GAO Sustains Post-Award Protest Challenging The Navy’s Unreasonable Interpretation Of Its Own Solicitation Criteria

The U.S. Government Accountability Office (“GAO”) recently sustained a protest challenging the Department of the Navy’s (“Navy”) evaluation of the awardee’s proposed professional employee compensation plan, which was based on a flawed interpretation of the term “professional employee” in the Solicitation. This decision serves as a reminder that the GAO will interpret provisions, clauses, statutes, and regulations consistent with their plain meaning. Further, GAO will deem documented agency actions unobjectionable if they are in compliance with the solicitation criteria.

Background

The Navy issued a solicitation for “mission system software engineering development, integration, testing, and in-service support for U.S. Naval aircraft major defense acquisition programs” on October 2, 2020. This solicitation contemplated the award of an indefinite-delivery indefinite-quantity contract with a 5-year ordering period and cost-plus-fixed-fee and cost-reimbursement components. The Solicitation also provided that the Navy would make award on a best-value trade-off basis after evaluating proposals based the following three factors listed in descending order of importance: (1) technical; (2) past performance; and (3) price. There were three subfactors under the “technical” factor: (1) understanding of work; (2) workforce; and (3) management approach. The technical and past performance factors combined were significantly more important than price, with price becoming more important with the degree of equality amongst proposals.

Sabre Systems, Inc. (“Sabre” or the “Protester”), the incumbent, submitted a proposal in response to the subject Solicitation along with three other offerors, one being American Systems Corporation (“ASC” or the “Awardee”). The Navy made an initial award to ASC on July 30, 2021, Sabre timely protested the Navy’s evaluation and award decision, and the Navy took corrective action thereafter by reevaluating the proposals submitted in response to the Solicitation. Upon reevaluation, the Navy rated Sabre’s technical proposal slightly superior to ASC’s in the “workforce” technical subfactor. Otherwise, ASC and Sabre received equal technical ratings. However, Sabre’s Most Probable Cost (“MPC”) at $211,471,566 was roughly $21 million higher than ASC’s MPC at $190,126,983. The Navy awarded the contract to ASC a second time, noting that Sabre’s proposal’s slight superiority did not warrant a $21 million price premium. This timely protest followed.

The Protest Allegations and GAO’s Analysis

Sabre first argued that, because the Navy improperly excluded many labor categories from its professional compensation evaluation, it failed to meaningfully evaluate the Awardee’s total compensation plan and conducted a flawed cost realism analysis. Sabre also challenged the Navy’s evaluation of its proposal under both the technical and past performance factors. Specifically, Sabre complained that the Navy failed to recognize multiple strengths within its proposal and unreasonably equalized its superior past performance with that of the Awardee.

With respect to Sabre’s first argument, the GAO noted that the Solicitation required offerors to set forth their total compensation plan “for each proposed professional employee” consistent with Federal Acquisition Regulation (“FAR”) 52.222-46. According to the Solicitation, this plan was to include each professional employees’ direct labor rate, fringe benefits package, and data used to determine the compensation structure. In pertinent part, FAR 52.222-46 provides as follows:

Recompetition of service contract may in some cases result in lowering the compensation (salaries and benefits) paid or furnished professional employees. This lowering can be detrimental in obtaining the quality of professional services needed for adequate contract performance. It is therefore in the Government’s best interest that professional employees, as defined in 29 CFR 541, be properly and fairly compensated…This evaluation will include an assessment of the offeror’s ability to provide uninterrupted high-quality work. The professional compensation proposed will be considered in terms of its impact upon recruiting and retention, its realism, and its consistency with a total plan for compensation.

(Emphasis added). 29 CFR 541, Subpart D defines “professional employees” as follows:

(a) The term “employee employed in a bona fide professional capacity” in section 13(a)(1) of the Act shall mean any employee (1) Compensated on a salary or fee basis . . . at a rate of not less than $684 per week . . .; and (2) Whose primary duty is the performance of work (i) Requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or (ii) Requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Notwithstanding the language in FAR 52.222-46, and the definition of “professional employees” set forth in 29 CFR 541, the Navy evaluators determined that only a small subset of four labor categories required by the Solicitation constituted “professional employees” as defined by 29 CFR 541. According to the record, the Navy’s rationale for excluding the remaining labor categories was that while these labor categories may constitute professional services, they also fit other definitions for categories of employees under 29 CFR 541. Therefore, the Navy did not consider the remaining labor categories as “professional employees.”

The GAO disagreed with the Navy, and concluded “that the plain language of the applicable FAR provision unambiguously required the Navy to evaluate the compensation plan for all proposed employees meeting the definition of “professional employees” as defined in subpart D of part 541…regardless of whether [proposed employees also meet] another part 541 labor category definition…” By way of example, the GAO highlighted the “software developer” labor category, which the Navy found not to be a “professional employee” under 29 CFR 541. However, according to the statement of work, this labor category required “minimum levels of higher education in the specified field of science or learning related to the duties of the position” including a bachelor’s degree in computer science or computer engineering. The Navy failed to include several professional employees in its evaluation of the Awardee’s compensation plan inconsistent with the Solicitation criteria, which contained FAR 52.222-46 referencing 29 CFR 541’s definition of “professional employees.” Accordingly, GAO sustained the protest on this basis.

Sabre also argued that the Navy failed to reasonably evaluate its technical proposal by failing to recognize additional strengths within its proposal. The GAO ultimately disagreed and found that the Navy thoroughly reviewed Sabre’s proposal and assessed strengths where the proposal exceeded the solicitation requirements in a manner advantageous to the government. Sabre also challenged the evaluation of its past performance by arguing that its past performance was more relevant and of higher quality than that of the Awardee. GAO found the Agency evaluated Sabre’s past performance consistent with the solicitation criteria, which required offerors’ past performance to be evaluated based on recency, relevancy, and quality of work. The Solicitation did not, however, require a comparison of offerors’ past performance examples. Therefore, the GAO denied this protest ground as well.

Lastly the GAO addressed prejudice. The Navy argued that that Sabre suffered no prejudice because a change in its methodology to include additional labor categories in the analysis would not have changed the evaluative outcome. In response, Sabre argued that the improper exclusion of more than 80 percent of its proposed personnel from its compensation plan analysis resulted in the Navy’s failure to appreciate the risk posed by the Awardee’s lowered compensation levels. The GAO resolved these arguments in favor of Sabre, noting that a reasonable possibility of prejudice is a sufficient basis for sustaining a protest.

Key takeaways

• When competing for government contracts, Contractors who are unsuccessful are advised to closely scrutinize solicitation requirements to ensure that the agency’s evaluation is in strict compliance therewith.
• Contractors should always look to the solicitation criteria for guidance regarding how an Agency should conduct the source selection evaluation of proposals. If, for example, a solicitation does not contemplate Agency’s evaluation of proposals by comparison, Contractors should expect that the Agency will evaluate proposals in accordance with the stated solicitation criteria, and not in comparison to other proposals.
• When considering the merits of a protest, the GAO will review provisions, clauses, statutes and regulations consistent with their plain meaning. To the extent that an Agency relies on a provision, clause, statute or regulation, and interprets that provision, clause, statute or regulation in a manner that is inconsistent with its plain meaning, and conducts its evaluation on a flawed interpretation, the GAO is likely to find this conduct objectionable and erroneous. If such has occurred, an unsuccessful bidder may have a very good chance at having the GAO recommend overturning that award decision.