United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

Decision

Matter of: Science Applications International Corporation

File: B-406460; B-406460.2

Date: June 7, 2012

James J. McCullough, Esq., Karen M. Soares, Esq., and Brian M. Stanford, Esq., 

Fried, Frank, Harris, Shriver & Jacobson LLP, for the protester.

David H. Turner, Esq., Department of the Navy, for the agency.

Mary G. Curcio, Esq., and David A. Ashen, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision.

DIGEST

1. Protest that agency performed an unreasonable cost realism analysis is denied 

where agency reasonably concluded that the awardee could hire qualified personnel 

at its proposed labor rates.

2. Protest that agency unreasonably assigned protester an acceptable technical 

rating and awardee an outstanding rating is denied where the agency reasonably 

determined that the awardee, unlike the protester, proposed a detailed approach to 

accomplishing all of the solicitation requirements, as well as innovations and 

resources to better meet the needs of the agency and the personnel it serves. 

DECISION

Science Applications International Corporation (SAIC), of McLean, Virginia, protests 

the Department of the Navy’s issuance of a task order to Lockheed Martin Integrated 

Systems, Inc., of Bethesda, Maryland, under request for proposals (RFP) No. 

N00024-11-R-3341, for information technology services and systems support (ITSS) 

for the Navy Personnel Command. SAIC challenges the agency’s evaluation of the 

technical proposals, and the cost realism evaluation of Lockheed Martin’s proposal.

We deny the protest.

The solicitation was issued to holders of SeaPort-Enhanced multiple award 

contracts. The RFP provided for issuance of a cost-plus-fixed-fee task order, for a 

base year with 2 option years, to the vendor whose proposal represented the “best 

value” considering five factors: technical approach, corporate experience, past 

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.
Page 2 B-406460, B-406460.2 

performance, socio-economic plan, and cost. RFP at 52. Cost was to be evaluated 

on the basis of cost realism, that is, the offeror's ability to project costs which are 

realistic and reasonable and which indicate that the offeror understands the nature 

and scope of work to be performed. Id. 

Three offerors, including SAIC (the incumbent contractor) and Lockheed Martin, 

submitted proposals. The proposals of SAIC and Lockheed Martin were evaluated 

as follows:

SAIC LOCKHEED MARTIN

Technical Approach1 Acceptable Outstanding

Corporate Experience Very Relevant Very Relevant

Past Performance Substantial Confidence Substantial Confidence

Socio-Economic Plan Acceptable Outstanding

Overall Non-Cost Acceptable Outstanding

Proposed Cost $37,321,213 $31,680,504

Evaluated Cost $37,321,213 $32,842,656

Business Clearance Memorandum at 3, 6, 11. Based on the evaluation of Lockheed 

Martin’s proposal as having the highest technical rating and lowest evaluated cost, 

the source selection authority determined that issuance of the task order to 

Lockheed Martin would result in the best value to the government. Id. at 15. 

Following a debriefing, SAIC filed this protest. 

Cost Realism

SAIC, the incumbent contractor, asserts that the agency failed to perform a 

reasonable cost realism analysis of Lockheed Martin’s proposal. Offerors were 

required to propose direct labor rates for 35 labor categories. SAIC asserts that the 

proposed direct labor rates of Lockheed Martin and its subcontractors were below 

SAIC’s incumbent rates such that, given Lockheed Martin’s proposal to retain up to 

[REDACTED] of the incumbent workforce, a reasonable cost realism analysis of 

Lockheed Martin’s cost proposal would have resulted in an upward adjustment to 

Lockheed Martin’s labor rates (and consequently its overall cost), as well as a 

negative risk assessment under the technical approach factor. In this regard, SAIC 

points to five labor categories where it believes a comparison of Lockheed Martin’s 

proposed rates with SAIC’s proposed rates demonstrates that Lockheed Martin’s 

were not realistic: senior customer service representative, where SAIC proposed an 

hourly rate of [REDACTED] and Lockheed Martin [REDACTED] ; supply technician 

analyst, where SAIC proposed rates between [REDACTED] and Lockheed Martin 

[REDACTED] ; senior business functional expert, where SAIC proposed a rate of 

 1 The possible ratings for technical approach were outstanding, good, acceptable, 

marginal, and unacceptable.
Page 3 B-406460, B-406460.2 

[REDACTED] and Lockheed Martin [REDACTED] ; Windows SQL administrator, 

where SAIC proposed a rate of [REDACTED] and Lockheed Martin [REDACTED] ; 

and production data entry operator, where SAIC proposed a rate of [REDACTED] 

and Lockheed Martin [REDACTED] . Lockheed Martin Price Proposal, att. 1 at 8; 

SAIC Price Proposal.2

The agency responds that in conducting the cost realism analysis of Lockheed 

Martin’s proposal, it first contacted the Defense Contract Audit Agency (DCAA) for 

information on the direct labor rates of Lockheed Martin and its proposed 

subcontractors. Since DCAA did not have relevant rate information available with 

respect to Lockheed Martin, and because the direct labor rates proposed by 

Lockheed Martin were in a number of cases lower than those of the incumbent 

SAIC, the agency asked Lockheed Martin to explain how it developed its rates. 

Agency Report (AR) at 17. In response, Lockheed Martin explained that, consistent 

with its usual approach, it [REDACTED] Lockheed Martin E-mail, Feb. 2, 2012. The 

contracting officer reviewed the information and determined that it presented a 

reasonable approach to developing labor rates which supported a finding that 

Lockheed Martin’s quoted rates were realistic. 

DCAA likewise had no direct rate information for three of Lockheed Martin’s 

proposed subcontractors--[REDACTED]. To evaluate the realism of these 

subcontractor rates, the agency with respect to [REDACTED] , reviewed USA 

jobs.gov for comparable labor rates and found that for two of the three proposed 

categories the rates were the same; for [REDACTED] , the agency compared the 

quoted labor rates to the federal government’s General Schedule (GS) rates, and 

found that the rates were realistic for the Millington, Tennessee area where the 

contract will be performed; and for [REDACTED] , the contracting officer reviewed 

information at salary.com for similar labor categories to be performed in Millington. 

(For the fourth subcontractor, [REDACTED], the Defense Contract Management 

Agency reported that it took no exception to the proposed rates based on 

information from DCAA and various salary websites.) Id. at 17. The agency 

determined that the subcontractors’ rates were realistic.

When agencies evaluate proposals for the award of a cost-reimbursement contract, 

an offeror's proposed estimated costs are not dispositive, because regardless of the 

 2 On June 5, the agency provided our Office and the protester with a document from 

Lockheed Martin’s cost proposal which had been inadvertently omitted from the 

agency report. The agency explains that this document contains Lockheed Martin’s 

actual proposed labor rates, which are different from the rates in the document that 

was submitted with the report. Lockheed Martin’s actual proposed rates, as 

reflected in this document, were higher than the rates cited in our decision, and thus 

further support the agency’s position that the rates were realistic.
Page 4 B-406460, B-406460.2 

costs proposed, the government is bound to pay the contractor its actual and 

allowable costs. Federal Acquisition Regulation (FAR) § 15.605(d). Consequently, 

a cost realism analysis must be performed by the agency to determine the extent to 

which an offeror's proposed costs represent what the contract should cost, assuming 

reasonable economy and efficiency. CGI Federal Inc., B-403570 et al.

. An agency is not required to conduct an in-depth cost 

analysis, 

, Nov. 5, 

2010, 2011 CPD ¶ 32 at 4

see FAR § 15.404-1(c), or to verify each and every item in assessing cost 

realism; rather, the evaluation requires the exercise of informed judgment by the 

contracting agency. Cascade Gen., Inc., B-283872, Jan. 18, 2000, 2000 CPD ¶ 14 

at 8. Because the contracting agency is in the best position to make this cost 

realism determination, our review of an agency's exercise of judgment in this area is 

limited to determining whether the agency's cost evaluation was reasonably based 

and not arbitrary. Hanford Envtl. Health Found.

B-292858.2, B-292858.5, Apr. 7, 2004, 2004 CPD ¶ 164 at 9. 

, 

We find the agency’s cost realism analysis to be unobjectionable. SAIC assumes in 

its protest that a reasonable cost realism analysis must be based on a comparison of 

Lockheed Martin’s proposed rates to SAIC’s proposed rates or the rates it is 

currently paying the incumbent employees, such that a proposed rate which is less 

than the incumbent employee’s rate was unrealistic. SAIC, however, has not 

provided any information which indicates that the direct rates Lockheed Martin and 

its subcontractors proposed were less than the current market rates for similar labor 

categories. Thus, there is no basis to find that the agency was unreasonable in 

concluding that Lockheed Martin would be able to hire qualified personnel, including 

at least some of the incumbent personnel.

In this regard, we note that Lockheed Martin’s proposed staffing approach did not 

rely simply on hiring incumbent personnel. Lockheed Martin explained in its 

proposal that [REDACTED] Lockheed Martin anticipated being able to retain “up to 

[REDACTED] of personnel.” Lockheed Martin Technical Proposal at 11-12. 

However, Lockheed Martin further explained that Lockheed Martin [REDACTED] 

Indeed, Lockheed Martin specifically noted that it had already identified and 

screened approximately 100 candidates. Id. at 12. 

In any case, the extent to which the incumbent employees would be asked to accept 

a reduction in pay if they accepted employment with Lockheed Martin, is unclear 

from the record here. While SAIC has cited [REDACTED] labor categories where 

Lockheed Martin’s proposed rates were lower than SAIC’s proposed rates, SAIC has 

not furnished information on what these employees are currently being paid. 

Furthermore, there were in fact 35 listed labor categories in the solicitation, including 

categories where the proposed rates were similar or where Lockheed Martin’s 

proposed rates were in fact higher than the rates proposed by SAIC. For example, 

while Lockheed Martin proposed a rate of [REDACTED] for the business functional 

analyst, SAIC proposed rates for four positions, including three at [REDACTED] ; 

while Lockheed Martin’s proposed rate for the program manager was [REDACTED]
Page 5 B-406460, B-406460.2 

, SAIC’s rate was [REDACTED] , only approximately [REDACTED] higher; and 

while Lockheed Martin’s proposed rate for the business application expert/operator 

was [REDACTED] , SAIC’s rate was only [REDACTED] . Lockheed Martin Price 

Proposal, att. 1 at 8; SAIC Price Proposal. Overall, the agency calculates that 

Lockheed Martin’s average proposed direct rates were approximately only 

[REDACTED] lower than SAIC’s. AR, att. 25.

3

 In sum, SAIC’s protest furnishes no 

basis to question the reasonableness of the agency’s determination that Lockheed 

Martin would be able to hire qualified personnel at the rates it proposed.

Technical Approach

SAIC asserts that the agency unreasonably assigned its proposal a rating of only 

acceptable under the technical approach factor. According to SAIC, the sole reason 

that its proposal was not rated higher is because it lacked detail regarding its 

technical approach. According to SAIC, this is inconsistent with the evaluation of its 

proposal which found that SAIC’s approach, while lacking detail in some areas, 

nevertheless showed a thorough understanding of the requirements and 

represented a low risk of unsuccessful performance. SAIC further argues that 

Lockheed Martin’s proposal should not have been rated outstanding under the 

technical approach factor since, according to the protester, the evaluators did not 

characterize Lockheed Martin’s technical approach as outstanding in the narrative 

and in some cases stated that the risk of performance was low, not very low.4

In reviewing a protest against an agency’s proposal evaluation, it is not our function 

to independently evaluate quotations and substitute our judgment for that of the 

contracting agency. Neopost USA Inc., B-404195, B-404195.2, Jan. 19, 2011, 2011 

CPD ¶ 35 at 4. Rather, our review is limited to determining whether the agency’s 

evaluation was reasonable and consistent with the terms of the solicitation and 

applicable statutes and regulations. United Def. LP, B-286925.3 et al., Apr. 9, 2001, 

2001 CPD ¶ 75 at 6. 

We have no basis to question the agency’s evaluation that Lockheed Martin 

submitted a superior technical proposal. In this regard, the agency explains that the 

evaluators’ primary concern was that while SAIC demonstrated a thorough 

understanding of the requirements, it did not provide a detailed approach to 

 3 Again, the document submitted by the agency on June 5 shows that the rates 

proposed by Lockheed Martin for these positions are higher than the rates cited in 

our decision.

4 SAIC asserts that under the internal evaluation guidelines, only a very low risk 

proposal can be rated outstanding. However, adjectival ratings themselves are 

merely guides for intelligent decision making in the procurement process. CACI 

Dynamic Systems, Inc., B-406130, Feb. 28, 2012, 2012 CPD ¶ 77 at 5.
Page 6 B-406460, B-406460.2 

accomplishing all of them. Further, according to the agency, SAIC did not describe 

in its proposal any new innovations, but instead indicated that it would continue to 

utilize the same approach that it was currently utilizing as the incumbent. In these 

circumstances, the evaluators did not believe that SAIC’s description of its intended 

approach warranted a rating higher than acceptable. AR at 50. SAIC has made no 

showing that the agency’s findings regarding its proposed approach were in error or 

otherwise were unreasonable.

Nor has SAIC refuted the agency’s conclusion that Lockheed Martin offered a well 

drafted and thorough approach that not only demonstrated a thorough 

understanding of the solicitation’s requirements, but also offered a number of 

innovative approaches to better meeting those requirements. For example, 

Lockheed Martin addressed in its proposal [REDACTED]. In this regard, [Lockheed 

Martin proposed to establish [REDACTED]. Lockheed Martin Technical Proposal at 

19; Technical Evaluation at T-7. Under Lockheed Martin’s proposed [REDACTED].

approach, [REDACTED]. Lockheed Martin Technical Proposal at 27; Technical 

Evaluation at T-9. In addition, Lockheed Martin offered to provide access to a 

number of corporate knowledge and technology resources that the evaluators 

considered value-added resources. These included [REDACTED]. AR at 53-54; 

Lockheed Martin Technical Proposal at 24; Technical Evaluation at T-8. According 

to the agency, it was Lockheed Martin’s combination of innovative ideas and sound 

approaches and business practices that resulted in the outstanding rating. We 

conclude that, given Lockheed Martin’s evaluated detailed approach to 

accomplishing all of the solicitation requirements, and its proposal of innovations and 

resources to better serve the needs of the Navy Personnel Command and the Navy 

personnel it serves, the agency reasonably determined that its technical proposal 

warranted a superior, outstanding rating. Accordingly, we see no basis to question 

either the technical evaluation or the resulting source selection. 

The protest is denied.

Lynn H. Gibson

General Counsel