United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

 

Decision

Matter of: Tetra Tech EC, Inc.

File: B-406975; B-406975.3; B-406975.4

Date: October 9, 2012

Holly A. Roth, Esq., Michael Bhargava, Esq., Jennifer A. Sincavage, Esq., and 

Howard H. Yuan, Esq., Manatt, Phelps & Phillips, LLP, for the protester.

Richard P. Rector, Esq., and C. Bradford Jorgensen, Esq., DLA Piper LLP, for 

Navarro Research and Engineering, Inc., the intervenor.

Tina Pixler, Esq., Jan McNutt, Esq., and Richard Bechtel, Esq., Department of the 

Army, for the agency.

Kenneth Kilgour, Esq., and David A. Ashen, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision.

DIGEST

Protest that the agency improperly evaluated the awardee’s proposal is denied 

where the record shows that the evaluation was reasonable and consistent with the 

terms of the solicitation.

DECISION

Tetra Tech EC, Inc., of Lakewood, Colorado, protests the Department of the Army, 

U.S. Army Materiel Command’s award of a contract to Navarro Research and 

Engineering, Inc., of Oak Ridge, Tennessee, under request for proposals (RFP) 

No. W9125F-11-R-0002, for environmental cleanup services at the Rocky Mountain 

Arsenal, Commerce City, Colorado. The protester asserts that the agency 

improperly evaluated the awardee’s proposal and conducted an improper 

cost/technical tradeoff. 

We deny the protest.

BACKGROUND

The Rocky Mountain Arsenal is a former chemical weapons production facility that 

has undergone a 15 year environmental remediation program. Tetra Tech is the 

incumbent contractor. While the environmental clean-up is now complete, with 

most of the facility transferred to the U.S. Fish and Wildlife Service, the Army retains 

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-406975 et al. 

responsibility for a small portion of the former arsenal and will conduct operations 

such as groundwater treatment for the foreseeable future. This RFP is for an 

operations and maintenance contract to perform those services.

The solicitation provided for the award of a cost plus incentive fee (CPIF) contract 

(with fixed price elements), with a base period of 3 years with two 3-year options. 

The cost portion of the proposal included direct productive labor hours (DPLH) and 

the associated labor burden rate. 

Award was to be made to the offeror whose proposal represented the best value to 

the government considering the following four evaluation areas: management; 

technical; cost/price; and performance risk. Management was more important than 

any other area. Technical and cost/price were of equal importance, and each was 

more important than performance risk. The non-cost/price areas, when combined, 

were significantly more important than cost/price. Management and technical were 

to be assigned an adjectival rating of excellent, good, acceptable, marginal or 

unacceptable, while performance risk was to be evaluated as low, moderate, high or 

unknown. 

The agency received offers from five firms, including the protester and the awardee. 

The proposals of Tetra Tech and Navarro were evaluated as follows:

Offeror Management Technical Cost/Price Performance 

Risk

Tetra Tech Excellent Excellent $78,117,000 Low

Navarro Good Good $68,507,000 Low

Source Selection Decision Document (SSDD) at 2.

The agency recognized that “[a]lthough the Cost Area is equal in importance to the 

Technical Area. . . there was one Offeror that had a significantly lower cost than the 

other Offerors.” SSDD at 19. Accordingly, the agency began its tradeoff analysis 

by comparing the offeror with the lowest cost, Navarro, against each of the other 

offerors. Under this approach, if an offeror with a higher cost offered a better value 

than the lowest cost offeror, the offeror with the lowest cost would be eliminated. 

The process was to be repeated until a best value determination could be made. 

SSDD at 19. 

The initial recommendation of the Source Selection Evaluation Board (SSEB) was 

that award be made to Tetra Tech. Agency Report (AR) at 13. However, when the 

SSEB and the Source Selection Advisory Council were requested to “identify those 

distinguishing characteristics of the Tetra Tech proposal that would provide such 

benefit as to readily offset the higher cost,” they were unable to identify tangible 

benefits warranting the higher cost. SSDD at 27; AR at 13.
Page 3 B-406975 et al. 

In this regard, the agency recognized the superiority of Tetra Tech’s proposal under 

the management and technical areas. In particular, the agency recognized Tetra 

Tech’s demonstrated very clear understanding of the solicitation requirements, and 

its proposed senior technical advisors, corporate resources and company support. 

However, the agency noted that both proposals relied heavily on the incumbent 

(contract) staff at Rocky Mountain Arsenal, and both were evaluated as having low 

performance risk. In addition, the agency viewed favorably Navarro’s plan to use 

[DELETE] percent of its award fee to [DELETED], and the fact that Navarro is a 

small business and its project manager will have direct access to company 

resources. SSDD at 20-22. The agency concluded that, notwithstanding Tetra 

Tech’s management and technical superiority,

the two firms are proposing very similar staffs and the additional 

benefits provided by the non-cost elements from [Tetra Tech] are 

simply not significant enough to justify the additional cost of 

$9,610,000 (or 14%) above [Navarro’s] cost.

SSDD at 23. Upon learning of the resulting award to Navarro, Tetra Tech filed this 

protest with our Office.

DISCUSSION

Navarro’s Most Probable Cost

The protester challenges the agency’s evaluation of the most probable cost of 

Navarro’s proposal. When an agency evaluates a proposal for the award of a costreimbursement contract, an offeror’s proposed estimated costs are not dispositive 

because, regardless of the costs proposed, the government is bound to pay the 

contractor its actual and allowable costs. Federal Acquisition Regulation (FAR) 

§§15.305(a)(1); 15.404-1(d); Palmetto GBA, LLC, B-298962, B-298962.2, Jan. 16, 

2007, 2007 CPD ¶ 25 at 7. Consequently, the agency must perform a cost realism 

analysis to determine the extent to which an offeror’s proposed costs are realistic 

for the work to be performed. FAR §15.404-1(d)(1). In this regard, an agency is not 

required to conduct an in-depth cost analysis, 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. Our review of an agency’s cost 

realism evaluation is limited to determining whether the cost analysis is reasonably 

based and not arbitrary. Jacobs COGEMA, LLC, B-290125.2, B-290125.3, Dec. 18, 

2002, 2003 CPD ¶ 16 at 26. As explained below, we find no basis here to question 

the agency’s evaluation of the awardee’s most probable cost; we consider, in turn, 

allegations that the agency failed to consider that the awardee underestimated its 

general and administrative costs, that the agency failed to consider that the 

awardee reduced its direct productive labor hours, and that the awardee failed to 
Page 4 B-406975 et al. 

comply with a material term of the solicitation regarding calculation of a certified 

fixed burden rate.

General and Administrative Expenses Allocation 

Tetra Tech asserts that the agency failed to account for the fact that Navarro’s 

proposal indicated that Navarro’s accounting practice is to allocate general and 

administrative (G&A) expenses to reimbursable expenses and subcontractor costs. 

In this regard, during proposal review, the agency asked offerors to 

confirm that per your accepted accounting practices for the Division 

under which this Contract would be awarded, that no overhead or 

G&A costs would be applied to Team Member Subcontract costs or to

any of the other reimbursable costs under [contract line item number 

(CLIN)] series 0007 through 8007.

AR, Tab 12, at 2 and Tab 16, at 3, Letters from Contracting Officer to Offerors, 

Feb. 29, 2012. The awardee responded that “[t]he Navarro Division where this 

contract will be located will not apply any overhead or G&A costs to Team Member 

[subcontractor] or to any of the reimbursable costs under CLIN series 0007 through 

8007.” AR, Tab 12, at 1, Undated Letter from Navarro to Contracting Officer. 

Noting that the awardee’s response did not confirm that foregoing G&A on 

reimbursable expenses and subcontractor costs “[was] its standard accounting 

practice,” the protester asserts that Navarro therefore in fact will incur and be 

reimbursed for these expenses in accordance with its standard accounting 

practices, increasing its actual G&A and costs by $2.4 million.1

 Second 

Supplemental Protest, Aug. 16, 2012, at 18.

As noted by the agency, however, the protester’s response to the agency’s request 

for confirmation did not meaningfully differ from the awardee’s. In this regard, Tetra 

Tech responded that it “does not apply any overhead or G&A costs to Team 

Members Subcontract costs or to any of the reimbursable costs under CLIN series 

0007 through 8007.” AR, Tab 16, Letter from Awardee to Contracting Officer, 

Mar. 5, 2012. While neither offeror confirmed that its proposed approach was 

consistent with its standard accounting practices, both stated that they would not 

apply G&A to subcontractor or other reimbursable costs, and the agency accepted 

both representations. We agree with the agency that, given Navarro’s commitment 

in its revised proposal that it would not apply G&A to subcontractor and other 

reimbursable costs, there is no basis for concluding that the government in fact will 

incur any such G&A costs.

 1 The protester calculated this figure by multiplying Navarro’s estimated 2011 G&A 

rate by its proposed reimbursable expenses and subcontractor costs. See Second 

Supplemental Protest, Aug. 16, 2012, at 18 n.4.
Page 5 B-406975 et al. 

Direct Productive Labor

Tetra Tech asserts that the agency failed to consider the effect on Navarro’s 

probable costs resulting from Navarro reducing the level of direct productive labor 

hours from its original proposal to its final proposal. Direct productive labor hours 

are defined in the solicitation as actual hours worked, exclusive of vacation, 

holidays, sick leave, and other absences. RFP ¶ L7.2(d). When, in its final 

proposal, Navarro provided for additional employee vacation time, its proposed 

direct productive labor hours per employee declined from [DELETED] to 

[DELETED]. AR, Tab 11, Awardee’s Final Proposal, Vol. III, Cost and Price at iii. 

The protester asserts that Navarro’s final proposal understated the costs of 

performance by failing to account for the reduction in effort per employee. As noted 

by the agency, however, notwithstanding the decrease in productive hours per 

employee, Navarro’s total annual proposed level of effort increased from 

[DELETED] hours in its original proposal to [DELETED] hours in the final proposal. 

Second Supplemental AR at 14; Compare Vol. III, Cost and Price, B-1 Staff Matrix 

of Original and Final Proposal Revision. In these circumstances, we find no basis to 

question the agency’s position that Navarro proposed (and costed) an adequate 

overall level of effort in its final proposal. 

Certified Fixed Burden Rate 

Tetra Tech asserts that Navarro failed to comply with a material term of the 

solicitation regarding calculation of a “certified fixed burden rate.” The RFP required 

offerors to complete a Staff Matrix containing a “Burden Rate” column (Column 12) 

for each labor category, and to enter in that column their “current certified fixed 

burden rates for allowable indirect costs on cost reimbursement contracts with the 

Government.” RFP ¶ L7.5.2.1. If the offeror “does not currently have a certified 

fixed burden rate,” the RFP required that the offeror “shall calculate one (subject to 

audit) and provide the basis in the ‘Comments on Pricing’ section of the proposal.” 

Id. The protester interprets the RFP to require an offeror to provide either a certified 

rate or “sufficient information such that the rate could [be] reliably verified by an 

auditor.” Second Supplemental Protest, Aug. 16, 2012, at 27. Tetra Tech asserts 

that Navarro’s proposal was unacceptable because it neither included a certified 

fixed burden rate nor sufficient information for an audit.

We agree with the agency, however, that the protester’s argument is based on an 

unreasonable interpretation of the solicitation. We instead find reasonable the 

agency’s position that the parenthetical phrase “subject to audit” simply advised 

offerors that their calculated rates should be supportable according to government 

contracting standards, without requiring offerors to submit information necessary for 

such an audit or requiring the agency to perform one, and that the required “basis” 

was simply the specific underlying indirect rates, e.g., the overhead, fringe benefits 

and G&A rates, comprising the overall burden rate. Second Supplemental AR at 

18. Since Navarro furnished the requested underlying specific indirect rates, Tetra 
Page 6 B-406975 et al. 

Tech’s argument provides no basis to question the agency’s determination that 

Navarro’s cost proposal was acceptable in this regard.

Cost/Technical Tradeoff

The protester challenges the reasonableness of the agency’s allegedly “merely 

perfunctory” cost/technical tradeoff, asserting that the agency elevated price to be 

the most important evaluation factor in violation of the terms of the RFP. Second 

Supplemental Protest, Aug. 16, 2012, at 6. In this regard, source selection officials 

in negotiated procurements have broad discretion in determining the manner and 

extent to which they will make use of technical and cost evaluation results; 

cost/technical tradeoffs may be made, and the extent to which one may be 

sacrificed for the other is governed only by the tests of rationality and consistency 

with the evaluation criteria. World Airways, Inc., B-402674, June 25, 2010, 2010 

CPD ¶ 284 at 12. A protester’s disagreement with the agency’s judgment is not 

sufficient to establish that the tradeoff was unreasonable. MRC Federal, LLC, 

B-401954.2, Aug. 17, 2010, 2010 CPD ¶ 196 at 11. 

Here, Tetra Tech has not shown the cost/technical tradeoff to be unreasonable. 

Tetra Tech asserts that beginning with a lower-priced proposal and asking whether 

another proposal offered better value to the government improperly elevated price 

to be the most important evaluation factor and made Navarro the “presumptive 

favorite.” Protester’s Comments, Sept. 17, 2012, at 25. We disagree. A best value 

tradeoff necessarily begins with one competing proposal, which has a certain 

cost/price, to which other proposals are compared. The starting point for the 

analysis does not preordain an outcome; to suggest otherwise is to elevate form 

over substance. Further, we see no evidence in the record to support the assertion 

that the agency’s conclusion necessarily followed from the format of the tradeoff 

analysis. Nor has the protester shown that the agency unreasonably determined 

that the advantages of its proposal under the management and technical factors did 

not warrant a 14 percent cost/price premium.

The protest is denied.

Lynn H. Gibson

General Counsel