAMPLE, WAS INADEQUATE TO COVER THE GOVERNMENT'S NEEDS AS INDICATED IN THE SOW. HOWEVER, TGS CONCEDES IT HAS NO PROOF OF THIS ALLEGATION. IT BELIEVES THE WORK ORDER FORMS INDICATING THE WORK PERFORMED AT THE ANIMAL CENTER WOULD SUPPORT ITS CONTENTION.

DOA ADVISES THAT THE WORK ORDER RECORDS DO EXIST, BUT THAT THE GOVERNMENT DID NOT HAVE THE RECORDS ORGANIZED IN ORDER TO PROVIDE POTENTIAL BIDDERS OR THE GOVERNMENT WITH THE AVERAGE TIME REQUIRED FOR SERVICE CALLS. WHILE DOA STATES THE RECORDS COULD HAVE BEEN REVIEWED TO DETERMINE THIS INFORMATION, IT CONTENDS IT WAS NOT OBLIGATED TO UNDERTAKE THE BURDEN OR EXPENSE OF REVIEWING ALL THE HISTORICAL RECORDS TO ASCERTAIN THE AVERAGE TIME FOR SERVICE CALLS. FURTHERMORE, DOA STATES THAT ITS STAFFING ESTIMATE WAS BASED ON MANAGEMENT EXPERIENCE. THE APPEALS BOARD USED THE ARMY STUDY IN REVIEWING ITS ESTIMATES IN RESPONSE TO TGS'S APPEAL AND, AS A RESULT, CERTAIN STAFFING WAS INCREASED.

FOR PERSONNEL COSTS, THE CCH ADVISES THAT:

"IN ESTIMATING THE TIME REQUIRED TO PERFORM A SERVICE OR PRODUCE A PRODUCT, THE STARTING POINT IS THE STATEMENT OF WORK. WHEN THE ESTIMATE IS BEING MADE FOR A PRODUCT/SERVICE PRESENTLY BEING PROVIDED BY THE GOVERNMENT, AND AGENCY MANAGEMENT CONSIDERS THAT AUTHORIZED STAFFING IS PROPER FOR EFFICIENT OPERATION, THE NUMBER OF NONSUPERVISORY POSITIONS AUTHORIZED MAY BE USED TO ESTIMATE THE NUMBER OF MAN-YEARS OF DIRECT LABOR REQUIRED. FOR ALL OTHER CASES, INCLUDING PROPOSED 'NEW STARTS,' A THOROUGH REVIEW OF THE WORK REQUIREMENTS SHOULD DEFINITIZE THE OUTPUTS REQUIRING LABOR. THE TIME REQUIRED TO PERFORM THESE OUTPUTS CAN BE ESTIMATED BY UTILIZING PRIOR EXPERIENCE IF IT IS AVAILABLE, ENGINEERING STANDARDS, OR ENGINEERING ESTIMATES." CCH CHAPTER III C.

OUR REVIEW OF THE RECORD INDICATES THE DOA STAFFING ESTIMATES WERE BASED ON EXISTING STAFFING NEEDS AS WELL AS ESTIMATES. AN AMENDMENT TO THE SOLICITATION CONCEDED THIS POINT. THIS SOLICITATION AMENDMENT STATED THAT WORKLOAD DATA:

"*** WAS PROVIDED FOR INFORMATION ONLY AND IS INTENDED TO REFLECT THE TYPE, DIVERSITY, AND GENERAL LEVEL OF EFFORT EXPERIENCED BY EACH FUNCTIONAL ACTIVITY AT THAT TIME AND IS NOT AN ABSOLUTE PROJECTION OF WORK ANTICIPATED UNDER THIS CONTRACT."

IN ESSENCE, THE CCH ONLY REQUIRED DOA TO USE ITS EXPERIENCE IN ESTIMATING ITS STAFFING NEEDS. WHILE THE SERVICE CALL DATA MAY HAVE PROVIDED A MORE ACCURATE ESTIMATE, THE CCH DID NOT REQUIRE THAT THIS DATA BE USED, IF THE AGENCY HAD ANOTHER METHOD TO ESTIMATE ITS DIRECT LABOR COSTS. TGS HAS NOT SHOWN THAT THE CCH WAS VIOLATED IN THIS REGARD.

TGS CONTENDS THAT THE GENERAL AND ADMINISTRATIVE COSTS (G&A) ARE IMPROPERLY CALCULATED. TGS OBJECTS TO THE FAILURE TO INCLUDE THE PRO RATA SHARE OF THE COST OF THE FOLLOWING FUNCTIONS: THE OFFICE OF THE ORGANIZATION DIRECTOR, THE OFFICE OF THE COMPTROLLER, THE OFFICE OF THE GENERAL COUNSEL, PUBLIC RELATIONS, INTERNAL REVIEW AND SECURITY. TGS CONTENDS THESE COSTS ARE MATERIAL AND REQUIRED TO BE INCLUDED IN THE G&A POOL UNDER THE CCH. WE NOTE THAT ON TGS'S INITIAL APPEAL, THE DOA APPEALS BOARD DETERMINED THE IN-HOUSE G&A COST CALCULATIONS WERE INCORRECT AND DIRECTED THAT THE CALCULATIONS BE RECOMPUTED.

WHILE THE CCH STATES THESE OFFICES OR FUNCTIONS ARE "TYPICAL EXAMPLES OF THE TYPES OF COSTS TO BE INCLUDED IN THE G&A EXPENSE POOL," IT FURTHER STATES:

"*** THOSE G&A EXPENSES WHICH CONTRIBUTE DIRECTLY TO THE ACTUAL OPERATION OF THE ORGANIZATION WILL BE INCLUDED IN THE ESTIMATE. (THE CCH FURTHER ADVISES THAT) THIS DECISION IS BASED ON MATERIALITY OF AMOUNT AND THE CONCLUSION THAT THE EFFORTS INVOLVED IN FUNDING, POLICY-MAKING, LONG-RANGE PLANNING, DIRECTION, ETC. (COMMONLY REFERRED TO AS STAFF FUNCTIONS) WOULD CONTINUE AND BE EQUALLY APPLICABLE TO EITHER CONTRACTOR OR GOVERNMENT EFFORT."

WE ARE NOT IN A POSITION TO DETERMINE WHETHER OR NOT THE FUNCTION OR OFFICES OMITTED FROM THE G&A POOL SHOULD HAVE BEEN INCLUDED. THE CCH APPEARS TO DELEGATE TO THE AGENCY BROAD DISCRETION CONCERNING THE G&A EXPENSES TO BE INCLUDED IN THE COST ESTIMATE. DOA WAS NOT REQUIRED TO INCLUDE ALL THE FUNCTIONS LISTED IN THE CCH UNLESS DOA DETERMINED THE COSTS OF THESE STAFF FUNCTIONS WERE MATERIAL; TGS HAS NOT SHOWN THAT THE FUNCTIONS, IN FACT, WERE OMITTED, OR, IF THEY WERE EXCLUDED, THAT THEY WERE MATERIAL TO THIS OPERATION AND, THUS, IMPROPERLY OMITTED. IN THIS CONNECTION, DOA STATES THAT ALL REQUIRED AGENCY AND REGIONAL COSTS WERE INCLUDED. THEREFORE, IT APPEARS DOA COMPLIED WITH THE REQUIREMENT OF THE CCH.

TGS CONTENDS THAT IN DEVELOPING DIRECT LABOR COSTS, DOA SHOULD HAVE USED 2,088 HOURS WHICH IS THE TOTAL NUMBER OF WORK HOURS IN A YEAR, NOT 2,080 HOURS USED BY DOA IN ITS COST ESTIMATES. WE ASSUME TGS'S ARGUMENT IS BASED ON THE FACT THAT 1982 IS A LEAP YEAR WITH AN ADDITIONAL WORK DAY. DOA STATES THAT IT USED 1,706 PRODUCTIVE MAN HOURS FOR EACH GOVERNMENT EMPLOYEE BASED ON 2,080 HOURS PER YEAR MINUS 18 PERCENT REPRESENTING LEAVE AND HOLIDAYS.

THE CCH, CHAPTER III, SECTIONS (C), (D) AND (E), STATES THAT:

"WHEN TIME REQUIREMENTS ARE EXPRESSED IN MAN-HOURS, THEY CAN BE CONVERTED TO MAN-YEARS BY DIVIDING THE TOTAL MAN-HOURS REQUIRED BY EITHER THE TOTAL NUMBER OF WORKING HOURS IN A YEAR (I.E, 52 X 40 OR 2080) OR BY THE NUMBER OF HOURS NORMALLY WORKED IN A YEAR (I.E., 2080 LESS LEAVE AND HOLIDAY TIME)."

DOA USED THE 2,080 AS ITS TOTAL FOR HOURS NORMALLY WORKED IN A YEAR AND, THEREFORE, IT COMPLIED LITERALLY WITH CCH GUIDANCE. WHILE, IN OUR VIEW, IN THE INTEREST OF ACCURACY, THE ACTUAL WORK HOURS SHOULD HAVE BEEN USED, WE CANNOT SAY THAT DOA DID NOT COMPLY WITH THE CCH OR THAT TGS WAS MISLED SINCE THE CCH LITERALLY PROVIDES THAT THE FIGURE 2,080 BE USED IN CALCULATING MAN-YEAR REQUIREMENTS. WE DENY THE PROTEST.

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