Science Applications International Corporation, Inc.
B-408270,B-408270.2, Aug 5, 2013
Science Applications International Corporation, Inc. (SAIC), of McLean, Virginia, protests the issuance of a task order to SRA International, Inc., of Fairfax, Virginia, under request for proposals (RFP) No. N00024-12-R-3421 issued by the Department of the Navy, Military Sealift Command, for information technology services to support afloat operations. SAIC challenges the Navy's cost and technical evaluations and selection decision.
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: Science Applications International Corporation, Inc.
File: B-408270; B-408270.2
Date: August 5, 2013
Protest challenging the agencys cost evaluation is denied where the record demonstrates that the agency reasonably adjusted proposed costs based on information provided in the offerors proposals.
Science Applications International Corporation, Inc. (SAIC), of McLean, Virginia, protests the issuance of a task order to SRA International, Inc., of Fairfax, Virginia, under request for proposals (RFP) No. N00024-12-R-3421 issued by the Department of the Navy, Military Sealift Command, for information technology services to support afloat operations. SAIC challenges the Navys cost and technical evaluations and selection decision.
We deny the protest.
The Navys Military Sealift Command is responsible for providing ocean transportation of equipment, fuel, supplies, and ammunition to sustain U.S. forces worldwide. Within the Military Sealift Command, the Command, Control, Communications and Computer Systems (C4S) Directorate is responsible for information technology systems both afloat and ashore. RFP, Performance Work Statement (PWS) § 2, Background.
The RFP, issued under Federal Acquisition Regulation subpart 16.5, sought proposals from firms holding Seaport-E multiple-award contracts to provide C4S afloat operations and program management services to the Military Sealift Command, including technical support services for various C4S, communications, navigation, electronic, networking computer and telecommunications systems aboard the Military Sealift Fleet Support Command fleet of ships worldwide. PWS § 3, Objectives. The RFP contemplated the issuance of a cost-plus fixed-fee task order for a base year and two option years. Offerors were informed that the selection decision would be on a best value basis, considering probable cost and the following non-cost factors (in descending importance): technical, past performance, and socioeconomic considerations. RFP amend. 4, at 55-56. The non-cost factors, when combined, were stated to be significantly more important than cost, with cost becoming more important as the ratings for non-cost factors approached equality. Id. at 56.
With respect to costs, the RFP informed offerors that the Navy would assess the realism of proposed costs and determine a probable cost for each offer. Id. Offerors were instructed to propose labor rates for a number of specified labor categories using the level of effort (labor hours) identified by the RFP for each labor category. Id. at 42. Offerors were further instructed, as relevant here, to include documentation establishing the accuracy of proposed direct labor rates, such as the most recent payroll run for current, named employees; signed letters of intent that indicate an agreed-upon annual salary for named, new hires; current or prior fiscal year forward pricing rate agreements or forward pricing rate recommendations if proposing unnamed existing personnel; labor category averages, including data supporting the averages; or a comprehensive description of the methodology used to establish the proposed direct labor rate if the other sources of information were not used. Id. at 43-44.
Offerors were also cautioned that to the extent proposed costs appear unrealistic, the Government may infer either a lack of understanding of the requirements, increased risk of performance, or lack of credibility on the part of the Offeror. Id. at 60.
The Navy received proposals from four offerors, including SAIC and SRA (the incumbent). SAICs and SRAs proposals were evaluated as follows:
Agency Report (AR), Tab 17, Source Selection Decision, at 2; Tab 16, SAIC Cost Evaluation, at 1, SRA Cost Evaluation, at 1. The agencys adjectival ratings were supported by narrative discussion that identified each proposals strengths and weaknesses. See AR, Tab 15, Technical Evaluation Worksheets for SAIC and SRA. Numerous strengths and no weaknesses were identified in SAICs and SRAs proposals. As relevant here, the evaluators concluded that SRAs proposal demonstrated a strong technical approach and a thorough understanding of all requirements, and that SRAs proposed staffing plan (to use its incumbent workforce) was capable of sustaining robust quality service. Id., Technical Evaluation Worksheet for SRA, at 4, 15.
In its cost realism analysis, the agency increased SRAs proposed costs by $17,975,390. Most of this increase ($12,890,140) reflected the agencys adjustment of SRAs proposed non-key personnel labor rates to the labor rates currently used under the incumbent contract. The Navy recognized that SRAs proposed rates for non-key personnel were consistent with the forward pricing rates on file with the Defense Contract Audit Agency. These forward pricing rates, however, were substantially lower than the actual rates being paid to these incumbent staff. AR, Tab 16, SRA Cost Evaluation, at 1-2. In this regard, the cost evaluators noted:
Throughout its proposal, SRA presents the high qualifications and planned retention of incumbent non-key personnel as strengths. However, it is not realistic to retain incumbent personnel in light of the substantially reduced wages SRA proposes. With the exceptions of the Technical and Junior Technician labor categories, the proposed base period rates for non-key personnel are adjusted to match the corresponding bridge contract rate or median estimate.
Id. at 3.
The agency also increased SAICs proposed costs by $11,558,499. As relevant here, with respect to the proposed labor rates for non-key personnel, SAIC identified three sources for its proposed labor rates: Service Contract Act wage determinations, forward pricing rate recommendations, and actual labor rates. The Navy accepted Service Contract Act wage determination rates for the labor categories that SAIC identified as being subject to the Service Contract Act. The Navy also accepted SAICs proposed labor rates for those labor categories for which SAIC provided matching codes from the firms forward pricing rate recommendation. The Navy, however, did not accept the proposed rates for six of the seven labor categories that SAIC stated were based on actual costs. The Navy found for these six labor categories SAIC had not provided any support for its proposed rates. Given SAICs emphasis on retaining incumbent non-key personnel, the cost evaluators decided for these labor categories to adjust SAICs proposed rates to the labor rates from the current contract. AR, Tab 16, SAIC Cost Evaluation, at 3-5.
The Navy also questioned the labor rates proposed by two of SAICs subcontractors, QinetiQ and Atlas Technologies, Inc. The Navy determined that supporting documentation was not provided for these labor rates, and the cost evaluators increased these proposed labor rates to match the estimated median wage rate in the Norfolk, Virginia, area as calculated by Salary.com, a third-party resource for labor rates. Id. at 8-10.
The results of the technical and cost evaluations were provided to the agencys source selection authority (SSA). AR, Tab 17, Source Selection Decision, at 1. The SSA considered the various strengths and risks presented in SAICs and SRAs proposals, concluding that both firms offered strong proposals that could provide significant benefits. Based upon his consideration of the evaluated technical merit in each firms proposal and their evaluated probable costs, the SSA determined that SAICs proposal offered no particular advantage to the government that outweighed SRAs $2,267,480 (or 3 percent) cost advantage. The SSA selected SRA for the issuance of the task order. Id. at 16-17, 22.
This protest followed a debriefing.
SAIC objects to the agencys cost realism evaluation of SAICs proposal, arguing that that the Navy mechanically adjusted its direct labor rates to match the incumbents rates; improperly adjusted the labor rates proposed by SAICs subcontractors; and failed to conduct meaningful discussions with respect to SAICs costs. SAIC also complains that the Navy failed to downgrade SRAs technical proposal to reflect the extent to which the agency upwardly adjusted SRAs proposed costs, and that this was inconsistent with the terms of the solicitation. We have considered all of SAICs various arguments, although we only address the more significant arguments, and find that none provide a basis on which to sustain the protest.
SAIC Cost Realism Evaluation
SAIC raises multiple challenges to the reasonableness of the Navys realism analysis of SAICs cost proposal. First, SAIC argues that the Navy mechanically adjusted its direct labor rates for non-key personnel to match the incumbents rates rather than accepting the protesters proposed rates. SAIC asserts that such an action is irrational given the Navys acceptance of lower wage determination rates for similar labor categories that are subject to the Service Contract Act. SAIC Comments at 2. For example, SAIC complains that the Navy accepted the Service Contract Act wage determination labor rates for eight journeyman IT analyst positions that SAIC identified as subject to the Service Contract Act (which ranged from $15.05 in Guam to $26.83 in Hawaii), but increased the labor rates for two other journeyman IT analyst positions that were not covered by the Service Contract Act from $[Deleted] to $32.62 to reflect the incumbents labor rates for the positions. Id. at 2-3; AR, Tab 16, SAIC Cost Evaluation, at 5.
The Navy explains that it accepted SAICs proposed costs where SAIC provided supporting documentation. With respect to the labor rates for non-key personnel--such as the journeyman IT analyst positions in Greece and Spain--SAIC asserted that it was proposing actual labor rates, but provided no supporting documentation. Therefore, the Navy considered SAICs stated intent to capture incumbent personnel and the companys historical [Deleted] percent incumbent employee capture rate in deciding to apply the incumbents labor rate for those categories. COs Statement at 14; AR, Tab 16, SAIC Cost Evaluation, at 4-5.
The evaluation of competing cost proposals requires the exercise of informed judgment by the contracting agency. We review an agencys judgment in this area only to see that the agencys cost realism evaluation was reasonably based and not arbitrary. Earl Indus., LLC, B-309996, B-309996.4, Nov. 5, 2007, 2007 CPD ¶ 203 at 8. In performing its cost realism evaluation, an agency must independently analyze the realism of an offerors proposed costs based upon its particular approach, personnel, and other circumstances; a cost estimation method which mechanically adjusts proposed labor rates fails to satisfy the requirement for an independent analysis of an offerors proposed costs. See The Jonathan Corp.; Metro Machine Corp., B-251698.3, B-251698.4, May 17, 1993, 93-2 CPD ¶ 174 at 11. The agencys cost realism evaluation need not achieve scientific certainty; rather, the methodology employed must be reasonably adequate and provide reasonable confidence in view of the cost information available to the agency at the time of its evaluation. See Metro Mach. Corp., B-295744, B-295744.2, Apr. 21, 2005, 2005 CPD ¶ 112 at 10-11.
Here, the record supports the reasonableness of the Navys cost adjustments given the lack of documentation provided to support SAICs assertion that it was proposing actual costs. The RFP plainly required that offerors document the accuracy of their proposed direct labor rates and identified acceptable forms of documentary support. See RFP amend. 4, at 43-44. SAIC has not identified where in its proposal it provided any documentation to support its proposed labor rates for journeyman IT analyst positions in Greece and Spain, nor explained why these overseas positions should be considered comparable to positions within the United States and its territories that are subject to Service Contract Act wage determinations. As such, we see no inconsistency in the Navys decision to accept as realistic Service Contract Act rates for positions subject to the Act, while applying incumbent rates for other positions. In the absence of supporting documentation for SAICs purported actual labor rates for these positions and in light of the protesters representations concerning its intentions to hire the incumbents employees, we find that the Navy reasonably adjusted these rates to those currently used under the incumbent contract.
Conversely, SAIC also argues that the Navy unreasonably applied labor rates from Salary.com to SAICs subcontractor costs rather than applying the labor rates from the incumbent contract. In this regard, the protester asserts that the Navy treated it differently than it treated SRA. Supp. Protest at 8. For example, with respect to a subject matter expert proposed by SAICs subcontractor QinetiQ, SAIC complains that the Navy applied an estimated median labor rate of $44.00 from Salary.com rather than the current contracts lower rate of $38.79 for a comparable position. In contrast, the Navy increased SRAs proposed labor rate for a subject matter expert from $28.40 to the incumbent contract rate of $38.79 for this position. Id. at 9. Likewise, SAIC complains that the Navy applied the current contracts labor rate of $49.67 for a senior IT analyst proposed by SRAs subcontractor, rather than applying a labor rate from Salary.com. Id. at 11.
The Navy states that it applied a consistent methodology in adjusting labor rates where documentation was not provided to support the proposed rates. The Navy explains that it applied the current contracts labor rates where SAIC and SRA proposed subject matter experts as direct labor, given that both firms indicated an intent to use the incumbent contract staff. Similarly, the Navy used incumbent contract rates for SRAs subcontractor personnel, where these personnel support the current contract. Supp. AR at 3-4. The Navy, however, applied the Salary.com rate for subject matter experts proposed by SAICs subcontractors because nothing in SAICs proposal or the subcontractors submissions indicated an intent on the part of the subcontractors to hire incumbent personnel for that position. Id. at 2.
The Navys explanation for applying different labor rates to SAICs and SRAs cost proposals is reasonable, given that the evaluators looked to the content of each offerors proposal to determine the appropriate basis for adjusting costs. The Navy reasonably recognized that SRAs proposed subcontractors are performing on the current contract and therefore could be expected to utilize the same labor rates currently in use. With regard to SAICs and its subcontractors labor rates, the Navy looked to SAICs proposal and its subcontractors submissions to support the proposed labor rates; in the absence of such support or indications that the subcontractors also would attempt to hire incumbent staff, we find that the Navy reasonably applied third-party median wage rates for the location.
SRA Technical Evaluation
SAIC also complains that the Navy did not consider the technical risk associated with SRAs unrealistic proposed costs, as required by the RFP. Protest at 34. Specifically, SAIC notes that the RFP stated that to the extent proposed costs appear unrealistic, the Government may infer either a lack of understanding of the requirements, increased risk of performance, or a lack of credibility on the part of the offeror. Id. at 35, citing RFP at 60. SAIC contends that the 32 percent increase in SRAs proposed costs should have led the Navy to conclude that SRA did not understand the work to be performed under the task order. Id. at 34-35.
The Navy disagrees that it was required to downgrade SRAs technical ratings as a result of the agencys cost realism adjustments. AR at 7. The Navy also states, however, that the agency considered risk in the offerors proposals. Id. at 7-8.
Here, the record indicates that the SSA considered the impact of cost realism adjustments in the technical evaluation, where appropriate. For example, with respect to another offerors proposal, the SSA noted that, although the technical evaluators assessed a strength in that firms plan to hire incumbent staff, the cost evaluators increased the firms proposed costs to reflect that its proposed rates were below that of the incumbent staff. The SSA therefore discounted the strength assessed in that firms proposal for hiring incumbent staff. See AR, Tab 17, Source Selection Decision, at 9.
In contrast, with respect to SRAs proposal, the SSA recognized the magnitude of the cost adjustment in SRAs proposed costs, see id. at 10, but did not note any associated risk. Rather, the SSA noted that SRAs proposal demonstrated a strong technical approach and thorough understanding of the requirements. Also, the SSA recognized SRAs high employee retention rates and that SRA proposed an incumbent workforce that was already onsite. Id. at 7. The record shows that the Navy recognized the inconsistency between SRAs proposed retention of high quality non-key personnel and the substantially reduced labor rates that SRA proposed in its cost proposal, and adjusted labor rates to match SRAs labor rates on the current contract to better reflect the quality of personnel proposed. AR, Tab 16, SRAs Cost Evaluation, at 3. Where the cost and technical evaluation of a proposal reach contradictory conclusions, the agency generally is required to reconcile the evaluations. See Booz Allen Hamilton, Inc., B-405993, B-405993.2, Jan. 19, 2012, 2012 CPD ¶ 30 at 11. In our view, the agencys conclusion that SRAs proposal demonstrated an understanding of the work despite the low proposed labor rates appears reasonable, particularly in light of the Navys experience with SRA as the incumbent.
Cost/Technical Tradeoff Decision
SAIC challenges the Navys cost/technical tradeoff decision on the basis of the alleged errors in the agencys evaluation of cost proposals. Protest at 37. However, this challenge is predicated on SAICs assertions that the agency improperly evaluated cost proposals and/or failed to downgrade SRAs technical proposal based on the size of the price adjustments to SRAs cost proposal. As discussed above, we found no merit in these assertions. Accordingly, on this record, we find no basis to question the agencys tradeoff decision. See Command Enters, Inc., B-293754, June 7, 2004, 2004 CPD ¶ 166 at 3 (challenge to tradeoff decision denied where challenge is dependent on other, unsubstantiated protest grounds).
The protest is denied.
Susan A. Poling
 The technical factor had two, equally-weighted subfactors: technical capability and management. RFP amend. 4, at 55-56.
 The requirement was previously competed under a different solicitation, under which a task order was issued to SAIC. SRA protested to our Office, and the Navy took corrective action, resulting in our dismissal of the protest as academic. Systems Research and Applications Corp., B-406775, B-406775.2, July 25, 2012. The Navy issued the current solicitation, conducted discussions, and obtained revised proposals from the four offerors. See Contracting Officers (CO) Statement at 2-3.
 The Navy found SRAs proposed labor rates for key personnel to be realistic. AR, Tab 16, SRA Cost Evaluation, at 1.
 The Navy increased labor rates to meet the wage determination rates for four journeyman IT analyst positions where the rates SAIC had proposed were below the Service Contract Act wage determination rates. AR, Tab 16, SAIC Cost Evaluation, at 4.
 The six labor categories for which the Navy did not accept SAICs proposed rates were: Journeyman IT analysts in Souda Bay, Greece, and Rota, Spain; senior IT analyst in Virginia; and subject matter experts in Diego Garcia, Singapore, and Japan. AR, Tab 16, SAIC Cost Evaluation, at 5. The Navy did accept SAICs proposed rates for the journeyman technician in Bahrain category, because it was higher than the current contract labor rate. Id.
 As the value of this task order is in excess of $10 million, this procurement is within our jurisdiction to hear protests related to the issuance of task orders under multiple-award indefinite-delivery/indefinite-quantity contracts. 10 U.S.C. § 2304c(e)(1)(B).
 Several of SAICs initial objections to the Navys cost realism analysis were based on the Navys failure to map the labor categories listed in the RFP to labor categories subject to the Service Contract Act. However, SAIC subsequently withdrew these objections. See SAIC Comments at 2 n.1.
 The two journeyman IT analyst positions are located in Souda Bay, Greece, and Rota, Spain. AR, Tab 25B, SAIC Cost Proposal Attach. S-1, at 7.
 SAIC also complains that the Navy did not discuss the agencys increases to SAICs proposed actual costs for unidentified non-key personnel, and should have, at a minimum, engaged in clarifications concerning the basis for SAICs proposed labor rates. Supp. Protest at 12-13. SAIC contends that its basis for non-key personnel labor rates--its forward pricing direct labor rates--has remained unchanged since its initial proposal. SAIC Supp. Comments at 3. The Navy responds that SAIC only identified actual costs as the supporting basis for several non-key personnel rates for the first time in its final proposal revision and provided no support for the statement. Supp. AR at 4-5. An agency has no obligation to reopen discussions to provide an offeror additional opportunity to revise its proposal where a proposal flaw first becomes apparent in a post-discussion submission. See Raytheon Co., B-403110.3, Apr. 26, 2011, 2011 CPD ¶ 96 at 7. There is also no requirement that an agency use clarifications to give offerors an opportunity to correct errors introduced in revised proposals.
 QinetiQ had proposed a labor rate of $[Deleted] for a subject matter expert in the Norfolk, Virginia, area. See AR, Tab 27, QinetiQ Cost Proposal, at 4; Tab 16, SAIC Cost Evaluation, at 9.
 SAIC did not identify a median labor rate from Salary.com for a comparable position.
 SAIC argues that we should not consider the agencys post hoc explanations of its cost analysis. SAIC Supp. Comments at 2. In reviewing an agencys evaluation, we do not limit our review to contemporaneous evidence, but consider all of the information provided, including the parties arguments and explanations. Remington Arms Co., Inc., B-297374, B-297374.2, Jan. 12, 2006, 2006 CPD ¶ 32 at 10. While we generally give little weight to reevaluations and judgments prepared in the heat of the adversarial process, Boeing Sikorsky Aircraft Support, B-277263.2, B-277263.3, Sept. 29, 1997, 97-2 CPD ¶ 91 at 15, post-protest explanations that provide a detailed rationale for contemporaneous conclusions and simply fill in previously unrecorded details will generally be considered in our review of the rationality of selection decisions, so long as those explanations are credible and consistent with the contemporaneous record. NWT, Inc.; PharmChem Labs., Inc., B-280988, B-280988.2, Dec. 17, 1998, 98-2 CPD ¶ 158 at 16. Here, we find the Navys explanations to be credible and consistent with the contemporaneous record.
 The technical evaluators noted that SRAs retention rate of 87.7 percent for fiscal year 2010 was higher than the industry average of 83.2 percent, and that SRAs retention rate for the current contract year is 88.2 percent, which the evaluators concluded suggests organizational stability and the assurance that trained individuals will perform under the contract. AR, Tab 15, SRA Technical Evaluation, at 17.
 SAIC cites our decision in Wisconsin Physicians Serv. Ins. Corp., B-401063, May 4, 2009, 2012 CPD ¶ 35 as supporting its argument that the Navy improperly failed to downgrade SRAs technical proposal. This case, however, is inapposite. In Wisconsin Physicians, we found that the agencys cost realism analysis was unreasonable for failing to upwardly adjust the awardees labor rates to match its actual labor rates. We also found that the agency erred in its view that it could not consider the effect of the lower proposed labor rates on the awardees ability to retain its existing staff. Id. at 14.