Comptroller General

United States Government Accountability Office

Washington, DC 20548 

of the United States

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: Basic Commerce and Industries, Inc.--Costs 

File: B-401702.3 

Date: February 22, 2010 

Heather A. James, Esq., and J. Bradley Aaron, Esq., Whiteford, Taylor & Preston 

L.L.P., for the protester. 

Stephen H.S. Tryon, Esq., Department of the Navy, for the agency. 

Paul N. Wengert, Esq., and Ralph O. White, Esq., Office of the General Counsel, GAO, 

participated in the preparation of the decision. 

DIGEST 

GAO will recommend that agency reimburse protester for its costs of filing and 

pursuing a protest challenging the agency’s cost realism analysis where the agency 

did not take corrective action in response to the protest until after submission of its 

agency report, and the protest was clearly meritorious. 

DECISION 

Basic Commerce and Industries, Inc. (BCI), of Moorestown, New Jersey, a small 

business,1

 requests that this Office recommend the reimbursement of BCI’s costs of 

filing and pursuing a protest challenging the issuance of a task order to McKean 

Defense Group-Information Technology, LLC, of Philadelphia, Pennsylvania, by the 

Department of the Navy under task order solicitation No. N00024-08-R-3331 for 

computer network support services. The Navy held a competition for the task order 

among small businesses holding Seaport-e contracts. BCI argued in its protest that 

the Navy had misevaluated both BCI and McKean, and had failed to perform a 

reasonable cost realism analysis of McKean. The Navy subsequently took corrective 

action in response to the protest. 

 

1

 The Navy states that BCI is no longer a small business. Our description of a 

protester as a small business here is based simply on the protester’s representation; 

the jurisdiction to determine the size status of a particular business rests with the 

Small Business Administration. See 4 C.F.R. § 21.5(b)(1) (2009). 
We grant the request. 

BACKGROUND 

The Navy issued the solicitation on November 17, 2008, seeking task order proposals 

to provide the required support services on a cost-plus-fixed-fee basis. The 

solicitation provided for issuance of the task order to the vendor whose quotation 

provided the best value based on evaluation of four factors: technical 

competence/understanding, personnel, past performance, and evaluated cost. 

Solicitation at 32. The Navy received task order proposals from six vendors, 

including both McKean and the incumbent vendor, BCI. On July 22, 2009, the Navy 

selected McKean to receive the task order, at an evaluated cost of $33,772,942. BCI 

requested a debriefing, which the Navy provided on July 24. On August 3, BCI filed 

its protest with our Office. 

BCI’s protest raised three main arguments. First, BCI argued that its own task order 

proposal was improperly downgraded to “technically acceptable” based on an 

incorrect evaluation of the qualifications of BCI’s personnel. Second, BCI argued 

that McKean should have been downgraded for offering unsatisfactory personnel 

while allegedly intending a “bait-and-switch” by hiring BCI’s incumbent staff upon 

receipt of the task order. Third, BCI argued that the Navy failed to conduct a proper 

cost realism analysis because McKean’s evaluated cost did not reflect the much 

higher salaries of the former BCI employees that McKean was using in performance. 

The Navy filed its report responding to the protest allegations on September 3. In its 

agency report, the Navy argued that it had reasonably evaluated both firms’ 

proposals, and that McKean’s hiring of BCI personnel after award was necessitated 

by BCI’s attempt to obstruct the transition to McKean.2 Agency Report (AR) at 4. 

With respect to the cost realism analysis, the Navy explained that its evaluator could 

not obtain audited rates for McKean, and therefore the cost realism analysis 

consisted of comparing McKean’s proposed rates to the rates charged by BCI as the 

incumbent. Id. at 7. 

In its comments on the agency report, BCI focused on its challenge to the cost 

realism analysis. BCI argued that the record showed that the evaluators had raised 

substantial questions about whether McKean could perform at the rates it had 

proposed, and that the Navy never addressed those concerns before selecting 

McKean. Protester’s Comments at 3. 

 

2

 BCI generally disputes the Navy’s allegations, and argues that they are beyond our 

Office’s jurisdiction. We note them here because the Navy’s allegations provide the 

foundation for a viable rebuttal of BCI’s bait-and-switch claim. Other than noting 

that the Navy had a viable defense, we find it unnecessary to resolve this issue on its 

merits. 

Page 2 B-401702.3 
After receiving the protester’s comments on the agency report, our Office convened 

a conference call with counsel for all parties, to schedule a hearing. We explained 

that the purpose of the hearing was to examine the Navy’s cost realism analysis. 

On October 9, the Navy announced that it would take corrective action by reopening 

discussions, and requesting and evaluating revised quotations, which would include 

a new cost realism analysis.3 Our Office dismissed BCI’s protest as academic based 

on the corrective action. 

BCI now requests that our Office recommend that the Navy reimburse the costs of 

filing and pursuing the protest, and argues that the Navy unduly delayed taking 

corrective action in response to a clearly meritorious protest. More specifically, BCI 

again argues that each of the technical evaluators raised concerns that McKean’s 

proposed costs were too low and would increase the risk of unsatisfactory 

performance; BCI also argues that the Navy should have recognized that it had no 

valid defense of the cost realism analysis when it prepared the agency report. BCI 

Costs Request at 3. 

The Navy responded that it was not motivated to take corrective action by any of the 

issues raised in BCI’s protest, but rather by a flaw that “had nothing to do with the 

complaints made by BCl, even with knowledge of the facts presented in the agency 

report documentation.” Navy Response at 3.4 The Navy describes the flaw that 

motivated the corrective action as a “methodology mistake” in the cost realism 

analysis, which it argues thereby distinguished the motive for corrective action from 

BCI’s grounds of protest. Id. The Navy argues that BCI’s arguments were not 

meritorious, and that the Navy independently discovered that it had erred in the 

method of comparing McKean’s rates to the rates being charged by BCI as 

incumbent. According to the Navy, it was this improper methodology that “led to an 

improper and unfair lowering of the assessed cost” of McKean’s quotation, and upon 

recognizing it, the Navy took corrective action. Id. at 2. 

DISCUSSION 

When a procuring agency takes corrective action in response to a protest, our Office 

may recommend reimbursement of protest costs, including reasonable attorneys’ 

fees, if, based on the circumstances of the case, we determine that the agency unduly 

delayed taking corrective action in the face of a clearly meritorious protest, thereby 

 

3

 Additional consideration of the scope of the corrective action is included in our 

decision denying McKean’s subsequent protest challenging the corrective action. 

McKean Def. Group--Info. Tech., LLC, B-401702.2, Jan. 11, 2010, 2010 CPD ¶ ___. 

4

 The Navy has not disputed that the timing of the corrective action would be 

considered unduly delayed because it occurred after the Navy’s agency report. Navy 

Response at 2. 

Page 3 B-401702.3 
causing the protester to expend unnecessary time and resources to make further use 

of the protest process in order to obtain relief. Competition in Contracting Act 

of 1984 (CICA), 31 U.S.C. § 3554(c)(1)(A) (2006); Bid Protest Regulations, 4 C.F.R. 

§ 21.8(e). A protest is clearly meritorious where a reasonable agency inquiry into the 

protest allegations would have shown facts disclosing the absence of a defensible 

legal position. While we consider corrective action to be prompt if it is taken before 

the due date for the agency report responding to the protest, we generally do not 

consider it to be prompt where it is taken after that date. Alsalam Aircraft Co.--

Costs, B-401298.3, Nov. 5, 2009, 2009 CPD ¶ 208 at 3. 

Ordinarily, we would not regard a protest as clearly meritorious where resolution of 

the protest required further record development, such as a hearing, to complete and 

clarify the record. However, when corrective action is taken by an agency after a 

hearing has been scheduled, we may still conclude that the protest is clearly 

meritorious, where, as here, that conclusion is otherwise established by the record. 

Eagle Home Med. Corp.--Costs, B- 299821.3, Feb. 4, 2008, 2008 CPD ¶ 41 at 4 n.4. 

In our view, BCI’s protest challenging the adequacy of the Navy’s cost realism 

analysis was clearly meritorious on the record provided to our Office with the 

agency report. In short, the record lacked support for the Navy’s conclusion that 

McKean could perform as it had proposed for the costs provided. Indeed, as BCI 

pointed out in its comments on the agency report, the evaluators’ expressed 

concerns about the realism of McKean’s rates remained unresolved when the Navy 

selected McKean for award. Based on our review, we are not persuaded that there is 

any meaningful difference between the Navy’s explanation of an error in the 

“methodology” of the cost realism analysis, and BCI’s challenge. 

As a general rule, we recommend that a successful protester be reimbursed protest 

costs with respect to all issues pursued, not merely those upon which it prevails. 

Nevertheless, in appropriate cases, we have limited our recommendation for the 

award of protest costs where a part of those costs is allocable to an unsuccessful 

protest issue that is so clearly severable from the successful issues that it essentially 

constitutes a separate protest. In determining whether protest issues are so clearly 

severable as to essentially constitute separate protests, we consider, among other 

things, the extent to which the issues are interrelated or intertwined--i.e., whether 

the successful and unsuccessful arguments share a common set of facts, are based 

on related legal theories, or are otherwise not readily severable. Core Tech Int’l 

Corp.--Costs, B-400047.2, Mar. 11, 2009, 2009 CPD ¶ 59 at 8. We view BCI’s 

challenges to the non-cost evaluation (which it has not shown were clearly 

meritorious) as severable from the challenge to the cost realism analysis because the 

questions involved distinct aspects of the record, and were not intertwined factually 

or legally. 

Page 4 B-401702.3 
Page 5 B-401702.3 

RECOMMENDATION 

We recommend that the Navy reimburse BCI’s costs of filing and pursuing its protest 

with respect to its cost realism challenge, including reasonable attorneys’ fees. 

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

spent and the cost incurred, must be submitted to the agency within 60 days after 

receiving this decision. 

The request is granted. 

Lynn H. Gibson 

Acting General Counsel