B-171391(2), FEB 26, 1971

B-171391(2): Feb 26, 1971

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE GAO WILL NOT CONTRADICT THE OPINION OF NASA LABOR RELATIONS CONSULTANTS THAT A SEVERE LABOR IMPACT AND SERIOUS DISRUPTION OF THE HARMONIOUS LABOR RELATIONS AT KENNEDY WOULD RESULT FROM THE PAN AMERICAN APPROACH TO ASSUMING ITS PREDECESSOR'S (TWA'S) COLLECTIVE BARGAINING AGREEMENT AT VARIANCE WITH THE SUCCESSOR EMPLOYER DOCTRINE. PICKETING IS SUFFICIENT JUSTIFICATION FOR AWARD TO BOEING. THE PROCUREMENT SOLICITATION IS REQUEST FOR PROPOSALS (RFP) 2-370-0. THE CLOSING DATE FOR SUBMISSION OF PROPOSALS WAS AUGUST 19. THE FIRST OF WHICH WAS REQUIRED TO BE FIRM PRICED. BASIC PROPOSALS WERE REQUIRED TO BE BASED UPON FIXED STAFFING SPECIFIED IN THE RFP. ALTERNATE PROPOSALS WERE SOLICITED BASED UPON ORGANIZATION AND STAFFING OTHER THAN AS INDICATED IN THE RFP.

B-171391(2), FEB 26, 1971

BID PROTEST - NEGOTIATIONS - SUCCESSOR EMPLOYER DENIAL OF PROTEST OF PAN AMERICAN WORLD AIRWAYS, INC., AGAINST THE AWARD OF A NEGOTIATED COST-PLUS-AWARD-FEE TYPE CONTRACT ISSUED BY NASA FOR THE PERFORMANCE OF INSTALLATION SUPPORT SERVICES AT KENNEDY SPACE CENTER TO BOEING COMPANY. THE GAO WILL NOT CONTRADICT THE OPINION OF NASA LABOR RELATIONS CONSULTANTS THAT A SEVERE LABOR IMPACT AND SERIOUS DISRUPTION OF THE HARMONIOUS LABOR RELATIONS AT KENNEDY WOULD RESULT FROM THE PAN AMERICAN APPROACH TO ASSUMING ITS PREDECESSOR'S (TWA'S) COLLECTIVE BARGAINING AGREEMENT AT VARIANCE WITH THE SUCCESSOR EMPLOYER DOCTRINE. THAT AN ATTEMPTED CHANGE OF UNIONS FOR INCUMBENT EMPLOYEES MIGHT BE RESISTED BY LITIGATION WITH UNCERTAIN OUTCOME, STRIKES, AND PICKETING IS SUFFICIENT JUSTIFICATION FOR AWARD TO BOEING.

TO PAN AMERICAN WORLD AIRWAYS, INCORPORATED, AEROSPACE SERVICES DIVISION:

WE REFER TO YOUR PROTEST BY TELEGRAM DATED DECEMBER 11, 1970, AS SUPPLEMENTED BY LETTERS DATED DECEMBER 14, 1970, AND JANUARY 26, 1971, AGAINST THE SELECTION BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) OF THE BOEING COMPANY (BOEING) FOR NEGOTIATION OF A COST-PLUS-AWARD -FEE TYPE CONTRACT FOR THE PERFORMANCE OF INSTALLATION SUPPORT SERVICES AT KENNEDY SPACE CENTER (KSC). THE PROCUREMENT SOLICITATION IS REQUEST FOR PROPOSALS (RFP) 2-370-0, DATED JUNE 30, 1970, AND THE CLOSING DATE FOR SUBMISSION OF PROPOSALS WAS AUGUST 19, 1970.

THE RFP CALLED FOR PERFORMANCE OF THE SPECIFIED SERVICES FOR AN INITIAL PERIOD OF ONE YEAR COMMENCING FEBRUARY 1, 1971, WITH FOUR EXTENSIONS OF ONE YEAR EACH TO BE AVAILABLE AT THE GOVERNMENT'S DISCRETION UNDER CONTRACT OPTIONS, THE FIRST OF WHICH WAS REQUIRED TO BE FIRM PRICED. BASIC PROPOSALS WERE REQUIRED TO BE BASED UPON FIXED STAFFING SPECIFIED IN THE RFP, BUT ALTERNATE PROPOSALS WERE SOLICITED BASED UPON ORGANIZATION AND STAFFING OTHER THAN AS INDICATED IN THE RFP.

ARTICLE VI OF APPENDIX III OF THE PROPOSED CONTRACT STATED A REQUIREMENT FOR CONTINUITY OF SERVICES NECESSITATING PHASE-IN TRAINING OF THE SUCCESSOR CONTRACTOR DURING THE LAST 60 DAYS OF THE EXISTING CONTRACT TERM AND COOPERATION OF BOTH CONTRACTORS RESPECTING, AMONG OTHER FACTORS, RELEASE OF EMPLOYEES TO THE NEW CONTRACTOR. ARTICLE XXXII, WHICH GOVERNED THE PHASE-IN OF THE FUNCTIONS TO BE ASSUMED UNDER THE PROPOSED CONTRACT FROM THREE INCUMBENT CONTRACTORS, REQUIRED THAT ALLOWANCE FOR PHASE-IN BE MADE IN THE COST AND FEE NEGOTIATED UNDER THE PROPOSED CONTRACT SUBJECT TO ADJUSTMENT IN THE EVENT THE FUNCTIONS IN QUESTION ARE NOT FULLY OPERATIONAL AND COMPLETELY STAFFED, AS AGREED DURING NEGOTIATIONS, BY THE DATES SCHEDULED IN ARTICLE XXXII.

ARTICLE XXIV OF APPENDIX III, ENTITLED "SERVICE CONTRACT ACT OF 1965," INFORMED OFFERORS OF THE ISSUANCE BY THE DEPARTMENT OF LABOR OF A WAGE DETERMINATION ESTABLISHING A MINIMUM HOURLY WAGE OF $2.45 PER HOUR, INCLUDING FRINGE BENEFITS, FOR JANITORS, PORTERS, AND CLEANERS.

PARAGRAPH 2.C., SECTION 1, PART B, APPENDIX II, AS AMENDED, RELATING TO MANAGEMENT STRUCTURE, READS AS FOLLOWS:

"EXPLAIN YOUR UNDERSTANDING OF THE IMPACT, IF ANY, THAT THE COLLECTIVE BARGAINING AGREEMENTS COVERING INCUMBENT EMPLOYEES WILL HAVE ON YOUR ASSUMING THE CONTRACT RESPONSIBILITIES. DISCUSS WHICH OF YOUR EMPLOYEES, IF ANY, WILL BE COVERED BY COLLECTIVE BARGAINING AGREEMENTS AND INDICATE WHICH, IF ANY, SUPERVISORY PERSONNEL ARE INCLUDED.

"PROSPECTIVE OFFERORS ARE ADVISED THAT MOST EMPLOYEES OF THE INCUMBENT CONTRACTORS ARE REPRESENTED BY IAM AND THAT THE LABOR AGREEMENTS IN FORCE ARE AS FOLLOWS:

CURRENT CONTRACT

AREA UNION DISTRICT NO. LOCAL NO. EXPIRATION DATE

MAJORITY IAM 142 773 12/31/71

JANITORIAL IAM 166 1306 12/31/71

GUARD UPGWA 128 1/31/72

FIRE SERVICE TWU 525 7/9/712

TRAINING IAM 166 690 3/1/71"

IAM STANDS FOR THE INTERNATIONAL ASSOCIATION OF MACHINISTS; UPGWA FOR THE UNITED PLANT GUARD WORKERS OF AMERICA; AND TWU FOR TRANSPORT WORKERS UNION OF AMERICA. IBT, AS YOU HAVE INDICATED IN YOUR PROTEST, STANDS FOR THE INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN AND HELPERS OF AMERICA.

PARAGRAPH 11, APPENDIX I, PART B, RELATING TO EVALUATION OF PROPOSALS, INFORMED PROSPECTIVE OFFERORS THAT FAILURE OF A PROPOSAL TO BE ACCEPTED FOR AWARD WOULD NOT NECESSARILY REFLECT ANY DEFICIENCIES BUT WOULD MEAN ONLY THAT ANOTHER PROPOSAL WAS CONSIDERED TO BE MORE ADVANTAGEOUS TO THE GOVERNMENT. THE MAJOR FACTORS TO BE CONSIDERED IN THE PROPOSAL EVALUATION AND THEIR RELATIVE ORDER OF IMPORTANCE WERE (A.) TECHNICAL WORK PLANS; (B.) REASONABLENESS OF COST AND FEE; (C.) EXPERIENCE AND PAST PERFORMANCE; (D.) KEY PERSONNEL; AND (E.) MANAGEMENT STRUCTURE. OFFERORS WERE ADVISED THAT FACTOR A. WOULD HAVE SLIGHTLY MORE WEIGHT THAN FACTOR B.; THAT FACTORS C., D., AND E. WOULD BE CONSIDERED TO HAVE APPROXIMATELY EQUAL IMPORTANCE; AND THAT THE AGGREGATE OF FACTORS C., D., AND E. WOULD BE APPROXIMATELY THE WEIGHT OF FACTOR B.

ON JULY 21 AND 22, 1970, PROSPECTIVE OFFERORS WERE PROVIDED A TOUR OF THE KSC FACILITIES WHICH WOULD BE INVOLVED IN THE PERFORMANCE OF THE REQUIRED SERVICES, AND A PREPROPOSAL CONFERENCE WAS HELD, DURING WHICH VARIOUS QUESTIONS RELATING TO THE CONTRACT WERE RAISED BY PARTICIPANTS IN THE CONFERENCE AND WERE ANSWERED BY NASA. SUBSEQUENTLY, NASA DISTRIBUTED TO INTERESTED PARTIES A LIST OF THE QUESTIONS AND ANSWERS WITH A LETTER DATED JULY 31. QUESTION 56 AND NASA'S ANSWER READ AS FOLLOWS:

"QUESTION 56: 1. IS IT NASA'S OPINION THAT SUCCESSFUL BIDDERS WILL BE REQUIRED TO ASSUME EMPLOYEE REPRESENTATION BY INCUMBENT UNIONS?

2. (A) IF THE ANSWER TO QUESTION 1 IS 'YES,' IS THE BASIS FOR THIS OPINION 'NO SIGNIFICANT CHANGE IN WORK SCOPE'?

(B) IF THE ANSWER TO QUESTION 1 IS 'NO,' IS THE BASIS FOR THIS OPINION 'A SIGNIFICANT CHANGE IN WORK SCOPE'?

3. IF THE ANSWER TO QUESTION 1 IS 'YES,' DOES NASA KSC PLAN TO PROVIDE CONTENTS OF THE CURRENT UNION AGREEMENT AS WELL AS SPECIFIC EMPLOYEE RATES AND BENEFITS COSTS TO ENABLE BIDDERS TO SUBMIT COMPETITIVE BIDS?

"ANSWER: 1. THE NLRB HAS HELD THAT WHEN AN EMPLOYER ASSUMES THE OPERATIONS OF ANOTHER EMPLOYER WITHOUT CHANGE IN EMPLOYEES, JOBS OR METHODS, THE SUCCESSOR-EMPLOYER IS OBLIGATED TO BARGAIN WITH THE UNION BEFORE CHANGING WAGES AND OTHER CONDITIONS OF EMPLOYMENT. UNDER A RECENT SERIES OF CASES, THE NLRB HAS HELD THAT THE SUCCESSOR-EMPLOYER MUST ASSUME THE PREDECESSOR'S COLLECTIVE BARGAINING AGREEMENT. IT IS NASA'S POSITION THAT THE OFFERORS MAKE THEMSELVES FAMILIAR WITH THE NLRB CASES COVERING THIS ISSUE, NAMELY, THE WILLIAM J. BURNS INTERNATIONAL DETECTIVE AGENCY, INC., 74 LRRM 1098; CHEMROCK CORP., 58 LRRM 1582; JOHN WILEY & SONS VS. LIVINGSTON, U.S. SUP. CT. 55 LRRM 2769.

2. THE OFFEROR WILL HAVE TO APPLY THE NLRB'S REASONING IN THE PREVIOUSLY MENTIONED CASES TO THE SCOPE OF THE RFP IN RELATION TO METHOD IN WHICH THE WORK HAS BEEN PERFORMED AND TO ITS OWN INTENDED MODE OF OPERATION.

3. IT IS NOT OUR POLICY TO SUPPLY ANY OFFERORS WITH ANY COPIES OF LABOR AGREEMENTS COVERING UNITS OF EMPLOYEES COMING WITHIN THE SCOPE OF THE RFP."

BY AUGUST 19, NASA HAD RECEIVED BASIC PROPOSALS FROM SEVEN COMPANIES, INCLUDING YOUR COMPANY AND BOEING. BOEING ALSO SUBMITTED AN ALTERNATE PROPOSAL COVERING A LESSER NUMBER OF EMPLOYEES THAN SPECIFIED BY NASA AS REQUIRED STAFFING. ONLY THE BASIC BOEING PROPOSAL IS INVOLVED IN YOUR PROTEST.

FOUR OF THE SEVEN OFFERORS, INCLUDING INCUMBENT CONTRACTOR TRANS WORLD AIRLINES, INC. (TWA), WHO PERFORMS MOST OF THE SERVICES COVERED BY THE RFP, PROPOSED TO ABIDE BY THE TERMS OF ALL OF TWA'S EXISTING BARGAINING AGREEMENTS WITH ITS UNION EMPLOYEES IN ACCORDANCE WITH THE "SUCCESSOR EMPLOYER" DOCTRINE. YOUR COMPANY, BOEING, AND ONE OTHER OFFEROR DID NOT PROPOSE TO PAY THE SAME WAGE RATES TO ALL EMPLOYEES AS TWA CURRENTLY PAYS.

YOU CONTEND THAT NASA DID NOT DEAL IN GOOD FAITH WITH YOU CONCERNING THE SELECTION FOR NEGOTIATION, DID NOT SELECT THE PROPOSAL MOST ADVANTAGEOUS TO THE GOVERNMENT, AND HAS ACTED ARBITRARILY IN SELECTING BOEING OVER YOU. IN THIS REGARD, YOU MAINTAIN THAT YOUR PROPOSAL WAS SUPERIOR TO BOEING'S PROPOSAL AND WAS MOST ADVANTAGEOUS TO THE GOVERNMENT FOR THE REASONS (1) THAT YOU FULLY UNDERSTAND THE WORK, HAVING PERFORMED IDENTICAL WORK OVER THE PAST 17 YEARS AT THE NEARBY AIR FORCE EASTERN TEST RANGE, PATRICK AIR FORCE BASE; (2) THAT YOUR ESTIMATED COST AND FEE OF $19,275,252 IS SIGNIFICANTLY LOWER THAN THE APPROXIMATE AMOUNT OF $20,000,000 ANNOUNCED BY NASA AS THE COSTS PROPOSED BY BOEING; (3) THAT YOU BELIEVE BOEING DOES NOT HAVE CREDENTIALS COMPARABLE TO YOURS INSOFAR AS THE FACTOR OF EXPERIENCE AND PAST PERFORMANCE IS CONCERNED; (4) THAT YOUR KEY PERSONNEL ARE SEASONED PROFESSIONALS WHO MEET OR EXCEED THE EDUCATION AND EXPERIENCE REQUIREMENTS SPECIFIED IN THE RFP; AND (5) AND THAT YOU PROPOSED A STRAIGHT-FORWARD MANAGEMENT STRUCTURE PROVIDING CLEAR LINES OF RESPONSIBILITY AND AUTHORITY, GROUPED LIKE FUNCTIONS FOR EFFICIENCY AND GOOD MANAGEMENT CONTROL, AND WERE RESPONSIVE TO ALL OTHER ASPECTS OF THIS PORTION OF THE RFP.

YOU ALSO CONTEND THAT THERE WOULD BE GREATER DISPARITY BETWEEN THE TWA AND BOEING UNION AGREEMENTS THAN BETWEEN TWA AND YOUR UNION AGREEMENTS, SINCE BOEING'S AGREEMENTS GO MUCH FURTHER THAN EITHER YOURS OR TWA'S IN ESTABLISHING SKILL LEVELS WITHIN PARTICULAR CATEGORIES OF WORK. ADDITION, YOU URGE THAT YOUR UNION AGREEMENTS ARE MORE LIKELY TO PREVAIL THAN BOEING'S INASMUCH AS YOU HAVE BENEFIT PROGRAMS, SUCH AS AIRLINE TRAVEL DISCOUNT PRIVILEGES AT NO COST TO THE GOVERNMENT, WHICH YOU MAY OFFER TO EMPLOYEES AND WHICH ARE NOT AVAILABLE TO BOEING. ACCORDINGLY, YOU URGE, THE PHASE-OVER WITHIN THE AIRLINE INDUSTRY (I.E., FROM TWA TO YOU) WITH SIMILAR BENEFITS AND SYSTEMS-WIDE AGREEMENTS UNDER THE RAILWAY LABOR ACT WOULD BE MORE PALATABLE TO THE INCUMBENT EMPLOYEES THAN THE MORE DRASTIC CHANGE, EVEN WITHIN THE SAME UNION, FROM TWA TO BOEING.

IN ADDITION, YOU STATE THAT YOU HAVE ALREADY FOLLOWED SIMILAR PLANS SUCCESSFULLY IN CONNECTION WITH ASSUMPTION BY YOU OF ENGINEERING SUPPORT SERVICES WORK AND MEDICAL SERVICES AT KSC FOR NASA.

BOEING, SUBJECT TO THE NATIONAL LABOR RELATIONS ACT, HAS A COMPANY WIDE LABOR AGREEMENT WITH IAM COVERING EMPLOYEES AT BOEING'S MAIN AIRCRAFT AND AEROSPACE MANUFACTURING OPERATION, AS WELL AS EMPLOYEES IN THE KSC AREA UNDER BOEING'S APOLLO V STAGE CONTRACT. SINCE THE WAGE RATES IN THIS UNION AGREEMENT ARE CONSIDERABLY LOWER THAN THE RATES PAID BY TWA FOR COMPARABLE WORK UNDER ITS EXISTING AGREEMENTS WITH IAM, BOEING PROPOSED TO BRING TWA'S INCUMBENT IAM EMPLOYEES UNDER ITS OWN AGREEMENT WITH LODGE 2061 OF IAM, WITH WHICH BOEING HAS HAD A VERY GOOD RELATIONSHIP, BUT DID NOT PROPOSE TO ASSUME THE EXISTING TWA AGREEMENTS. BOEING SIGNIFIED ITS ACCEPTANCE OF THE "SUCCESSOR EMPLOYER" DOCTRINE WITH RESPECT TO THE SECURITY EMPLOYEES CURRENTLY REPRESENTED BY THE UPGWA AND THE FIRE PROTECTION EMPLOYEES REPRESENTED BY THE TWU, BUT PROPOSED TO SUBCONTRACT THE JANITORIAL FUNCTION.

NASA'S INDUSTRIAL RELATIONS OFFICER REVIEWED BOEING'S BASIC PROPOSAL AND EXPRESSED THE OPINION THAT NO MAJOR LABOR PROBLEMS WOULD APPEAR TO BE ASSOCIATED THEREWITH. AS TO THE WAGE RATES PROPOSED BY BOEING, NASA STATES THAT SUCH RATES ARE COMPARABLE TO OTHER AEROSPACE COMPANIES BOTH LOCALLY AND NATIONALLY AND ARE THEREFORE NOT CONSIDERED SUBSTANDARD WHEN COMPARED TO THE LOCAL ECONOMY OR NATIONAL AEROSPACE STANDARDS.

YOUR COMPANY, LIKE TWA, IS SUBJECT TO THE RAILWAY LABOR ACT (RLA), 44 STAT. 577, AS AMENDED, PURSUANT TO WHICH YOU HAVE OPERATED AS A CONTRACTOR FOR THE DEPARTMENT OF THE AIR FORCE AT THE AIR FORCE EASTERN TEST RANGE AT NEARBY PATRICK AIR FORCE BASE. UNDER YOUR PROPOSAL NO CHANGE WOULD BE MADE INSOFAR AS EXISTING UNION REPRESENTATION FOR INCUMBENT FIREMEN AND GUARDS IS CONCERNED, BUT YOU PROPOSE TO TRANSFER TWA'S INCUMBENT EMPLOYEES, WHO ARE NOW REPRESENTED BY IAM, TO YOUR BARGAINING UNITS WITH THE TWU AND IBT, WHICH YOU STATE HAVE ALL BEEN APPROVED BY THE NATIONAL MEDIATION BOARD ESTABLISHED UNDER THE RLA. THE WAGE RATES WHICH YOU PROPOSE TO PAY WOULD NOT ONLY BE LOWER THAN THE CURRENT WAGE RATES BEING PAID BY TWA BUT WOULD ALSO BE LOWER THAN THE RATES WHICH YOU NOW PAY AT THE AIR FORCE EASTERN TEST RANGE.

NASA'S EVALUATION TEAM, HAVING IN MIND PAST EXPERIENCE THAT THE RELATIONSHIPS BETWEEN CERTAIN OF THE INTERNATIONAL UNIONS WHICH WOULD BE INVOLVED IN A TRANSITION OF OPERATIONS FROM TWA TO YOU HAVE BEEN STRAINED AND INHARMONIOUS, WAS OF THE OPINION THAT THE ATTEMPTED CHANGE OF UNIONS FOR INCUMBENT EMPLOYEES WOULD PROBABLY BE RESISTED BY LITIGATION WITH UNCERTAIN OUTCOME, STRIKES, AND PICKETING. IN SUCH CIRCUMSTANCES, YOUR PLAN MIGHT FAIL WITH THE RESULT THAT YOUR COSTS WOULD APPROXIMATE TWA'S ESTIMATED COSTS, WHICH WERE SUBSTANTIALLY GREATER THAN THE COSTS ESTIMATED BY YOU. IN THIS CONNECTION, NASA STATES IT VERIFIED THAT THERE IS NO WAY TO DETERMINE THROUGH CONTRACT NEGOTIATIONS WHETHER YOUR PLAN WOULD SUCCEED, SINCE LITIGATION OR EMPLOYEE ELECTIONS WOULD BE POSSIBLE ONLY AFTER AWARD, AT WHICH TIME IT WOULD BE TOO LATE FOR NASA TO SELECT A DIFFERENT CONTRACTOR.

WHILE YOUR COSTS WERE SOMEWHAT BELOW BOEING'S COSTS FOR THE INITIAL ONE- YEAR PERIOD, NASA DID NOT CONSIDER THE DIFFERENTIAL SIGNIFICANT. FURTHER, NASA STATES THAT CONSIDERING THE FIRM OPTION FOR THE SECOND YEAR TOGETHER WITH THE FIRST YEAR, BOEING WAS LOWER IN PRICE FOR THE TWO-YEAR PERIOD. MORE SIGNIFICANT, NASA STATES, WAS THE OPINION OF ITS LABOR RELATIONS CONSULTANTS AND ITS EVALUATION BOARD THAT A SEVERE LABOR IMPACT AND A SERIOUS DISRUPTION OF THE HARMONIOUS LABOR RELATIONS AT KSC COULD BE FORESEEN IN YOUR PROPOSED APPROACH. THE RECORD BEFORE OUR OFFICE SHOWS THAT FOLLOWING THE INITIAL EVALUATION OF THE PROPOSALS, YOU WERE AMONG THE FIVE OFFERORS WHO WERE INVITED TO PARTICIPATE IN ORAL DISCUSSIONS OF THEIR PROPOSALS, WITH ATTENTION TO BE FOCUSED ON 25 GENERAL QUESTIONS AND VARIOUS SPECIFIC QUESTIONS RELATING TO PARTICULAR PROPOSALS. DISCUSSIONS WERE CONDUCTED WITH THE VARIOUS OFFERORS FROM SEPTEMBER 28 TO OCTOBER 1, INCLUSIVE, AND EACH OFFEROR WAS AFFORDED AN ADDITIONAL WEEK TO FURTHER REVISE OR CLARIFY ITS PROPOSALS IN LIGHT OF THE DISCUSSIONS. THE CUT-OFF DATE FOR ALL OFFERORS WAS OCTOBER 19, 1970, AS SPECIFIED IN TELEGRAPHIC AMENDMENT NO. 3 TO THE RFP, AND NO FURTHER REVISIONS WERE RECEIVED AFTER THAT DATE. NASA ALSO REPORTS THAT NO CHANGES WERE MADE BY ANY OFFEROR IN ITS PROPOSED UNION STRUCTURE IN RESPONSE TO THE QUESTIONS WHICH HAD BEEN RAISED BY THE GOVERNMENT.

AFTER CAREFUL RECONSIDERATION OF ALL OF THE ABOVE PROPOSALS, NASA CONCLUDED THAT THE TECHNICAL SUPERIORITY OF THE TWA PROPOSAL DID NOT JUSTIFY ITS ACCEPTANCE IF THE LOW COST ARRANGEMENT PROPOSED BY BOEING COULD BE ACHIEVED, BOEING'S TECHNICAL PROPOSAL BEING ENTIRELY ACCEPTABLE TO NASA. AS TO YOUR PROPOSAL, WHICH WAS RATED TECHNICALLY ALMOST EQUAL TO TWA'S PROPOSAL, NASA DECIDED NOT TO RISK THE LABOR UNREST LIKELY TO BE ATTENDANT UPON ITS ACCEPTANCE. NASA ACCORDINGLY CONCLUDED THAT SELECTION OF BOEING'S BASIC PROPOSAL WOULD GIVE THE GOVERNMENT THE BEST PROMISE OF GOOD TECHNICAL PERFORMANCE AND REASONABLE COST, AND THE ACTING ADMINISTRATOR OF NASA DIRECTED THAT NEGOTIATIONS BE CONDUCTED WITH BOEING ON THE BASIS OF THE LABOR PLAN REFLECTED IN BOEING'S PROPOSAL, WITH THE CONDITION THAT PRIOR TO AWARD AND APPROVAL OF THE CONTRACT BOEING SHOW FIRM AGREEMENTS WITH THE APPROPRIATE UNIONS PROVIDING COVERAGE FOR THE WORK TO BE PERFORMED UNDER THE PROCUREMENT. PENDING OUR DECISION ON YOUR PROTEST AND ALSO ON A SEPARATE PROTEST BY TWA, AWARD OF THE CONTRACT IS BEING WITHHELD BY NASA.

OUR OFFICE HAS NOTED THAT THE AWARD OF COST-REIMBURSEMENT CONTRACTS REQUIRES PROCUREMENT PERSONNEL TO EXERCISE INFORMED JUDGMENTS AS TO WHETHER SUBMITTED PROPOSALS ARE REALISTIC INSOFAR AS THE PROPOSED COSTS AND TECHNICAL APPROACH ARE CONCERNED. B-152039, JANUARY 20, 1964. BELIEVE THAT SUCH JUDGMENT MUST PROPERLY BE LEFT TO THE ADMINISTRATIVE DISCRETION OF THE CONTRACTING AGENCIES CONCERNED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS "REALISM" OF COSTS AND TECHNICAL APPROACHES, AND MUST BEAR THE MAJOR CRITICISM FOR ANY DIFFICULTIES OR EXPENSES EXPERIENCED BY REASON OF A DEFECTIVE COST ANALYSIS. B-171076, DECEMBER 16, 1970, 50 COMP. GEN. .

NASA PR 3.805-2, RELATING TO COST-REIMBURSEMENT TYPE CONTRACTS, READS AS FOLLOWS:

"3.805-2 COST-REIMBURSEMENT TYPE CONTRACTS. IN SELECTING THE CONTRACTOR FOR A COST-REIMBURSEMENT TYPE CONTRACT, ESTIMATED COSTS OF CONTRACT PERFORMANCE AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING, SINCE IN THIS TYPE OF CONTRACT ADVANCE ESTIMATES OF COST MAY NOT PROVIDE VALID INDICATORS OF FINAL ACTUAL COSTS. THERE IS NO REQUIREMENT THAT COST -REIMBURSEMENT TYPE CONTRACTS BE AWARDED ON THE BASIS OF EITHER (1) THE LOWEST PROPOSED COST, (2) THE LOWEST PROPOSED FEE, OR (3) THE LOWEST TOTAL ESTIMATED COST PLUS PROPOSED FEE. THE AWARD OF COST-REIMBURSEMENT TYPE CONTRACTS PRIMARILY ON THE BASIS OF ESTIMATED COSTS MAY ENCOURAGE THE SUBMISSION OF UNREALISTICALLY LOW ESTIMATES AND INCREASE THE LIKELIHOOD OF COST OVERRUNS. THE COST ESTIMATE IS IMPORTANT TO DETERMINE THE PROSPECTIVE CONTRACTOR'S UNDERSTANDING OF THE PROJECT AND ABILITY TO ORGANIZE AND PERFORM THE CONTRACT. THE AGREED FEE MUST BE WITHIN THE LIMITS PRESCRIBED BY LAW AND APPROPRIATE TO THE WORK TO BE PERFORMED. BEYOND THIS, HOWEVER, THE PRIMARY CONSIDERATION IN DETERMINING TO WHOM THE AWARD SHALL BE MADE IS: WHICH CONTRACTOR CAN PERFORM THE CONTRACT IN A MANNER MOST ADVANTAGEOUS TO THE GOVERNMENT."

ON THE BASIS OF THE INFORMATION FURNISHED BY NASA AS TO PAST LABOR PROBLEMS INVOLVING CERTAIN OF THE INTERNATIONAL UNIONS WHICH WOULD BE CONCERNED IN ANY TRANSITION OF INCUMBENT IAM EMPLOYEES FROM TWA TO YOU, WE CONCLUDE THAT THE FACTOR OF POSSIBLE LABOR STRIFE WAS PROPERLY CONSIDERED BY NASA IN MAKING ITS SELECTION OF THE OFFEROR WITH WHOM NEGOTIATIONS WOULD BE CONDUCTED, PARTICULARLY IN VIEW OF THE NEED FOR CONTINUITY OF SERVICES AS STATED IN ARTICLE VI OF THE PROPOSED CONTRACT SCHEDULE. NOR CAN WE SAY THAT IN CONNECTION WITH SUCH POSSIBLE LABOR STRIFE, NASA COULD NOT PROPERLY CONSIDER THE EFFECT ON YOUR COSTS OF WORK STOPPAGES, WORK SLOWDOWNS, PICKETING, AND OTHER PROBLEMS WHICH ARE COSTLY IN AND OF THEMSELVES.

IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCLUDE THAT NASA'S SELECTION OF BOEING FOR NEGOTIATION OF A CONTRACT FOR THIS PROCUREMENT UNDER THE CONDITIONS STIPULATED BY THE ACTING ADMINISTRATOR, I.E., THAT BOEING SHOW FIRM AGREEMENTS WITH THE APPROPRIATE UNIONS PROVIDING COVERAGE FOR THE WORK TO BE PERFORMED, WAS OTHER THAN A VALID EXERCISE OF THE DISCRETION GRANTED TO NASA, AS THE CONTRACTING AGENCY, TO MAKE THE AWARD WHICH WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT AS CONTEMPLATED BY THE PROVISIONS OF NASA PR 3.805-2. YOUR PROTEST IS THEREFORE DENIED.