Hughes STX Corporation, B-278466, February 2, 1998

B-278466 Feb 02, 1998 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Protest is sustained where the cost realism evaluation was unreasonable and discussions conducted with the protester concerning its proposed direct labor rates were not meaningful. The RFP required offerors to provide 287 direct labor years of information systems (IS) personnel and 13 direct labor years of contract administration (CA) personnel. [1] The RFP specified ten IS and nine CA labor categories and provided staffing levels for each category. An offeror could propose to staff these labor categories with personnel employed by the offeror as the prime contractor or with personnel employed by the offeror's subcontractors. [2] The RFP provided that the award would be made to the offeror whose proposal was determined to be most advantageous to the government. View Decision Matter of: Hughes STX Corporation File: B-278466 Date: February 2, 1998 * Redacted Decision DIGEST Attorneys DECISION Hughes STX Corporation protests the award of a contract to Computer Sciences Corporation (CSC) under request for proposals (RFP) No. DTRS57- 97-R-00001, issued by the John A. Volpe National Transportation Systems Center, Department of Transportation, Cambridge, Massachusetts, for on- site information systems support. Hughes challenges the agency's evaluation of cost realism, conduct of discussions, and source selection decision. We sustain the protest. The RFP, issued on December 19, 1996, contemplated the award of a level- of-effort, cost-plus-fixed-fee contract for a 2-year base period and three 1-year option periods. For each year of the contract, the RFP required offerors to provide 287 direct labor years of information systems (IS) personnel and 13 direct labor years of contract administration (CA) personnel. [1] The RFP specified ten IS and nine CA labor categories and provided staffing levels for each category. Under the RFP, an offeror could propose to staff these labor categories with personnel employed by the offeror as the prime contractor or with personnel employed by the offeror's subcontractors. [2] The RFP provided that the award would be made to the offeror whose proposal was determined to be most advantageous to the government, technical evaluation factors and an offeror's evaluated costs considered. The RFP contained the following five technical evaluation factors: (1) corporate experience and past performance; (2) performance plan for major functional areas of work; (3) professional employees compensation plan; (4) key personnel assignments; and (5) plan for contract management and contract operation. (Technical evaluation factors (1) through (3) were of equal weight, and the other two technical evaluation factors were of lesser weight and listed in descending order of importance.) With respect to technical evaluation factor (3), the RFP stated that an offeror's proposed professional employees compensation plan would be evaluated in terms of realism and its impact upon the recruitment and retention of quality staff in order for the offeror to furnish high-quality uninterrupted service. With respect to costs, the RFP stated that an offeror's proposed costs would be evaluated for fairness, reasonableness, realism, and consistency with an offeror's technical proposal. According to the chairperson of the cost business evaluation team (CBET), in evaluating an offeror's cost proposal for realism, the agency was concerned with the offeror's claim that it would retain a stated percentage of the incumbent staff in light of direct labor rates proposed. Hearing Transcript (Tr.) at 8. [3] In determining the most advantageous proposal, the RFP provided that an offeror's technical proposal would be the "most important factor" and the firm's cost proposal would be the "next most important." Four firms, including Hughes and CSC, submitted initial technical and cost proposals by the closing date of February 12, 1997. Each of these proposals was included in the competitive range. In their respective proposals, Hughes proposed to retain approximately [deleted] percent of current incumbent personnel, and CSC proposed to retain approximately [deleted] percent of those personnel. In evaluating offerors' proposed labor rates for realism, the agency was concerned with the offerors' ability to retain a [deleted] percentage of incumbent personnel in light of direct labor rates proposed. Tr. at 8. Accordingly, the agency decided to determine the realism of each offeror's proposed labor rates in terms of incumbent personnel retention by comparing the proposed rates to historical labor rates on an individual labor category basis; the historical rates, which were essentially [deleted], were not disclosed to offerors. Tr. at 10, 17. [4] As stated by the chair of the CBET in the agency's post-hearing comments: [A]ll non-incumbents claimed [deleted] to [deleted] percent of the incumbent's staff would be retained.