Link: GAO Opinion
Agency: Department of the Navy
Disposition: Protest denied.
Keywords: Small Business Set-Asides
General Counsel P.C. Highlight: Where a proposal, on its face, demonstrates that an offeror is taking exception to the subcontracting limitation clause, the proposal is technically unacceptable.
Addx Corporation protests the rejection of its proposal and the issuance of a task order, under a task order proposal request (TOPR), issued by the Department of the Navy, Naval Surface Warfare Center for information technology, modeling and simulation services.
The TOPR was issued as a small business set-aside and sought proposals from firms holding Seaport-E contracts for Zone 2 (National Capital Zone). The solicitation contemplated the issuance of a cost-plus-fixed-fee task order to the contractor whose proposal represented the best value to the government considering three technical factors (technical approach, personnel resources, and corporate relevant experience), past performance, and evaluated cost. The underlying Seaport-E contracts state that when competition under a TOPR is restricted to small businesses, as was the subject TOPR, “the Prime Contractor must perform at least 50% of the Work (See FAR 52.219-14).” The TOPR incorporated, by reference, all the clauses from the underlying Seaport-E contract, to include the Limitations on Subcontracting clause.
Addx proposed a team consisting of itself (as prime) and several subcontractors. As reflected in its cost proposal, 22% of Addx’s personnel costs were associated with Addx’s own employees while the remaining 78% were allocated to costs for Addx’s subcontractors. According to its technical proposal, Addx employees accounted for approximately 24% of the total number of employees proposed by Addx–the remaining 76% was comprised of employees from Addx’s subcontractors. After evaluating the proposals, the agency assigned the protester’s proposal a technical rating of unsatisfactory, finding that Addx failed to adhere to the requirements of the Limitations on Subcontracting clause.
Addx argues that the agency improperly relied upon an unstated evaluation factor in rejecting its proposal for failure to comply with the limitation on subcontracting clause. GAO states that the protester’s first argument is without merit. Where a proposal, on its face, demonstrates that an offeror is taking exception to the subcontracting limitation clause, the proposal is technically unacceptable. This is so because the limitation on subcontracting is a material term of the solicitation, and a proposal that fails to conform to a material term or condition of a solicitation is unacceptable and may not form the basis for an award. To the extent that the protester is arguing that the TOPR did not notify offerors that it incorporated the limitation on subcontracting clause, the protester’s underlying Seaport-E contract provided it with notice that the limitation on subcontracting clause would be incorporated into any TOPR set aside for small business.
Addx next argues that until the agency definitively decides the required level of effort under the task order, it lacks a basis for concluding that the protester will not comply with the limitation. GAO states that the agency reasonably concluded that Addx had not agreed to comply with the limitation on subcontracting clause. While it is true that the precise level of effort under the task order is to be defined at the task order kick-off meeting and throughout the life of the task order, this does not render meaningless, as Addx suggests, the information concerning Addx’s proposed staffing mix (prime vs. subcontractor) set forth in Addx’s technical and cost proposals. The protester’s proposal was based on the “best estimate” of the government’s labor hour requirements and, in addition, the protester’s cost proposal indicated that it would perform the estimated requirements using largely a subcontractor work force (78% of its labor costs were for subcontractor employees). Given the information Addx provided in its proposal, the agency had a reasonable basis to conclude that Addx was not agreeing to expend at least 50% of personnel costs for its own employees in performance of the contract. The protest is denied.