B-174908(1), MAY 23, 1972

B-174908(1): May 23, 1972

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SHOULD HAVE BEEN I INCLUDED IN ITS ESTIMATED COSTS. SINCE CONTRACTORS COULD NOT HAVE ANTICIPATED THE GOVERNMENT'S DELAY IN AWARDING THE CONTRACT. IT IS UNNECESSARY TO REACH A DECISION WITH REGARD TO THE COST OF CARRYING EXCESS EMPLOYEES FOR 45 DAYS AND ADDITIONAL INSURANCE PREMIUMS. SINCE SUCH AMOUNTS ARE CONSIDERABLY LESS THAN THE DIFFERENCE IN BID PRICES. THE PROTEST IS DENIED. INC.: FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A COST PLUS-FIXED FEE (CPFF) CONTRACT TO UNIVERSAL-HYUPWOO (UH). ITS PROPOSAL REMAINED LOW AFTER NEGOTIATIONS WERE CONDUCTED AND FINAL REVISED OFFERS WERE SUBMITTED ON OCTOBER 27. AN AWARD WAS MADE TO UH ON DECEMBER 23. WAS DEEMED TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT.

B-174908(1), MAY 23, 1972

BID PROTEST - IMPROPER BID EVALUATION - ALLEGED DECEPTIVE COST METHODS DECISION DENYING THE PROTEST OF ASSOCIATED AMERICAN ENGINEERS OVERSEAS, INC., AGAINST THE AWARD OF A COST-PLUS-FIXED FEE CONTRACT TO UNIVERSAL- HYUPWOO (UH) UNDER AN RFP ISSUED BY THE ARMY KOREA PROCUREMENT AGENCY. THE COMP. GEN. CANNOT AGREE THAT SEVERANCE PAY COSTS, ALLEGEDLY GENERATED BY UH'S PROPOSED REDUCTION IN STAFF, SHOULD HAVE BEEN I INCLUDED IN ITS ESTIMATED COSTS, SINCE CONTRACTORS COULD NOT HAVE ANTICIPATED THE GOVERNMENT'S DELAY IN AWARDING THE CONTRACT, AND THE INCLUSION OF SUCH COSTS WOULD UNFAIRLY PENALIZE BIDDERS WISHING TO REDUCE THE NUMBER OF EMPLOYEES SUGGESTED BY THE MANNING TABLE. IT IS UNNECESSARY TO REACH A DECISION WITH REGARD TO THE COST OF CARRYING EXCESS EMPLOYEES FOR 45 DAYS AND ADDITIONAL INSURANCE PREMIUMS, SINCE SUCH AMOUNTS ARE CONSIDERABLY LESS THAN THE DIFFERENCE IN BID PRICES. FINALLY, ABSENT SUBSTANTIAL EVIDENCE OF A DECEPTIVE COST METHOD BEING EMPLOYED, THE CONTRACTING OFFICER'S USE OF DISCRETION MUST BE CONSIDERED REASONABLE AND IN GOOD FAITH. FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.

TO ASSOCIATED AMERICAN ENGINEERS OVERSEAS, INC.:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A COST PLUS-FIXED FEE (CPFF) CONTRACT TO UNIVERSAL-HYUPWOO (UH), A JOINT VENTURE, UNDER REQUEST FOR PROPOSALS (RFP) NO. DAJB03-72-R-6010, ISSUED ON SEPTEMBER 15, 1971, BY THE UNITED STATES ARMY KOREA PROCUREMENT AGENCY.

THE INSTANT RFP SOLICITED OFFERS FOR THE MANAGEMENT, OPERATION, MAINTENANCE AND REPAIR OF REAL PROPERTY FACILITIES IN THE CENTRAL SECTOR COMPREHENSIVE FACILITIES AND ENGINEERING SERVICES AREA, KOREA FOR THE PERIOD JANUARY 1, 1972, THROUGH JUNE 30, 1972.

OF THE SEVEN PROPOSALS SUBMITTED ON THE AMENDED CLOSING DATE OF OCTOBER 12, 1971, UH SUBMITTED THE LOWEST COST PROPOSAL. ITS PROPOSAL REMAINED LOW AFTER NEGOTIATIONS WERE CONDUCTED AND FINAL REVISED OFFERS WERE SUBMITTED ON OCTOBER 27, 1971, WITH FINAL REVISED ESTIMATED COSTS OF $791,381.00, WHICH INCLUDED A FIXED FEE OF $3,600. CONSEQUENTLY, AN AWARD WAS MADE TO UH ON DECEMBER 23, 1971, AS THE RESPONSIBLE OFFEROR WHOSE PROPOSAL, IN CONFORMANCE WITH THE STANDARDS SET FORTH IN THE RFP, WAS DEEMED TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

THE SUGGESTED MANNING TABLE INCLUDED IN THE SOLICITATION SHOWED A TOTAL OF 18 AMERICAN AND 787 KOREAN PERSONNEL BELIEVED TO BE REQUIRED FOR ADEQUATE PERFORMANCE OF THE CONTRACT, WHICH MANNING ESTIMATE COINCIDED WITH THE EXISTING PERSONNEL AUTHORIZED UNDER THE THEN CURRENT CONTRACT. HOWEVER, PARAGRAPH 2D.(3) OF SECTION C OF THE RFP PROVIDED:

"(3) SUGGESTED MANNING TABLE IS ATTACHED FOR OFFEROR'S INFORMATION ONLY, AND IS NOT INTENDED TO RESTRICT THE OFFEROR WHEN SUBMITTING HIS PROPOSAL. THE SUGGESTED MANNING TABLE IS BASED ON TECHNICAL EVALUATION AND PRIOR EXPERIENCE AND IS CONSIDERED TO REFLECT THE MINIMUM MANNING ESSENTIAL FOR ADEQUATE PERFORMANCE. PROPOSALS OFFERING MANNING BELOW OR ABOVE THAT SHOWN ON THE SUGGESTED MANNING TABLE MUST BE THOROUGHLY JUSTIFIED. THE BURDEN OF PROOF JUSTIFYING A LOWER OR INCREASED NUMBER OF EMPLOYEES THAN THAT SPECIFIED AS MINIMUM ESSENTIAL BY THE UNITED STATES GOVERNMENT WILL BE UPON THE OFFEROR."

THE CONTRACTING OFFICER STATES THAT THE REASON FOR SUCH A PROVISION WAS "TO ENCOURAGE PROPOSALS WHICH COULD REDUCE COSTS BY IMPROVED MANAGEMENT." ALSO, AT A PRE-PROPOSAL CONFERENCE HELD ON SEPTEMBER 21, 1971, THE CONTRACTING OFFICER MADE THE FOLLOWING COMMENT CONCERNING MANNING REQUIREMENTS:

"MANNING TABLE IDENTIFIED AS APPENDIX AA IN THE SOLICITATION IS A SUGGESTED TABLE, THEREFORE, OFFERORS WILL SUBMIT THEIR OWN PROPOSED MANNING TABLE WHICH WILL BE EVALUATED BY THE REVIEW BOARD. CHANGES TO THE SUGGESTED MANNING TABLE SHOULD BE THOROUGHLY JUSTIFIED IN YOUR OFFER."

THE SUCCESSFUL OFFEROR'S FINAL PROPOSAL DID PROPOSE A MANNING TABLE PROVIDING FOR A REDUCTION OF 87 KOREAN PERSONNEL AND 4 AMERICAN PERSONNEL. THE CONTRACTING OFFICER AND THE PURCHASING AGENCY'S BOARD OF AWARD DETERMINED AFTER EXTENSIVE REVIEW OF THE WORK REQUIREMENTS THAT UH WAS RESPONSIBLE AND COULD ADEQUATELY PERFORM THE CONTRACT WITH THE PROPOSED REDUCED MANNING.

YOU GIVE THREE BASES FOR YOUR OBJECTION TO THE AWARD; THAT THE AWARD AMOUNT IS UNREALISTIC; THAT THE SUCCESSFUL CONTRACTOR USED DELIBERATELY DECEPTIVE METHODS TO ARRIVE AT HIS OFFER AMOUNT; AND THAT THE GOVERNMENT WAS REMISS IN ITS FAILURE TO DETECT THE DECEPTION.

FROM A COST POINT OF VIEW, YOUR PROTEST IS CENTERED AROUND THE ALLEGATION THAT THE ABNORMAL AMOUNT OF SEVERANCE PAY REQUIRED TO BE MADE TO SEVERED EMPLOYEES WHEN THERE IS A REDUCTION IN FORCE (RIF) IS GENERATED IN THIS CASE BY UH'S PROPOSED REDUCTION IN STAFF, THE ESTIMATED COST OF WHICH ($130,000) SHOULD HAVE BEEN INCLUDED IN UH'S ESTIMATED COST. SPECIFICALLY, YOU URGE THAT ALL BIDDERS HAVE BEEN REQUIRED IN THE PAST TO INCLUDE IN THEIR ESTIMATES THE COST FOR RETENTION OF RIF PERSONNEL FOR THE 45 DAY PERIOD REQUIRED FOR THE RIF ACTION TO BE EFFECTED, THE ESTIMATED COST OF SEVERANCE PAY FOR RIF PERSONNEL, AND ACCURATE COST CALCULATIONS FOR INSURANCE, ALL RECONCILED AGAINST THE TOTAL ESTIMATED LABOR. ADDITIONALLY, YOU HAVE CITED SEVERAL PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) AS BEING RELEVANT TO THE MATTERS IN ISSUE.

WHILE PARAGRAPH 31 OF THE SPECIAL PROVISIONS OF THE SUBJECT SOLICITATION REQUIRED THE SUCCESSFUL OFFEROR TO HIRE ALL EMPLOYEES UNDER ITS PREDECESSOR'S CONTRACT AND TO GIVE 30 DAYS NOTICE PRIOR TO RIF ACTION, THE RFP DID NOT REQUIRE THE INCLUSION OF COST FOR THE RETENTION OF RIF PERSONNEL ON THE PAYROLL FOR 45 DAYS, OR FOR SEVERANCE PAY. THE CONTRACTING OFFICER'S ANALYSIS FOR EXCLUDING THESE ITEMS OF COST IS AS FOLLOWS:

"THE SUCCESSFUL CONTRACTOR DID NOT GENERATE THE ADDITIONAL COST INCURRED BY FORCED RETENTION OF RIF'D PERSONNEL FOR 45 DAYS. CLAUSE 31 OF THE SPECIAL PROVISIONS OF THE CONTRACT *** STIPULATES THAT 'LOCAL NATIONAL EMPLOYEES NOT REQUIRED ON THE CONTRACT AS OF THE EFFECTIVE DATE OF THE NEW CONTRACT WILL BE ISSUED ADVANCE NOTICE OF RIF ACTION NOT LESS THAN 30 CALENDAR DAYS PRIOR TO THE EFFECTIVE DATE OF THE RIF.' 'IN ANY EVENT,' THE CLAUSE FURTHER ADDS, 'THE EFFECTIVE DATE OF TERMINATION WILL NOT EXCEED 45 CALENDAR DAYS FROM THE EFFECTIVE DATE OF NEW CONTRACT.'

"THE SUCCESSFUL CONTRACTOR WOULD HAVE HAD AMPLE TIME TO MEET THIS PROVISION IF THE GOVERNMENT HAD BEEN ABLE TO AWARD THE CONTRACT ON OR BEFORE 15 NOVEMBER 1971. THERE IS NO REASON TO EXPECT THAT THE SUCCESSFUL CONTRACTOR, AND FOR THAT MATTER EACH OF THE OTHER UNSUCCESSFUL OFFERORS, SHOULD HAVE ANTICIPATED THE DELAY ON THE PART OF THE GOVERNMENT IN MAKING THE AWARD AND SHOULD HAVE INCLUDED SUCH ADDITIONAL COST NOT GENERATED BY THE OFFEROR IN ITS COST ESTIMATE. IT SHOULD BE REITERATED THAT HAD THE GOVERNMENT BEEN ABLE TO EXPEDITE THE PROCESSING OF THE AWARD ON OR BEFORE 15 NOVEMBER 1971 THE SEVERANCE PAY WOULD HAVE BEEN PROCESSED BY THE INCUMBENT CONTRACTORS UNDER THE CONTRACTS IN THE TWO AREAS. IT SHOULD BE BORNE IN MIND THAT ALL OFFERORS SUBMITTED THEIR FINAL REVISED OFFERS ON 27 OCTOBER 1971, WHILE THE CONTRACT WAS AWARDED ON 23 DECEMBER 1971. THE APPROXIMATE COST OF CARRYING THE EXCESS EMPLOYEES FOR 45 DAYS WAS $17,700. OMISSION OF THIS COST FROM THE OFFERORS COST ESTIMATE IS PROPER.

"THE SIZABLE REDUCTION IN RIF'D PERSONNEL RESULTING IN AN INCREASE IN EXPECTED SEVERANCE PAYMENT IS NOT A COST RIGHTFULLY ATTRIBUTABLE TO THE ESTIMATED COST OF ANY ONE OFFEROR. SEVERANCE PAY IS ACCUMULATED OVER THE WHOLE PERIOD OF AN EMPLOYEE'S EMPLOYMENT AND IS A BURDEN TO BE BORNE BY THE US GOVERNMENT. ONCE PAID THE US GOVERNMENT IS RELIEVED OF THAT OBLIGATION FOR ALL TIME. ACCELERATING THE TIME OF PAYMENT BY AN EARLY RIF, WHILE RESULTING IN A REQUIREMENT FOR EARLY PAYMENT UNDER A PARTICULAR CONTRACT CAN NOT, IN ALL FAIRNESS, BE REGARDED AS AN EXPENSE CREATED BY AND ATTRIBUTABLE TO THAT CONTRACT NOR IS IT SO REGARDED IN EVALUATING OFFERS. THE OMISSION FROM THE SUCCESSFUL OFFEROR'S COST ESTIMATE OF THE SEVERANCE PAY ESTIMATED BY THE PROTESTOR AS $130,000 WAS, THEREFORE, PROPER."

FOR THE REASONS LAST STATED ABOVE, WE MUST AGREE WITH THE CONTRACTING OFFICER'S POSITION RELATIVE TO OMITTING THE ESTIMATED COST OF $130,000 FOR SEVERANCE PAY IN THE EVALUATION OF UH'S BID. ADDITIONALLY, TO DO OTHERWISE WOULD, WE BELIEVE, UNFAIRLY PENALIZE ANY BIDDER WHO PROPOSED TO REDUCE THE NUMBER OF EMPLOYEES BEING USED IN PERFORMING THE CONTRACT.

WHILE THERE MAY BE MERIT IN YOUR POSITION THAT APPROXIMATELY $17,700, REPRESENTING THE COST OF CARRYING THE EXCESS EMPLOYEES FOR 45 DAYS, AND $1,100 IN INSURANCE PREMIUMS SHOULD HAVE BEEN INCLUDED IN THE EVALUATION OF UH'S BID, IT IS APPARENT THAT SUCH AMOUNTS ARE INSUFFICIENT TO OVERCOME THE $58,946 DIFFERENCE BETWEEN YOUR EVALUATED BID PRICE AND THAT OF UH, AND WE THEREFORE FIND IT UNNECESSARY TO REACH A DECISION ON THESE TWO ITEMS.

OUR OFFICE HAS CONSISTENTLY TAKEN THE POSITION THAT THE AWARD OF COST REIMBURSEMENT CONTRACTS REQUIRES PROCUREMENT PERSONNEL TO EXERCISE INFORMED JUDGMENTS AS TO WHETHER SUBMITTED PROPOSALS ARE REALISTIC CONCERNING THE PROPOSED COSTS INVOLVED. CONSEQUENTLY, WE HAVE HELD THAT SUCH JUDGMENT MUST PROPERLY BE LEFT TO THE ADMINISTRATIVE DISCRETION OF THE PROCURING ACTIVITIES INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS THE REALISM OF ESTIMATED COSTS AND MUST BEAR THE MAJOR CRITICISM FOR ANY DIFFICULTIES OR EXPENSES EXPERIENCED BY REASON OF A DEFECTIVE COST ANALYSIS. 50 COMP. GEN. 390, 410 (1970).

IN VIEW OF THE FOREGOING, AND OF THE LACK OF ANY EVIDENCE TO SUPPORT YOUR CHARGE OF A DELIBERATELY DECEPTIVE COST METHOD BEING EMPLOYED BY THE SUCCESSFUL OFFEROR, WE CANNOT AGREE THAT UH'S LOW ESTIMATED COSTS MAY BE CONSIDERED UNREALISTIC, OR THAT THE ARMY WAS REMISS IN ITS ANALYSIS AND EVALUATION OF ITS OFFER IN VIOLATION OF THE PRINCIPLES SET FORTH IN THE CITED ASPR PROVISIONS.

WE MUST THEREFORE CONCLUDE THAT THE CONTRACTING OFFICER ACTED REASONABLY AND IN GOOD FAITH UNDER ..END :