Tidewater Construction Corporation, B-278360, January 20,

B-278360 Jan 20, 1998 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Agency failed to perform a proper cost realism analysis in evaluating for the award of a cost-plus-award-fee construction contract where its only analysis of the offerors' proposals was a comparison of the proposed costs for various work items to the government estimate. There was no analysis of the cost elements of the proposed costs or consideration of possible differences in technical approach between the proposals and the government estimate. Offerors were required to propose a "target cost" for each of the 13 items. Target costs and award fees were requested for each option. Option 1 was broken down into 2 work items and option 3 was broken down into 7 work items. The RFP evaluation scheme provided for award on a best-value basis in which the technical area was said to be more important than cost. View Decision Matter of: Tidewater Construction Corporation File: B-278360 Date: January 20, 1998 * Redacted Decision DIGEST Attorneys DECISION Tidewater Construction Corporation protests the award of a contract to Pizzagalli Construction Company under request for proposals (RFP) No. N62470-96-R-6134, issued by the Naval Facilities Engineering Command, for the construction of a crane rail interconnect system at the Norfolk Naval Shipyard, Portsmouth, Virginia. Tidewater objects to the Navy's cost realism evaluation and best value analysis that resulted in Pizzagalli's lower-rated, lower-cost proposal being selected for the award. We sustain the protest. The RFP, issued on April 22, 1997, contemplated the award of a cost-plus-award-fee contract for the construction of an interconnecting crane rail system on certain piers, including relocation of railroad tracks and utilities, paving, and related site work. The RFP, as amended, broke down the basic work into 13 work items. Offerors were required to propose a "target cost" for each of the 13 items, and a proposed award fee for the first work item, the second work item, and the combination of the other 11 work items. The RFP, as amended, also contained four priced options. Options 1 and 2 required the construction of a crane rail between certain piers. Option 3 required the construction of an oily waste/waste oil collection system. Options 4 and 5 required the construction of crane rail spurs at certain piers. Target costs and award fees were requested for each option. In addition, option 1 was broken down into 2 work items and option 3 was broken down into 7 work items. The RFP evaluation scheme provided for award on a best-value basis in which the technical area was said to be more important than cost. At the time the RFP was issued, proposals were to be based upon a 60-percent design of the project. Proposals were to be evaluated for "technical and contractual acceptability, and for cost reasonableness." The technical evaluation factors, listed in descending order of importance, were as follows: 1. Prime Contractor's Past Performance 2. Prime Contractor's Corporate Experience 3. Major Subcontractor's Corporate Experience and Performance 4. Work Plan/Schedule/Contractor Quality/Safety 5. Support for Small Business, Small Disadvantaged, And Women Owned Small Business Program The RFP did not request detailed cost information, but advised that back-up documentation to support proposed costs for various large elements of cost and elements of cost making up the offeror's overhead pool would be requested during discussions. Subsequent amendments requested offerors to identify the home office overhead rate, and the elements of cost thereof, and advised that overhead should be included in all prices and that overhead would be reimbursed at the actual incurred rate determined by yearly Defense Contract Audit Agency (DCAA) audits. During discussions, the offerors were requested to identify cost items under the first work item of the basic contract that exceeded $400,000. /1/ No other information regarding the offerors' elements of their proposed costs was requested. To assist in the cost evaluation, the Navy had an architect/engineer prepare cost estimates tracking 35 percent, 60 percent, and 100 percent design of the project. On May 22, the Navy received proposals from Tidewater, Pizzagalli, [DELETED]. All were included in the competitive range. After discussions, offerors submitted revised technical and cost proposals incorporating various amendments, including the 100-percent design of the project. After further discussions, best and final offers (BAFO) were submitted on September 8. Tidewater's BAFO proposed a total target cost plus fee of [DELETED] and Pizzagalli's BAFO proposed a total target cost plus fee of [DELETED]. /2/ The architect/engineer's estimate based on the 100-percent design was [DELETED]. This estimate was the basis for the agency's cost realism and reasonableness evaluation. Hearing Transcript (Tr.) at 14-17, 36-39, 50, 61.