Matter of:
TyeCom, Inc.
File:
B-287321.3;
B-287321.4
Date:
April 29,
2002
Howard Stanislawski, Esq., and Richard L. Larach, Esq., Sidley
Austin Brown & Wood, for the protester.
Moses Harvin, for American
Services Technology, Inc., an intervenor.
Joseph A. Lenhard, Esq., and
Timothy Fischer, Esq., Department of Energy, for the agency.
Paul I.
Lieberman, Esq., and Michael R. Golden, Esq., Office of the General Counsel,
GAO, participated in the preparation of the decision.
DIGEST
Protest against proposal
reevaluation is denied where the reevaluation was performed by the agency in
response to, and consistent with, corrective action suggested during alternate
dispute resolution conducted in conjunction with a predecessor protest of the
same procurement to the General Accounting Office, and the protester has not
provided any persuasive evidence that the reevaluation was improper or
unreasonable.
DECISION
TyeCom, Inc. protests the
award of a contract to American Services Technology, Inc. (ASTI), under
request for proposals (RFP) No. DE-RP09-00SR22183, issued by the Department of
Energy (DOE) as an 8(a) small disadvantaged business (SDB) set-aside for
administrative facility support services at DOE's Savannah River Operations
Office. TyeCom contends that the agency's most recent technical and cost
evaluation is “fatally flawed.” Protest at 1.
We
deny the protest.
BACKGROUND
This procurement has had a
protracted history, commencing with DOE's issuance of the solicitation on March
18, 2000. On February 15, 2001, the agency initially selected [deleted]
proposal for award from amongst a final competitive range consisting of three
proposals, the others of which were the TyeCom and ASTI proposals. TyeCom
protested the award determination to our Office on February 26, whereupon
the agency determined to reopen discussions and, on March 6, TyeCom
withdrew this protest.[1] After conducting additional discussions
and providing the offerors an opportunity to submit final proposal revisions
(FPR), the DOE source evaluation panel (SEP) evaluated TyeCom's proposal as
“acceptable” with a proposed cost-plus-fee of $8,003,798. ASTI's proposal
was evaluated as “exceptional” with a proposed cost-plus-fee of
$8,921,239. Agency Report, B-287321.2, Aug. 10, 2001 (AR.2), Tab 4, Source
Selection Decision, at 1-2. The two offerors had proposed virtually the
identical existing workforce, with the exception of three managers. The
SSO reasoned that since TyeCom's proposal had been evaluated as “acceptable” by
the SEP, “from a technical standpoint, TyeCom should be successful in
performance,” and also believed that “[since] TyeCom has accepted indirect rate
ceiling rates, which protect the Government against increased indirect costs (an
eventuality I consider likely), cost risk is reduced to an acceptable
level.” Id. at 2. In these circumstances, the SSO
decided that “[i]n terms of the evaluation criteria of the RFP, Tyecom would be
in line to receive the award.” Id.
However, the
SSO questioned TyeCom's responsibility based on other available information,
including that TyeCom had done very little business during the [deleted] years
that it had been in the 8(a) program, had been, [deleted], essentially dormant
for the past [deleted], had no [deleted] for the year [deleted], and had
[deleted] current business and only [deleted] employee, [deleted].
Id. at 2-3. As a result, the SSO requested the Small Business
Administration (SBA) to review TyeCom's responsibility under SBA's certificate
of competency (COC) procedures. SBA issued a COC for TyeCom on July 2,
2001, after which DOE determined to make award to TyeCom. In particular,
the SSO determined that TyeCom's lower technically rated, lower cost proposal
was in line for award on the basis that: “the overall advantage the
'Exceptional' rated proposal of ASTI represents over the 'Acceptable' rated
proposal of Tyecom is one of degree. . . . [T]he incremental increase in overall
performance potential represented by the ASTI offer does not warrant the
increased cost of $917,441.” AR.2, Tab 8, Source Selection Decision
Addendum, July 17, 2001, at 4. On July 27, after receiving a
debriefing, ASTI protested this award determination to our
Office.
Alternative Dispute Resolution Disposition
of ASTI's Protest
As a result of ASTI's protest, our Office
conducted an “outcome prediction” alternative dispute resolution (ADR)
conference with the parties.[2] During this conference, the GAO attorney
handling the protest explained to the parties that ASTI's protest was likely to
be sustained because the agency had awarded to TyeCom, which had submitted a
substantially lower-rated technical proposal, on the basis of TyeCom's low
proposed cost under a cost-reimbursement contract, without performing any
meaningful cost realism analysis on TyeCom's proposed costs, which the record
established were subject to serious question. As a result of the ADR
conference, the agency determined to take corrective action in the form of
conducting probable cost analysis of all proposals and making a new award
determination based on consideration of the resulting cost and technical
evaluations, along with a documented cost/technical tradeoff, if
appropriate. Thereupon, on September 4, our Office dismissed ASTI's
protest as academic.
ADR Rationale
During the
ADR conference, the GAO attorney pointed out that the solicitation provided that
technical was more important than cost, which was being proposed on a
cost-reimbursement-plus-fee basis. The solicitation further provided that
the agency would evaluate offerors' cost data to assess the accuracy and
reasonableness of the proposed cost and the probable cost to the
government. RFP § M.3(2). ASTI's proposal had received an overall
technical rating of “exceptional” while TyeCom's overall technical rating was
“acceptable”; TyeCom's proposed cost (including fee) was $8,003,798, while
ASTI's proposed cost was $8,921,239. The offerors were proposing
substantially the same labor force, and the most significant cause for the cost
difference was that TyeCom had applied a flat 2.5 percent per year direct wage
escalation rate over the life of the contract, including options, while ASTI had
applied a significantly higher wage escalation rate which substantially
reflected the rates contained in an independent survey conducted by Data
Resource Inc. (DRI) of labor escalation rates for the industry. The
Defense Contract Audit Agency (DCAA), which reviewed the proposed costs for DOE,
had used DRI data as a measure of likely direct labor cost escalation, and
during discussions DOE had asked TyeCom about its flat, low proposed direct
labor escalation rate, requesting supporting documentation. Agency Report,
B-287321.3, B-287321.4, Mar. 8, 2002 (AR.3), Tab 12, TyeCom Discussion
Questions, encl. 1, at 1. In response, TyeCom acknowledged that its
proposed escalation rate was below the DRI estimates used by DCAA; noted that it
had used a “conservative” 2.5 escalation rate “in the interest of being price
competitive”; stated that it desired to “retain the current work force in
place,” and had “proposed to pay current prevailing wages, an excellent fringe
benefits package and will offer competitive annual adjustments”; and indicated
its willingness to discuss a higher rate during contract negotiations.
AR.3, Tab 14, TyeCom Discussion Response, Aug. 28, 2000, at
5-6.
The agency eventually accepted TyeCom's flat 2.5 percent
escalation rate, without making a probable cost adjustment, despite the fact
that nothing in the record provided any basis to conclude that TyeCom would be
able to achieve this low wage escalation rate, beyond the fact that its initial
wages exceeded the Service Contract Act wage determination rates for the local
area. During the ADR conference, TyeCom was provided an opportunity to
point to anything in the record which supported the artificially low escalation
rate. TyeCom's only response was that the proposals should be individually
evaluated and that TyeCom's low escalation rate was supported by the fact that
its initial wage rates exceeded the wage determination rates. However,
this was also true, and, indeed, to a greater extent for ASTI, which proposed
the identical workforce at initial wage rates which exceeded the wage
determination rates, in some cases by more than TyeCom; thus, TyeCom's initial
rates did not provide a reasonable basis to distinguish between the respective
proposed direct wage escalation rates.
Nonetheless, DOE had
not made any adjustments to TyeCom's proposed cost, noting only that “[i]n as
much as TyeCom has accepted indirect rate ceiling rates, which protect the
Government against increased indirect costs (an eventuality I consider likely),
cost risk is reduced to an acceptable level.” AR.2, Tab 4, Source
Selection Decision, at 2. However, the indirect rate ceilings are
completely unrelated to the direct wage rates and thus cannot reduce the
government's risk with respect to the direct wage escalation rate. In
addition, the indirect rate ceiling rates that TyeCom had proposed to accept
were below the indirect ceiling rates it had actually proposed in its cost
proposal. That is, TyeCom could escalate its indirect rates by amounts
that would result in a cost increase that DOE conceded was in excess of $200,000
before the ceilings were reached. Accordingly, the ceilings provided
limited protection even with respect to the indirect
rates.
The GAO attorney noted during the ADR session that DOE
had improperly accepted TyeCom's apparently unrealistic proposed cost, without
performing an adequate cost realism analysis, and without making the required
probable cost adjustment. Accordingly, the GAO attorney suggested that,
since TyeCom's low cost had been determinative, and the record showed that there
was no basis to conclude that this cost was realistic, the agency reevaluate
proposed cost and make a new award determination taking into consideration this
reevaluation.
Reevaluation and New Award
Determination
DOE subsequently decided to take this corrective
action, and in so notifying TyeCom, DOE advised that “[w]ith respect to labor
escalation rates, DOE intends to apply the appropriate Data Resource, Inc. (DRI)
labor escalation rates as the realistic measure of labor escalation to each of
the offerors' cost proposals.” Protester's Comments, Mar. 18, 2002,
attach. 1, SSO Letter to TyeCom, Aug. 30, 2001. TyeCom, after having fully
participated in the ADR conference, and having received this specific
explanation of the specific method of cost reevaluation that the agency would be
implementing, did not protest either the agency's decision to conduct the
reevaluation, or the specified methodology for conducting the
reevaluation.
As a result of the agency's revised cost evaluation,
in large measure because of the imposition of DRI wage escalation rates to both
proposals, TyeCom's final evaluated cost-plus-negotiated-fee was increased to
$8,889,202, and ASTI's evaluated cost was increased to $9,154,834.
TyeCom's “acceptable” technical proposal evaluation remained unchanged, as did
ASTI's “exceptional” evaluation. Based on the results of this
reevaluation, the agency determined that the relatively small, $265,632, total
cost advantage (less than 3 percent of the cost total) associated with TyeCom's
proposal was outweighed by ASTI's substantial technical superiority under the
most important technical areas. In particular, the SSO noted that there
was a major technical difference in the strengths between the offerors under the
three most heavily weighted technical criteria and subcriteria, under each of
which ASTI's proposal was substantially higher rated. AR.3, Tab 33, Source
Selection Decision, at 6-7. Accordingly, DOE awarded ASTI the
contract on January 10, 2002. After receiving a debriefing from the
agency, TyeCom filed this protest with our Office on January 18, 2002, and later
filed a supplemental protest after receiving documents from the
agency.
While TyeCom styles its protest as an
objection to a wide array of technical and cost evaluation, the real core of the
protest is TyeCom's objection to the agency's implementation of the corrective
action suggested during the ADR conducted in conjunction with the predecessor
ASTI protest. In our view, TyeCom has not provided any persuasive evidence
that the reevaluation and award are unreasonable or improper, and the protest is
entirely without merit.
PROBABLE COST
EVALUATION
During ADR, the GAO attorney advised the agency that
it appeared to have failed to perform an appropriate and required cost
evaluation, and suggested that in the circumstances presented here, a normative
application of the DRI wage escalation percentages would be a reasonable step,
at least as a starting point. Because a GAO attorney will inform the
parties through outcome prediction ADR that a protest is likely to be sustained
only if he or she has a high degree of confidence regarding the outcome, the
willingness to do so is a sufficiently clear indication that the protest is
meritorious such that, absent persuasive evidence to the contrary, such a
prediction satisfies the requirement that we conclude that a protest was
“clearly meritorious” for purposes of recommending reimbursement of protest
costs. National Opinion Research Center--Costs, B-289044.3, Mar. 6,
2002, 2002 CPD ¶ 55, at 3. Similarly, an agency may reasonably rely on
such a prediction in implementing corrective action.
Here, DOE
implemented corrective action that was precisely consistent with GAO's ADR
analysis, including the specific nature of the suggested corrective action,
after notifying TyeCom of its specific proposed evaluation methodology.
The cost realism analysis and the resulting upward adjustments applied by DOE
were reasonable and consistent with both applicable regulatory guidance under
Federal Acquisition Regulation (FAR) § 15.404-1(d)(2), and with the GAO
attorney's suggestion during ADR. TyeCom's protest does not provide any
basis to question the agency's action since TyeCom has merely recapitulated
essentially the same argument it presented during ADR, and has not provided any
persuasive evidence that the reevaluation was unreasonable.
Similarly, the new cost/technical tradeoff determination resulting in selection
of ASTI's proposal is reasonably based on the corrected cost evaluations, and
TyeCom has not provided any meaningful basis to question the propriety of the
determination.
TECHNICAL EVALUATION
TyeCom has
also raised a broad array of objections regarding various aspects of the
agency's evaluation of its own and of ASTI's technical proposals, which is
unchanged from the initial evaluation, all of which we have considered and find
without merit. We will limit our discussion in this decision to a
representative example of these arguments.
Experience of
TyeCom's President
In evaluating TyeCom's proposal as neutral
for past performance, and “acceptable” overall under the most important
technical criterion of Experience of Organization--Past Performance, the agency
concluded that TyeCom did not have demonstrated past performance related to the
statement of work. TyeCom asserts that it was entitled to an exceptional
rating under this evaluation factor based on the past performance of its company
president, and that DOE improperly failed to credit this experience.
TyeCom cites FAR 15.305(a)(2)(iii) as requiring that “the evaluation take into
account past performance information regarding predecessor companies, key
personnel who have relevant experience, or subcontractors that will perform
major or critical aspects of the requirement when such information is relevant
to the instant acquisition.” Protest at 6. While, in fact, the FAR
language cited by the protester is precatory rather than mandatory, the simple
and undisputed answer is that for purposes of evaluation as key persons under
section L-14 of the RFP, the solicitation designated only the program manager
and assistant program manager. AR.3 at 6. TyeCom's company president
was not proposed to fill either position and therefore does not fall within the
purview of the key person requirement.
The agency also
correctly points out that while, in appropriate circumstances, an agency
properly may consider the experience of supervisory personnel in evaluating the
experience of a new business, there is no legal requirement for an agency to
attribute employee experience to the contractor as an entity. Hard
Bodies, Inc., B-279543, June 23, 1998, 98-1 CPD ¶ 172 at 4.
Accordingly, the agency was under no obligation to credit TyeCom as a corporate
entity with the individual experience or past performance of the company's
president; TyeCom's protest allegation is misplaced as to both fact and
law.
COST EVALUATION VERSUS COC
Finally,
TyeCom asserts that because the agency's cost reevaluation included an
adjustment of TyeCom's proposed indirect rates, it constituted a “de
facto nonresponsibility determination,” thus, the agency “usurp[ed] SBA's
legal authority to make responsibility determinations for small
businesses.” Protest at 10. This argument patently misconstrues the
nature and effect of both the COC determination and the probable cost
evaluation. Under FAR 15.305(a)(1), when contracting on a
cost-reimbursement basis, an agency is required to perform a cost realism
analysis to determine what the government should realistically expect to pay for
the proposed effort when contracting. SBA's issuance of a COC constitutes
an affirmative determination of responsibility with respect to responsibility
elements such as capability, competency, credit, integrity, perseverance,
tenacity and limitations on subcontracting. FAR 19.601. An
affirmative determination with regard to these kinds of responsibility
considerations is separate from and unrelated to a probable cost adjustment, as
required by the FAR and specifically called for here under the RFP, in
conjunction with performing a cost realism analysis. Accordingly, this
allegation provides no basis to question the agency's probable cost adjustment
or reevaluation.
The protest is denied.
Anthony
H. Gamboa
General Counsel
[1] Performance under each of the contract award
decisions from February 15, 2001, until the present has been stayed by DOE
because of the protests. As a result, performance of the work at issue has
continued by the incumbent, Madison Research Group (MRG), a non-SDB, with
Systems Support Alternatives, Inc. (SSA), another non-SDB, performing as MRG's
subcontractor for certain of the operations. In the current SDB set-aside
competition, TyeCom has proposed SSA as its subcontractor, and ASTI has proposed
MRG as its subcontractor.
[2] In outcome prediction ADR, the GAO attorney handling a protest convenes the parties, at their request or at GAO's initiative, and informs the parties what the GAO attorney believes the likely outcome will be, and the reasons for that belief, including the form of corrective action that our Office would likely recommend where the protest is likely to be sustained. A GAO attorney will engage in this form of ADR only if she or he has a high degree of confidence regarding the outcome. Where the party predicted to lose the protest takes action obviating the need for a written decision (either the agency taking corrective action or the protester withdrawing the protest), our Office closes the case.