Protest challenging the agency’s technical and price evaluation is sustained, where the agency waived for some awardees a material requirement that offerors adequately verify that they possessed an audited, acceptable cost accounting system. The court also agreed the price evaluation was unreasonable, finding that the agency’s calculation of an average and deviation range for each CLIN relied on rates chosen from an arbitrary group of offerors. The court found that some offerors’ rates were double counted, while others were omitted from the calculation, and that the agency had used different sets of averages and upper bounds of the deviation range to evaluate the proposed prices of different offerors.
Citizant Inc. protested the General Services Administration’s award of IT services contracts under its Alliant 2 Small Business governmentwide acquisition contract, arguing that the agency improperly evaluated the technical proposals of the awardees.
Citizant was not among the 81 awardees, because its proposal score was too low. GSA intended to make award only to the top 80 proposals, or more, if there were a tie for the 80th spot, and the protester’s score was not in the top 80.
Citizant challenged GSA’s evaluation of multiple offerors that were selected as awardees. The protester argued that certain awardees (1) failed to substantiate claims they possessed a verified cost accounting system or (2) submitted inadequate pricing information, or (3) both.
First, Citizant argued the agency improperly concluded that 21 offerors had adequately substantiated their CAS. Among the major evaluation criteria, GSA required offerors to demonstrate they had an acceptable and verified CAS. Offerors were required to submit verification from DCAA, DCMA, or another cognizant federal agency. In lieu of submitting a letter from the auditing agency, an offeror could submit a statement of certainty in which it averred that it possessed an audited and adequate CAS.
Of the 21 offerors challenged by Citizant, two attempted to validate their experience by submitting a letter from DCAA addressing the adequacy of their incurred cost proposal. Relying on those letters, the CO concluded the offerors had demonstrated they each had a CAS that had been audited and determined adequate. Citizant argued these offerors failed to provide evidence that their CASs were audited and found adequate.
In response, the agency argued the awardees’ DCAA letters provided the necessary information because an ICP is submitted by a contractor performing a cost-reimbursement contract, and can only be used if the contractor’s CAS has been deemed adequate.
However, the court agreed with the protester, first finding that DCAA’s review of an ICP is not unequivocal evidence that the contractor has an adequate CAS. DCAA’s assessment of an ICP is evidence that the contractor has an adequate CAS only if the ICP was submitted in connection with a cost-reimbursement contract. Because the type of contract associated with the offerors’ ICPs was not evident from their respective proposals, the CO could not rely on the DCAA letters to conclude that those offerors possessed an adequate CAS.
Second, the court noted that the DCAA letters did not indicate that the awardees’ CASs were audited and found adequate by the DCAA or another CFA even if the ICPs were submitted in connection with a cost-reimbursement contract. A contractor can receive a cost-reimbursement contract without having a CFA provide an audit-and-adequacy determination. The court noted the FAR is silent with respect to how a procuring agency must assess the adequacy of a CAS, and agencies have accepted materials other than a CFA audit-and-adequacy determination. The court concluded the CO’s evaluation of these offerors’ proposals in this area was irrational.
For 17 awardees, Citizant alleged they did not include a statement addressing whether they had materially changed their CASs since their last audit. In response, the agency argued that the CO found the necessary averment in each offeror’s basis of estimate or waived the requirement to submit a statement because the substance of the requisite representation was present in the BOE. Halvik, the defendant-intervenor, responds that it made the necessary averment in volume 1 as part of its meaningful commitment letter.
However, the court agreed this action was problematic. First, the court noted the CO reviewed the CAS component of offerors’ proposals using an evaluation worksheet that did not contain a question concerning whether the offerors provided the required statement. Further, he failed to mention this requirement in the technical summary. Second, these offerors did not submit the averment in the appropriate volume. Offerors were required to submit this information in volume 4, not in the price volume. Thus, the court held these offerors failed to substantiate the points they claimed for having an acceptable CAS.
Further, the CO still erred even if he could, and did, look beyond volume 4 for this information. The agency argued the CO found this information in the offerors BOEs in volume 6, but the court found no evidence he actually relied on that information. Finally, the court noted the CO could not know what was in the BOE when he evaluated volume 4 of the offerors’ submissions, as the evaluation scheme called for a review of the price volume after the technical evaluation was complete.
Citizant also challenged the award to five offerors, arguing they were improperly found to have submitted fair and reasonable pricing. These offerors had submitted a complete volume 6 with a basis of estimate and cost/price template. In the BOE, each of the offerors stated that they were proposing direct labor rates within the DOL range and indirect labor rates derived from their CASs.
The CO found their direct labor rates were reasonable because those rates were within the DOL range. He then determined that their indirect labor rates were reasonable because they were generated from the offerors’ CASs or otherwise met the criteria set forth in the solicitation. In addition, he concluded that these offerors proposed reasonable profit rates because the rates were no more than 7.5 percent per CLIN.
The CO then evaluated the reasonableness of the rates by comparing them to the average prices proposed by offerors in response to the solicitation. The CO calculated the average and deviation range from the rates proposed by eighty-seven offerors. However, in the spreadsheet that he used for his calculations, he excluded some awardees, omitted the rates proposed by many of the offerors, and double counted the rates proposed by two offerors. The CO also did not use the same averages and ratings when assessing each proposal; for various CLINs, he identified at least two different averages and upper bounds of the deviation range. Nonetheless, he concluded that the offerors challenged by Citizant had submitted fair and reasonable prices.
Citizant argued the CO improperly concluded that these five awardees proposed reasonable prices even though they did not provide a clear and convincing rationale for proposing fully burdened labor rates that were outside the deviation range. However, the court noted that GSA did not require offerors to provide such an explanation; offerors only needed to provide a rationale for direct labor rates that were not within the DOL range. Further, the court noted that offerors could not provide such a rationale, because the deviation range was not calculated until after proposals were submitted.
However, the court took issue with how the CO analyzed the fully burdened labor rates proposed these five awardees. First, the CO did not evaluate the offerors’ proposed pricing in a consistent manner, but used two different sets of averages and upper bounds of the deviation range when comparing offerors’ proposed rates for a CLIN to the associated average and upper bound for that CLIN. Specifically, he used one set for reviewing one awardee’s proposed pricing and a different set for the other offerors without explaining (or even acknowledging) the discrepancy.
Second, for that second group of offerors, the CO calculated an average and deviation range for each CLIN using rates proposed by an arbitrary group of offerors. Though he derived those figures from the rates proposed by eighty-seven offerors, the CO excluded the rates proposed by some awardees, omitted the rates proposed by many of the offerors, and double counted the rates proposed by two offerors. The CO provided no justification, much less a rational justification, for how he selected the proposed rates to use in his averages.
Third, the CO failed to provide a rational explanation for concluding that rates offerors proposed outside the deviation range were reasonable. For those outlier rates, he concluded that they were reasonable because the two inputs—indirect and direct labor rates—were reasonable. But the court explained that it did not follow that reasonable inputs per se lead to a reasonable output; indeed, an offeror who proposed high (but reasonable) direct and indirect labor rates could theoretically exceed the acceptable range for the fully burdened rate.
The court concluded that Citizant was prejudiced by these errors, due to the multiple instances of evaluation actions that were arbitrary, capricious, or irrational. The court also held that Citizant demonstrated that it had a substantial chance of receiving an award but for the CO’s errors. First, the court found that noting in the protester’s proposal would have disqualified it from award based on the technical or price evaluations. Citizant missed out on an award only because its score was not among the top 80 scores. Second, the court held that Citizant successfully alleged errors that would have eliminated enough of the awardees from the competition to place its proposal within the top 80. The court granted Citizant an injunction barring the awards and requiring the agency to reevaluate and re-sort proposals in accordance with the solicitation criteria.
Citizent Inc. is represented by Tenley A. Carp. The government is represented by Jeffrey D. Klingman, United States Department of Justice. Halvik Corp. is represented by Alexander J. Brittin.
