The Navy recently awarded three cost-plus-award-fee, indefinite-delivery/indefinite-quantity (ID/IQ) contracts to Fluor International, Inc., URS-IAP, LLC (a joint venture of URS Corporation and IAP Worldwide Services, Inc.) and Atlantic Contingency Constructors, LLC (a limited liability company managed by The Shaw Group) for global contingency construction. Each contract was for a base year with four one year options, and the value of each contract was approximately one billion dollars. The contractors were to provide construction and related engineering services in response to war fighting needs, global natural disasters, and humanitarian assistance.
The awards were made following a “best value” evaluation based on experience, past performance, contingency planning, management, small business utilization, and cost. Non-cost factors were considered more important than cost. A disappointed offeror, Kellogg Brown & Root Services, Inc. (“KBR”), filed a GAO protest asserting that the Navy misevaluated the proposals under technical and cost factors. The GAO agreed and issued a decision sustaining the protest.
In a rather complicated and detailed analysis, the GAO determined that the cost comparison performed by the Navy was flawed because the agency did not perform a reasonable cost realism evaluation. Specifically, the Navy’s evaluators deleted a certain element of cost from ACC’s proposed indirect costs because other offerors had accounted for the same element as a direct cost. KBR argued that if this adjustment had not been made, KBR’s evaluated cost would have been lower than ACC’s. The protester went on to argue that it was unreasonable for the agency to make an adjustment to ACC’s costs when it was apparent that there were other instances where the offerors had treated costs differently for accounting purposes that were not accounted for in the cost evaluation. Given the multiple accounting variances among the offerors, the agency’s “singling out” of certain ACC costs to adjust from indirect costs to direct costs was unreasonable, according to KBR, and represented unequal treatment. Significantly, the GAO commented that “The agency has offered no substantive response to this KBR contention, which, based on this record, appears to have merit.” The GAO concluded that the agency’s adjustment to ACC’s proposal was unreasonable and prejudicial to KBR because it resulted in ACC’s proposal being evaluated as having a lower cost than KBR’s.
In another aspect of this protest, KBR contended that the agency misevaluated its proposal and the proposals of URS and ACC under many of the technical factors. In particular, KBR asserted that the agency overlooked a number of strengths, and assessed a number of weaknesses that were unreasonable with regard to the contingency plan factor. The Navy responded in cursory fashion that KBR’s proposal was “more general” and provided “limited details,” and contended that the protester’s arguments reflect only “mere disagreement” with the agency. The GAO disagreed and concluded that “Our review of the record shows more than “mere disagreement.” The protest was therefore sustained because “the record does not, on its face, support the agency’s ratings, and the agency has otherwise failed to explain the difference in ratings.”
The GAO recommended that the Navy reevaluate the proposals, conduct discussions if necessary, and make a new source selection decision. If based on this new evaluation, the agency determines that one or more of the awardees are no longer in line for award, the GAO recommended that the agency should terminate the awardees’ contracts and make awards consistent with the new selection decision.
This decision is important because it represents a departure from the GAO’s frequent reluctance to look behind the discretion of source selection officials, as long as some justification is provided for their decisions. Given the very large and important defense contractors involved, and the subject matter of the procurement, it will be interesting to see if the Navy complies with the GAO’s recommendations, and whether there is ultimately a new list of awardees. One thing is certain; with this much money involved additional challenges to the procurement are likely to arise. See Kellogg Brown & Root Services, Inc., B-298694; B-298694.2; B-298694.3, November 16, 2006.