[Protest of Navy Contract Award for Engineering Services]

A firm protested a Navy contract award for engineering services, contending that the Navy: (1) improperly adjusted its proposed costs upward in evaluating its proposal for cost realism; and (2) unreasonably rejected its proposed uncompensated overtime (UCOT) policy. GAO held that the Navy: (1) unreasonably downgraded its proposal based on incorrect and unverified information; and (2) reasonably determined that the protester's UCOT policy posed a risk to the performance of the contract. Accordingly, the protest was denied in part and sustained in part, and GAO recommended that the Navy: (1) conduct discussions with both bidders regarding any remaining cost proposal concerns, request revised cost proposals, and evaluate those offers for cost realism; (2) terminate the awardee's contract and make award to the protester, if otherwise appropriate; and (3) reimburse the protester for its protest costs.