B-221089, MAR 31, 1986, 86-1 CPD 302

B-221089: Mar 31, 1986

Additional Materials:

Contact:

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

 

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

GENERAL ACCOUNTING OFFICE WILL REVIEW AN ALLEGATION THAT THE AGENCY DID NOT COMPLY WITH ESTABLISHED GROUND RULES. PROTEST THAT AGENCY SUPERVISORY STAFFING LEVEL COST IS UNDER STATED FOR PURPOSES OF COMPARISON WITH CONTRACT COST IS SUSTAINED WHERE THE AGENCY'S STAFFING LEVEL IS UNSUPPORTED BY THE MANAGEMENT STUDY IT PREPARED AS REQUIRED BY COST COMPARISON RULES. THE COST COMPARISON WAS TO DETERMINE WHETHER VEHICLE MAINTENANCE AND DISPATCH SERVICES AT THE KENNEDY SPACE CENTER FLEET MANAGEMENT CENTER (FMC) COULD BE PERFORMED AT A LOWER COST IN-HOUSE OR BY CONTRACT. BACKGROUND DYNATERIA WAS THE ONLY FIRM TO SUBMIT AN OFFER UNDER THE SOLICITATION. DYNATERIA'S APPEAL WAS REJECTED BY GSA. SO THAT THEIR JOBS AS GOVERNMENT EMPLOYEES WERE NOT DEPENDENT ON KEEPING THE FUNCTION IN- HOUSE.

B-221089, MAR 31, 1986, 86-1 CPD 302

CONTRACTS - IN-HOUSE PERFORMANCE V. CONTRACTING OUT - GUIDELINES DIGEST: 1. WHEN AN AGENCY ENGAGES IN A COST COMPARISON UNDER OFFICE OF MANAGEMENT AND BUDGET CIRCULAR NO. A-76, GENERAL ACCOUNTING OFFICE WILL REVIEW AN ALLEGATION THAT THE AGENCY DID NOT COMPLY WITH ESTABLISHED GROUND RULES. MOREOVER, SINCE THE CIRCULAR REQUIRES THE AGENCY TO PREPARE A MANAGEMENT STUDY, WHICH DEFINES WHAT MUST BE DONE UNDER THE SOLICITATION AND THE BEST WAY OF DOING IT AND WHICH ULTIMATELY SERVES AS THE BASIS FOR THE GOVERNMENT'S ESTIMATE IN THE COST COMPARISON, THE REVIEW INCLUDES ENSURING CONSISTENCY BETWEEN STUDY AND IN-HOUSE COSTS. CONTRACTS - IN-HOUSE PERFORMANCE V. CONTRACTING OUT - AGENCY IN HOUSE ESTIMATE - BASIS 2. PROTEST THAT AGENCY SUPERVISORY STAFFING LEVEL COST IS UNDER STATED FOR PURPOSES OF COMPARISON WITH CONTRACT COST IS SUSTAINED WHERE THE AGENCY'S STAFFING LEVEL IS UNSUPPORTED BY THE MANAGEMENT STUDY IT PREPARED AS REQUIRED BY COST COMPARISON RULES, AND THE AGENCY OTHERWISE HAS FAILED TO DOCUMENT THE BASIS FOR THESE STAFFING LEVELS.

DYNATERIA, INC.:

DYNATERIA, INC. PROTESTS THE DECISION OF THE GENERAL SERVICES ADMINISTRATION (GSA) TO CANCEL SOLICITATION NO. AT/TC19797, ISSUED ON MARCH 29, 1985 FOR PURPOSES OF A COST COMPARISON UNDER OFFICE OF MANAGEMENT AND BUDGET (OMB) CIRCULAR NO. A-76. THE COST COMPARISON WAS TO DETERMINE WHETHER VEHICLE MAINTENANCE AND DISPATCH SERVICES AT THE KENNEDY SPACE CENTER FLEET MANAGEMENT CENTER (FMC) COULD BE PERFORMED AT A LOWER COST IN-HOUSE OR BY CONTRACT. DYNATERIA COMPLAINS THAT GSA, IN CONDUCTING THE COST COMPARISON, FAILED TO COMPLY WITH REQUIREMENTS AND PROCEDURES IN THE OMB CIRCULAR NO. A-76 SUPPLEMENT. WE SUSTAIN THE PROTEST.

BACKGROUND

DYNATERIA WAS THE ONLY FIRM TO SUBMIT AN OFFER UNDER THE SOLICITATION. AFTER A TECHNICAL REVIEW AND DYNATERIA'S SUBMISSION OF A BEST AND FINAL OFFER, GSA CONDUCTED A COST COMPARISON INVOLVING DYNATERIA'S OFFER AND THE GOVERNMENT'S "OFFER." ON JULY 17, GSA ANNOUNCED ITS TENTATIVE DECISION TO RETAIN THE SERVICES IN-HOUSE, AS DYNATERIA'S EVALUATED OFFER EXCEEDED THE GOVERNMENT'S BY $227,628.27 OVER A 3-YEAR PERIOD.

DYNATERIA THEN APPEALED GSA'S FINDINGS TO GSA'S REGIONAL ADMINISTRATOR IN ATLANTA, GEORGIA. IN THE MEANTIME, OMB UPDATED SEVERAL COST FACTORS USED IN THE CIRCULAR NO. A-76 COST COMPARISON PROCESS, WHICH RESULTED IN AN INCREASE IN GSA'S BID BY $123,280. REVISIONS MADE TO THE COST COMPARISON AS A RESULT OF DYNATERIA'S APPEAL YIELDED A DIFFERENCE OF ALMOST $125,000 BETWEEN THE PROPOSALS IN FAVOR OF GSA-- $5,920,002.07 FOR DYNATERIA, TO $5,795,360 FOR IN-HOUSE. BY LETTER DATED OCTOBER 29, DYNATERIA'S APPEAL WAS REJECTED BY GSA; DYNATERIA FILED ITS PROTEST IN OUR OFFICE ON NOVEMBER 18.

PROTEST

IN ITS ADMINISTRATIVE APPEAL, DYNATERIA OBJECTED TO THE ABSENCE OF ANY SUPERVISORY EXPENSES IN GSA'S IN-HOUSE COST ESTIMATE. THE AGENCY DID NOT INDICATE ANY SUCH COSTS BECAUSE THE EMPLOYEES THAT WOULD SUPERVISE THE WORK HAD OTHER, UNRELATED DUTIES AT THE INSTALLATION, SO THAT THEIR JOBS AS GOVERNMENT EMPLOYEES WERE NOT DEPENDENT ON KEEPING THE FUNCTION IN- HOUSE. IN ITS APPEAL RESPONSE, HOWEVER, GSA ACKNOWLEDGED THAT A SEPTEMBER 10, 1985 MEMO FROM ITS OFFICE OF PROGRAM INITIATIVE REQUIRED THE ALLOCATION OF COSTS FOR DIRECT SUPERVISION, REGARDLESS OF WHETHER THESE COSTS WOULD BE ELIMINATED BY CONTRACTING FOR THE SERVICES. GSA ALLOCATED $79,532 FOR THE TIME THAT FOUR WS-08 AUTOMOTIVE FOREMEN WOULD PERFORM SUPERVISORY DUTIES IF THE FUNCTION WERE RETAINED; GSA DID NOT INCLUDE IN ITS OFFER THE COST OF THE WORK THESE EMPLOYEES WOULD PERFORM OUTSIDE THE SCOPE OF THE WORK REQUIRED BY THE SOLICITATION. DYNATERIA PROTESTS THAT THE EFFECT OF GSA'S METHOD OF COSTING SUPERVISION RESULTS IN ONLY 28 PERCENT OF THE HOURS DURING WHICH THE FACILITY WILL OPERATE BEING ACCOUNTED FOR. ACCORDING TO DYNATERIA THIS DOES NOT CONFORM TO THE REQUIREMENTS FOR SUPERVISION SET OUT IN THE SOLICITATION'S PERFORMANCE WORK STATEMENT (PWS), AGAINST WHICH DYNATERIA HAD TO PREPARE ITS OFFER.

GSA CONTENDS THAT ALTHOUGH THE PWS REQUIRES "SUPERVISION," IT DOES NOT SPECIFY A STRUCTURE FOR THE ACCOMPLISHMENT OF THAT SUPERVISION OR THE NUMBER OF HOURS OR EMPLOYEES REQUIRED. GSA STATES THAT ITS FOUR SUPERVISORS WHO PERFORM FUNCTIONS OUTSIDE THE SCOPE OF THIS CONTRACT EFFORT RECEIVED SECOND LINE SUPERVISION SUPPORT FROM THE FMC MANAGER AND ASSISTANT MANAGER. THUS, CONCLUDES GSA, THE NUMBER OF EMPLOYEES TASKED FOR SUPERVISION FOR IN-HOUSE PERFORMANCE, AND THEIR ALLOCATED COST, ARE ADEQUATE.

STANDARD OF REVIEW

WE WILL REVIEW PROTESTS, SUCH AS DYNATERIA'S, CONCERNING AGENCY DECISIONS THAT IN-HOUSE PERFORMANCE WILL BE MORE ECONOMICAL THAN PERFORMANCE BY CONTRACT TO ASCERTAIN WHETHER THE AGENCY ADHERED TO THE PROCEDURES, OR GROUND RULES, FOR DETERMINING THE COMPARATIVE COSTS. JOULE MAINTENANCE CORP., B-208684, SEPT. 16, 1983, 83-2 CPD PARA. 333. WE DO SO BECAUSE WE BELIEVE IT WOULD BE DETRIMENTAL TO THE PROCUREMENT SYSTEM IF, AFTER THE AGENCY INDUCED THE SUBMISSION OF OFFERS, THERE WERE A FAULTY OR MISLEADING COST COMPARISON WHICH AFFECTED THE DECISION TO A MATERIAL DEGREE. SEE GRIFFIN-SPACE SERVICES CO., B-214458.2, SEPT. 11, 1984, 84-2 CPD PARA. 281.

OUR DECISION HERE THUS TURNS ON WHETHER GSA COMPLIED WITH THE APPLICABLE PROCEDURES IN SELECTING IN-HOUSE PERFORMANCE OVER CONTRACTING. IN THIS RESPECT, THE OMB CIRCULAR NO. A-76 SUPPLEMENT REQUIRES THAT COST ESTIMATES FOR GOVERNMENT AND CONTRACTOR PROPOSALS BE BASED ON THE SAME OUTLINE OF THE SCOPE OF WORK AND STANDARDS OF PERFORMANCE, I.E., THE SOLICITATION'S PWS. THE SUPPLEMENT'S COST COMPARISON HANDBOOK SETS OUT THE METHODS AND PROCEDURES NECESSARY TO PERFORM THE COST COMPARISON STUDY. THE SUPPLEMENT REQUIRES THAT THE IN HOUSE ESTIMATE USED IN THE COST COMPARISON BE BASED ON THE GOVERNMENT'S MOST EFFICIENT AND EFFECTIVE IN-HOUSE OPERATION NEEDED TO PERFORM THE CONTRACT. SUPPLEMENT AT I-12(E)(1). TO THAT END, A MANAGEMENT STUDY IS REQUIRED TO ANALYZE THE OPERATION AND TO ESTABLISH THE MOST EFFICIENT AND EFFECTIVE OPERATION. ID.; SEE ALSO DWAIN FLETCHER CO., B-219580, SEPT. 27, 1985, 85-2 CPD PARA. 348.

IN AN EFFORT TO UNDERSTAND THE BASIS FOR GSA'S OFFER, WE REQUESTED A COPY OF THE MANAGEMENT STUDY AFTER A JANUARY 7, 1986 CONFERENCE ON THE PROTEST. ALTHOUGH GSA HAS FURNISHED THE MANAGEMENT STUDY TO OUR OFFICE, THE AGENCY SUGGESTS THAT MUCH OF THE STUDY IS BEYOND THE SCOPE OF OUR REVIEW BECAUSE THE STUDY RELATES ONLY TO HOW THE GOVERNMENT'S OFFER WAS PREPARED, NOT TO WHETHER THE AGENCY ADHERED TO THE REQUIRED PROCEDURES IN MAKING THE COST COMPARISON.

WHILE GSA IS CORRECT AS TO THE MERITS OF THE STUDY ITSELF-- IT IS NOT OUR PROVINCE, IN THE CONTEXT OF A BID PROTEST, TO DECIDE WHETHER A MANAGEMENT STUDY ACTUALLY REPRESENTS THE BEST WAY OF DOING SOMETHING-- WE DO NOT AGREE WITH GSA TO THE EXTENT IT IS ARGUING THAT THE MANAGEMENT STUDY IS NOT RELEVANT TO THE GOVERNMENT'S OFFER OR THE COST COMPARISON. THE OMB CIRCULAR NO. A-76 SUPPLEMENT STATES THAT THE "PRIMARY EMPHASIS" OF THE MANAGEMENT STUDY IS "THE DEFINITION OF WHAT MUST BE DONE ... AND THE BEST WAY OF DOING IT. ..." SUPPLEMENT AT III-2(E)(1). THE MANAGEMENT STUDY THUS NECESSARILY MUST SERVE AS THE BASIS FOR THE GOVERNMENT ESTIMATE, OR "BID," FOR PURPOSES OF THE COMPARISON-- IT CLEARLY WOULD MAKE NO SENSE FOR AN AGENCY TO STUDY AN ACTIVITY FOR PURPOSES OF AN A-76 REVIEW, DECIDE ON HOW THAT ACTIVITY MUST BE RUN, AND THEN IGNORE THAT DECISION IN DETERMINING HOW MUCH IT SHOULD COST TO MAINTAIN THE ACTIVITY. ACCORDINGLY, OUR REVIEW OF THE FAIR APPLICATION OF OMB CIRCULAR NO. A-76 PROCEDURES ENCOMPASSES ENSURING CONSISTENCY BETWEEN THE REQUIRED MANAGEMENT STUDY AND THE GOVERNMENT'S IN-HOUSE COSTS. SEE DWAIN FLETCHER CO., B-219580, SUPRA (WHERE PROTESTER'S OBJECTION TO EMPLOYEE STAFFING LEVELS WAS DISMISSED BASED ON AGENCY'S STAFFING LEVEL DETERMINATION SET FORTH IN ITS MANAGEMENT STUDY).

DECISION

GSA'S MANAGEMENT STUDY NOTED THAT FIVE SUPERVISORY POSITIONS WERE STAFFED AT THE FACILITY, AND RECOMMENDED THE ELIMINATION OF ONE SUPERVISORY POSITION IN THE MAINTENANCE SECTION. MORE SPECIFICALLY, FIGURE 1 OF THE STUDY SHOWS A PROPOSAL FOR FOUR WS-08 AUTO MECHANIC FOREMEN IN THE MAINTENANCE SECTION. NOWHERE DOES IT APPEAR THAT THESE POSITIONS ARE PART -TIME OR INVOLVE THE SHARING OF DUTIES OUTSIDE THE SCOPE OF THIS CONTRACT. YET, BASED ON GSA'S POSITION THAT THE FOUR WS 08 SUPERVISORY EMPLOYEES THE AGENCY WOULD ASSIGN TO THE CONTRACT EFFORT ALSO WOULD HAVE DUTIES TO PERFORM OTHER THAN SUPERVISION UNDER THE PWS, THE AGENCY, ACCORDING TO THE ADMINISTRATIVE APPEAL DECISION, USED ONLY 0.15 FTE /1/ PER SUPERVISOR, OR A TOTAL OF 0.60 FTE, IN THE CALCULATION OF DIRECT LABOR COSTS.

THE AMOUNT ATTRIBUTED TO SUPERVISION IN GSA'S OFFER THUS CLEARLY IS SIGNIFICANTLY UNDERSTATED COMPARED TO WHAT THE AGENCY'S MANAGEMENT STUDY SHOWS IS NEEDED. WHILE THE ADMINISTRATIVE APPEAL DECISION LISTS THE SUPERVISORY DUTIES OF THE WS-08 EMPLOYEES THAT WERE OUTSIDE THE SCOPE OF THE PWS, WE SIMPLY FIND NO SUBSTANTIVE BASIS FOR THE BREAKDOWN OF DUTIES THAT LED TO 0.60 FTE BEING ALLOCATED TO THIS CONTRACT EFFORT. THE MANAGEMENT STUDY EXPRESSLY STATES THAT "4 PERSONS ARE REQUIRED FOR MANAGING THE FACILITY" AND ASSOCIATES 6,976 ANNUAL HOURS AND 4.00 FTE WITH THAT TASK, A FACT THE APPEAL DECISION ITSELF RECOGNIZES IN STATING THAT "THERE ARE 4 FTE IDENTIFIED IN THE MEO FOR THE WS-8 FOREMEN POSITIONS." WITHOUT MORE INFORMATION, SUCH AS AN AMENDED MANAGEMENT STUDY OR EVEN INPUT FROM THE MANAGEMENT STUDY TEAM, WHICH CONSISTS OF THE EXPERTS WHO FORMULATE THE MANNER IN WHICH SERVICES ARE PROVIDED, SUPPLEMENT AT III-2, WE SEE NO BASIS FOR THE SEGREGATION AND PARTIAL COSTING OF DUTIES FOR THESE EMPLOYEES.

MOREOVER, THE RECORD APPEARS TO BELIE THE ADEQUACY OF GSA'S STAFFING/COSTING MODE FOR THESE EMPLOYEES. DYNATERIA'S OFFER CONTAINS A PERSONNEL PHASE-IN CHART THAT IDENTIFIES ONE SUPERVISOR IN THE QC/MAINTENANCE CENTER BRANCH, WHICH IS 0.4 FTE GREATER THAN GSA'S PRESENT CONFIGURATION FOR THE SAME BRANCH. ALSO, THE TECHNICAL REVIEW PANEL CONVENED TO EVALUATE PROPOSALS STATED THAT "THE NUMBER OF SUPERVISORS DESIGNATED ON THE PERSONNEL PHASE-IN CHART IS NOT ADEQUATE TO PROVIDE CONTINUING SUPERVISION ..." AND THAT A "LIMITED NUMBER OF SUPERVISORY PERSONNEL COULD RESULT IN AN ABNORMAL SPAN OF CONTROL PROBLEMS." INDEED, THIS APPEARS TO HAVE PROMPTED DYNATERIA'S ADDITION OF ONE SUPERVISOR IN ITS BEST AND FINAL OFFER. THUS, IF DYNATERIA'S TIME ALLOCATED FOR SUPERVISION INITIALLY WAS LOW, WE FAIL TO SEE HOW GSA'S TIME ALLOCATION, WHICH IS LESS THAN DYNATERIA'S WAS ADEQUATE IN TERMS OF TIME AND COST.

ACCORDINGLY, SINCE THERE IS NO SUBSTANTIVE EVIDENCE IN THE RECORD TO SUPPORT GSA'S STAFFING/COSTING STRUCTURE FOR THE FOUR WS-08 EMPLOYEES-- DESPITE GSA'S OPPORTUNITY TO PRESENT THIS BASIS IN ITS REPORT, IN ITS COMMENTS TO THE PROTEST CONFERENCE AND IN ITS SUBMISSION OF THE MANAGEMENT STUDY-- WE AGREE WITH DYNATERIA'S PROTEST ON THIS ISSUE. IN THIS REGARD, WE HAVE RECOGNIZED THAT IT IS ESSENTIAL TO THE INTEGRITY OF THE COST COMPARISON PROCESS THAT THE AGENCY IDENTIFY AND DOCUMENT THE ELEMENTS OF THE COST COMPARISON. OTHERWISE, THE AGENCY RUNS THE RISK OF BEING UNABLE TO DISPEL THE DOUBT RAISED BY A PROTESTER. SEE MAR, INC., B-205635, SEPT. 27, 1982, 82-2 CPD PARA. 278.

THE QUESTIONS REMAIN AS TO WHAT AMOUNT THE GSA IN-HOUSE ESTIMATE SHOULD BE INCREASED IN COSTING FOUR WS-08 SUPERVISORS FULL-TIME AND WHETHER OR NOT THIS INCREASE WILL RESULT IN A LOWER PERFORMANCE COST UNDER A CONTRACT WITH DYNATERIA. ALTHOUGH THE ANSWERS TO THESE QUESTIONS ARE NOT CLEAR FROM THE RECORD, THE RECORD DOES SUGGEST THAT THE TOTAL COST FOR THESE EMPLOYEES WOULD BE SIGNIFICANTLY GREATER THAN THE $125,000 IN-HOUSE COST ADVANTAGE. ACCORDINGLY, IT APPEARS THAT DYNATERIA SHOULD HAVE BEEN VIEWED AS THE WINNER OF THIS CIRCULAR A-76 COMPETITION.

THE PROTEST IS SUSTAINED. WE ARE INFORMING THE ADMINISTRATOR OF GENERAL SERVICES THAT IF A CONTRACT IS NOT AWARDED TO DYNATERIA, THAT DYNATERIA IS ENTITLED TO ITS PROPOSAL PREPARATION COSTS AND THE COSTS OF PURSUING THE PROTEST.

/1/ FULL-TIME EQUIVALENT. THE FTE CALCULATION IS THE MEANS FOR DETERMINING, GENERALLY, THE NUMBER OF EMPLOYEES NECESSARY TO PERFORM SPECIFIED WORK. THIS NUMBER IS DERIVED BY DIVIDING THE TOTAL ESTIMATED PERSON-HOURS NEEDED TO PERFORM THE WORK BY THE ANNUAL PRODUCTIVE HOURS FOR A SINGLE EMPLOYEE.