Protest challenging the agency’s assessment of a significant weakness and moderate risk in the protester’s proposal is denied, where the solicitation warned that unsubstantiated indirect rates could result in the assessment of a significant weakness and where the agency opened a third round of discussions to address this specific area with the protester. GAO found the protester not only failed to adequately substantiate its rates in response to the discussion notice, but had introduced additional reasons for the agency to question the basis of support for the dramatically low rates.
Vertex Aerospace LLC protested the Navy’s award of a contract for aircraft maintenance and logistics support services to DynCorp International LLC, challenging the technical evaluation and assessment of risks to Vertex’s proposal.
Vertex challenged the assessment of a significant weakness and associated risk in its proposal, in relation to its
The agency held several rounds of discussions and accepted revised proposals after each. In its second revised proposal, Vertex dramatically lowered the overhead and G&A rates it used to calculate the composite labor rate for one CLIN. The protester stated these were “strategic plan rates” but did provide any meaningful support for the lower rates. The agency opened discussions again and told Vertex that it was unable to verify these rates or the reason for the decrease, and cautioned that this could result in a significant weakness.
In response, Vertex explained that its parent company had sold Vertex to another firm and noted that the rates in its initial proposal were no longer relevant because of organizational changes and a “business win.” Vertex acknowledged that the cost models on which it based its planning rates were only preliminary estimates, because the company’s strategic plan had not been completed nor approved by management. In other words, Vertex relied on future organizational changes that had not been implemented to calculate and support its dramatically reduced rates, but did not provide any supporting documentation, such as an approved forward pricing rate proposal.
The agency assigned a moderate risk rating to Vertex’s proposal on this basis, noting that the rates were neither final nor approved and that the solicitation explicitly warned that an inadequately substantiated price for this particular CLIN could be considered a significant weakness. The evaluators expressed concern that Vertex may have underpriced this CLIN by as much as 25 percent. The source selection authority agreed that the unsubstantiated rates could render Vertex unable to staff this CLIN, which would introduce risk into the performance schedule. The SSA considered this a differentiator in the source selection decision.
In its protest, Vertex did not dispute that it proposed dramatically lower indirect rates for this CLIN than it had originally proposed. Vertex also acknowledged that the agency’s discussions had warned that failing to substantiate the rates could result in the assessment of a significant weakness. Nonetheless, Vertex argued that its rates for this CLIN were substantiated in its final revised proposal.
In response, the agency argued that Vertex’s response to the third round of discussions not only failed to provide anything more meaningful than vague references to ongoing corporate changes and restructuring, but actually presented additional indications that the rates were unreliable—specifically acknowledging that the rates were preliminary and had not even been approved by Vertex’s own internal management. Further, the agency noted that the risk that a contracting could be required to perform at a loss was precisely what it sought to avoid when it crafted the solicitation.
GAO found no basis to question the assessment of the weakness or moderate technical risk. The solicitation clearly put offerors on notice regarding the importance of technical risk and the agency’s concerns regarding unsubstantiated price proposals, and particularly regarding this CLIN. The solicitation stated that a significant weakness could be assessed for inadequately substantiated price proposals.
Further, GAO found reasonable the agency’s process for reviewing Vertex’s rates for this CLIN and for concluding that the rates presented a risk. GAO noted the agency opened a new round of discussions specifically to address this issue with Vertex, and yet the protester responded inadequately and, in fact, introduced new reasons to doubt the basis for the rates. Finally, GAO found nothing unreasonable about the agency’s concern that the unsubstantiated pricing could result in Vertex having difficulty staffing the CLIN. GAO denied the protest in full.
Vertex Aerospace LLC is represented by W. Jay DeVecchio, J. Alex Ward, James A. Tucker, R. Locke Bell, and Caitlin A. Crujido of Morrison & Foerster LLP. DynCorp International LLC is represented by Scott F. Lane and Katherine S. Nucci of Thompson Coburn LLP. The government is represented by R. Montana Erickson and Lisa D. Wentz, Department of the Navy. GAO attorneys Glenn G. Wolcott and Christina Sklarew participated in the preparation of the decision.
