B-243974, B-243974.2, B-243974.3, Sep 17, 1991
B-243974,B-243974.3,B-243974.2: Sep 17, 1991
The procuring agency's cost realism determination was unreasonable where the agency failed to consider the awardee's likely considerable probable costs for required spare/repair parts for the contract's option years. The provision of spare/repair parts for the base year at government expense was a change in the solicitation requirements of which the agency improperly failed to inform offerors. Higher cost proposal was unreasonable where the source selection authority. Was unaware of the awardee's failure to price spare/repair parts for the option years or of the agency's failure to inform the protester of the agency's changed requirements concerning the provision of the parts at government expense for the base year.
B-243974, B-243974.2, B-243974.3, Sep 17, 1991
DIGEST: 1. In a negotiated procurement for the award of a cost reimbursement contract for the operation and maintenance of aircraft, the procuring agency's cost realism determination was unreasonable where the agency failed to consider the awardee's likely considerable probable costs for required spare/repair parts for the contract's option years, even though the solicitation contemplated the evaluation of such costs. 2. The procuring agency improperly conducted prejudicially unequal discussions where it did not inform the protester, as it had the awardee, that spare/repair parts would be provided at government expense for the base year, and the protester thus proposed costs in excess of $1 million for these parts while the awardee proposed $0 costs; the provision of spare/repair parts for the base year at government expense was a change in the solicitation requirements of which the agency improperly failed to inform offerors, other than the awardee. 3. The selection of the awardee's higher rated, higher cost proposal was unreasonable where the source selection authority, in performing his cost/technical tradeoff, was unaware of the awardee's failure to price spare/repair parts for the option years or of the agency's failure to inform the protester of the agency's changed requirements concerning the provision of the parts at government expense for the base year, and where the protester's cost advantage could have been significantly greater had the offers been properly evaluated.
MSI, a Division of the Bionetics Corporation:
MSI, a Division of the Bionetics Corporation, protests the award of a cost reimbursement contract to DynCorp under request for proposals (RFP) No. 0000-930102(CS), issued by the Department of State, for operational and maintenance support for the agency's Bureau of International Narcotics Matters (INM) air wing mission to combat narcotics growing and trafficking. /1/ MSI objects to the Department of State's cost realism analysis, conduct of discussions, and selection of DynCorp's $16 million higher cost proposal.
We sustain the protests.
INM has principal responsibility for the international narcotics control assistance program established by the Foreign Assistance Act of 1961. U.S.C. Sec. 2291 (1988). An integral part of this assistance program is the INM air wing, which consists of more than 50 fixed-wing and rotary aircraft that are used in narcotics eradication and interdiction. /2/ The RFP contemplated the award of a cost-plus-award fee contract for a base and 4 option years for operational and maintenance services to support the INM air wing in various countries in South America, Central America and Asia. /3/ The RFP provided detailed information concerning the number and type of aircraft; the anticipated flying hours, crew factors and missions per aircraft per country; and a monthly deployment schedule per country. The contractor was required to provide personnel and material sufficient to support the RFP requirements. The RFP also provided detailed instructions for the preparation of technical and cost proposals.
Offerors were informed that award would be made to the responsible offeror, whose proposal, conforming to the RFP requirements, was evaluated as most advantageous to the government, price and other factors considered. Technical, management, and cost were the stated evaluation factors, with the technical and management factors to be of equal weight and the cost factor of less importance. Subfactors, and subelements for each subfactor, were stated for the technical and management evaluation factors. Offerors were informed that the technical and management factors would be evaluated under the following assessment criteria, which were stated to be of equal weight: (1) understanding of and compliance with RFP statement of work, (2) technical approach, and (3) past performance. addition, each technical and management factor and subfactor would be assessed for risk.
The cost evaluation was to consider the degree to which costs tracked the technical/management evaluation factors, whether the costs were rationally supported, cost realism, and overall cost. /4/ Offerors were informed that the government would evaluate offers for award purposes by adding the total cost for all options to the total cost for the basic requirement.
The agency received nine offers, of which only three offers, including those of MSI and DynCorp, were found to be within the competitive range. Written deficiency reports (DR), clarification requests (CR), and cost questions were issued to each of the competitive range offerors, and the written discussions formed the basis of oral, face-to-face discussions with each offeror.
During the first round of discussions, the agency issued amendment No. 6 to the RFP, which requested technical and cost proposals for an option for operational and maintenance support of an additional 49 rotary aircraft. Offerors were requested to provide their estimated costs for the base year for each additional aircraft up to a stated maximum for each of four designated countries and to provide escalation rates to be applied to the base year costs to calculate the option year costs. Offerors were required to provide detailed supporting cost documentation for their estimated costs and to price a summary table (Table B(1)) that would reflect the offerors' estimated base year monthly charges for operating and maintaining varying quantities of aircraft for each country.
At the conclusion of discussions, revised proposals, which included the offerors' responses to amendment No. 6, were requested and received. The agency evaluated the offerors' responses to the DRs, CRs, and cost questions, and the proposals for the additional rotary aircraft. The agency also evaluated the revised cost proposals for the degree to which they were realistic with respect to the technical/management proposals and statement of work. The Defense Contract Audit Agency (DCAA) then audited the offerors' cost proposals.
The agency conducted a second round of discussions, including further DRs, CRs, cost questions, and face-to-face discussions, and requested best and final offers (BAFO). The final evaluation results were as follows: /5/
Ratings/Risk Cost /6/
DynCorp Blue/Low Blue/Low $108,247,833
Offeror A Green/Low Green/Low 108,114,744
MSI Green/Low Green/Moderate 92,134,314
DynCorp's overall superior rating reflected the agency's determination that DynCorp had provided a detailed documented proposal that exceeded the RFP evaluation standards under many of the evaluation subfactors. The technical evaluators concluded that DynCorp had extensive experience, a complete understanding of the RFP work and had detailed its technical ability to perform the contract work in an exceptional manner.
MSI's overall acceptable rating reflected the agency's determination that MSI had submitted an acceptable proposal that generally satisfied the RFP evaluation standards. While MSI's proposal was rated acceptable overall, significant weaknesses were noted under several evaluation subfactors. The technical evaluators' overall impression of MSI's proposal was that the firm's proposal, while acceptable, lacked detail on its approach to meeting the contract requirements and represented a moderate risk. /7/
The source selection authority (SSA) determined that while all the proposals in the competitive range were acceptable, DynCorp's proposal "was rated exceptional and substantially higher than the other two offerors in the technical and management areas, and competitive in the cost area." Although MSI's proposed costs were approximately $16 million lower than DynCorp's, the SSA concluded that under the RFP evaluation factors-- that provided that technical and management factors were more important than cost-- DynCorp's proposal was the most advantageous to the government. The SSA further noted that the cost realism of MSI's cost proposal was questionable in several important areas, i.e., insurance and spare/repair parts, and that this discounted the apparent cost savings offered by MSI.
Award was made to DynCorp on May 1, 1991, and this protest followed on May 10. /8/ Contract performance was not suspended based upon the agency's written determination that urgent and compelling circumstances significantly affecting the interests of the government would not permit awaiting our decision in this matter. See 31 U.S.C. Sec. 3553(3)(d)(1) (1988).
As a preliminary matter, DynCorp argues that MSI is not an interested party to protest the award because the firm would not be in line for award even if its protest were sustained. See 4 C.F.R. Sec. 21.1(a) (1991). disagree. It is true that another offeror was rated higher technically than MSI, and that MSI does not challenge that offeror's eligibility for award. The protester, however, has a significantly lower cost than either of the other competitive range offerors and its protest challenges the agency's cost/technical tradeoff, cost realism analysis, and source selection decision. If, as MSI argues, the agency's cost evaluation is flawed and would have resulted in an even greater cost advantage for MSI, a revised cost/technical tradeoff could result in MSI being in line for award. Accordingly, MSI is an interested party under our Bid Protest Regulations. See Kinton, Inc., 67 Comp.Gen. 226 (1988), 88-1 CPD Para. 112.
MSI essentially protests the rationality of the agency's source selection of DynCorp's $16 million higher cost proposal where, the protester alleges, the agency's cost realism analysis of DynCorp's proposal was arbitrary and unreasonable. /9/ Among other things, MSI specifically contends that DynCorp's cost proposal for the additional aircraft added by amendment No. 6 is incomplete in that the awardee failed to price required spare/repair parts. /10/
When an agency evaluates proposals for the award of a cost reimbursement contract, an offeror's proposed estimated cost of contract performance and proposed fees are not considered controlling since an offeror's estimated costs may not provide valid indications of final actual costs that the government is required, within certain limits, to pay. Federal Acquisition Regulation (FAR) Sec. 15.605(d); Amtec Corp., B-240647, Dec. 12, 1990, 90-2 CPD Para. 482. Consequently, a cost realism analysis must be performed by the agency to determine the extent to which an offeror's proposed costs represent what the contract should cost, assuming reasonable economy and efficiency. CACI, Inc. Federal, 64 Comp.Gen. 71 (1984), 84-2 CPD Para. 542. Because the contracting agency is in the best position to make this cost realism determination, our review is limited to determining whether the agency's cost realism analysis is reasonably based and not arbitrary. Grey Advertising, Inc., 55 Comp.Gen. 1111 (1976), 76-1 CPD Para. 325.
The agency does not contest MSI's contention that DynCorp failed to price the spare/repair parts required for the aircraft added by amendment No. 6, but argues that the agency "accepted" 98 percent of DynCorp's proposed costs while questioning 17 percent of MSI's proposed costs. /11/ The agency contends that DynCorp's cost documentation "left no doubt as to what DynCorp's proposed costs for the option to add aircraft were."
DynCorp, in its revised proposal offered to provide the required spare/repair parts for the optional aircraft added by amendment No. 6 for the base year at an estimated cost several times higher than MSI's estimated cost of $1 million. /12/ During discussions, the agency informed DynCorp that "spare and repair parts for optional aircraft will be provided by the government for the first year. Adjust DynCorp's subcontractor's proposal to price only for 4 years." DynCorp in its BAFO proposed $0 for spare/repair parts for the base year, with the same escalation rates for the option years as it offered in its revised proposal, which resulted in DynCorp proposing $0 for spare/repair parts for the 4 option years as well.
In the evaluation of BAFO cost proposals, the agency recognized that DynCorp had failed to propose any costs for the spare/repair parts required to support the amendment No. 6 additional aircraft for the option years, even though these parts were not to be provided by the government and the RFP requested costs for these parts. Nevertheless, the agency made no determination of DynCorp's probable costs for the spare/repair parts for the option years. Instead, the agency accepted DynCorp's estimate of $0 for these parts and requested that DCAA conduct a post- award audit for the purpose of determining Dyncorp's probable cost for providing these parts for the option years, recognizing that considerable costs could be anticipated for the parts for the option years. We find that this resulted in an irrational cost realism analysis of DynCorp's proposal, since the RFP reasonably contemplated that the offerors supply and price these parts.
The agency and DynCorp contend that, because amendment No. 6 only requested pricing for the base year and escalation factors for the option years, the government was not required to evaluate the costs, or cost realism, of the option years of the amendment No. 6 aircraft. However, amendment No. 6 specifically provides that offerors' estimated costs for the additional aircraft would be evaluated by adding the total price for all options to the total price for the base requirement, and the agency has provided no reasonable basis for not considering these costs. /13/
This problem was compounded by the agency's failure to conduct equal discussions with MSI and Dyncorp and to inform MSI of the change in the RFP requirements, i.e., that spare/repair parts would be furnished for the base year at government expense. /14/ In negotiated procurements, procuring agencies are generally required to conduct meaningful discussions with all competitive range offerors; this obligation is not satisfied by misleading or prejudicially unequal discussions. See Pan Am World Servs., Inc., et al., B-231840 et al., Nov. 7, 1988, 88-2 CPD Para. 446. In its revised proposal for the spare/repair parts required for the additional aircraft, MSI estimated costs in excess of a $1 million for the base year. The agency did not inform MSI, as it had DynCorp, that spare/repair parts for the additional aircraft would be provided by the government for the base year but questioned MSI's rationale and methodology for its estimated costs for the parts. In its BAFO, MSI slightly increased its estimated costs for the parts for the base year, with the same escalation rates as it proposed in the revised proposal. /15/ Since only the awardee was informed that spare/repair parts for the optional, additional aircraft would be furnished at government expense for the base year, MSI proposed costs in excess of a $1 million for the parts for the base year while DynCorp reduced its proposed costs for the parts to $0 for the base year. These were the costs used in making the source selection decision. Moreover, since amendment No. 6 required offerors to propose their costs for providing spare/repair parts for the additional aircraft for the base year and escalation rates for the option years, the provision of spare/repair parts for the optional aircraft by the government during the base year was a change in the RFP requirements. /16/ It is a fundamental principle of government procurements that competition be conducted on an equal basis, that is, offerors must be treated equally and be provided with a common basis for the preparation of their proposals. Cylink Corp., B-242304, Apr. 18, 1991, 91-1 CPD Para. 384. Thus, when either before or after the receipt of proposals, the government changes or relaxes its requirements, it must issue a written amendment notifying all offerors of the changed requirements. See FAR Sec. 15.606(a). Thus, when the agency determined that the parts would be provided by the government for the base year, and so informed Dyncorp, it was incumbent upon the agency to likewise notify the other competitive range offerors of the changed RFP requirements so that all offerors were competing on an equal basis. See Joint Action in Community Serv., Inc., B-214564, Aug. 27, 1984, 84-2 CPD Para. 228.
The agency's failure to conduct a proper cost realism analysis of DynCorp's offer under amendment No. 6 and to conduct equal discussions- informing offerors of the changed RFP requirements-- resulted in a significant distortion of DynCorp's and MSI's relative costs of performance. We think that if the agency considered DynCorp's probable costs for the spare/ repair parts for the option years for the amendment No. 6 aircraft, DynCorp's evaluated costs would be substantially higher than its offered $108 million. /17/ MSI's evaluated cost, on the other hand, may well have been lower than its offered $92 million if it had been informed that parts for the amendment No. 6 aircraft would be furnished by the government for the base year.
Thus, we find unreasonable the agency's source selection decision and underlying cost/technical tradeoff, which were based upon erroneous cost information. The record shows that the SSA was not informed of DynCorp's failure to price spare/repair parts for the amendment No. 6 additional aircraft for the option years. He was also not informed that the cost evaluation did not reflect the fact that MSI, but not DynCorp, priced the first year's spare parts for the additional aircraft. Under the circumstances, MSI's cost advantage would appear to be substantially greater than $16 million, a fact of which the SSA was not aware, and could have resulted in a different cost/technical tradeoff judgment and selection decision. /18/
We sustain the protests. /19/
We recommend that the Department of the State reopen negotiations with the three offerors in the competitive range, informing them of the agency's requirements, and request revised proposals. If, as a result of the revised proposals and a proper cost evaluation, an offeror other than DynCorp is found to be entitled to award, Dyncorp's contract should be terminated for the convenience of the government and award made to that firm, if otherwise eligible. In addition, MSI is entitled to recover its costs of filing and pursuing the protest, including reasonable attorneys' fees. 4 C.F.R. Sec. 21.6(d)(1). MSI should submit its certified claim for its protest cost directly to the agency within 60 working days of receipt of this decision. 56 Fed.Reg. 3759 (1991) (to be codified at 4 C.F.R. Sec. 21.6(f)(1)).
The Honorable James A. Baker III
The Secretary of State
Enclosed is a copy of our decision of today sustaining the protest filed by MSI, a Division of the Bionetics Corporation, against the award of a cost reimbursement contract to DynCorp under request for proposals No. 0000-930102(CS), issued by the Department of State, for operational and maintenance support for the agency's Bureau of International Narcotics Matters air wing mission to combat narcotics growing and trafficking.
We sustained the protest because the agency failed to conduct a proper cost realism analysis of DynCorp's probable costs of contract performance and failed to conduct equal discussions with MSI and DynCorp, informing the offerors of a change in the solicitation requirements. We recommend that the agency reopen negotiations with the offerors in the competitive range, informing them of the agency's requirements, and request revised proposals. If, as a result of the revised proposals and a proper cost evaluation, an offeror other than DynCorp is found to be entitled to award, Dyncorp's contract should be terminated for the convenience of the government and make award to that firm, if otherwise eligible. addition, we find that MSI is entitled to recover its costs of filing and pursuing the protest, including reasonable attorneys' fees.
Since the enclosed decision contains a recommendation for corrective action, we direct your attention to 31 U.S.C. Sec. 3554(e)(1) (1988), which requires that the head of the procuring activity responsible for the solicitation report to our Office if the agency has not fully implemented our recommendations within 60 days of receipt of our decision. Please advise us, in any case, of the action taken on the recommendation.
/1/ The RFP was issued in response to our recommendation in MSI, a Div. of the Bionetics Corp., B-233090, Feb. 22, 1989,89-1 CPD Para. 185, that the Department of State recompete this requirement. In our prior decision, we found that the agency had failed to clearly indicate its requirements, to conductmeaningful discussions, or to perform a proper cost realism analysis. We recommended that the agency not exercise the contract options and resolicit its remaining requirements under an amended solicitation.
/2/ The Anti-Drug Abuse Act of 1986 requires that the government retain title to all aircraft used in international narcotics control. 22 U.S.C. Sec. 2291c. Thus, the air wing aircraft will be provided as government- furnished-property to the INM aviation support services program contractor.
/3/ Specific air wing missions include eradication of marijuana, poppy and coca; interdiction of narcotics; training; transport of personnel and supplies; reconnaissance;search and rescue; medical evacuation; ferrying of aircraft from one country to another; and maintenance.
/4/ Offerors were required to provide detailed cost data supporting their estimated costs for the base and each option year.
/5/ BAFOs were evaluated as being either "blue/exceptional," which was defined as exceeding the specified performance with high probability of success and no significant weaknesses; "green/acceptable," which was defined as meeting the specified performance standards with good probability of success and no significant weaknesses; "yellow/marginal," which was defined as failing to meet the performance standards but with deficiencies that were correctable without a major rewrite; and "red/unacceptable," which was defined as a proposal that failed to meet specified performance standards where correction of the deficiencies would require a major rewrite. Proposal risk assessments were defined according to the potential risk of disruption of schedule, increase in cost, or degradation of performance. "Low" risk was defined as having "little potential" for causing risk. "Moderate" risk was defined as "potentially" causing some risk. "High" risk was defined as being "likely" to cause "significant serious risk."
/6/ The agency calculated the offerors' total costs by adding the firms' proposed costs for the basic requirement, including option years, to the proposed costs for the maximum number of additional aircraft added by amendment No. 6 for the base year only. The offerors' option year costs for the optional additional aircraft were not considered.
/7/ "Moderate risk" is defined in the source selection plan as potentially causing come disruption of schedule, increase incost, or degradation of performance.
/8/ The entire evaluation record, including the offerors' proposals and the agency's technical and cost evaluation documents, was provided to the parties' counsel pursuant to a protective order issued by our Office on May 29, 1991. See 56 Fed.Reg. 3759 (1991) (to be codified at 4 C.F.R. Sec. 21.3(d)).
/9/ MSI does not contest the technical evaluations of DynCorp's or MSI's proposals or that DynCorp's exceptional ratings do not reflect actual technical superiority.
/10/ MSI also protests that DynCorp's cost proposal for the additional aircraft was deficient in several other regards, e.g., associated personnel and administrative equipment costs.
/11/ The cost evaluation documentation notes that "accepted costs do not take into consideration under-proposed costs; however, the individual cost analyses identified these areas for post-award audit."
/12/ In addition, DynCorp and MSI, as required by the RFP, proposed escalation rates for the amendment No. 6 option years.
/13/ The agency states that "given the contingencies of option implementation and the cost-plus-award-fee type of contract envisioned, full costing of option years was determined by the Department to be impractical and unnecessary." However, the RFP, and amendment No. 6 thereto, expressly stated that the options would be evaluated.
/14/ There is no contention that the agency's decision to provide spare/repair parts for the first year was based on any particular technical approach of DynCorp.
/15/ In its evaluation of BAFO cost proposals, the agency questioned all of MSI's proposed costs for the spare/repair parts.
/16/ The RFP indicates that some spare/repair parts would be furnished to the contractor as government-furnished-property (GFP) and that a complete list of parts to be provided as GFP would be incorporated into the contract at award. Nevertheless, the RFP provided that offerors propose costs for providing spare/repair parts for the aircraft for the base and option years and provided for the evaluation of the proposed costs.
/17/ The record indicates, given DynCorp's proposed costs forthese parts in its revised proposal and the government estimate, that the probable costs of providing these parts in the option years would be a considerable sum.
/18/ We are not persuaded by the agency contentions that MSI's proposed costs were understated in several areas, i.e., insurance and spare/repair parts, inasmuch as the agency did not determine the probable level of MSI's costs for these areas or otherwise attempt to quantify the extent of the alleged understatement.
/19/ Because we sustain MSI's protest and recommend the reopening of negotiations, we need not consider MSI's allegations concerning the other elements of DynCorp's cost proposal for the additional air raft that were not priced or were underpriced. We also need not address MSI's allegations concerning the lack of meaningful discussions and the post award correction of DynCorp's summary pricing table. (Table B(1)).