ABSG Consulting, Inc.
B-407956,B-407956.2, Apr 18, 2013
ABSG Consulting, Inc. (ABSG), of Arlington, Virginia, a small business, protests the award of a contract to Booz Allen Hamilton, Inc. (BAH), of McLean, Virginia, by the Department of Homeland Security, United States Coast Guard, under request for proposals (RFP) No. HSCG32-12-R-R00004 for systems engineering and technical assistance services at the Coast Guard Research and Development Center (RDC) in New London, Connecticut. ABSG argues that the Coast Guard misevaluated the proposals, failed to conduct a proper cost realism analysis, and made an unreasonable best value determination.
We deny the protest.
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
Matter of: ABSG Consulting, Inc.
File: B-407956; B-407956.2
Date: April 18, 2013
1. Protest challenging past performance evaluation is denied where the agency rated protester and awardee the same because both firms had consistently highly-rated past performance, and the agency was not required to give protester additional credit based on its status as the incumbent contractor.
2. Protest that cost realism analysis was unreasonable is denied where the agency reasonably adjusted protesters costs upward using the higher of two overhead rates identified by a subcontractor because the proposal did not adequately explain why the lower overhead rate would apply.
3. Protest that source selection decision was unreasonable is denied where the contracting officer reasonably determined that awardees lower evaluated cost outweighed protesters advantage in experience as incumbent.
ABSG Consulting, Inc. (ABSG), of Arlington, Virginia, a small business, protests the award of a contract to Booz Allen Hamilton, Inc. (BAH), of McLean, Virginia, by the Department of Homeland Security, United States Coast Guard, under request for proposals (RFP) No. HSCG32-12-R-R00004 for systems engineering and technical assistance services at the Coast Guard Research and Development Center (RDC) in New London, Connecticut. ABSG argues that the Coast Guard misevaluated the proposals, failed to conduct a proper cost realism analysis, and made an unreasonable best value determination. Protest at 3-4.
We deny the protest.
The Coast Guard issued the RFP on April 20, 2012, seeking proposals to provide services for a 6-year period under a single-award indefinite-delivery/indefinite-quantity cost-plus-fixed-fee contract. RFP at 1, 5, 7-8, 55, 69. The RFP provided that the Coast Guard would award a contract to the firm whose proposal provided the best value based on the evaluation of four equally-weighted non-price factors: technical understanding and management approach, staffing, corporate experience, and past performance. Id. at 69-70. The RFP identified two equally-weighted subfactors (or subcriteria) under the technical understanding and management approach factor: technical understanding of the requirement, and management approach to providing conflict-free advice to RDC. Id. at 69. The staffing factor also had two equally-weighted subfactors: program manager, and principal investigators. Id. The four non-price factors, when combined, were significantly more important than price. Id. at 69.
The RFP directed each offeror to provide specific information about its (and any major subcontractors) corporate experience, and to show how that experience related to the requirements of the RFP. Id. at 60. For the past performance evaluation, the RFP directed offerors to submit completed performance evaluations, preferably on the agencys performance questionnaire form. RFP attach. 8, Past Performance Questionnaire, at 1. Where a completed evaluation was unavailable, the RFP directed the offeror to use its best efforts to persuade the reference to submit an evaluation directly to the Coast Guard contract specialist. RFP at 61. The RFP stated that the past performance evaluation would consider the offerors ability to perform the contract successfully based on its past performance using the same references submitted for the corporate experience evaluation. RFP at 70.
With respect to the business/cost portion of each offerors proposal, the RFP specified an estimate of labor hours in each of six labor categories, to be used in preparing the proposal. Id. at 62-63. The RFP also directed offerors to provide a detailed breakdown of all costs and furnish supporting documentation for each element of its costs, including the calculation of labor costs, overhead, and distribution of non-incidental other direct costs and travel costs, for each subcontractor. Id. at 63-65. The Coast Guard was to assess each offerors proposal for cost realism. RFP at 61, 65, 70.
The Coast Guard received proposals from five offerors, including ABSG and BAH. Contract Officers Statement at 1. The source selection plan provided that each factor was to be rated adjectivally as superior, excellent, satisfactory, marginal, or unacceptable. Agency Report (AR), Tab D, SETA Source Selection Plan, attach. D, Ratings Definition Table, at 1-3. The description of each rating also associated the rating with a level of performance risk; thus, a superior rating related to performance risk that was very low; an excellent rating signified low performance risk; a satisfactory rating signified moderate risk, and so on. Id. at 1-2.
A technical evaluation team prepared a technical evaluation report. The evaluators concluded that ABSGs proposal merited a superior rating under the technical understanding/management approach, and corporate experience factors, and excellent ratings under the staffing and past performance factors, based on the firms demonstrated ability to respond to complex requirements, and strategies to achieve future improvements, among other things. AR, Tab E, Final Technical Evaluation Report, at 6. With respect to BAH, the evaluators concluded that the firm and its proposed personnel had comprehensively justified their capabilities, had shown a thorough understanding of the task requirements, and that, overall, strong contract performance and execution could be expected. Id. at 6-7.
The evaluation ratings of the remaining offerors were as follows:
AR, Tab F, Pre-Negotiation Memorandum, at 8.
A cost evaluation team evaluated both offerors proposed costs. The evaluation compared the individual labor rates submitted by each offeror (including each of its subcontractors), to the corresponding rate in the government estimate. The agency then analyzed the basis for the overhead, general and administrative (G&A) and other direct costs amounts, and determined whether those, and the proposed fixed fee, had been correctly calculated. That analysis identified a number of individual labor rates that were above or below the government estimate. Nevertheless, the evaluators determined that overall both firms costs were realistic and did not require adjustment to any of the labor rates. The analysis did, however, make adjustments to both firms proposed costs based on discrepancies in the distribution of non-incidental other direct costs and travel costs, and in the application of overhead and G&A rates. The net effect of those adjustments increased ABSGs proposed cost by $0.5 million, and increased BAHs proposed cost by $0.2 million. See generally, AR, Tab F, Pre-Negotiation Memorandum, at 38-108 (cost realism analysis of ABSG and BAH).
The agency made two findings that are significant to the protest issues: First, even though some individual labor rates differed from the corresponding government estimate, the cost realism analysis concluded that, overall, BAHs labor rates were 1.18 percent lower than the government estimate, while ABSGs were 7.92 percent higher overall. Id. at 44, 88. Second, one of ABSGs subcontractors, [deleted], listed two overhead rates--71.6 percent and 21.1 percent--which the firm applied to its direct labor cost (each rate was applied to approximately half the labor hours in each labor category), in developing its proposed costs. The subcontractors cost proposal did not include an explanation for why each rate applied. In analyzing that subcontractors costs, the evaluators concluded that the lower overhead rate applied to work at a government site. Since the RFPs statement of work (SOW) did not provide for government-site work, the evaluators found the application of that lower rate improper, and recalculated that subcontractors costs using the higher overhead rate. Along with two other (much smaller) adjustments, the subcontractors evaluated cost increased by $418,000. Id. at 43, 50-51.
The results of the cost realism adjustments were as follows:
Id. at 9.
The contracting officer considered the results of the final technical evaluation and cost realism analysis. She reviewed the reasons for the unacceptable ratings for Offerors A and B, and concluded that neither firm should be considered for award despite their lower costs. With respect to BAH and ABSG, the contracting officer observed that both firms were rated identically except for corporate experience and cost. She noted that ABSGs advantage reflected the firms directly relevant experience as the incumbent. She also noted that, although the evaluators had identified two minor weaknesses for BAH under the technical understanding/ management approach factor, those weaknesses did not justify a lower factor rating and did not pose performance risk for BAH. The contracting officer expressed her view that the two firms technical evaluations were comparable, and that the cost difference therefore justified award to BAH. Id. at 112.
After the Coast Guard awarded the contract to BAH, ABSG filed its post-debriefing protest, followed by a timely supplemental protest.
ABSG raises a variety of issues in its initial and supplemental protest. Principally, the firm argues that the Coast Guard failed to give sufficient weight to ABSGs evaluated advantage in corporate experience, unreasonably evaluated past performance, improperly evaluated performance risk, relied on an unreasonable cost realism analysis, and made an unreasonable source selection decision. We consider ABSGs challenges in each of these areas. As explained below, we find that none of ABSGs arguments has merit.
Past Performance Evaluation
ABSG challenges the Coast Guards assessment of ABSGs claimed advantage based on its status as the incumbent contractor. In particular, ABSG argues that the Coast Guard improperly minimized ABSGs advantages as the incumbent contractor. ABSG specifically argues that since the past performance evaluation was to consider the same references that were submitted for the corporate experience evaluation, its proposal should have received a superior rating under the past performance factor, as it had under the corporate experience factor. Protest at 4-5; Protesters Comments at 2.
The evaluation of past performance, including the agencys determination of the relevance and scope of a firms performance history to be considered, is a matter of agency discretion, which we will not find improper unless unreasonable, inconsistent with the solicitation criteria, or undocumented. A protesters mere disagreement with the agencys judgment is insufficient to establish that an evaluation was improper. Harris IT Servs. Corp., B-406067, Jan. 27, 2012, 2012 CPD ¶ 57 at 10. While an agency may provide for evaluation of relevance, the agency is not required to evaluate the past performance of the incumbent contractor as superior to its competitors simply because the incumbent has the most relevant past performance. See, e.g., Oceaneering, Intl, Inc., B-287325, June 5, 2001, 2001 CPD ¶ 95 at 8-9 (protest denied where protester did not receive additional credit as incumbent since solicitation did not require assessment of degree of relevance in past performance evaluation).
Our review of the record shows that the Coast Guard evaluators assessed both ABSGs and BAHs past performance reports, and found that both firms had been rated very similarly (consistently high ratings for ABSG, and exceptional or very good in all areas for BAH). See AR, Tab E, Technical Evaluation Report, at 11, 14. The Coast Guard identified no weaknesses or deficiencies for either firm. Id. Contrary to ABSGs position, the record does not show that ABSGs performance was materially superior to BAHs performance, or that the evaluation was otherwise arbitrary. Instead, the record shows that the evaluators found references for both first gave each firm high marks without exception, and identified no performance problems. Since both firms received uniformly high ratings, and since the Coast Guard was not required to give ABSG a higher rating based only on its status as incumbent, we have no basis to question the assignment of the same past performance rating to both firms.
Evaluation of Performance Risk
ABSG raises a number of complaints about the consideration of performance risk in the evaluation: that it was not disclosed as an evaluation factor, that it was inextricably tied together with the factor ratings (but should have been independent), and ultimately, that the evaluation of performance risk was meaningless and became a nullity. Protest at 5; Protesters Comments at 2-3; Supplemental Protest at 4-5; Protesters Supplemental Comments at 3-4.
We have long held that an agency may consider risk in conjunction with the specific evaluation factors listed in an RFP, where the risk is intrinsic to the evaluation factor. See, e.g., Information Spectrum, Inc., B-256609.3, B-256609.5, Sept. 1, 1994, 94-2 CPD ¶ 251 at 6; see also Sigmatech, Inc., B-406288.2, July 20, 2012, 2012 CPD ¶ 222 at 9-10. Thus, the fact that the Coast Guard expressed the evaluation factor ratings in terms of a corresponding level of risk of performance problems does not provide a basis to sustain the protest.
Cost Realism Analysis
ABSG raises two challenges to the cost realism analysis. First, ABSG challenges a significant upward adjustment of the firms evaluated cost, based on the agencys application of a higher overhead rate to one of the firms subcontractors. Second, ABSG argues that the Coast Guard identified unrealistic labor rates, but made no cost realism adjustments.
Where an agency will subsequently issue task orders for services to be performed by contractor personnel within various labor categories, the purpose of a cost realism analysis is to determine, among other things, the extent to which the offerors proposed labor rates are reasonable and realistic. In doing so, the agency is not required to verify each and every conceivable variable in performing its cost realism assessments; rather the evaluation requires the exercise of informed judgment by the agency. Wyle Labs., Inc., B-311123, Apr. 29, 2008, 2009 CPD ¶ 96 at 7. Because the agency is in the best position to make the cost realism determination, our review is limited to determining whether its cost evaluation was reasonably based and not arbitrary. Kalman & Co., B-287442.2, Mar. 21, 2002, 2002 CPD ¶ 63 at 9.
As to the first issue, ABSG argues that the Coast Guard improperly increased ABSGs proposed costs by applying a higher overhead rate for one of the firms subcontractors ([deleted]) than the subcontractor had proposed. As noted above, [deleted]s cost proposal listed two overhead rates, 71.6 and 21.1 percent. The firm divided its labor line items roughly in half, and applied each rate to one half of the labor. However, the proposal does not explain the basis for these rates, or their application, and instead leaves blank the area under the heading Basis To Which Rate Is Applied. AR, Tab B, ABSG Proposal, Subcontractor Cost Proposal for [deleted], Direct & Indirect Rate Statement Spreadsheet, at 1-5.
In evaluating this subcontractors costs, the Coast Guard determined that the subcontractors lower overhead rate applied to services performed at the government site (or off-site). AR, Tab F, Final Price Negotiation Memorandum, at 51. However, since the RFPs SOW did not provide for performance of services at the government site, the evaluators determined that the higher rate would apply to all of the subcontractors labor costs. Id. Accordingly, the Coast Guard recalculated the subcontractors costs using the higher on-site rate, which then resulted in an upward adjustment to the subcontractors costs by $418,000. Id.
In our view, the Coast Guards cost realism adjustment for ABSGs subcontractor was reasonable. The subcontractors cost submission did not provide an explanation why the lower overhead rate was applicable to any of its labor. Since the RFP did not provide for the contractor to perform the required services at the Coast Guards RDC, the evaluators reasonably determined that the contractor would be entitled to charge its higher overhead rate on all services under the contract. Therefore, the Coast Guard reasonably evaluated ABSGs costs using its subcontractors higher overhead rate; the record provides no basis to question this cost realism adjustment to ABSGs proposed costs. See Titan Corp., B-260557.2, July 18, 1995, 95-2 CPD ¶ 89 at 5-6 (agency properly used higher overhead rate in cost realism analysis where protester did not adequately justify use of lower rate to calculate proposed cost).
ABSGs second challenge to the Coast Guards cost realism analysis argues that the agency should have found BAHs proposed costs to be unrealistic, should have adjusted BAHs evaluated cost upward, and should have downgraded BAHs technical evaluation.
As part of its cost realism analysis, for each contractor and subcontractor, the agency prepared loaded labor rates based on proposed rates and compared them with the rates in the government estimate. In reviewing the rates of over 40 firms (that is, both the offerors and their subcontractors), the Coast Guard identified a significant number of the rates that were higher than the government estimate, while others were lower. With respect to BAH, the analysis showed that the costs proposed by BAH and its subcontractors were 1.18 percent lower overall than the government estimate. The agency concluded that none of the labor rate issues it identified were ultimately significant for BAH or ABSG.
Under the terms of our Offices protective order, ABSGs counsel received access to BAHs proposal, which explained BAHs technical and staffing approaches, as well as the derivation of and justification for its labor rates. Nevertheless, the protesters only support for its claim that the cost realism analysis was improper was that the agencys analysis showed that some of BAHs (and its subcontractors) labor rates were higher than the government estimate, while some were lower than the estimate. Additionally, BAHs labor rates were lower overall by an average of 1.18 percent compared to the government estimate. However, the mere fact that an offerors labor rates do not mirror those in a government estimate does not mean that the rates are unrealistic, or mandate their adjustment to government estimate levels. Other than pointing out that the Coast Guard analysis showed differences from the government estimate for some of BAHs rates, resulting in a difference from the government estimate of 1.18 percent overall, ABSG has not shown that the Coast Guards determination not to adjust BAHs costs upward was unreasonable.
Further, although not mentioned by ABSG, the record also shows the Coast Guard found that 16 of ABSGs 19 subcontractors (which were to collectively perform nearly 50 percent of the work) also had overall labor rates significantly lower than the government estimate--in one case by more than 35 percent. In other words, the cost realism adjustments advocated by the protester may well have resulted in a larger increase to ABSGs evaluated price, and thus a greater price difference between the two proposals.
Finally, ABSG challenges the contracting officers decision to award the contract to BAH on the basis of its lower-rated, lower-cost proposal. ABSG argues that the trade-off ignored ABSGs advantages as the incumbent contractor, and instead arbitrarily found ABSG and BAH to be equal under the non-price evaluation factors.
The record provides no support for ABSGs challenge to the best value trade-off. To the contrary, the source selection decision considered the differences between the offerors proposals. The contracting officer recognized that both offerors had received the same ratings under most factors, and concluded two weaknesses identified for BAH under the technical understanding/management approach factor were not significant to the rating, and would not affect her source selection judgment. She also recognized that ABSG had an advantage due to its incumbency, particularly as reflected in its superior rating under the corporate experience factor. AR, Tab F, Final Pre-Negotiation Memorandum, at 111-12. Contrary to ABSGs argument, we see no basis to conclude that the contracting officer used the term comparable to mean that she erroneously considered the firms to be technically equal.
In a best value procurement, it is the function of the source selection authority to perform a tradeoff between price and non-price factors; that is, to determine whether one proposals superiority under the non-price factor is worth a higher price. Even where, as here, price is stated to be of less importance than the non-price factors, an agency must meaningfully consider cost or price to the government in making its source selection decision. J.R. Conkey & Assocs., Inc., B-406024.4, Aug. 22, 2012, 2012 CPD ¶ 241 at 9.
In our view, it was neither unreasonable nor inconsistent with the RFP for the contracting officer to make a trade-off determination that ABSGs advantage as the incumbent was insufficient to justify its higher evaluated cost. Since the record reflects that the contracting officer understood the evaluation results, and the basis for the evaluation ratings, and she reasonably explained that the advantage conveyed by ABSGs incumbency did not merit the higher evaluated cost, we have no basis to question the source selection decision.
The protest is denied.
Susan A. Poling
 The RFP allowed offerors to propose fewer hours in a seventh labor category, but it has no bearing on the protest issues.
 The plan also identified an additional adjectival rating of neutral for a firm that lacked relevant past performance. Id. at 3.
 The evaluators concluded that the fifth offerors proposal was unacceptable.
 We have considered a number of other arguments raised by ABSG, but do not discuss each of them in depth since we find that none have merit. For example, ABSG argues that it does not make sense that the agency gave ABSG a rating of superior under the technical understanding and management approach factor, but a rating of excellent under the staffing factor. ABSG notes that both factors had two equally-weighted subfactors, and that for each factor ABSG was rated superior under one subfactor, and excellent under the other subfactor. Protest at 6. However, adjectival ratings are merely a guide to intelligent decisionmaking, Endeavor Enter. Solutions, LLC, B-407760 et al., Jan. 31, 2013, 2013 CPD ¶ 60 at 3, and ABSGs insistence that the ratings are nonsensical is not a basis to sustain the protest. Further, to the extent that ABSG also argues that one of the staffing subfactors ought to be considered more important, and thus should have been weighted more heavily than the other, see Protest at 6, that complaint is untimely. The equal weighting of the subfactors was stated in the RFP, so any challenge to that aspect of the solicitation had to be filed before the proposal due date, in order to be timely. Bid Protest Regulations, 4 C.F.R. § 21.2(a)(1) (2013). For the same reason, we also regard the protesters claim that the costs of transition to a new contractor should have been included as an element of the evaluation, Protest at 9, as untimely.
 We also consider other aspects of the incumbency advantage arguments below, in addressing ABSGs challenges to the best value trade-off.
 To the extent that ABSG also suggests that the Coast Guard should have required more past performance information, see Protest at 4, it has not shown that the Coast Guard lacked adequate information upon which to assess past performance, or that Federal Acquisition Regulation (FAR) § 15.305 was violated here.
 Additionally, ABSG argues that this is one of several aspects of the Coast Guards source selection plan that were not followed. Supplemental Protest at 2-3. Such complaints concerning whether an agency followed internal guidelines do not state a valid ground of protest. Johnson Controls World Servs., Inc., B-289942, B-289942.2, May 24, 2002, 2002 CPD ¶ 88 at 6 n.6; see also Walsh Investors, LLC, B-407717, B-407717.2, Jan. 28, 2013, 2013 CPD ¶ 39 at 8 n.6 (source selection plan is an internal guide that does not give rights to parties).
 The summary spreadsheet provided no better response, and merely stated thus: Over head is applied to Direct Labor plus Fringe Benefits. Id. at 6. While ABSG now argues that the lower overhead rate applies because the subcontractor allows its employees to work from home and other locations, Protest at 8, this explanation was not included in the proposal.