[Protest of Army Corps of Engineers Contract Award]

A firm protested the award of a cost-plus-award-fee (CPAF) contract for the operation and maintenance of two Government-owned facilities under a request for proposals (RFP) issued by the Army Corps of Engineers. The protester alleged that: (1) the Army did not establish specific evaluation factors for determining which proposal offered the lowest cost to the Government; (2) the Army made no evaluation of the cost realism of the proposals submitted; and (3) the awardee's offer should have been rejected because it did not provide for any profit. The RFP required offerors to propose only a CPAF fee structure utilizing the Government estimate as their estimated base cost figure. The award was to be made to the offeror whose total fee percentage was lowest. Because the RFP did not require offerors to submit independent cost proposals, GAO stated that it was not possible for the Army to conduct a cost realism analysis; nevertheless, the deficiencies in the procurement warranted consideration of the protest on its merits. GAO held that a CPAF award made on the basis of the lowest proposed fees, without solicitation or consideration of any other proposed costs, precludes an adequate cost realism analysis of competing offers and is contrary to an applicable statute which requires that proposals, including price, be solicited in negotiated procurements. The award fee of a CPAF contract is intended to operate as an incentive for excellence in contract performance. A competition in which offerors may propose award fees of 0 percent defeats the purpose of such fees. A competition where neither cost nor technical proposals are requested and where there is no basis for meaningful negotiations is a competition in form without substance. Accordingly, the protest of the cost realism analysis issue was sustained. Because the one ground of protest was sustained, GAO did not consider it necessary to decide the merits of the protester's other allegations.