Agency Failed to Consider Proposed Efficiencies Before Making Upward Cost Adjustment; GAO B-415944, Trident Vantage Systems, LLC; SKER-SGT Engineering & Science, LLC


Protests alleging an impaired objectivity organizational conflict of interest are denied, where the performance of an affiliate of the awardee on another contract for the agency did not include evaluating or testing the awardee’s products or solutions. A protest challenging the agency’s evaluation of relevant experience and past performance is sustained, where the agency failed to document its evaluation or demonstrate that it meaningfully considered the scope of offerors’ past performance contracts in comparison to the current procurement. Finally, GAO sustained one challenge to the agency’s cost realism adjustments, finding that the agency failed to consider the protester’s proposed efficiencies before making the adjustment, and denied another challenge, finding that the protester failed to support its decision to eliminate highly-skilled but expensive subcontractor support in favor of its own workforce.

Trident Vantage Systems LLC and SKER-SGT Engineering & Science LLC protested the National Aeronautics and Space Administration’s award of an engineering, research, and scientific support services contract to HX5 LLC, alleging the agency failed to consider an organizational conflict of interest and erred in its evaluation of proposals.

First, the protesters argued NASA failed to meaningfully consider an alleged impaired objectivity OCI stemming from HX5’s performance on a different NASA contract for Glenn Research Center, where the contract under dispute will be performed. Specifically, HX5 Sierra LLC (a joint venture between HX5 and another firm) performs the test facility operations, maintenance, and engineering (TFOME) services contract for the center. According to the protesters, HX5 Sierra will evaluate HX5’s own work on the disputed contract.

In response, the agency noted that the contracting officer determined that nothing in HX5 Sierra’s work could give HX5 the opportunity to benefit on this contract, or vice versa. According to the CO, the TFOME contractor provides facility-focused support services related to the management, operations, maintenance, and engineering of test facilities and laboratories at GRC. Under the contract, the customers are NASA projects that require testing of NASA articles. In other words, the TFOME contractor will not support the awardee of the contract at issue. Further, the TFOME contractor does not actually direct or control any test activities; rather, NASA either performs the testing or maintains complete control over the test activities.

GAO found the agency’s explanation reasonable and that the CO convincingly refuted the protesters’ allegations. GAO found the protesters’ allegations misrepresented the nature of the TFOME contract and were generally speculative in nature. Absent hard facts or an allegation of a direct financial benefit to HX5, GAO denied these grounds of protest.

SSES also protested NASA’s evaluation of proposals under the relevant experience and past performance factor, specifically challenging the agency’s relevancy determinations. SSES argued the evaluators failed to consider scope as part of the assessment of relevancy, and that the contemporaneous record is inadequately documented.

The solicitation required offerors to provide performance information for past or current contracts that were relevant to the GEARS requirement, and were instructed to provide information about each contract, such as the contract title, contract type, total dollar value, and a brief description of the work. The solicitation established that only contracts deemed relevant in terms of the scope of work would be considered.

GAO found that the entirety of the contemporaneous evaluation record that discussed relevant experience and past performance is the SEB’s briefing to the SSA, which GAO considered sparse. For each offeror, the SEB created a table providing the contract information provided by each offerors—number, name, etc.—by simply copying the information from the proposals. The SEB then assigned an overall rating of relevant, somewhat relevant, or highly relevant. GAO found no discussion of the scope of the offerors’ past performance contracts, nor any rationale for the assigned relevancy ratings.

Given the lack of documentation of the agency’s evaluation, GAO had insufficient information to assess its reasonableness. GAO found no evidence the evaluators meaningfully considered the scope of the offerors’ past performance, even though the RFP established that, as a threshold matter, only contracts relevant in scope to the requirement would be considered. GAO also noted that the agency’s post-protest explanations unavailing. For example, the CO explained that H5X’s performance of operations and quality assurance services under the engineering contract NAICS code translated into experience performing some of the work required under the current contract’s statement of work. However, GAO failed to see how simply having a NAICS code with the term engineering in it—notably, a different NAICS code than the GEARS procurement—demonstrated relevance to GEARS in terms of scope.

GAO also found the agency’s relevancy conclusions were inconsistent and did not withstand scrutiny. For example, SSES noted that two of its contracts were deemed highly relevant, while a third contract for the same work but of higher value, was found to be only relevant. While the agency attempted to justify the difference in ratings, GAO found NASA’s response unhelpful.

SSES also argued that HX5’s high level of confidence rating appears inconsistent with the solicitation’s ratings criteria. The solicitation stated that a high level of confidence rating was reserved for offerors whose relevant past performance was highly pertinent to the requirement. However, despite its high level of confidence rating, HX5 had only one prior contract deemed relevant and one deemed somewhat relevant, and its major subcontractor had one relevant contract and three somewhat relevant contracts. GAO agreed that the rating appeared at odds with the evaluation conclusions. Accordingly, GAO sustained both SSES’s relevant experience and past performance challenges.

Next, both protesters challenged the agency’s cost realism adjustments to their respective proposals. In the staffing element of SSES’ mission suitability proposal, the protester proposed a reduction of work-year equivalent employees over the life of the contract. SSES based its plan on the government’s estimated staffing levels and its proposed innovations and efficiencies. The SEB assigned the proposal a significant weakness under this element, finding that the reduction in staff was unsubstantiated. In their briefing, the evaluators included a chart showing the total WYEs SSES proposed, and documented the key areas impacted by the WYE reductions. No additional information was documented in the evaluation report regarding this weakness.

Based solely on the significant weakness, the cost committee performed a probable cost adjustment to “straight-line” SSES’s year 1 WYEs across each year of performance. This adjustment, coupled with an increase to direct labor rates to track with the government estimate, resulted in an upward adjustment of nearly $22.5 million in direct labor alone.

SSES challenged this adjustment, arguing that NASA failed to consider numerous innovations and efficiencies that substantiated the proposed WYE reductions. Specifically, SSES included three pages of substantiating information in the innovations and efficiencies part of its proposal, which was to be assessed under the fourth element of the understanding the requirements subfactor. In addition, SSES also included the substantiating information detailing its proposed innovations and efficiencies in its cost proposal. Further, SSES noted the cost adjustment appeared to have been based solely on the significant weakness assigned to its proposal, while the record lacked any evidence the agency considered these efficiencies.

GAO agreed, finding the agency did not support its cost adjustment. GAO agreed that the adjustment appeared to be based solely on the assigned weakness without considering the rest of SSES’s proposal. Contrary to the agency’s conclusion that the staffing reductions were unsubstantiated, GAO identified numerous efficiencies documented in SSES’s proposal. If the agency had concerns about SSES’s assumptions, it failed to document them in the evaluation. Accordingly, GAO sustained SSES’s protest on these grounds

TVS also objected to the agency’s upward adjustments to its proposal under the following five cost elements: overhead, other direct costs, subcontractor labor, general and administrative expenses, and award fee. However, GAO found none of the challenges provided a basis to sustain the protest. For example, TVS protested the agency’s upward adjustment under the minor subcontractor labor element.

In its proposal, TVS recognized the “essential” “advanced skillsets” being fulfilled with minor subcontractor labor, as well as the relatively high labor rate for these WYEs. However, TVS also proposed to replace some of the minor subcontractors with labor categories from its direct labor pool. Based on its concern that the highly specialized subcontractor employees could not be replaced by employees from TVS’s own workforce, the agency removed the WYEs from the direct labor pool and replaced them in the minor subcontractor category, resulting in an upward adjustment to TVS’s price.

Though TVS challenged this decision, GAO found the protester acknowledged that some of the work would be best procured by subcontracts and that the agency’s staffing estimates were accurate, but nonetheless used its business judgment to reduce the minor subcontractor support and rely on its own employees. Further, the agency made no adjustment to the net labor hours, only to the categories. Based on the agency’s well-documented concerns and TVS’s own acknowledgement of the expertise of the subcontractor employees, GAO found no reason to sustain the protest.

The protesters are represented by Daniel R. Forman, and Hart W. Wood of Crowell & Moring LLP, for Trident Vantage Systems, LLC; and by Adam K. Lasky, Howard W. Roth, Ryan M. Gilchrist, and Daniel P. Radthorne of Oles Morrison Rinker & Baker LLP, for SKER-SGT Engineering & Science, LLC.

HX5 LLC is represented by Jonathan D. Shaffer, John S. Pachter, Mary Pat Buckenmeyer, and Todd M. Garland of Smith Pachter McWhorter PLC. The government is represented by Alexander T. Bakos, Callista M. Puchmeyer, Macallister A. West, James P. Burke, and Lisette S. Washington, National Aeronautics and Space Administration. GAO attorneys Noah B. Bleicher, and Peter H. Tran participated in the preparation of the decision.