Comptroller General

of the United States

United States Government Accountability Office

Washington, DC 20548 

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to a

GAO Protective Order. This redacted version has been

approved for public release.

Decision 

Matter of: ASRC Research & Technology Solutions, LLC

File: B-400217; B-400217.2 

Date: August 21, 2008 

Marc F. Efron, Esq., John E. McCarthy Jr., Esq., Puja Satiani, Esq., and 

Amy Laderberg O’Sullivan, Esq., Crowell & Moring LLP, for the protester. 

Anne B. Perry, Esq., Marko W. Kipa, Esq., Bethany Hengsbach, Esq., Keith R. Szeliga, 

Esq., and Jonathan Aronie, Esq., Shepphard Mullin LLP, for SP Systems, Inc., an 

intervenor. 

Richard J. McCarthy, Esq., James T. Mahoney, Esq., and Daniel C. Hymer, Esq., 

National Aeronautics and Space Administration, for the agency. 

Edward Goldstein, Esq., and Christine S. Melody, Esq., Office of the General 

Counsel, GAO, participated in the preparation of the decision. 

DIGEST 

1. Protest is sustained where agency unreasonably concluded that the protester’s 

proposed plan for capturing incumbent personnel presented significant technical 

risk. The agency’s technical evaluation in this regard stemmed from its 

determination, in the context of the agency’s cost evaluation, that the protester’s 

weighted average direct labor rates were too low to successfully capture incumbent 

employees. This conclusion, however, was based upon the premise that the agency’s 

own unweighted average direct labor rates were a better reflection of the cost of the 

incumbent workforce, a premise not supported by the record. 

2. Agency’s evaluation of the awardee’s past performance was unreasonable since 

the agency did not consider the substantial difference in size between the awardee’s 

past performance references and the size of the contemplated contract, as required 

by the solicitation. 

DECISION 

ASRC Research & Technology Solutions, LLC (ARTS) protests the award of a 

contract to SP Systems, Inc. under request for proposals (RFP) No. NNG07197688R, 

issued by the National Aeronautics and Space Administration (NASA), for 

programmatic support services within the Flight Project Directorate at Goddard 

Space Flight Center in Greenbelt, Maryland. ARTS argues that NASA’s cost and 

technical evaluations were flawed. 
We sustain the protest. 

BACKGROUND 

The Flight Project Directorate is responsible for planning and managing space flight

projects at the Goddard Space Flight Center. These responsibilities include 

managing spacecraft flight hardware systems, ground systems, launch vehicles, and 

research instrumentation payloads. RFP attach. A, at 1. NASA currently receives 

contractor services in support of these responsibilities under its Program Analysis

and Control (PAAC) II contract. The RFP was issued as a follow-on to PAAC II, and 

sought support services in the areas of planning and scheduling, configuration 

management, information technology, documentation/library, general business, and 

general accounting functions. The contemplated award under the RFP has been 

referred to as the PAAC III contract. 

The RFP, issued on October 12, 2007 as a competitive 8(a) set-aside,1

 contemplates 

the award of a cost-plus-award-fee indefinite-delivery/indefinite-quantity (ID/IQ) 

contract, with a 1-year base period of performance plus four 1-year options. Award 

was to be made to the offeror submitting the proposal representing the best value to

the government, considering three evaluation factors: mission suitability, past 

performance, and cost.

2

 The RFP provided that the mission suitability factor would 

be weighted and scored based on a 1,000 point scale considering the following 

subfactors: understanding the requirements of the statement of work (SOW) 

(275 points); technical approach to representative task orders (RTO)3

 (275 points); 

management plan (400 points); and safety and health (50 points). RFP at 116. 

As it relates to the protest, with respect to the management plan subfactor, the RFP 

advised that NASA would evaluate an offeror’s staffing and recruiting plan and 

generally provided that “[t]he plan for any incumbent capture and the basis for this 

rate will be evaluated for reasonableness and consistency with other parts of the 

 1

 Section 8(a) of the Small Business Act authorizes the Small Business 

Administration to contract with other government agencies and to arrange for the 

performance of those contracts via subcontracts awarded to socially and 

economically disadvantaged small businesses. 15 U.S.C. § 637(a) (2000). 

2

 The RFP explains that the cost factor is less important than the mission suitability 

factor and approximately equal in weight to the past performance factor. RFP 

at 110. 

3

 Representative task orders (essentially sample task orders) served as a basis for 

evaluating how an offeror would perform specific tasks associated with the 

statement of work. RFP at 111. 

Page 2 B-400217; B-400217.2 
proposal.” RFP at 517-18. With respect to the cost factor, the RFP indicated that the 

agency would evaluate proposals for reasonableness and cost realism. For the 

purpose of evaluating cost, NASA sought to capture offerors’ costs for the RTOs, as 

well as their total contract costs through a cost model.4

 In completing the cost 

model, offerors were required to propose, among other things, their direct and 

indirect rates, and specifically their direct labor rates for 18 specified nonmanagement labor categories. These 18 labor categories were composed of six 

primary labor categories (Scheduling Specialist, Configuration Management 

Specialist, Documentation Specialist, Information Technology Specialist, Project 

Support Specialist, and Accounting Specialist) with three sub-categories under each 

category (Junior, Intermediate, and Senior). RFP, exh. 1A. 

Under the RFP, offerors were allowed to propose labor categories which varied from

those mandated by the cost model. RFP at 95. Thus, offerors’ cost proposals could 

include sub-level labor categories under the 18 identified labor categories.

5

 Where 

they did so, offerors were required to identify the percentage of effort for each sublevel labor category in the cost model, which was then used to calculate a “weighted” 

average labor rate for each of the 18 labor categories. 

NASA also provided offerors, in a reading library, an average labor rate for the 18 

labor categories. Regarding these “library rates,” the RFP’s instructions stated that 

they “reflect the incumbent’s current direct labor categories and average (prime and 

major subcontractors) unburdened direct labor hourly rates for those categories

being used under the incumbent contract for PAAC II services. These Average Labor 

Rates . . . are provided for information purposes only.” RFP at 89-90 (emphasis in 

RFP). In response to questions from offerors, NASA further explained that the rates

reflected a “‘straight’ average as opposed to a ‘weighted average’”--that the rates “did 

not take into account the number of individuals in an specific [labor] category.” 

Agency Report, Tab 6, Responses to Industry Questions, at 00395, 00400. The RFP’s

instructions also stated that “when proposing to capture incumbent personnel, 

Offerors shall clearly explain variances from their proposed . . . Direct Labor Rates

[for the 18 labor categories] and those of the current incumbent’s unburdened rates.” 

RFP at 90. 

 4

 The RTO cost evaluation, which reflected an offeror’s costs in performing specific 

tasks associated with the statement of work, was distinct from the agency’s cost 

evaluation under its cost model, which sought to establish an offeror’s cost for 

performing the entire contract. 

5

 In fact, the agency noted that the incumbent’s workforce was comprised of five subcategories, as opposed to the three utilized in the cost model (junior, intermediate, 

and senior) for each of the six labor categories. 

Page 3 B-400217; B-400217.2 
While mission suitability and cost were separate factors, because “the proposed cost 

of the work (and rates proposed) may be a significant indicator of an Offeror’s

understanding and ability to perform the [work],” the RFP provided for adjusting 

mission suitability point scores to account for a lack of cost realism. RFP at 116. In

this regard, the RFP included a table detailing point deductions to an offeror’s 

mission suitability score based on the difference between the offeror’s proposed 

costs for the RTOs and the most probable RTO costs as calculated by the agency 

(e.g., a difference of between 10 percent and 14.99 percent between an offeror’s 

proposed cost and the probable cost would result in a deduction of 50 points from

the offeror’s mission suitability score). RFP at 117. The RFP specified that “[t]his 

adjustment is in addition to any finding(s) already reflected under Mission Suitability 

concerning the inadequacy of resources, cost or otherwise, prior to the cost realism 

adjustment.” Id. 

For the purpose of evaluating past performance, the RFP instructed offerors to 

provide information for all relevant contracts and subcontracts in excess of 

$2 million that the offeror and/or subcontractor were currently performing or had 

completed within the past 3 years. The RFP also directed offerors (and their 

significant proposed subcontractors) to provide questionnaires to references in 

order to establish their record of past performance. 

In evaluating offerors’ past performance information, the RFP indicated that the 

agency would consider two components: relevance and performance. Regarding 

relevance, the RFP stated that NASA would “consider the degree of similarity in size, 

content, and complexity” between an offeror’s past performance information and the 

solicitation requirements. RFP at 119. Under this scheme, past performance would 

be evaluated as “highly relevant,” “very relevant,” “relevant,” “somewhat relevant,” 

or not relevant. RFP at 119-20. The RFP advised that the agency would utilize the 

following adjectival rating scheme for the purpose of rating past performance: 

excellent, very good, good, fair, poor, and neutral. In order to be rated “excellent,” 

an offeror’s past performance would have to be deemed to be “highly relevant.” 

NASA received four proposals by the November 20 closing date. The agency 

established a source evaluation board (SEB) and its findings are summarized below: 

Offeror Mission

Suitability 

Mission 

Suitability

Adjectival

Rating 

Proposed Cost

Plus Award 

Fee 

Recommended 

Cost Plus

Award Fee 

Past

Performance 

SP Systems 914 Excellent $191,086,870.00 $192,448,817.00 Excellent

A 592 Good $187,014,782.00 $189,426,766.00 Excellent

ARTS 864 Very Good $176,914,763.19 $189,331,294.37 Excellent

B 382 Fair $191,339,121.20 $196,763,915.36 Very Good

AR, Tab 37, SEB Report, at 2. 

Page 4 B-400217; B-400217.2 
In its evaluation of SP Systems’ proposal under the mission suitability factor, NASA 

identified 9 significant strengths, 12 strengths, 4 weaknesses, and no significant

weaknesses or deficiencies. In evaluating ARTS’ proposal under this factor, NASA 

identified 10 significant strengths, 9 strengths, 3 weaknesses, and 1 significant 

weakness (under the management plan subfactor). The significant weakness

attributed to ARTS was a consequence of NASA’s finding that ARTS’ labor rates for 

their senior level personnel in the various labor categories of the cost model (i.e., 

accounting, configuration management, information technology, project support,

and scheduling) were below the library rates. AR, Tab 37, SEB Report, at 65. In the 

view of the SEB this created a “significant risk” regarding ARTS’ ability to achieve its 

proposed 98 percent incumbent capture rate. Id. According to the SEB, failing to 

capture the incumbents “will lead to an increased risk of unsuccessful contract 

performance.” Id. 

Based upon the results of the SEB’s evaluation, the SSA determined that the 

proposal submitted by SP Systems represented the best value to the government. In

sum, the SSA found that SP Systems’ overall “excellent” mission suitability proposal 

coupled with their “excellent” past performance outweighed the “slight” probable 

cost advantage maintained by ARTS. AR, Tab 29, SSA Decision, at 17. After 

receiving its debriefing, ARTS filed this protest. 

DISCUSSION 

In its protest, ARTS principally challenges NASA’s evaluation of its cost proposal and 

the significant weakness attributed to its proposal under the management plan 

subfactor. Regarding these issues, ARTS complains that the agency unduly relied 

upon and mechanically applied the library rates in its cost realism and technical 

evaluations.6

 As discussed more fully below, we conclude that the agency’s cost

 6

 NASA argues that ARTS’ challenges in this regard are untimely since they are 

essentially solicitation challenges, reflecting ARTS’ disagreement with its use of the 

library rates for the purposes of evaluation, which was clearly identified by the terms 

of the RFP. Accordingly, in order for these issues to have been timely under our Bid 

Protest Regulations, NASA argues that ARTS’ should have raised them prior to the 

closing time for receipt of proposals. See 4 C.F.R. § 21.2(a)(1) (2008). We disagree. 

ARTS is not challenging NASA’s use of the library rates per se. Rather, with respect 

to the cost adjustment issue, we view ARTS as challenging the agency’s rejection of 

the explanation in its proposal as to why its rates should have been considered in 

lieu of the library rates. Regarding the technical evaluation challenge, we note that 

there is nothing in the solicitation in the section addressing the technical evaluation 

expressly indicating that the library rates would be used as a benchmark for 

evaluation purposes, and we conclude that ARTS is simply challenging the 

reasonableness of NASA’s evaluation and conclusions, which stem from its reliance 

on the library rates as an evaluation tool. 

Page 5 B-400217; B-400217.2 
realism evaluation was reasonable to the extent the agency utilized the library rates 

solely as “plug numbers” in an attempt to normalize the basis for the cost evaluation 

among offerors who proposed to capture the incumbent workforce. Because the 

library rates may not in fact reflect the actual cost of the incumbent workforce, 

however, we sustain the protest to the extent that the agency relied on the difference 

between the library rates and the labor rates proposed by ARTS to conclude that

ARTS’ proposed plan for capturing incumbent personnel presented significant

technical risk. ARTS also challenges the agency’s past performance evaluation of the

awardee.7

 Specifically, the protester argues that in assessing the relevance of SP 

Systems’ past performance information, the agency failed to evaluate the degree to 

which the size of SP Systems’ contracts was similar to that of the PAAC III 

requirement as required by the RFP. We sustain the protest in this regard as well. 

Cost Realism and Mission Suitability

The agency’s cost evaluation and the propriety of the significant weakness identified 

in ARTS’ proposal under the management plan subfactor are directly related, and we 

therefore address these matters together. As it relates to these issues, and as noted 

above, the agency provided offerors with the PAAC II average labor rates, the 

“library rates,” for the 18 direct labor categories in the cost model. These rates were 

as follows: 

Accounting

Specialist 

CM Documentation

Specialist 

MIS

Specialist 

Project

Support

Specialist 

Scheduling 

Specialist 

Junior 

Level 

$16.46 $18.65 $14.74 $20.47 $19.49 $21.49

Mid Level $17.25 $24.57 $21.31 $26.65 $22.41 $29.83 

Senior 

Level 

$24.24 $37.38 $29.16 $38.79 $29.91 $52.17

 

AR, Tab 8, Procurement Reading Library Materials, at 00712. 

 7

 In challenging the agency’s evaluation of the awardee’s proposal, ARTS also argued

that NASA failed to properly consider the fact that SP Systems and its team member 

proposed different compensation packages with different fringe benefits plans, 

which in ARTS’ view could create problems with hiring and retention. The 

contracting officer indicated that the SEB was aware of the difference and did not

find that the different plans posed a risk, noting that different benefits among prime 

contractors and subcontractors exist on the PAAC II contract and have not

presented problems. Contracting Officer’s Statement at 13. We find this reflects 

reasonable consideration, and we therefore deny the protest in this respect. ARTS 

also raised several issues regarding NASA’s technical evaluation, which it 

abandoned. 

Page 6 B-400217; B-400217.2 
 

In their proposals, and as reflected in their respective cost models, both ARTS and 

SP Systems proposed sub-levels under the junior, intermediate, and senior subcategories, in several instances. Specifically, while ARTS proposed only one juniorlevel and one intermediate-level position (which it called level I and II, respectively), 

it proposed to sub-divide the senior-level position into three sub-levels (which it 

called levels III, IV, and V). In a similar fashion, SP Systems’ cost model was based

on additional sub-levels, such that each sub-category (i.e., junior, intermediate, and 

senior) was composed of no fewer than three sub-levels. As explained above, ARTS 

and SP Systems had to identify in the cost model the percentage of effort for each 

sub-level, which was then used to calculate a “weighted” average labor rate. RFP, 

exhs. 2A and 2B. 

For example, with respect to the accounting specialist labor category, the ARTS cost

model provided the following information: 

Direct Labor Category Labor Rate Portion % Weighted Average

Labor Rate

Level I - Accounting Specialist

Junior

[deleted] [deleted] $16.46 

Level II - Accounting Specialist

Intermediate

[deleted] [deleted] $17.25 

Level III [deleted] [deleted] $22.97 

Level IV [deleted] [deleted]

Level V [deleted] [deleted]

Accounting Specialist Senior $22.97

ARTS Cost Proposal, exh. 2A. 

For the senior-level labor category, ARTS’ weighted average labor rate of $22.97, 

reflected in the above table, was less than the $24.24 library rate for this same labor 

category. This was true for each of ARTS’ senior-level labor categories in the cost 

model, which reflected differences ranging from $1.27 up to $2.74 per labor category. 

 

With respect to the Accounting Specialist labor category, SP Systems’ cost model 

reflected the following:

Page 7 B-400217; B-400217.2 
Direct Labor Category Labor Rate Portion % Weighted Average

Labor Rate

Junior Acct. -- A [deleted] [deleted]

Junior Acct. -- B [deleted] [deleted]

Junior Acct. -- C [deleted] [deleted]

Accounting Specialist Junior [deleted] [deleted] $16.46 

Intermediate Acct. -- A [deleted] [deleted]

Intermediate Acct. -- B [deleted] [deleted]

Intermediate Acct. -- C [deleted] [deleted]

Accounting Specialist

Intermediate 

[deleted] [deleted] $17.25 

Chief Acct. Support Specialist [deleted] [deleted]

Principal Acct. Support Specialist [deleted] [deleted]

Senior Acct. Support Specialist -- A [deleted] [deleted]

Senior Acct. Support Specialist -- B [deleted] [deleted]

Accounting Specialist Senior $24.24

SP Systems Cost Proposal, exh. 2A. 

 

Unlike the cost proposal submitted by ARTS, SP Systems’ weighted labor rate for the 

senior-level positions exactly matched the library rates for all six labor categories. 

With respect to both the cost evaluation and the significant weakness identified in 

ARTS’ proposal, a key issue is the rates being paid to the incumbent workforce and 

how ARTS’ proposed labor rates compared to those rates. Because both ARTS and 

SP Systems proposed to retain a very high proportion of the incumbent workforce, 

the agency was justifiably focused on how the offerors’ proposed rates compared to

those of the incumbent. This affected the agency’s cost-realism adjustment to 

proposed costs, since the agency rightly assumed that, absent some valid 

explanation, an offeror proposing to retain a very high proportion of the incumbent

workforce would need to pay at least equal to the incumbent workforce’s rates. 

Because this is a cost-reimbursement contract, a cost realism analysis was required 

to determine the extent to which each offeror’s proposed costs represent the 

offeror’s likely costs in performing the contract under the offeror’s technical 

approach, assuming reasonable economy and efficiency. See Federal Acquisition 

Regulation (FAR) §§ 15.305(a)(1), 15.404-1(d)(1). The proposed labor rates also 

affected the agency’s evaluation of proposals under the management plan subfactor 

for offerors proposing to retain the incumbent workforce, since proposing labor 

rates lower than the incumbents’ could reasonably be found to represent a 

management plan weakness. 

Unfortunately, NASA’s solicitation did not disclose the incumbent workforce’s actual 

labor rates to offerors, at least not in a meaningful way, and those conducting the 

Page 8 B-400217; B-400217.2 
evaluation may not have had access to the actual rates.8

 The library rates are 

unweighted averages, which do not reflect the distribution of actual labor rates 

among the sub-levels within the junior/intermediate/senior levels that the incumbent 

uses.

9

 This problem with the RFP was not protested, however, so that the agency 

was free to choose any reasonable method, within the context of the RFP, to assess

the evaluated cost of each proposal and to evaluate the cost-related technical 

factors, such as the management plan subfactor. 

With respect to the cost-realism analysis, the agency, as noted above, took the 

reasonable view that it could adjust proposed costs up to reflect the rates paid to the 

incumbent workforce, if the offeror proposed to retain the great majority of the 

incumbent workforce, as both ARTS and SP Systems did. The problem in making 

that adjustment, however, was that those conducting the evaluation apparently did 

not have access to the incumbent’s actual weighted rates. Instead, the agency relied 

on the unweighted library rates and treated them as reflecting the rates paid the 

incumbent workforce.

While it would clearly have been preferable to use the incumbent workforce’s 

weighted rates in calculating offerors’ evaluated costs, we believe that it was 

adequate, as a legal matter, that the offerors were treated equally, through the 

agency’s use of the library rates as a “plug number.” This methodology of treating 

the incumbent workforce cost as, in effect, a normalized cost was reasonable, since 

 8

 The agency stated that “more detailed data on incumbent pay, such as their 

weighted direct labor rates, reflecting each of the incumbent’s own current wage 

sub-categories, cannot be published because it is proprietary to the incumbent.” 

Agency Supplemental Report, at 7-8. Absent further explanation from NASA, we fail 

to understand why weighted average labor rates would be considered proprietary to

the incumbent and could not have been shared with offerors. 

9

 This issue was noted in a question regarding the RFP, as follows: 

(d) For example, consider ten Senior-Level [Information Technology] 

Specialists with salaries of either $44.09/hr or $33.49/hr (for [a straight] 

average rate of $38.79). If nine of this staff earn the higher rate, the 

[weighted] average cost for all ten employees is $43.03/hr. Conversely, 

if nine of the Senior-Level staff earn the lower rate, the average cost for 

all ten employees is $34.55/hr. 

Answer: The Government did not have weighted salary information 

available to provide to potential offerors. The information set forth in

the RFP is intended to provide offerors with the ability to more 

accurately project the cost of incumbent capture. 

AR, Tab 10, Agency Responses to RFP Questions, at 0833. 

Page 9 B-400217; B-400217.2 
the cost of the incumbent workforce would not have been unique to the particular 

approach of any individual offeror (nor has there been a suggestion to the contrary), 

and offerors such as ARTS were not in a position to know the actual cost of the 

incumbent workforce. In other words, one would reasonably expect that the direct 

labor cost of the incumbent workforce should be the same among all offerors. 

Absent persuasive explanation for any deviation (which ARTS did not offer here), a 

reasonably derived estimate of direct, unburdened labor rates for comparable labor 

categories can provide an objective standard against which the realism of proposals

can be measured. United Int’l Eng’g et al., B-245448.3 et al., Jan. 29, 1992, 92-1 CPD 

¶ 122 at 11. As a consequence, there is no basis for our Office to question the 

agency’s upward adjustment of ARTS’ cost, as part of the cost-realism analysis, to 

account for the cost of the incumbent workforce. 

We do not, however, find support in the record for the determination that ARTS’ 

proposed rates were inadequate to retain the incumbent workforce. For this reason, 

we find problematic both the input that NASA received from the Defense Contract 

Audit Agency (DCAA) and NASA’s assignment of a significant weakness to ARTS’ 

proposal under the management plan subfactor. 

Regarding the DCAA input, with respect to ARTS’ proposed labor rates for labor 

categories at the senior level, DCAA noted that ARTS proposed to capture 98 percent

of the incumbent workforce and determined that “the method used by [ARTS] to

compute the proposed senior level direct labor rates resulted in a potential 

understatement of direct labor rates. [ARTS] used a weighted average which 

resulted in a rate lower than the straight average rate.” AR, Tab 33, DCAA Audit of

ARTS Cost Proposal, at 5. DCAA then calculated an unweighted average rate with

respect to the rates proposed by ARTS under the senior level labor categories and 

determined that the unweighted average was identical to the library rates.10 Without

further elaboration, DCAA determined that the library rates were a more reliable and 

reasonable basis for the proposed senior level rates.11 Id. As explained above, there 

is no way to tell, from the unweighted library rates, how much the incumbent 

workforce is being paid. Indeed, DCAA’s analysis demonstrates this. As DCAA 

discovered, ARTS’ proposed rates, when averaged without weighting, are precisely 

the same as the unweighted library rates, so that it is theoretically possible that 

 10 For example, with respect the senior level accounting specialist position, DCAA

averaged on a straight line basis (without accounting for the relative number of 

individuals at a given level) ARTS’ III, IV, and V labor rates [deleted]. In each

instance, ARTS’ straight average rate matched the library rate. 

11 We note that DCAA rejected the weighted rates for all offerors out of hand, in favor 

of a straight line average method. This rejection, however, is at odds with the fact

that offerors were required by the RFP to calculate a weighted average under the 

cost model. 

Page 10 B-400217; B-400217.2 
ARTS’ proposed labor rates are in fact identical to those actually being paid by the 

incumbent. In any event, because the record does not establish a connection 

between the library rates and the incumbent’s actual, weighted rates, we see no basis 

in the record to support DCAA’s analysis. 

More importantly, we find no reasonable basis for the agency’s assignment of a 

significant weakness to ARTS’ proposal under the management plan subfactor. 12

 

Absent more information, there simply is no way for the agency to determine 

whether the library rates or the weighted averages proposed by any offeror are 

closer to the incumbent’s direct labor cost. In addition, if one compares the 

weighted rates proposed by ARTS and SP Systems, it is not possible in many 

instances to determine whether one firm will be more or less likely to attract the 

incumbent workforce in any given labor category, since the firms proposed different

high and low rates within a labor category, in some instances different numbers of

levels of sub-categories, and different percentages of effort for each sub-level. For 

any given labor category, it may be that, as compared to the incumbent workforce,

one offeror’s rates are high, the other’s are low; neither the evaluators nor the 

offerors had any basis to know. 

ARTS, like the other offerors, proposed to perform the PAAC III contract utilizing 

the existing incumbent workforce. However, as explained above, offerors such as 

ARTS did not have access to the actual labor rates that the incumbent was paying its 

workforce. Nonetheless, offerors proposing to use the incumbent workforce, 

including ARTS, had to account for the cost of this workforce in their proposals. 

ARTS attempted to do this by including a blanket statement committing ARTS to 

paying incumbent employees their current salaries, at a minimum, and providing 

labor rates based in part upon outside salary survey information. While the rates

proposed by ARTS, when averaged on a weighted basis, were lower than the nonweighted library rates, they were identical to the library rates, when averaged on a 

straight line basis, as the library rates themselves had been calculated. 

As relevant here, the agency could only assign ARTS’ proposal a significant 

weakness under the management plan subfactor based on a determination that

ARTS is unlikely to be able to retain the incumbent workforce with its proposed 

labor rates.

13 There is simply no basis in the record for that. ARTS’ proposed rates

 12 To the extent that the agency relied upon DCAA’s conclusions, this does not affect 

our analysis. An agency’s reliance upon the advice of DCAA does not insulate the 

agency from responsibility for error on the part of DCAA. See L-3 Commc’ns Corp., 

Ocean Sys. Div., B-281784.3, B-281784.4, Apr. 26, 1999, 99-1 CPD ¶ 81 at 11; American 

Mgmt. Sys., Inc.; Dep’t of the Army--Recon., B-241569.2, B-241569.3, May 21, 1991, 91-

1 CPD ¶ 492 at 7-8. 

13 In its protest, ARTS argued that downgrading its mission suitability score based 

upon findings in its cost proposal was per se improper since it was inconsistent with

(continued...) 

Page 11 B-400217; B-400217.2 
may be lower than those paid to the incumbent workforce--but they may be higher 

than the incumbent’s rates. Indeed, as noted above, they may be identical to the 

rates of the incumbent. Yet, under the management plan subfactor, NASA 

questioned the ability of ARTS to achieve its proposed 98 percent incumbent capture 

given its “unreasonably low” labor rates for the senior-level positions as compared to 

the library rates. AR, Tab 37, SEB Report, at 65. Given the meaninglessness of the 

library rates as a criterion for retaining the incumbent workforce, the conclusion 

drawn by the agency in assessing ARTS’ ability to retain that workforce was 

unreasonable, especially where ARTS committed to paying incumbents their current 

wages, at a minimum. Accordingly, we conclude that the agency’s evaluation in this 

regard was unreasonable. 

While our findings regarding the technical evaluation and the cost-realism 

adjustment may appear inconsistent with regard to the treatment of the library rates, 

we believe that they are consistent. In the cost-realism analysis, we found that the 

agency could reasonably use a “plug number” for labor rates for all offerors that 

proposed to retain the incumbent workforce. We found use of the library rates

acceptable, under the circumstances--not because they reflected the incumbent’s 

rates, but simply because they were a constant used equally for all offerors. From 

that standpoint, the agency could just as well have used ARTS’ labor rates, or SP 

Systems’, as the plug numbers. With regard to the technical evaluation evaluation, 

however, the agency was finding that ARTS had proposed rates so much lower than 

the incumbent’s as to present a significant management plan weakness, and that 

finding could not be supported without evidence that the library rates were closer 

than ARTS’ rates to the incumbent’s rates--and the record provides no basis for that 

finding. 14

 

 

 

(...continued) 

the RFP’s methodology for adjusting mission suitability based upon a cost realism

adjustment to the offerors’ RTO. We believe ARTS’ interpretation of the RFP is 

overly narrow, given that the RFP expressly provided such an adjustment was “in 

addition to any finding(s) already reflected under Mission Suitability concerning the 

inadequacy of resources, cost or otherwise, prior to the cost realism adjustment.” 

RFP at 117. 

14 This case is distinguishable from other decisions by our Office in which we have 

found that the agency acted reasonably when it in fact made both a cost adjustment

and risk finding with respect to an offeror’s proposal. See, e.g., Honeywell, Inc., 

B-238184, Apr. 30, 1990, 90-1 CPD ¶ 435 at 7; Serv-Air, Inc.; Kay and Assocs., Inc., B258243 et al., Dec. 28, 1994, 96-1 CPD ¶ 267 at 10-11. In Honeywell, the agency’s risk 

assessment was based upon the offeror’s specific technical approach and in Serv-Air, 

the risk assessment was attributed to the offeror’s cost proposal, not the offeror’s

technical proposal. 

Page 12 B-400217; B-400217.2 
Past Performance 

ARTS also challenges the agency’s evaluation of SP Systems’ past performance, 

arguing that the agency failed to evaluate the degree to which the size of SP Systems’ 

contracts was similar to the PAAC III requirement as required by the RFP. The 

PAAC III procurement was valued at nearly $200 million and is expected to involve 

more than 270 personnel. In its evaluation of SP Systems’ past performance, NASA 

considered six past performance contract references for SP Systems and its major 

subcontractor. AR, Tab 37, SEB Report, at 125-28. Of these, five were valued 

between $2 million and $3.5 million, with between 5 and 12 employees, and the sixth 

had a dollar value of approximately $30 million, with 67 employees. AR, Tab 23, SP 

Systems’ Past Performance Information, at 02168. In its evaluation of ARTS’ past 

performance, NASA considered the contracts performed by ARTS team, which 

included, among others, a contract with value of $600 million, one with a value of 

$250 million, one valued at more than $100 million, as well as a contract with a value 

of $43.6 million. AR, Tab 37, SEB Report, at 137-43. Most of these contracts involved 

performance with more than 200 employees. AR, Tab 14, ARTS’ Past Performance 

Information, at 01146. Both offerors’ proposals were rated as “excellent” under the 

past performance factor, which required a determination by NASA that their past

performance information was “highly relevant.” 

As a general matter, the evaluation of an offeror’s past performance is a matter 

within the discretion of the contracting agency, and we will not substitute our 

judgment for reasonably based past performance ratings. However, we will question

an agency’s evaluation conclusions where they are unreasonable or undocumented. 

Clean Harbors Envtl. Servs., Inc., B-296176.2, Dec. 9, 2005, 2005 CPD ¶ 222 at 3; OSI 

Collection Servs., Inc., B-286597, B-286597.2, Jan. 17, 2001, 2001 CPD ¶ 18 at 6. The 

critical question is whether the evaluation was conducted fairly, reasonably, and in

accordance with the solicitation’s evaluation scheme. Clean Harbors Envtl. Servs., 

Inc., supra. The agency’s past performance evaluation here did not meet this 

standard. 

The record reflects that, in evaluating offerors’ past performance, NASA utilized, in 

essence, a “pass/fail” criterion with respect to its consideration of the relative size of 

offerors’ past performance references. In responding to ARTS’ allegations, NASA 

essentially argues that in considering relevance, offerors’ prior contracts were 

deemed to be relevant by the terms of the RFP if they met the $2 million minimum 

threshold established by the RFP. 15 Agency Supplemental Report at 31. 

 

(continued...) 

15 NASA also disputes ARTS’ general assertion that it failed to give any consideration 

to size in evaluating past performance. This disagreement, however, is of no 

consequence since there is nothing in the record of NASA’s evaluation of SP Systems 

or ARTS to suggest that NASA did anything more than assess whether a contract had 

a value of more or less than the $2 million threshold. For example, in finding that 

Page 13 B-400217; B-400217.2 
The fundamental premise of NASA’s argument, however, is flawed. By the terms of

the RFP, the evaluation of relevance with respect to size was not merely a “pass” or 

“fail” determination (either over or under the $2 million threshold). Rather, the 

solicitation specified that NASA would consider the “degree” to which the size of an

offeror’s past performance references (in addition to scope and complexity) are 

similar to the size of the PAAC III requirements. Thus, consistent with the 

solicitation language, NASA had to consider the relative size of offerors’ past 

performance references in weighing their past performance ratings and assessing 

whether the references were highly relevant, very relevant, relevant, somewhat 

relevant, or simply not relevant at all. In this context, the $2 million minimum set 

forth in the solicitation cannot be considered anything more than a floor, 

establishing the minimum dollar amount that NASA would consider for the purpose 

of evaluating relevance. Since there is nothing in the record to indicate that NASA 

engaged in the type of analysis required by the solicitation, we conclude that its 

determination that SP Systems’ past performance was “highly relevant,” particularly 

given that SP Systems’ references were, in most respects, small fractions of the size 

of the contemplated PAAC III contract, was unreasonable. Sytronics, Inc., B-297346, 

Dec. 29, 2005, 2006 CPD ¶ 15 at 6-7. 

RECOMMENDATION 

We recommend that NASA reevaluate proposals by removing the “significant 

weakness” improperly assigned to ARTS under the mission suitability factor and readjusting ARTS’ point scores and ratings accordingly, and reevaluating the relevance 

of SP Systems’ past performance. Based upon this reevaluation the agency should 

make a new source selection decision. If, after the new evaluation, NASA 

determines that another firm’s proposal represents the best value to the government,

the agency should terminate SP Systems’ contract and make a new award. We also

recommend that the agency reimburse the protester for the reasonable costs of filing 

and pursuing its protests, including reasonable attorneys’ fees. Bid Protest

Regulations, 4 C.F.R. § 21.8(d)(1). The protester’s certified claims for costs, detailing 

time expended and costs incurred, must be submitted directly to the agency within 

60 days of receiving this decision. 4 C.F.R. § 21.8(f)(1). 

The protest is sustained. 

Gary L. Kepplinger 

General Counsel 

 

(...continued) 

ARTS (not considering its team members) did not have any “large contract relevant 

past performance,” the record merely establishes that the agency rejected an ARTS’ 

subcontract with a value of less than $2 million. AR, Tab 37, SEB Report, at 137-38. 

Page 14 B-400217; B-400217.2