Protest challenging agency’s cost realism evaluation is denied. The agency assessed realism by comparing offerors’ labor rates and mixes to those in a similar contract. The agency reasonably found that prices’ were realistic if they fell within a certain margin of that previous contract. The protester argued that the awardee’s price was unrealistic because it was lower than the government’s estimate. But GAO found that the agency was entitled to disregard the estimate because it did not provide a useful or accurate comparison to offerors’ proposals.
The Air Force issued an RFP seeking research and development services for its space experiments program. Five offerors, including ATA Aerospace and Millennium Engineering and Integration Company, submitted proposals. The Air Force awarded the contract to Millennium, which had a significantly lower evaluated cost than ATA. Thereafter, ATA protested, challenging the Air Force’s cost realism analysis.
ATA alleged that the Air Force had unreasonably determined that Millennium’s proposed price for one of the task orders contemplated by the solicitation was realistic. Millennium’s price for the task order was $25 million; ATA’s was $60 million.
GAO, however, found the evaluation reasonable. The Air Force had evaluated realism, in part, by comparing offerors’ proposed direct labor to a similar previous contract, the STRIVE contract. Because of the hard-to-predict nature of R&D efforts, the Air Force determined that proposed FTEs were reasonable if they feel within a margin of plus/minus 40 percent of the STRIVE contract. Millennium’s proposed FTE’s fell within this range. In addition to analyzing direct labor, the Air Force compared Millennium’s proposed hours and labor mix with the STRIVE contract and found the company’s approach consistent with that past effort.
ATA argued that the 40 percent margin was reverse-engineered to support a finding that Millennium’s costs were realistic. GAO noted that while ATA challenged the use of this margin, it had not demonstrated that the margin failed to accurately and fairly represent the uncertainties inherent in an R&D contract. What’s more, ATA had failed to show that it was unreasonable for the agency to conclude that R&D contracts in and of themselves created uncertainties in determining the appropriate amount of effort required.
ATA also argued that the Air Force’s reliance on the STRIVE contract was improper because it greatly understated the level of effort that would be required to perform the effort contemplated in this procurement. In support of this, ATA submitted a declaration from its proposed project manager who identified requirements that were not included in the STRIVE contract.
But GAO found that reliance on the STRIVE contract was reasonable. The opinion of ATA’s proposed project manager did not supersede the Air Force’s informed analysis and decision to use the STRIVE contract as part its realism analysis. What’s more, while ATA’s project manager identified a bunch of requirements that were not included in the STRIVE contract, he did not identify how many of those requirements were more complex than the requirements in the STRIVE contract or whether they would require more FTEs.
Lastly, ATA contended that Millennium’s proposed cost was lower than the government estimate, so the Air Force should have concluded that the company’s proposed cost were unrealistic. But GAO found that the Air Force had reasonably determined that the government estimate was not accurate. The estimate assumed development efforts that did not correlate with the level of effort reflected in the RFP.
ATA is represented by Devon E. Hewitt and Michael E. Stamp of Protorae Law PLLC. The intervenor, Millennium, is represented by Paul F. McQuade, Michael J. Schaengold, Daniel D. Straus, and Danielle K. Muenzfeld of Greenberg Traurig LLP. The agency is represented by Colonel Patricia S. Wiegman-Lenz, Major Michelle Gregory, Christian J. Robison, and Charles L. Webster of the Air Force. GAO attorneys John Sorrenti and Christina Sklarew participated in the preparation of the decision.
