Protest challenging the agency’s consideration of an alleged OCI on the part of the awardee is denied in part, where the agency’s OCI waiver was executed in accordance with the FAR, and sustained in part, where the record contained no evidence the agency considered the impact of the awardee’s OCI mitigation plan on its technical approach. GAO also sustained a protest challenging the agency’s evaluation of the awardee’s cost proposal, finding that the agency’s downward adjustments to some of the awardee’s labor rates were unreasonable. After being informed during discussions that some of its proposed rates were higher than the incumbent’s, the awardee actually raised these rates. GAO concluded this decision reflected its business strategy for recruiting highly skilled employees, and therefore it was unreasonable for the agency to make a downward adjustment to rates it considered adequate.
ARES Technical Services Corporation protested NASA’s award of a contract for safety and mission assurance services to Millennium Engineering and Integration Company, arguing that the agency misevaluated proposals and inadequately addressed an alleged organizational conflict of interest.
First, ARES argued that MEI had an impaired objectivity type of OCI. In a previous protest, ARES maintained that performance under the currently-awarded contract could potentially involve MEI performing a review of work it or one of its subcontractors performed under other contracts. In response to that earlier protest, the agency performed a detailed investigation of possible OCIs on the part of both firms, and also solicited and obtained mitigation strategies from both. Based on MEI’s mitigation plan, NASA concluded that award to MEI would be unobjectionable, and therefore affirmed its earlier selection decision.
In this second protest, AREA alleged that MEI’s mitigation strategy was inadequate. The agency defended its review, but also executed a waiver of any residual OCI that MEI might have, notwithstanding its mitigation strategy. AREA argued this waiver was unreasonable.
GAO dismissed these grounds of protest, explaining that agencies may properly waive an OCI, provided the wavier is issued in accordance with the FAR. In its protest, ARES did not allege the waiver was deficient, but instead argued the waiver went against NASA policy. However, GAO explained that compliance with internal agency policy is not a FAR requirement for an OCI waiver, and therefore ARES’s complaint did not provide a basis for GAO to object to the waiver.
Next, ARES argued that when MEI provided the agency with its OCI mitigation strategy, it effectively made changes to its technical approach that the agency never considered in connection with its evaluation of MEI’s proposal. Under the new contract, MEI or its subcontractor might be required to review engineering work provided under another of MEI’s contracts, which creates the possibility of an impaired objectivity OCI. In order to mitigate this OCI, MEI stated that it would divest itself of all future work under the OMES II contract. Further, MEI stated it would consider whether any task orders issued under the new contract would require MEI to review its own work under the previous contract. If so, MEI stated it would not assign the review or approval of any previously developed MEI products to MEI employees working on the current contract. Instead, MEI would assign these tasks to other teammate employees, who would coordinate directly with NASA without MEI’s participation.
MEI also stated it would use physical and electronic firewalls to limit access to data among teaming members where the work being performed could give rise to a possible OCI, and the agency’s contracting officer stated that she would ensure that any OCI plan incorporated into the MEI contract would include such firewall provisions.
However, ARES noted that MEI’s proposal specifically provided that its program manager would have overarching authority over all contract matters, including the management and assignment of work among subcontractors, and that he is designated as the single point of interface with the agency. ARES also noted that MEI’s technical solution relies on use of a suite of software and communications tools that created a single architecture for sharing information among all members of MEI’s team. According to ARES, MEI’s mitigation strategy—which specifically contemplates the assignment of work directly to a subcontractor that will be responsible for execution and management of the task at issue without any involvement of MEI’s personnel or resources, and also contemplates using firewalled electronic information sharing protocols—is inconsistent with its proposed technical approach.
ARES argued the agency failed to consider these contradictions. ARES noted that the agency found its and MEI’s technical proposals essentially equal under the mission suitability factor, and therefore it was unreasonable for the agency not to consider how MEI’s mitigation strategy would affect its approach to the requirement.
GAO agreed, finding that NASA did not consider the impact of the awardee’s mitigation plan on its technical approach. The agency completed its technical evaluations before MEI submitted its mitigation strategy and the record contained no evidence evaluators later considered the effect of the OCI plan. Further, the evaluation materials provided to the SSA did not mention either the details of the OCI mitigation plan or its possible effect on MEI’s technical approach. While the CO provided an analysis of both parties’ OCI mitigation strategies, that document also did not address any impact on the offerors’ technical approaches. While the CO argued that she and the technical evaluators did discuss these considerations, GAO found no evidence of these considerations in the record. Without such supporting evidence, GAO had no basis to conclude the agency gave MEI’s mitigation strategy the appropriate level of consideration. Further, there is no evidence the SSA was aware that MEI’s mitigation strategy could have had an impact on its technical approach, or that he meaningfully considered this when making the source selection decision.
Finally, ARES protested the agency’s evaluation of the MEI cost proposal. According to ARES, when developing its most probable cost estimate for the awardee, the agency unreasonably made downward adjustments to a number of MEI’s proposed direct labor rates, and also made downward adjustments to MEI’s indirect costs to conform those costs to the downward adjustments made to MEI’s direct labor costs. In total, NASA reduced MEI’s most probably cost by $4,302,152. Because the awardee planned to hire a certain percentage of the incumbent staff, the agency adjusted selected MEI direct labor rates to the actual rates currently being paid under the incumbent contract, which were lower than those MEI proposed. ARES argued this adjustment was unreasonable and that NASA should have used MEI’s proposed direct labor rates in arriving at its most probable cost estimate for MEI.
GAO agreed, finding that the downward adjustment to MEI’s direct labor rates was unreasonable and therefore its downward adjustment to MEI’s indirect cost to account for the change in its evaluated direct labor costs also was unreasonable. GAO noted that the agency informed MEI during discussions that its direct labor rates were higher than the incumbent rates under the predecessor contract, In addition, the agency provided MEI with specific information relating to the percentage by which its proposed rates varied from the rates used by the agency in its most probable cost evaluation. However, in response to the agency’s discussion questions, MEI actually increased its rates for these labor categories.
GAO found MEI did make some reductions, which did not necessarily correspond to the percentages by which MEI’s proposed rates were identified as high by the agency. Under these categories, the agency adjusted MEI’s proposed direct rates downward still further, notwithstanding MEI’s proposed reductions. Further, GAO noted that MEI’s technical proposal stated that MEI would offer a total compensation package designed to attract, motivate and retain key engineering talent—the principal types of employees to be used to perform the contract.
Under these circumstances, GAO found the agency’s adjustments unreasonable. Despite the agency’s discussions, MEI decided to propose compensation above the amounts the agency suggested were adequate. GAO therefore concluded that MEI’s business strategy relied on its offer of compensation that it thought would be adequate to attract the incumbent workforce, rather than simply to match the incumbent direct rates. Therefore, GAO sustained the protest on these grounds as well.
ARES Technical Services Corporation is represented by Daniel R. Forman, James G. Peyster, and Hart W. Wood of Crowell & Moring LLP. Millennium Engineering and Integration Company is represented by Paul F. McQuade, Michael J. Schaengold, Danielle K. Muenzfeld, and Melissa P. Prusock, Greenberg Traurig, LLP. The government is represented by Ken M. Kanzawa, Victoria H. Kauffman, Amber M. Hufft, and Jessica A. Deihl, National Aeronautics and Space Administration. GAO attorneys Scott H. Riback and Tania Calhoun participated in the preparation of the decision.
