THIS OPINION WAS INITIALLTY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN REDACTED FORM ON MAY 2, 1995 DENIED: January 13, 1995 GSBCA 13004-P MARTIN MARIETTA CORPORATION, MANAGEMENT AND DATA SYSTEMS, Protester, v. DEPARTMENT OF TRANSPORTATION, Respondent, and TRW, INC., SYSTEMS INTEGRATION GROUP, Intervenor. Thomas C. Papson, Patrick K. O'Keefe, David Kasanow, and C. Stanley Dees of McKenna & Cuneo, Washington, DC, counsel for Protester. Patricia A. McNall, Gregory C. Carter, Jerome P. Jones, Robert Zuckerman, and Maureen Cummings-Spickler, Federal Aviation Administration, Department of Transportation, Washington, DC, counsel for Respondent. James J. McCullough, John W. Chierichella, Deneen J. Melander, and Anne B. Perry of Fried, Frank, Harris, Shriver & Jacobson, Washington, DC; and James C. Diggs, Vice President & Senior Counsel of TRW, Inc., Systems Integration Group, Fairfax, VA, counsel for Intervenor. Before Board Judges WILLIAMS, DeGRAFF, and GOODMAN. GOODMAN, Board Judge. Protester, Martin Marietta Corporation, Management and Data Systems (MMC), protests the award by respondent, the Department of Transportation, Federal Aviation Administration (FAA), of a contract for System Engineering and Technical Assistance (SETA) to intervenor, TRW, Inc. (TRW). The original protest complaint contained four grounds. The first and second grounds of protest were withdrawn by protester on November 4, 1994, and a fifth ground was added on November 7, 1994. Three grounds for protest remain to be resolved. The first of those grounds (the third count of the complaint) is that TRW's proposal did not comply with, and that the FAA failed to reasonably evaluate compliance with, the requirements of Section L.9.3.1.3, entitled Uncompensated and Non-Standard Hours. The second ground (the fourth count of the complaint) is that TRW's bid was unbalanced, in violation of Federal Acquisition Regulation (FAR) 15.804, and that, again, the FAA failed to reasonably evaluate this aspect of the proposals. The third ground (the fifth count of the complaint) is that TRW's best and final offer (BAFO) contained material misrepresentations. As discussed below, we deny the protest. Findings of Fact Nature of the Procurement 1. This protest involves a procurement by the FAA known as the System Engineering and Technical Assistance (SETA) procurement, which will in part supersede the current Systems Engineering and Integration (SEI) contract held by MMC. The contractor under the SETA contract will provide a broad scope of research, engineering, and development services to a wide range of FAA organizations. Protest File, Exhibit 1 at 010018. The contract has a three-year base period with two, two-year option periods. Id. at 010149. Round 1 of the Procurement[foot #] 1 2. The SETA procurement was initiated on April 17, 1992, when the FAA issued request for proposals number DTFA01-92-R- 06689 (the RFP or solicitation). The FAA intended to award a cost-plus- fixed-fee contract. Transcript at 39. 3. The solicitation identified a number of labor categories, and defined four skill levels within each labor category. For evaluation purposes, the RFP specified the hours in each labor category, but left the offerors free to allocate those hours among the four skill levels. Transcript at 39-40. ----------- FOOTNOTE BEGINS --------- [foot #] 1 For convenience, the parties and the Board have adopted the terminology "round 1" of the procurement to refer to the procurement up to and including the initial award to MMC, and "round 2" to include the procurement after TRW's protest to GAO. ----------- FOOTNOTE ENDS ----------- 4. MMC, TRW, and Vitro Corporation (Vitro) submitted proposals. 5. In its round 1 BAFO, MMC proposed a mandatory forty-five hour work week, plus four hours of uncompensated overtime per week for each employee. Transcript at 41. 6. MMC was awarded contract number DTFA0l-93-C-00047 on July 2, 1993. Protest File, Exhibit 10 at 100001. Protest to GAO 7. On July 9, 1993, TRW filed a protest with the General Accounting Office (GAO) challenging the award to MMC. Protest File, Exhibit 353. GAO granted the protest and recommended that the FAA reopen negotiations with the offerors who were within the competitive range, obtain revised proposals, and conduct a new evaluation. TRW, Inc., B-254045.2, 94-1 CPD 18 (Jan. 10, 1994). Round 2 of the Procurement 8. On March 21, 1994, the FAA issued amendment 8 to the RFP, which requested offerors that had been in the competitive range in July 1992 to submit revised proposals.[foot #] 2 Protest File, Exhibit 2. 9. The solicitation required: L.7 General Proposal Considerations . . . . Comprehensive responses to the requirements are necessary to enable the Government to evaluate the offeror's understanding, approach and capability to accomplish the stated requirements. Throughout the proposal, the offeror should provide sufficient details to substantiate the validity of all assertions. . . . . Proposals shall be submitted in accordance with the instructions herein, and non-conformance with the specified required content may be cause for rejection of the proposal. Protest File, Exhibit 1 at 010308. ----------- FOOTNOTE BEGINS --------- [foot #] 2 Various amendments were made to the solicitation during round 2. The final version of the solicitation is contained in the Protest File, Exhibit 1, and quoted herein. ----------- FOOTNOTE ENDS ----------- 10. The RFP also stated: M.4. General . . . . Offerors are cautioned not to minimize the importance of a full and complete response to any segment of the RFP because it appears to carry less weight than another segment or because it is not scored. Each segment contains information that will assist in the overall evaluation of the proposal and should be prepared accordingly. Protest File, Exhibit 1 at 010354-55. 11. Each offeror was required to submit a technical proposal, a business management proposal, and a price proposal. Protest File, Exhibit 1 at 010309-10. 12. The basis for award that would apply to round 2 of the SETA procurement was as follows: M.3. Basis for Award The offer that provides the overall greatest value to the Government and which has an acceptable business management proposal will be selected. Therefore, the successful offer may not necessarily be the one with lowest price. Technical competence is most important, followed by price. While technical competence is significantly more important than price, the price may become relatively more important as the difference in technical scores between offers decreases. Protest File, Exhibit 1 at 010354. 13. In round 2, the number of skill levels within each labor category was increased from four to five. Section H.37 of the RFP defined the skill levels in terms of the experience and education required. Protest File, Exhibit 1 at 010180. 14. The solicitation required offerors to propose 4,281,720 man-hours, and for evaluation purposes provided the number of hours for each labor category and skill level. This information was provided in Exhibit B of the solicitation. Protest File, Exhibit 1 at 010325-36. 15. The SETA program manager testified how the estimated number of hours for each labor category and skill level in Exhibit B were prepared: [Exhibit B] basically is the staffing requirements we would have for the contract for all seven years at all the different labor categories and skill level mixes. . . . [The SETA customers] analyzed their own services and their own support [and] came back with these hours for us. We reviewed them and we felt we could do a little better. We changed them somewhat . . . . These numbers were [later] verified by the service directors themselves. These were the numbers [the service directors] were comfortable with. These were the numbers they fully expected to implement. . . . [They're] firm numbers. These numbers will not change. Transcript at 467-70. 16. The estimated number of hours for each labor category and skill level was used to develop the budget for the SETA contract. Transcript at 471. The SETA program manager controls the budget and has the authority to purchase hours from the contractor. Id. at 473. Requirement for Price Analysis in Round 2 17. When the SETA solicitation was originally issued in July 1992 contemplating award on a cost-plus-fixed-fee basis, a cost evaluation plan was issued. A cost evaluation team was established to perform both cost and price analysis. Protest File, Exhibit 17 at 170001-18. The cost analysis to be performed was to "include an analysis of each Offeror's projected costs, reviewing in detail all cost elements for cost realism." Id. at 170011. 18. In round 2, the contract type was changed to a time and materials task order contract. Protest File, Exhibit 1 at 010306. The contract was not a cost reimbursement contract. The submission of cost and pricing data was not required. MMC did not interpret the solicitation as requiring cost or pricing data, nor did respondent or TRW. Transcript at 528; Respondent's Posthearing Brief at 6; Intervenor's Posthearing Brief at 13. 19. In round 2, the cost evaluation plan was revised and referred to as the price evaluation plan. Procedures for evaluation of price proposals were revised. Protest File, Exhibit 17 at 170019-24. The requirement for cost analysis was deleted from the price evaluation plan. Id. at 170022. 20. The price evaluation team for round 2 consisted of the contracting officer, a price analyst, and two technical quantitative and qualitative (Q&Q) evaluators. Protest File, Exhibit 17 at 170019. 21. The price evaluation plan read, in relevant part: The evaluators will perform a price analysis of those proposals that were not eliminated as a result of the preliminary review. This analysis will be performed in accordance with FAR 15.805-2. The following price analysis techniques are likely to be employed: a) Comparison of each offeror's proposed burdened hourly labor rates to those of the other offerors (FAR 15.805-2(a)). b) Comparison of proposed burdened hourly rates to the rates in the independent Government cost estimate (FAR 15.805- 2(e)).[[foot #] 3] In addition to performing the price analysis mentioned above, the evaluators will, as required by M.6 of the RFP, determine price fairness and reasonableness by reviewing Exhibit C "Hourly Rate Schedule," in which the burdened hourly rates are broken down by element of cost of each proposal.[[foot #] 4] Protest File, Exhibit 17 at 17020-21. 22. The price evaluation plan also required that the price evaluators "review the 'Professional Employees Compensation Plan' of each offeror for reasonableness and realism." Protest File, Exhibit 17 at 170021. 23. Section M.6 of the RFP established the criteria for evaluation of price proposals. Section M.6 stated: M.6 Evaluation of Price Proposal The Price Proposal will be evaluated in accordance with FAR 15.805-2. The price evaluation will be based on the Government-estimated quantities of hours and Government- estimated travel costs and Task Order ----------- FOOTNOTE BEGINS --------- [foot #] 3 The independent Government cost estimate (IGCE or IGE) consisted of the Government's estimated burdened hourly rates for each labor category and skill level in the RFP. Protest File, Exhibit 88. The IGCE also included the Government's estimates of the direct labor component of the burdened hourly rates for each labor category and skill level in the RFP. Transcript at 423. [foot #] 4 The contracting officer testified that the FAA was not seeking cost data. The FAA's purpose in requiring the submission of Exhibit C was to provide the evaluators with "insight as to how each offeror came up with a burdened rate. It was not to analyze each component because we didn't have enough information to analyze the components." Transcript at 177-78. ----------- FOOTNOTE ENDS ----------- Specific Materials (TOSM). The total evaluated prices will include the evaluated prices for the base period and option periods. Exhibit C will also be reviewed to determine that proposed prices are fair and reasonable. Evaluation of the Price Proposal will also include a review of the reasonableness and realism of the Professional Employees Compensation Plan.[[foot #] 5] Unrealistically low proposed prices may be grounds for eliminating a proposal from competition on the basis that the offeror does not understand the requirement. Protest File, Exhibit 1 at 010358-59. 24. Section L.11 set forth the instructions for preparation of the price proposal: The Price Proposal is the offeror's estimate of the price to perform the work . . . . . . . . Unrealistically low proposed prices may be grounds for eliminating a proposal from competition on the basis that the offeror does not understand the requirement. . . . Offerors shall propose the Government estimate of $1.5 million in direct travel costs for each of the seven years ($10.5 million total), and $3 million in direct Task Order Specific Materials (TOSM) cost for each of the seven years ($21 million total), exclusive of G&A. In preparing estimates, offerors that propose subcontractors may allocate portions of the travel and TOSM costs to the subcontractors. The Government will pay no profit or fee on travel or TOSM costs. The following information shall be organized and submitted in the form of exhibits. . . . Exhibit A - Total Contract Amount and Fixed, Burdened Hourly Rates Exhibit B - Estimated Hours, Fixed, Burdened Hourly Rates, and Total Proposed Price ----------- FOOTNOTE BEGINS --------- [foot #] 5 Offerors were required to include in their price proposals a description of their professional employees compensation plan (PECP). Protest File, Exhibit 2 at 020081. ----------- FOOTNOTE ENDS ----------- Exhibit C - Hourly Rate Schedule Exhibit D - Composite Rates EXHIBIT A - Total Contract Amount The offeror shall insert into the spaces provided the amounts for ceiling prices and fixed, burdened hourly rates, in Section B, paragraphs B.2 and B.3 of this RFP (Section J, Attachment 10), and submit a copy of each page as this exhibit of the Price Proposal. The offeror shall submit one fixed, burdened hourly rate only for each labor category and skill level, which shall be a composite of prime and subcontractor rates. Fixed, burdened hourly rates shall include, but not be limited to, direct labor, applicable indirect expenses, and profit, and reflect all associated facility-related expenses such as office leases, ADP hardware and software, telephones, and office equipment and supplies; but exclusive of travel and Task Order Specific Materials (TOSM), as discussed in Section H, plus applicable G&A. EXHIBIT B - Estimated Hours, Fixed, Burdened Hourly Rates, and Proposed Price* (*A single Exhibit B shall be submitted for the prime contractor only.) The offeror shall complete the exhibit, using the format contained at the end of Section L. The total proposed price is the product of the estimated hours and the proposed fixed hourly rate. The hourly rates shall include, but not be limited to direct labor, applicable indirect expenses, and profit. Fixed burdened hourly rates shall include, but not be limited to: direct labor, applicable indirect expenses, and profit, and reflect all associated facility-related expenses such as office leases, ADP hardware and software, telephones, office equipment and supplies, and expenses for contract management, including the preparation of invoices, cost/technical proposals, contract status reports, etc.; but exclude travel and Task Order Specific Materials (TOSM) plus associated G&A, as discussed in Section H. Accordingly, offerors shall specify the G&A rate and G&A costs applicable to the Government-specified travel and TOSM costs. The total proposed price is the sum of total estimated labor cost, travel and TOSM, and G&A applicable to travel and TOSM. This exhibit shall be prepared for each contract year, along with a seven year summary. In addition to the Exhibit, the offeror shall provide a detailed narrative description to explain the specific methodology used to estimate each labor category and skill level. The offeror shall provide supporting information to allow the Government to assess whether or not the offeror's proposed use of its pre-SETA labor categories and skill levels, including those of its proposed subcontractors, is responsive to the Government's requirement for labor categories and skill levels, as contained in Section H.37 of the RFP. The supporting documentation shall include a full description of each of the offeror's and its subcontractors' labor categories and skill levels in terms of typical or required education, skills and years of experience. The supporting documentation should include a presentation in the format presented below. . . . . The offeror shall provide a clear mapping of its current labor categories and skill levels into the Government's labor categories and skill levels. EXHIBIT C - Hourly Rate Schedule The offeror shall complete the exhibit, using the format contained at the end of Section L. Each hourly rate shown on Exhibit B shall be broken down into its components, as applicable. Exhibit C shall be provided for the offeror and each subcontractor proposed. This solicitation includes the requirement to compensate all professional employees fairly and properly, per FAR 52.22-46. In order for the FAA to evaluate this requirement, the offeror shall submit a total compensation plan, setting forth proposed salaries and fringe benefits for professional employees who will be working on the contract - including the proposed compensation for overtime. The plan shall contain supporting data such as recognized national and regional compensation surveys or studies of professional, public and private organizations which were used in establishing the total compensation structure. EXHIBIT D - Composite Rates The offeror shall disclose the composite rate for each labor category, skill level and contract year. The composite rate shall include the offeror's and subcontractors' component rates. For each composite rate, the offeror shall show its development by listing each component rate, including rates for separate prime contractor divisions, if applicable, and for each subcontractor whose rate(s) are reflected in the composite rate. The offeror shall indicate the weighting assigned to each component rate. Protest File, Exhibit 1 at 010317-21. 25. The requirement to show a composite rate in Exhibit D was added to the solicitation by amendment 12. Protest File, Exhibit 6 at 060003-04. This amendment resulted from a recommendation by the price evaluation team, after review of initial proposals that each offeror be required to submit a single composite rate, comprising "weighted average rates for the offeror and its subcontractors." Protest File, Exhibit 40 at 400006-07. 26. The purpose of requiring a composite rate was stated in the SETA price report which included the price evaluation of the BAFOs: After evaluating the [initial] proposals, the government issued amendment 0012 to the RFP. Had this amendment not been issued, the contract would have included one set of fixed burdened hourly rates for each participating entity of the prime contract and another set for each subcontractor. Thus, the cost to the government would have depended not only on the quantity of hours required in each category and skill level but also on which . . . entity . . . did the work. Amendment 12 stipulates that the contract will contain a single set of burdened hourly rates covering every participating entity of the prime contractor and all subcontractors. It is now known what rates the government would pay for each RFP category and skill level - regardless of whether the prime contractor or a subcontractor performs the work. Protest File, Exhibit 75 at 750004. Section L.9.3.1.3 (Uncompensated and Non-Standard Hours) 27. Upon receipt of amendment 8, MMC's proposal team met to discuss its initial strategy for responding to the solicitation. MMC anticipated proposing the same standard forty-five hour work week plus four hours of uncompensated overtime it had proposed in round 1. Transcript at 46. 28. On March 29, 1994, the FAA held a pre-proposal conference for the offerors. During the conference, TRW representatives expressed concern about the impact of "professional people having to work extended work weeks in this environment." The FAA did not respond to the question during the pre-proposal conference. Transcript at 51-52. 29. On April 7, 1994, the FAA issued amendment 9 to the solicitation. Protest File, Exhibit 3. Amendment 9 included the questions from the March 29, 1994, pre-proposal conference, as well as the FAA's written responses. TRW's question concerning extended work weeks and the FAA response was as follows: Question 32. During the SETA award debriefing, we were informed that the successful offeror had proposed, for its "professional" employees, a required 45 hour work week, and an additional 4 hours per week of mandatory uncompensated overtime. We are not anxious to demand that our professional employees work longer than the standard forty hour work week, but we very much desire to be the FAA's SETA contractor. Does the FAA, in fact, believe that any offeror can attract and retain a competent, professional SETA staff, over a 7 year period, when they are required to work a minimum of 49 hours per week? Does the FAA believe that it is in its best interest to have the SETA staff required to work a minimum of 49 hours per week? Is there an upper limit to the number of hours per week that the FAA considers acceptable for its SETA professionals to work? What is it? (In other words, how will the FAA treat excessive mandatory uncompensated overtime, with regard to "reasonableness, realism, and unrealistically low proposed prices["]?) Answer: Per Section M.6, evaluation of the Price Proposal will include a review of the reasonableness and realism of the offerors Professional Employees Compensation Plan. Section L.9.3.1 of the RFP has been modified to require offerors to address uncompensated overtime and non-standard hours as part of their Staffing Plan, which will be evaluated as part of the technical evaluation of the SETA Contract Management Plan. Protest File, Exhibit 3 at 030068. 30. Amendment 9 added Section L.9.3.1.3, entitled Uncompensated and Non-Standard Hours, to the RFP, which provided: While the Government does not encourage the use of uncompensated and/or non-standard hours, they may be proposed. However, if uncompensated overtime and/or a non-standard work-week or work-year has been used in this proposal, the usage shall be clearly identified and the rationale and justification supporting the usage shall be included in the proposal. The offeror must fully support, through company policy and documentation, disclosure statements, historical practices, etc., a different work-week or work-year. Any work-week or work-year proposed other than the standard 40-hour work-week or 1,860-hour work-year must also be verifiable through the Defense Contract Audit Agency. Protest File, Exhibit 3 at 030036. 31. The record of this protest does not contain any indication that any offeror requested clarification from the FAA as to the intent or meaning of Section L.9.3.1.3. MMC made no attempt to clarify the meaning of the clause. Transcript at 56. 32. Amendment 9 also added Section L.15 to the solicitation, which set forth the clause at FAR 52.222-46, Evaluation of Compensation of Professional Employees (Feb. 1993). Protest File, Exhibits 1 at 010322-23, 3 at 030044-45. 33. The SETA program manager testified that the FAA and source evaluation board (SEB) members were concerned about the forty-nine hour work week proposed in round 1. He further testified that the intent of Section L.9.3.1.3 was to express concern about the forty-nine hour work week. Transcript at 454. 34. Ms. Tammara Morrow became the FAA contracting officer for the SETA procurement in late April or May 1994. Transcript at 127. She testified it was her understanding that one of the reasons for Section L.9.3.1.3 was the FAA's concern about the type of professional employees compensation plan offerors were likely to propose. She further testified that there were concerns about a forty-nine hour work week, especially in light of question number 32, as discussed at the pre-proposal conference. Transcript at 182. 35. The SETA program manager and the contracting officer testified that the FAA did not intend and did not interpret Section L.9.3.1.3 as prohibiting a contractor from instituting a reasonable extended work week policy for the first time for the purposes of this procurement. Transcript at 161, 206, 457-59. 36. According to the contracting officer, the other offeror, Vitro, interpreted the provision to allow nonstandard work weeks even if this practice was initiated for the first time for this procurement. Transcript at 206-07. 37. Upon receipt of amendment 9, MMC's proposal team reviewed Section L.9.3.1.3 and "determined that Martin Marietta would have to bid a 40 hour work week because of the stipulations in this clause." Transcript at 48-49. This determination was made because MMC concluded that the meaning of the clause was "crystal clear" and that MMC did "not meet the criteria, Id. at 56. 38. MMC interpreted the clause to require a preexisting practice supported by historical data. This interpretation was held by MMC's proposal manager, who stated that he interpreted DCAA (Defense Contract Audit Agency) verification to preclude new policies, because "[a]s far as I know, DCAA does not audit future work" and "my definition of an audit is to validate history." Transcript at 54-56. 39. MMC also modified the RFP it sent to its proposed subcontractors to reflect the requirements of Section L.9.3.1.3. Transcript at 59. To assure itself that its subcontractors complied with MMC's interpretation of this clause, MMC reiterated in negotiations with each of its subcontractors the importance of conforming to a forty-hour work week unless the subcontractor could document an established practice of using a nonstandard work week. Id. at 59-60. 40. TRW interpreted the clause as permitting offerors to propose any nonstandard work week desired, as long as the offeror "could formulate a policy for it, convince the FAA that it was a good policy, a viable policy, and prepare to withstand a DCAA audit." Transcript at 650. 41. On April 20, 1994, TRW sent each of its subcontractors a letter of the SETA procurement. Protest File, Exhibit 362. 42. At the hearing on the merits of this protest, TRW presented testimony by Ms. Margaret Worthington, who was qualified as an expert in "proposal pricing . . . DCAA audit procedures, and the audit and analysis of cost or price proposals." Transcript at 720. She is currently a partner in the firm of Price-Waterhouse, and the East Coast director of the firm's government contracts consulting service. Id. at 719. Before joining Price-Waterhouse, she had almost sixteen years of experience as a DCAA auditor. Id. at 730. Ms. Worthington testified that DCAA regularly evaluates contractor accounting policies that have been instituted for the first time. "Otherwise, no company could ever get in [as a Government contractor] for the first time because it would have the history held against it. . . .[I]f there is relevant history . . . [DCAA will of course not ignore it.] . . . But the mere fact that there is no history doesn't mean that the area cannot be adequately evaluated." Id. at 730-31. 43. The contracting officer testified that it was her belief that respondent fulfilled the requirement that the nonstandard work week be verifiable through DCAA by seeking documentation sufficient for DCAA to examine and confirm the existence and operation of the policy after contract award. Transcript at 214-17. Submission of Initial Proposals[foot #] 6 44. TRW's proposal manager for the SETA procurement testified as to various assumptions and strategies that TRW used ----------- FOOTNOTE BEGINS --------- [foot #] 6 "Initial proposals" as used in this decision refers to the June 2, 1994, proposals, which were received in round 2 of the procurement. ----------- FOOTNOTE ENDS ----------- during the bidding process in an effort to predict staffing by skill mix. In preparing its initial price proposal for submission in June 1994, TRW assumed that the skill mix in actual performance would be significantly "richer" than the skill mix estimated in the RFP and used for evaluation purposes. In strategy documents at the initial stage, TRW projected that the actual mix would likely have Protest File, Exhibits 338 at TRW004294, 355 at TRW004299. 45. The strategy which TRW used for the June 2, 1994, proposal was to Protest File, Exhibit 338 at TRW004294. 46. On June 2, 1994, TRW, MMC, and Vitro submitted initial proposals. Protest File, Exhibits 18-23, 24-31, 32-37. 47. TRW proposed a SETA team consisting of Protest File, Exhibit 19 at 190026-27. 48. The total seven-year contract hours specified in the solicitation for evaluation purposes was 4,281,721. Of this total, TRW bid , or approximately and the remaining out of its subcontractors. Protest File, Exhibit 22 at 220050, 220060, 220070. For prime contractor effort, TRW proposed that Id., Exhibit 22 at 220132. 49. To comply with Exhibit B of the solicitation that facilities and ADP costs be included in indirect costs in the burdened hourly rates, TRW created a contract management and facilities support rate, also referred to as the contract management and other direct costs (CMODC) rate.[foot #] 7 In its initial proposal, TRW stated: Protest File, Exhibit 22 at 220166. ----------- FOOTNOTE BEGINS --------- [foot #] 7 TRW's CMODC for the contract included office leases, parking for employees, local travel, furniture, communications, supplies, reproduction, contract management support, ADP hardware and software procurement and installation and technical library support. Protest File, Exhibit 62 at 620149-50. ----------- FOOTNOTE ENDS ----------- 50. In its June 2, 1994, initial proposal and its August 8, 1994, BAFO, TRW proposed a forty-hour work week with five hours of voluntary compensated overtime. TRW proposed this forty-five hour work week using its which has been a policy utilized by TRW for approximately Protest File, Exhibits 22 at 220006-08, 62 at 620011-13, 241. 51. MMC does not dispute that TRW's nonstandard work week complied with the requirement of the clause. Protester's counsel stated in his opening statement: At the prime level, we do not dispute that TRW's existing practice qualified under this clause [RFP Clause L.9.3.1.3] and that they adequately documented it. They had that policy in place for years. . . . It's been reviewed by the DCAA. They stressed in their proposal, the length of time it had been in place and the fact that it was a clearly established historic practice, and we don't dispute that it was. Transcript at 17. 52. TRW's subcontractors also based their proposed hourly rates on an average forty-five hour work week. Protest File, Exhibits 19 at 190097-98, 22 at 220006-07. 53. TRW's internal labor grades or levels range from Protest File, Exhibit 22 at 220171. These labor grades are referred to as TRW's Transcript at 276-77. The labor grade for an individual employee is Protest File, Exhibit 22 at 220171. 54. For each labor grade, TRW established hourly bid rates personnel. Protest File, Exhibits 312, 384. 55. Figure 4.3-2 of TRW's initial price proposal "provides the FAA with government labor categories and skill levels mapped to TRW and teammate labor categories." TRW mapped skill level 1 in skill level 2 in skill level 3 in skill level 4 in ; and skill level 5 in Protest File, Exhibit 22 at 220136-37. 56. In assigning its internal labor grades to the RFP skill levels for the initial proposal, TRW assumed that each year of college education was equal to a year of relevant experience. Protest File, Exhibit 22 at 220135. 57. In its initial proposal, TRW Protest File, Exhibit 22 at 220132-33. 58. In its initial proposal, TRW proposed a . Protest File, Exhibit 22 at 220166. 59. TRW's initial proposal had a total evaluated price of Protest File, Exhibit 22 at 220050. 60. MMC proposed to perform the contract using Protest File, Exhibit 25 at 250013. MMC's proposed prime contractor rates were based on a forty-hour work week. Id., Exhibit 28 at 280036. MMC's initial evaluated proposal price was Id. at 280132. Initial Evaluation 61. The technical evaluation report stated that MMC and TRW received technical scores of 64.65 and 63.57, respectively, out of a total possible score of 75. Protest File, Exhibit 39 at 390005-06. The price evaluation report stated that "[t]he comparison of the proposed total estimated prices to the IGE indicates that all three proposed prices are reasonable -- that is, not excessive. Each proposal is at least 22 percent below the IGE." Id., Exhibit 40 at 400004. 62. The Q&Q evaluators questioned whether . Protest File, Exhibit 38 at 380015. 63. The offerors' proposed professional employee compensation plans were evaluated for reasonableness and realism. The price evaluators found that the proposed compensation plans of and were reasonable and realistic. The price evaluators found that the "single largest concern regarding any offeror's compensation is that the ." Protest File, Exhibit 40 at 400005. 64. With respect to proposed extended work weeks, the price evaluators noted that "[a]ll of TRW's subcontractors have based their proposed rates on a voluntary 45-hour work week, even though it appears that most of the subcontractors do not ordinarily propose uncompensated overtime." Protest File, Exhibit 40 at 400005. The price evaluators concluded that "[w]e feel that none of the offerors' or subcontractors' requirements of uncompensated time would significantly impair their ability to attract and retain competent employees." Id. at 400006. 65. As noted previously, as a result of the initial evaluation of proposals, the price evaluation team made a recommendation to revise the solicitation to require a composite burdened labor rate (a weighted average) for each labor and skill category to be applied regardless of whether the work was to be performed by the prime contractor or the subcontractor. Protest File, Exhibit 40 at 400006-07. This was accomplished by amendment 12. Id., Exhibit 6 at 060003-04. Weakness And Deficiency (W&D) Requests 66. On July 11, 1994, the FAA issued weakness and deficiency requests to each offeror. Protest File, Exhibits 41- 43. 67. The FAA's W&D requests to TRW included questions relating to TRW's pricing. Questions were directed at TRW's proposed compensation, and in particular regarding the Protest File, Exhibit 41 at 410009-19. 68. The FAA's W&D requests to TRW also stated that "[a]ll of the subcontractors propose a 40/45 voluntary work-week. However, did not provide any history or policy as requested in Section L.9.3.1.3, entitled 'Uncompensated and Non- Standard Hours' - Please submit copies." Protest File, Exhibit 41 at 410020. The FAA requested the same type of information concerning the uncompensated time policies of MMC's subcontractors. Id., Exhibit 42 at 420007. 69. "Price question" number 24 requested TRW to address the voluntary nature of its proposed subcontractors forty-five hour work week. "Other pertinent question" number 2 instructed TRW to provide additional information concerning its subcontractors compliance with Section L.9.3.1.3 of the RFP. Protest File, Exhibit 41. Discussions And Responses to W&D Requests 70. On July 14, 1994, the FAA engaged in separate face-to- face discussions with the three offerors. Protest File, Exhibits 47-49. 71. In the discussions with TRW, the FAA expressed concern about the Protest File, Exhibit 47 at 470002. 72. The FAA advised TRW that its interpretation of the experience requirements was incorrect, i.e., that each year of college education was not equal to one year of relevant experience. Protest File, Exhibit 47 at 470001. 73. On July 26, 1994, Vitro, TRW, and MMC provided written responses to the FAA's W&D Requests. Protest File, Exhibits 53- 55. 74. In response to price questions 6-8, TRW provided detailed information concerning the salaries of selected current TRW Washington area employees. Protest File, Exhibit 53 at 530037-45. It stated in response to each of these questions: Id. at 530037, 39, 43. 75. Price question 16 to TRW stated as follows: TRW responded as follows: Protest File, Exhibit 53 at 530055. 76. The SETA program manager testified that during discussions, the issue was raised as to TRW's desire to employ a higher number of skill level 2 employees. Q: Did [TRW] talk to you at all about a different mix [of hours than shown on Exhibit B]? A: Yes, they had proposed using a higher mix of [skill level] 2's and we told them, no, that we were not buying into that, our budget was fixed, they better figure out a way of handling the [skill level] 2's somewhere else, because we weren't interested in buying them. Transcript at 471-72. 77. The minutes of discussions held on July 14, 1994, state: [TRW] indicated that [it] had wanted to provide the FAA with a of skill levels, emphasizing the quality of its personnel. [The Program Manager] and the [contracting officer] advised TRW that the estimated mix of labor categories and skill levels contained in [the solicitation] must be used in its proposal. Protest File, Exhibit 47 at 470002. 78. TRW's subcontractors submitted documentation with regard to their practice of uncompensated overtime: provided a copy of its general administrative manual which contained an existing policy for extended workweeks. It noted that it would pay its employees "straight time" for hours in excess of forty hours, and its employees had accepted this for the project. Protest File, Exhibit 53 at 530109-11. submitted sections of its policy and procedure manual concerning uncompensated overtime. had a historical practice of recording all hours worked and total time accounting system, and its policy was to "[e]xpect employees to accomplish assigned tasks completely and within schedule and cost constraints even when doing so requires overtime work." Protest File, Exhibit 53 at 530112-15. responded to the FAA's weaknesses and deficiencies letter by stating that employed a that tracks total time, and that it had statistics available to document its employees' historical practice of working extended work weeks. Protest File, Exhibits 53 at 530117, 373 at TRW1281. submitted a letter dated July 19, 1994, which stated, in part: [O]ur employees often work hours far in excess of the "standard" 40 hours. Although we have not collected substantiating statistics, I am certain we exceed even the proposed 45-hour week. To ensure and support this approach, we intend to initiate a "Total Time Reporting System." . . . All employees that are selected to participate in the SETA Program will be advised that at least a 45 hour average work week is anticipated." Protest File, Exhibit 53 at 530118; Transcript at 577-87. These representations were reaffirmed by in a submission directly to the FAA. Protest File, Exhibit 89 at S000200. stated that it did not have an existing policy. stated in its submission directly to the FAA: is proposing a 45 hour work week . . . on a voluntary basis . . . . does not have historical data supporting uncompensated overtime, nor has established a Corporate Policy on uncompensated overtime. However, intents on implementing Timesheet Procedures necessary to account, record, and report uncompensated overtime between now and contract award. Protest File, Exhibit 89 at S000258. provided additional information to the FAA detailing the keeping of . Protest File, Exhibit 53 at 530019-20. also submitted a copy of its written policy for recording total hours worked. Id., Exhibit 89 at S000297-306. provided its standard company policy, in effect since , regarding accounting for uncompensated time, as well as its company policy regarding its extended work week. Protest File, Exhibit 53 at 530121-26. 79. MMC responded to FAA's question concerning its subcontractors' use of uncompensated time by providing Two of MMC's subcontractors, Protest File, Exhibit 54 at 540113-27. MMC's director of systems engineering testified that he became convinced that and met the RFP's requirements because they had "total time accounting systems." Transcript at 81. One subcontractor, Protest File, Exhibit 54 at 540111- 12. 80. Upon reviewing the documentation submitted by all prime contractors and subcontractors, the contracting officer concluded that "all the information . . . received from the subcontractors was adequate." Transcript at 214. TRW's Strategy Prior to BAFO 81. After submission of its initial proposal, TRW believed that it would its BAFO. Protest File Exhibit 376 at M002447. 82. TRW for two reasons. It and included an of an at the end of the base. This increase, in conjunction with the requirement in amendment 12 for composite team rates, caused the bottom-line TRW bid, stated as an overall hourly rate, . Protest File, Exhibit 376 at M002447. TRW did not believe that a bid of was a winning bid. Transcript at 333-36. 83. Before submitting its BAFO, TRW analyzed various bidding strategies. These strategies were set forth in an internal TRW document " dated August 1, 1994, which analyzed Under an initial analysis entitled Protest File, Exhibit 376. 84. As a result of this analysis, TRW determined the Protest File, Exhibit 29 Protest File, Exhibit 376 at M00248-49; Transcript at 77-82, 404-08, 603, 610-11. . Protest File, Exhibit 62 at 620135-48. MMC's Strategy Prior to BAFO 85. Prior to submitting its BAFO, MMC also performed a risk analysis. MMC's risk analysis was performed by an "independent" review team. Transcript at 532. MMC's independent review team performed and analyses and determined a mid-point between the two analyses. Protest File, Exhibit 209 at M000802; Transcript at 532-34. Based on the RFP's estimate of hours, MMC's independent review showed a Protest File, Exhibit 209 at M000802; Transcript at 535. Under MMC's MMC's independent review showed a Protest File, Exhibit 209 at M000805; Transcript at 535. 86. MMC also developed a which MMC believed reflected a most likely scenario for actual performance under the SETA contract. Under this scenario, MMC anticipated a Transcript at 99-102, 523-24, 537; Protest File, Exhibits 209-10 at M000794. This scenario also assumed a Transcript at 525, 527, 537-38; Protest File, Exhibits 209 at M000800, 210 at M000794. Transcript at 525. He stated that MMC "hoped" to the contract was awarded in Id. at 527. Submission and Evaluation of BAFOs 87. On July 29, 1994, the FAA issued a request for BAFOs. Protest File, Exhibits 58-60. All three offerors submitted BAFOs on August 8, 1994. Id., Exhibits 61-73. 88. BAFO evaluation was completed on August 26, 1994. MMC and TRW received technical scores of 65.97 and 64.37, respectively, out of a total possible score of 75. Protest File, Exhibit 78 at 780019. 89. TRW's BAFO base price was and its BAFO price for its alternate proposal #1, which projected that TRW would house all of its Washington area personnel in the Portals Building, was $187,975,250. Protest File, Exhibit 75 at 750007. 90. In its BAFO, TRW proposed to perform the SETA contract with and subcontractor organizations it had proposed in its initial offer. Protest File, Exhibit 61 at 610024. 91. In its BAFO price proposal, TRW The BAFO stated, in relevant part: Protest File, Exhibit 62 at 620149. 92. An introduction to the BAFO price volume also stated: Protest File, Exhibit 62 at 620009. 93. In addition to its basic direct labor rate, TRW broke down its labor rates into Protest File, Exhibit 62 at 620134. 94. In its BAFO, TRW and its subcontractors continued to propose an extended work week, and based their hourly rates on a forty-five hour work week. Protest File, Exhibit 61 at 610063. 95. TRW Protest File, Exhibit 62 at 620120-21. 96. TRW proposed a subcontractor hours, a Protest File, Exhibit 62 at 620150 (TRW BAFO price proposal). 97. With regard to the requirement in Exhibit C of the solicitation to "provide a clear mapping of its current labor categories and skill levels into the Government's labor categories and skill levels," TRW explained in its BAFO that its use of specific in estimating its prices did not necessarily mean that only personnel in those exact would be used to perform the contract. TRW stated: Protest File, Exhibit 62 at 620009. 98. In its BAFO, TRW made the following statement with respect to skill level 2: Protest File, Exhibit 62 at 620114. 99. MMC's BAFO base price was and its BAFO alternate price (MMC's alternate proposal projected that MMC would assign more than 90% of its staff to its Virginia Avenue facility) was Protest File, Exhibit 75 at 750007. 100. MMC broke its direct labor rates down showing Some of MMC's rates also included Protest File, Exhibit 67 at 670075-156. 101. With respect to the specific internal categories, which were "mapped" to the required RFP labor categories and skill levels in its BAFO, MMC also did not believe that it was making any "promises" that an individual from that internal category would be the one to supply the labor for the RFP category. Transcript at 510-11. The mapping "represented [MMC's] best thought at the time, and it would obviously represent the most likely place where that [person] would come from." Id. at 511. MMC did not derive its proposed labor rates , and MMC's proposed labor rates do to which they can be mapped. Id. at 513-14. 102. MMC did not include in its proposal any internal labor categories. Protest File, Exhibit 67 at 670067; Transcript at 508-09. Transcript at 508-10. 103. The price evaluation team reviewed the professional employee compensation plans for reasonableness and realism and performed a price analysis of the offerors' proposals pursuant to FAR 18.502-2. Protest File, Exhibit 75 at 750005. 104. The conclusions of the price evaluation team were set forth in the SETA price report. Each offeror's proposed price was at least 21% below the IGCE, and MMC's price exceeded TRW's and Vitro's by and respectively. Protest File, Exhibit 75 at 750008. The price evaluation team concluded that: [a]ll of the proposed prices [are] reasonable and [we] believe each is a realistic indicator of the amount the government would pay if that proposal were selected and the government estimate of hours proved accurate. We consider all of the compensation plans acceptable and believe all three offerors and their subcontractors would compensate their employees sufficiently to attract and retain competent personnel. In our opinion, none of the proposed prices is so low that it indicates the offeror fails to understand the requirements. Protest File, Exhibit 75 at 750021. 105. The price evaluation team also concluded that "[n]one of the BAFO prices is unbalanced with respect to the basic and optional periods. In each proposal and the IGCE, the price for the three-year base period represents approximately 40 percent of the seven-year total and the price for each two-year option accounts for roughly 30 percent of the total." Protest File, Exhibit 75 at 750009. 106. With regard to its own TRW described a proposed Protest File, Exhibit 62 at 620013. 107. The contracting officer testified that she determined that all of TRW's and MMC's subcontractors complied with the requirements of Section L.9.3.1.3. Transcript at 166-67. 108. The conclusion of the price evaluation team with regard to the uncompensated overtime and nonstandard work weeks proposed by the offerors was as follows: The RFP required the offerors to identify the use of uncompensated and/or non-standard hours and fully support through company policy and documentation, disclosure statements, historical practices, etc. that exceed a 40 hour work-week or 1,860 [hour] work-year. The FAA's concern in regard to the use of uncompensated overtime and non-standard work-weeks was that this practice can result in lowering the compensation (salary and fringe benefits) paid or furnished professional employees. This lowering can be detrimental to obtaining the quality of professional services needed for adequate contract performance. The number of hours to be used in the Price Proposal was specified in the RFP. Since the hours are "fixed" the important element is the rate, which is lowered by using uncompensated overtime and non-standard work- weeks, resulting in a commensurately lower overall cost. The offerors and their subcontractors made various assumptions regarding the standard work week. TRW has based its proposed rates on a 45-hour work week. The company has had for All of TRW's subcontractors have based their proposed rates on a voluntary 45-hour work week. The proposed rates of Martin Marietta and six of its nine subcontractors reflect a standard 40-hour work week with no uncompensated overtime. The personnel of two subcontractors, are expected to work a 42.5-hour week. Another subcontractor, has adjusted its base rates by 2 percent (the equivalent of .8 hours per week) to account for uncompensated overtime. We believe that none of the offerors' or subcontractors' requirements or expectations of uncompensated overtime or extended work weeks would significantly impair their ability to attract and retain competent employees. Protest File, Exhibit 75 at 750018-19. 109. With regard to the professional employees compensation plans, the price evaluation team concluded: 2.3 Professional Employees Compensation Plans . . . . Compensation plans of TRW, Vitro, and Martin did not significantly change from the June 1994 to the August 1994 (BAFO) proposals. In the report on the June 1994 proposals, we stated that compensation plans were considered reasonable and realistic We were concerned because the direct labor rates reflected in burdened hourly rates appeared very low. Consequently, our written and oral discussion with focused on this issue. In discussions, we learned that TRW had misinterpreted the skill level definitions in H.37 of the RFP when preparing its June 1994 proposal. For example, according to the RFP, skill level 3 personnel need not have a college degree (although one is "preferred") but must have at least 10 years of direct or related experience in the labor category proposed. TRW inappropriately credited a year of experience for each year of college. Consequently, for purposes of matching TRW labor grades with RFP labor categories and skill levels, the offeror classified an employee with a bachelor's degree and six years of relevant work experience as having 10 years of experience and meeting the skill level 3 requirements. During the discussion stage, we informed TRW and the other offerors that the numbers of years of experience cited in H.37 of the RFP include actual work experience only - and not years spent in college. In the BAFO, TRW revised its estimating methodology, they appear to be based on a proper interpretation of the requirements of H.37 of the RFP. Further, in response to one of our written questions, and The compensation plans of all the offerors are considered reasonable and realistic. Protest File, Exhibit 75 at 750017-18. 110. In the BAFO Q&Q evaluation, the evaluators examined uncompensated overtime and nonstandard work weeks proposed in the BAFOs to assess the impact on an offeror's ability to hire and retain qualified individuals under the SETA contract. Protest File, Exhibit 74 at 740007. 111. The price analyst examined the uncompensated overtime and nonstandard work weeks proposed by TRW and its subcontractors to assess the impact on the ability to attract and retain competent employees. Protest File, Exhibit 75 at 750018-19; Transcript at 480-81. 112. In Schedule 6 to the SETA Price Report, the price evaluators compared the direct labor component of the burdened hourly rates of the IGCE, and of for the labor categories and skill levels containing RFP estimates of hours. Protest File, Exhibit 75 at 750028. 113. In Schedule 7 of the SETA price report, the price evaluators compared the direct labor rate component of the burdened hourly rates in the electrical engineer, skill level 3, and financial analyst, skill level 4, categories for the IGCE, the initial and BAFO proposals, the initial and BAFO proposals, and the initial and BAFO proposals. The evaluators also "converted" each direct labor rate to the equivalent grade and step on the Government's GS pay scale, and then compared the equivalent grades and steps. Protest File, Exhibit 75 at 750029. 114. The price evaluators noted that in it's BAFO, TRW Protest File, Exhibit 75 at 750018 (SETA price report of 8/24/94). The evaluators said that these rates " Id. 115. The contracting officer testified that the price analysis which was performed did not analyze the individual components of the fully burdened labor rates. Transcript at 201-02. She further testified that she utilized the rate information provided by the offerors to determine whether the proposed rates were fair and reasonable. Id. at 145, 204. 116. Finally, TRW's expert witness testified that she had performed an independent analysis to determine if TRW's rates were mathematically unbalanced. She focused upon Transcript at 739-52. Her opinion was that there was no mathematical unbalancing, as there was neither enhancement of price nor nominal pricing. Id. at 753-54. Source Selection Proceedings 117. After the evaluation teams completed their evaluation of the BAFOs, the SEB prepared a report and briefing summarizing its findings for the source selection official (SSO). Protest File, Exhibits 78-79. 118. The SSO report concluded that "each offeror was evaluated and found to have an acceptable [PECP] that indicated the ability to hire and retain competent professional employees." Protest File, Exhibit 79 at 790025. This conclusion was based on an examination of the "compensation levels proposed" and the "salary rates" included in the burdened hourly rates proposed by each offeror. Id. 119. In the SEB's September 20, 1994, briefing to the SSO, the SEB commented on the direct labor rates included in the burdened hourly rates proposed by each offeror. Protest File, Exhibit 78 at 780025-27. The SEB noted that which account for about of the RFP's estimated hours." Id. at 780027. 120. The SSO concluded that the MMC and TRW proposals were technically equivalent, so, therefore, "price has become more important." Protest File, Exhibit 80 at 800001. The SSO then concluded: "The evaluated price of TRW is lower. On this basis, I select TRW as the successful offeror." Id. The award was based on TRW's alternate proposal 1, in which all SETA personnel would be located in the Portals facility. Id. Discussion Count Three - Uncompensated and Non-Standard Hours MMC alleges that the FAA failed to adequately evaluate TRW's compliance with Section L.9.3.1.3 of the RFP, which is entitled "Uncompensated and Non-Standard Hours" (the clause). Complaint 61-63. The clause reads as follows: While the Government does not encourage the use of uncompensated and/or non-standard hours, they may be proposed. However, if uncompensated overtime and/or a non-standard work-week or work-year has been used in this proposal, the usage shall be clearly identified and the rationale and justification supporting the usage shall be included in the proposal. The offeror must fully support, through company policy and documentation, disclosure statements, historical practices, etc., a different work-week or work-year. Any work-week or work-year proposed other than the standard 40-hour work-week or 1,860-hour work-year must also be verifiable through the Defense Contract Audit Agency. Finding 30. MMC interpreted the clause as precluding the institution of a nonstandard work week for the first time for the purposes of this procurement, and requiring an established, verifiable practice. Findings 37, 38. MMC argues that each of TRW's subcontractors lacked this established, verifiable practice and, therefore, failed to comply with the requirements of the clause. Notice of Amendment to Protest Complaint 2. MMC contends that its interpretation is based upon the plain meaning of the clause: First, a proposed non-standard work-week must be "clearly identified" and the offeror must provide supporting "rationale and justification." Second, the non-standard week [sic]-week must also be fully supported "through company policy and documentation, disclosure statements, historical practices, etc." And third, the non-standard work-week must "also be verifiable through the Defense Contract Audit Agency." Read together, the second and third requirements mandated that any non-standard work-week be based on an established, verifiable practice. Each item in the series of potential supporting items in the third sentence of the clause is one that is likely to be associated with a current, established accounting practice. When combined with the express, additional requirement that the practice be "verifiable" by DCAA, the FAA's message is clear: We don't encourage non- standard work-weeks at all. But if you choose to propose one, you must identify it, justify it, and show that it is a real, established practice that can be verified by DCAA. . . . The requirement for an established, verifiable practice is thus clear from the plain language of the clause. Protester's Posthearing Brief at 46. Protester's proposal manager testified that he interpreted the clause to require a preexisting policy because he believed that a policy which was instituted for the first time for the instant procurement could not be verifiable by DCAA. Finding 37. MMC therefore prepared its proposal based upon this interpretation of the clause. MMC argues that: The SETA RFP makes clear that the FAA had an overriding concern with the performance risk that would result from inadequate compensation of professional employees working on the contract. In particular, the FAA was concerned with the offerors' ability to attract and retain qualified employees. Section L.9.3.1.3 was intended to address this concern. This stated intention is served only if the clause is read to require an established, verifiable practice. Protester's Posthearing Brief at 47-48. Respondent and two offerors, TRW and Vitro, interpreted the clause to allow the institution of a nonstandard work week for the instant procurement, without prior historical usage by the offeror. Findings 35-36, 40. Both the contracting officer and the SETA program manager testified as to respondent's interpretation. Finding 35. Additionally, the contracting officer testified that she believed respondent fulfilled the requirement that the nonstandard work week be verifiable through DCAA by seeking documentation sufficient for DCAA to examine and confirm the existence and operation of the policy after contract award. Finding 43. TRW interpreted the clause as permitting offerors to propose either an existing or a new uncompensated overtime and/or extended work week policy, so long as the policy could be supported by information which would demonstrate that the policy was "verifiable" by DCAA. Finding 40. TRW offered unrebutted expert testimony by a former DCAA employee, who had almost sixteen years of experience as a DCAA auditor. She testified that DCAA regularly evaluates contractor accounting policies that have been instituted for the first time for a specific procurement. Accordingly, she stated that if a preexisting policy were a prerequisite, a company could not become a Government contractor for the first time because it would have a lack of history held against it. The fact that there is no historical data does not mean that the area cannot be adequately evaluated. Finding 42. Thus, TRW and respondent argue that protester's equation of preexistence with DCAA verifiability is based upon its own erroneous assumption of DCAA practice. Protester considered the clause "crystal clear," Finding 37, and did not seek clarification with regard to its interpretation of the clause, nor did it protest the inclusion of the clause in the solicitation. Finding 31. Where the protester has not timely protested the terms of a solicitation, it must be content with any reasonable interpretation of the terms which promotes full and open competition. In examining the reasonableness of the Government's interpretation of a clause, we read solicitation requirements in the least restrictive manner given the context, and give weight to the plain meaning of solicitation language. Centel Federal Systems, Inc. v. Department of Navy, GSBCA 12011- P, et al., 93-2 BCA 25,648, 1992 BPD 359. Protester's interpretation is contrary to the plain meaning of the clause. The clause lists documents which would support a nonstandard work week policy and uses the term "etc.," which denotes a noninclusive list containing other unspecified items. While the list includes historical data as one means of support, we do not agree with protester's argument that "each item in . . . the third sentence of the clause is one that is likely to be associated with a current, established accounting practice." According to unrebutted expert testimony, protester's interpretation is also contrary to the practices of DCAA, which do not require, as protester assumed, historical data of prior use in order to verify a practice of a nonstandard work week. Finding 42. The interpretation of the clause by respondent is reasonable and according to its plain meaning. MMC also argues that TRW's proposal fails to meet the material, mandatory documentation requirements of the clause, even if the clause did not require an established practice.[foot #] 8 MMC cites Sections L.7 and M.4 of the solicitation requiring "comprehensive responses" and "full and complete responses" to all portions of the solicitation. Findings 9, 10. MMC does not dispute that TRW's own practice qualified under the clause and was adequately documented. Finding 51. However, MMC alleges that TRW did not sufficiently document its which its BAFO indicated would be several months after contract award. MMC argues: [O]ther than stating that TRW failed to provide any documentation on . . . . TRW provided neither a nor any other documentation. The FAA completely ignored the fact that TRW's of contract performance. Protester's Posthearing Brief at 63. TRW described its Finding 106. The basic features of MMC admits that TRW's existing was adequately documented. Finding 51. We do not view the or a failure to meet the requirements of the solicitation. With regard to TRW subcontractor submissions, protester contends that respondent "never attempted to assess compliance with the documentation requirements of Section L.9.3.1.3 and therefore failed to recognize the insufficiency of the documentation submitted by and on behalf of TRW's subcontractors." Protester's Posthearing Brief at 62. This argument also lacks merit, as respondent clearly assessed compliance with the documentation requirements of the clause and deemed the documentation sufficient, a conclusion which we find reasonable. ----------- FOOTNOTE BEGINS --------- [foot #] 8 MMC argues that if the Board finds the clause ambiguous, it was prejudiced by a latent ambiguity. We do not find the clause ambiguous, and therefore do not address this argument. ----------- FOOTNOTE ENDS ----------- After receipt of initial proposals, respondent issued weaknesses and deficiencies letters to TRW and MMC concerning their subcontractors' compliance with the clause. Finding 68. Documentation was submitted by the subcontractors. Several of TRW's subcontractors submitted evidence of historical practices. Others described an intent to implement the practice for the first time for this procurement, and described accounting procedures which they intended to implement in this regard. As previously discussed, such an intended practice is verifiable by DCAA and is in compliance with the clause. One of MMC's Finding 79. Upon reviewing the documentation submitted by all prime contractors and subcontractors, the contracting officer concluded that "all the information . . . received from the subcontractors was adequate." Finding 80. Protester does not contest the veracity of the documentation submitted by TRW's subcontractors. Instead, protester argues that: To the extent that any of the final agency evaluation reports address the issue of uncompensated or non- standard hours at all, they focus exclusively on the question of an offeror's ability to attract and retain qualified employees. Protester's Posthearing Brief at 61-62. Protester's complaint that respondent's analysis focuses on this issue is puzzling, in light of protester's previous statement that the very purpose of the clause was to ensure an offeror's ability to attract and retain qualified employees. Amendment 9 to the solicitation included the clause found in FAR 52.222-46, Evaluation of Compensation for Professional Employees. Finding 32. This clause required an evaluation of professional compensation by respondent to assure that such compensation is not "unrealistically low or not in a reasonable relationship to the various job categories" so that the offered compensation does not "impair the Contractor's ability to attract and retain competent professional employees." The price evaluation team stated in the SETA price report the concern that uncompensated overtime and/or nonstandard work hours can "result in lowering the compensation . . . paid or furnished professional employees." Finding 108. They concluded that: "We believe that none of the offerors' or subcontractors' requirements or expectations of uncompensated overtime or extended work weeks would significantly impair their ability to attract and retain competent employees." Id. Thus, contrary to protester's assertions, respondent reviewed the documentation submitted by all subcontractors to support the use of uncompensated overtime and nonstandard work weeks, in conjunction with the proposed prices. Respondent concluded that the documentation from the subcontractors from all offerors was sufficient to comply with the requirement of the clause and the prices offered would not impair the offerors' ability to attract and retain professional employees. We find respondent's conclusion reasonable. Protester has failed to prove the allegations of this count of its complaint. The Requirement for Price Analysis of Proposals Issues raised in the remaining counts four and five of this protest require an understanding of the purpose of price analysis performed by respondent. When the SETA solicitation was first issued, a contract was to be awarded on a cost-plus-fixed-fee basis. The contract as originally conceived was to be a cost- reimbursement type contract, and respondent planned to use both cost and price analysis to evaluate proposals. Findings 2, 17. When the SETA solicitation was revised in round 2 from a cost- reimbursement to a time and materials contract, procedures for evaluation of price proposals were revised. Finding 18. The solicitation stated that the price proposal is the "offeror's estimate of the price to perform the work." Finding 24. Section M.6 of the solicitation specified "[t]he Price Proposal will be evaluated in accordance with FAR 15.805-2." Finding 23. The requirement for cost analysis which was to be performed in round 1 was deleted.[foot #] 9 There was no requirement for submitting cost or pricing data. The contract was not to be a cost- reimbursement contract. Findings 18, 19. According to the solicitation and the price evaluation plan for this procurement, the evaluators were to perform a price analysis of proposals in accordance with FAR 15.805. The techniques to be used, and which were used, included a comparison of each offeror's proposed burdened labor rates to those of the other offerors (FAR 15.805.2(a)) and a comparison of proposed burdened hourly rates to the rates in the independent Government cost estimate (FAR 15.805-2(e)). Finding 21. Additionally, the evaluators were to review the offerors' professional employee compensation plan for reasonableness and realism. Finding 22. Price analysis is "the process of examining and evaluating a proposed price without evaluating its separate cost elements and proposed profits." 48 CFR 15.801 (1993) (FAR 15.801). According to FAR 15.805-2, the contracting officer is responsible for selecting and using whatever price analysis will ensure a fair and reasonable price and may use one or more of the following techniques: ----------- FOOTNOTE BEGINS --------- [foot #] 9 The FAR defines cost analysis as: [T]he review and evaluation of the separate cost elements and proposed profit of (a) an offeror's or contractor's cost or pricing data and (b) the judgmental factors applied in projecting from the data to the estimated costs, in order to form an opinion on the degree to which the proposed costs represent what the contract should cost, assuming reasonable economy and efficiency. 48 CFR 15.801 (1993) (FAR 15.801). ----------- FOOTNOTE ENDS ----------- (a) Comparison of proposed prices received in response to the solicitation. (b) Comparison of prior proposed prices and contract prices with current proposed prices for the same or similar end items. (c) Application of rough yardsticks (such as dollars per pound or per horsepower, or other units) to highlight significant inconsistencies that warrant additional pricing inquiry. (d) Comparison with competitive published price lists, published market prices of commodities, similar indexes, and discount or rebate arrangements. (e) Comparison of proposed prices with independent Government cost estimates (see FAR 15.803(b)). Thus, the focus of the price analysis to be performed was the reasonableness of the price offered, and not a determination of the actual costs the offerors expected to incur in performing the contract requirements. The hourly rates submitted for each labor category and skill level were composite rates, i.e., weighted averages derived from the hourly rates of all team members, including all components of the prime contractor and subcontractors. Finding 24. The price analysis did not require an evaluation of the reasonableness or accuracy of the cost elements contained in the labor rates. Cost analysis was not required to be performed, and the review and evaluation of the separate cost elements and proposed profit was therefore not required. It is true that Exhibit C of the solicitation required offerors to include an "Hourly Rate Schedule," in which the burdened hourly rates are broken down by element of cost of each proposal. Id. However, the price evaluation plan stated the purpose of this information was to assess price fairness and reasonableness. Finding 21. The contracting officer confirmed that the FAA's purpose in requiring the submission of the information in Exhibit C was to determine if the prices proposed were fair and reasonable and to provide the evaluators with "insight as to how each offeror came up with a burdened rate. It was not to analyze each component because we didn't have enough information to analyze the components." Findings 21, n.4, 115. This information was for the benefit of the Government in making its analysis of the reasonableness of the price offered. It did not contravene the fact that cost analysis and cost or pricing data were not required. See, e.g., Richard S. Carson & Associates, Inc., GSBCA 11452-P, 92-1 BCA 24,641, 1991 BPD 338. Count Five - Misrepresentation[foot #] 10 The fifth count of the amended protest complaint alleges that TRW made material misrepresentations in its BAFO which compromised the integrity of the competitive bidding system and respondent's ability to make award to the source whose offer was most advantageous to the United States. Notice of Second Amendment to Protest Complaint 67H.[foot #] 11 In alleging the various misrepresentations in count five, protester assumes that offerors were required to inform the respondent as to their "expected costs."[foot #] 12 These allegations fail in large part because, as discussed above, cost and pricing data was not required from offerors, nor was respondent required to perform cost analysis. Alleged Misrepresentation of Protester alleges that TRW made a material misrepresentation in its BAFO "that its ." Notice of Second Amendment to Protest Complaint 67D. This allegation concerns the requirement in Exhibit B of the solicitation that be included in To comply with this requirement, TRW created a . Finding 49. In the instant procurement, TRW determined that it would incur approximately in what it called in performing the contract. Finding 84. MMC alleges that TRW's proposal misrepresented "its true, estimated performance costs for ----------- FOOTNOTE BEGINS --------- [foot #] 10 The allegations of counts four and five of the amended protest complaint overlap, and we find it necessary to resolve various issues raised in count five before discussing count four. [foot #] 11 In the discussion that follows, we consider the alleged misrepresentations in the order presented in protester's posthearing brief. [foot #] 12 In its brief, protester characterizes this as a requirement to reveal true, estimated performance costs. ----------- FOOTNOTE ENDS ----------- " Protester's Posthearing Brief at 85. In support of this argument MMC states: It is undisputed that TRW's actual, estimated expenses for these this statement was, at best, highly misleading. Protester's Posthearing Brief at 86. TRW rebuts protester's argument by stating: [t]he gravamen of MMC's allegations is that TRW failed to disclose to the FAA its best estimates of the actual cost of performance. MMC makes this argument, however, in the face of a Solicitation that contemplates the award of a fixed-price contract that contains no requirement for cost data or "best estimates" of any type. The information that was requested by the FAA was a build-up of the fully burdened hourly rates. As the FAA testified, it did not request these data to determine whether the individual components of the fully burdened labor rate were reasonable. Rather, the information was sought to determine whether the offeror could attract and retain a qualified workforce at its proposed fixed fully burdened hourly rates. Intervenor's Posthearing Brief at 66-67. MMC relies upon Sterling Federal Systems, Inc., GSBCA 10381- P, 90-2 BCA 22,802, 1990 BPD 70. In that case, the awardee represented individuals' proposed actual salaries as much less than they were paid, in a cost reimbursement procurement where the Government was obligating itself to pay the actual salaries. In its BAFO, the awardee represented that the cost of key individuals' salaries would be a certain amount, when in reality it knew these salaries would be greater. "[The awardee] knew it was going to have to pay [these key individuals] -- and what respondent would in turn have to pay [them] -- because it knew what their salaries were at the time [the awardee] submitted its BAFO." 90-2 BCA at 114,510, 1990 BPD 70 at 18-19. Thus, the misrepresentation was that there was a great disparity between the rates in the BAFO and the actual salaries. Respondent, under the terms of the cost-reimbursement contract, was obligated to pay the actual salaries. In reviewing the BAFO, respondent was therefore misled as to the actual amount it would have to pay for these individuals. TRW interprets the solicitation correctly. The instant procurement is not a cost reimbursement contract. Finding 18. Respondent will pay an agreed price for labor hours, regardless of the contractor's actual cost of performance. As the SETA price report noted, because amendment 12 of the solicitation required a composite labor rate for each labor category and skill level, "it is now known what rates the government would pay for each RFP category and skill level - regardless of whether the prime contractor or a subcontractor performed the work." Finding 26. The solicitation required offerors to submit an estimated price of performance, not a "true estimated cost of performance" as alleged by protester. Finding 24. The solicitation required proposals to be evaluated by price analysis. Cost analysis was not required, and expressly deleted from the evaluation plan in round 2. Finding 19. Unlike the situation in Sterling, the price which respondent is obligating itself to pay for each category and skill level is the price stated in the BAFO by the offeror, regardless of the actual salary of the individual employed and regardless of the cost incurred by the offeror in supplying the labor. Protester alleges that TRW's use of was a material misrepresentation. This was not a misrepresentation, because offerors were not required to disclose the estimated costs they expected to incur, nor was respondent required to perform a cost analysis to evaluate the proposals. Respondent knew that it would pay approximately if it awarded the contract to TRW and issued task orders in consonance with the estimated hours contained in the solicitation. TRW neither misrepresented its proposed price nor was the respondent misled as to the price it would pay. In fact, in its BAFO, TRW did indicate that . . . as the successful offeror, [TRW] will provide all of the staffing, facilities, ADPE and support, etc., proposed for the performance of this program, Finding 92. Thus, TRW's BAFO indicated that the Alleged Misrepresentation of Performance Costs for The remaining allegations of misrepresentation are that TRW's proposal misstated its "true, estimated performance costs for contract ." The specific allegations contained in the protest complaint are: 1) that TRW expected to supply RFP through during the base period and during the option periods, and that its expected was as stated in its proposal; 2) that TRW expected to supply RFP through TRW respectively, during the base period, and respectively, during the option periods, and that its expected were as stated in its proposal; and 3) that TRW priced its proposal using the for all to be Notice of Second Amendment to Protest Complaint 67D. MMC bases its allegation on the solicitation requirement that "Each hourly rate shown on Exhibit B shall be broken down into its components. Exhibit C shall be provided for the offeror and each subcontractor proposed." Finding 24. Exhibit C did contain a designation "Labor Rate Components," but no specific components were specified. Id. Exhibit B specified that the hourly rates "shall include, but not be limited to direct labor, applicable indirect expenses, and profit." Id. In their offers, TRW and MMC broke down their hourly rates into components of their own designation. In addition to its base direct labor rate, TRW broke its labor rates down into Findings 49, 93. MMC broke its hourly rates down showing Some of MMC's rates were also broken down showing Finding 100. MMC also relies upon the solicitation requirement of a "detailed narrative description to explain the specific methodology used to estimate each labor category and skill level," and a "mapping" of the offeror's internal labor categories and skill levels to the RFP labor categories and skill levels. Finding 24. In support of this argument MMC states: In response to these instructions, TRW stated in its proposal that its for had been estimated at the rates established for its respectively, for the base period, and respectively, for the option periods. TRW proposed It applied a profit rate to the burdened direct labor for these hours. With regard to TRW stated in its proposal that its had been estimated at the rate established for in the base period in the option periods. TRW proposed It applied a profit rate to the and a profit rate to the In fact, consistent with its pricing strategy, TRW always expected and to perform [TRW's Proposal Manager's] various written estimates of expected and probable consistently show as being performed in the base period and in the option period. Those same written estimates consistently show as being performed in the base period and in the second option period. Conversely, [TRW's] written estimates consistently show as being performed at TRW gave the FAA every indication that its true, estimated were as stated in its proposal. That was not correct. TRW never expected to perform the contract using would approximate those used in the proposal. In addition, as a result of the overstatement of for and the understatement of the effective for were higher and the effective for than those used in the proposal. Protester's Posthearing Brief at 88-89. This argument contains two issues. This first issue concerns the allegation that the indicated for various was not stated accurately in TRW's proposal, as TRW actually intended and some at than indicated in the BAFO. MMC's argument fails for the same reasons discussed above with regard to The representation made was with regard to what respondent would pay, not as to the cost to be incurred by the offeror. Respondent will pay an agreed price for labor hours, regardless of the awardee's profit. The second issue presented is the allegation that while TRW based its bid rates on The basis of the second allegation is that TRW's "mapping," as required by Exhibit C of the solicitation, allegedly does not correspond to TRW's actual intent, as shown by which were not revealed to respondent. TRW's BAFO indicated its upon which it had calculated the For each TRW indicated Finding 53. TRW also explained in its BAFO that Finding 97. There was clearly no representation that this "mapping" represented the from which TRW expected to in all circumstances. In contrast, MMC's BAFO indicates with regard to the "mapping" requirement. With respect to the specific internal categories "mapped" to the required RFP labor categories and skill levels in its BAFO, MMC also did not believe that it was making any would be the one to supply for the RFP category. The mapping Finding 101. Additionally, MMC with the internal categories. MMC's price proposal leader . Finding 102. Thus, neither TRW nor MMC affirmatively represented by its mapping of internal labor categories that such categories would be the sole source from which to supply individuals for the corresponding solicitation categories, or that the rates contained in the proposal represented the actual costs to the offeror. As there was no requirement that the offerors supply "true, estimated costs" for direct labor in the proposal, an offeror could supply an individual with the proper experience and education level in response to an RFP labor category and skill level at a cost less (or more) than the rate proposed. MMC also alleges misrepresentation occurred because TRW's bidding strategy allegedly indicates an intent to actually than indicated in the "mapping" upon which labor rates were calculated. In support of this allegation, MMC relies upon TRW's pre-BAFO internal documentation in which TRW in order to arrive at its final BAFO prices. Finding 83. We note that MMC performed similar pre-bid calculations, anticipating skill mixes differing from those estimated in the solicitation. Findings 85-86. As neither TRW nor MMC affirmatively represented that the RFP labor and skill categories would be supplied from one specific internal labor grade, the fact that such pre-bid strategies are undertaken to arrive at a bid price do not render the proposed misrepresentations. Count Four - Allegations of Mathematically and Materially Unbalanced Bid Count four of the protest complaint alleges that TRW's proposal is mathematically and materially unbalanced. MMC alleges that TRW adopted a pricing and bidding strategy that was predicated on an assumption that it could and would deliver (the percentages of hours to be delivered as among the five skill levels). Under this strategy, TRW expected to deliver than set forth in the solicitation. Complaint 66A. MMC alleges further that: In its price proposal, TRW understated its true, expected cost of overstated its true, expected cost of Further, TRW understated its true, expected As a result of these distortions, TRW's price proposal both substantially overstated its expected and Notice of Amendment to Protest Complaint 66B. MMC further alleges that the integrity of the competitive bidding system has been adversely affected because TRW intended to Notice of Amendment to Protest Complaint 66D. The FAR, 48 CFR 15.814, reads, in relevant part as follows: 15.814 Unbalanced offers. (a) Offers shall also be analyzed to determine whether they are unbalanced with respect to prices or separately priced line items. This is particularly important when evaluating the relationship of the price for first article tests or test items to the price for the production units, and in evaluating the prices for options in relationship to the prices for the basic requirement. (b) An offer is mathematically unbalanced if it is based on prices which are significantly less than cost for some contract line items and significantly overstated in relation to cost for others. An offer is materially unbalanced if it is mathematically unbalanced, and if-- (1) There is a reasonable doubt that the offer would result in the lowest overall cost to the Government, even though it is the lowest evaluated offer; or (2) The offer is so grossly unbalanced that its acceptance would be tantamount to allowing an advance payment. (c) Offers that are materially unbalanced may be rejected. (d) Depending on the nature of the acquisition, contracting officers shall use either price analysis or cost analysis techniques, or a combination of the two techniques, to determine if offers are materially unbalanced. Thus according to the regulation, in order for a bid to be rejected, it must be both mathematically and materially unbalanced. An offer is mathematically unbalanced if it is based on prices which are significantly less than cost for some contract line items and significantly overstated in relation to cost for others. The above regulation does not require cost analysis to be performed to attempt to determine if the bid was mathematically unbalanced. The price evaluation team noted during the evaluation of initial proposals that and questioned whether Finding 63. They mentioned in their SETA price report that TRW although the Finding 109. The SEB also noted that "TRW proposed which account for about Finding 119. However, respondent did not find any offer to be mathematically unbalanced. In response to MMC's allegation that respondent failed to adequately assess whether TRW's bid was mathematically unbalanced, TRW presented expert testimony that there was no mathematical imbalance. TRW's expert testified that she had performed an independent analysis to determine if TRW's rates were mathematically unbalanced. She focused upon skill levels 2 and 3 Her opinion was that there was no mathematical unbalancing. Finding 116. MMC offered no expert testimony in rebuttal. We need not resolve the issue of mathematical unbalance, since according to the regulation and relevant case law, mathematical imbalance, alone, does not make a bid unacceptable. See e.g., Earth Engineering and Sciences, Inc., B-248219, 92-2 CPD 72 (July 30, 1992). A bid must be materially unbalanced before it must be rejected. Our appellate authority has held that an offer is materially unbalanced if an award "fails to represent the lowest ultimate cost to the Government or that the imbalance is such that it will adversely affect the integrity of the bidding system." SMS Data Products Group, Inc. v. United States, 900 F.2d 1553, 1557 (Fed. Cir. 1990). MMC's argument is premised upon what it perceives as TRW's understatement and overstatement of the "true, expected cost" of with the expectation that respondent's ordering under the contract would not follow the estimates as set forth in the solicitation. Protester argues as follows: In this case, the lack of balance of TRW's offer does not mean that the TRW offer is likely to produce a higher, ultimate price to the government than the evaluated price. The TRW contract contains ceiling prices for each of the contract periods and for the overall contract. As a result, unless the ceilings are modified, the FAA will not pay TRW more than the evaluated price, which is also the ceiling amount. There is a substantial risk, however, that TRW will ultimately Protester's Posthearing Brief at 80-81. As discussed previously, there was no requirement in the solicitation that the proposed represent "true, expected costs of performance." However, MMC's allegation of material unbalance is premised upon respondent purchasing a "mix" of hours that differ by skill level from the government's estimated hours in the solicitation. MMC speaks in terms of Presumably, this would result in an increase of the ceiling, thereby causing TRW's price not to be the lowest overall cost to the Government. However, MMC's allegation ignores respondent's control over its own estimate and the hours ordered under the contract. There has been no showing that there is a likelihood of respondent ordering hours in a different skill mix, regardless of the alleged "economic incentive" of TRW to attempt to staff such task orders at a different skill level. Richard S. Carson & Associates, Inc., GSBCA 11452-P, 92-1 BCA 24,641, 1991 BPD 338, dealt with a similar allegation of unbalanced bidding, in which the awardee offered "relatively low prices" for some labor categories and "rather high prices" for others. Id. at 122,959, 1991 BPD 338, at 16. We noted that this was not the typical allegation as to unbalanced bidding, which usually involves a question of when, during the life of the contract, the low bidder becomes low. Rather, the alleged imbalance results only if the Government's estimates are not accurate as to the labor to be ordered from the awardee. We held that if the Government had a reasonable expectation of ordering the labor categories in the quantities estimated in the solicitation, then there was a reasonable basis for the contracting officer's determination that the awardee's offer, which was most advantageous given these ordering patterns, is not materially unbalanced. Further, where the assertion rests on a contention that the estimated quantities are inaccurate, thereby rendering the imbalance in a bid potentially material, the protester must establish the inaccuracy. SMC Information Systems, Inc., GSBCA 8071-P, 85-3 BCA 18,388, at 92,237, 1985 BPD 72, at 9. Absent such evidence, or evidence of the adverse effect to the integrity of the competitive bidding system, the Board will not overturn the award. SMS Data Products Group, 900 F.2d at 1557. In the instant procurement, the solicitation specified the number of hours for each labor category and skill level upon which the offerors were to base their proposals. Finding 14. These hours represented respondent's estimate of the ordering of these skill levels and labor categories during contract performance. Finding 15. The SETA program manager offered unrebutted testimony that the hours included in the solicitation were the agency's estimate of hours to be performed under the contract, based on historical data and expectation of ordering. Id. He testified that he had informed TRW during discussions that respondent was not interested in ordering labor at skill level 2 in excess of the estimates. Finding 76. The price evaluation team concluded that all of the proposed prices were "reasonable and [we] believe each is a realistic indicator of the amount the government would pay if that proposal were selected and the government estimate of the hours proved accurate . . . . [N]one of the prices is so low that it indicated the offeror fails to understand the requirements." Finding 104. The price evaluation team analyzed the prices for the base and option years. The conclusion was that "[n]one of the BAFO prices is unbalanced with respect to the basic and optional periods. In each proposal and the IGCE, the price for the three-year base period represents approximately 40 percent of the seven-year total and the price for each two-year option accounts for roughly 30 percent of the total." Finding 105. Thus, respondent did not conclude that any offer was materially unbalanced. Protester has made no attempt to establish the inaccuracy of respondent's estimated quantities. Respondent has stated the basis of its estimate and the expectation that such estimates will reflect the ordering pattern of the Government during contract performance. In the instant procurement, if the task orders are issued based upon the Government's estimates of labor skill levels and labor categories set forth in the solicitation, TRW's bid represents the lowest ultimate price to the Government. Finding 104. Protester has failed to prove that material imbalance exists, and has therefore failed in its burden of proof on this issue. Allegation of Adversely Affecting the Integrity of the Bidding System Protester further alleges that TRW's offer was materially unbalanced because it adversely affected the integrity of the competitive bidding system. MMC argues: However one assesses the likelihood that TRW will be successful in its strategy, absent this protest, the FAA would never have known of the true nature and extent of TRW's economic incentive and If TRW is not successful in both of these areas, it inevitably will contract. . . . If it is successful, the agency will have to chose [sic] between fewer hours or more contract dollars. In either event, TRW's and other estimating tactics interfered with the agency's ability to evaluate and administer the contract. For this reason, as well, TRW's unbalanced offer adversely impacted the integrity of the competitive bidding system. Protester's Posthearing Brief at 81. This argument lacks merit for several reasons. The fact that TRW based its initial proposal on the expectation, based upon its own experience in similar contracts, that the Government would require more skill level 2 labor than estimated was recognized in the evaluation of initial proposals and discussed thereafter. Findings 44, 75-76. TRW was informed that the estimated mix of labor categories and skill levels contained [in the solicitation] must be used for its proposal." Finding 77. Even so, TRW continued to that the Government would require more skill level 2 labor than estimated. Finding 83. Ultimately, the is dependent on respondent's ordering decisions under the contract. We fail to see how TRW, or any awardee, could induce respondent to order tasks to be performed by labor categories and skill levels other than required by respondent. If respondent orders more skill level 2 personnel then estimated, it will receive them at the price bid. MMC is correct that this may result in fewer contract hours at more contract dollars. However, this will result from respondent's decision as to work required, not because TRW withheld any information from respondent. What happened here was that TRW embarked upon a bidding strategy, and revealed this strategy to respondent during discussions. Even after respondent told TRW that it had no intention of varying the quantities ordered from those estimated in the solicitation, TRW maintained its bidding strategy in its BAFO. Respondent has determined that if it orders quantities as stated, TRW's proposal represents the lowest price. Whether TRW will reap a greater profit because respondent does not follow its intended ordering pattern remains to be seen. If this occurs, it will not be the result of any action by TRW which has adversely affected the integrity of the bidding process. Additionally, we do not accept protester's characterization that TRW's offer contained a " As discussed above, offerors were not required to disclose costs expected to be incurred. In order to arrive at its price, TRW calculated its offer so that it would if respondent ordered labor according to the estimates in the solicitation. Finding 84. Respondent was fully informed as to the price it would pay for services rendered, and respondent will pay no more for any given labor category or skill level than proposed by TRW. TRW's decision to did not adversely affect the integrity of the bidding process. Decision The protest is DENIED. ________________________ ALLAN H. GOODMAN Board Judge We concur: __________________________ ________________________ MARY ELLEN COSTER WILLIAMS MARTHA H. DeGRAFF Board Judge Board Judge