B-181738, JAN 15, 1975, 54 COMP GEN 562

B-181738, JAN 15, 1975, 54 COMP GEN 562

CONTRACTS - NEGOTIATION - COST, ETC., DATA - NATIONAL AERONAUTICS AND SPACE ADMINISTRATION PROCEDURES - NORMALIZATION OF PROPOSED COSTS WHERE OBJECTIONS TO NATIONAL AERONAUTICS AND SPACE ADMINISTRATION EVALUATION OF MISSION SUITABILITY, REQUEST FOR PROPOSALS' (RFP) MOST IMPORTANT EVALUATION CRITERION, ARE NOT SUSTAINED, BUT REVIEW CASTS DOUBTS ON REASONABLENESS OF NORMALIZATION OF CERTAIN COSTS AND REEVALUATION MIGHT INCREASE COST DIFFERENTIAL BETWEEN OFFERORS - CONSIDERING THAT SOURCE SELECTION OF HIGHER COST OFFEROR FOR AWARD OF COST-PLUS-AWARD-FEE CONTRACT IS BASED ON SIGNIFICANT MISSION SUITABILITY SUPERIORITY, REASONABLENESS OF COST, AND LACK OF SIGNIFICANT COST DIFFERENCE AMONG OFFERORS - SOURCE SELECTION OFFICIAL SHOULD JUDGE WHETHER THOSE DOUBTS ARE OF SUFFICIENT IMPACT TO JUSTIFY COST REEVALUATION OR RECONSIDERATION OF SELECTION DECISION. CONTRACTS NEGOTIATION - EVALUATION FACTORS - MANNING REQUIREMENTS - PROPRIETY USE IN MISSION SUITABILITY EVALUATION OF MANNING AND STAFFING GUIDELINE, DEVELOPED BY EVALUATION BOARD BASED ON ITS KNOWLEDGE OF WORK REQUIREMENTS, IS NOT IMPROPER, AND ITS JUDGMENT IN DOWNGRADING PROTESTER'S PROPOSAL BECAUSE OF TECHNICIAN DEMOTIONS AND STAFF SALARY REDUCTIONS, WHILE PROPOSING TO SUBSTANTIALLY RETAIN PRESENT WORK FORCE, RESULTING IN LOW SKILL MIX AND EXPECTED DIFFICULTIES IN PERSONNEL RETENTION, IS NOT UNREASONABLE. INSUFFICIENT BASIS EXISTS TO CONCLUDE THAT NASA ERRED IN REGARDING PROPOSAL DEFICIENCIES AS COMING WITHIN EXCEPTION TO 10 U.S.C. 2304(G) REQUIREMENT FOR "WRITTEN OR ORAL DISCUSSIONS," OR THAT EXCEPTION ITSELF REPRESENTED FAILURE TO COMPORT WITH STATUTE. CONTRACTS - NEGOTIATION - COST, ETC., DATA - LABOR COSTS - DIRECT WHERE REQUEST FOR PROPOSALS ALLOWS FLEXIBILITY TO OFFERORS IN DEVELOPING PROPOSALS FOR SITE SUPPORT SERVICES, APPARENTLY CONTEMPLATING INDIVIDUAL APPROACHES, REASONABLENESS OF AGENCY'S NORMALIZATION IN PROBABLE COST EVALUATION OF CERTAIN DIRECT LABOR COSTS IS IN DOUBT, BECAUSE NORMALIZATION IS NOT KEYED TO INDIVIDUAL APPROACHES AND MAY ENCOURAGE INFLATED TECHNICAL PROPOSALS. CONTRACTS - NEGOTIATION - COST, ETC., DATA - UPWARD COST ADJUSTMENT UPON REVIEW, AGENCY'S UPWARD COST ADJUSTMENTS (FOR LOW SKILL MIX, PROJECT MANAGEMENT AND STAFF COSTS, AND G&A) WERE NOT IMPROPER SINCE, BASED ON GOVERNMENT COST ESTIMATE, EVALUATION BOARD COULD PROPERLY COMPENSATE FOR DEFICIENCIES IN PROTESTER'S APPROACH. ALSO, NO OBJECTION IS FOUND TO DOWNWARD TREATMENT OF PROPOSED FEE. CONTRACTS - NEGOTIATION - EVALUATION FACTORS - TAX BENEFITS NATIONAL AERONAUTICS AND SPACE ADMINISTRATION'S NORMALIZED TREATMENT IN PROBABLE COST ANALYSIS OF COSTS PROPOSED BY OFFERORS FOR PAYMENT OF NEW MEXICO GROSS RECEIPTS TAX IS NOT OBJECTIONABLE, BECAUSE TAX AND AGENCY'S TREATMENT OF COSTS FOR TAX PAYMENT ARE FACTORS APPLICABLE TO ALL OFFERORS, AND CITED STATE REVENUE RULING DOES NOT INDICATE WITH CERTAINTY THAT CONTINUATION OF INCUMBENT CONTRACTOR'S PRIVILEGED TAX POSITION IS CERTAIN.

IN THE MATTER OF DYNALECTRON CORPORATION; LOCKHEED ELECTRONICS COMPANY, INC., JANUARY 15, 1975:

TABLE OF CONTENTS

PAGE

I. INTRODUCTION 563

II. BACKGROUND 564

III. MISSION SUITABILITY EVALUATION 566

IV. COST EVALUATION 573

V. CONCLUSION 579

I. INTRODUCTION

DYNALECTRON CORPORATION HAS PROTESTED TO OUR OFFICE AGAINST THE SELECTION BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) OF LOCKHEED ELECTRONICS COMPANY, INC. (LEC), FOR FINAL NEGOTIATIONS LEADING TO THE PROPOSED AWARD OF A CONTRACT UNDER REQUEST FOR PROPOSALS (RFP) NO. 9-WSRE- 3-3-1P.

THE PROTESTER'S CONTENTIONS, DISCUSSED IN DETAIL INFRA, PRESENT NUMEROUS CHALLENGES TO THE NASA EVALUATION PROCEDURE AND THE SELECTION DECISION. IN GENERAL, IT IS ALLEGED THAT EVALUATION ERRORS BY NASA CAUSED THE PROTESTER'S PROPOSALS TO BE UNDERRATED TECHNICALLY, AND ITS PROPOSED COSTS TO BE IMPROPERLY ADJUSTED UPWARDS. DYNALECTRON FURTHER CONTENDS THAT, IN SPITE OF THESE ERRORS, ITS PROPOSALS STILL PROVIDED FOR AN ACCEPTABLE LEVEL OF WORK AT THE LOWEST COST OF ANY OFFEROR. DYNALECTRON CONTENDS THAT THE SELECTION OF LEC, A HIGHER COST OFFEROR, WAS THEREFORE IN VIOLATION OF APPLICABLE LAW AND REGULATIONS. THE REMEDY REQUESTED IS BASICALLY THAT OUR OFFICE INVESTIGATE THE EVALUATION AND CORRECT NASA'S ERRORS, AND BASED ON THE RESULTS OF THESE ACTIONS, THAT WE EITHER INSTRUCT THE SOURCE SELECTION OFFICIAL (SSO) TO RECONSIDER HIS SELECTION AND REACH A NEW DECISION, OR THAT WE REQUEST NASA TO FORM A NEW SOURCE EVALUATION BOARD (SEB) TO REVIEW THE PROPOSALS DE NOVO.

AS DISCUSSED INFRA, WE BELIEVE THAT THE PROTESTER HAS FAILED TO SUBSTANTIATE ITS CONTENTIONS AS TO THE UNREASONABLENESS OF THE MISSION SUITABILITY EVALUATION. HOWEVER, OUR REVIEW OF THE COST EVALUATION HAS RAISED SOME DOUBTS CONCERNING THE PROPRIETY OF THE NORMALIZATION APPROACH USED IN EVALUATING CERTAIN ELEMENTS OF THE OFFERORS' COST PROPOSALS. BELIEVE IT IS FOR THE SSO TO WEIGHT THESE DOUBTS AGAINST HIS SELECTION DECISION, AND TO DETERMINE WHETHER THEY ARE OF SUFFICIENT IMPACT TO JUSTIFY A COST REEVALUATION, OR A RECONSIDERATION OF THE SELECTION DECISION.

OUR DECISION WAS REACHED AFTER REVIEW AND CONSIDERATION OF WRITTEN SUBMISSIONS AND DOCUMENTATION FROM THE PROTESTER, NASA, AND LEC, AND A CONFERENCE CONDUCTED WITH ALL INTERESTED PARTIES. WHILE ALL OF THE NUMEROUS CONTENTIONS RAISED IN THE SUBMISSIONS HAVE BEEN CONSIDERED, DEVELOPMENT OF THE CASE HAS TENDED TO NARROW THE AREAS OF DISAGREEMENT TO CERTAIN BASIC ISSUES. THIS DECISION FOCUSES ON THOSE ISSUES WHICH WE BELIEVE ARE CENTRAL TO A PROPER DISPOSITION OF DYNALECTRON'S PROTEST.

IT IS FURTHER TO BE NOTED THAT AS THE PROTEST INVOLVES A NEGOTIATED PROCUREMENT IN WHICH NO AWARD HAS BEEN MADE, A SUBSTANTIAL AMOUNT OF THE PROCUREMENT INFORMATION FURNISHED BY NASA TO OUR OFFICE WAS WITHHELD BY THE CONTRACTING AGENCY FROM DYNALECTRON AND LEC. IN GENERAL, WHILE THE INTERESTED PARTIES WERE PROVIDED WITH AN INDICATION OF THE OVERALL TECHNICAL SCORES AND THE RANGE OF COST DIFFERENCES, THEY DID NOT RECEIVE THE DETAILED SCORING AND COST BREAKDOWNS. OUR DISCUSSION OF THE ISSUES IS PRESENTED IN A MANNER WHICH SAFEGUARDS THE CONFIDENTIAL TREATMENT OF NONDISCLOSED PROCUREMENT SENSITIVE INFORMATION.

ALSO, IT IS TO BE NOTED THAT SEVERAL DIFFERENT DYNALECTRON PROPOSALS WERE WITHIN THE COMPETITIVE RANGE, AND THAT UNDER THE TERMS OF THE RFP EACH WAS TO BE CONSIDERED ON ITS OWN MERITS. THE DISCUSSION OF THE ISSUES, INFRA, CONCERNS ITSELF LARGELY WITH THE PROPOSAL WHICH WAS MOST FAVORABLY EVALUATED BY NASA (DYNALECTRON'S ALTERNATE PROPOSAL NO. 2) EXCEPT AS OTHERWISE INDICATED.

II. BACKGROUND

THE RFP WAS ISSUED ON JANUARY 22, 1974, PURSUANT TO A DETERMINATION AND FINDINGS TO NEGOTIATE A CONTRACT UNDER 10 U.S.C. SEC. 2304(A)(10) (1970). THE SOLICITATION CALLED FOR OFFERS TO PERFORM SITE SUPPORT SERVICES FOR THE JOHNSON SPACE CENTER'S WHITE SANDS TEST FACILITY (WSTF) IN NEW MEXICO. THE STATEMENT OF WORK (SOW) COVERED:

(1) PROPULSION AND POWER SYSTEMS AND SUBSYSTEMS DEVELOPMENT TESTS

(2) MATERIALS TESTING AND EVALUATION

(3) COMPONENT EVALUATION AND CERTIFICATION

(4) OPERATION OF CHEMISTRY, PHYSICAL METALLURGY, AND RADIOGRAPHY LABORATORIES

(5) OPERATION AND MAINTENANCE OF RADIO AND FREQUENCY DEVICES AND EQUIPMENT FOR CALIBRATING FORCE, PRESSURE, FLOW, AND OTHER ELECTROMECHANICAL AND MECHANICAL MEASURING DEVICES

(6) REPAIR, CALIBRATION, AND MAINTENANCE OF ELECTRICAL AND ELECTRONIC INSTRUMENTS

(7) CONTAMINATION CONTROL AND PRECISION CLEANING OF PARTS AND COMPONENTS

(8) PROVIDING BASE SUPPORT SERVICES INCLUDING SECURITY, SAFETY, FIRE PROTECTION, MAINTENANCE, OPERATION AND REPAIR OF ALL FACILITIES AND GROUND SUPPORT EQUIPMENT.

THE RFP REQUESTED OFFERS FOR A SPECIFIED LEVEL OF EFFORT AND CONTEMPLATED THE AWARD OF A COST-PLUS-AWARD-FEE CONTRACT PURSUANT TO 41 C.F.R. SEC. 18- 3.405-5 (1974) FOR A 1-YEAR PERIOD, WITH AN OPTION FOR A SECOND 1-YEAR PERIOD, AND POSSIBLY THROUGH THIRD, FOURTH AND FIFTH YEARS. OFFERORS WERE REQUESTED TO PROVIDE COMPLETE AND DETAILED STAFFING AND MANNING INFORMATION AND SUMMARY COST INFORMATION. IN THIS REGARD, THE RFP SPECIFIC INSTRUCTIONS CONTAINED THE FOLLOWING INFORMATION ON THE EVALUATION OF PROPOSALS:

A. INTRODUCTION:

PROPOSALS WILL BE EVALUATED BY A SOURCE EVALUATION BOARD (SEB) APPOINTED BY THE ASSOCIATE ADMINISTRATOR FOR MANNED SPACE FLIGHT. THE ADMINISTRATOR, NASA HEADQUARTERS, WILL BE THE SOURCE SELECTION OFFICIAL (SSO). FAILURE OF A PROPOSAL TO BE ACCEPTED FOR AWARD WILL NOT NECESSARILY REFLECT ANY DEFICIENCIES, BUT WILL MEAN ONLY THAT ANOTHER PROPOSAL WAS CONSIDERED TO BE MORE ADVANTAGEOUS TO THE GOVERNMENT.

B. EVALUATION CRITERIA AND RELATIVE IMPORTANCE:

IN THE EVALUATION OF PROPOSALS, THE SEB IS INTERESTED IN DETERMINING THE QUALITY OF THE SERVICE AND PROBABLE COST OF THAT WORK THAT WILL BE DELIVERED IF A PARTICULAR CONTRACTOR IS SELECTED. IN THIS LIGHT, THE MAJOR FACTORS TO BE CONSIDERED IN THE PROPOSAL EVALUATION PROCESS ARE IDENTIFIED AS FOLLOWS:

1. MISSION SUITABILITY:

A. OPERATING PLAN

B. KEY PERSONNEL

C. ORGANIZATION AND MANNING

ALL CRITERIA UNDER MISSION SUITABILITY WILL BE ASSIGNED NUMERICAL WEIGHTINGS.

THE RELATIVE IMPORTANCE OF THE MISSION SUITABILITY EVALUATION CRITERIA IS AS FOLLOWS:

MOST IMPORTANT - OPERATING PLAN

VERY IMPORTANT - KEY PERSONNEL

IMPORTANT - ORGANIZATION AND MANNING

2. COST: IN ADDITION TO THE MAJOR CRITERIA IDENTIFIED ABOVE, EACH OFFEROR'S PROPOSED COST WILL BE ANALYZED AND PRESENTED TO THE SOURCE SELECTION OFFICIAL (SSO) FOR HIS CONSIDERATION IN MAKING A SELECTION.

3. OTHER FACTORS: OTHER FACTORS WHICH WILL BE CONSIDERED BY THE SSO INCLUDE BUT ARE NOT NECESSARILY LIMITED TO PAST PERFORMANCE, COMPANY EXPERIENCE, EQUAL EMPLOYMENT OPPORTUNITY, UTILIZATION OF SMALL BUSINESS, UTILIZATION OF MINORITY BUSINESS, FINANCIAL CAPABILITY, ACCEPTANCE OF CONTRACT PROVISIONS, LABOR RELATIONS, PHASE-IN PLAN, COMPANY POLICIES, AND NEW TECHNOLOGY.

OFFERORS ARE CAUTIONED NOT TO MINIMIZE THE IMPORTANCE OF ADEQUATE RESPONSE IN ANY AREA BECAUSE IT CARRIES LESS WEIGHT THAN OTHER AREAS OR NO WEIGHT. IN FACT, COST OR OTHER FACTORS, ALTHOUGH NOT WEIGHTED, COULD BE THE DETERMINING FACTORS IN SOURCE SELECTION.

WRITTEN OR ORAL DISCUSSIONS WILL BE CONDUCTED WITH THOSE FIRMS WHICH HAVE BEEN DETERMINED BY THE SOURCE EVALUATION BOARD TO BE IN THE COMPETITIVE RANGE. AS A PART OF THIS EVALUATION PROCESS, OFFERORS MAY BE QUESTIONED ABOUT SPECIFIC AREAS OF THEIR PROPOSALS ***.

FOURTEEN PROPOSALS WERE SUBMITTED BY 10 OFFERORS. DYNALECTRON, THE INCUMBENT CONTRACTOR, SUBMITTED FOUR PROPOSALS. AFTER INITIAL EVALUATION, IT WAS DETERMINED THAT SEVEN OF THE PROPOSALS, INCLUDING DYNALECTRON'S ALTERNATE PROPOSAL NO. 3, WERE NOT WITHIN THE COMPETITIVE RANGE. THE REMAINING PROPOSALS WITHIN THE COMPETITIVE RANGE WERE:

BENDIX CORPORATION (LAUNCH SUPPORT DIVISION)

DYNALECTRON (BASIC AND ALTERNATE PROPOSALS NOS. 1 AND 2)

LEC

MANAGEMENT AND TECHNICAL SERVICES COMPANY (MATSCO)

NORTHROP SERVICES, INC. (BASIC PROPOSAL)

NASA STATES THAT WRITTEN AND ORAL DISCUSSIONS WERE CONDUCTED WITH THE OFFERORS WITHIN THE COMPETITIVE RANGE WHEREIN CLARIFICATION OF AMBIGUITIES AND UNCERTAINTIES WAS SOUGHT AND THAT A COMMON CUTOFF DATE FOR SUBMISSION OF REVISED PROPOSALS WAS ESTABLISHED. AFTER RECEIPT OF REVISED PROPOSALS, THEY WERE EVALUATED BY THE SEB.

IN THE FINAL MISSION SUITABILITY RANKINGS, LEC RECEIVED THE HIGHEST TOTAL SCORE (869 OUT OF A POSSIBLE 1,000); MATSCO WAS SECOND HIGHEST, WITH A SCORE OF 826, FOLLOWED BY DYNALECTRON ALTERNATE PROPOSAL NO. 2 (780), DYNALECTRON BASIC PROPOSAL (776), AND DYNALECTRON ALTERNATE PROPOSAL NO. 1 (772). THE DYNALECTRON COST PROPOSALS, BOTH AS PROPOSED AND AS ADJUSTED UPWARDS BY THE SEB, WERE THE LOWEST OF THE OFFERORS WITHIN THE COMPETITIVE RANGE; LEC'S COST PROPOSAL, BOTH AS PROPOSED AND AS ADJUSTED DOWNWARDS, WAS HIGHER THAN ANY OF DYNALECTRON'S. NASA HAS INDICATED THAT THE DIFFERENCE IN PROBABLE COSTS BETWEEN THE LEC PROPOSAL AND DYNALECTRON'S ALTERNATE NO. 2 PROPOSAL WAS $100,000 OR 2.43 PERCENT FOR THE FIRST YEAR; $183,000 OR 2.40 PERCENT FOR THE SECOND YEAR; AND $803,000 OR 2.18 PERCENT FOR THE ENTIRE 5 YEARS. THE ADJECTIVE RATINGS FOR DYNALECTRON AND LEC IN THE OTHER FACTORS SUBCRITERIA WERE IDENTICAL WITH TWO EXCEPTIONS. COMPANY EXPERIENCE, DYNALECTRON WAS RATED "EXCELLENT" AND LEC "LOW GOOD"; AND PHASE-IN, DYNALECTRON, THE INCUMBENT CONTRACTOR, WAS NOT RATED, WHILE LEC WAS RATED "GOOD."

ON JUNE 27, 1974, THE SEB MADE A PRESENTATION OF ITS FINDINGS TO THE SSO. THE SSO SELECTED LEC ON JULY 22, 1974, FOR FINAL NEGOTIATIONS, AND STATED:

*** IT WAS APPARENT TO US THAT LOCKHEED'S PROPOSAL WAS BETTER THAN THE OTHERS BY A SIGNIFICANT MARGIN IN THE AREA OF MISSION SUITABILITY AND THAT THERE WAS NO SIGNIFICANT DIFFERENCE IN THE PROBABLE COSTS OF THE PROPOSALS. SPECIFICALLY, WE CONCLUDED THAT THE LOCKHEED PROPOSAL OFFERED THE BEST OPERATING PLAN, THE BEST OVERALL KEY PERSONNEL, AND WAS REASONABLE IN COST. WE AGREED THAT LOCKHEED'S TECHNICAL PROPOSAL WAS SIGNIFICANTLY BETTER THAN THE TECHNICAL PROPOSALS OF MATSCO, DYNALECTRON, BENDIX, AND NORTHROP. WE FURTHER AGREED THAT THE LOWER MISSION SUITABILITY RATINGS OF MATSCO, DYNALECTRON, BENDIX, AND NORTHROP, COUPLED WITH SUBSTANTIALLY THE SAME PROBABLE COSTS FOR ALL PROPOSERS, WARRANTED THE CONCLUSION THAT THOSE PROPOSALS OFFERED NO ADVANTAGE OVER THAT OF LOCKHEED. ACCORDINGLY, WE SELECTED LOCKHEED FOR FINAL NEGOTIATIONS LEADING TO THE CONTRACT AWARD.

III. MISSION SUITABILITY EVALUATION

DYNALECTRON CONTENDS THE LEC PROPOSAL WAS NOT SIGNIFICANTLY SUPERIOR IN MISSION SUITABILITY TO ITS PROPOSALS. IT IS ALLEGED THAT THE DYNALECTRON PROPOSALS, IF PROPERLY EVALUATED, WOULD BE EQUAL OR SUPERIOR TO LEC IN THIS REGARD. WHILE DYNALECTRON CONTESTS NASA'S EVALUATION OF ITS PROPOSALS IN THE "MOST IMPORTANT" AND "VERY IMPORTANT" CRITERIA (OPERATING PLAN AND KEY PERSONNEL, RESPECTIVELY), THE PRINCIPAL CONTROVERTED AREA INVOLVES TWO SUBCRITERIA OF THE "IMPORTANT CRITERION (ORGANIZATION AND MANNING) - MANNING TABLES AND STAFFING.

THE RFP PROVIDED THE FOLLOWING INSTRUCTIONS TO OFFERORS CONCERNING THE PREPARATION OF THEIR PROPOSALS AS REGARDS DIRECT LABOR REQUIREMENTS (LESS PROJECT MANAGEMENT AND STAFF):

THE OFFEROR IS PERMITTED FULL FLEXIBILITY IN PROPOSING THE ORGANIZATION, APPROPRIATE SUPERVISION, AND WAGE CLASSIFICATION LEVELS. THE ONLY RESTRICTIONS ARE THE TOTAL DIRECT LABOR AND OVERTIME MAN-HOURS SPECIFIED IN ITEM A.1.A AND B., FORM 6A THROUGH 6E AND THE MAN-YEAR EQUIVALENTS AND LABOR CLASSIFICATIONS SET FORTH IN ATTACHMENTS 1, 2, AND 3.

THE RFP ATTACHMENTS 1, 2 AND 3 LISTED ESTIMATED DIRECT LABOR REQUIREMENTS (LESS PROJECT MANAGEMENT AND STAFF) COVERING EMPLOYEES IN 26 LABOR CATEGORIES. THE REQUIREMENTS WERE TOTALED IN MAN-HOURS (PLUS OVERTIME), AND MAN-YEAR EQUIVALENTS, FOR EACH OF THE FIVE CONTRACT YEARS. THE TOTAL MAN-HOURS AND OVERTIME WERE STIPULATED IN ITEM A.1.A AND B ON THE COST PROPOSAL FORMS 6A THROUGH 6E.

THE RFP PROVIDED THE FOLLOWING INSTRUCTIONS CONCERNING PROJECT MANAGEMENT AND STAFF:

NO ESTIMATES ARE PROVIDED FOR PROJECT MANAGEMENT AND STAFF. THESE ARE LEFT TO THE OFFEROR'S DISCRETION. THEY WILL DEPEND LARGELY ON THE PROPOSED ORGANIZATION AND WILL BE A REFLECTION OF MANAGEMENT AND ADMINISTRATIVE APPROACHES. THESE PERSONNEL ARE DESCRIBED IN DETAIL IN SECTION 5 OF THE STATEMENT OF WORK. PROJECT MANAGEMENT AND STAFF WILL BE TREATED AS DIRECT COST FOR PURPOSES OF COMPLETION OF FORMS 6 AND 6A THROUGH 6E.

THE WORK INVOLVED IN SECTION 5 OF THE SOW CALLED FOR THE CONTRACTOR TO PROVIDE ALL NECESSARY MANAGEMENT, SUPERVISORY AND LABOR PERSONNEL TO PERFORM ALL EFFORTS ASSOCIATED WITH THE SOW, INCLUDING SERVICES SUCH AS OVERALL CONTRACT MANAGEMENT ADMINISTRATION; TRANSPORTATION; QUALITY ASSURANCE AND INSPECTION; SAFETY; SECURITY; AND A NUMBER OF OTHER DESCRIBED FUNCTIONS. THE RFP ALSO INSTRUCTED OFFERORS TO SUBMIT SEPARATE MANNING TABLES KEYED TO THEIR ORGANIZATION CHARTS FOR EACH FUNCTIONAL WORK ELEMENT, INCLUDING ALL PROPOSED EMPLOYEES DESCRIBED BY WAGE CLASSIFICATION LEVELS, OR DESCRIBED BY QUALIFICATION REQUIREMENTS IN THOSE LABOR CATEGORIES NOT FOUND IN THE DEPARTMENT OF LABOR SERVICE CONTRACT ACT WAGE DETERMINATION. IN ADDITION TO THE MANNING INFORMATION, THE RFP DIRECTED OFFERORS TO PROVIDE A STAFFING PLAN DESCRIBING RECRUITMENT AND EMPLOYMENT METHODS AND SOURCES TO BE USED IN THE MANNING AND TO RELATE THE PLAN TO THE ORGANIZATION CHARTS AND MANNING TABLES.

DYNALECTRON BELIEVES THAT THE PURPORTED LEC SUPERIORITY IN MISSION SUITABILITY RESULTED PRIMARILY FROM IMPROPER DOWNGRADING OF ITS PROPOSALS IN THE MANNING AND STAFFING SUBCRITERIA. THE PROTESTER CONTENDS THAT:

(1) NASA, IN CONTRAVENTION OF THE TERMS OF THE RFP, USED A SECRET MANNING AND STAFFING GUIDELINE IN ITS EVALUATION.

(2) NASA MISINTERPRETED THE DYNALECTRON PROPOSALS AS MEANING THAT 27 TECHNICIANS WOULD BE DEMOTED AND THAT 23 PROFESSIONAL PERSONNEL WOULD HAVE THEIR SALARIES REDUCED, AND THAT DYNALECTRON'S EVALUATION SCORE WAS DOWNGRADED ACCORDINGLY.

(3) THE MISINTERPRETATIONS COULD HAVE BEEN AVOIDED HAD NASA SOUGHT CLARIFICATION OF THESE MATTERS IN THE DISCUSSIONS, SO THAT WEAKNESSES IN THE PROPOSALS COULD HAVE BEEN CORRECTED.

IN REGARD TO THE NASA GUIDELINE, DYNALECTRON, IN PART, ATTACKS ITS USE IN THE EVALUATION, SINCE THE RFP ALLOWED FULL FLEXIBILITY TO THE OFFERORS, AND, IN PART, QUESTIONS THE PREMISES ON WHICH THE GUIDELINE IS BASED - I.E., THE PROFILE OF ON-BOARD DYNALECTRON PERSONNEL IN VARIOUS CATEGORIES AS OF JANUARY 31, 1974. DYNALECTRON CONTENDS THAT, AT THAT TIME, ITS LABOR FORCE WAS IN A TRANSITIONARY STATE WITH AN "HOURGLASS" CONFIGURATION CONSISTING OF A LARGE NUMBER OF HIGH-SKILLED "A" TECHNICIANS, A SMALL NUMBER OF LESS-SKILLED "B" TECHNICIANS, AND A LARGE NUMBER OF LEAST- SKILLED "C" TECHNICIANS. THE NASA GUIDELINE FOLLOWS AN HOURGLASS CONFIGURATION, THOUGH WITH LARGER NUMBERS OF TECHNICANS IN ALL THREE CATEGORIES. IN THIS REGARD, THERE IS ALSO A FUNDAMENTAL DIFFERENCE IN OPINION BETWEEN THE PARTIES AS TO WHETHER THE WORK UNDER THE NEW CONTRACT WILL BE OF GREATER SCOPE AND COMPLEXITY THAN THE WORK PERFORMED BY DYNALECTRON IN THE PAST. THE PROTESTER CONTENDS THAT SUCH IS NOT THE CASE, CITING THE SIMILARITY OF STATED FUNCTIONS IN THE SOW AND ITS CURRENT CONTRACT, AND CONTENDS THAT IT WAS THEREFORE MOVING TOWARDS AN "UPRIGHT PYRAMID" LABOR STRUCTURE (A LOW NUMBER OF "A'S" AND AN INCREASINGLY LARGER NUMBER OF "B'S" AND "C'S").

NASA DEFENDS ITS USE OF THE GUIDELINE, POINTING OUT THAT IT WAS EXACTLY THAT, AND NOT AN ABSOLUTE STANDARD, BECAUSE ONLY SIGNIFICANT PROPOSAL DEPARTURES WERE PENALIZED IN THE EVALUATION. MOREOVER, IT IS STATED THAT THE SEB DEVELOPED THE GUIDELINE BASED UPON ITS DETAILED KNOWLEDGE OF THE TECHNICAL REQUIREMENTS. NASA FURTHER POINTS OUT THAT THE SOW IN THE PRESENT DYNALECTRON CONTRACT INCLUDES ONLY A GENERIC DESCRIPTION OF WORK PERFORMED DURING THE PAST 3 YEARS.

WE BELIEVE THAT NASA, WHICH HAS THE RESPONSIBILITY OF DETERMINING ITS MINIMUM NEEDS AND FORMULATING ITS REQUIREMENTS, IS IN THE BEST POSITION TO ASSESS THE SCOPE AND COMPLEXITY OF THE WORK REQUIRED, AND THAT THE SEB IS IN THE BEST POSITION TO DETERMINE THE PROPER GUIDELINE TO BE USED IN EVALUATING PROPOSED EFFORTS TO ACCOMPLISH THAT WORK. DYNALECTRON'S DIFFERING ESTIMATES OF THE NATURE OF THE REQUIRED WORK AND THE PROPER GUIDELINE TO BE USED IN EVALUATION DO NOT, IN OUR VIEW, CONVINCINGLY SHOW THAT THE AGENCY'S AND THE SEB'S DETERMINATIONS WERE WITHOUT A REASONABLE BASIS. ACCORDINGLY, WE SEE NO BASIS FOR OBJECTION TO THE GUIDELINE AS A VALID TOOL TO ASSIST THE SEB IN EVALUATING MISSION SUITABILITY.

THE PRINCIPAL DISPUTE IN THE MANNING AND STAFFING AREAS INVOLVES THE SEB'S FINDINGS THAT THE DYNALECTRON PROPOSALS REDUCED THE SKILL MIXES IN CERTAIN LABOR CATEGORIES AND REDUCED THE SALARIES IN MOST LABOR CATEGORIES, INCLUDING PROJECT MANAGEMENT AND STAFF, WHILE PROPOSING TO RETAIN THE CURRENT WORK FORCE. THE SEB JUDGED THAT THE WAGE CLASSIFICATION LEVELS PER SE WERE TOO LOW TO MEET THE TECHNICAL REQUIREMENTS, AND ALSO THAT THE DEMOTIONS OF 27 TECHNICIANS AND SALARY REDUCTIONS OF 23 PROFESSIONAL PERSONNEL WOULD MAKE RETENTION OF THESE PERSONNEL DIFFICULT. IN THE INITIAL EVALUATION, DYNALECTRON'S STAFFING PLAN WAS THUS RATED "FAIR" AND ITS MANNING TABLES "HIGH FAIR." AFTER FURTHER REDUCTIONS IN WAGE CLASSIFICATIONS AND SKILL MIX IN ITS BEST AND FINAL OFFER, DYNALECTRON WAS RATED "POOR" AND "LOW FAIR," RESPECTIVELY.

IN ITS SEPTEMBER 30, 1974, LETTER TO OUR OFFICE, DYNALECTRON CONTENDS THAT THERE IS NO INTENTION TO DEMOTE ANY TECHNICIANS PRESENTLY ON THE JOB, NOR DID ITS PROPOSALS INDICATE THAT IT WOULD DO SO. THE PROTESTER STATES THAT NORMAL ATTRITION AMONG "A" AND "B" TECHNICIANS WOULD RESULT IN THEIR REPLACEMENT BY UPGRADED "C" TECHNICIANS, AND THAT HIGHER WAGE LEVELS RESULTING FROM A NEW COLLECTIVE BARGAINING AGREEMENT WILL MEAN THAT BETTER SKILLED PERSONNEL WILL BE HIRED IN THE LOWER SKILL CLASSIFICATIONS. RESTRUCTURING OF THE DYNALECTRON WSTF WORK FORCE WOULD ALSO BE ACCOMPLISHED BY PROMOTIONS AND TRANSFERS WITHIN THE CORPORATION'S LARGE EXISTING LABOR FORCE.

IN REGARD TO THE 23 PROFESSIONAL PERSONNEL, DYNALECTRON STATES THAT IT PROPOSED AVERAGE SALARY RATES FOR PARTICULAR FUNCTIONAL GROUPS, WHICH TOOK INTO ACCOUNT FUTURE 5.5-PERCENT SALARY INCREASES. DYNALECTRON BELIEVES NASA MISINTERPRETED THIS INFORMATION TO MEAN THAT SOME INDIVIDUAL EMPLOYEES' SALARIES WOULD BE REDUCED. THE PROTESTER'S CONTENTION APPEARS TO BE THAT THOUGH PROPOSED AVERAGE SALARY RATES WERE REDUCED IN THE BEST AND FINAL OFFER, THIS CANNOT BE TAKEN TO MEAN, AS THE SEB DID, THAT REDUCTIONS IN ANY INDIVIDUAL SALARIED EMPLOYEES' RATES OF PAY WOULD MAKE THEIR RETENTION DIFFICULT.

IN EVALUATING THE PROPOSED NUMBER OF TECHNICIANS, IT IS REPORTED THAT THE SEB UNDERTOOK THE FOLLOWING ANALYSIS:

IN EVALUATING DYNALECTRON'S FORM 5 (MANNING TABLES) SUBMISSION, THE SEB WAS AWARE THAT A MAJORITY OF DYNALECTRON NON-PROFESSIONAL EMPLOYEES WERE COVERED BY A COLLECTIVE BARGAINING AGREEMENT *** THE WAGE RATES PER HOUR WERE SET FORTH IN THAT AGREEMENT AND IT WAS A RELATIVELY SIMPLE MATTER TO ESTABLISH THE RATES FOR THESE LABOR CATEGORIES. THE SEB THEN COMPARED THE ON-BOARD STRENGTH OF TECHNICIANS A, B, AND C UNDER THE DYNALECTRON CONTRACT WITH THE NUMBER OF TECHNICIANS A, B, AND C PROPOSED BY DYNALECTRON FOR THE NEW PERIOD OF PERFORMANCE. THIS ANALYSIS REVEALED THAT THE DYNALECTRON BEST AND FINAL OFFER REDUCED THE NUMBER OF TECHNICIAN "A'S" FROM 53 TO 26 *** WHILE AT THE SAME TIME DYNALECTRON PROPOSED TO RETAIN THE CURRENT WORK FORCE. (SEE, FOR EXAMPLE, THE GENERAL STAFFING PLAN AND THE NUMBER OF PLANNED RECRUITMENTS ON FORM 5.) THEREFORE, THE SEB CONCLUDED THAT INCUMBENT TECHNICIANS WOULD BE DOWNGRADED, MAKING THEIR RETENTION DOUBTFUL OR UNCERTAIN. ***

A SIMILAR APPROACH WAS USED IN EVALUATING THE PROPOSED PROFESSIONAL EMPLOYEES. THE SEB COMPARED DYNALECTRON'S RATES PER HOUR IN THE BEST AND FINAL OFFER WITH THE ACTUAL RATES BEING PAID INDIVIDUALS AS OF FEBRUARY 12, 1974. IN THIS REGARD, THE MAJORITY OF THE 23 PROFESSIONAL PERSONNEL WERE IDENTIFIED BY ANALYZING SITUATIONS WHERE A LABOR CATEGORY COVERED ONLY A SINGLE INDIVIDUAL RATHER THAN A GROUP. THE SEB TOOK A CONSERVATIVE APPROACH IN THAT IT COMPARED THE PROPOSED RATES WITH ONLY THE ACTUAL RATES BEING PAID (NOT INCLUDING FUTURE COST-OF LIVING INCREASES). THE SEB CONCLUDED THAT THE BEST AND FINAL OFFER CLEARLY AND UNAMBIGUOUSLY SHOWED REDUCTIONS IN SALARIES BOTH FOR INDIVIDUALS AND IN AVERAGE WAGE RATES IN GROUP CATEGORIES.

INITIALLY, WE BELIEVE THAT WHILE THE PROTESTER'S EXPLANATIONS MADE SUBSEQUENT TO THE SOURCE SELECTION MAY SHED LIGHT ON THE MEANING OF ITS PROPOSALS, THE BASIC MATERIALS FOR ANALYSIS, AS POINTED OUT BY NASA, ARE THE PROPOSALS THEMSELVES. AFTER REVIEW OF THE RECORD, WE BELIEVE DYNALECTRON HAS FAILED TO SHOW THAT THE SEB'S JUDGMENTS IN THESE AREAS WERE UNREASONABLE. DYNALECTRON APPEARS TO CONCEDE THAT A CERTAIN AMOUNT OF ATTRITION AMONG ITS HIGHER-SKILLED TECHNICIANS IS EXPECTED IN THE COURSE OF RESTRUCTURING ITS WORK FORCE TO AN UPRIGHT PYRAMID CONFIGURATION. WE DO NOT BELIEVE DYNALECTRON'S CONJECTURE THAT HIRING OF HIGHER-CALIBER "C" TECHNICIANS CAN BE EXPECTED, EVEN IF TRUE, ESSENTIALLY MEETS THE OBJECTION THAT ITS SKILL MIX IS TOO LOW. IN ADDITION, THE DYNALECTRON STAFFING PLAN, AS NASA HAS STATED, PROPOSES TO RETAIN THE CURRENT WORKFORCE. THE PLAN INDICATES THAT STAFFING EFFORT WILL BE MINIMAL FOR THE FIRST YEAR, SINCE MOST JOB CATEGORIES ARE ALREADY EMPLOYED BY DYNALECTRON AT WSTF, AND THAT THE HIRING OF APPROXIMATELY 30 NEW PERSONNEL IS PLANNED.

IN REGARD TO THE PROFESSIONAL EMPLOYEES, WE AGREE WITH NASA THAT THE BEST AND FINAL OFFER SHOWS CLEAR AND UNAMBIGUOUS REDUCTIONS IN SALARIES, MOST OF WHICH RELATE TO IDENTIFIABLE INDIVIDUAL PERSONNEL POSITIONS. IN THIS LIGHT, THE SEB CONCLUSION THAT RETENTION OF SOME PERSONNEL MIGHT BE DIFFICULT, AND THE RESULTING DOWNGRADING OF DYNALECTRON'S SCORE DOES NOT APPEAR TO BE AN UNREASONABLE EXERCISE OF JUDGMENT.

DYNALECTRON ALSO ARGUES THAT THESE MATTERS SHOULD HAVE BEEN CLARIFIED IN THE DISCUSSIONS, SO THAT ITS PROPOSALS COULD HAVE BEEN REVISED TO ACCOMMODATE NASA'S DESIRES. WHILE 10 U.S.C. SEC. 2304(G) CALLS FOR THE CONDUCT OF "WRITTEN OR ORAL DISCUSSIONS," VALID EXCEPTIONS TO THIS REQUIREMENT UNDER NASA'S PROCEDURES HAVE BEEN RECOGNIZED - FOR INSTANCE, WHERE IT WOULD BE UNFAIR TO HELP AN OFFEROR THROUGH SUCCESSIVE ROUNDS OF DISCUSSIONS TO BRING ITS ORIGINAL INADEQUATE PROPOSAL UP TO THE LEVEL OF OTHER ADEQUATE PROPOSALS BY POINTING OUT WEAKNESSES WHICH WERE THE RESULT OF THE OFFEROR'S LACK OF DILIGENCE, COMPETENCE, OR INVENTIVENESS IN PREPARING ITS PROPOSAL. 51 COMP. GEN. 621, 622 (1972). IN THIS REGARD, SEE NASA PROCUREMENT REGULATION DIRECTIVE NO. 70-15, SEPTEMBER 15, 1972, SECTION III.E(2), WHICH PROVIDES THAT IN THE CONDUCT OF DISCUSSIONS WITH REGARD TO COST REIMBURSEMENT TYPE CONTRACTS, WHERE THE MEANING OF A PROPOSAL IS CLEAR AND THE SEB HAS ENOUGH INFORMATION TO ASSESS ITS VALIDITY, AND THE PROPOSAL CONTAINS A WEAKNESS WHICH IS INHERENT IN THE PROPOSER'S MANAGEMENT, ENGINEERING, OR SCIENTIFIC JUDGMENT, OR IS THE RESULT OF ITS OWN LACK OF COMPETENCE OR INVENTIVENESS IN PREPARING ITS PROPOSAL, THE CONTRACTING OFFICER SHALL NOT POINT OUT THE WEAKNESS. THE PRESENT CASE, WE DO NOT FIND A SUFFICIENT BASIS ON THE RECORD TO CONCLUDE THAT NASA ERRED IN DETERMINING THAT DYNALECTRON'S MANNING AND STAFFING WEAKNESSES CAME WITHIN THE SECTION III.E(2) EXCEPTION TO THE REQUIREMENT FOR DISCUSSIONS, OR THAT THE EXCEPTION REPRESENTED A FAILURE TO COMPORT WITH THE STATUTORY MANDATE.

A FINAL POINT TO BE CONSIDERED IN CONNECTION WITH THE PROPOSED DEMOTIONS AND SALARY REDUCTIONS CONCERNS THE DEFENSE CONTRACT AUDIT AGENCY (DCAA) AUDIT REPORT DATED JULY 15, 1974, ON EVALUATION OF DYNALECTRON'S BASIC BEST AND FINAL PROPOSAL. THIS AUDIT STUDY WAS CONDUCTED WITHOUT CONSIDERATION OF THE RESULTS OF THE SEB TECHNICAL EVALUATION. THE GIST OF DYNALECTRON'S ARGUMENT IS THE SUGGESTION THAT THE DCAA AUDITOR CORRECTLY UNDERSTOOD THE PROPOSAL AND WAS SATISFIED THAT NO REDUCTIONS IN SALARIES WERE BEING MADE BY DYNALECTRON. IT IS CONTENDED THAT HAD THE SEB TAKEN ADVANTAGE OF THE OPPORTUNITY, IT COULD HAVE SOUGHT CLARIFICATION OF THIS MATTER FROM THE DCAA AUDITOR, WHO WOULD HAVE DISABUSED THE SEB OF ITS CONCERN OVER POSSIBLE SALARY REDUCTIONS.

WE AGREE WITH THE VIEW EXPRESSED BY NASA THAT THE DCAA AUDIT APPEARS TO CONSIST OF RATE VERIFICATION AND VALIDATION. WHILE THE AUDIT EXAMINED DYNALECTRON'S PROPOSED LABOR COSTS, WE FIND NOTHING IN IT TO INDICATE SUPPORT FOR THE ABOVE INTERPRETATION ADVANCED BY DYNALECTRON. ACCORDINGLY, WE FIND NO MERIT IN THIS ARGUMENT.

A SEPARATE DYNALECTRON CONTENTION IN REGARD TO THE MANNING AND STAFFING EVALUATION RELATES TO ALLEGED IMPROPRIETY OF THE LEC PROPOSAL. THE CONTENTION IS BASICALLY THAT LEC PROPOSED A "GOLDPLATED," SUBSTANTIALLY EXCESSIVE MANNING AND STAFFING APPROACH. IN THIS REGARD, WE NOTE THAT THE NASA ADMINISTRATIVE REPORT DATED SEPTEMBER 13, 1974, POINTS OUT THAT LEC WAS IN FACT DOWNGRADED FOR OVERSTAFFING (A TOTAL OF 11 PERSONNEL IN THE FIRST YEAR AND 15 IN THE SECOND) IN WAGE CLASSIFICATION LEVELS AND PROJECT MANAGEMENT AND STAFF; ALSO, THAT LEC WAS DOWNGRADED BECAUSE OF UNDERSTAFFING AND LOW SKILL MIXES IN OTHER AREAS. NASA STRONGLY REJECTS THE PROTESTER'S SUGGESTION THAT IT HAS SELECTED A PROPOSAL WHICH IS SUBSTANTIALLY OVERSTAFFED.

WE BELIEVE THAT AS FAR AS THE MISSION SUITABILITY EVALUATION OF LEC'S MANNING AND STAFFING PROPOSAL IS CONCERNED, THE ADMINISTRATIVE REPORT HAS ADEQUATELY RESPONDED TO THE PROTESTER'S CONTENTION. A RELATED ISSUE FOR CONSIDERATION IS DYNALECTRON'S CONTENTION THAT THE PROPOSED AWARD TO LEC RUNS CONTRARY TO REPRESENTATIONS MADE BY NASA TO CONGRESSIONAL COMMITTEES IN CONNECTION WITH APPROPRIATIONS OF FUNDS FOR FISCAL YEAR 1975. IN THIS CONNECTION, THE PROTESTER CITES A STATEMENT BY NASA BEFORE A SUBCOMMITTEE OF THE HOUSE COMMITTEE ON APPROPRIATIONS (HEARINGS ON HUD - SPACE SCIENCE - VETERANS APPROPRIATIONS FOR 1975, 93D CONGRESS, 2D SESS. PART 3, AT PAGE 148) TO THE EFFECT THAT FISCAL YEAR 1975 FUNDS WERE TO PROVIDE FOR A "BASIC" LEVEL OF SUPPORT SERVICES AT WSTF. WE HAVE NOTED THAT GUIDANCE FROM CONGRESSIONAL COMMITTEES CAN HAVE AN IMPORTANT BEARING ON AN AGENCY'S DETERMINATION OF ITS MINIMUM NEEDS AND THE PROCUREMENT PROCEDURES TO SATISFY THOSE NEEDS. MATTER OF CESSNA AIRCRAFT COMPANY ET AL., 54 COMP. GEN. 97 (1974). HOWEVER, WE SEE NO BASIS TO CONCLUDE THAT THE STATEMENTS CITED BY DYNALECTRON SHOULD ADVERSELY IMPACT UPON THE SELECTION DECISION. IN ADDITION TO ALLEGED ERRORS IN EVALUATION OF MANNING AND STAFFING, DYNALECTRON HAS ALSO ARGUED THAT NASA IMPROPERLY EVALUATED ITS OPERATING PLAN AND KEY PERSONNEL. THE PROTESTER CONTENDS THAT ITS OPERATING PLAN SHOULD HAVE BEEN EVALUATED BY THE SEB AS SUPERIOR, OR AT LEAST EQUAL TO LEC'S. IN THE KEY PERSONNEL CRITERION, DYNALECTRON CONTENDS THAT ITS PROPOSALS SHOULD HAVE BEEN RATED "VERY GOOD" OR "EXCELLENT," BASED ON THE PROTESTER'S EXCELLENT PAST PERFORMANCE AND ITS VIEW THAT THE NEW CONTRACT WILL NOT INVOLVE WORK OF GREATER SCOPE AND COMPLEXITY THAN THE WORK UNDER THE PREDECESSOR CONTRACT. IN THIS CONNECTION, DYNALECTRON HAS PRESENTED ARGUMENTS TO SUBSTANTIATE ITS VIEW THAT ITS COMPONENTS AND TEST MANAGER, ADMINISTRATIVE SERVICES MANAGER AND PROGRAM MANAGER SHOULD HAVE BEEN RATED HIGHER BY THE SEB.

WHILE WE HAVE TAKEN THESE CONTENTIONS INTO CONSIDERATION, AND VIEWED THEM IN JUXTAPOSITION WITH THE DOCUMENTATION OF THE SEB EVALUATION CONTAINED IN THE RECORD, WE BELIEVE THAT ESSENTIALLY THEY CONSTITUTE AN INVITATION FOR OUR OFFICE TO SUBSTITUTE ITS JUDGMENT FOR THE SEB'S IN THESE AREAS. THE ABSENCE OF INDICATIONS THAT THE EVALUATION PROCEDURES FOR THESE CRITERIA WERE DEFICIENT, OR OF CLEAR EVIDENCE TENDING TO SHOW THAT PARTICULAR FINDINGS OF THE SEB WERE UNSUPPORTED BY A REASONABLE BASIS, WE SEE NO GROUNDS UPON WHICH TO QUESTION THE AGENCY'S POSITION.

IN VIEW OF THE FOREGOING, WE CONCLUDE THAT DYNALECTRON HAS FAILED TO SUSTAIN ITS ARGUMENTS IN REGARD TO MISSION SUITABILITY. THUS, WE SEE NO BASIS TO QUESTION THE EVALUATED 89-POINT DIFFERENTIAL BETWEEN THE PROTESTER AND LEC, FOUND BY THE SSO TO BE "SIGNIFICANT," IN THE MOST IMPORTANT OF THE RFP'S THREE EVALUATION CRITERIA.

IV. COST EVALUATION

DYNALECTRON CONTENDS THAT, REGARDLESS OF WHATEVER ADVANTAGE LEC'S PROPOSAL HAD IN MISSION SUITABILITY, IT IS CLEARLY OFFSET BY THE SUPERIORITY OF DYNALECTRON'S COST PROPOSAL. DYNALECTRON ESTIMATES THE COST DIFFERENTIAL BETWEEN THE TWO PROPOSALS AT $5 MILLION OVER A 5-YEAR PERIOD, PLUS AN ADDITIONAL $1.5 MILLION DYNALECTRON ADVANTAGE BECAUSE OF ITS EXEMPTION FROM THE NEW MEXICO GROSS RECEIPTS TAX. IT IS CONTENDED THAT, EVEN CONCEDING A SIGNIFICANT MISSION SUITABILITY SUPERIORITY TO LEC, THE SUBSTANTIAL DYNALECTRON COST ADVANTAGE SHOULD HAVE CAUSED THE SSO TO LOOK TO "OTHER FACTORS," WHERE DYNALECTRON WAS AGAIN SUPERIOR TO LEC.

AS DISCUSSED INFRA, WE DO NOT FIND MERIT IN THE PROTESTER'S SPECIFIC OBJECTIONS CONCERNING THE SEB'S TREATMENT OF PROPOSED COSTS FOR G&A, PROPOSED FEE AND THE NEW MEXICO GROSS RECEIPTS TAX. WE BELIEVE THE CENTRAL ISSUE FOR CONSIDERATION IN REGARD TO THE COST EVALUATION CONCERNS DYNALECTRON'S CONTENTION THAT THE SEB IMPROPERLY INCREASED ITS PROPOSED COSTS BY EVALUATING THEM AGAINST THE SEB GUIDELINE USED IN THE MISSION SUITABILITY EVALUATION. THIS PROCESS OF NORMALIZING OFFERORS' COST PROPOSALS ALSO HAD THE EFFECT OF REDUCING LEC'S PROPOSED COSTS. DYNALECTRON, IN THIS REGARD, POINTS OUT A CONFLICT BETWEEN THIS COST EVALUATION APPROACH AND THE ABOVE-QUOTED RFP INSTRUCTIONS WHICH LEFT "FULL FLEXIBILITY" TO THE OFFERORS IN PROPOSING DIRECT LABOR FOR WAGE CLASSIFICATION POSITIONS, SUBJECT TO CERTAIN ESTIMATES, AND WHICH GAVE DISCRETION TO THE OFFERORS IN PROPOSING PROJECT MANAGEMENT AND STAFF.

WHERE AWARD OF A COST-REIMBURSEMENT CONTRACT IS CONTEMPLATED, THE IMPORTANCE OF ANALYZING PROPOSED COSTS IN TERMS OF THEIR REALISM IS APPARENT, SINCE, REGARDLESS OF THE PROPOSED COSTS SUBMITTED, THE GOVERNMENT WILL BE OBLIGATED TO REIMBURSE TO THE CONTRACTOR ITS ALLOWABLE COSTS. THUS, IT IS INCUMBENT UPON THE CONTRACTING AGENCY'S PERSONNEL TO EXERCISE INFORMED JUDGMENTS AS TO WHETHER PROPOSALS ARE REALISTIC WITH RESPECT TO PROPOSED COSTS AND TECHNICAL APPROACH, AND LACK OF REALISM MAY RESULT IN UPWARD ADJUSTMENT TO AN OFFEROR'S COSTS. SEE, GENERALLY, MATTER OF SCOTT SERVICES, INCORPORATED, B-181075, OCTOBER 30, 1974; B-178667, DECEMBER 14, 1973; AND DECISIONS CITED THEREIN.

NORMALIZATION IS A TECHNIQUE SOMETIMES USED WITHIN THE COST ADJUSTMENT PROCESS IN AN ATTEMPT TO ARRIVE AT A GREATER DEGREE OF COST REALISM. INVOLVES THE MEASUREMENT OF AT LEAST TWO OFFERORS AGAINST THE SAME COST STANDARD OR BASELINE IN CIRCUMSTANCES WHERE THERE IS NO LOGICAL BASIS FOR DIFFERENCES IN APPROACH, OR IN SITUATIONS WHERE INSUFFICIENT INFORMATION IS PROVIDED WITH THE PROPOSALS, LEADING TO THE ESTABLISHMENT OF COMMON "SHOULD HAVE BID" ESTIMATES BY THE AGENCY. SEE MATTER OF LOCKHEED PROPULSION COMPANY, 53 COMP. GEN. 977 (1974).

IN THE PRESENT CASE, THE RECORD REVEALS THAT THE SEB UTILIZED A PROCESS OF NORMALIZING OFFERORS' PROPOSALS. THE FOLLOWING GENERAL APPROACH WAS TAKEN. THE SKILL LEVEL PROFILE FOR DIRECT LABOR AND NUMERICAL STAFFING RANGE FOR PROJECT MANAGEMENT AND STAFF, WHICH WERE USED AS A GUIDELINE IN THE MISSION SUITABILITY EVALUATION, WERE USED AS A COMMON BASELINE IN COST EVALUATION.

IN DEVELOPING THE COMMON BASELINE AS REGARDS DIRECT LABOR (LESS PROJECT MANAGEMENT AND STAFF), THE SEB BEGAN WITH THE DIRECT LABOR HOURS SET FORTH IN THE RFP. THE DIRECT LABOR HOURS WERE ASSIGNED TO SKILL LEVELS, AS DETERMINED BY NASA, APPLICABLE TO ALL OFFERORS; SKILL MIX VARIATIONS AMONG OFFERORS WERE NOT RECOGNIZED. THE APPLICATION OF DIRECT LABOR WAGE RATES BASED UPON CONSIDERATION OF THE DEPARTMENT OF LABOR WAGE DETERMINATION, UNION AGREEMENTS, PAYROLL RECORDS AND APPLICABLE DCAA AUDIT MATERIALS, RESULTED IN A COMPOSITE LABOR RATE, WHICH INCLUDED AN ALLOWANCE FOR ESCALATION.

GIVEN THIS APPROACH, THE RESULT WAS NORMALIZATION OF THIS PORTION OF DIRECT LABOR COSTS ACROSS THE BOARD FOR ALL OFFERORS. TAKING, FOR INSTANCE, THE NUMBER OF LABOR HOURS STIPULATED IN THE RFP FOR THE FIRST CONTRACT YEAR (432,640), MULTIPLIED BY THE NASA COMPOSITE LABOR RATE (DERIVED FROM THE NASA SKILL MIX) LED TO THE SAME PROBABLE DIRECT LABOR COST FOR ALL PROPOSALS. BASE OVERTIME HOURS SET FORTH IN THE RFP WERE SIMILARLY APPLIED TO ALL OFFERORS, USING THE COMPOSITE LABOR RATE; ALSO, THE SEB USED AN ASSUMED OVERTIME PREMIUM FORMULA AND A STANDARD SHIFT PREMIUM DIFFERENTIAL. IN REGARD TO PROJECT MANAGEMENT AND STAFF, THE SEB ESTIMATED THE HOURS NECESSARY TO FULFILL THE FUNCTIONS DESCRIBED IN SECTION 5 OF THE SOW; TO THE ESTIMATED HOURS WERE APPLIED THE PARTICULAR OFFEROR'S LABOR RATES FOR OTHER THAN SERVICE CONTRACT ACT WAGE CLASSIFICATION POSITIONS.

WE BELIEVE THERE IS MERIT IN DYNALECTRON'S OBJECTION THAT THE NORMALIZATION PROCESS IS TO SOME EXTENT IN CONFLICT WITH THE TERMS OF THE RFP. WHERE THE RFP ALLOWS FULL FLEXIBILITY TO THE OFFERORS IN PROPOSING DIRECT LABOR, IT WOULD APPEAR THAT INDIVIDUAL APPROACHES TO MEETING THE REQUIREMENTS ARE BOTH BEING CALLED FOR AND ARE RECOGNIZED AS TECHNICALLY FEASIBLE. IT IS CLEAR THAT IF AN OFFEROR PROPOSES A LOW SKILL MIX, IT MAY BE DOWNGRADED TECHNICALLY, AND, IN ADDITION, ITS COSTS MAY BE ADJUSTED UPWARDS TO COMPENSATE FOR THE TECHNICAL DEFICIENCY. THE AGENCY MIGHT EXAMINE THE COSTS PROPOSED FOR THE LOW SKILL MIX, COMPARE THEM WITH ITS OWN ESTIMATE, AND ADJUST THE OFFEROR'S COSTS UPWARDS. SEE, IN THIS REGARD, B-178667, SUPRA. BUT THIS TYPE OF PROCEDURE CONTEMPLATES ADJUSTMENT OF A PARTICULAR OFFEROR'S COSTS, TAKING INTO ACCOUNT ITS OWN APPROACH FOR MEETING THE RFP REQUIREMENTS. WHERE DIRECT LABOR COSTS ARE NORMALIZED FOR ALL OFFERORS, WE BELIEVE THE RESULT MAY BE, AS POINTED OUT BY DYNALECTRON, TO ENCOURAGE UNREALISTIC AND INFLATED TECHNICAL PROPOSALS. BY AIMING "HIGH," AN OFFEROR MAY RISK BEING DOWNGRADED TO SOME EXTENT TECHNICALLY, BECAUSE SIGNIFICANT DEPARTURES FROM THE TECHNICAL GUIDELINE WILL BE PENALIZED, BUT AT THE SAME TIME ITS COSTS, HOWEVER EXCESSIVE THEY MAY BE, WILL BE REDUCED TO A STANDARD NORMALIZED AMOUNT. ON THE OTHER HAND, AN OFFEROR WHICH AIMS "LOW" WILL NOT ONLY BE DOWNGRADED TECHNICALLY, BUT WILL ALSO HAVE ITS COSTS NORMALIZED UPWARDS.

THE PROPER GOAL IN BOTH INSTRUCTING OFFERORS AS TO PROPOSAL PREPARATION AND IN CONDUCTING THE PROBABLE COST EVALUATION ITSELF IS TO SEGREGATE COST FACTORS WHICH ARE "COMPANY UNIQUE" - DEPENDENT ON VARIABLES RESULTING FROM DISSIMILAR COMPANY POLICIES - FROM THOSE WHICH ARE GENERALLY APPLICABLE TO ALL OFFERORS AND THEREFORE SUBJECT TO NORMALIZATION. SEE MATTER OF LOCKHEED PROPULSION COMPANY, SUPRA. IN THE PRESENT CASE, WE BELIEVE BOTH THE RFP INSTRUCTIONS AND THE PROBABLE COST EVALUATION FELL SHORT OF THIS GOAL. IT MAY BE THAT SOME OF THE COST ELEMENTS INHERENT IN PROPOSING DIRECT WAGE CLASSIFICATION LABOR POSITIONS MIGHT BE SUBJECT TO NORMALIZATION BECAUSE THE AVAILABLE LABOR POOL OF TECHNICIANS MAY BE THE SAME FOR ALL OFFERORS. FOR INSTANCE, ANY CONTRACTOR WANTING TO HIRE A CERTAIN NUMBER OF "A" TECHNICIANS IN A LABOR CATEGORY WOULD FIND THE COSTS CIRCUMSCRIBED BY THE SERVICE CONTRACT ACT WAGE DETERMINATION AND MARKET CONDITIONS IN THE WSTF AREA. FURTHER, NASA HAS CONTENDED THAT NORMALIZATION TO A REALISTIC COMMON BASELINE, REFLECTING THE SKILL LEVELS KNOWN TO BE REQUIRED, IS NECESSARY IN ORDER TO DETERMINE THE PROBABLE COSTS OF DOING THE JOB.

ON THE OTHER HAND, UNDER THE RFP TERMS THE OFFERORS WERE ENCOURAGED TO PROPOSE DIFFERENT TECHNICIAN SKILL MIXES REFLECTING THEIR OWN APPROACHES TO MEET THE WORK REQUIREMENTS. ALSO, WE FIND IT DIFFICULT TO CONCEIVE THAT SOME INDIVIDUALITY IN ACCEPTABLE TECHNICAL APPROACHES, WITH CONSEQUENT VARIATIONS IN INDIVIDUAL OFFERORS' COSTS, WAS NOT POSSIBLE. THUS, WE HAVE DOUBTS CONCERNING THE REASONABLENESS OF NORMALIZING THE COSTS OF THESE APPROACHES TO A COMMON COST BASELINE GOUNDED UPON WHAT NASA HAS DESCRIBED AS A SKILL MIX PROFILE GEARED TO A "NOMINAL" APPROACH TO SATISFYING THE WORK REQUIREMENTS. SINCE DYNALECTRON PROPOSED A LOW SKILL MIX AND LEC A HIGHER ONE, A COST REEVALUATION EFFECTING INDIVIDUALIZED COST ADJUSTMENTS MIGHT HAVE THE EFFECT OF INCREASING THE COST DIFFERENTIAL BETWEEN THE OFFERORS.

HOWEVER, WHILE NORMALIZATION MAY HAVE DISADVANTAGED DYNALECTRON TO SOME EXTENT, THIS DISADVANTAGE IS LIMITED BY THE FACT THAT IN A COST REEVALUATION INDIVIDUALIZED UPWARD ADJUSTMENTS TO ITS PROPOSALS WOULD NOT BE INAPPROPRIATE. THE NORMALIZED DOLLAR AMOUNT FOR DIRECT LABOR DEVELOPED BY THE SEB HAS VALIDITY AS A GOVERNMENT ESTIMATE OF THE PROBABLE COSTS. IN VIEW OF THE LOW DYNALECTRON SKILLS MIX AND OTHER TECHNICAL DEFICIENCIES, SUPRA, AN ADJUSTMENT FOR INCREASE IN DYNALECTRON'S PROBABLE COSTS (DIRECT LABOR AND COSTS FLOWING FROM DIRECT LABOR, SUCH AS OVERTIME, OVERTIME PREMIUM AND FRINGE BENEFITS) WOULD NOT BE UNREASONABLE. 178667, SUPRA.

IN ADDITION, WE DO NOT FIND IMPROPRIETY IN THE PROBABLE COST EVALUATION FOR DYNALECTRON'S PROJECT MANAGEMENT AND STAFF. IN THIS REGARD, WE SEE NO BASIS FOR OBJECTION TO THE SEB'S UTILIZATION OF THE 2,080 HOURS MAN-YEAR EQUIVALENT DEFINITION, AS SPECIFIED IN THE RFP, RATHER THAN DYNALECTRON'S REDUCED FIGURE OF 2,043 HOURS BASED ON EXPECTED LEAVE WITHOUT PAY. THE SEB JUDGED THAT ALL OFFERORS WOULD HAVE SOME LEAVE WITHOUT PAY, AND THAT TO ALLOW A DEPARTURE FROM 2,080 FIGURE WOULD RESULT IN INEQUITABLE TREATMENT. THE NASA ANALYSIS OF PROBABLE COSTS FOR THE FIRST YEAR OF DYNALECTRON'S ALTERNATE PROPOSAL NO. 2 SHOWS THAT THE 2,080 FIGURE WAS APPLIED, NOT TO THE NASA STAFFING RANGE OF 61-63 PERSONNEL, BUT TO 58 PERSONNEL (THE LOW END OF THE STAFFING RANGE MINUS THREE DYNALECTRON PERSONNEL NOT CHARGED TO THE CONTRACT). DYNALECTRON HAD PROPOSED 57 PROJECT MANAGEMENT AND STAFF PERSONNEL. THE ADDED PERSONNEL COST, THEREFORE, APPEARS TO BE IN THE NATURE OF AN ADJUSTMENT TO THE DYNALECTRON PROPOSAL, RATHER THAN NORMALIZATION OF THE PROPOSAL TO A COMMON BASELINE, AND WE SEE NO BASIS ON THE RECORD TO CONCLUDE THAT THE UPWARD ADJUSTMENT WAS UNREASONABLE.

DYNALECTRON HAS ALSO CONTESTED THE SEB'S TREATMENT OF ITS PROPOSED G&A COSTS AND PROPOSED FEE. IN REGARD TO G&A, DYNALECTRON CONTENDS THAT SINCE, AS REQUIRED BY THE TERMS OF THE RFP, IT OFFERED ABSOLUTE DOLLAR CEILINGS FOR G&A COSTS, THE SEB ERRED IN MAKING UPWARD ADJUSTMENTS ABOVE THESE CEILING AMOUNTS. DYNALECTRON CITES RFP INSTRUCTIONS WHICH STATED:

OFFERORS WILL BE REQUIRED TO INDICATE THEIR WILLINGNESS TO ACCEPT THEIR OWN ESTIMATED AMOUNTS OF PARTICULAR COST ELEMENTS AS CEILINGS (I.E., PROJECT OVERHEAD AND G&A) THEREBY LIMITING THEIR RECOVERY UNDER ANY CONTRACT TO BE AWARDED.

ALSO, THE FORM 6 COST PROPOSAL CALLED FOR OFFERS IN THE FOLLOWING FORM:

D.G&A % CEILING AMOUNT $

DYNALECTRON ALSO ARGUES THAT A COMPARISON OF THE COST STRUCTURE OF ITS SEVERAL PROPOSALS, SHOWING NO RELATIONSHIP BETWEEN PROPOSED DIRECT COSTS AND G&A, FURTHER SUBSTANTIATES ITS CONTRACTUAL INTENT NOT TO RECOVER G&A COSTS ABOVE THE STATED DOLLAR CEILING AMOUNTS. NASA, ON THE OTHER HAND, BELIEVES IT IS CLEAR THAT DYNALECTRON DID NOT OFFER ABSOLUTE DOLLAR CEILINGS. THE SEB, BECAUSE OF INCREASES IN THE PROBABLE COST BASE, ADJUSTED DYNALECTRON'S G&A COSTS ABOVE THE QUOTED DOLLAR AMOUNTS.

BESIDES THE RFP TERMS CITED BY DYNALECTRON, WE NOTE THAT THE RFP SPECIFIC INSTRUCTIONS PROVIDE IN SECTION G.1.C.: "STATE THE OVERHEAD AND G&A RATES THAT YOUR COMPANY WOULD BE WILLING TO ACCEPT AS CEILINGS ***" ALSO, AMENDMENT NO. 3 TO THE RFP, FEBRUARY 5, 1974, STATED IN RESPONSE TO AN OFFEROR'S QUESTION THAT "PROVISIONAL" OVERHEAD AND G&A COSTS SHOULD BE PROVIDED IN THE DOLLAR COST COLUMN AND CEILING RATES IN THE PERCENTAGE BLANK ON LINES C. & D. ON FORMS 6, 6A, AND 6B, AND CEILING RATES AND COSTS ONLY SHOULD BE PROVIDED ON FORMS 6C, D AND E. READING THE RFP TERMS AS A WHOLE, AND DYNALECTRON'S RESPONSES THERETO, IT APPEARS CLEAR THAT THE G&A CEILING IS A PERCENTAGE AND NOT AN ABSOLUTE DOLLAR AMOUNT. ALSO, WE NOTE THAT IN A LETTER DATED MAY 28, 1974, TO THE CONTRACTING OFFICER, DYNALECTRON STATED IN PART THAT "THE TOTAL COMBINED AMOUNTS FOR G&A AND ANY FUTURE OVERHEAD (WHICH IS NOW ZERO) WOULD BE LIMITED TO THE PERCENTAGES PROPOSED FOR G&A." IN VIEW OF THE FOREGOING, WE DO NOT BELIEVE A REASONABLE BASIS EXISTS ON THE RECORD TO CONCLUDE THAT THE SEB'S ACTION IN MAKING UPWARD ADJUSTMENT OF DYNALECTRON'S G&A COSTS WAS IMPROPER. IN REGARD TO DYNALECTRON'S PROPOSED FEE, AND ITS OBJECTIONS TO ASSUMED INCREASES IN THE FEE MADE BY THE SEB, IT APPEARS FROM THE RECORD THAT THE SEB'S USE OF PERFORMANCE PROJECTIONS IN THE EVALUATION ACTUALLY RESULTED IN DECREASES IN DYNALECTRON'S FEE. ANOTHER CONTROVERTED ASPECT OF THE COST EVALUATION INVOLVES THE NEW MEXICO GROSS RECEIPTS TAX. DYNALECTRON OBJECTS TO NASA'S NORMALIZATION OF THE NONAPPLICABILITY OF THE TAX BY REMOVING FROM THE PROBABLE COST EVALUATION ALL DOLLARS PROPOSED BY VARIOUS OFFERORS FOR PAYMENT OF THE TAX. IN THIS REGARD, CHAPTER 72, ARTICLE 16A, SECTION 72-16A-4 OF THE NEW MEXICO REVISED STATUTES ANNOTATED STATES THAT "FOR THE PRIVILEGE OF ENGAGING IN BUSINESS, AN EXCISE TAX EQUAL TO FOUR PER CENT (4%) OF GROSS RECEIPTS IS IMPOSED ON ANY PERSON ENGAGING IN BUSINESS IN NEW MEXICO." IN ADDITION, AMENDMENT NO. 3 TO THE RFP, FEBRUARY 5, 1974, CONTAINED THE FOLLOWING NASA ANSWER TO AN OFFEROR'S QUESTION CONCERNING THE TAX:

A TAX OF 4% OF GROSS RECEIPTS IS IMPOSED FOR THE PRIVILEGE OF DOING BUSINESS IN NEW MEXICO UNLESS AN EXEMPTION OR DEDUCTION IS APPLICABLE. SOME ACTIVITIES AND INDUSTRIES ARE LARGELY EXEMPT FROM THESE TAXES, AND OTHERS ARE EXEMPT BY VIRTUE OF THEIR TAXATION UNDER OTHER SPECIFIC LAWS. EACH PROPOSER SHOULD INDICATE WHETHER HE HAS AN EXEMPTION UNDER THE ABOVE. THEREFORE IT IS SUGGESTED THAT THROUGH YOUR LEGAL COUNSEL OR OTHERWISE YOU DETERMINE YOUR PARTICULAR NEW MEXICO TAX LIABILITY AND PROPOSE ACCORDINGLY.

DYNALECTRON ESTIMATES THAT LEC PROPOSED ABOUT $1,500,000 FOR PAYMENT OF THE TAX OVER A 5-YEAR PERIOD. IN CONTRAST, THE DYNALECTRON PROPOSALS STATED:

NO COST HAS BEEN INCLUDED FOR NEW MEXICO GROSS RECEIPTS TAX, BASED UPON THE STATE OF NEW MEXICO BUREAU OF REVENUE RULING NO. 69-085-5 WHICH WAS ISSUED TO DYNALECTRON ON 13 NOVEMBER 1971. THIS RULING PERMITS THE EXCLUSION OF ALL GROSS RECEIPTS FROM THE NEW MEXICO GROSS RECEIPTS TAX AND IS A UNIQUE FACTOR WHICH, TO OUR KNOWLEDGE, NO OTHER CONTRACTOR CAN OFFER.

IN VIEW OF THESE FACTS, DYNALECTRON CONTENDS THAT ABOUT $1,500,000 MUST BE ADDED TO LEC'S PROBABLE COSTS, SUBSTANTIALLY INCREASING THE COST DIFFERENTIAL BETWEEN THE TWO OFFERORS.

NASA DEFENDS ITS TREATMENT OF THE TAX IN THE COST EVALUATION. THE AGENCY HAS CONFIRMED THAT, AT ITS URGING, DYNALECTRON APPLIED FOR AND OBTAINED A SPECIAL RULING FOR ITS CURRENT WSTF CONTRACT. NASA STATES THAT THERE IS NO BASIS TO ASSUME THAT LEC WOULD NOT BE GRANTED THE SAME TYPE OF RULING UNDER THE SUCCESSOR CONTRACT. IN ADDITION, NASA POINTS OUT THAT THE LEGAL QUESTION OF THE TAXES' APPLICABILITY IS HIGHLY CONFUSED AND UNCERTAIN, AND THAT DIFFERENT CONTRACTORS AT WSTF HAVE RECEIVED QUITE DIFFERENT TREATMENT IN THEIR ATTEMPTS TO CLAIM DEDUCTION OF THE TAX. UNDER THE FOREGOING CIRCUMSTANCES, THE SEB DECIDED TO EXCLUDE ALL DOLLARS PROPOSED FOR TAX PAYMENT.

DYNALECTRON'S ARGUMENT IS THAT IT WAS IMPROPER TO NORMALIZE THE NONAPPLICABILITY OF THE TAX, SINCE THE QUESTION OF WHETHER OR NOT A FUTURE WSTF CONTRACTOR WILL BE ABLE TO OBTAIN AN EXEMPTION IS A RISK FACTOR WHICH COMPANY MANAGEMENT MUST JUDGE IN PREPARING ITS PROPOSAL. THE PROTESTER CONTENDS THAT, IN VIEW OF THE CONFUSED STATE OF THE LAW, IT CANNOT BE SAID THERE IS NO LOGICAL BASIS FOR DIFFERENT APPROACHES, AND STATES: "WHETHER LOCKHEED COULD OR COULD NOT OBTAIN SUCH AN EXEMPTION IS SPECULATIVE. VIEW OF THAT RISK, LOCKHEED MADE A MANAGEMENT DECISION TO INCLUDE THESE COSTS IN ITS PROPOSAL. IN VIEW OF DYNALECTRON'S OWN ASSESSMENT OF ITS OWN RISK, DYNALECTRON MADE A MANAGEMENT DECISION NOT TO INCLUDE THESE COSTS IN ITS PROPOSAL."

BOTH THE TAX ITSELF AND THE CONTRACTING AGENCY'S TREATMENT OF COST INCURRED FOR TAX PAYMENTS APPEAR TO BE FACTORS WHICH ARE GENERALLY APPLICABLE TO ALL OFFERORS. SEE, IN THIS REGARD, NASA PROCUREMENT REGULATION (PR) 15.205-41, WHICH PROVIDES INTER ALIA THAT TAXES WHICH THE CONTRACTOR IS REQUIRED TO PAY ARE ALLOWABLE COSTS, EXCEPT FOR TAXES FROM WHICH EXEMPTIONS ARE AVAILABLE TO THE CONTRACTOR. UNDER THESE CIRCUMSTANCES, WE DO NOT SEE THAT A DECISION TO PROPOSE OR NOT TO PROPOSE COSTS FOR TAX PAYMENT REPRESENTS A UNIQUE COMPANY APPROACH OR AN INDEPENDENT MANAGEMENT DECISION, EXCEPT IN THE SEEMINGLY UNUSUAL CIRCUMSTANCES WHERE A PARTICULAR OFFEROR'S FUTURE TAX EXEMPTION IS ASSURED. IN THIS CONNECTION, WE THINK IT IS CLEAR THAT FROM THE ABOVE QUOTED DYNALECTRON STATEMENT, THE PROTESTER ITSELF RECOGNIZES THAT CONTINUATION OF ITS PRIVILEGED TAX POSITION IS NOT ASSURED. DYNALECTRON'S ALLEGED EXEMPTION UNDER A NEW CONTRACT WERE A CERTAINTY, THERE WOULD BE NO NEED FOR IT TO ENTER INTO AN ASSESSMENT OF RISK IN PREPARING ITS PROPOSAL. IN ADDITION, WE HAVE EXAMINED THE REVENUE RULING CITED IN THE DYNALECTRON PROPOSALS AND DO NOT BELIEVE IT DEMONSTRATES WITH ANY CERTAINTY THAT DYNALECTRON WOULD BE ALLOWED AN EXEMPTION OR DEDUCTION FOR THE WORK UNDER THE NEW CONTRACT.

UNDER THE CIRCUMSTANCES, WE SEE NO MERIT IN THIS PORTION OF THE PROTEST. IN PASSING, WE NOTE THAT IT MIGHT BE MORE REALISTIC TO NORMALIZE THE APPLICABILITY OF THE TAX RATHER THAN ITS NONAPPLICABILITY - I.E., TO ADD 4 PERCENT TO EACH OFFEROR'S PROBABLE COSTS. HOWEVER, IN EITHER EVENT THE RELATIVE COST POSITIONS OF THE OFFERORS WOULD BE THE SAME.

V. CONCLUSION

SEVERAL ADDITIONAL CONTENTIONS OF THE PROTESTER CONCERNING POST SELECTION MATTERS MUST BE CONSIDERED. ONE OF THESE IS DYNALECTRON'S CONTENTION THAT ONLY ITS PROPOSALS CAN BE CONSIDERED FOR AWARD AT THE PRESENT TIME, SINCE ALL OTHER PROPOSALS, INCLUDING LEC'S, HAVE EXPIRED. DYNALECTRON BELIEVES THAT TO CONSIDER LEC'S PROPOSAL FOR AWARD AT THIS TIME WOULD IN EFFECT AMOUNT TO AN OPPORTUNITY FOR LEC TO SUBMIT A LATE PROPOSAL, ABRIDGING THE COMMON CUTOFF PROCEDURE FOR BEST AND FINAL OFFERS AND VIOLATING THE INTEGRITY OF THE PROCUREMENT PROCESS.

WE FIND NO MERIT IN THIS CONTENTION. WHILE LEC'S INITIAL PROPOSAL, MARCH 2, 1974, STIPULATED AN EXPIRATION DATE WITHIN 180 DAYS AFTER SUBMISSION, WE NOTE THAT SINCE THAT TIME LEC SUBMITTED A BEST AND FINAL OFFER (MAY 17, 1974); MOREOVER, AFTER SELECTION BY THE SSO, WE UNDERSTAND THAT NASA AND LEC HAVE BEEN ENGAGED IN NEGOTIATIONS WITH A VIEW TOWARDS DEFINITIZING A FINAL CONTRACT. WE ARE OF THE VIEW THAT BY PARTICIPATING IN THE CONTINUING SERIES OF OFFERS AND COUNTER-OFFERS INVOLVED IN THE NEGOTIATIONS PROCESS, LEC HAS INDICATED ITS INTENT TO EXTEND ITS OFFER. MOREOVER, BY LETTER OF DECEMBER 6, 1974, TO THE CONTRACTING OFFICER, LEC STATED THAT IT EXTENDED ITS OFFER BY 180 DAYS FROM DECEMBER 6, 1974. ALSO, WE HAVE HELD THAT NASA'S FINAL NEGOTIATION PROCEDURES DO NOT ABRIDGE THE COMMON CUTOFF REQUIREMENT. SEE MATTER OF SPERRY RAND CORPORATION (UNIVAC DIVISION) ET AL., 54 COMP. GEN. 408 (1974).

CONCERNING THE SELECTION DECISION ITSELF, DYNALECTRON HAS RAISED A NUMBER OF CONJECTURAL ARGUMENTS TO THE EFFECT THAT THE SSO WAS MISINFORMED AND CONFUSED BY THE SEB'S PRESENTATION, DUE TO THE ALLEGEDLY ERRONEOUS SEB CONCLUSIONS IN THE MISSION SUITABILITY EVALUATION. SINCE, AS INDICATED, SUPRA, WE HAVE FOUND NO BASIS TO OBJECT TO THE MISSION SUITABILITY EVALUATION, WE BELIEVE THESE CONTENTIONS ARE WITHOUT MERIT. LEC'S SUPERIORITY IN WHAT WAS CLEARLY STATED TO BE THE MOST IMPORTANT OF THE EVALUATION CRITERIA IS UNAFFECTED BY OUR DECISION.

THE SSO'S SELECTION OF LEC, AS INDICATED IN THE ABOVE-QUOTED SELECTION STATEMENT, IS CLEARLY PREMISED IN PART OF A "SIGNIFICANT" LEC MARGIN IN MISSION SUITABILITY; IN ADDITION, THE DECISION MAKES REFERENCE TO THE "REASONABLE COST" OF THE LEC PROPOSAL, AND TO THE LACK OF A "SIGNIFICANT DIFFERENCE," AND TO THE "SUBSTANTIALLY SIMILAR" PROBABLE COSTS OF ALL THE OFFERORS. THE ONLY QUESTION FOR CONSIDERATION IS WHAT RECOMMENDATION, IF ANY, IS MANDATED BY OUR DOUBTS CONCERNING CERTAIN ASPECTS OF THE PROBABLE COST EVALUATION. (SEE PP. 19-21.) IN THIS REGARD, WE NOTE THAT ALTHOUGH A COST REEVALUATION MIGHT REVEAL AN INCREASE IN THE PROBABLE COST DIFFERENTIAL BETWEEN DYNALECTRON AND LEC, THIS DEVELOPMENT WOULD NOT NECESSARILY HAVE A DECISIVE EFFECT ON THE SELECTION DECISION, SINCE A WIDER DIFFERENTIAL MIGHT NOT EXCEED THE RANGE OF UNCERTAINTY WHICH EXISTS IN ESTIMATING FOR COST-TYPE CONTRACTS OVER A PERIOD OF YEARS.

ACCORDINGLY, WE RECOMMEND THAT THE SSO DETERMINE, IN LIGHT OF THE VIEWS EXPRESSED IN THIS DECISION, WHETHER A REEVALUATION OF COSTS IS CALLED FOR UNDER THE CIRCUMSTANCES, OR WHETHER OUR DOUBTS RELATING TO THE EVALUATION OF THE CRITERION WHICH WAS SECOND IN IMPORTANCE ARE NOT, IN THE SSO'S JUDGMENT, OF SUFFICIENTLY SERIOUS IMPACT TO AFFECT THE VALIDITY OF HIS SELECTION DECISION. IN THE EVENT THE SSO DETERMINES THAT A COST REEVALUATION IS CALLED FOR, WE RECOMMEND THAT HE THEN DETERMINE WHETHER THE RESULTS OF THE REEVALUATION MANDATE A RECONSIDERATION OF HIS SELECTION DECISION.