Matter of: DynCorp File: B-245289.3 Date: July 30, 1992

Matter of: DynCorp File: B-245289.3 Date: July 30, 1992

PROCUREMENT Competitive Negotiation Contract awards Administrative discretion Cost/technical tradeoffs Cost savings PROCUREMENT Competitive Negotiation Offers Evaluation errors Evaluation criteria Application In a negotiated, best value procurement, the procuring agency's quantification of the value of the higher-rated, higher-priced offeror's greater manning level of effort was not inconsistent with the stated evaluation scheme but was simply and properly a tool to assess whether the greater manning, upon which the offeror's technical superiority was based, was worth the associated cost premium.

Attorneys

DECISION

DynCorp protests the Department of the Air Force's selection of Lear Siegler Management Services Corporation for award under request for proposals (RFP) No. F41689-91-R-0015 for aircraft operation and maintenance services for the 80th Flying Training Wing at Sheppard Air Force Base, Texas. Dyncorp contends that the selection of Lear Siegler's lower-priced, lower-rated proposal was not in accordance with the stated evaluation factors.

We deny the protest. [1]

The Air Force's cost/technical tradeoff evaluation and award selection, that is the subject of this protest, was performed in response to our recommendation in DynCorp, 71 Comp.Gen. 129 (1991), 91-2 CPD Para. 575, in which we sustained DynCorp's protest of the agency's original, best value selection of Lear Siegler's proposal. We found that the agency's cost/technical tradeoff was unreasonable because DynCorp's evaluated technical superiority was based upon its offer of greater manpower, but the source selection authority (SSA) failed to consider where the differences in the offerors' manpower arose to determine whether DynCorp's technical superiority was not worth the associated cost premium. We recommended that the Air Force either make award to DynCorp as the technically superior offeror with a reasonable price or perform a new cost/technical tradeoff evaluation that considered the extent of DynCorp's technical superiority and its associated cost premium. The Air Force chose to perform a new cost/technical tradeoff evaluation of the firms' proposals. [2]

The RFP contemplated the award of a fixed-price incentive (firm target), award fee contract [3] for various operation and maintenance services, including maintenance of T-37/T-38 jet aircraft, engines, associated support equipment, fuels, and instrument flight trainer (IFT) maintenance and instruction, for a base and 4 option years. [4] Detailed work specifications, including Air Training Command (ATC) standards and estimated flying hours per aircraft were provided. [5] In pricing proposals, offerors were also required to provide their sharing formula by which the government and the contractor would share responsibility for cost overruns or underruns.

The RFP provided that evaluation of proposals would be conducted under the streamlined source selection procedures of Air Force Regulation (AFR) 70-30, and that award would be made "on the basis of a combination of the technical excellence and total price to [the] responsible offeror," whose offer was the most advantageous to the government in accordance with the stated evaluation criteria. Technical capability was stated to more important than cost/price, which, while not specifically rated, would be evaluated as to completeness, realism, reasonableness, and risk.

The solicitation, as amended, provided that proposals would be evaluated in the following functional areas, stated in descending order of importance: (1) aircraft maintenance, (2) IFT, and (3) fuels and transportation. The aircraft maintenance area was stated to be significantly more important than any of the other function areas. [6] Offerors were also informed that each of the three functional areas would be evaluated under the following evaluation criteria: [7]

Manpower and organization Understanding the mission Mobilization plan Past experience

The RFP provided that manpower was significantly more important than any other criterion and warned offerors that proposals offering less than adequate levels of manning may be rated unacceptable.

The Air Force received 10 proposals, including offers from DynCorp and Lear Siegler. The proposals were evaluated by the source selection evaluation team (SSET) in accordance the color/adjectival rating and risk assessment scheme stated in AFR 70-30. [8] All 10 proposals were found to be in the competitive range. The Air Force conducted discussions with all offerors and received best and final offers (BAFO). After evaluation of final BAFOs, DynCorp and Lear Siegler were rated first and second, respectively, as follows:

DynCorp [9] Lear Siegler

Rating/Risk Rating/Risk

Aircraft Maintenance Blue/Low Green(-)/Low IFT Blue(-)/Low Green/Low Fuels Green(+)/Low Green(-)/Moderate

OVERALL BLUE(-)/LOW GREEN(-)/LOW

PRICE [10] $107,648,976 $98,156,681

DynCorp's proposal was evaluated as being exceptional under 23 of 37 evaluated areas, factors, and subfactors, including the most important aircraft maintenance manpower factor. Only DynCorp's proposal was evaluated as containing no marginal or unacceptable ratings.

Lear Siegler's proposal, on the other hand, was evaluated as minimally satisfactory overall with low risk. Of the 37 evaluated items, Lear Siegler received 3 exceptional, 28 satisfactory, and 6 marginal ratings, and was rated minimally acceptable for the most important aircraft manpower criterion.

The SSET concluded that while all proposals in the competitive range were adequate, DynCorp's proposal was "superior overall, especially in terms of total manning (the highest), cost per man-year (ranked fifth), potential for performing within the target price (and, hence, the lowest potential for cost overrun), and it has the least risk." The SSET recommended award to DynCorp.

The original SSA determined, however, that DynCorp's technical superiority did not justify its nearly $9.5 million cost premium and concluded that Lear Siegler's lower-rated, lower-cost acceptable proposal was the most advantageous to the government. Award was made to Lear Siegler on August 12, 1991, and DynCorp protested on August 19.

As noted above, we sustained DynCorp's protest of the award to Lear Siegler because we found unreasonable the SSA's cost/technical tradeoff that failed to consider the extent of DynCorp's technical superiority. In response to our recommendation, the agency decided to perform a new cost/ technical tradeoff evaluation to assess the value of DynCorp's evaluated technical superiority.

The SSET reevaluated the manning levels of DynCorp's and Lear Siegler's BAFOs to arrive at a "shop-by-shop/position-by-position comparison of the two proposals to derive the gross manpower differences between the two contractors." In this regard, the SSET recognized that DynCorp offered 46 more man-years of effort than Lear Siegler, and that these additional man-years were primarily grouped in the aircraft maintenance area. The manning differences between the firms' offers were then grouped in four labor categories, which were assigned the following "productivity values":

Categories Value

Sortie production 8 Direct support 6 Indirect support 4 Overhead support 2

Sortie production was defined as any position that directly assists in sortie production; [11] direct support was defined as any position that performs maintenance on airframes, engines, and other major components; indirect support was defined as those positions that cannot be identified with a specific aircraft, i.e., ground equipment, survival equipment, or backshop support; and overhead support are hours used to manage and support the aircraft maintenance complex. The productivity values were determined by the SSA, [12] based upon his assessment of the relative importance of the different kinds of contract work to be performed. [13] Specifically, the SSA concluded that "[a]dditional manpower that adds directly to mission accomplishment adds more relative value to performance than manpower further removed from direct mission accomplishment."

The Air Force also assigned a "manpower value" for each position that required multiple persons. Specifically, the agency determined an optimum manning number for each position and assigned less value to manning beyond the optimum number based upon a theory of diminishing returns. In other words, additional manning beyond the optimum number was considered of less value than the manpower provided up to the optimum number.

The productivity values and manpower values were multiplied to determine a relative value for each labor position. The offerors' respective costs for each position was then multiplied by the respective relative value to determine the "dollar value added" for each labor position. Applying this equation of relative value to the firms' proposals, the SSET calculated that while DynCorp's proposed target price was $8.9 million greater than Lear Siegler's, the dollar value added by DynCorp's offer was only $5.4 million. Thus, the agency concluded that the government would pay an additional $8.9 million to only receive additional value of $5.4 million.

The SSA was briefed by the SSET as to the value added by DynCorp's proposal and concluded that Lear Siegler's proposal was the most advantageous to the government. Specifically, the SSA found that:

"In summary, while DynCorp had a net 46 more manyears for the 18 workcenters that have increased manning, in my opinion the above analysis has not shown that the increased manning merits the cost premium associated with the DynCorp proposal. [Lear Siegler's] realistic manning and low risk all in the context of a more responsive and advantageous sharing ratio are clearly to the [g]overnment's advantage.

"DynCorp proposed an overrun share ratio of 0/100 and an underrun share ratio of 70/30. Inherent to this pricing technique is the distinct possibility that DynCorp will obtain additional profit in the amount of 30 [percent] of any cost underrun. [Lear Siegler] proposed an overrun share ratio of 65/35 and an underrun share ration of 80/20. In today's resource constrained environment, it is quite reasonable for a contractor to assume a portion of risk with the Air Force. By agreeing to pay 35 [percent] of overruns and assume only 20 [percent] of cost underruns, [Lear Siegler] has demonstrated willingness to share risk. Additionally, [Lear Siegler's] ceiling price is less than DynCorp's target price. Thus, [Lear Siegler's] share ratio is clearly superior to that proposed by DynCorp and offers distinct cost sensitivity, which is of value to the [g]overnment."

Based upon the above analysis, the Air Force determined that its earlier award to Lear Siegler, as the offeror whose proposal was the most advantageous to the government, was proper. This protest followed. [14]

The crux of DynCorp's protest is that the agency's new cost/technical tradeoff methodology is inconsistent with the stated evaluation scheme. [15] Specifically, DynCorp argues that all elements of aircraft maintenance labor were of equal weight under the stated technical evaluation scheme, but the agency, in its cost/technical tradeoff evaluation, improperly treated some categories of aircraft maintenance labor as more important than others. Also, DynCorp challenges the agency's application of "manpower values"--that is, that labor hours beyond a selected optimum number would result in diminishing returns--as inconsistent with the solicitation evaluation scheme that "emphasized the importance of high manning levels."

Source selection officials have broad discretion to determine the manner and extent to which they will make use of the technical and cost evaluation results in negotiated procurements. Grey Advertising, Inc., 55 Comp.Gen. 1111 (1976), 76-1 CPD Para. 325. In deciding between competing proposals, cost/technical tradeoffs may be made; the propriety of such a tradeoff turns not on the difference in technical scores or ratings, per se, but on whether the selection official's judgment concerning the significance of that difference was reasonable and adequately justified in light of the RFP evaluation scheme. Wyle Laboratories, Inc.; Latecoere Int'l, Inc., supra. Accordingly, where, as here, cost is secondary to technical considerations, selection of a lower-priced, lower-rated proposal over a higher-rated proposal requires an adequate justification, i.e., one showing that the agency reasonably concluded that the higher technical score did not reflect actual technical superiority, see Dayton T. Brown, Inc., B-239664, Mar. 30, 1988, 88-1 CPD Para. 321, or that the agency reasonably concluded that the higher-rated proposal's technical superiority was not worth the cost premium. See Wyle Laboratories, Inc.; Latecoere Int'l, Inc., supra.

In this case, the agency found that while Lear Siegler was capable of successfully performing the contract work, [16] DynCorp's higher technical rating reflected actual technical superiority. Nevertheless, the agency determined that DynCorp's technical superiority was not worth the associated cost premium. From our review of the record, we find that, in accordance with our decision recommendation, the Air Force fully considered the extent of DynCorp's technical superiority, and that the agency's cost/technical tradeoff was adequately justified and reasonable under the stated evaluation scheme.

First, we disagree with DynCorp's contention that the Air Force's application of relative weights for the various aircraft maintenance labor categories in determining the productivity value of the various labor categories was inconsistent with the stated solicitation evaluation criteria. Contrary to Dyncorp's allegations, the RFP did not state that all the various types of contract labor were of equal value or importance to the Air Force. Rather, the solicitation evaluation scheme did not identify any subcategories of aircraft maintenance labor or provide relative weights for types of labor. [17]

DynCorp argues that other parts of the solicitation--that is, the solicitation statement of work and an attachment, entitled "Reviewing Contractor Proposals for UPT Contract Maintenance"--indicated that all the required contract labor would be of equal value. We do not agree. While it is true that the RFP's statement of work did not state the relative importance in the evaluation of the various contract services to be performed, this section was only intended to inform offerors of the work to be performed under the contract, not to state their relative value to the agency. Similarly, the RFP attachment, upon which DynCorp also relies, does not indicate the relative value to the agency of the various labor categories, but only provides procedural guidance indicating the method by which the firms' manning will be evaluated. In our view, the RFP cannot reasonably be read as indicating to offerors that all contract labor categories were of equal value to the agency, regardless of their relationship to the contract mission.

Since it was not inconsistent with the evaluation scheme stated in the RFP, the SSA, in his reasonable judgment, could identify which functions were most important to the successful accomplishment of the contract and take this into account in the cost/technical tradeoff in deciding whether the specific additional personnel offered by DynCorp that contributed to its superior technical rating were worth the additional incremental cost. See Wyle Laboratories, Inc.; Latecoere Int'l, Inc., supra. While DynCorp suggests the designated categories and their weighing was arbitrary, we find that the agency reasonably documented its determination that the manning levels in the categories that most directly support the contract mission (e.g., sortie production) are more valuable than manning that only indirectly supports the successful and productive accomplishment of the contract work. [18]

DynCorp also argues that the agency's application of "manpower values"-- that is, that labor hours beyond a selected optimum number would result in diminishing returns--was inconsistent with the solicitation evaluation scheme that emphasized the importance of high manning levels. We agree that aircraft maintenance manning was identified as the most important evaluation criterion and that DynCorp's superior technical rating was primarily based upon its far greater proposed manning than Lear Siegler's. Nevertheless, offerors were also informed that cost would be weighed against the technical considerations to determine the proposal that represented the best value to the government. Indeed, cost or price must be considered in all of the government's selection decisions. 10 U.S.C. Sec. 2305(b) (1988).

Here, in order to have a reasonably based source selection considering both cost and technical factors, the costs associated with the firms' proposed levels of effort were weighed against the technical worth represented by the manning. Given the fact that an offeror's proposed cost on this RFP was primarily a function of the proposed contract manning, offerors were reasonably on notice that the agency would consider, in its cost/technical tradeoff, whether the amount of manning offered was worth the cost. In this regard, the RFP cannot be reasonably read to provide that any level of manning offered will be viewed as justified irrespective of cost. Thus the agency used manpower and productivity values--which recognized the diminishing returns associated with lavish levels of effort and the fact that certain personnel positions (e.g., in sortie production) are considered more important to the contract mission than other positions (e.g., overhead support)--to quantify the value of DynCorp's greater manning in terms of its costs to the government. This was a reasonable methodology to use as an aid in ascertaining the "best value," and was consistent with the RFP evaluation scheme that informed offerors that both cost and technical factors would be considered and weighed against each other. See, e.g., Training and Mgmt. Resources, Inc., B-220965, Mar. 12, 1986, 86-1 CPD Para. 244 (undisclosed optimum staffing level properly considered in the agency's cost/technical tradeoff).

In summary, we find that the agency's use of productivity and manpower values was not inconsistent with the stated evaluation scheme. Indeed, the agency's consideration of these values was done in response to our earlier decision recommendation to fully consider the value of DynCorp's technically superior proposal. The Air Force chose to do this by quantifying the value added by DynCorp's greater manning, upon which its acknowledged superior technical rating was based. [19] Within the context of the cost/ technical tradeoff, the agency's consideration of productivity and manpower values was simply and properly a tool to assess whether DynCorp's technical superiority was worth the associated cost premium. See Purvis Sys. Inc., 71 Comp.Gen. 203 (1992), 92-1 CPD Para. 132 (performance efficiency associated with superior technical proposal properly used as a tool in making cost/technical tradeoff). [20] Here, consistent with the RFP evaluation criteria, the SSA reasonably used this tool in exercising his discretion to find that DynCorp's significant technical advantage was not worth the associated cost premium, considering Lear Siegler's realistic manning and low risk, and what the additional costs associated with DynCorp's superior rating would buy. See Wyle Laboratories, Inc.; Latecoere Int'l, Inc., supra.

The protest is denied.

1. Portions of the protest record are subject to a General Accounting Office protective order to which counsel for DynCorp and Lear Siegler have been admitted. Our decision, which is based upon protected, confidential information, is necessarily general.

2. No further negotiations or technical evaluations were conducted.

3. A fixed-price incentive (firm target) contract specifies a previously negotiated target cost, target profit, price ceiling (but not a profit ceiling or floor), and profit adjustment formula. See Federal Acquisition Regulation Sec. 16.403-1(a).

4. Operation and maintenance of IFTs is a firm requirement in the base year only; the Air Force contemplates procuring this requirement under a separate logistics support contract after the base year.

5. The RFP required contractors to meet or exceed ATC standards.

6. The bulk of the contract work is aircraft maintenance.

7. Subcriteria were stated for each of the four evaluation criteria.

8. Proposals were qualitatively evaluated as either blue/ exceptional; green/acceptable; yellow/marginal; or red/ unacceptable. In addition, proposal risk was assessed as either high, moderate, or low.

9. DynCorp was the incumbent contractor for these contract services.

10. The total proposed price is the sum of the target price, fixed-price items, and award fee for the base and option years. Both DynCorp's and Lear Siegler's prices were found to be complete, realistic, and reasonable.

11. "Sortie production" involves maintenance that directly supports the launching of aircraft, i.e., flightline maintenance. "Direct support," on the other hand, involves all other aircraft maintenance, other than that directly supporting the launching of aircraft, i.e., "backshop" maintenance.

12. A new SSA was appointed after our initial decision because the original SSA had been reassigned overseas.

13. The new SSA, an experienced pilot and air wing commander, based his assessment of the relative value of contract labor upon his experience and the ultimate purpose of the contract work to support the air operations of this training wing. In this regard, the new SSA is not bound by the opinions of the earlier SSA as to the relative importance of the various contract services. Wyle Laboratories, Inc.; Latecoere Int'l, Inc., 69 Comp.Gen. 648 (1990), 90-2 CPD Para. 107.

14. Award had been made to Lear Siegler on August 12, 1991, but performance of Lear Siegler's contract had been stayed pending our decision and the agency's new cost/technical tradeoff analysis in response to our protest decision recommendation. Based upon its determination that award was properly made to Lear Siegler, performance of Lear Siegler's contract was authorized, and contract performance by Lear Siegler has commenced.

15. DynCorp also challenges the agency's cost/technical tradeoff on the basis that it does not document where the differences are between DynCorp's and Lear Siegler's proposed manning. However, the record specifically documents the nature of the firms' manning differences on a position-by-position basis. DynCorp also complains that the agency's cost/ technical tradeoff is not equated to actual contract experience; this issue is untimely since it was first raised in DynCorp's supplemental comments that were filed more than 10 working days after it received the agency's report. 4 C.F.R. Sec. 21.2(a)(2) (1992).

16. DynCorp does not contest the agency's determination that Lear Siegler is capable of successfully performing the contract work.

17. DynCorp recognized in its comments that "[t]hese [labor] categories [used in the reevaluation] are neither mentioned nor defined in the [s]olicitation."

18. We find no support for DynCorp's suggestion that all personnel categories were equally important to the successful accomplishment of the work.

19. The agency used neither productivity or manpower values in its evaluation of technical proposals.

20. Compare TRW, Inc., 68 Comp.Gen. 511 (1989), 89-1 CPD Para. 584 (agency's "Monte Carlo" risk analysis that determined the estimated cost of upgrading the deficiencies in the lower-rated, lower-priced proposal to acceptable levels was not a valid evaluation tool that itself could reasonably demonstrate that the lower-rated proposal was most advantageous to the government, since it was not a tradeoff of cost and technical factors).