Canadian Commercial Corporation/Heroux, Inc. B-253278 September 3, 1993 72 Comp.Gen. 312
Highlights
That a price proposal submitted by a depot included comparable estimates of all direct and indirect costs at the depot's proposed price of $14.1 million was unreasonable. Was understated by $1.3 million and should be adjusted upwards to $15.4 million. Heroux contends that FMP's cost was not properly evaluated and certified in the source selection.[4] The work assignment was made under request for proposals (RFP) No. We sustain the protest.[5] This competition was conducted pursuant to statutory authorization contained in the Department of Defense (DOD) Appropriations Act. "enough information to judge if the estimating methodology is reasonable. To determine [whether] the scope of the estimate is realistic.
Canadian Commercial Corporation/Heroux, Inc. B-253278 September 3, 1993 72 Comp.Gen. 312
Procurement Competitive Negotiation Offers Evaluation Cost estimates The Defense Contract Audit Agency's (DCAA) certification pursuant to section 9095 of the Department of Defense (DOD) Appropriations Act, which authorizes DOD depots to submit proposals to repair aircraft components, that a price proposal submitted by a depot included comparable estimates of all direct and indirect costs at the depot's proposed price of $14.1 million was unreasonable, where DCAA audited the depot's price proposal, and concluded that the proposal, considering all direct and indirect costs and comparability adjustments, was understated by $1.3 million and should be adjusted upwards to $15.4 million.
Attorneys
4. Heroux also argues that improper discussions were held with FMP regarding its price proposal, that FMP gained an unfair competitive advantage because certain FMP personnel participated in the drafting of the solicitation, and that the Air Force personnel who evaluated FMP's proposal have a conflict of interest and are biased. Because we sustain the protest and recommend that award be made to Heroux, we need not consider these issues.
5. A hearing was held in this case at which certain of the issues raised were addressed by the parties. Our conclusions are based on the testimony at the hearing as well as the written submissions of the parties.
6. FMP's labor efficiency for fiscal year 1992, the most recent full year for which data is available, was 84 percent.
7. FMP proposed a total of 192,876 labor hours. DCAA added 18,040 hours to this figure because of its conclusions regarding FMP's proposed efficiency rate, and subtracted 3,054 hours because of errors in FMP's calculations. This resulted in a net upwards adjustment of 14,986 hours, for a total of 207,862 direct labor hours (i.e., FMP's proposed 192,876 labor hours plus DCAA's net adjustment of 14,986 labor hours). Heroux, the incumbent contractor, based its proposal on 232,365 hours.
8. The Air Force accounted for the DCAA projection of FMP's cost as $15,426,575 by assigning FMP's proposal a moderate cost risk. The Air Force did not evaluate FMP's cost at this level, which is higher than Heroux's offered price.
9. Because of the specific requirement in section 9095 of the Appropriations Act that DCAA certify that successful bids include comparable estimates of all direct and indirect costs, DCAA's role here is unlike the advisory role of DCAA in providing audit recommendations as to the cost realism of offerors' proposals in response to solicitations contemplating the award of cost reimbursement contracts. See, e.g., Marine Animal Prods. Int'l, Inc., B-247150.2, July 13, 1992, 92-1 CPD Para. 16.
10. The competitions in Newport News Shipbuilding and Dry Dock Co. and Hoboken Shipyards, Inc. were conducted under statutory authority set forth in Title II of the Defense Appropriations Act for fiscal year 1986, Pub. L. No. 99-190. That Act appropriated funds for a test program to acquire the overhaul of four or more vessels by competition between public and private shipyards, and provided in pertinent part:
"The Secretary of the Navy shall certify, prior to award of a contract under this test, that the successful bid includes comparable estimates of all direct and indirect costs for both public and private shipyards."
11. While the DCAA audit report included the statement "DCAA does not approve or recommend prospective costs because the amounts depend partly on factors outside the realm of accounting expertise such as opinions on technical and production matters," the record shows that DCAA is firmly of the view that FMP's costs will approximate $15,425,575 based on its audit findings. VT 12:12:45; 12:13:40; 12:35:58; 14:37:52.
12. We note that DCAA's conclusion that FMP's labor efficiency rates were unrealistic is consistent with our Office's findings that the Defense Maintenance Industrial Fund (DMIF), which finances the Air Force's in- house contracts and contract depot maintenance operations:
"suffered losses and experienced a steady increase in its backlog of work primarily because DMIF managers repeatedly based the fund's prices and the size of its work force on productivity estimates that were not attained." Air Force Depot Maintenance: Improved Pricing and Financial Management Practices Needed, GAO/AFMD-93-5, November 17, 1992.
13. While the Air Force points out that DCAA takes a "conservative" approach to auditing, and argues that DCAA's determination that FMP's proposal was understated was due primarily to DCAA's "business judgment" with regard to FMP's proposed labor efficiency rates, it has neither argued nor shown that DCAA's bases for DCAA's upward adjustment to FMP's costs were unreasonable. Instead, the Air Force argues that it finds FMP's proposed costs, particularly labor hours, to be a more reliable measure of FMP's cost. DCAA, not the Air Force, is vested with the authority to certify FMP's proposed costs; under section 9095 of the Appropriations Act the Air Force is without authority to disregard DCAA's determination of FMP's probable costs.