Note: As always, I take considerable liberties with the source documents when presenting them here. For instance, critical citations are often omitted, parts are re-arranged and/or paraphrased, etc. Read the source at the link if accuracy, completeness and fidelity is important to you. (If it is not important to you, reconsider wandering around the web without an escort.)
Before the GAO in re Matter of: Fluor Federal Solutions, LLC, File: B-410486.9, January 18, 2017
DIGEST: Fluor maintains that the agency misevaluated proposals and made an unreasonable source selection decision. Protest challenging agency’s evaluation of staffing and resources proposals is sustained where record shows that agency evaluated the protester’s and awardee’s proposals disparately in a manner that prejudiced the protester. We sustain the protest.
This is our third occasion to consider the propriety of the Navy’s actions in connection with this acquisition. In a prior decision, we sustained a protest filed by Fluor relating to the agency’s evaluation of proposals and conduct of discussions in connection with this acquisition. We recommended that the agency reopen discussions with the offerors, solicit, obtain and evaluate revised proposals, and make a new source selection decision.
The Navy implemented our recommended corrective action and again selected DZSP for contract award. Fluor filed a second protest challenging the agency’s selection of DZSP in the wake of the agency’s corrective action. After full development of the record in that case, we conducted an outcome prediction alternative dispute resolution (ADR) procedure at the request of the Navy. We advised the parties that the agency’s evaluation of DZSP’s proposed cost in the area of its exempt employee compensation (discussed in detail below) appeared to have overlooked certain significant features of DZSP’s proposed costs. As a result, the GAO attorney advised that our Office likely would sustain the protest. The agency advised our Office that it intended to take corrective action to address the concerns we identified, and on that basis we dismissed Fluor’s second protest as academic.
After dismissal of Fluor’s second protest, the agency engaged in limited discussions with the protester and DZSP and solicited, obtained and evaluated revised proposals. The agency again selected DZSP for award, and the current protest followed.
The RFP advised offerors that the agency would make award on a best-value basis, considering cost and several non-cost evaluation factors. The non-cost factors were as follows: past performance, occupational safety, staffing and resources, technical approach, and small business utilization. For cost evaluation purposes, the RFP advised offerors that the agency would evaluate proposals for completeness, reasonableness, balance, and realism. The RFP stated that the agency would assign past performance examples relevancy ratings of very relevant, relevant, somewhat relevant or not relevant, and would assign each offeror’s past performance a confidence rating of substantial confidence, satisfactory confidence, limited confidence, no confidence or unknown confidence. Finally, the RFP stated that past performance was approximately equal in importance to the other four non-cost evaluation factors combined, and that all five non-cost factors, when combined, were approximately equal in importance to cost.
DZSP had proposed 113 exempt labor categories, and claimed that it was escalating the direct rates of compensation for these employees by [deleted] percent for each year of contract performance. A careful examination of the record showed, however, that in addition to applying an escalation factor of [deleted] percent, DZSP also was applying what it termed a “decrement factor” of [deleted] percent to these same rates of compensation. The net result of these calculations was that, rather than escalating its direct labor by [deleted] percent per year, DZSP actually was reducing the rates of compensation for these employees by [deleted] percent during each year of contract performance. The contemporaneous record showed that the agency failed to recognize this decrease in DZSP’s proposed compensation, and that its cost realism evaluation failed to take it into account.
The record further showed that Fluor had been found technically superior to DZSP under the non-cost evaluation factors. While both firms received the highest ratings (substantial confidence and outstanding) under the past performance, occupational safety, staffing and resources, and small business utilization factors, Fluor’s proposal received an outstanding rating under the technical approach factor, while DZSP’s proposal was assigned a rating of good under that factor.
The agency’s selection of DZSP’s lower-rated proposal was based on its conclusion that it represented a savings of approximately $6.9 million over the life of the contract. However, we concluded, based on the error associated with the agency’s failure to recognize DZSP’s decrease in its exempt employee compensation, that this apparent cost savings was largely non-existent. We therefore concluded that the agency’s source selection decision was not reasonable.
Subsequently, the agency elected to allow Fluor and DZSP to make limited revisions to their proposals.
Both firms revised their proposals and the agency reevaluated them on the basis of those revisions. The agency made no changes to the adjectival ratings assigned to the offerors’ non-cost proposals (Fluor was again found superior under the technical approach factor). Both firms revised their proposed costs: Fluor proposed a total cost of $494,519,656, and DZSP proposed a total cost of $491,894,166. The agency made no adjustments to either firm’s proposed cost for purposes of evaluating realism. On the basis of these evaluation results, the agency again made award to DZSP, concluding that, although Fluor’s proposal was technically superior, it did not merit the approximately $2.6 million cost premium.
The focus of Fluor’s latest protest centers on a change in the proposed approach to managing and compensating its exempt personnel that DZSP introduced in response to the agency’s latest round of discussions. The agency had provided DZSP a discussion question relating to the fact that, in its earlier proposal, it had offered to reduce its exempt employees’ compensation by a net factor of [deleted] percent during each year of contract performance. The agency advised DZSP that such an approach was not considered by the government to be reasonable or realistic because it implied that every exempt position would be replaced with a new hire at a lower rate of compensation for each year of contract performance.
In response to the agency’s discussion question, DZSP essentially introduced an entirely new approach to how it would manage and compensate its exempt employees. In effect, DZSP’s new approach was that it would replace incumbent workers at a rate of [deleted] percent of its exempt workforce per year and hire new, lower paid, employees in their place. These new employees would be paid [deleted] percent of the hourly rates identified in DZSP’s proposal. The employees that were not replaced in a particular contract year would be given a [deleted] percent escalation to their hourly rates of compensation (until such time as they were replaced), and this would result in [deleted] hourly rates of compensation that would [deleted] over the life of the contract.
Fluor raises various challenges to the agency’s evaluation of DZSP’s proposed approach to maintaining [deleted] wage rates for its exempt employees. Among other arguments, Fluor alleges that the agency engaged in disparate treatment in connection with evaluating its proposal and DZSP’s proposal in the area of staff recruitment and retention.
For the reasons discussed below, we agree with the protester that the agency evaluated the two proposals disparately in connection with the question of recruitment and retention of staff. It is axiomatic that agencies are required to evaluate proposals on a common basis and in accordance with the terms of the RFP; agencies may not properly engage in disparate treatment of offerors in the evaluation of proposals.
Under the express terms of the RFP, the agency was required to evaluate the adequacy of the offerors’ staffing approach as it related to the recruitment and retention of staff.
The record shows that Fluor’s staffing approach for exempt employees involved recruitment of 95 percent of the incumbent staff. Fluor represented to the agency that it was confident in its ability to do this based on the wage rates it was proposing. Of significance, Fluor specifically represented that, in the event it was unable to attract the incumbent staff with the rates of compensation it was proposing, Fluor proposed to [deleted] for exempt employees. Notwithstanding this representation in the Fluor proposal, the record shows that the agency’s evaluators and source selection authority expressed a concern that Fluor would be unable to recruit the incumbent exempt employees at the wage rates it had proposed. The agency’s technical evaluators questioned Fluor’s ability to recruit the incumbent exempt staff based on the wage rates it had proposed, and suggested that Fluor’s approach could result in employee morale and retention issues. The agency’s cost evaluators echoed these same concerns.
In contrast, the evaluators did not give meaningful consideration to similar implications of DZSP’s proposed approach described above, or how it would impact the firm’s retention of employees, as required by the RFP. In this connection, the evaluators gave no consideration to the fact that DZSP expressly proposed to replace its incumbent staff at a rate of [deleted] percent per year for each year of the 8-year potential life of this contract. The agency technical evaluators confined their observations to consideration of whether or not it was realistic for DZSP to replace its existing, incumbent exempt employees, and concluded that it was “very realistic” for DZSP to do so because approximately [deleted] percent of DZSP’s overall workforce was comprised of an aging population. In addition, the technical evaluators observed only that DZSP’s claimed 95 percent retention rate for its exempt employees would “not be applicable” to future contract periods, but did not criticize the firm’s proposal for this reason. The cost evaluators, for their part, did not give consideration to DZSP’s proposed plan to replace its exempt workforce, and instead confined their observations to whether or not DZSP’s proposed rates of compensation were reasonable and realistic.
In addition to these inconsistencies, the agency’s source selection authority (SSA) specifically found the DZSP proposal superior to the Fluor proposal in the area of employee retention and used that as a discriminator for making her selection decision. In fact, she apparently was unaware of DZSPs’ proposed approach of essentially replacing its exempt workforce more than once over the life of the contract.
In sum, the record shows that the agency evaluated the offerors disparately under the staffing and resources factor, criticizing Fluor’s proposed approach as possibly involving a risk that it would not be able to recruit the incumbent workforce, while at the same time failing to meaningfully consider whether a similar risk was raised by DZSP’s proposed approach of repeatedly replacing its exempt employee workforce over the life of the contract. In light of these considerations, we sustain Fluor’s protest.
We recommend that the agency reevaluate proposals in a manner that is consistent with this decision and make a new source selection decision after performing that reevaluation. Should the agency conclude that DZSP is no longer in line for award, we further recommend that the agency terminate DZSP’s contract for the convenience of the government, and make award to Fluor, if otherwise proper.
No comments:
Post a Comment