In view of the foregoing, we sustain Career Quests protest. As noted, we find that the agency unreasonably evaluated the MEOs TPP based on a higher level of staffing than was included in the calculation of the cost of inhouse performance, and also may not have properly considered the adequacy of the proposed level of staffing for the MEOs quality control program. On the record before us, we cannot determine the precise effect that these flaws had on the evaluation, but since additional staffing, if found to be required, could increase the MEOs cost above the protesters, we find that the protester has been prejudiced by the agencys errors. Accordingly, we recommend that the agency obtain clarification of the MEOs intended level of staffing. The agency should then reevaluate the MEO to determine whether it includes staffing adequate to meet the PWS requirements. Assuming that the MEO as clarified or revised is found to satisfy the PWS requirements, the agency should perform a new cost comparison and award a contract to Career Quest if its evaluated cost is lower than the MEOs. We further recommend that Career Quest be reimbursed the costs associated with its filing and pursuing its protest, including reasonable attorneys fees. 4 C.F.R. 21.8(d) (2004).  (Career Quest, a division of Syllan Careers, Inc., B-293435.2; B-293435.3, August 2, 2004) (pdf)

As the agency points out, in reviewing bid protests challenging an agency’s cost comparison, our Office has previously considered revisions to an MEO that are made at some point after the MEO and the private sector proposals have been submitted. See, e.g., Symvionics, Inc., B‑281199.2, Mar. 4, 1999, 99‑1 CPD ¶ 48; BAE Sys., B‑287189, B-287189.2, May 14, 2001, 2001 CPD ¶ 86. However, these cases address situations where the agency made cost adjustments to the MEO during the course of initially reviewing the MEO for compliance with the PWS, or during the course of the administrative appeal. Such adjustments are anticipated and authorized by the A-76 Revised Supplemental Handbook. Additionally, in performing our Office’s bid protest function, we have considered whether the addition of costs, improperly omitted from an IHCE, would alter an agency’s cost comparison decision, thereby providing a basis for our determination regarding prejudice to the protester. Trajen, Inc., B- 284310, B-284310.2, March 28, 2000, 2000 CPD ¶ 61. We have never considered an agency’s post-protest MEO revisions which contemplate addition of improperly omitted costs, along with offsetting deletions of costs which the agency, in the process of defending against the protest, for the first time asserts are not required. Under the circumstances presented here, we conclude that it would not be appropriate to permit the agency’s post-appeal, post protest modifications to the MEO’s performance approach. Here, the Navy seeks to materially revise the MEO, after the cost comparison with BAE has been completed, in a manner that appears designed to maintain a purported cost advantage that the record shows was based on the MEO’s failure to cost all of the PWS requirements. We view the integrity of the A-76 process as precluding such material revisions to the proposed performance approach at this stage of the process. This is particularly true where, as here, the agency has declined to comply with the PWS requirements--despite having been presented, through the appeal process, with the precise aspects of its proposed approach that it now acknowledges are noncompliant. More specifically, the record shows that the contracting officer, the MEO manager, the IRO, and the AAA all failed to properly perform their required functions. We view these combined, multiple failures as damaging the integrity of the A-76 process, and allowing revisions to the MEO now would only compound that damage. Moreover, the failure of the various government officials to properly perform their respective roles has unduly prolonged the A-76 process, thereby improperly extending the agency’s in‑house performance.  In any event, even if we were to consider the agency’s post-appeal, post-protest rearrangement of the MEO staffing, the revisions proposed by the agency in response to BAE’s protest fail to provide a basis for denying the protest or for retaining performance in-house. As discussed above, when the costs associated with meeting all of the PWS requirements are properly added to the IHCE, it is clear that the expected cost of performance by BAE, even after the conversion differential is applied, will be lower than the expected cost of performance by the MEO. Accordingly, we recommend that the agency award a contract to BAE under the RFP. We also recommend that BAE be reimbursed the reasonable costs of filing and pursing the protest, including reasonable attorneys’ fees. Bid Protest Regulations, 4 C.F.R. § 21.8(d)(1)(2003). BAE’s certified claim for costs, detailing the time expended and costs incurred, must be submitted to the agency within 60 days of receiving this decision. (BAE Systems Technical Services, Inc., B-293070, January 28, 2004) (pdf)

It is true that the RSH requires that the in-house management plan for an MEO explain and document the assumptions that an agency relies upon in developing the MEO and in-house cost estimate, including "[a]n overall comparison of the current organization with the MEO and a review of any special initiatives or assumptions, including equipment or productivity changes." RSH, part I, ch. 3, sect. E.4. Rather than the detailed position-by-position comparison the protester maintains is required, however, the RSH thus provides that the MEO is to include "an overall comparison" with the current operation, and that the MEO is to "reflect the scope of the PWS." Id. The RSH further provides that the management plan "should identify the organizational structures, staffing, and operating procedures, equipment, transition and inspection plans necessary to ensure that the in-house activity is performed in an efficient and cost effective manner." Id. sect. E.1. The RSH thus simply requires that in forming the MEO, agencies determine what positions will be needed to perform the work reflected in the PWS.  (Johnson Controls World Services, Inc., B-288636; B-288636.2, November 23, 2001)

In the first instance, the RSH requires that both the in-house offer and the private-sector proposals must comply with the minimum PWS requirements. RSH, part II, ch. 2, ¶ A.1.b. This determination must be made before there is any consideration as to whether the successful private-sector proposal offers quality and performance exceeding the PWS requirements, such that the in-house offer must be brought up to the private-sector proposal’s level of performance and quality. RSH, part I, ch. 3, ¶ H.3.d.  It is the IRO’s responsibility prior to sealing the government’s in-house offer to ensure that the in-house offer satisfies the minimum PWS requirements and that the adjustments necessary to satisfy the PWS requirements are made.  See RSH, part I, ch. 3, ¶¶ H, I, J.  Here, the record indicates that the IRO failed to properly carry out its responsibility.  

Secondly, the PWS was significantly revised after the in-house offer was certified by the IRO and sealed. The IRO did not consider whether the in-house offer complied with the revised PWS, although that was the basis on which BAE’s proposal was prepared and evaluated. See, e.g., Tr. at 672, 678, 697-98. Because of the PWS revisions, the TPP should have been opened prior to the receipt of private-sector offers, examined against the revised requirements and adjusted, as required, and certified anew as satisfying the revised PWS requirements. This was not done here.  

Thirdly, the agency apparently believed that no revisions could be made to the in-house offer once it was initially sealed, except to the extent necessary to bring it up to the level of the private-sector offeror’s proposal. However, even after completion of the private-sector competition, the agency must ensure the compliance of the in-house offer with the PWS requirements (unless these requirements are also waived for the private-sector offeror). Yet here, even though they found the in-house offer was noncompliant with the PWS requirements, the SSEB and SSA apparently believed that it was inappropriate for them to compare the in-house offer to the PWS requirements to determine what was needed to make the in-house offer compliant.  See, e.g., Tr. at 39, 122, 161, 320-22. In our view, there was no reasonable basis for this belief; once the SSEB or the SSA determined that the in-house offer did not satisfy the PWS requirements, that deficiency needed to be resolved before the agency could proceed to the public/private cost comparison.  

Fourthly, the failure to focus on the in-house offer’s compliance with the PWS requirements led to a further deficiency. In our view, the SSEB and SSA erred in simply adopting the private-sector offeror’s proposed staffing levels to determine the amount of staffing required by the in-house offer to comply with the PWS requirements. Just as two competing private-sector offerors may reasonably propose different levels of staffing, depending on each offeror’s technical approach and proposed efficiencies, so, too, the in-house offer may be based on a level of staffing different from that offered by the private-sector proposal. Neither the SSEB nor the SSA should impose the private-sector proposal’s staffing level on the in-house team.  

Finally, the agency unreasonably failed to determine the in-house offer’s compliance with the PWS key personnel experience requirements in the face of evidence indicating noncompliance.  (BAE Systems, B-287189, B-287189.2, May 14, 2001)