Link: GAO Opinion
Agency: Transportation Security Administration
Disposition: Protests sustained.
Keywords: Price realism; Incentive fee
General Counsel P.C. Highlight: Where a solicitation clearly specifies a particular incentive fee amount, a different, lower, incentive fee may not be accepted for award.
In 2008, the Transportation Security Administration (TSA) issued a request for proposals (RFP) for a fixed-price task order to perform a wide variety of computer support services for TSA at a number of the agency’s installations nationally and internationally. The RFP was solicited in two phases; during phase I, offerors provided information related to their transition strategy, technical capabilities, and past performance. After phase I, three of the six offerors were eliminated from the competition. Two of these three filed protests with the Federal Aviation Administration’s Office of Dispute Resolution for Acquisition (ODRA) and the GAO because it was not clear which office had jurisdiction to consider the protests. After learning that ODRA would consider their protests, both withdrew their protests from the GAO. While the ODRA protests were pending, TSA issued phase II of the solicitation to the three successful offerors. Before reaching a conclusion on phase II, TSA settled the two outstanding ODRA protests by allowing the protestors, as well as the third offeror eliminated in phase I, back into the solicitation. The phase II solicitation was then reissued to all offerors, which stated that the award would be made on a “best value” determination considering price and four non-price factors: technical approach, management, performance, and small business contracting plan. TSA received proposals from General Dynamics (GD), Unisys and Computer Sciences Corporation (CSC), after which it prepared a technical evaluation report and a price evaluation report. Based on these reports, TSA issued the task order to CSC, finding that its proposal offered the best value to the government. After being advised of the source selection decision and receiving debriefings, GD and Unisys filed protests.
Each protester alleged that (1) TSA’s price realism evaluation of the CSC proposal was improper and (2) TSA impermissibly accepted CSC’s proposal with an incentive fee that varied from the fee specified in the RFP.
Beginning with the price realism analysis, both protestors challenged TSA’s findings that CSC’s pricing was realistic for two reasons: (1) CSC’s proposed staffing was inadequate to meet the requirements of the RFP and inconsistent with staffing information included elsewhere in the proposal, and (2) inadequate consideration was given to CSC’s comparatively low proposed labor rates, given the fact that CSC proposed to hire incumbent personnel to perform the duties required by the solicitation. The primary fact supporting this portion of the protest was that CSC’s price proposal contained staffing estimates that decreased steadily through the option years, to a level that was significantly below what CSC had outlined in its technical/management proposal. TSA attempted to counteract this allegation by submitting affidavits from several of its evaluators, however these were found to be insufficient in showing that the evaluators were aware of the disparity between the technical/management and price proposal staffing figures. Because GAO was not able to find an indication in the record that TSA had considered the staffing decrease in the option years, or the staffing inconsistency between the price and technical/management proposals, it concluded that TSA’s price realism analysis of the CSC proposal was not supported by the record.
Both protestors also alleged that the price realism analysis also failed to address sufficiently the low labor rates contained in CSC’s proposal. TSA countered this allegation by stating that the labor rates were not a meaningful basis for evaluation because they are fully burdened hourly rates, rather than wage rates; thus, a comparison of the labor rates does not necessarily show the actual wages that CSC anticipates paying. TSA also asserts that while CSC had the lowest proposed labor rates for many of the categories, it also had the highest wages for several key employee categories, which meant that they would be better able to recruit and retain key personnel. GAO’s analysis of the record related to this issue was unable to get past the fact that CSC was proposing such low rates for the majority of its proposed staff, and the fact that it was proposing to hire a high number of incumbent personnel. Based on these two factors, GAO sustained the price realism portion of the protests.
The second component of the protest related to CSC’s inclusion of a lower incentive fee in its proposal than the fee that was specified in the RFP. The RFP appeared to require that vendors add a 5% incentive fee on certain contract line items (CLINs). GD had submitted a question attempting to clarify whether the 5% was required or not. TSA did not answer the question directly, but issued an amendment inserting a 5% incentive fee in its table of calculations. Both GD and Unisys included a 5% incentive fee in their final proposal revisions, but CSC included an incentive fee of only 3%. GD and Unisys first assert that TSA had led them to believe that they were required to apply a 5% incentive fee in calculating their prices, and that TSA should have rejected CSC’s proposal or advised all offerors that some other percentage was acceptable. TSA argued that offerors were free to propose their own fee percentage and that the wording of the solicitation put all firms on notice that offers of amounts different from 5% would be entertained. Based on this fact, and TSA’s unwillingness to clarify this point through the evaluation period, GAO concluded that the offerors were led to believe that the 5% was the required fee in their price proposals. Where a solicitation clearly specifies a particular incentive fee amount, a different, lower, incentive fee may not be accepted for award. For this reason, GAO sustained this element of the protest. In sustaining both elements of the protests, GAO recommended that TSA amend the RFP to advise offerors of its intent regarding the incentive fee, provide adequate discussions, and solicit revised proposals. If a firm other than CSC is in line for the award, it is recommended that TSA cancel CSC’s task order and issue a new task order to the successful offeror.