Matter of: ORBIS Sibro, Inc.

Agency: Department of the Navy

Disposition:Protest Sustained in Part, Denied in Part

Keywords: Cost Realism, Cost Evaluation

Decided:February 26, 2018

Published: March 15, 2018

General Counsel P.C. Highlight: A cost realism analysis may properly include adjusting labor rates to make them consistent with proposed labor categories.  It may not, however, adjust costs to account for internal variances in the proposal when the RFP indicates one section is considered the final authority for costs.

Summary of Facts

ORBIS Sibro, Inc. (ORBIS) protests the award of a task order to Craig Technologies, Inc, arguing the Navy’s cost realism analysis was unreasonable, leading to a flawed best value trade off determination.

On May 24, 2016, the Navy issued a cost plus incentive fee task order to holders of the Navy’s Seaport-e multiple award indefinite delivery, indefinite quantity (IDIQ) contracts. The three evaluation factors included technical capability; past performance, and evaluated cost/price.  Technical capability was more important than past performance, which, when combined with technical capability, was significantly more important than cost/price.

The request for proposals (RFP) established minimum labor qualifications.  The Navy also offered the Bureau of Labor Statistics (BSLS) data for reference.  This was done with an eye towards offering the best approximation of labor categories and approximate annual wage for labor categories.  The RFP also indicated the Navy planned to perform cost realism analysis and would evaluate offerors costs against the Navy’s best estimate of probable cost.  The RFP noted discrepancies between Section B of the proposal (costs by CLINs) with Attachments detailing costs (burdened direct labor rates for each labor category) would be resolved by relying on Section B costs.

ORBIS submitted a proposal with Section B costs at $35,327,697 and cost summaries listed at $34,089,015, a difference of $1,238,682.

The Navy evaluated the proposal for cost realism and discovered several labor categories wherein ORBIS’ proposed labor rates were below the minimum rate in the BLS data. The Navy therefore adjusted the costs upwards to reflect an increased rate of labor at the lowest rate in the appropriate labor category range.

Further, the Navy increased the costs by the $1.2 million difference between the Section B costs and the cost summaries.  They reasoned this accounted for the variance in the figures.

This resulted in a cost increase of $6,225,377.

Basis for Protest

ORBIS objects both to the cost realism adjustments for labor rates, and the addition of the $1.2 million difference between the Section B costs and the cost summaries.

GAO Decision

Agencies perform cost realism analyses to determine whether the proposed costs are considered realistic given the work that will be performed.  Where costs are considered unrealistic, the proposed costs may be adjusted upward to better reflect realistic costs.

As to labor category cost increases, these costs adjustments were found to be appropriate, in that ORBIS’ proposed labor rates were not realistic given the labor categories. Protest on this ground is denied.

However, once the adjustment was made to reflect more accurate labor costs, it was inappropriate for the Navy to separately adjust the proposed costs.  This additional adjustment was unreasonable.

Protest Sustained