THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER, WAS RELEASED IN REDACTED FORM ON MARCH 24, 1994, AND IS BEING RELEASED IN LESS REDACTED FORM ON MARCH 7, 1995 ____________________________ GRANTED: February 24, 1994 ____________________________ GSBCA 12705-P(12628-P) COMMUNICATION NETWORK SYSTEMS, INC., Protester, and GONZALES CONSULTING SERVICES, INC., and PRODUCTIVE DATA SYSTEMS, INC., Intervenors, v. DEPARTMENT OF COMMERCE, Respondent, and SYSTEM TECHNOLOGY ASSOCIATES, INC., Intervenor. Alan M. Grayson and Hugh J. Hurwitz of Law Offices of Alan M. Grayson, Falls Church, VA, counsel for Protester. Pamela J. Mazza, Andrew P. Hallowell, and Antonio R. Franco of Piliero, Mazza & Pargament, Washington, DC, counsel for Intervenor Gonzales Consulting Services, Inc. Craig T. Othmer of Sommer Fox Udall Othmer & Hardwick, Santa Fe, NM, counsel for Intervenor Productive Data Systems, Inc. Jerry A. Walz, Mark Langstein, Lisa J. Obayashi, and F. Jefferson Hughes, Office of the Assistant General Counsel for Finance and Litigation, Department of Commerce, Washington, DC, counsel for Respondent. Robert Ben, President of System Technology Associates, Inc., Colorado Springs, CO, appearing for Intervenor. Before Board Judges DEVINE, HENDLEY, and WILLIAMS. WILLIAMS, Board Judge. Communication Network Systems, Inc. (CNS) has challenged the award by the Department of Commerce (DOC) of three contracts for automatic data processing equipment and services to System Technology Associates, Inc. (STA). CNS claims that DOC incorrectly evaluated its proposals and failed to conduct meaningful discussions. Specifically, CNS contends that the agency failed to consider Appendix E to its proposals, containing its corporate policies and procedures, which included information on its management approach, quality control plan, and past experience. DOC admits that during the evaluation it failed to evaluate CNS' Appendix E because CNS failed to deliver the proper number of copies of this appendix. Moreover, DOC contends that after it located Appendix E during the course of this protest, its evaluators considered Appendix E and concluded that an evaluation of that part of the proposals would not have altered CNS' relative standing. Secondly, CNS contends that DOC improperly disclosed the Government estimate of labor hours under request for proposals (RFP) 52RANR400001 (RFP 1) to a single offeror during discussions -- the awardee. DOC admits that it disclosed the Government estimate of labor hours only to STA, but contends that no prejudice resulted from this disclosure. Finally, CNS claims that the agency failed to conduct meaningful discussions with it because DOC downgraded CNS for several other alleged deficiencies that were never raised with CNS during discussions. For the reasons stated below, we grant the protest. We agree with protester that the agency erred in failing to consider Appendix E during the course of evaluations and improperly disclosed the Government's labor estimate to only one offeror, the awardee.[foot #] 4 Because of DOC's improper evaluation of Appendix E, DOC is to terminate the award to STA, empanel a new Source Evaluation Board (SEB) replacing two of the current members, which shall reevaluate best and final offers (BAFOs) under all three solicitations, and proceed in accordance with statute and regulation. In addition, with regard to RFP 1, ----------- FOOTNOTE BEGINS --------- [foot #] 4 CNS also contends that the agency failed to consider the advantages flowing from CNS' incumbency, but we deny this allegation. We also deny CNS' claim that the agency failed to advise CNS of deficiencies unrelated to Appendix E during discussions. ----------- FOOTNOTE ENDS ----------- as a result of the illegal disclosure of the estimate, the agency shall reopen discussions, provide the same information on the Government estimate to all offerors, call for another round of BAFOs, and proceed in accordance with statute and regulation, utilizing the new SEB. Findings of Fact Solicitation of 8(a) Candidates On December 10, 1992, the National Oceanic and Atmospheric Administration (NOAA) requested a list of potential 8(a) candidates from the U.S. Small Business Administration (SBA) in an effort to replace expiring 8(a) contracts for the Forecast Systems Laboratory, Environmental Research Laboratories, NOAA. Protest File, Exhibit 2. By letter dated January 26, 1993, SBA identified several potential 8(a) candidates. Id., Exhibit 3. On March 25, 1993, after conducting informal capabilities presentations, NOAA notified SBA that CNS, Gonzales Consulting Services, Inc. (GCS), Productive Data Systems, Inc. (PDS), and STA had a reasonable chance of successfully performing the requirements. Id., Exhibit 20. SBA subsequently authorized the release of solicitations to those four firms. Id., Exhibits 20, 21. The Solicitations On May 28, 1993, DOC issued three solicitations under SBA's 8(a) program for computer operations, maintenance, administration, and research services for the Forecast Systems Laboratory of NOAA. Protest File, Exhibit 34. Specifically, RFP 1 sought software, systems analysis, and operations/maintenance support for the Wind Profiler Demonstration Network and Special Projects of the Demonstration Division, Forecast Systems Laboratory. Id. RFP number 52RANR400002 (RFP 2) solicited computer operations, administration, and systems design support services for the Forecast Systems Laboratory. Id. Finally, RFP number 52RANR400003 (RFP 3) sought hardware, software, and systems analysis support for the Forecast Systems Laboratory. Id. The three RFPs sought follow-on contracts; CNS has been the incumbent contractor performing the services solicited under RFP 2 since October 1, 1991. Id., Exhibit 22 at 4. The anticipated contracts were to be cost-plus-fixed-fee, level-of-effort contracts. Id., Exhibit 34 at 61. Each RFP provided for a one- year base period plus a one-year option period. Id. at 8. Paragraph L.8 of the solicitations required that proposals be prepared in two separate parts, a technical and management proposal and a cost proposal. The instructions for preparation of the technical and management proposal in paragraph L.8(b) included the following subpart: (7) The technical and management proposal must briefly describe organization policies in the following areas (published policies may be furnished): (i) Salary increases (merit and cash award, bonus, etc., cost of living, and general) (ii) Employee recruitment policies (iii) Employee fringe benefits (health, life and disability insurance, retirement plan, employee assistance program, leave policies, education allowance, mass transit subsidy, automatic payroll deposits, etc.) (iv) Travel/subsistence (include information concerning corporate travel cards, cash travel advances, liability insurance while on travel) (v) Consultant use and terms of agreements (vi) Subcontractor use and terms of agreements (vii) Invoices/billings/timecards (include example) Protest File, Exhibit 34 at 63-65. Section L of the RFPs also required offerors to submit a section described as their "Corporate Policies and Procedures." Protest File, Exhibit 34 at 68. Eight copies of all proposal documents, including the corporate policies and procedures, were originally required for each RFP, but this was amended by Amendment 0001 of each RFP as follows: A total of 8 copies of Corporate Policies and Procedures are required. However, if the offeror is submitting this information under two or more solicitations, i.e. solicitations number 52RANR400001, 52RANR400002, 52RANR400003 or 52RANR400004, submittal for only one of the solicitations shall fulfill this requirement and additional submittals will not be necessary. Protest File, Exhibit 34, Amendment 0001. The RFPs also contained the following specific requirements for cost proposals: The offeror must also submit the following detailed information to support the proposed budget: (i) Breakdown of direct labor cost by named person or labor category including number of labor- hours and current actual or average hourly rates. Indicate whether current rates or escalated rates are used. If escalation is included, state the degree (percent) and methodology. Direct labor or levels of effort are to be identified as labor-hours and not as a percentage of an individual's time. Indicate fringe benefit rate, if separate from indirect cost rate. (ii) The amount proposed for travel, subsistence and local transportation. (iii) Cost breakdown of material, equipment, administrative/clerical, on-call pager support and other direct costs including duplication/reproduction, meetings and conferences, postage, communication and any other applicable items. . . . Protest File, Exhibit 34 at 67. Paragraph M.2, Evaluation of Proposals and Award of Contract, advised vendors of the evaluation factors and subfactors and explained: The evaluation factors are listed below in descending order of importance with factor (b)(1) being more important than factor (b)(2) and factor (b)(3) of less [importance than] factor (b)(1) and (2). Subfactors are also listed in descending order of importance. The breakdown of the details which will be considered in the evaluation of each criterion is not exhaustive; rather it is meant to convey the breadth of the examination and the intended approach which will be used to rate the proposals. (b) Evaluation Criteria for Technical and Management Proposal (1) Management and Financial Approach (i) Organizational Policies (Salaries, Recruitment, Benefit Packages, Travel, Subcontracts, Consultants) (ii) Sub-contracting plans (iii) Financial approach of government contracts (iv) Management approach and responsiveness to terms, conditions, and time of performance (v) Adequacy of facilities (vi) Quality and control plan for contracts/subcontracts (2) Organization, Personnel, and Facilities (i) Geographic location of management support (ii) Evidence of good organizational and management practices (iii) Record of past experience (iv) Qualifications of personnel (v) Experience in similar or related fields (3) General Quality and Responsiveness of Proposal (i) Understanding of requirement (ii) Completeness and thoroughness (c) Cost proposals will be evaluated by a representative of the Contracting Officer to determine that they are fair, reasonable and adequately reflect costs associated with the work described in the offeror's proposal. Cost proposals will be referred to the Board upon completion of their technical and management evaluation for their review and evaluation. Protest File, Exhibit 34 at 70-72. The RFPs did not disclose either the specific weights assigned or the maximum points available for the factors and subfactors. Id., Exhibit 34. Section M.2(e) of each RFP stated that award was to be made on the basis of "best overall value," with greater emphasis placed on technical and management approach than on cost: Award of the contract will be made . . . to that offeror whose proposal contains the combination of those factors offering the best overall value to the Government. This will be determined by comparing differences in the values of technical and management features with differences in cost to the Government. In making this comparison the Government is more concerned with obtaining superior technical or management features than with making an award at the lowest overall cost to the Government. However, the Government will not make an award at a significantly higher overall cost to the Government to achieve slightly superior technical or management features. Protest File, Exhibit 34 at 72. The Statement of Work for RFP 1 provided the following estimates regarding contractor personnel: VIII. CLASSES OF SERVICE AND ESTIMATED SCHEDULE It is estimated that, with the exceptions noted below, contractor personnel will be required to perform the activities specified under this contract full time (40 hours per week). The rates, based on FY-93 dollars not including out-year inflation factors, are those that would be paid to Federal employees if work were performed in-house, are indicated below: . Half (1/2) time for the Program Manager; . 25% overtime for Electrical Engineers I and II during field support activities; . 5% overtime for all other employees. FOR INFORMATIONAL PURPOSES ONLY Position Title Hourly Wage Rate Project Manager 32.57 System Analyst III 24.18 System Analyst II 22.00 System Analyst I 18.82 Programmer/Analyst II 16.50 Programmer/Analyst I 11.59 System Manager 19.48 Computer HW Tech II 12.50 Electrical Engineer II 17.62 Electrical Engineer I 17.00 Engineering Tech Supervisor 16.75 Logistics Engineer I 12.33 Data Technician II 10.50 ESTIMATED SCHEDULE OF NEEDED SERVICES Fiscal Years - 1994 through 1995 .5 Project Manager 2.0 Computer HW Tech II 1.0 System Analyst III 1.0 Electrical Engineer II 2.0 System Analyst II 1.0 Electrical Engineer I 1.0 System Analyst I 1.0 Engineering Tech Supervisor 1.0 Programmer/Analyst II 1.0 Logistics Engineer I 1.0 Programmer/Analyst I 1.0 Data Technician II 1.0 System Manager Protest File, Exhibit 34, RFP 1, Attachment 1 at 11-12. The Government's estimate of total labor hours, including overtime and pager hours, was not disclosed in RFP 1. Protest File, Exhibit 34. The Source Evaluation and Selection Plan The Source Evaluation and Selection Plan set forth the procedures to be used in the selection of contractors for RFPs 1, 2, and 3. Protest File, Exhibit 28. According to this plan, which was not disclosed to offerors, the maximum point scores for the evaluation factors and subfactors were: Factors Points I. Management and Financial Approach 60 a. Organizational Policies 15 b. Subcontracting Plans 15 c. Financial Approach 10 d. Management Approach 10 e. Adequacy of Facilities 5 f. Quality and Control Plan for Contract/Subcontracts 5 II. Organization, Personnel and Facilities 30 a. Geographic Location of Management Support 10 b. Evidence of Good Organization and Management Practices 8 c. Record of Past Experience (Reference Check) 7 d. Qualification of Personnel 3 e. Experience in Similar Fields 2 III. General Quality and Responsiveness of Proposal 10 a. Understanding of Requirement 7 b. Completeness and Thoroughness 3 Id. at 5-9. The Source Evaluation and Selection Plan also set forth a rating system which specified that each element of the criteria would be evaluated by using a rating of 0-5 and then applying that rating to the weight assigned to the element to arrive at the total score. Protest File, Exhibit 28 at 3. The possible ratings were: 0 - Unacceptable; 1 - Marginal; 2 - Satisfactory; 3 - Good; 4 - Excellent; and 5 - Superior. Id. at 3-4. The Source Evaluation and Selection Plan established a four- person Source Evaluation Board and set forth the following evaluation procedure: 1. Each Board member will complete and [sic] evaluation form for each offeror's proposal . . . . In addition to the numeric scores given for each criterion, a summary comment form will be provided to each evaluator for brief justification for the scores awarded and for further comments on every proposal . . . . 2. After Board members have completed their individual evaluations, the Board will meet with the Contract Specialist to assign the consensus scores for each proposal. 3. The Chairperson will then present a written summary of the consensus scores . . . to the Contract Specialist. 4. The Contract Specialist shall have completed an evaluation of cost proposals in parallel with evaluation of technical proposals by members of the SEB. 5. The Contract Specialist will release cost information to the Chairperson following the Chairperson's presentation of a summary of the evaluation scores. The Board will then re-score, if necessary, the proposals in light of the cost information. In the meantime, all questions about proposal contents or request for clarifications will have been resolved by the Contract Specialist. 6. After Completion of all negotiations (if any) and receipt of Best and Final Offers (if necessary), the Chairperson will complete the evaluation report and submit it to the Source Selection Official for each RFP. The report will recommend the selection of a specific contractor(s). Award will be made to that offeror(s) whose proposal contains the combination of those factors offering the best overall value to the Government. This will be determined by comparing differences in the values of technical and management features with differences in cost to the Government. In making this comparison the Government is more concerned with obtaining superior technical or management features than with making an award at the lowest overall cost to the Government. However, the Government will not make an award at a significantly higher overall cost to the Government to achieve slightly superior technical or management features. Protest File, Exhibit 28 at 9-10. Initial Proposals On July 7, 1993, CNS, STA, GCS, and PDS submitted proposals in response to the three RFPs. Protest File, Exhibit 41. CNS submitted its corporate policies and procedures in Appendix E to its proposals. Protest File, Exhibit 41. CNS stated in the table of contents of each proposal that Appendix E was contained in the CNS proposal for solicitation 52RANR400001. Id. DOC has admitted receiving four copies of CNS' Appendix E. Declaration of Chairman of Source Evaluation Board, ( Declaration) (January 19, 1994) 6; Declaration of Contract Specialist Daniel R. Gomez (January 19, 1994) 3, 4. However, none of the copies of the CNS proposal sent by DOC to the evaluators contained Appendix E. Declaration of Contracting Officer and Source Selection Official, David M. Barr (January 19, 1994) 36, 37. As the chairman of the Source Evaluation Board explained: I have concluded that, due to the absence of Appendix E from the five complete sets of CNS proposals (20 proposals) forwarded to the evaluation panel, and to the discovery that a single copy of Appendix E had been submitted as to RFP #2, RFP #3, and RFP #4, CNS submitted only four copies of Appendix E with its 32 proposals. I further conclude that these four were submitted one to an RFP, rather than eight per RFP or eight for one RFP as directed by Amendment 0001. Thus instead of the evaluators receiving five complete sets of materials from CNS out of eight complete sets as intended, CNS only furnished one complete set in disregard of solicitation instructions, resulting in the material not being examined in a timely fashion. Declaration 6. CNS' Appendix E CNS' Appendix E contained approximately 200 pages. Protest File, Exhibit 41. Section E.1 contained CNS' time keeping policy and procedure, including the policy for direct and indirect labor charges, sample time cards, weekly time card instructions, correction instructions, and a sample authorization of overtime. Id. In Section E.2, CNS explained its purchasing policies and procedures including the responsibilities of its departmental managers. Id. Section E.3 contained a sample invoice. Section E.4 contained CNS' business travel and subsistence policy for employees. Id. Section E.5 contained CNS' code of business ethics, compliance, and conduct, Section E.6, CNS' policy for a drug-free work place, and Section E.7, CNS' affirmative action compliance plan. Protest File, Exhibit 41. Section E.8 contained CNS' employee performance review and rating forms and performance evaluation factors. Id. Section E.9 included CNS' administrative action forms, such as requests for overtime, on- call authorization, training, and other internal forms. Id. Section E.10, Personnel Action Procedures, set forth procedures for personnel actions such as new hires and change in classification. Id. Section E.11, Contract Management Methodology, contained policies and procedures for RFP/proposal activities, negotiations, contract administration, and contract closeout. Protest File, Exhibit 41. Section E.12, Delivery Order Management, contained a flow chart on processing a task order request, including the responsibilities of the contracting officer, program manager, project manager, and the QA function. Id. Section E.13, Contract Management and Control System, contained a flow chart showing corporate, contract, and program management responsibilities from the planning through resolution stage of contract management. Id. Section E.14, Project Management Plan and Procedures, detailed the responsibilities of project management during project planning, implementation, and completion. Protest File, Exhibit 41. This included flow charts and forms including a project schedule, labor estimate sheet, equipment estimate sheet, and instructions for completing these forms. Id. Section E.15, CNS' Integrated Management Plan, identified design and implementation considerations to enhance CNS' ability to plan scheduled costs and control work in the 1990's. Id. This plan was stated to be a draft and was dated January 28, 1992. Id. Section E.16, Corporate Policy Manual Index and Key Section, outlined CNS' current operating policies, and included statements of CNS' mission and personnel practices, including attendance, termination, benefits, and professional integrity. Protest File, Exhibit 41. Section E.17 contained the Employee Handbook which was designed to answer commonly asked questions concerning company-wide policies by employees. Id. The handbook included definitions of employee categories, as well as policies on EEO, business ethics, inventions and patents, and employee rules and practices. Id. Evaluation of Initial Proposals As a result of the initial evaluation of proposals, the SEB determined that all four proposals were acceptable. Protest File, Exhibit 44. On July 28, 1993, the contract specialist issued a preliminary evaluation report. Id. STA was ranked highest, CNS was second, GCS third, and PDS fourth. Id. at 2. The individual scores and rankings were: [INDIVIDUAL RANKINGS] COMPANY REVIEWERS AND RANKINGS ------------------------------------------------------------ - BLT JH MA MK DW ------------------------------------------------------------ - System Technology Assoc. 1 1 1* 1 1 Communication Network Systems 2 2 3 4 2 Gonzales Consulting Services 3 4 2* 2 4 Productive Data Systems 4 3 4 3 3 *Through discussion for consensus, it was decided that STA and Gonzales could be either a 1 or 2. It was decided that STA would be rated as 1 and GCS would be 2. [SCORES] COMPANY REVIEWERS AND RANKINGS ------------------------------------------------------------ - BLT JH MA MK DW AVG %of500 ------------------------------------------------------------ - System Technology Assoc. 374 375 347 329 343 354 71 Communication Network Systems 270 314 329 238 320 294 59 Gonzales Consulting Services 250 238 357 279 263 277 55 Productive Data Systems 212 266 265 244 302 258 52 Id., Attachment 2. Among the weaknesses listed in this report for CNS were: "organizational policies are questionable; no quality control plan other than to state 'will use TQM for QC;' no evidence of good organization and management practices; CNS did not describe invoices, did not address quality and control plan for contract/subcontracts, and did not have any information on employee performance reviews or appraisals; finally Appendix E (company policy) is referenced but not provided. Policies are not clearly stated." Protest File, Exhibit 44, Attachment 3. Written Discussion Questions On August 23, 1993, DOC notified CNS, STA, and the two other offerors that their proposals were "acceptable" for the purpose of conducting discussions. Protest File, Exhibit 48. DOC's letter to each offeror further stated: ^N^Fx^C=^V13