Protest challenging the agency’s cost realism evaluation is sustained. The solicitation required offerors to submit historical data to substantiate the escalation rates for proposed salaries. The protester submitted historical data to support its rates. The agency, however, did not consider the historical data and upwardly adjusted the protester’s rates based on current market data. GAO found that the agency unreasonably ignored the cost data in the protester’s proposal.
The Navy issued an RFP seeking to award a task order for engineering services. Sayres & Associates Corporation and RP Technologies submitted proposals in response. The Navy awarded the contract to RP, finding it had a technically superior proposal and a lower price. Sayres protested, challenging the cost realism evaluation of its proposal.
Sayres alleged the cost realism analysis was flawed because the Navy unreasonably rejected Sayres’ escalation rate for salaries. The solicitation required offerors to provide an escalation rate for proposed wages. Offerors had to provide historical information to substantiate the rate. In the absence of historical information, the government would use market data to evaluate the escalation rate.
The Navy found that Sayres did not provide historical data to support its escalation rate. The Navy thus adjusted Sayres escalation rate upward based on market data. Sayres, however, provided detailed salary data for the last five years.
GAO found that the Navy had ignored Sayres cost data. The record was devoid of any documentation reflecting the agency’s acknowledgement of substantiating data let alone any consideration of the information provided. The cost realism evaluation of Sayres’ escalation rate was therefore unreasonable.
The Navy attempted to argue that it rejected Sayres escalation data because it was not verified. But GAO noted that the Navy had only raised this rationale after Sayres’ protest and that it was not supported by the contemporaneous record. Moreover, GAO noted, nothing in the solicitation required offerors to verify or authenticate the cost data in proposals.
Finally, the Navy argued that even it made an error ignoring the cost data, Sayres had not been prejudiced. If Sayres’s escalation rates were accepted, the Navy contended, it would only result in a statistically insignificant change in price. Given RP’s technical superiority, Sayres could still not establish that it had a substantial chance of receiving award.
But GAO noted that because the Navy found that RP had a higher rated proposal and a lower price, the agency had not performed a best value tradeoff. Had the Navy accepted Sayres’ escalation rates, however, Sayres would have had a lower price than RP, and the Navy would have been required to analyze best value. Although the difference in cost was small, GAO could not ascertain whether the Navy would have selected Sayres for award if it had conducted a proper realism analysis.
Sayres is represented by Andrew P. Hallowell of Pargament & Hallowell, PLLC. The intervenor, RP Technologies, is represented by Maria L. Panichelli of Obermayer Rebmann Maxwell & Hippel LLP. The agency is represented by Ryan Banach of Naval Sea Systems Command. GAO attorneys Joshua R. Gillerman and Peter H. Tran participated in
