United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

Decision

Matter of: Energy Enterprise Solutions, LLC; Digital Management, Inc.

File: B-406089; B-406089.2; B-406089.5

Date: February 7, 2012

John E. Jensen, Esq., Daniel S. Herzfeld, Esq., Evan D. Wesser, Esq., and Nicole Y. 

Beeler, Esq., Pillsbury Winthrop Shaw Pittman LLP, for Energy Enterprise Solutions, 

LLC; David P. Metzger, Esq., and Caitlin K. Cloonan, Esq., Arnold & Porter, LLP, for 

Digital Management, Inc., protesters.

J. Scott Hommer, III, Esq., Justin J. Wortman, Esq., Paul A. Debolt, Esq., and 

Melanie J. Totman, Esq., Venable LLP, for ActioNet, Inc., an intervenor.

H. Jack Shearer, Esq., Laura L. Hoffman, Esq., Steven Jones-Ellard, Esq., and 

David R. Koeppel, Esq., Department of Energy, for the agency.

Scott H. Riback, Esq., and David A. Ashen, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision.

DIGEST

Protests challenging agency’s cost realism evaluation are denied where record 

shows that agency performed a reasonable and adequate evaluation of cost 

proposals.

DECISION

Energy Enterprise Solutions, LLC (EES), of Germantown, Maryland, and Digital 

Management, Inc. (DMI), of Bethesda, Maryland, protest the issuance of a task 

order to ActioNet, Inc. of Vienna, Virginia, under request for proposals (RFP) 

No. DE-SOL-0001043, issued by the Department of Energy (DOE) for information 

technology support services.1 Both protesters maintain that the agency 

misevaluated proposals and made an unreasonable source selection decision.

We deny the protests.

BACKGROUND

 1 The RFP was issued under the General Services Administration’s small business 

Alliant government-wide acquisition contract program and was limited to small 

business contract holders under that program. 

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-406089 et al.

The Solicitation

The RFP contemplated the issuance, on a “best value” basis, of a task order to 

perform comprehensive information technology support services for the agency’s 

Office of the Chief Information Officer for a 60-day transition period, a two year base 

period plus one two-year option period. The RFP is for the issuance of an indefinitedelivery, indefinite-quantity task order under which the agency will place sub task 

orders on either a cost-plus-fixed-fee, cost-plus-award-fee or fixed-price basis. RFP 

at 8. 

For evaluation purposes, the RFP advised that the agency would review proposals 

under four non-cost considerations: technical approach, management approach 

(deemed equal in importance), sample task (deemed less important than the first 

two factors), and past performance (deemed less important than the other three 

factors); collectively, the non-cost factors were deemed significantly more important 

than cost.2 Agency Report (AR) exh. A.14, at 78. For cost evaluation purposes, the 

RFP advised that the agency would evaluate proposals for realism, reasonableness 

and completeness. AR, exh. A.14, at 81.

In addition to these evaluation considerations, the RFP included detailed instructions 

for preparing proposals. For purposes of this decision, only the cost proposal 

instructions are relevant. First, the RFP required offerors to propose maximum 

indirect rates for overhead and general and administrative (G&A) expenses, as well 

as maximum fixed/award fee rates and profit. RFP at 10-11; 

AR, exh. A.14, at 67. Second, offerors were required to submit a “cost model” to 

provide the agency with proposed direct labor rates and indirect rates, as well as 

fully burdened labor rates for 87 specified labor categories.3 (The RFP included an 

excel spreadsheet “cost model,” designated as attachment F, that the offerors had to 

submit with their proposals.) With respect to these labor categories, the RFP also 

specified the number of hours within each labor category that were to be used in 

calculating total proposed costs, and offerors were not permitted to alter the number 

of hours used for the calculation. AR, exhs. A.14, at 67-68; A.4.4

 2 The record shows that, in evaluating the proposals, the agency assigned adjectival 

ratings of either excellent, good, average, marginal or poor for the technical 

approach, management approach and sample task factors and rated past 

performance on a pass/fail basis. AR, exh. B.1, at 61, 86. 

 Additionally, the 

3 The RFP included 91 labor categories, but the remaining 4 categories were for 

senior management personnel designated as key personnel under the contract. 

4 For the 4 remaining key personnel categories, offerors also were required to 

propose direct and fully burdened labor rates, but the number of hours for each of 

the categories was left up to the offeror to specify. AR, exh. A.4. 
Page 3 B-406089 et al.

RFP specified an escalation rate of 2.8 percent to be applied to the labor rates in the 

out-years of the contract, and also specified an annual amount of $50 million in 

material costs. AR, exh. A.14, at 67-68. In effect, all variables relating to how the 

firms would calculate their total estimated cost to perform, with the exception of 

direct labor rates and indirect rates applied to the direct rates (along with fee/profit), 

were dictated by the terms of the solicitation.

The Independent Government Cost Estimate (IGCE)

In anticipation of evaluating cost proposals, the agency prepared an IGCE to use as 

a reference point for performing its cost realism analysis. In preparing its estimate, 

the agency used Bureau of Labor Statistics (BLS) direct labor rate data from 

2009 for the 87 labor categories called for in the RFP. Of note for purposes of this 

discussion, BLS wage rate data are available at various standardized intervals, or 

percentile thresholds, as follows: 10th percentile, 25th percentile, 50th percentile 

(median), 75th percentile and 90th percentile, with the lowest wage rates expressed 

at the 10th percentile and the highest wage rates expressed at the 90th percentile.5

The record shows that, in preparing its original IGCE, the agency decided to use 

above average percentile wage rate data because, as explained by the agency, the 

sophisticated nature of DOE’s IT requirements warranted using more highly qualified 

personnel. EES Agency Report (EESAR) at 13-14; DMI Agency Report (DMIAR) at 

13; AR, exhs. B.1, at 65; F.1, at 65.6 The percentile wage rate data used by the 

agency varied by labor category, but the agency made a judgment in the case of 

each labor category concerning the threshold at which it could obtain enhanced 

performance of its requirements. AR, exhs. E.8; I.5.

After selecting the various direct wage rates, the agency applied an escalation factor 

of 3.9 percent to the 2009 data to arrive at estimated 2011 direct hourly rates. AR, 

exhs. E.8; I.5. After selecting and escalating the direct wage rates, the agency 

calculated indirect burden rates and applied them to the direct labor rates to arrive at 

fully burdened labor rates for each of the labor categories. Id.

The agency then used the fully burdened wage rates to calculate the total labor cost

for the IGCE. The agency then calculated a fully burdened composite, weighted 

 5 For example, see http://www.bls.gov/oes/2009/may/oes151021.htm which provides 

2009 wage rate data for computer programmers at the various percentile thresholds.

6 The record in each protest was developed separately, although our Office was 

provided a single, consolidated agency report that included all of the exhibits for both 

protests. We provide parallel citations to the two agency reports where necessary.
Page 4 B-406089 et al.

average (FBCWA) hourly wage rate. As originally calculated, the government’s 

FBCWA hourly wage rate was $88.49. EESAR at 14; DMIAR at 13.7

The Revised IGCE

After the agency received proposals, it concluded that its FBCWA hourly wage rate 

was high based on a comparison of that figure to FBCWA hourly wage rates that it 

had calculated for each offeror, as well as an average FBCWA wage rate for all 

proposals. AR, exhs. B.1, at 65; F.1, at 65. In particular, the agency found that the 

average FBCWA hourly wage rate for all proposals was $72.12, which was 

19.5 percent lower than the agency’s FBCWA hourly wage rate of $88.49. Id.

The agency determined that its initial use of the higher-than-average direct labor 

rates was the underlying cause of its FBCWA hourly wage rate being high. 

Specifically, the record shows that the agency reviewed the underlying BLS data that 

it had used in its earlier calculations. On the basis of that review, the agency 

calculated that the average interval between the percentile thresholds (10th

25

, th, etc.) was 20.7 percent. AR, exhs. B.1, at 65; F.1, at 65. The agency reasoned 

that, since that figure was close to the 19.5 percent difference between its FBCWA 

hourly wage rate and the average FBCWA hourly wage rate for all proposals, its use 

of the higher-than-average direct wage rates was responsible for the disparity 

because nothing in the RFP required offerors to use above average wage rates. Id.

In light of these considerations, the agency reduced its FBCWA hourly wage rate by 

20.7 percent (essentially reducing its calculations by one percentile category) to 

arrive at a new FBCWA hourly wage rate of $70.17.8

at 65.

 The record shows that this 

figure was very comparable to (within 2.8 percent of) the $72.12 average FBCWA 

hourly wage rate for all proposals, and that, of the 13 proposals submitted, 6 had 

FBCWA hourly wage rates above the agency’s revised figure and 7 had FBCWA 

hourly wage rates below the agency’s revised figure. The agency therefore 

concluded that this revised FBCWA hourly wage rate was a reasonable benchmark 

against which to assess the realism of the proposals. AR, exhs. B.1, at 65; F.1, 

 7 When it prepared its initial IGCE, the agency also made a comparison of the 

estimated fully burdened rates to the labor rates under the predecessor contract. 

The agency initially found that the initial comparison tended to support the validity of 

its original IGCE because the rates used in the IGCE were approximately [deleted] 

percent [deleted] the rates under the predecessor contract, which was a time and 

materials type contract. EESAR at 14; DMIAR at 14. Once the agency received 

proposals and revised the IGCE (discussed below) it made no further reference to, 

and ceased to rely on, the predecessor rates as a point of comparison. 

8 $88.49 – 20.7 percent ($18.317) = $70.17.
Page 5 B-406089 et al.

The Presumptive Realistic Threshold Rate

Finally, the agency reasoned that, because the BLS data upon which it had relied 

was itself composite, averaged data, it would be reasonable to assume that offerors’ 

proposed costs could vary somewhat from the agency’s calculations and 

nonetheless still be realistic. The agency determined that it would be reasonable to 

assume that offerors’ proposed costs could vary by as much as one half of the 

average interval between the BLS percentile categories, or 10.35 percent. 

AR, exhs. B.1, at 65; F.1, at 65. Accordingly, the agency further reduced its FBCWA 

by 10.35 percent to arrive at a presumptively realistic threshold rate of $62.91.9

As noted, the record shows that the agency calculated a FBCWA hourly wage rate 

for each offeror. In evaluating proposals, where an offeror’s FBCWA hourly wage 

rate fell below the presumptive realistic threshold rate, the agency reviewed the 

firm’s proposal to determine whether there was an adequate explanation for the 

difference. Where the agency concluded that the difference was not adequately 

explained, the agency made an upward cost adjustment to the proposal to increase 

the offeror’s FBCWA hourly wage rate to the presumptive realistic threshold rate for 

evaluation purposes. 

Proposals

In response to the RFP, the agency received 13 proposals, including those of the 

protesters and the awardee. The agency performed a technical and cost evaluation 

on the proposals and arrived at the following evaluation results:

 9 $70.17 – 10.35 percent ($7.26) = $62.91.
Page 6 B-406089 et al.

•

• Offeror

•

• Technical

•

• Management

• Sample 

Problem

• Past 

Performance

• Evaluated 

Cost

• ActioNet • Excellent • Excellent • Excellent • Pass • $491,863,365

• DMI • Good • Good • Good • Pass • $494,764,811

• EES • Average • Good • Good • Pass • $494,980,898

• A • Good • Good • Good • Pass • $549,307,100

• B • Good • Good • Good • Pass • $540,032,851

• C • Good • Marginal • Good • Pass • $535,376,307

• D • Good • Good • Good • Pass • $621,732,120

• E • Good • Excellent • Good • Pass • $547,326,567

• F • Good • Average • Good • Neutral • $536,827,236

• G • Good • Good • Good • Pass • $601,110,178

• H • Good • Average • Good • Pass • $537,319,353

• I • Good • Good • Good • Pass • $517,663,636

• J • Good • Good • Good • Pass • $650,224,348

AR, exhs. B.1, at 5; F.1, at 5. The record shows that, of the 13 proposals received, 

the agency made upward cost adjustments to four of them, including the protesters’ 

proposals as well as the awardee’s proposal. AR, exhs. B.1, at 91; F.1, at 91. 

Specifically, the record shows that the agency adjusted ActioNet’s proposed cost 

upward by $[deleted], EES’s proposed cost upward by $[deleted], and DMI’s 

proposed cost upward by $[deleted]. Id.

In view of these evaluation results, the agency made award to ActioNet on the basis 

of initial proposals, finding that its proposal was both the most highly rated under the 

non-cost criteria, and also offered the lowest evaluated cost among all offerors. 

After being advised of the agency’s source selection decision and receiving 

debriefings, EES and DMI protested to our Office. 
Page 7 B-406089 et al.

PROTESTS

Both protesters raise numerous challenges the agency’s cost evaluation, 

maintaining that virtually every aspect of it was improper. We have carefully 

reviewed all of the protesters’ contentions and conclude that none of them have 

merit. We discuss the protesters’ principal contentions below, but note at the outset 

that, in considering protests relating to an agency’s evaluation of proposals, we do 

not independently evaluate proposals; rather we review the agency’s evaluation to 

ensure that it is consistent with the terms of the solicitation and applicable statutes 

and regulations. SOS Int’l, Ltd., B-402558.3, B-402558.9, June 3, 2010, 2010 CPD 

¶ 131 at 2. On the record before us, we have no basis to object to the agency’s 

evaluation of the cost proposals. 

The Reasonableness of the IGCE

Both protesters take issue with the propriety of the IGCE, and more specifically the 

presumptive realistic threshold rate. According to the protesters, this figure was 

arrived at arbitrarily, and should not reasonably have been used to evaluate the 

realism of the offerors’ proposed costs. Both protesters point to the fact that the 

agency had to adjust its initial IGCE--because it was set too high--as evidence of 

how arbitrary the original figure was, and also note how the agency’s subsequent 

downward adjustment of the figure simply applied the apparently arbitrary 

20.7 percent and 10.35 percent reductions without any reasoned basis. According 

to both protesters, there is no reasonable connection between the agency’s IGCE 

and the costs proposed, such that the agency could reasonably rely on the IGCE or 

the presumptive realistic threshold rate in evaluating the protesters’ cost proposals.

We find no merit to this aspect of the protests. First, neither protester has advanced 

any argument relating to the validity of the underlying methodology or data used by 

the agency to prepare the IGCE. The record shows that the agency’s calculation of 

the original IGCE was mathematically correct and based on the labor mix and 

quantities envisioned by the RFP and relied on actual, accurate BLS data for 

purposes of establishing the direct hourly rates for the various labor categories. The 

protesters have neither alleged nor shown that the agency’s fundamental approach 

was unreasonable or that it used unreliable data (for example, inaccurate labor 

categories) to arrive at its original calculations. 

Second, to the extent the agency miscalculated by selecting the higher percentile 

rates, the record shows that DOE recognized its error and corrected it once 

proposals were submitted. In particular, the record shows that the agency expressly 

recognized that the RFP did not contemplate superior quality staffing as envisioned 

by the agency in preparing the original IGCE. AR, exhs. B.1, at 65; F.1, at 65. As 

summarized by the evaluators: “Since the RFP did not require a ‘best of the best’

approach to recruitment and employment of labor, it would be inaccurate to assess 

the cost realism of proposed labor rates for individual Offeror[s] using a ‘best of the 
Page 8 B-406089 et al.

best’ approach.” Id. The record thus shows that the agency timely realized its 

miscalculation and sought to take measures to correct the problem. 

Third, and most importantly, the record shows that the agency acted reasonably 

after receiving proposals in adjusting the IGCE downward by an amount that was 

close to the difference between the original IGCE and the average FBCWA hourly 

wage rate among all proposals. This was a reasoned response in light of the 

agency’s conclusion regarding the underlying reason why its original IGCE was high 

(essentially, because the agency had used direct rates that were a percentile 

category too high) and also resulted in a revised IGCE that was statistically 

consistent with the proposals submitted. In this latter regard, as noted, the revised 

IGCE was at the median point among all proposals received (with 6 proposals above 

the IGCE and 7 below) and was just slightly below (2.8 percent) the average 

FBCWA hourly rate for all proposals.

10 In effect, the reasonableness of the revised 

IGCE was externally validated by the results of the competition.

Finally, the agency acted reasonably in establishing the presumptive realistic 

threshold rate. The record shows that the agency recognized that the BLS data was 

itself based on averaged wage data, and that individual offers could vary from the 

rates derived from the BLS data and nonetheless still be realistic. The agency’s 

source evaluation board report specifically explains the agency’s reasoning as 

follows:

In recognition of the fact that any specific BLS percentile labor rate is 

an average rate itself, the IGCE [team] determined that Offerors could 

reasonably have proposed somewhat lower labor rates than the 

specific BLS labor rate used for the revised IGCE and still be realistic. 

However, the IGCE team determined that any Offerors proposing a 

significantly lower rate than the revised IGCE may put the Offeror’s 

proposed rate in a lower BLS percentile category and required further 

analysis to assess the realism of their proposed rates. Therefore, in 

assessing cost realism, the IGCE team determined that any average 

fully burdened labor that was more than 10.35% (1/2 of the 20.7% 

difference between BLS percentiles) less than the revised IGCE 

required review of the Offeror’s proposal to identify whether the 

proposal explained the basis for the rates being unrealistically low.

We have no basis to object to the agency’s actions in establishing the presumptive 

realistic threshold rate. The rate allows for variation among proposed cost, but only 

within a span of lower costs that would not be so low as to suggest that the offeror 

 10 In fact, to the extent that the revised government FBCWA hourly wage rate was 

lower than the average FBCWA hourly wage rate for all proposals, it favored the 

protesters. 
Page 9 B-406089 et al.

was proposing either labor at an unrealistically low level of compensation or labor 

that was not qualified to perform the agency’s requirements. Additionally, the 

agency did not establish an absolute threshold below which the offerors’ proposed 

rates were determined unrealistic, but simply a threshold that would lead the 

agency’s evaluators to further review any proposal that fell below the threshold. 

Simply stated, an agency’s cost realism evaluation need not (and realistically 

cannot) achieve scientific certainty; rather, the analysis must provide a reasonable 

measure of confidence that the proposed costs are reasonable and realistic. L-3 

Sys. Co., B-404671.2, B-404671.4, Apr. 8, 2011, 2011 CPD ¶ 93 at 10. We 

conclude that the agency’s presumptive realistic threshold rate provided it with a 

reasonable yardstick to use in evaluating the realism of the offerors’ proposed rates.

The Reasonableness of the Agency’s Most Probable Cost Evaluation

The protesters also challenge the reasonableness of the agency’s cost realism 

adjustments for several reasons. First, both protesters allege that the agency’s cost 

realism evaluation failed to take into consideration their respective unique technical 

approaches.

While the protesters are correct that, in a typical cost realism evaluation setting, 

agencies are responsible for considering the realism of a firm’s proposed costs in 

light of its unique technical approach, see e.g., Metro Mach. Corp.

B-402567.2, June 3, 2010, 2010 CPD ¶ 132 at 6, that general rule is inapplicable 

here because of how the solicitation was structured. As discussed above, the 

offerors cost proposals were based on completion of the agency’s “cost model” 

which controlled all variables except direct and burdened labor rates and fee/profit. 

Thus, all of the offerors’ cost proposals were based on an identical technical 

approach that was dictated by the terms of the RFP, and used the same labor 

categories, staffing mix, escalation rate and material costs.

, B-402567, 

11 Thus, it was not 

necessary for the agency’s cost evaluation to take into consideration each offeror’s 

unique technical approach.12

 11 In a related argument, DMI asserts that the agency improperly “normalized” the 

labor costs of the lowest cost offerors, While this may be true, in view of the fact that 

all of the offers were evaluated based on essentially the same technical approach, 

this was unobjectionable. Moreover, as discussed below, the agency did not 

normalize the low cost offerors’ rates to either the government’s FBCWA hourly rate 

or the average FBCWA rate for all offerors, but only to the presumptive realistic 

threshold rate, which essentially represented a presumed realistic floor rate, below 

which the agency further examined the proposals. 

12 Of course, the agency’s technical evaluation--and especially its evaluation of the 

offerors’ responses to the sample tasks--did take into consideration the unique 

technical approaches proposed. DMI suggests that the agency should have taken 

(continued...)
Page 10 B-406089 et al.

The protesters also maintain that the agency unreasonably failed adequately to 

consider the information included in their proposals relating to how they established 

their proposed direct and fully burdened rates. According to both protesters, they 

included information in their proposals--for example, private third-party wage 

studies--that show that their proposed rates of compensation were realistic. 

We find no basis to object to the agency’s upward adjustments to either offeror’s 

proposed costs. In the case of both offerors the record shows that the central basis 

for the agency’s upward adjustment was their significantly lower proposed 

compensation, coupled with the absence of an explanation for this significant 

departure from either the government estimate or the average wage rate data for all 

competitors. In this connection, we point out that the agency’s adjustments did not 

result in either protester’s evaluated costs being particularly close to the average 

level of compensation proposed by all competitors; rather, their respective proposed 

costs were only adjusted up to the presumptive realistic threshold, which was itself 

12.7 percent below the average rate of compensation proposed by all offerors. In 

addition, neither protester has directed our attention to any information in their 

proposals that demonstrates that the agency’s evaluation findings were 

unreasonable.

With respect to DMI, the agency evaluators first noted that their proposed rates were 

based principally on estimates. AR, exh. F.1, at 77. The evaluators further 

determined that DMI’s proposed rates were significantly lower than the government’s 

FBCWA hourly wage rate (approximately 19 percent lower), and also lower than the 

average FBCWA hourly wage rate for all offerors (more than 20 percent lower). Id.

at 78. The agency also noted that the deviation of DMI’s proposed rates was due 

principally to significantly lower [deleted] labor rates. Id.

In light of these considerations, the evaluators reviewed the DMI proposal in order to 

determine whether there was an explanation for why its proposed rates were so 

 

(...continued)

the offerors’ responses to the sample tasks into consideration when performing its 

cost realism evaluation. Leaving aside the fact that no cost information was 

provided by the offerors in their responses to the sample tasks, the solicitation was 

clear regarding how cost and technical proposals were to be prepared and 

evaluated, and there is nothing in the solicitation that suggests that the agency 

would evaluate the offerors’ responses to the sample tasks in performing its cost 

realism evaluation. To the extent that either protester thought that the agency’s cost 

model was inconsistent with how it thought cost proposals should be evaluated, it 

was required to file a protest challenging this aspect of the RFP prior to the deadline 

for submitting proposals. 4 C.F.R. § 21.2 (a)(1) (2011). 
Page 11 B-406089 et al.

significantly low, and found no explanation. Although DMI directs our attention to 

those portions of its proposal that it maintains support its underlying proposed rates 

(for example, third-party salary survey data), we have no basis to question the 

agency’s evaluation conclusions in light of the magnitude of the difference between 

the protester’s proposed rates and the rate information used by the agency in its 

evaluation (the IGCE and the average proposed rate of compensation for all 

proposals); as discussed, the agency’s data was inherently more reliable in light of 

the fact that it was based on actual BLS data that effectively had been validated 

through the competition. Simply stated, DMI’s assertions essentially amount to no 

more than disagreement with the conclusions reached by the agency’s evaluators 

and do not provide a basis for our Office to object to the evaluation. OPTIMUS 

Corp., B-400777, Jan. 26, 2009, 2009 CPD ¶ 33 at 6.

With respect to EES, the record shows that the evaluators reviewed the EES 

proposal and found that their proposed rates were based principally on market data 

and current economic conditions, but also made reference to EES’s incumbency. 

However, as with DMI, the agency evaluators found that EES’s proposed rates were 

significantly lower than the government’s FBCWA hourly wage rate (approximately 

17 percent lower), and also lower than the average FBCWA hourly wage rate for all 

offerors (18 percent lower). AR, exh. B.1, at 78. Also as with DMI, the record shows 

that the agency’s review disclosed that the principle consideration driving EES’s 

lower rates were its significantly low [deleted] rates. Id. (The record also shows that 

EES had proposed [deleted] as the incumbent contractor.) Id. Finally, as with DMI, 

the evaluators reviewed the EES proposal in order to determine whether there was 

an explanation for why its proposed rates were so significantly low, and found no 

explanation. As with DMI, although EES directs our attention to portions of its 

proposal that it maintains demonstrate the realism of its proposed rates, we have no 

basis to question the agency’s evaluation conclusions in light of the magnitude of the 

difference between the protester’s proposed rates and the rate information used by 

the agency in its evaluation. EES’s disagreement with the evaluators’ conclusions 

does not provide a basis for our Office to object to the agency’s evaluation. 

OPTIMUS Corp., supra.

Indirect Rates

Both protesters also challenge the agency’s evaluation because they maintain that it 

essentially masked differences in, or features of, their respective indirect rates. EES 

maintains that the agency’s evaluation effectively overlooked its proposed fringe 

benefit rate which was [deleted] than the fringe benefit rate used by the agency to 

calculate the IGCE. According to EES, its [deleted] fringe benefit rate is an 

important component of its compensation package that it uses to attract and retain 

qualified employees. As for DMI, it asserts that the agency’s evaluation overlooks 

the fact that it voluntarily capped all of its indirect rates and that, as a consequence, 

it was unreasonable for the agency’s evaluation to apply any escalation to its 

proposed indirect rates.
Page 12 B-406089 et al.

We find no merit to these assertions. As noted, the principal reason underlying the 

agency’s adjustments to the protesters’ proposed costs was their significantly 

understated direct labor rates. AR, exhs. B.1, at 78; F.1, at 78. While the record 

does show that there were minor differences in the elements used by each protester 

and the agency in calculating their respective indirect rates, in the final analysis 

those rates were broadly comparable (EES proposed indirect rates totaling 

[deleted] percent, DMI proposed indirect rates totaling [deleted] percent and the 

agency used indirect rates totaling 45.5 percent).13 Compare AR, exh. E.8; EES 

Cost Proposal, vol. III, spreadsheets 4.1-1-4.9-1; DMI Cost Proposal at 6. Thus, to 

the extent that there were differences attributable to the proposed elements of 

indirect costs (as, for example, with EES’s proposed [deleted] rate) these differences 

were comparatively minor and did not substantially affect the agency’s evaluation or 

prejudice either protester.

With regard to DMI’s assertion that the agency’s evaluation did not take into 

consideration the fact that its indirect rates were capped, we point out that all 

offerors were required to proposed maximum (that is, capped) indirect rates for 

overhead and G&A. RFP at 10-11; exh. A.14, at 67. Thus, to the extent that DMI 

offered something that was not offered by the other competitors, its proposal to cap 

indirect rates applied only to its [deleted] rate and its [deletetd] rate. DMI Cost 

Proposal at 6. As with the EES’s different [deleted] rate, the extent to which these 

differences affected the outcome of the agency’s evaluation were minor and the 

record fails to demonstrate that DMI was prejudiced by the agency’s evaluation. In 

the final analysis, as noted earlier, an agency’s cost realism evaluation need not 

(and realistically cannot) achieve scientific certainty; rather, the analysis must 

provide a reasonable measure of confidence that the proposed costs are reasonable 

and realistic. L-3 Sys. Co., supra. Here, we conclude that the agency’s cost realism 

evaluation, even in light of the minor differences in indirect rates proposals noted by 

the protesters, was reasonable and provided a comparatively confident measure of 

the likely costs of the protesters’ proposals. 

 13 Both proposals and the agency’s IGCE also included various permutations of 

indirect rates. For example, both proposals and the IGCE included indirect rate 

calculations for work performed at a government location and different rates for work 

performed at a contractor location; both offerors also had different indirect rate 

calculations based on whether or not a subcontractor was performing work. The 

record shows, however, that when calculating proposed costs using the agency’s 

“cost model” excel spreadsheet, all three calculations used burdened rates for 

government site locations, and therefore were directly comparable. Compare AR, 

exh. E.8; EES Cost Proposal, vol. III, spreadsheets 4.1-1-4.9-1; DMI Cost Proposal 

at 14-18. 
Page 13 B-406089 et al.

In sum, we conclude that the agency’s cost evaluation was based on a reasonably 

established IGCE and that the agency’s most probable cost evaluation of all of the 

proposals, including those of the protesters’, was reasonable. Accordingly, we deny 

these aspects of the protests. 

Technical Evaluation

In addition to challenging the agency’s evaluation of cost proposals, both protesters 

also allege that the agency misevaluated technical proposals. In the case of DMI, its 

protest allegations relate solely to the evaluation of its own technical proposal. 

EES’s allegations also are confined to the evaluation of its own technical proposal, 

but--in an effort to show that its proposal was misevaluated--EES also alleges that 

the agency treated it and the awardee disparately by assigning strengths to the 

awardee’s proposal that also should have been--but were not--assigned to the EES 

proposal.14 

We need not consider these allegations in detail. Prejudice is an essential element 

of every viable protest, and where none is shown or otherwise evident, we will not 

sustain a protest, even where a protester may have shown that an agency’s actions 

arguably were improper. ITT Corp.-Electronic Sys., B-402808, Aug. 6, 2010, 2010 

CPD ¶ 178 at 7. 

Here, as discussed in detail above, we conclude that the agency’s cost evaluation of 

proposals was reasonable. In light of that conclusion, ActioNet properly was found 

to have the lowest evaluated cost, with DMI and EES found to have offered the 

second and third lowest evaluated costs respectively. AR, exhs. B.1, at 5; F.1, at 5. 

The record also establishes that the ActioNet proposal was rated excellent in each of 

the three non-cost evaluation factors, and was assigned a passing rating for past 

performance. Id. Thus, even if the protesters were correct with respect to every one 

of their challenges to the agency’s technical evaluation, their proposals would not 

receive ratings higher than the ratings assigned to the ActioNet proposal. Given that 

this would render the three proposals technically equivalent, it follows that ActioNet 

 14 EES suggests in its comments responding to the initial agency report that it raised 

substantive challenges to the agency’s evaluation of the ActioNet technical proposal. 

Protesters Comments, Dec. 12, 2011, at 22 n.10. However, a review of EES’s 

pleadings shows that it never substantively challenged the agency’s evaluation of 

the ActioNet proposal; rather it confined its allegations to contentions that it should 

also have been, but was not, awarded strengths in the same areas that ActioNet 

was awarded strengths.
Page 14 B-406089 et al.

would still be in line for award based on its low evaluated cost. Under the 

circumstances, we conclude that there is no reasonable possibility that any of the 

alleged errors in the agency’s technical evaluation were prejudicial to the protesters.

The protests are denied.

Lynn H. Gibson

General Counsel