B-176763, APR 11, 1973, 52 COMP GEN 686

B-176763, APR 11, 1973, 52 COMP GEN 686

CONTRACTS - NEGOTIATION - PRICES - TECHNICAL STATUS OF LOW OFFEROR UNDER A NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) SOLICITATION FOR ON-SITE DATA PROCESSING SERVICES ON A COST-PLUS-AWARD FEE BASIS WHICH INDICATED BOTH TECHNICAL AND COST FACTORS WOULD BE ACCORDED SUBSTANTIALLY EQUAL WEIGHT, NASA PR 3-805.2 DOES NOT PRECLUDE CONSIDERATION OF COST - EVALUATED IN TERMS OF COST REALISM, AND PROBABLE AND MAXIMUM COST TO THE GOVERNMENT - AS A SIGNIFICANT FACTOR IN DETERMINING THE MOST ADVANTAGEOUS PROPOSAL, AND NASA PROPERLY SELECTED THE LOW OFFEROR WHOSE PROPOSAL ALTHOUGH CONTAINING MINOR WEAKNESSES WAS RELATIVELY EQUIVALENT TECHNICALLY TO THE ONLY OTHER ACCEPTABLE OFFER RECEIVED. A SPREAD OF 81 POINTS BETWEEN THE TWO PROPOSALS, THE LOW OFFER SCORING 649 POINTS OUT OF A POSSIBLE 1,000, AS COMPARED TO 730, DOES NOT AUTOMATICALLY ESTABLISH THAT THE HIGHER RATED PROPOSAL WAS MATERIALLY SUPERIOR, FOR ALTHOUGH TECHNICAL POINT RATINGS ARE USEFUL AS GUIDES, THE QUESTION OF SUPERIORITY DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH PROCUREMENT. CONTRACTS - NEGOTIATION - CHANGES, ETC. - REOPENING NEGOTIATIONS - WAGE DETERMINATION CHANGE THE INCORPORATION IS A PROCUREMENT BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) OF A WAGE DETERMINATION RECEIVED FROM THE DEPARTMENT OF LABOR AFTER SELECTION OF A CONTRACTOR BUT BEFORE CONTRACT AWARD WITHOUT CONDUCTING FURTHER NEGOTIATIONS AND ALLOWING OFFERORS TO SUBMIT REVISED PROPOSALS FOR ON-SITE DATA PROCESSING SERVICES ALTHOUGH CONTRARY TO NASA PR 12.1005-3 WAS NOT AN ABUSE OF ADMINISTRATIVE DISCRETION BECAUSE THE VALIDITY OF THE CONTRACTOR SELECTION WAS NOT AFFECTED AND THE RELATIVE COST POSITION OF THE TWO ACCEPTABLE FIRMS RESPONDING TO THE REQUEST FOR PROPOSALS DID NOT CHANGE, NOTWITHSTANDING THE INSIGNIFICANT ERRORS MADE BY NASA IN DETERMINING THE AFFECTS OF THE WAGE DETERMINATION AND, FURTHERMORE, THE UNSUCCESSFUL OFFEROR WAS NOT ONLY AWARE OF ITS COMPETITOR'S PROPOSED COSTS BUT WAS APPRISED IN A DEBRIEFING OF HOW ITS PROPOSAL WAS ASSESSED.

TO REAVES, POGUE, NEAL AND ROSE, APRIL 11, 1973:

THIS IS IN REPLY TO THE AUGUST 11, 1972, LETTER FROM COMPUTING AND SOFTWARE, INCORPORATED (CSI), AND TO YOUR SUBSEQUENT CORRESPONDENCE ON ITS BEHALF, PROTESTING THE PROPOSED AWARD OF A CONTRACT BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA) UNDER REQUEST FOR PROPOSALS NO. 5-73679-711, ISSUED BY THE GODDARD SPACE FLIGHT CENTER.

THE SOLICITATION IS FOR ON-SITE DATA PROCESSING SERVICES FOR A 3-YEAR PERIOD, ON A COST-PLUS-AWARD-FEE BASIS. THREE PROPOSALS WERE RECEIVED BY THE CLOSING DATE OF APRIL 27, 1972. FOLLOWING DISCUSSIONS WITH THREE OFFERORS, NASA'S SOURCE EVALUATION BOARD (SEB) EVALUATED THE PROPOSALS. ONE PROPOSAL WAS FOUND TO BE UNACCEPTABLE. THE CSI PROPOSAL WAS FOUND TO BE "ACCEPTABLE AS SUBMITTED." THE PROPOSAL SUBMITTED BY A JOINT VENTURE HEADED BY COMPUTER SCIENCES CORPORATION (CSC) WAS FOUND TO BE "ACCEPTABLE" EXCEPT FOR CERTAIN "WEAKNESSES AND DEFICIENCIES" WHICH WERE "NOT MAJOR" AND "EXPECTED TO BE CORRECTABLE IN FINAL CONTRACT NEGOTIATIONS WITHOUT MAJOR IMPACT ON THE COST." EVALUATION OF THE COST PROPOSAL INDICATED THAT CSC'S FINAL PROPOSED CEILING PRICE WAS MORE THAN $7 MILLION LOWER THAN THAT PROPOSED BY CSI; AND THAT THE CSC'S ESTIMATED COSTS WERE SIGNIFICANTLY LOWER THAN CSI'S ESTIMATED COSTS. THE SOURCE SELECTION OFFICIAL DECIDED THAT THERE WERE NO TECHNICAL CONSIDERATIONS WHICH OUTWEIGHED THE COST ADVANTAGE OF THE CSC PROPOSAL, AND SELECTED CSC FOR AWARD. ON AUGUST 16, 1972, A DEBRIEFING WAS HELD DURING WHICH CSI WAS INFORMED OF NASA'S ASSESSMENT OF ITS PROPOSAL.

ON AUGUST 25, 1972, THE DEPARTMENT OF LABOR (DOL) ISSUED WAGE DETERMINATION 72-118, AND BY LETTER OF SEPTEMBER 20, 1972, ADVISED NASA THAT THE WAGE DETERMINATION WAS APPLICABLE TO THIS PROCUREMENT. THIS WAS CONTRARY TO DOL'S ADVISE TO NASA ON JUNE 5, 1972, THAT NO WAGE DETERMINATION WAS APPLICABLE. NASA THEN DECIDED TO INCORPORATE THE WAGE DETERMINATION INTO THE CONTRACT TO BE AWARDED WITHOUT CONDUCTING FURTHER NEGOTIATIONS. IT ESTIMATED THAT INCORPORATION OF THE WAGE DETERMINATION WOULD INCREASE THE TOAL COSTS OF THE CSC AND CSI PROPOSALS, BUT THAT THERE WOULD BE NO SIGNIFICANT CHANGE WITH RESPECT TO THE COST DIFFERENCES BETWEEN THE TWO PROPOSALS.

SUBSEQUENTLY, NASA OBTAINED A PROPOSAL FROM CSI, THE INCUMBENT CONTRACTOR, FOR FURNISHING SERVICES FOR A 4-MONTH PERIOD FOLLOWING EXPIRATION OF ITS CONTRACT ON JANUARY 23, 1973, AND A PROPOSAL FROM CSC FOR PROVIDING SUCH SERVICES ON A MONTH-TO-MONTH BASIS. BOTH PROPOSALS INCORPORATED WAGE DETERMINATION 72-118. NASA UTILIZED THESE PROPOSALS TO PREPARE "MORE PRECISE COST ESTIMATES" OF THE EFFECT OF THE WAGE DETERMINATION ON THE ORIGINAL PROPOSALS, AND CONCLUDED THAT CSI'S COSTS REMAINED SUBSTANTIALLY HIGHER THAN CSC'S. THE SELECTION OFFICIAL CONSIDERED THESE REVISED ESTIMATES AND ON JANUARY 30, 1973, CONFIRMED THE SELECTION OF CSC. AWARD HAS NOT BEEN MADE PENDING RESOLUTION OF THE PROTEST, AND CSI HAS CONTINUED TO PROVIDE SERVICES UNDER AN EXTENSION OF ITS CURRENT CONTRACT.

YOU RAISE SEVERAL OBJECTIONS TO NASA'S SELECTION OF CSC. FIRST, YOU STATE THAT COST WAS A DOMINANT EVALUATION FACTOR, CONTRARY TO THE PROVISIONS OF THE RFP WHICH YOU CONTEND STRESSED TECHNICAL EXCELLENCE. SECOND, YOU ASSERT THAT NASA CANNOT PROPERLY AWARD A CONTRACT IN THIS PROCUREMENT THAT INCORPORATES WAGE DETERMINATION 72-118 WITHOUT GIVING OFFERORS AN OPPORTUNITY TO SUBMIT OFFERS BASED ON THE WAGE DETERMINATION. THIRD, YOU CLAIM THAT NASA'S EVALUATION OF PROPOSALS BASED ON INCORPORATING THE WAGE DETERMINATION WAS ERRONEOUS AND THAT A PROPER EVALUATION WOULD INDICATE THAT THE CSI COST PROPOSAL IS HIGHER THAN THE CSC PROPOSAL ONLY BY AN INSIGNIFICANT AMOUNT, SO THAT CSI'S TECHNICAL SUPERIORITY SHOULD RESULT IN AWARD TO IT. IN ADDITION, YOU CLAIM THAT CSC OBTAINED AN UNFAIR ADVANTAGE WHEN NASA RELEASED TO CSC INFORMATION PROPRIETARY TO CSI, AND THAT NEGOTIATIONS WERE NOT PROPERLY CONDUCTED WITH CSI.

SECTION A OF THE RFP CONTAINS THE FOLLOWING PROVISION:

COMPETITIVE PROPOSAL EVALUATION

SEPARATE TECHNICAL, BUSINESS MANAGEMENT AND COST/PRICE EVALUATIONS ARE PERFORMED. INTERRELATIONSHIP OF THE THREE IS ASSESSED CONSISTENT WITH NASA REGULATIONS CONCERNING THE CONSIDERATION OF COST AND OTHER FACTORS IN MAKING CONTRACT AWARDS.

THE TECHNICAL EVALUATION IS CONDUCTED IN ACCORDANCE WITH WEIGHTED TECHNICAL EVALUATION CRITERIA ESTABLISHED AND APPROVED PRIOR TO THE RECEIPT OF PROPOSALS. THIS EVALUATION PRODUCES A NUMERICAL SCORE (POINTS).

BUSINESS MANAGEMENT CAPABILITY IS EVALUATED TO DETERMINE THE OFFERORS' ACCEPTABILITY (OR LACK OF) AS MEASURED AGAINST BUSINESS MANAGEMENT EVALUATION CRITERIA (NOT WEIGHTED). IT IS NOT SCORED.

COST PROPOSALS ARE EVALUATED TO (A) ASSESS THE REALISM OF THE PROPOSED COST/PRICE AND (B) DETERMINE THE PROBABLE COST TO THE GOVERNMENT INCLUDING ANY IMPROVEMENTS TO BE REQUIRED BY THE GOVERNMENT. IF TOTAL OR COST ELEMENT CEILINGS ARE INCLUDED, THE EVALUATION WILL ALSO DETERMINE THE MAXIMUM PROBABLE COST TO THE GOVERNMENT FOR EACH PROPOSAL.

EVALUATIONS ARE BASED UPON INFORMATION IN THE PROPOSALS AND DATA FROM GOVERNMENT AND OTHER SOURCES.

EVALUATION CRITERIA ARE INCLUDED IN EACH APPLICABLE PART OF THE RFP.

PARAGRAPH 2.1.1.3 OF THE RFP SETS FORTH THE FIVE MAIN ITEMS TO BE CONSIDERED IN THE EVALUATION OF TECHNICAL PROPOSALS, IN DECREASING ORDER OF IMPORTANCE. PART III OF THE RFP STATES THE FOLLOWING:

COST/PRICE EVALUATION CRITERIA

PROPOSALS WILL BE EVALUATED TO ESTABLISH, FOR EACH PROPOSAL EVALUATED:

(A) THE REALISM OF THE PROPOSED COST/PRICE,

(B) THE PROBABLE COST TO THE GOVERNMENT, INCLUDING ANY IMPROVEMENTS TO BE REQUIRED BY THE GOVERNMENT AND

(C) IF CEILING LIMITATIONS ARE INVOLVED, THE MAXIMUM COST TO THE GOVERNMENT FOR THE PROPOSED EFFORT.

WHILE PROPOSED COSTS WILL NOT BE POINT-SCORED IN THE EVALUATION OF PROPOSALS IN RESPONSE TO THIS REQUEST FOR PROPOSAL, THE COST PROPOSED FOR THE CONTRACT PERIOD AND PHASE-IN WILL BE ANALYZED AND EXAMINED RELATIVE TO A DECISION ON SOURCE FOR THE PROCUREMENT.

IN ADDITION, YOU REFER TO ARTICLE XI OF SECTION B OF THE RFP AND TO NASA PROCUREMENT REGULATIONS 3.805-2 AND 3.405-5 AS BEING RELEVANT TO THIS ISSUE. ARTICLE XI ENTITLED "AWARD FEE," PROVIDES THAT "THE CONTRACTOR MAY EARN A PORTION OF THE AWARD FEE *** FOR CONTINUED HIGH LEVEL PERFORMANCE AT LOWEST POSSIBLE COST *** AND FOR CONTRACTOR INITIATED INNOVATIONS AND ACCEPTED IMPROVEMENTS IN THE SERVICES PROVIDED." NASA PR 3.405-5, DEALING WITH THE USE OF COST-PLUS-AWARD FEE CONTRACTS NOTES THAT "NASA PROCUREMENT OBJECTIVES WILL BE ADVANCED IF THE CONTRACTOR IS EFFECTIVELY MOTIVATED TO EXCEPTIONAL PERFORMANCE." NASA PR 3.805-2, ENTITLED "COST-REIMBURSEMENT TYPE CONTRACTS," STATES THAT "ESTIMATED COSTS OF CONTRACT PERFORMANCE AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING IN COST REIMBURSEMENT CONTRACTS," AND THAT "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."

YOU ASSERT THAT THESE PROVISIONS ESTABLISH EXCEPTIONAL PERFORMANCE AS THE PRIMARY EVALUATION FACTOR AND SUBSTANTIALLY MINIMIZE THE IMPORTANCE OF COST, AND THAT AS A RESULT THE CSI PROPOSAL MAXIMIZED TECHNICAL PERFORMANCE. YOU CLAIM THAT HAD IT BEEN MADE AWARE OF NASA'S INTEREST IN COST, CSI COULD HAVE SUBMITTED A PROPOSAL TO PROVIDE TECHNICAL PERFORMANCE OF MINIMUM ACCEPTABILITY WITH A SUBSTANTIAL REDUCTION IN PROPOSED COSTS. YOU STATE THAT THIS COMPETITION WAS NOT EQUITABLE BECAUSE WHILE "CSC WAS PROPOSING THE MINIMUM TECHNICAL PERFORMANCE AT A LOW COST, THE PROTESTER WAS PROPOSING MAXIMUM TECHNICAL PERFORMANCE AT SUBSTANTIALLY HIGHER COST, AND NASA QUIETLY CHANGED THE PARAMOUNT EVALUATION FACTOR FROM TECHNICAL TO COST."

WE DO NOT AGREE THAT THE RFP MINIMIZED COST CONSIDERATIONS. WE THINK THAT THE SOLICITATION, ESPECIALLY PART III, CLEARLY INDICATED THAT EVALUATION OF COST WOULD PLAY A SIGNIFICANT ROLE IN THE SELECTION OF AN OFFEROR. THE RFP AND REGULATORY PROVISIONS YOU CITE DO NOT NEGATE THE SIGNIFICANCE OF THE COST FACTOR. ARTICLE XI OF THE RFP AND NASA PR 3.405- 5 ARE CONCERNED WITH CONTRACTOR'S PERFORMANCE AFTER AWARD, AND DO NOT, IN OUR OPINION, INDICATE HOW PROPOSALS ARE TO BE EVALUATED. NASA PR 3.805-2 STATES THAT ESTIMATED COSTS AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING IN SELECTING AN OFFEROR FOR AWARD; HOWEVER, IT DOES NOT PRECLUDE CONSIDERATION OF COST AS A SIGNIFICANT FACTOR IN DETERMINING WHICH PROPOSAL WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT, AND IN FACT ESTIMATED COSTS AND PROPOSED FEES "MAY BECOME CONTROLLING IF ALL OTHER FACTORS ARE SUBSTANTIALLY EQUAL." 50 COMP. GEN. 390, 407(1970).

IN THIS DEGARD, WE NOTE THAT NASA DOES NOT AGREE WITH YOUR ASSERTION THAT CSI'S PROPOSAL WAS TECHNICALLY SUPERIOR TO THE CSC PROPOSAL. IT STATES THAT THE TWO PROPOSALS WERE "CONSIDERED TO BE RELATIVELY EQUIVALENT TECHNICALLY." ON THE OTHER HAND, YOU CLAIM THAT THE POINT SCORES AWARDED TO EACH PROPOSAL BY THE SEB ESTABLISHES THE SUPERIORITY OF THE CSI PROPOSAL.

THE RECORD INDICATES THAT THE CSI PROPOSAL RECEIVED A FINAL TECHNICAL SCORE OF 730 OUT OF A POSSIBLE 1,000 POINTS, WHILE THE CSC PROPOSAL RECEIVED 649 POINTS, AND THAT CERTAIN WEAKNESSES WERE NOTED IN THE CSC PROPOSAL BY BOTH THE SEB AND THE SOURCE SELECTION OFFICIAL. HOWEVER, BOTH OFFERORS WERE REGARDED AS "WELL QUALIFIED TO PROVIDE THE REQUIRED SERVICES" AND THE CSC PROPOSAL WAS DESCRIBED AS "TECHNICALLY STRONG" AND AS DEMONSTRATING "A GOOD UNDERSTANDING OF THE REQUIREMENTS." IN VIEW OF THESE STATEMENTS IN THE NASA PROCUREMENT FILE, WE HAVE NO BASIS FOR QUESTIONING NASA'S POSITION THAT CSI'S TECHNICAL PROPOSAL WAS NOT SIGNIFICANTLY SUPERIOR TO CSC'S TECHNICAL PROPOSAL. THE FACT THAT THERE IS A SPREAD OF 81 POINTS BETWEEN THE TWO PROPOSALS DOES NOT AUTOMATICALLY ESTABLISH THAT THE HIGHER RATED PROPOSAL IS MATERIALLY SUPERIOR. BELIEVE THAT TECHNICAL POINT RATINGS ARE USEFUL AS GUIDES FOR INTELLIGENT DECISION-MAKING IN THE PROCUREMENT PROCESS, BUT WHETHER A GIVEN POINT SPREAD BETWEEN TWO COMPETING PROPOSALS INDICATES THE SIGNIFICANT SUPERIORITY OF ONE PROPOSAL OVER ANOTHER DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF EACH PROCUREMENT AND IS PRIMARILY A MATTER WITHIN THE DISCRETION OF THE PROCURING AGENCY. B-173677, MARCH 31, 1972(SUMMARIZED AT 51 COMP. GEN. 621); 50 COMP. GEN. 246(1970). IN THE INSTANT SITUATION, THE RECORD DOES NOT ESTABLISH THAT NASA ABUSED ITS DISCRETION IN DETERMINING THAT THE POINT SPREAD BETWEEN THE CSI AND CSC PROPOSALS, WHICH CORRESPOND TO A DIFFERENCE OF 8.1 POINTS ON A 100 POINT SCALE) DID NOT INDICATE THE MATERIAL SUPERIORITY OF THE CSI PROPOSAL.

YOU ALSO REFER TO OUR DECISION OF SEPTEMBER 25, 1972(52 COMP. GEN. 161), IN WHICH WE HELD THAT AS A MATTER OF SOUND PROCUREMENT POLICY AN RFP SHOULD ADVISE OFFERORS OF THE RELATIVE IMPORTANCE OF PRICE IN RELATION TO THE OTHER LISTED EVALUATION FACTORS. IN THAT CASE, THE RFP DID NOT INDICATE THE RELATIVE IMPORTANCE OF COST IN THE EVALUATION AND YOU CLAIM THAT A "VIRTUALLY IDENTICAL" SITUATION EXISTS HERE. WE DO NOT AGREE. 49 COMP. GEN. 229(1969), CITED 52 COMP. GEN. 161, SUPRA, WE SAID THAT WHEN A POINT EVALUATION FORMULA IS TO BE USED, OFFERORS SHOULD BE INFORMED AS TO THE EVALUATION FACTORS AND THE RELATIVE IMPORTANCE OF EACH FACTOR. FURTHER SAID THAT "NOTICE SHOULD BE GIVEN AS TO ANY MINIMUM STANDARDS WHICH WILL BE REQUIRED AS TO ANY PARTICULAR ELEMENT OF EVALUATION, AS WELL AS REASONABLY DEFINITE INFORMATION AS TO THE DEGREE OF IMPORTANCE TO BE ACCORDED TO PARTICULAR FACTORS IN RELATION TO EACH OTHER." ID. 230-231. IN 52 COMP. GEN. 161, SUPRA, WE SAID THAT "EACH OFFEROR HAS A RIGHT TO KNOW WHETHER THE PROCUREMENT IS INTENDED TO ACHIEVE A MINIMUM STANDARD AT THE LOWEST COST OR WHETHER COST IS SECONDARY TO QUALITY."

WE BELIEVE IT IS CLEAR FROM THIS SOLICITATION THAT BOTH TECHNICAL AND COST FACTORS WERE CONSIDERED IMPORTANT IN THE EVALUATION AND, ABSENT ANY CONTRARY INDICATION, WERE TO BE ACCORDED SUBSTANTIALLY EQUAL WEIGHT. THE SOLICITATION DID NOT STATE THAT THE TECHNICAL FACTOR WOULD BE PARAMOUNT OR THAT THE COST FACTOR WOULD BE SUBORDINATE TO THE TECHNICAL FACTOR. RATHER THE SOLICITATION STATED THAT EACH OF THE LISTED FACTORS IN SECTION A OF THE RFP (TECHNICAL, BUSINESS MANAGEMENT, AND COST/PRICE) WOULD BE EVALUATED AND CONSIDERED CONSISTENT WITH THE NASA REGULATIONS. AS WE STATED ABOVE, NASA PR 3.805-2 DOES NOT, IN OUR VIEW, PRECLUDE CONSIDERATION OF COST AS A SIGNIFICANT FACTOR IN DETERMINING WHICH PROPOSAL IS MOST ADVANTAGEOUS TO THE GOVERNMENT. THE REGULATION CLEARLY MEANS THAT AN OFFEROR'S PROPOSED COSTS SHOULD NOT BE CONSIDERED AS CONTROLLING. THIS DOES NOT PRECLUDE SIGNIFICANT CONSIDERATION IN AN EVALUATION OF THE AGENCY'S ASSESSMENT OF THE OFFEROR'S COST PROPOSAL IN TERMS OF COST REALISM, PROBABLE COST TO THE GOVERNMENT AND, WHERE CEILING LIMITATIONS ARE INVOLVED, THE MAXIMUM COST TO THE GOVERNMENT FOR THE CONTRACT PERFORMANCE. YOU ALSO CONTEND THAT PROPER NEGOTIATIONS WERE NOT CONDUCTED WITH CSI BECAUSE NASA DID NOT INFORM CSI THAT ITS PROPOSAL WAS WEAK OR DEFICIENT BECAUSE OF ITS RELATIVELY HIGHER COST. HOWEVER, THE RECORD DOES NOT ESTABLISH THAT DURING THE COURSE OF NEGOTIATIONS NASA REGARDED THE CSI PROPOSAL AS WEAK BECAUSE OF ITS COST OR FOR ANY OTHER REASON. AS INDICATED ABOVE, IT WAS ONLY AFTER NEGOTIATIONS HAD BEEN COMPLETED AND THE TWO ACCEPTABLE PROPOSALS HAD BEEN FINALLY EVALUATED THAT THE SELECTION OFFICIAL WEIGHED THE RESPECTIVE TECHNICAL MERITS AND COST CONSIDERATIONS OF EACH PROPOSAL AND DETERMINED THAT ACCEPTANCE OF THE CSC PROPOSAL WOULD BE IN THE GOVERNMENT'S BEST INTERESTS. FURTHERMORE, EVEN IF THE CSI PROPOSED COST WAS REGARDED ORIGINALLY AS TOO HIGH, NASA WAS NOT REQUIRED TO OFFER SUCH INFORMATION TO CSI. 52 COMP. GEN. 161, SUPRA. UNDER THESE CIRCUMSTANCES, THERE IS NO BASIS FOR YOUR CLAIM THAT NEGOTIATIONS WERE IMPROPERLY CONDUCTED.

IN YOUR LETTER OF OCTOBER 6, 1972, YOU ARGUE THAT NASA COULD NOT PROPERLY INCORPORATE THE NEW WAGE DETERMINATION IN THIS PROCUREMENT WITHOUT CONDUCTING FURTHER NEGOTIATIONS AND ALLOWING OFFERORS TO SUBMIT REVISED COST PROPOSALS. YOU POINT OUT THAT NASA WAS IN VIOLATION OF ITS OWN REGULATION, PR 12.1005-3, BY DECIDING TO INCORPORATE THE WAGE DETERMINATION AFTER SELECTION OF A CONTRACTOR BUT BEFORE AWARD. NASA ADMITS THAT IT WAIVED ITS OWN REGULATION TO INCORPORATE THE WAGE DETERMINATION, BUT CLAIMS THAT A FURTHER ROUND OF PROPOSALS WAS NOT REQUIRED BECAUSE THE VALIDITY OF THE ORIGINAL SELECTION OF THE CSC PROPOSAL WAS NOT AFFECTED. IN B-177317, DECEMBER 29, 1972, ALSO INVOLVING NASA'S DECISION TO INCORPORATE WAGE DETERMINATION 72-118 INTO A CONTRACT WITHOUT SEEKING REVISED PROPOSALS, WE HELD THAT SINCE THE RELATIVE COST POSITION OF THE TWO FIRMS CONCERNED DID NOT CHANGE, IT WAS NOT AN ABUSE OF DISCRETION FOR NASA TO DECLINE TO SOLICIT REVISED PROPOSALS. WE THINK SUCH REASONING APPLIES EQUALLY TO THIS CASE.

YOU ASSERT, HOWEVER, THAT INCORPORATION OF THE WAGE DETERMINATION IN THIS PROCUREMENT DOES AFFECT THE RELATIVE POSITION OF CSC AND CSI. YOU STATE THAT NASA HAS BEEN UNABLE TO PROPERLY DETERMINE THE ACTUAL EFFECT OF THE WAGE DETERMINATION ON CSI'S PROPOSAL, AND NASA MADE A VARIETY OF ERRORS IN TRYING TO DO SO. YOU CLAIM THAT NASA SHOULD HAVE PROPERLY EVALUATED THE CSI PROPOSAL AT $25,415,353, AND THAT THIS SHOULD HAVE BEEN REDUCED BY ANOTHER $500,000 TO ALLOW FOR DISRUPTION COSTS. THUS, YOU MAINTAIN THAT THE PROPER FIGURE NASA SHOULD HAVE USED FOR COMPARISON PURPOSES IS $24,915,353. SINCE THIS FIGURE IS VERY CLOSE TO THE FIGURE NASA COMPUTED FOR THE CSC PROPOSAL, YOU CLAIM THAT A PROPER EVALUATION BY NASA OF THE EFFECTS OF THE WAGE DETERMINATION ON THE COST PROPOSALS COULD EASILY HAVE RESULTED IN THE SELECTION OF CSI FOR THE AWARD.

NASA HAS INFORMED US THAT IT UTILIZED "EACH COMPANY'S DETAILED PROJECTION OF THE EFFECT THAT THE WAGE DETERMINATION WOULD HAVE ON ITS WAGE STRUCTURE" FOUND IN THE INTERIM PROPOSALS SUBMITTED BY BOTH COMPANIES DURING THE PENDENCY OF THIS PROTEST. NASA HAS MADE IT CLEAR THAT IN SO DOING IT CONSIDERED ONLY UPWARD ADJUSTMENTS IN LABOR RATES AS REQUIRED BY THE WAGE DETERMINATION. YOU STATE, HOWEVER, THAT THE INCREASE IN WAGES IS ATTENDED BY A DECREASE IN OVERHEAD, G AND A, AND AWARD FEE AND CERTAIN DOWNWARD CHANGES IN LABOR COSTS. IN THIS REGARD, YOU STATE:

WITH THE MINIMUM RATES AS SPECIFIED BY THE LABOR DEPARTMENT THE WAGES EARNED BY EMPLOYEES ARE VERY SIGNIFICANTLY INCREASED ELIMINATING MUCH OF THE NECESSITY FOR PROVIDING AN ATTRACTIVE FRINGE BENEFIT PROGRAM, RESULTING IN A SUBSTANTIAL REDUCTION IN LABOR OVERHEAD COSTS. OFF-SITE CONTRACT ADMINISTRATION COSTS COULD ALSO BE REDUCED DUE TO A DECREASE IN TURNOVER OF PERSONNEL WHICH WOULD ELIMINATE THE NEED FOR SOME STAFF RECRUITERS.

THE G&A EXPENSES COULD LIKEWISE BE REDUCED SINCE SOME OF THE FRINGE BENEFITS PROVIDED FROM THIS COST POOL WOULD NO LONGER BE REQUIRED TO AVOID TURNOVER IN THESE PERSONNEL. THE PERCENTAGE ALLOCATION FOR G&A WOULD ALSO BE SIGNIFICANTLY REDUCED SINCE THE LABOR COSTS WOULD BE SUBSTANTIALLY INCREASED BY APPLICATION OF THE HIGHER LABOR RATES.

THE AWARD FEE RANGE COULD ALSO BE REDUCED SINCE THE APPLICATION OF THESE HIGHER LABOR RATES ELIMINATES MUCH OF THE RISK OF EXCEEDING LABOR RATE CEILINGS. THE AWARD FEE POOL COULD BE FURTHER REDUCED SINCE THESE INCREASED LABOR RATES WOULD PROVIDE A HIGHER LEVEL OF TECHNICAL EXPERTISE RESULTING IN INCREASED JOB PERFORMANCE AND EARNING A HIGHER PERCENTAGE OF THE AVAILABLE FEE.

A QUICK REVIEW OF OUR COST PROPOSAL SUBMITTED IN RESPONSE TO YOUR RFP 5- 73679-711, INDICATES OUR COSTS FOR LABOR OVERHEAD, G&A AND FEE COULD BE REDUCED BY ONE TO TWO MILLION DOLLARS OR MORE AS A RESULT OF APPLYING THESE INCREASED LABOR RATES AS SPECIFIED BY THE LABOR DEPARTMENT WAGE DETERMINATION.

TO SUPPORT YOUR ASSERTIONS THAT NASA ERRED BOTH MATHEMATICALLY AND IN ITS FAILURE TO CONSIDER THE DOWNWARD ADJUSTMENTS DESCRIBED ABOVE, YOU DESCRIBE IN YOUR LETTER OF MARCH 12, 1973, EACH OF THE AREAS IN WHICH YOU CLAIM NASA IMPROPERLY COMPUTED CSI'S REVISED COSTS. IN THE AREA OF DIRECT LABOR ALONE, YOU ALLEGE THAT NASA MADE SEVEN SIGNIFICANT ERRORS, ESSENTIALLY DUE TO NASA'S FAILURE TO TAKE INTO ACCOUNT PROPOSED REVISIONS AND REDUCTIONS IN STAFFING AND CERTAIN WAGE RATES AND TO THE USE OF INCORRECT LABOR CATEGORIES, AS WELL AS TO ERRORS IN COMPUTATION. IN THE AREA OF OVERHEAD, YOU ASSERT THAT WITH THE HIGHER WAGE RATES CSI'S 30 TO 40 PERCENT LABOR TURNOVER RATE IS BEING REDUCED TO A 10 TO 15 PERCENT RATE, WHICH PERMITS THE REDUCTION OF THE SUPPORT STAFF BY FOUR PERSONNEL. THIS, YOU STATE, WOULD ELIMINATE NOT ONLY WAGE COSTS FOR THE FOUR EMPLOYEES, BUT SUCH THINGS AS PAYROLL TAXES, INSURANCE, AND OTHER OVERHEAD ITEMS. YOU FURTHER CLAIM THAT SUCH THINGS AS FRINGE BENEFITS IN THE G&A EXPENSE POOL WERE REDUCIBLE IN LIGHT OF THE INCREASED WAGES, AND THAT A G&A RATE LOWER THAN THAT ORIGINALLY PROPOSED IS THEREFORE MADE POSSIBLE. WITH RESPECT TO FEE, YOU ASSERT THAT THE HIGH LEVEL OF TECHNICAL EXPERTISE AND INCREASED STABILITY BROUGHT ABOUT BY THE INCREASED WAGES "WILL EARN A SUBSTANTIALLY HIGHER PORTION OF THE AVAILABLE AWARD FEE POOL, AND THE INCREASED LABOR COSTS WILL PRODUCE A HIGHER COST BASE ON WHICH TO COMPUTE THE POOL." YOU STATE THAT UNDER THE WAGE DETERMINATION THE MAXIMUM AWARD POOL SHOULD BE 5 PERCENT, AS COMPARED TO THE 8 PERCENT ORIGINALLY PROPOSED BY CSI, BECAUSE YOU EXPECT AN INCREASE IN THE PERFORMANCE AWARD FROM 50 PERCENT TO 80 PERCENT TO RESULT FROM INCREASED STABILITY OF THE WORK FORCE. THIS, YOU STATE, WOULD PERMIT A DECREASE IN THE MAXIMUM AWARD FEE WHILE STILL ALLOWING YOU AN OVERALL 4 PERCENT FEE AS ORIGINALLY PROPOSED.

AT A CONFERENCE HELD IN OUR OFFICE ON MARCH 23, 1973, NASA EXPLAINED IN DETAIL THE BASIS FOR ITS EVALUATION. IT ADMITTED THAT SOME MATHEMATICAL ERRORS WERE MADE, BUT CLAIMED THAT THEY RESULTED IN AN OVERSTATEMENT OF CSI'S PROPOSAL PRICE BY ONLY APPROXIMATELY $50,000. NASA ALSO ADMITTED THAT IT IGNORED A REDUCTION OF 1 MAN YEAR, IN COMPUTING SECOND YEAR LABOR COSTS, AS INSIGNIFICANT. THE REMAINING DIFFERENCES NASA ASCRIBED TO ITS USING THE ORIGINAL PROPOSAL FIGURES AND RFP REQUIREMENTS RATHER THAN TO WHAT WAS INDICATED IN CSI'S 4-MONTH EXTENSION PROPOSAL. THUS, NASA DID NOT CONSIDER ANY REDUCTIONS IN WAGES, BUT ONLY INCREASES REQUIRED BY THE WAGE DETERMINATION. SIMILARLY, IT DID NOT CONSIDER STAFFING CHANGES, SUCH AS ELIMINATION OF POSITIONS OR THE CHANGING OF CERTAIN POSITIONS TO LOWER PAYING ONES. NASA ALSO POINTED OUT THAT THE LABOR CATEGORIES IT UTILIZED WERE BASED ON THE PERSONNEL EXPERIENCE REQUIREMENTS OF THE RFP. THE RECORD ALSO ESTABLISHES THAT NASA DID NOT CONSIDER ANY CHANGE IN OVERHEAD, G&A, AND FEE, SINCE IT DOUBTED THAT REDUCTIONS IN THESE AREAS "BEAR ANY REASONABLE RELATIONSHIP TO WAGE DETERMINATION 72-718." WITH REGARD TO CSI'S FEE STRUCTURE, NASA ALSO ASSERTS THAT THERE IS NO EVIDENCE THAT IT "WOULD HAVE BEEN OTHER THAN AS PROPOSED IF A WAGE DETERMINATION HAD BEEN MADE APPLICABLE DURING THE ORIGINAL COMPETITION, SINCE CSI'S PROPOSED COSTS WERE GENERALLY HIGHER IN ALL AREAS." IN ADDITION, NASA HAS PREPARED AN ANALYSIS, A COPY OF WHICH WAS PROVIDED TO YOU, WHICH INDICATES NASA'S BELIEF THAT CSI'S OVERHEAD AND G&A EXPENSE POOLS WOULD INCREASE AS A RESULT OF THE HIGHER WAGE SCALES, RATHER THAN DECREASE.

WE HAVE RECOGNIZED, AS YOU POINT OUT, THAT A SIGNIFICANT CHANGE IN REQUIRED MAN-HOURS WOULD BRING ABOUT SOME IMPACT ON INDIRECT COSTS, AND THAT THE EXTENT OF THE IMPACT IS "A MATTER OF INDIVIDUAL ALLOCATION OF OVERHEAD RATES AND OTHER INDIRECT COSTS" AND CANNOT BE READILY DETERMINED BY A PROCURING AGENCY. 50 COMP. GEN. 619, 626(1971). IT MAY ALSO BE THAT THERE WOULD BE SOME KIND OF IMPACT ON INDIRECT COSTS BECAUSE OF THE CHANGE IN WAGE RATES, AND THAT NASA COULD NOT EFFECTIVELY MEASURE THAT IMPACT. HOWEVER, YOUR FIGURES INDICATE THAT NASA OVERSTATED YOUR G&A BY LESS THAN $121,000. THEREFORE, EVEN IF YOU ARE CORRECT WITH RESPECT TO THE APPROPRIATE G&A RATE, IT DOES NOT APPEAR THAT THE OVERALL REDUCTION IN THE CSI PROPOSAL WOULD BE SIGNIFICANT. B-177317, SUPRA.

WE HAVE CAREFULLY REVIEWED THE RESPECTIVE APPROACHES OF NASA AND CSI IN DETERMINING THE AFFECTS OF WAGE DETERMINATION ON THE CSI PROPOSAL. WHILE IT IS CLEAR THAT NASA'S ESTIMATES WERE NOT ENTIRELY FREE FROM ERROR, IT DOES NOT APPEAR THAT THOSE ERRORS WERE SIGNIFICANT. FURTHERMORE, WE AGREE WITH NASA'S BASIC APPROACH OF CONSIDERING ONLY THE DIRECT AND NECESSARY EFFECTS OF INCORPORATING THE WAGE DETERMINATION. FURTHERMORE, EVEN WERE WE TO ASSUME THAT YOU ARE CORRECT ABOUT THE EFFECTS OF THE WAGE DETERMINATION ON THE CSI PROPOSAL, IT WOULD NOT THEN BE UNREASONABLE FOR US TO FURTHER ASSUME THAT, TO AT LEAST SOME EXTENT, THERE WOULD BE A SIMILAR EFFECT ON THE CSC PROPOSAL. WE THINK THAT NASA'S APPROACH WAS REASONABLE UNDER THE CIRCUMSTANCES, AND THAT NASA IS BASICALLY CORRECT WHEN IT POINTS OUT THAT YOUR APPROACH REALLY INVOLVES THE SUBMISSION OF A NEW PROPOSAL. WHILE YOU CITE 50 COMP. GEN. 619, SUPRA, TO INDICATE THAT THE SUBMISSION OF REVISED PROPOSALS IS APPROPRIATE UNDER THE CIRCUMSTANCES OF THIS CASE, WE HELD ONLY THAT THE CIRCUMSTANCES OF THAT CASE PROVIDED A VALID REASON FOR THE CONTRACTING OFFICER TO REOPEN THE NEGOTIATIONS. THIS SITUATION, HOWEVER, WE THINK NASA COULD PROPERLY REFUSE TO REQUEST OR CONSIDER REVISED PROPOSALS AFTER CSC HAD BEEN SELECTED CONSIDERING THAT CSI WAS NOT ONLY AWARE OF ITS COMPETITOR'S PROPOSED COSTS BUT WAS APPRISED, IN A DEBRIEFING, OF HOW ITS PROPOSAL WAS ASSESSED BY NASA. 177317, SUPRA.

YOUR CLAIM THAT CSC WAS AFFORDED AN UNFAIR COMPETITIVE ADVANTAGE BY RELEASE OF CSI'S PROPRIETARY INFORMATION CONCERNS NASA'S RELEASE OF THE EXISTING CSI CONTRACT TO CSC. YOU STATE THAT THE COPY OF THE CONTRACT FURNISHED TO CSC CONTAINED THE OVERTIME RATE LIMITATION, OVERTIME HOUR LIMITATION, G&A RATE CEILING, AWARD FEE RANGE, AND LABOR OVERHEAD CEILING, "THUS ENABLING CSC TO CALCULATE WITHIN 2 PERCENT THE WAGE RATES TO BE USED IN THE PROTESTOR'S PROPOSAL ***." IN REPLY, NASA STATES:

THE OVERTIME RATE AND HOUR LIMITATION WERE RELEASED. THEY ARE LUMP SUM FIGURES, E.G., FOR THE FIRST YEAR 34,000 HOURS AND $128,436 AND ARE NOT CONSIDERED TO BE PROPRIETARY. THIS IS A MISSION TYPE CONTRACT - THERE IS NO LEVEL OF EFFORT NOR ANY OTHER INDICATION OF HOURS IN ANY OTHER PART OF THE CONTRACT. THE G&A AND LABOR O/H CEILINGS WERE DELETED FROM THE COPIES OF THE CONTRACT THAT WE RELEASED. THE AWARD FEE RANGE WAS RELEASED. NASA HEADQUARTERS HAS TAKEN THE POSITION THAT THERE IS NOTHING PRIVILEGED ABOUT FEE, AWARD FEE, AWARD FEE RANGE OR AWARD FEE EARNED.

FROM THE INFORMATION THAT WAS RELEASED IT IS IMPOSSIBLE TO CALCULATE WAGE RATES TO BE USED.

IN VIEW OF THIS STATEMENT AND IN THE ABSENCE OF ANY ADDITIONAL INFORMATION IN THE RECORD BEFORE US THAT SUPPORTS YOUR CLAIM, WE MUST CONCLUDE THAT NASA DID NOT RELEASE CSI'S PROPRIETARY INFORMATION TO CSC, NOR WAS CSC AFFORDED AN UNFAIR COMPETITIVE ADVANTAGE.

FOR THE FOREGOING REASONS, WE DO NOT BELIEVE THAT NASA HAS ABUSED ITS DISCRETION IN THE HANDLING OF THIS PROCUREMENT. ACCORDINGLY, YOUR PROTEST IS DENIED.