Dynamic Science, Inc.

B-270448.3 May 01, 1996 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Protest against agency determination to disregard proposed discount that would render offer for indefinite delivery/indefinite quantity contract low is denied where proposal with discount was mathematically unbalanced and agency had a reasonable basis to doubt that award to protester would result in lowest overall cost to the government in light of the inherent unreliability of its estimates. That while the estimates represented the government's "best estimate of the requirements" and were to be used in preparing cost proposals. Was subsequently terminated after it became apparent that JIL was not in fact an SDB. 492) was approximately 14 percent lower than Kay's ($38. NAVAIR determined that DSI's offer was mathematically unbalanced. View Decision Matter of: Dynamic Science, Inc. File: B-270448.3 Date: May 1, 1996 Protest against agency determination to disregard proposed discount that would render offer for indefinite delivery/indefinite quantity contract low is denied where proposal with discount was mathematically unbalanced and agency had a reasonable basis to doubt that award to protester would result in lowest overall cost to the government in light of the inherent unreliability of its estimates. Attorneys DECISION Dynamic Science, Inc. (DSI) protests the Naval Air Systems Command's (NAVAIR) award of a contract to Kay & Associates, Inc., under request for proposals (RFP) No. N68936-95-R-0190, for aircraft maintenance support services at the Naval Air Warfare Center, China Lake, California. DSI argues that NAVAIR improperly disregarded DSI's proposed pricing discount that rendered its proposal low and did not conduct meaningful discussions with respect to the discount. We deny the protest. The solicitation contemplated the award of a time-and-materials, indefinite delivery/indefinite quantity contract for a 3-year base period, with 2 option years, to the low, technically acceptable offeror. The solicitation requested labor rates and included "estimated annual manhours per category" for 20 specified labor categories. It cautioned, however, that while the estimates represented the government's "best estimate of the requirements" and were to be used in preparing cost proposals, "the Government can guarantee neither the estimated quantities of man-hours shown for individual labor categories nor the total estimated man-hours." NAVAIR received three proposals by the closing time. Following discussions with all offerors, the agency requested best and final offers (BAFO). The agency initially determined that, based upon its eligibility for a small disadvantaged business (SDB) preference evaluation factor, JIL Information Systems had submitted the low, technically acceptable BAFO. The resulting award to JIL, however, was subsequently terminated after it became apparent that JIL was not in fact an SDB. Of the two remaining offerors, DSI proposed higher hourly labor rates than Kay, but also offered a discount pursuant to which it generally would not charge for labor hours in excess of approximately 80 percent and up to 100 percent of the solicitation estimate for a specified labor category. The evaluated cost of DSI's BAFO with the discount ($33,009,492) was approximately 14 percent lower than Kay's ($38,481,284). However, NAVAIR determined that DSI's offer was mathematically unbalanced, on the basis that the prices for the initial labor hours were overstated, and that, since actual labor hour usage could vary from the solicitation estimates, it was unlikely that the government would benefit from the proposed discount. NAVAIR concluded that Kay's BAFO offered the lowest cost to the government and made award to Kay on that basis. DSI essentially argues that, since its offer was low when evaluated with the proposed discount at the stated estimated labor hours, NAVAIR was required to make award to it. DSI specifically denies that its offer was unbalanced. The solicitation incorporated by reference Federal Acquisition Regulation (FAR) clause "Contract Award ALT III," FAR Sec. 52.215-16 (FAC 90-13), which cautioned offerors that the agency "may determine that an offeror is unacceptable if the prices proposed are materially unbalanced between line items or subline items." In this regard, there are two aspects to unbalancing. The first is a mathematical evaluation of the offer to determine whether each element of the offer carries its share of the cost of the work plus profit, or whether the offer is based on nominal prices for some work and enhanced prices for other work. The second aspect-- material unbalancing--involves an assessment of the cost impact of a mathematically unbalanced offer. An offer is materially unbalanced where there is reasonable doubt that award based on the offer will result in the lowest ultimate cost to the government. USA Pro Co., Inc., B-220976, Feb. 13, 1986, 86-1 CPD para. 159.