Matter of: Combat Systems Development Associates Joint Venture File: B-259920.2 Date: June 13, 1995 REDACTED VERSION[*]

Matter of: Combat Systems Development Associates Joint Venture File: B-259920.2 Date: June 13, 1995 REDACTED VERSION[*]

Protester's contention that the agency conducted an unreasonable cost realism review of the awardee's proposed cuts to pay and benefits is denied where the record shows that the agency reasonably concluded that the proposed cost savings should be accepted because the awardee would be able to unilaterally impose such cost-savings measures on its employees, and where the record also shows that the agency adequately reflected its concerns about the effects of the pay cuts in its decision to downgrade the awardee's technical proposal in two separate areas. Challenge to agency's decision to accept the awardee's level of proposed uncompensated overtime is sustained where the record shows that despite the submission of a signed certification from every employee promising to voluntarily perform [DELETED] hours of uncompensated overtime each week, the agency did not consider the fact that the awardee intended to announce on the day of contract award significant reductions in pay rates and fringe benefits, calling into question the continued willingness of the existing employees to voluntarily work additional hours without compensation. The challenge is also sustained because the record suggests that over the life of the contract the rate of employee turnover will be higher than estimated and that the newly hired employees will have even less incentive to provide uncompensated overtime than existing employees. Protester's contention that the agency conducted an improper evaluation of technical proposals is denied where the record shows that the agency review was reasonable and consistent with the solicitation's stated evaluation criteria. Argument that agency should have awarded to protester on the strength of its initial proposal, and should have excluded the awardee from the competitive range, is denied where the protester makes no showing that the agency acted unreasonably in including the awardee's proposal in the competitive range and holding negotiations.

Attorneys

DECISION

We sustain the protest.

The RFP, issued February 18, 1994, sought offers for a cost-plus-fixed-fee level-of-effort contract for the technical and engineering support services described above. The RFP estimated the level of effort for the base period, and for each of five option quantities. These estimates were as follows:

Base Year 336,396 man-hours Option I 71,840 man-hours Option II 400,220 man-hours Option III 361,862 man-hours Option IV 357,054 man-hours Option V 323,013 man-hours

The base year together with the five options reflect approximately 5 years of contract effort. Each option effort contains several contract line items (for example, option II consists of line items 0006-0009), and for each line item offerors were required to identify a proposed cost for the man-hours and an accompanying fixed fee.

The RFP advised that the Navy was seeking proposals offering "the greatest technical ability at a reasonable price," and that the agency would select the technically acceptable offeror whose proposal offered the greatest value to the government. The evaluation was structured to consider technical issues and proposed costs. Under the technical factor, there were four subfactors: technical approach; management approach; experience; and facilities and resources. Generally, the technical approach subfactor was substantially more important than the other subfactors, which are listed in declining level of importance. [1] Under the first three subfactors were additional evaluation criteria, which need not be addressed here.

Under the cost factor, the RFP advised that the Navy would consider realism, reasonableness and validity of the costs as proposed. Potential offerors were also advised that they were responsible for demonstrating the cost credibility of their proposals, and that the government would develop an evaluated cost for each offeror's proposal. In addition, to establish the relative balance between technical advantage and proposed cost, the RFP set forth a formula for calculating the amount of cost premium the agency would pay for additional technical merit. [2]

The Navy received initial proposals from three offerors on April 26. Technical proposals were reviewed by the technical evaluation review panel (TERP); cost proposals were reviewed by the cost analysis panel (CAP). Both panels submitted their reviews of initial proposals to the contract award review panel (CARP). Upon receipt of the TERP and CAP reports, the CARP made adjustments to the conclusions of the two initial review panels, and then converted the adjusted adjectival technical ratings prepared by the TERP to numerical scores, which were weighted according to the importance of each of the evaluation subfactors and criteria. The results of the technical and cost review are shown below:

(Costs in millions) Weighted Proposed Evaluated Offeror Score Costs Costs

Vitro 84 $[DELETED] $67.8 CSDA 82 $[DELETED] $55.3 Company A 75 $[DELETED] $71.1

After completing its review, the CARP recommended negotiations, and excluded Company A from further consideration based on its lower score and significantly higher proposed and evaluated costs. On August 23, the contracting officer began discussions with CSDA and Vitro.

After holding written and oral discussions with both offerors, the Navy received best and final offers (BAFO) on October 11. Again, both the CAP and TERP produced reports for the CARP, and, as before, the CARP did not accept all of the findings of the two panels. Instead, the CARP set forth in a memorandum for the record explanations for eight separate adjustments to the ratings assigned by the TERP. After again assigning weighted numerical scores to each offeror's BAFO and comparing those scores to each offeror's evaluated costs, the results of the CARP's BAFO review were as follows:

(Costs in millions) Weighted Proposed Evaluated Offeror Score Costs Costs

Vitro 85 $53.1 $54.6 CSDA 80 $[DELETED] $54.4

Although both proposals were technically acceptable and although CSDA's proposal was evaluated as having a slightly lower cost than Vitro's proposal, Vitro's slightly higher evaluated costs were within the range established by the RFP's premium formula, given Vitro's slightly higher weighted score. Thus, the Navy decided that Vitro's proposal was worth the additional evaluated cost, and Vitro was awarded the contract on December 29.

COST REALISM EVALUATION

CSDA argues that the Navy's evaluation of proposed costs was unreasonable because the Navy: (1) failed to properly consider the overall effect of the cost-cutting efforts in Vitro's BAFO--i.e., Vitro's combination of significant pay and benefit cuts together with voluntary uncompensated overtime--on Vitro's probable costs; and (2) acted unfairly by advising CSDA that the Navy would only accept uncompensated overtime where the offeror could provide historical evidence that the proposed employee had provided uncompensated overtime in the past, but then accepting Vitro's uncompensated overtime because Vitro submitted signed certifications from its employees promising to perform the overtime proposed.

Background on Cost Realism Issues

Addressing CSDA's challenges to the cost realism evaluation requires additional details about the two offerors' approach to proposed costs. In preparing their respective cost proposals, the record clearly shows that both Vitro, the incumbent here, [3] and CSDA were considering ways to achieve a competitive advantage by using uncompensated overtime. [4] The record also shows, however, that CSDA's and Vitro's enthusiasm for proposing uncompensated overtime was tempered by their concern that the Navy might "reject" such overtime if the overtime lacked historical support--i.e., the Navy might recalculate the offeror's proposed costs using a standard 40-hour workweek, thus making evaluated costs significantly higher than those proposed.

As a preliminary matter, a brief explanation of the way uncompensated overtime is priced demonstrates its appeal to competitors seeking an edge in a cost reimbursement environment. In general terms, since the RFP here requires offerors to propose costs using an estimated number of man-hours, an offeror that can credibly state that each of its employees will work more than 40 hours per week without additional compensation, can, other things being equal, propose lower costs. In addition, although the methodology for using uncompensated overtime may vary, offerors are permitted to calculate their costs using an uncompensated overtime rate which is lower than the employee's standard hourly rate. Id.; see also Systems Research & Applications Corp., B-225574.2, May 26, 1987, 87-1 CPD Para. 540.

For example, if employees are paid $20 per hour for 40 hours of work, but will actually work 5 additional hours without compensation, the effective hourly rate for those employees is lower, as shown below:

$20.00 x 40 hours = $17.78 45 hours hour

Since offerors proposing uncompensated overtime may use this lower effective hourly rate to calculate their total proposed costs, the reduction in proposed costs can be substantial. Using the effective rate calculated above for 5 hours of uncompensated overtime each week (without overhead or other adjustments) and the number of man-hours in the base period for this RFP (336,396 man-hours), the advantage of using uncompensated overtime is shown below:

Offeror with standard rate:

336,396 x $20 = $6,727,920.

Offeror with uncompensated overtime rate:

336,396 x $17.78 = $5,981,120.80

Evaluation of the Cost Proposals

In its initial proposal, Vitro advised that its employees would work a [DELETED], and would be required to provide an additional [DELETED] hours of uncompensated overtime. [5] The Navy's evaluators rejected Vitro's [DELETED] because there was no company policy in place and because, even if implemented, there was no indication that the policy would be in effect for any other Vitro contract. The Navy also rejected Vitro's proposed [DELETED] hours of uncompensated overtime per employee because the former Tracor employees performing the contract were not under the total time accounting system necessary to generate a verifiable history of performing such overtime during Tracor/Vitro's past performance of this contract. [6] As a result, the Navy's CAP report recalculated Vitro's costs using a 40-hour workweek rather than the [DELETED]-hour weeks proposed. This recalculation--together with adjustments to Vitro's overhead rates and general and administrative expenses--resulted in an upward adjustment to Vitro's initial proposed costs from $59.2 million to $67.8 million.

Vitro's BAFO attempted to address the Navy's concerns, and to introduce other significant cost-savings measures. Vitro abandoned the [DELETED] with the explanation that senior management had rejected the proposal to impose a [DELETED] company policy. In its place Vitro proposed that its employees would provide voluntary uncompensated overtime at average amounts of [DELETED] or [DELETED] hours per week. [7] Since Vitro did not have evidence of providing uncompensated overtime in the past, Vitro submitted signed certifications from each of its exempt employees promising to provide the uncompensated overtime. These certifications stated

"I understand that the Vitro Corporation Proposal, in response to Naval Sea Systems Command solicitation N00024-94-R-6360, projects that exempt employees will deliver [DELETED] [or [DELETED] where appropriate] hours of uncompensated overtime (UT) per week on average during the contract period of performance. As an employee of Vitro Corporation, I hereby certify and freely represent that I will voluntarily provide the projected UT in accordance with the UT policies of the Company."

Vitro also proposed to cut employee pay between [DELETED] and [DELETED] percent on the day of contract award, and to implement the following cuts in benefits: a decrease in [DELETED]; a decrease in [DELETED]; and the elimination of [DELETED]. [8] The record indicates that Vitro's employees had not been advised about the proposed cuts in pay and benefits.

In response to Vitro's BAFO, the Navy explains that it considered each of three major factors in Vitro's proposal: (1) whether Vitro was likely to provide the uncompensated overtime in its proposal; (2) the realism of the proposed pay cut; and (3) the adequacy of Vitro's proposed fringe benefit rates. [9] With respect to Vitro's proposed uncompensated overtime, the Navy accepted Vitro's approach because each of the employees provided a signed certification. Although the evaluation records show that the Navy
would have preferred historical data as evidence of the likelihood that it
would actually receive the benefits of the uncompensated overtime
proposed, it concluded that the use of signed employee certifications was
adequate for purposes of its cost realism review. With respect to the
cuts in pay and benefits, the Navy concluded that Vitro's approach would
have a negative impact on employee morale and downgraded Vitro's technical
proposal in areas related to contract management and retention of
personnel.

CSDA's proposal, given its status as a joint venture, required different
considerations. CSDA is a joint venture comprised of two teaming
partners: EG&G Washington Analytical Services Center, Inc., holding a
49-percent interest in the joint venture; and GPS Technologies, Inc.,
holding a 51-percent interest in the joint venture. None of the proposed
work was to be performed by the joint venture itself; instead the work was
to be performed by subcontractors, including EG&G and GPS, to which
approximately 70 percent of the total effort was allocated. The two joint
venturers, and one of the four remaining subcontractors, Matrix, accounted
for approximately 80 percent of the total effort, and were the only three
subcontractors to propose the use of uncompensated overtime. Given the
amounts of uncompensated overtime proposed by the three subcontractors,
CSDA's proposal anticipated that slightly more than [DELETED] percent of
the total required effort would be provided as uncompensated overtime.
[10]

When the Navy evaluated CSDA's proposal for cost realism, it accepted all
of Matrix's proposed uncompensated overtime, but rejected portions of the
uncompensated overtime proposed by EG&G and GPS as overly optimistic and
not supported by the historical information available. [11] Although the
record indicates that the Navy and DCAA requested historical information
from CSDA to support the proposed uncompensated overtime, there is a
dispute about what oral instruction may have been given to CSDA regarding
the necessity for historical data. According to CSDA, the Navy's
contracting officer advised CSDA during oral discussions that the agency
would only allow offerors to propose uncompensated overtime where the
offeror had historical evidence of such overtime being performed in the
past. The Navy denies giving any such instruction to CSDA. In addition,
because of the alleged instruction regarding historical information, CSDA
claims that it instructed one of its subcontractors that it could not
propose uncompensated overtime in the BAFO since it lacked historical
support for the overtime.

Analysis

When an agency evaluates proposals for the award of a cost reimbursement
contract, an offeror's proposed estimated costs are not dispositive
because, regardless of the costs proposed, the government is bound to pay
the contractor its actual and allowable costs. Federal Acquisition
Regulation (FAR) Sec. 15.605(d). 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.-Fed., 64 Comp.Gen. 71
(1984), 84-2 CPD Para. 542. Contracting officers are required by the FAR
to document this evaluation, FAR Sec. 15.608(a)(1), and when properly
documented, our review of an agency's exercise of judgment in this area is
limited to determining whether the agency's cost evaluation was reasonably
based and not arbitrary. General Research Corp., 70 Comp.Gen. 279
(1991), 91-1 CPD Para. 183, aff'd, American Management Sys., Inc.;
Department of the Army--Recon., 70 Comp.Gen. 510 (1991), 91-1 CPD Para.
492; Grey Advertising, Inc., 55 Comp.Gen. 1111 (1976), 76-1 CPD Para.
325.

With respect to CSDA's contention that the Navy should not have accepted
Vitro's pay and benefits cuts, we note first that the evaluation record
shows that the Navy expressly considered Vitro's proposed pay and benefits
cuts and ensured that the possible adverse effect of the cuts was
reflected in the evaluation, as required by FAR Sec. 15.608(a)(1). See
also Amtec Corp., B-240647, Dec. 12, 1990, 90-2 CPD Para. 482, aff'd,
Department of the Army--Recon., B-240647.2, Feb. 26, 1991, 91-1 CPD Para.
211. Specifically, the CAP identified the proposed pay and benefits cuts
in Vitro's cost proposal, and suggested that the CARP consider their
impact when reviewing the TERP's evaluation of the technical proposal.
When the CARP reviewed both the technical and cost evaluation reports, it
concluded that:

"these measures proposed by Vitro (pay cuts, benefits
reduction, working uncompensated overtime) will result in
dissatisfied and disgruntled employees. Disgruntled employees
are rarely, if ever, enthusiastic about their jobs and will
just do the bare minimum of effort needed to accomplish the
work without concern about the quality of work."

Thus, the CARP reduced Vitro's technical ratings to address concerns about
the impact of Vitro's approach on its personnel.

The CARP reduced Vitro's technical ratings from excellent to acceptable
under the contract management criterion under the management approach
subfactor (which includes consideration of how the offeror manages its
personnel), because the CARP concluded that the cuts suggested that Vitro
lacked a good personnel management scheme. This reduction resulted in a
corresponding reduction for the entire management approach subfactor from
"excellent (low)" to "good (high)." In addition, the CARP increased the
risk assessment for the personnel qualifications criterion under the
experience subfactor from low risk to high risk, which resulted in a
corresponding increase in the risk assessment for the entire experience
subfactor from low to medium. The Navy based this change on its concern
that Vitro might have difficulty retaining its people given the proposed
changes to pay and benefits.

We view the Navy's decision to downgrade Vitro's technical proposal for
its proposed pay and benefit cuts as a reasonable and adequate response to
the issues presented by Vitro's approach. See Information Spectrum, Inc.,
B-256609.3; B-256609.5, Sept. 1, 1994, 94-2 CPD Para. 251. Although CSDA
argues that the Navy should have rejected the proposed pay and benefits
cuts, we disagree. Unlike the voluntary nature of the proposed
uncompensated overtime, discussed below, a cut in pay and benefits for
exempt employees is a unilateral company action requiring no employee
input or action, is clearly verifiable, and is definite in its impact on
proposed costs. To the extent that the proposed cuts raise issues
regarding Vitro's personnel management, and its ability to retain existing
personnel, the Navy adequately responded to those concerns with its
adjustments to the technical evaluation.

With respect to CSDA's contention that the Navy should not have accepted
Vitro's uncompensated overtime in light of Vitro's proposed pay and
benefit cuts, we agree that the Navy's evaluation was inadequate.

Vitro's proposal, the Navy's evaluation materials, and the pleadings filed
during the course of this protest, show that Vitro intended to announce
its pay and benefit cuts on the date of contract award if successful in
retaining its contract as a result of this competition. The record shows
that the unannounced pay cuts of between [DELETED] to [DELETED] percent
will be imposed for all employees other than the [DELETED] most senior
employees proposed for this effort, and that for many of the junior
employees, the pay cut will range from [DELETED] to [DELETED] percent.
Thus, when Vitro's proposed employees certified that they would
voluntarily provide [DELETED] (or [DELETED]) hours of uncompensated
overtime every week, they were unaware of the significant pending cut in
pay, and the pending loss of a portion of their [DELETED]; a portion of
their [DELETED]; and [DELETED].

Although the Navy considered Vitro's proposed uncompensated overtime as
part of its decision to downgrade Vitro's technical evaluation for the
proposed pay cuts, there is no evidence in the record that the Navy
considered the impact of the pay cuts on the continued willingness of
Vitro's employees to provide uncompensated overtime. In fact, at a
hearing convened by our Office, the Navy's contracting officer testified
that there was no consideration of the relationship between these issues
as part of the decision to accept the employee certifications. In
addition, given that Vitro declined to revise its company policies and
will continue to view such overtime as voluntary, the certifications here
have no bearing on whether Vitro's new hires will voluntarily agree to
continue providing uncompensated overtime. [12]

The significance of the treatment of proposed uncompensated overtime is
clear: without continued voluntary unpaid effort from Vitro's employees,
the cost of this contract over the next 5 years will likely be much
greater than the evaluated cost upon which the Navy made its selection
decision. Accordingly, given the relatively small difference in evaluated
costs between CSDA's and Vitro's proposals, a change in the treatment of
proposed uncompensated overtime--even a partial discounting of the amount
of proposed uncompensated overtime the Navy would accept as
realistic--could have a determinative effect on the technical/cost
tradeoff and thus on the ultimate award decision.

We conclude that the Navy failed to consider the fact that the
certifications here were solicited from and provided by employees without
knowledge of pending decreases to their pay and benefits. Under these
unique circumstances, the Navy's cost realism review must consider whether
Vitro's certifications truly provide evidence of a long-term willingness
to provide voluntary unpaid effort over the life of this contract.
Accordingly, based on our conclusion that the Navy's cost realism
evaluation with respect to Vitro's proposed uncompensated overtime failed
to consider certain key information, we sustain the protest on this
ground.

CSDA also argues that the cost realism review was unfair because the Navy
advised CSDA that it would only accept an offeror's proposed uncompensated
overtime where the offeror could provide evidence that the employee had
provided uncompensated overtime in the past, but then accepted Vitro's
uncompensated overtime even though Vitro had no historical evidence of
providing such overtime. In support of its claim, CSDA's president
testified at a hearing convened by our Office that its understanding was
supported by the terms of the RFP, by the historical support requested
during negotiations by both the DCAA and the Navy, and because the
contracting officer expressly advised CSDA of this requirement during oral
discussions.

As stated above, the record here shows that both CSDA and Vitro expected
that the Navy would focus on historical support for uncompensated
overtime, and that the Navy itself intended to disallow uncompensated
overtime when offerors lacked historical data to support it. In fact, the
Navy admits it abandoned its preference for historical support and
accepted Vitro's certifications only "after much discussion."

Despite the Navy's clear intent at the outset to review historical support
for uncompensated overtime, the record does not support CSDA's claim that
it was advised that such information was the only way an offeror could
establish that such overtime should be accepted. First, although CSDA is
correct in noting that the RFP required offerors to establish the
credibility of their cost proposals, the RFP makes no mention of a
requirement for historical data. Second, although both the Navy and DCAA
requested information about past performance of such overtime, the
contracting officer testified that she never stated that such information
was required to show an offeror's cost realism. Third, the Navy's
memorandum for the record documenting issues covered during oral
discussions makes no mention of any discussion of uncompensated overtime
during the meeting with CSDA. [13] Finally, the handwritten notes of
CSDA's president do not clearly support CSDA's contention: while these
notes--written on the day of CSDA's oral discussions with the Navy and
produced by CSDA in response to a document request from the Navy--show a
notation about a requirement for historical data to support uncompensated
overtime, CSDA's president testified that the relevant portion of the
notes was written after the meeting, but later the same day.

On balance, based on our review of the record, including the testimony
from both CSDA's president and the contracting officer, we find that the
Navy did not advise CSDA that historical evidence was the only way an
offeror could provide support for uncompensated overtime. While it is
clear that CSDA believed that its proposed costs might be increased
wherever it proposed uncompensated overtime without supporting historical
data, and that CSDA advised at least one of its subcontractors of its
belief, we cannot conclude that CSDA, or any of the other offerors, was
advised that such historical data was a requirement for proposing
uncompensated overtime.

TECHNICAL EVALUATION

CSDA argues that the Navy's technical evaluation was unreasonable because
the conversion of adjectival ratings to numerical scores was unfairly
executed, and because the Navy improperly downgraded CSDA's score based on
its split office arrangement. CSDA also argues that the Navy should have
excluded Vitro's proposal from the competitive range and awarded to CSDA
on the strength of its initial proposal, rather than conduct discussions.

In considering protests against an agency's evaluation of proposals, we
will examine the record to determine whether the agency's judgment was
reasonable and consistent with the stated evaluation criteria and
applicable statutes and regulations. ESCO, Inc., 66 Comp.Gen. 404
(1987), 87-1 CPD Para. 450. A protester's disagreement with the agency's
judgment, without more, does not show that the judgment was unreasonable.
Id.

With respect to CSDA's contention that the Navy improperly and unfairly
converted adjectival ratings to numerical scores, our review of the record
shows that none of CSDA's contentions are supported by the facts. For
example, CSDA claims that in the Navy's initial evaluation of the
management approach subfactor, Vitro was rated "excellent (low) with low
risk," but unfairly received 85 points for this rating while all other
assessments modified with the adjective "low" received a score ending in
1--i.e., 71, 81, or 91. [14] While Vitro's contention accurately cites
the numbers in the initial CARP report, the discrepancy is clearly an
oversight. The CARP report explains that the TERP evaluated Vitro's
proposal as unacceptable under the small business/small disadvantaged
business subcontracting plan criterion under the management approach
subfactor. However, Vitro included this information in its cost proposal
and the CARP upgraded the score awarded by the TERP from unacceptable to
excellent. The effect of the upgraded score on this criterion resulted in
an upgrade for the management approach subfactor from excellent(low) to
excellent(medium). Hence the award of 85 points was consistent with the
numerical conversion scheme that was fairly applied to both offerors.
CSDA's other challenges in this area are similarly answered.

We also find unpersuasive CSDA's contention that the agency unreasonably
downgraded CSDA for proposing a split office. The RFP here required
offerors to propose a facility within 1 mile of the Navy's program office
in Crystal City. Prior to the closing time for receipt of proposals, the
Navy received an offeror's question asking if the Navy required all
personnel assigned to the program to reside in one facility. The Navy
answered that "the Offeror should assign personnel in whichever facilities
they (the Offeror) have determined those personnel can best perform the
requirements delineated in Section C of the RFP." As a result, CSDA
proposed that [DELETED] percent of the personnel for this effort would be
housed in Crystal City, while the remaining personnel would be housed in
CSDA's Fairfax, Virginia facility.

Our review of the record shows that the Navy reasonably concluded that
CSDA had not adequately addressed the impact of a split office on its
ability to manage and coordinate the effort here. We see no reason to
question the CARP's concern that the physical separation of CSDA's
employees could lead to poor integration of related work efforts, or the
CARP's determination that CSDA should have identified the separation of
personnel between Crystal City and Fairfax as a potential problem area
with recommended solutions. We also note that CSDA does not challenge the
results of the agency's evaluation, but instead contends it was misled by
the Navy's response to the pre-proposal submission question wherein the
Navy stated that offerors could appropriately locate their work force in
more than one place. We disagree. The Navy's decision to permit offerors
to propose a split work force could not reasonably be interpreted to mean
that such an approach might not raise concerns about coordinating the
contract effort. In short, we find no fault with the Navy's documented
and rational consideration of this issue.

As a final matter, CSDA argues that the Navy should have excluded Vitro's
proposal from the competitive range and awarded to CSDA on the strength of
its initial proposal, rather than conducting discussions. To support its
contention, CSDA argues that the proposal submitted by Company A contained
similar weaknesses to Vitro's proposal.

The competitive range consists of all proposals that have a reasonable
chance of being selected for award, that is, those proposals which are
technically acceptable as submitted or which are reasonably susceptible of
being made acceptable through discussions. FAR Sec. 15.609(a); Mainstream
Eng'g Corp., B-251444, Apr. 8, 1993, 93-1 CPD Para. 307. Here, the Navy
included both CSDA's and Vitro's proposals in the competitive range, but
concluded that neither of the proposals could be accepted without further
negotiation. While CSDA is correct that some of the reasons stated by the
Navy for not awarding to CSDA on the strength of its initial proposal are
legally unsound--such as, for example, the Navy's claim that it could not
accept CSDA's initial proposal because the company failed to include an
executed certificate of procurement integrity, see FAR Sec.
3.104-9(b)(3)(ii)(A); General Elec. Ocean and Radar Sys. Div., B-250418;
B-250419, Jan. 11, 1993, 93-1 CPD Para. 30 its contentions are misplaced.
The proposal to be examined here is Vitro's, not CSDA's, and we find
nothing unreasonable about the decision to include Vitro's proposal in the
competitive range.

Even assuming the Navy reasonably could have excluded Vitro's proposal
from the competitive range--and we reach no conclusion on this issue--it
does not follow that the agency acted improperly by including the proposal
in the competitive range. See Vortec Corp., B-257568 et al., Oct. 18,
1994, 94-2 CPD Para. 145 at n.1. In fact, where there is doubt about
whether a given proposal should be included in the competitive range, that
doubt should be resolved in favor of including the proposal, since this is
consistent with the overall goal of maximizing competition. FAR Sec.
15.609(a); Birch & Davis Assocs., Inc.--Protest and Recon., B-246120.3;
B-246120.4, Apr. 20, 1992, 92-1 CPD Para. 372. See also Mainstream Eng'g
Corp., supra; Avondale Technical Servs., Inc., B-243330, July 18, 1991,
91-2 CPD Para. 72. Since Vitro's proposal was clearly technically
acceptable, and since its much higher evaluated cost was generally related
to one agency decision--the decision to reject Vitro's proposed
uncompensated overtime--we will not question the agency's decision to hold
discussions with Vitro regarding its proposal. [15]

RECOMMENDATION

Because we conclude that the Navy could not reasonably accept Vitro's
proposed uncompensated overtime on the strength of the employee
certifications submitted in Vitro's BAFO without considering the impact of
the proposed but unannounced pay and benefit cuts, we conclude that the
agency conducted an unreasonable evaluation of cost proposals and thus
lacked a rational basis for making award to Vitro.

We recommend that the Navy reconsider its evaluation of uncompensated
overtime, and make a finding regarding the likelihood that, under the
circumstances here, Vitro will deliver the uncompensated overtime
proposed. Based on the results of that reevaluation, the Navy should make
adjustments, if appropriate, to Vitro's proposed costs. In addition, the
Navy may also choose to reopen discussions with both competitive range
offerors and request revised BAFOs. If the Navy concludes that CSDA,
rather than Vitro, is the offeror whose proposal offers the greatest value
to the government--within the guidelines established by the RFP's premium
formula--then Vitro's contract should be terminated and award made to
CSDA. We also find that the protester is entitled to recover its costs of
filing and pursuing the protest, including reasonable attorneys' fees. 4
C.F.R. Sec. 21.6. CSDA's certified claim for such costs, detailing the
time expended and costs incurred, must be submitted directly to the agency
within 60 days after receipt of this decision.

The protest is sustained.

* The decision issued on June 13, 1995, contained proprietary information and was subject to a General Accounting Office protective order. This version of the decision has been redacted. Deletions in text are indicated by "[DELETED]."

1. Specifically, paragraph B of section M of the RFP advised that the technical approach subfactor was substantially more important than the management approach subfactor, and was more important than the cumulative value for all three of the remaining subfactors. Management approach and experience were of equal importance, and each was more important that the facilities and resources subfactor.

2. The RFP's formula for calculating the premium to be paid for additional technical merit is based on the assumption that a proposal scoring at least 60 (on a scale of 100) would be technically acceptable, and that the agency would consider paying a premium of up to 40 percent above the cost of a proposal with the lowest evaluated cost and a technical score of 60 in order to select a proposal with the highest achievable technical score (100).

3. The incumbent contract was actually awarded to Tracor Applied Sciences, Inc., part of Tracor, Inc. Tracor, Inc. acquired Vitro in August 1993, and decided to consolidate the performance of this contract under Vitro. The contract was subsequently transferred by novation from Tracor to Vitro.

4. Uncompensated overtime is used to describe "hours worked in excess of an average of 40 hours per week by direct charge employees who are exempt from the Fair Labor Standards Act (FLSA), without additional compensation." Defense Federal Acquisition Regulation Supplement (DFARS) Sec. 252.237-7019(a)(1). See also Tracor Applied Sciences, Inc., B-253732, Oct. 19, 1993, 93-2 CPD Para. 238.

5. This decision need not consider the accounting differences between providing a [DELETED] and an additional [DELETED] hours of uncompensated overtime, and providing [DELETED] hours of uncompensated overtime in addition to a standard 40 hour per week, because Vitro abandoned its [DELETED] in its BAFO.

6. DFARS Sec. 252.237-7019 requires that contractors offering to provide uncompensated overtime have a cost accounting practice appropriate for accumulating and reporting uncompensated overtime hours--i.e., the offeror must be able to record all hours worked, including uncompensated hours, for all employees, which is referred to as a total time accounting system.

7. Specifically, Vitro proposed that its [DELETED] most senior people would provide [DELETED] hours of uncompensated overtime each week, while all other exempt personnel would provide [DELETED] hours of uncompensated overtime each week.

8. For replacement hires, Vitro proposed to offer only [DELETED].

9. The Navy's review of Vitro's proposed fringe benefit rates--[DELETED]-- considered both the impact of the fringe benefit rates on the quality of personnel over the life of the contract, and whether Vitro's method of calculating the rates met with the approval of the Defense Contract Audit Agency (DCAA). CSDA does not challenge, and our decision does not consider, the mechanics of how the fringe rate was calculated. With respect to the impact of the lower benefits signified by these rates, we will review this issue together with the Navy's evaluation of the proposed pay cut.

10. For comparison, the record shows that Vitro's BAFO proposed that slightly more than [DELETED] percent of the total effort would be made up of uncompensated overtime.

11. Unlike Vitro, CSDA's three subcontractors, mentioned above, were able to provide historical evidence that some of the proposed employees had provided uncompensated overtime in the past, although in the case of GPS and EG&G, the Navy concluded that the historical data did not adequately support the amount of uncompensated overtime claimed.

12. The record shows that Vitro estimated its annual turnover at [DELETED] percent prior to proposing these cuts. Thus, prior to the end of this contract, new hires will likely comprise a majority of Vitro's work force, and their actions could substantially change Vitro's ability to deliver the uncompensated overtime here.

13. With respect to the Navy's notes, the record shows that even though CSDA submitted an agenda of issues to be covered during oral discussions, CSDA's agenda does not mention uncompensated overtime. In addition, the Navy's memorandum includes other issues not on CSDA's agenda that the contracting officer testified were covered during oral discussions, but the memorandum does not mention uncompensated overtime.

14. The source selection plan here established the following numerical ranges: outstanding, 91-100; excellent, 81-90; good, 71-80; acceptable, 60-70; and unacceptable, 0-59. Within the 10-point range, assessments modified with the adjective "low" were scored at the low end of the range (81, 91, etc.); assessments modified with the adjective "mid" were scored in the middle of the range (65, 75, etc.); and assessments modified with the adjective "high" were scored at the high end of range (79, 89, etc.).

15. To the extent CSDA claims that Vitro's proposal was not significantly different from the proposal that was excluded, our conclusion is twofold: as stated above, we conclude above that the decision to include Vitro's proposal in the competitive range was reasonable; with respect to the proposal that was excluded from the competitive range, CSDA is not an interested party to raise this issue. This is a matter for pursuit by the excluded company, not CSDA. See 4 C.F.R. Sec. 21.0(a) (1995).