Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest denied.
Keywords: Cost Realism
General Counsel P.C. Highlight: Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.
Orion Technology, Inc. protests the elimination of its proposal from consideration for award by the Department of the Army, Mission and Installation Contracting Command, under a request for proposals (RFP), for support services at various Army installations.
The agency issued the solicitation as a total small business set-aside for garrison augmentation support services at various Army installations located in the United States. The solicitation contemplated the award of multiple indefinite-delivery/indefinite-quantity (ID/IQ) contracts, each with a 12-month base period and four one-year options. Awards were to be made without discussions, although the agency reserved the right to conduct discussions if necessary. The solicitation described the basis for award as “the best value to the Government,” considering the following three evaluation factors: mission capability, past performance, and cost/price.
Offerors were to submit a cost/price proposal specific to the task order scenario. The task order scenario cost/price proposal was to include costs and pricing for numerous contract line item numbers (CLINs) listed in a pricing schedule that accompanied the solicitation. For the base period and the final option period individually, the pricing schedule included three fixed-price CLINs and 15 cost-type CLINs. For the second and third option periods individually, the pricing schedule included two fixed-price CLINs and 15 cost-type CLINs. For the base period and all of the option periods, one of the cost-type CLINs was for other direct costs (ODCs). Offerors’ task order scenario cost/price proposals also were to include detailed supporting information for the proposed costs and pricing. With respect to ODCs, offerors were to provide ODC amounts “in total and as separate proposed amounts, and annotated as to the PWS paragraph the cost element supports.” The solicitation provided that offerors’ task order scenario cost/price proposals would be evaluated for cost realism. The solicitation further provided that offerors’ proposed costs and prices would be evaluated for reasonableness using cost and price analysis techniques.
In connection with preparing a proposal in response to the solicitation, Orion teamed with eleven firms with the understanding that if Orion were awarded a contract, those firms would perform portions of the contract as subcontractors to Orion. With respect to the task order scenario, Orion’s proposal indicated that eight of Orion’s team members would perform tasks required by the task order scenario PWS. As required by the solicitation, Orion’s task order scenario cost/pricing proposal included a table that listed the number of hours that Orion and Orion team member personnel were to work in connection with the various PWS paragraphs. The table also listed the total cost, with fee, for the work. For Orion personnel, the table disclosed the direct labor, fringe benefit, and G&A rates for each labor category. For Orion team member personnel, however, the table included no direct labor, fringe benefit, or G&A rate information. The agency received cost/price proposals from three Orion team members that were to perform tasks under the task order scenario PWS. All three cost/price proposals provided detailed supporting information, including direct labor, fringe benefit, and G&A rate information. The agency then received Orion’s proposal. Orion sent two other proposal packages, but because the packages arrived after the time set for receipt of proposals, the contracting officer returned the unopened packages to Orion as late.
Based on an initial review of Orion’s proposal, the agency determined that the proposal did not include required cost/pricing information for five Orion team members that were to perform tasks under the task order scenario PWS. From the initial review, the agency also determined that Orion’s proposal did not include an allocation of ODCs to the task order scenario PWS CLINs, as required by the solicitation. Orion filed a protest with the agency challenging the elimination of the firm’s proposal from the competition.
Orion asserts that its proposal included sufficient information for the agency’s evaluation, and, therefore, the agency’s determination to eliminate the proposal from consideration for award was unreasonable. GAO states that in reviewing protests challenging allegedly improper evaluations, or, as here, the rejection of a proposal based on the agency’s evaluation, it is not GAO’s role to reevaluate proposals; rather, GAO examines the record to determine whether the agency’s judgment was reasonable, and in accordance with the solicitation criteria and applicable procurement statutes and regulations. A protester’s mere disagreement with the agency’s judgment does not establish that an evaluation, or rejection, was unreasonable. Additionally, it is an offeror’s responsibility to submit a well-written proposal, with adequately detailed information which clearly demonstrates compliance with the solicitation and allows a meaningful review by the procuring agency. Any proposal that fails to conform to material terms of the solicitation may be considered unacceptable and not form the basis for an award. Even where individual deficiencies may be susceptible to correction through discussions, the aggregate of many such deficiencies may preclude an agency from making an intelligent evaluation, and the agency is not required to give the offeror an opportunity to rewrite its proposal. Further, communications with offerors before the establishment of the competitive range “shall not be used to cure proposal deficiencies or material omissions, or materially alter the technical or cost elements of the proposal.”
The solicitation here provided that offerors’ task order scenario cost/price proposals would be evaluated for cost realism and that proposed costs would be evaluated for reasonableness using cost analysis techniques. The FAR describes cost analysis as, “the review and evaluation of any separate cost elements and profit or fee in an offeror’s or contractor’s proposal, as needed to determine a fair and reasonable price or to determine cost realism, and the application of judgment to determine how well the proposed costs represent what the cost of the contract should be, assuming reasonable economy and efficiency.” With respect to cost realism analysis, the FAR provides that, “Cost realism analysis is the process of independently reviewing and evaluating specific elements of each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements are realistic for the work to be performed; reflect a clear understanding of the requirements; and are consistent with the unique methods of performance and materials described in the offeror’s technical proposal.”
The FAR also provides that cost realism analyses “shall be performed on cost reimbursement contracts.”
Although application of the methodology advocated by Orion would have permitted the agency to derive the fully loaded labor rates of the Orion team members for which cost information was missing, such methodology would not have permitted the agency to review the specific elements of the team members’ costs to determine whether those elements were realistic or reasonable. For example, using Orion’s methodology, the agency could not have derived the team members’ direct labor rates or indirect costs, such as fringe benefit or G&A costs. Accordingly, application of Orion’s methodology would not have permitted the agency to evaluate Orion’s proposed costs as contemplated by the FAR. Further, the informational deficiencies in Orion’s proposal relate to specific and detailed cost evaluation criteria in the solicitation and the solicitation expressly cautioned offerors that failure to submit the information in question could result in the elimination of a proposal from consideration for award. GAO therefore concludes that the agency reasonably excluded Orion’s proposal from the competition. The protest is denied.