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Protest challenging agency’s technical evaluation and cost analysis is denied. The protester argued that it should not have received a weakness for its escalation of labor rates because, in its experience, the proposed escalation had worked. GAO found that the protester had to offer more—like documentation substantiating its escalation approach—than the contemptuous “In-our-experience” rationale. The protester also complained that the agency “double-penalized” it by assigning a weakness for the escalation and then adjusting the protester’s cost to reflect the risk posed by that escalation issue. But GAO chucked this argument, reasoning the agency could adjust cost to reflect technical risk.

The Army awarded a contract for aviation maintenance services to DynCorp International, LLC. PAE Aviation and Technical Services, LLC, whose proposal was technically inferior to but cheaper than DynCorp’s, protested. PAE alleged that the Army’s technical evaluation and cost analysis were defective.

PAE challenged a weakness assigned to its technical approach. The specifics of the weakness are redacted, but it appeared to concern the escalation of labor rates. The Army notified PAE during discussions that problems with escalation could impact the company’s ability to recruit and retain employees. In its revised proposal, PAE apparently altered some of the rates, but it left others unchanged. PAE explained that in its experience, the proposed escalation was fine. The Army was not satisfied with this explanation and thus assigned PAE a weakness.

GAO found no reason to question the Army’s conclusions. PAE had to do more than simply rely on the “in-our-experience” reasoning to justify it rates. Rather, it should have provided substantiating documentation for its approach. An offeror that does not affirmatively demonstrate the merits of its proposal risks unfavorable evaluation.

PAE also objected a weakness it received for including the physical examinations of employees as a cost-reimbursable item. PAE argued that the RFP allowed physical examinations to be included in certain cost CLINs. But GAO noted that only the physicals of certain employees fulfilling “unique government requirements” were reimbursable. PAE’s proposal appeared to indicate that all employee physicals were reimbursable. Indeed, even if PAE only intended to include only the allowable physicals in the CLINs, its proposal was ambiguous as it appeared to include all employees. GAO found this weakness unobjectionable.

Lastly, PAE complained that the Army adjusted the company’s proposed price upward. PAE did not really take issue with the Army’s cost realism methodology. Instead, it claimed the Army “double-penalized” PAE by (1) assigning a weakness for the labor rate escalation issue, and then (2) imposing a cost adjustment based on the risk posed by that escalation issue.

GAO was unconcerned with the price adjustment. A cost realism analysis is an independent review of specific elements of an offeror’s price. Thus, just because an offeror received a technical weakness does not mean that their price can’t be adjusted. Here, the RFP provided that the Army would perform a cost analysis to evaluate risk associated with technical proposals. The Army found that PAE’s technical posed a risk with respect to escalation. The Army was entitled adjust the price to reflect that risk.

PAE is represented by Anuj Vohra, James G. Peyster, and Stephanie L. Crawford of  Crowell & Moring LLP. The intervenor, DynCorp, is represented by Scott F. Lane, Timothy Sullivan, Katherine S. Nucci, Edward W. Gray, Jr., and Jayna M. Rust of Thompson Coburn LLP. The agency is represented by Wade L. Brown, Christopher C. Schwan, and Alexa B. Bryan of the U.S. Army. GAO attorneys April Y. Shields, Glenn G. Wolcott, and Christina Sklarew participated in the preparation of the decision.