In December 2019, Raytheon Company filed a protest of an award of a contract to DynCorp International LLC by the Department of the Army. The award was for the security assistance training and advice as part of the Security Ministries of Afghanistan Advisory Program. Raytheon alleged that the Army failed to perform a price realism analysis and performed an unreasonable price evaluation, and improperly issued a solicitation with a latent ambiguity regarding which elements were fixed or reimbursable. Raytheon argued these mistakes led to a flawed best-value award decision.
REQUEST FOR PROPOSAL
The Army issued a Request for Proposal (RFP) in 2018 using procedure of the Federal Acquisition Regulation (FAR). The best value to the agency factored in the time-and-materials, cost-reimbursable, fixed-price contract with a 1-year base period and four 1-year option periods. These factors considered program management, past performance, and cost/price. In August 2019, the Army awarded DynCorp the contract award as the best value to the agency. It concluded that Raytheon’s proposal offered “very slight advantages” over DynCorp’s proposal, those advantages did not justify its premium of over $200 million.
CHALLENGES RAISED BY RAYTHEON
Raytheon raised several challenges to the Army’s price evaluation and its acceptance of DynCorp’s proposed cost/price, arguing that such errors led to a flawed decision and prejudice to Raytheon. It alleged the Army failed to perform a required price realism evaluation. It also argued DynCorp was improperly allowed to move employee compensation in the form of bonuses from the fixed price labor rates that would have raised the TEP to cost-reimbursable, where the cost to the agency was obscured by the agency’s plug figure. Raytheon found the solicitation contained a “latent ambiguity” about the definitions of “fully-burdened labor rates” and “other direct costs.” Finally, it argued DynCorp did not intend to honor its fixed rate for PMO security and improperly planned to renegotiate this rate during contract performance.
PRICE REALISM ANALYSIS
Raytheon argued the Army failed to perform a price realism analysis for the fixed-rate portions of the solicitation, as required by the RFP. It acknowledged that provisions in the solicitation do not have express commitments for the agency to perform a price realism evaluation, but stated the solicitation put offerors on notice the Army “could reject proposals with low prices that reflected a lack of understanding or inability to perform the contract, i.e., that the agency would conduct a price realism evaluation.”
The Army argued the contract where offerors proposed fixed, fully-burdened labor rates “bear the risk of any increased costs, and can propose prices that pose a risk that they might perform at a loss.” It contended the solicitation did not require, nor permit the agency to conduct a price realism assessment. The U.S. Government Accountability Office (GAO), however, found that language in the permitting proposals to be rejected for inconsistencies did not create an obligation for the Army to conduct a price realism evaluation. It stated that a price realism evaluation may be conducted to assess whether an offeror’s low price reflects “a lack of technical understanding only where the solicitation advises that the agency will conduct such an analysis.” GAO added that it did not find Raytheon’s argument persuasive because RFP’s instructions to offerors provides guidance to prepare and organize their proposals. It found the provision in the proposal could not bind the agency to perform a price realism evaluation because “it was not part of the evaluation criteria.”
Raytheon argued the Army’s price evaluation overlooked offerors’ different pricing structures. Contrary to Raytheon’s contention, the Army asserted its price evaluation was reasonable and consistent with the terms of the solicitation. It noted Enterprise Servs., LLC, B-417329, et al., May 30, 2019 to show argued that the protestor must first show “the agency was on notice that offerors’ prices were based on different assumptions.” The Army argued that without evidence of such notice, the protest ground should be denied.
The GAO denied Raytheon’s protest ground because it found its interpretation of the RFP unreasonable. Raytheon and DynCorp offered completion bonuses to their employees and both assumed they would be paid on a cost-reimbursable basis. Raytheon argued its bonuses were different because they comprised of only a small part of an average Raytheon’s employee’s total compensation. However, GAO found that if Raytheon’s bonuses were excludable from “fully-burdened hourly labor rates,” so were DynCorp’s.
Raytheon asserted DynCorp attempted to move employee compensation to the cost-reimbursement and there was a “latent ambiguity” in the RFP that described fully-burdened labor rates. It argued DynCorp’s proposal excluded employee compensation in the form of bonuses from its “fully-burdened hourly rates. However, GAO found no evidence that showed Raytheon was competitively prejudiced. It argued Raytheon received the same benefit as DynCorp for purposes of the evaluation. GAO found Raytheon’s argument it was harmed or misled in its proposal by its interpretation of the solicitation. GAO noted Raytheon, like DynCorp, also proposed to be paid for expenses under the agency’s cost-reimbursable offer.
Raytheon claimed the Army improperly permitted DynCorp to ignore the fixed-price nature of PMO security and propose a low hourly rate for the purpose of the procurement. DynCorp proposed the lowest rate possible. The Army, however, stated the contract proposal instructions contained a patent ambiguity that rendered Raytheon’s objection untimely. The agency asserted that the “only reasonable interpretation of the instructions” is the duties and final labor rates would be negotiated after the award. Offerors would not have been required to propose a fixed hourly rate because the Army withheld information about the duties of contract performance.
GAO agreed there was a patent ambiguity in the solicitation. A patent ambiguity occurs when there is “an obvious, gross, or glaring error.” It found an “obvious error” in the solicitation terms. Offerors were instructed to propose a labor rate “associated” with unspecified duties as well as the “associate labor rate” that would be determined after the award. GAO found “nothing in this structure is reasonably consistent with the fixed hourly rate required in the solicitation.” GAO noted patent ambiguities that had not been challenged prior to the submission of proposals must be dismissed as untimely.
GAO found no basis to question the Army’s best-value tradeoff decision.