Trajen, Inc., B-284310; B-284310.2, March 28, 2000

Trajen, Inc., B-284310; B-284310.2, March 28, 2000 TITLE: Trajen, Inc., B-284310; B-284310.2, March 28, 2000 BNUMBER: B-284310; B-284310.2 DATE: March 28, 2000 ********************************************************************** Trajen, Inc., B-284310; B-284310.2, March 28, 2000 Decision Matter of: Trajen, Inc. File: B-284310; B-284310.2 Date: March 28, 2000 Jeffrey A. Stonerock, Esq., and Steven A. Alerding, Esq., Baker Botts, for the protester. Anne Rathmell Davis, Esq., and Lori S. Chofnas, Esq., Department of the Navy, for the agency. Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Protest of agency appeal authority's cost comparison decision made pursuant to Office of Management and Budget Circular No. A-76 is sustained where the appeal authority lacked a reasonable basis for reversing the initial cost comparison conclusion that contractor performance was more economical than in-house performance. DECISION Trajen, Inc. protests the decision of the Department of the Navy's appeal authority, pursuant to Office of Management and Budget (OMB) Circular No. A-76, that it would be more economical to operate and maintain in-house the Defense Fuel Support Point (DFSP) Pearl Harbor, Hawaii, rather than to contract for these services under request for proposals (RFP) No. SPO600-99-R-0005, issued by the Defense Energy Support Center, Defense Logistics Agency (DLA). Trajen challenges the appeal authority's cost comparison decision on numerous grounds and argues that if the cost comparison is adjusted to correct errors, the cost of performance under a contract with Trajen would be lower than the cost of in-house performance. We sustain the protest. BACKGROUND DLA issued the RFP on October 13, 1998 for the "operation, maintenance, product quality surveillance, shelf-life testing on packaged products, inventory control and accounting, security, safety, plant protection, and environmental protection of the [DFSP], Pearl Harbor." RFP sect. C-1.1, at C-PH-7. The RFP contemplated the award of a 2-year fixed-price contract with cost reimbursable provisions, plus one 3-year option. RFP Cover Sheet at 3. Offerors were advised that the procurement was to be conducted in accordance with OMB Circular No. A-76, "Performance of Commercial Activities," under which a cost comparison would be made to determine whether accomplishing the work with a commercial offeror or in-house by the government would be more economical. Id. at 1. Offerors were advised that if in-house performance was determined more economical, the RFP would be canceled and no contract would be awarded. Id. On August 5, 1999, DLA selected Trajen's proposal as the most advantageous proposal for purposes of the cost comparison with the government's in-house cost estimate. Trajen's proposed contract price was $10,476,263. See Agency Report, Tab 8, Initial Cost Comparison Decision, Sept. 9, 1999, at line 9. On September 9, the DLA contracting officer at Fort Belvoir, Virginia, completed the cost comparison form which showed that the adjusted total cost for Trajen to perform the contract was $1,848 lower than the adjusted total cost of in-house performance. Id. at line 19. In this regard, Trajen's proposed contract price was adjusted upward, from $10,476,263 to $12,711,615, taking into account contract administration costs, one-time conversion costs, and a minimum 10-percent conversion differential (based on 10 percent of the government's personnel costs) to ensure that the government would not be converting for marginal estimated savings; Trajen's price also was reduced to reflect estimated future tax payments to the government. Id. at lines 10, 12, 14, 16, 18. The adjusted total cost for in-house performance was $12,713,463. The in-house cost estimate consisted of costs for personnel, materials, "other costs," and overhead. Id. at lines 1-4, 17. Accordingly, after revealing the results of this cost comparison, the DLA contracting officer selected Trajen for award. Pursuant to the administrative appeal procedures in OMB Circular No. A-76, Trajen and the National Association of Government Employees (NAGE) filed appeals, each alleging errors and omissions in the cost comparison form. Agency Report, Tab 2, NAGE Appeal, and Tab 3, Trajen Appeal. On December 8, after considering the issues raised in the two appeals, the Navy's appeal authority in Mechanicsburg, Pennsylvania, made various adjustments to the cost comparison. [1] According to the appeal authority's cost comparison decision, the cost of in-house performance was $103,613 lower than the cost if Trajen was to perform the contract. Agency Report, Tab 4, Administrative Appeal Authority Decision (Appeal Authority Decision), Dec. 8, 1999, at line 19.