!R! CALL BCA; EXIT; THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN REDACTED FORM ON JULY 13, 1992 DECIDED: May 15, 1992 GSBCA 11750-P SONICRAFT, INC., Protester, v. DEFENSE INFORMATION SYSTEMS AGENCY, Respondent, and MCI TELECOMMUNICATIONS CORPORATION, Intervenor. Thomas C. Wheeler, Donna Lee Yesner, and Kevin P. Mullen of Pettit & Martin, Washington, DC, appearing for Protester. Major H. Jack Shearer and Clifton M. Hasegawa, Defense Information Systems Agency, Defense Commercial Communications Office, Scott Air Force Base, IL, appearing for Respondent. Robert H. Koehler, Mary Beth Bosco, Curtis V. Gomez, and Michael J. Schaengold of Patton, Boggs & Blow, Washington, DC, and Robin L. Redfield of MCI Telecommunications Corporation (MCI), appearing for Intervenor. Before Board Judges LaBELLA, HENDLEY, and HYATT. Board Judge HENDLEY. On March 5, 1992, Sonicraft, Inc. (Sonicraft) filed this protest concerning the award of a contract by the respondent, the Defense Information Systems Agency (DISA) to MCI Telecommunica- tions Corporation (MCI), an intervenor of right. Sonicraft claims that it, rather than MCI, should have received the award as the offeror whose proposal was most advantageous to the Government. The protester contends that, although the respondent properly granted it the Small Disadvantaged Business (SDB) price preference in evaluating proposals, respondent should have significantly increased its evaluation of Sonicraft's management proposal. Then, with the SDB price preference and significantly higher management scores, Sonicraft should have received the award. We conclude that the protester was not entitled to the SDB preference. Even assuming, arguendo, that the preference was properly given to the protester, any realistic increase in its score for management would not have resulted in it receiving the award. Consequently, we deny the protest. Findings of Fact The Request for Proposals 1. The Defense Commercial Communications Office (DECCO) of the Defense Information Systems Agency (DISA), respondent, issued Request for Proposals (RFP) number DCA200-91-R-0030 for Inter- national Switched Voice Services (ISVS): telecommunications services from any Government location on the United States mainland to specified international locations. The resulting service contract was to be a fixed-price, indefinite quantity- type contract for two years, with three one-year options. Protest File, Exhibit 7. The Evaluation Provisions 2. The Statement of Work (SOW) at section C of the RFP described the scope of the services to be provided. In addition to the basic provisioning of voice-band and analog data trans- mission telecommunications, it required such services as operator assistance (C.2.2.2.1), training and customer service support (C.2.2.3.2.), billing (C.2.2.3.4), installation (C.2.2.4), network management (C.2.2.5), subcontractor management (C.2.2.7), and maintenance (C.2.2.6), to name but a few. Protest File, Exhibit 7. 3. Section L of the RFP described the information the offeror was to provide in its price and technical proposals. For the technical proposal, the offeror was to demonstrate its competency in two specific areas: (1) the technical capabilities delineated at section L18(a)(3), and (2) the management response described at section L18(a)(4). In this latter area, the offeror was to demonstrate its management capabilities as evidenced by its past performance and experience. The offeror was to provide three ISVS customer references and other information which, in turn, would be the basis for interview questions by the respondent. Protest File, Exhibit 7, Q/A for Section L18(a)(4)(A), Amendment No. 0006. 4. Section M of the RFP described the basis for award: evaluation "trade-offs" between price, technical, and management areas, with price being the most important area, followed by technical, then management. Clause M2, "BASIS FOR AWARD," detailed the factors and subfactors applicable to these three areas. For example, offerors were advised that the respondent would use a Discounted Life Cycle Cost methodology to evaluate price realism and reasonableness. It was at this point that the respondent introduced an additional evaluation factor applicable to price: (f) If a Small Disadvantaged Business (SDB) concern bids on this proposal, a factor of ten percent (10%) will be added to offers from concerns which are not SDB concerns, and to offers from those SDB concerns which elect to waive the SDB evaluation preference (see paragraph M5). Protest File, Exhibit 7 (emphasis added). The reference to paragraph M5 is to the "NOTICE OF EVALUATION PREFERENCE FOR SMALL DISADVANTAGED BUSINESS (SDB) CONCERNS (UNRESTRICTED)" clause (see below). The SDB 10% Evaluation Preference 5. Clause M5 advised offerors that, if an offeror had certified that it was an SDB concern, then the offeror could elect to avail itself of the 10% evaluation preference by agreeing to use its own employees to perform at least 50% of the personnel costs of the contract. 6. Paragraph (c) of clause M5 invoked the 50% personnel requirement as a mandatory requirement of the solicitation and resulting telecommunications service contract: (1) By submission of an offer and execution of a Contract, the SDB Offeror/Contractor (except a regular dealer) who did not waive the evaluation preference by checking the box in paragraph (b) above agrees that in performance of the Contract in the case of a Contract for-- (i) Services (except construction). At least fifty percent (50%) of the cost of Contract performance incurred for personnel shall be expended for employees of the concern. Protest File, Exhibit 7 (emphasis added). The offeror's proposal was to be incorporated into the resulting contract by reference. Evaluating "Management" 7. Section M2(c)(3) of the solicitation detailed the basis upon which the "Management Response" portion of the offeror's technical proposal would be evaluated, by factor and subfactor: (A) ITEM: Past Performance. The following factors are of equal importance: (i) FACTOR: Management Ability. The Government will evaluate the offeror on the perceptions as to his management ability by at least three of his largest five non- government customers of International Switched Voice Service to determine his ability to manage a project comparable in size and complexity to the proposed service. (ii) FACTOR: Quality of Service. The Government will evaluate the offeror on the standards he has established to determine the quality of service he proposes to furnish to the Government. (iii) FACTOR: Managing Changes. The Government will evaluate the offeror on his past performance in managing changes to comparable contracts to determine the effectiveness in managing changes to this Contract. (B) ITEM: Experience. The Government will evaluate the Offeror on his past experience rendering services similar to the International Switched Voice Service to determine how well prepared he is to provide high quality ISVS on an ongoing basis. Offerors also were alerted prior to submission of initial proposals by Q/A number 3 (for section L18(a)(4)(A)) in solicitation amendment number 0006 that the offeror's references would be contacted and questioned concerning Items (A)(i), (ii), and (iii). Protest File, Exhibit 7. The Protester--a Reseller of Telecommunications Services 8. The protester's principal business activity is the manufacture of various types of communications equipment for the Government. Transcript at 61, 63, 65. Approximately 90% of the items the protester manufactures are for the Government, and approximately 150 of its 250 employees are engaged in this operation. Of the remaining 100 employees, approximately 50 perform administrative functions at the protester's headquarters in Chicago, Illinois, with the remaining 50 located in Alexandria, Virginia. Those latter employees are mostly sales personnel, while others perform contract support-type activity. Id. at 61-64. 9. The protester recently entered the long-distance tele- communications business. In 1990, the protester decided to become involved in selling domestic long distance telecommunications services. To this end, it entered into a "reseller agreement" with American Telephone and Telegraph Company (AT&T) which allows the protester, through a software- defined network, to resell, in the protester's name, AT&T's long distance telecommunications services. Transcript at 65-67, 76- 77. 10. Of the protester's 250 employees, only 3 have full-time responsibilities associated with its reseller telecommunications services. Transcript at 75-76. In its domestic reseller business, the protester has 41 customers, of which 3 are governmental customers: (1) the City of Gary, Indiana; (2) the Chicago Housing Authority; and (3) the Chicago Public School System. Id. at 67. The protester has a volume of approximately 4 million minutes per year. Id. at 77. By comparison, the respondent estimated "the total requirement for outbound ISVS from the Army, DTS-W, USAF, and 15 civilian agencies [at] approximately 1,121,000 minutes per month," Protest File, Exhibit 7 at J-28, Paragraph 2.1, Attachment 3 (emphasis added), and that these calls would be initiated by approximately 1,719,589 Government employees during the course of the contract, id. at J- 39, Attachment 3. 11. In performing its domestic reseller activity, the pro- tester does nothing more than obtain the customers and then bills them for AT&T's telecommunications services. AT&T performs all other aspects of the service, including site installations. Transcript at 65-67, 69-70, 79-80. 12. As part of their proposals, offerors were required to provide references from at least three of their five largest non- governmental customers of International Switched Voice Services, preferably measured by their revenue in the past twelve months. Protest File, Exhibit 7, Amendment No. 0006, Q/A No. 1 for Section L18(a)(4)(A). The protester identified only two references: (1) Chicago Public Schools, and (2) TRI-Industries. The former was classified by the protester as a "new account," and it had few or no international calls. The latter had been the protester's customer for only "three months," and it too had very few international calls. Id., Exhibit 14. 13. The protester had few references because its entrance into the international telecommunications business was simultaneous with the issuance of the solicitation. As a reseller of international telecommunications, the protester had no customers and no prior experience, since it had only obtained its reseller license for international switched voice and data services from the Federal Communications Commission (FCC) in mid- July 1991, the day after the respondent issued the solicitation. Intervenor's Exhibit 4; Transcript at 67-68. Protester's Pursuit of the Procurement 14. On February 8, 1991, the General Services Administration (GSA) issued to twenty-one prospective offerors a Request for Comments on behalf of the respondent, concerning the procurement of ISVS. The list of prospective offerors did not include the protester, but it did include MCI, Sprint Communications Company (Sprint), and AT&T. Intervenor's Exhibit 1. At some time subsequent to the issuance of the RFC and the respondent's pre-bid conference on the proposed procurement, the protester learned of the proposed procurement. Transcript at 108. It then wrote to the contracting officer on April 16, 1991, requesting that it receive a copy of the solicitation when it was issued. Intervenor's Exhibit 2. 15. On May 13, 1991, the protester wrote to the Director of the Defense Information Systems Agency (DISA) [formerly Defense Communications Agency (DCA)] asking that DECCO incorporate the DOD FAR Supplement Clause 252.219-7007, "Notice of Evaluation Preference for Small Disadvantaged Business (SDB) Concerns," into the solicitation. In this letter, the protester stated that it was "currently providing the same and similar services to other City and State Governments."[foot #] 1 Protest File, Exhibit 23; Transcript at 109. At about this time, the protester also met with Senator Alan Dixon's staff concerning the procure- ment. The respondent granted the protester's request and so notified the protester in a letter dated May 31, 1991. Protest File, Exhibit 23; Transcript at 110. By letter dated June 6, 1991, the senator's staff wrote to DOD ----------- FOOTNOTE BEGINS --------- [foot #] 1 As of that date the protester had not received its FCC reseller license to provide international switched voice and data services. Intervenor's Exhibit 4; Transcript at 67-68, 125. Protester had been a domestic reseller for only approximately one year, Transcript at 65, and did not receive its ISVS reseller license until mid-July 1991, Intervenor's Exhibit 4. ----------- FOOTNOTE ENDS ----------- concerning adoption of the SDB Evaluation Preference clause. Protest File, Exhibit 23. 16. After receiving the respondent's notification, the protester met with AT&T's representatives in early July 1991, to determine whether AT&T would team with the protester in the submission of a proposal. In promoting its teaming arrangement concept, the protester stressed in its letter to AT&T, dated July 8, 1991, that the protester would provide a "distinct competitive pricing advantage" because the protester's proposal would "be allocated a ten percent preference in the final evaluation for Award." Intervenor's Exhibit 3. Protester Was Forewarned It Could Not Meet Requirement 17. After considering the plan, AT&T advised the protester during the week of July 15, 1991, "that [AT&T] will Prime the response to this opportunity" because AT&T did "not believe any Small Disadvantaged Business can meet the 51% [sic] labor requirement to obtain the Small Business 10% Preference." Intervenor's Exhibit 6.[foot #] 2 AT&T's basis for rejecting the protester's plan caused the protester's Mr. Jim McQuillan to ask its Director of Programs, Larry Brooks, "for review and interpretation of the requirements for the Small Business Preference." Id. 18. On July 19, 1991, immediately upon receiving AT&T's rejection of its teaming plan, the protester wrote to Mr. Glen C. Moore, DISA's Director of the Office of Small Disadvantaged Business Utilization, requesting an interpretation of the SDB Evaluation Preference clause. Intervenor's Exhibit 5. Mr. Moore's response, dated July 25, 1991, advised the protester that the requirement that at least 50% of the cost of contract performance incurred for personnel must be expended for employees of the SDB, did not apply at all in the ISVS procurement: The 50% subcontracting limitation only applies to set asides under the Small Business Program. Therefore, as an SDB reseller you are not required to provide 50% of the labor associated with that product or service (which in this case equates to the labor associated with the network services that you resell). Furthermore, as your company is certified by the FCC to be an international resale carrier, you may subcontract 50%, 70%, 90% or 100% ----------- FOOTNOTE BEGINS --------- [foot #] 2 Concurrent with this decision by AT&T, on July 17, 1991, the respondent issued the solicitation. Protest File, Exhibit 7. ----------- FOOTNOTE ENDS ----------- of the switched voice services you resell to provide the services requested in this RFP and receive the 10% evaluation preference. Protest File, Exhibit 23. Within several days of issuing this letter, Mr. Moore telephoned the protester's Mr. Jerome Jones and advised him that the letter of July 25, 1991, was wrong, and that the protester should disregard it. Transcript at 111-12, 138-39. 19. Although the protester had no prior experience with the SDB Evaluation Preference clause, Transcript at 135, and although it had been advised to disregard the guidance provided in Mr. Moore's letter dated July 25, 1991, the protester did not contact the contracting officer for an interpretation of the SDB Evaluation Preference clause, id. at 139. Thus, the protester left unresolved the doubt which AT&T expressed in rejecting the protester's teaming proposal, which was the reason the protester sought Mr. Moore's interpretation, at least until well after the protester began teaming discussions with Sprint. 20. On August 13, 1991, Sonicraft and Sprint executed a "Non-Disclosure Agreement" to pursue the possibilities of teaming for this procurement. Intervenor's Exhibit 7; Transcript at 571. At their initial meeting, the protester advised Sprint that the protester was responsible for the respondent's incorporation into the solicitation of the SDB Evaluation Preference clause, and it provided Sprint with a copy of the letter, dated May 31, 1991, from the respondent's Mr. Tom Whitlow to the protester, Protest File, Exhibit 23, informing the protester of that decision. Transcript at 572. Interestingly, at this meeting the protester did not inform Sprint representatives of Mr. Moore's letter, dated July 25, 1991, or reveal the facts related to its subsequent withdrawal. Id. at 571-72. Sprint's contract administrator for this procurement, Carolyn E. Williamson, attended the meeting and signed the non-disclosure agreement for Sprint. She did not learn of Mr. Moore's letter until after the respondent issued amendment number 0003 to the solicitation on September 5, 1991. Id. at 581-82. 21. On September 5, 1991, the respondent issued amendment number 0003 to the solicitation. Protest File, Exhibit 7. At pages 14 and15 of the amendment, the contracting officer, Ms. Carole Schneider, responded to a question posed by MCI: Question: Section M of the RFP includes the provision for evaluation preference for small disadvantaged business concerns (SDBs) bidding as prime Contractors. The provision at M5 stipulates that "at least fifty percent (50%) of the cost of Contract Performance incurred for personnel shall be expended for employees of the concern" for service contracts. For the purpose of determining compliance with applicable SDB criteria, does the cost of "Contract performance" include charges for foreign PTT services and/or common carrier network facilities? Answer: FAR 19.000(b) specifies that FAR Part 19 applies only inside the United States, its territories and possessions, Puerto Rico, the Trust Territory of the Pacific Islands, and the District of Columbia. Therefore, for SDB evaluation purposes, charges for foreign PTT services do not apply to the cost of contract performance. For a SDB offeror to be entitled to the evaluation preference for SDBs, at least 50% of the cost of Contract performance incurred for personnel must be expended for employees of the SDB concern. Id. (emphasis added). Based on the above statement, it was evident that the contracting officer's interpretation of the clause permitted exclusion of only those personnel costs incurred outside the United States in determining compliance with the 50% requirement. 22. After Sprint's contract administrator, Ms. Williamson, reviewed the above statement in amendment number 0003, she recognized that the contracting officer's interpretation raised questions going to the advisability of the proposed teaming agreement then being negotiated with the protester, Transcript at 590, and she brought this to the attention of other Sprint representatives. Id. at 573-74. Shortly thereafter, and no later than September 8, 1991, Ms. Williamson received a copy of Mr. Moore's letter to the protester of July 25, 1991--albeit by that time disavowed--apparently as evidence of the respondent's interpretation of the SDB Evaluation Preference clause. Id. at 582, 576. 23. Totally unaware that Mr. Moore already had disavowed his letter, dated July 25, 1991, Ms. Williamson was concerned because she recognized that the contracting officer's position differed from Mr. Moore's. She believed that it was necessary for her to seek clarification of these disparate positions. Transcript at 584, 578-79. Accordingly, on September 10, 1991, Ms. Williamson faxed to the contracting officer a copy of Mr. Moore's letter, dated July 25, 1991, and then telephoned the contracting officer to discuss the contracting officer's interpretation of the clause. Id. at 298-99, 363, 583-85. In this conversation, Ms. Williamson asked whether the contracting officer was aware of Mr. Moore's letter and then read those portions of the letter which indicated that the protester could subcontract 50%, 80%, 90%, or even 100% of the effort and still be eligible for the SDB preference. Id. at 298. In response, the contracting officer stated she was unaware of the letter and asked for a copy of it. Id. at 298-99. 24. Thereafter, Ms. Williamson alerted her manager, Howard Marx, as to the problem and told him that she had faxed Mr. Moore's letter to the contracting officer. Transcript at 585-86, 588. Several hours later, the protester's Mr. Jerome Jones telephoned Ms. Williamson and advised her that Mr. Moore's letter was a sensitive document which should not have been provided to the contracting officer. He added that he had advised other Sprint personnel not to release the document outside Sprint. Id. at 586. Ms. Williamson had no specific recollection whether Mr. Jones also informed her during this conversation that Mr. Moore's letter had been disavowed by Mr. Moore within days of its issuance in July 1991. Id. at 588. But whether Mr. Jones so informed her or not, Ms. Williamson did not apprise the contract- ing officer that Mr. Moore's letter had been disavowed and was no longer operative. Id. at 376, 588. When Ms. Williamson called back to the contracting officer, she advised the contracting officer that she was not supposed to have the letter and asked the contracting officer to disregard it. Id. at 363, 386. At that time, the contracting officer stated that she had to respond to Mr. Moore's letter because the information in it was wrong. Id. at 363, 374. Opting for the 10% Preference 25. On September 11, 1991, the day after these exchanges between Sprint's Ms. Williamson and the contracting officer, the protester and Sprint executed their teaming agreement for the procurement. Protest File, Exhibit 22. Since both parties knew not only that Mr. Moore had disavowed his letter shortly after writing it, but also that the contracting officer also believed it to be wrong, the terms of the teaming agreement provided that it could be terminated "at US Sprint's option, upon the Govern- ment's determination that the 10% evaluation preference for SDBs does not apply to this procurement." Id. Paragraph 13.g. At this point in time, Sprint was "keeping all of [its] options open," Transcript at 591, i.e., it was preparing to submit a proposal in its own name as well as one with the protester, id. at 590-92. 26. On September 17, 1991, the contracting officer advised Sprint and the protester in writing that Mr. Moore's letter had been "issued without the contracting officer's coordination or knowledge, and contained incorrect information." The contracting officer then stated: In order for a SDB offeror to obtain the 10% evaluation preference cited in DFARS 252.219-7007 . . . the Offeror must agree that in the performance of a service contract at least fifty percent (50%) of the cost of contract performance (direct labor) incurred for personnel shall be expended for employees of the concern. Further clarification of this issue was given in the Questions and Answers in Amendment No. 0003, Pages 14 and 15, Section M. If you have any further questions on this subject, or any other questions relating to this acquisition, please call me at (618) 256-9446. Protest File, Exhibit 23. 27. Between receipt of the contracting officer's letter dated September 17, 1991, and the submission of initial proposals on October 8, 1991, neither the protester nor Sprint otherwise queried the contracting officer concerning the meaning of the phrase "direct labor," which was inserted as a parenthetical after the words "contract performance" in the letter. Nor did they raise any other concern as to how to interpret the SDB Evaluation Preference clause. Transcript at 370. 28. Sprint chose to participate as a subcontractor to the protester for the procurement. On October 8, 1991, the protester submitted its proposal in response to the solicitation with Sprint as its subcontractor to provide the long-distance network services. Evaluation of Proposals 29. The solicitation made a clear distinction between the offeror/contractor (here the protester) and its subcontractor (Sprint). For example, the SOW carefully detailed the responsi- bilities of the offeror/contractor, making it solely responsible for overall design and operation of all ISVS service, the management of all subcontracts (both domestic and foreign), and the single point of contact for the Government: C.2.2.7 Subcontractor Management The Contractor [protester] shall be responsible for the overall design and operation of the required service, including those services provided by subcontractors [Sprint]. The Contractor [the protester] shall manage and coordinate the activities of any such subcontractor [Sprint], including those who provide local access service or ISVS to locations that are not accessible using the Contractor's facilities and existing agreements with foreign public telephone and telegraph companies. Use of another interexchange carrier's facilities to complete a call shall not degrade the quality or result in failure to meet the service specifications defined herein. The Contractor [protester] shall serve as the sole point of contact with the Government for Contract administration matters. However, operational contact with the Government by subcontractor personnel is not precluded. Protest File, Exhibit 7; see also id., Paragraphs C.2.2.3.2 (Customer Service Support: "The Contractor [protester] shall directly interact with subscribers to verify service was rendered, respond to trouble reports and complaints, verify credits and adjustments, and respond to billing inquiries"); C.2.2.4 (Contractor Installation Planning); C.2.2.5 (Network Operations and Management); and C.2.2.6 (Maintenance). 30. Although the direct labor associated with management was not, in and of itself, a major portion of the total cost of contract performance for personnel, finding 54, the importance placed on the offeror/contractor's management skills by the respondent was stressed in section L (which detailed the specific management information to be provided in the offeror's technical proposal) and in section M (which described the manner in which the offeror's management skills would be evaluated). See findings 3, 9. Moreover, these management requirements were established as part of the original version of the solicitation, all well before the respondent was aware that the protester was one of the offerors. Transcript at 300-01, 364, 366. 31. The successful contractor's management capability was important to the respondent because of the large number of users (3 DOD and 15 civilian agencies with approximately 1,719,589 callers) and the many foreign countries involved in the ISVS contract. See Finding 14; Protest File, Exhibit 7 at J-27 to -30, J-39, Attachment 3; Transcript at 471-73, 517. Air Force Major Thomas VanDerPloeg, who served on the Source Selection Evaluation Board (SSEB), testified that the successful offeror's management structure had to be capable of ensuring that the large number of Government users were transitioned to the new ISVS service as quickly and as efficiently as possible. Equally important would be the offeror's ability to respond effectively to changing Government needs during the entire term of this multi- year contract. Transcript at 471-72, 477. Major VanDerPloeg cited as an example the ability to respond to the increased requirements which would be imposed by an engagement such as Operation "Desert Storm." Transcript at 472.[foot #] 3 The Protester's Response to the Solicitation's Management Requirements 32. In response to these requirements, the protester's proposal, Protest File, Exhibit 10, repeatedly stressed that the protester was to be responsible for the stated areas of contract management. For example, page I-C-21 of the protester's revised proposal dated November 13, 1991, stated: Sonicraft is responsible for the overall design and operation of all ISVS services, including those services provided by subcontractors. Sonicraft will manage, directs [sic] and coordinate and be responsible to the Government for all activities of Sprint, our major subcontractor for end-to-end international switched voice service. Sprint's ubiquitous access to ISVS originating locations and to all foreign countries permits Sonicraft to provide ISVS service through one major subcontractor. This greatly simplifies Sonicraft's management of the ISVS program and provides a low risk to the Government. Id. (emphasis added). Page I-C-21b of the revised proposal dated December 17, 1991, stated: Sonicraft personnel will perform all customer service functions with the exception of network trouble handling. Id. (emphasis added). Pages I-C-52-54 stated the protester's responsibilities as follows: ( I.C(A)(i)9.1) Based on extensive past performance with the Federal Government, with commercial customers, with local exchange carriers (LECs), and inter- nationally with ----------- FOOTNOTE BEGINS --------- [foot #] 3 Of the approximately 1,121,000 minutes per month that the 18 federal agencies would use ISVS, DECCO estimated that DOD agencies alone would place about 57% of the projected total calls: Defense Telecommunications Systems- Washington, D.C. (DTS-W), which manages communications for all branches of the service in the Washington, D.C. area including the Pentagon and Ft. Belvoir, would use 38% of the total calls, the Air Force 12%, and the Army 7%. Protest File, Exhibit 7 at J-28, Attachment 3. ----------- FOOTNOTE ENDS ----------- the Postal, Telegraph, and Telephone Administrations (PTTs), Sonicraft has the ability to integrate the services necessary to meet the requirements of the ISVS contract. Sonicraft will ensure the on-time implementation of the ISVS services through use of proven project management skills and the deployment of a highly experienced technical team. ( I.C(A)(i)9.1.3) Sonicraft will be responsible for the installation, operation, and maintenance of service to the ISVS subscriber's service demarcation point (SDB). All services and interfaces required to connect the representative terminals from a SDB to the ISVS network will be provided by Sonicraft. . . . Sonicraft will use Sprint's expertise in providing international tele- communications services to perform the coordination with the LECs and foreign PTTs required to furnish ISVS. Sonicraft will, however, have ultimate responsibility to ensure that all such coordination is carried out effectively. Id. (emphasis added). Page 1-C-60 of the protester's proposal stated: ( I.C(A)(i)10.1) Sonicraft understands that, as the prime contractor, it will be fully responsible for managing service continuity. Sonicraft, as the international network provider, will manage all aspects of the operations and maintenance of the international voice traffic. As such, Sonicraft will provide the Government with a single point of contact to resolve any service problem, ranging from the service origination point to the call termination point. Id. (emphasis added). Page I-D-6 of the protester's management proposal reiterated: ( I.D2.1) To ensure effective management of the ISVS programs. Sonicraft has clearly delineated the ISVS program responsibilities between itself and its major subcontractor, Sprint. The program responsibilities of the two major team members are presented in Figure D2- 1. Sonicraft will be responsible for overall ISVS program management, as well as delivery order administration, customer service administration, site installation planning, invoicing, training, and quality assurance. Sprint will be responsible for network service, installation, and maintenance, as well as trouble handling, performance measurement, and data collection and aggregation. The program responsibilities have been delineated to ensure that both Sonicraft and Sprint, respectively, are supporting ISVS in those areas in which they have past experience and current expertise, along with current in-place systems to augment their capabilities. Id. (emphasis added). 33. Appendix J to the protester's proposal, Protest File, Exhibit 10, detailed its Work Breakdown Structure (WBS). The WBS listed contract tasks and then assigned responsibility for those tasks. The protester was listed as having primary responsibility for the seven items listed on the WBS under "Program Management." Similarly, the protester was designated as having primary responsibility for: the five items comprising "Program Control;" the items listed under "Contract/Subcontract Administration;" the items listed under "Quality Assurance;" the items listed under "Develop Site Specific Implementation Plans;" seven of the nine items listed under "Provide Customer Service Support;" four of the five items listed under "Administer Delivery Orders;" and seven of the eight "Invoice" tasks. 34. The protester repeated its understanding of the critical importance of management in the award evaluation when it responded to the respondent's discussion item seeking clarification of how the protester would staff the contract management functions it stated it would be performing. Discussion item number T013, Protest File, Exhibit 13, asked the protester the following: D. QUESTION: Please clarify where in your proposal you indicate how Sonicraft is staffed to support the referenced ISVS customer service support functions. Please indicate where in your proposal you describe Sonicraft's experience performing these functions in programs similar to ISVS. The protester responded with the following: E. ANSWER: (a) Sonicraft personnel currently on staff perform the tasks of delivery order administration, trouble handling, processing credits and adjustments, and training subscribers for our long distance service. (Refer to Proposal pages I-D-18 and I-D-19.) The initial staffing for the ISVS program will be provided by Sonicraft's experienced staff currently located in our Alexandria, VA office, supplemented by Sprint personnel currently on staff. In addition to these functions, Sonicraft has identified an experienced ISVS Program Manager and Sprint has identified a Subcontractor Program Manager. (Reference Proposal Section I.D2.2 on page I-D-8. . . . . Sonicraft personnel will perform all customer service functions with the exception of network trouble handling. As identified in Figure D2-1 on page I-D-7 of our pro-posal, Sprint will provide the network trouble handling. . . . . (b) As mentioned above, Sonicraft will use personnel experienced in performing customer service functions for their current long distance offerings which are similar to those required for ISVS. Personnel hired to supplement our ISVS staff will be added as business volume dictates, and will be evaluated on previous experience in providing like service. Sprint will use a Program Manager and trouble handling personnel who are performing similar services under existing Government contracts. (Reference Proposal Section I.D(B) on page I-D-19a.) Id. 35. Through the testimony of Larry K. Brooks, protester's Director of Programs, protester confirmed that it understood that the solicitation required the offeror/contractor to be responsible for overall contract management and its intention, as stated in its proposal and its responses to discussion items. Mr. Brooks testified that the protester was to be responsible for the ordering process; tracking of delivery orders; billing functions, including monthly billing and billing inquiries; reporting to the respondent; contract administration functions; and subcontract administration. Transcript at 84, 88. 36. In contrast, Mr. Brooks characterized Sprint's management function on the contract as follows: Other than provide support to Sonicraft, it was very minimal. The value-added activities were to be performed by Sonicraft, those that are above and beyond the commercial service. Transcript at 88-89. In sum, Mr. Brooks confirmed that the protester was responsible for, and it would in fact be performing, the overall contract management functions, as well as management of its subcontractor, Sprint. Id. Evaluation of the Protester's References 37. Based on the mandates of the SOW (i.e., C.2.2.7, Subcontractor Management), sections L and M of the solicitation, and the representations in the protester's proposal that the Government was to look to the protester for all contract management functions, with the exception of network trouble handling, finding 42, the TET considered both the textual information provided in the protester's proposal concerning the protester's management ability, as well as the customer references it provided. Transcript at 203-09, 244-46, 480-83. 38. Paragraph M2(3)(A)(i) of the solicitation required offerors to provide at least three nongovernmental references to demonstrate the offeror's management ability. Solicitation amendment number 0006 also made clear that the offeror's references would be contacted by the respondent and asked questions that would address the evaluation factors detailed in paragraphs M2(3)(A)(i), (ii), and (iii). 39. In response to this requirement, the protester provided only two references for itself and three references for Sprint. Protest File, Exhibit 14. The two protester references were the Chicago Public School System and Tri-Industries. Finding 12. Sprint's references were Kodak, General Electric, and Exxon Company, USA. Finding 39. The respondent contacted all five references on October 17, 18, and 21, 1991. Transcript at 229; Protest File, Exhibit 14.[foot #] 4 40. According to the TET members who spoke with the protester references, the references during the interviews were unable to address many of the management functions of concern to the respondent. For example, TET Chairman Robert Reed testified that the Chicago Public School System reference could provide no information as to the protester's billing system because all of the ----------- FOOTNOTE BEGINS --------- [foot #] 4 Although not required to do so, Sonicraft also provided three government customer references as part of its proposal. Protest File, Exhibit 10, at 1-A-1. The TET members did not contact these additional Government references during the proposal evaluation. However, had the TET members contacted these government references, they would have received unfavorable ___________ reviews of Sonicraft's past government contract management ability. Transcript at 339-43 (Ciancetta); at 506-08 (Alexander). ----------- FOOTNOTE ENDS ----------- billing functions on its contract with the protester were performed by AT&T, the protester's subcontractor for that project. Transcript at 192. In contrast, the protester's proposal stated that the protester would be responsible for all billing management. Finding 42. Similarly, Mr. Reed was concerned that the protester's references could provide no insight into the protester's ability to manage international services. Transcript at 230. 41. Major VanDerPloeg summarized the respondent's concern with the protester's management ability as follows: [W]hen I reviewed the evidence that showed that the Sonicraft folks were not that robust and didn't have the depth of management and had limited experience in dealing with a wide geographical scope and range of customers, I felt it was not in the best advantage or value of the Government or the Air Force in this case to select Sonicraft. Transcript at 480. This concern was shared by the TET members. Id. at 247, 521. 42. Upon completion of all interviews, the TET conducted an initial scoring of the technical proposals and found the pro- tester's technical proposal (Vendor "C") to be seriously deficient: Vendor "C"'s proposal [sic] contains several major weaknesses which include their experience with customer service support functions such as billing, rating, trouble handling, order processing, etc.; and experience working with PTTs and designing and operating service comparable to ISVS. Protest File, Exhibit 15. When the TET scored the technical proposals, the protester only received points for Factor A(i), "Management Ability"; points for Factor A(ii), "Quality of Service"; points for Factor A(iii), "Managing Changes"; and points for Factor B, "Experience." These produced a total weighted management score of only . Respondent's Exhibit 3 at 2; Transcript at 236-38, 252. Discussion Items to Clarify Proposals 43. After completing this initial scoring of the technical proposals in late October 1991, the contracting officer issued discussion items to all of the offerors concerning questions developed by the TET. In view of the respondent's receipt of the protester's poor customer reference checks, the respondent issued several discussion items (T013, T014, T015, T018, and T019) to the protester related to the management issue. Protest File, Exhibits 13, 15. After review of the protester's responses to the discussion items, the TET determined that Sprint's presence as the protester's subcontractor should be given additional consideration in evaluating the protester in the "Management Ability" and "Experience" areas. When the protester was considered in this light, the TET substantially upgraded the protester's management scores in its final scoring of the protester's management proposal. Transcript at 238-39, 496, 535- 36. In fact, the protester's score for "Management Ability" (Factor A(iii)) increased from to points, and its score for "Experience" (Factor B) increased from to points because of the respondent's consderation of Sprint in the final scoring. This resulted in a final weighted management score of , an increase of some 130% from the original TET scoring. Respondent's Exhibit 3 at 3. 44. The SSEB considered as a "transparency" Sprint's abilities in its evaluation of the protester's technical proposal, but could not similarly ignore the protester in its evaluation of management because of the protester's proposal's representations that it would be responsible for management and because contract management is personnel-intensive. Transcript at 480-82. Nonetheless, in addition to the consideration of Sprint references and experience described in the preceding paragraph, the TET upgraded the protester's scores in the following technical areas which also involved some management functions: Service Order Administration, Trouble Handling, Credits and Adjustments, and Billing. Respondent's Exhibit 3. In total, the protester received an additional points as a result of the respondent's consideration of Sprint's capabilities. Id. 45. Sprint's assistant vice-president of Strategic Planning and Communications for the Government Systems Division, Ms. Nancy Cole, testified as to the magnitude of Sprint's role in this contract. She described the network service that Sprint sells to network customers as "conductivity," which is: "connection from here to there when you pick up the phone and dial somewhere. It sends the information, either voice or data information." Transcript at 419. On direct questioning, Ms. Cole testified that the software-defined electronics, not people, provided these "network services," i.e., connection of callers internationally. Id. 46. As to the planned Sonicraft/Sprint division of responsibility for billing respondent for the network service, Ms. Cole, when asked on direct examination, "Who is taking the data from the billing software and actually formatting that for the government," testified that, "Sprint Systems would do that. They would generate a tape and it would go to the billing contractor." Transcript at 452. Ms. Cole added that Sprint intended to purchase billing software to aid in servicing Government and other contracts, id. at 440, at a price of about , id. at 459. 47. Mr. Larry Brooks testified that Sprint Engineering would install certain capital equipment necessary to provide the Government with "dedicated access." Transcript at 99. Mr. Brooks testified that Sonicraft and Sprint would recover these costs through actual usage of the service. Id. at 102. Like- wise, Ms. Cole testified that Sprint would pool the ISVS capital equipment costs in Sprint's "government" profit center, id. at 462, then amortize them along with other profit center assets, by including them "typically as a use charge in the same way. It's a part of the cost of service provided," id. at 460. SDB Evaluated Offeror Requirements 48. Upon initial receipt of proposals, the respondent learned that only the protester and U.S. Sprint had joined to submit an SDB proposal, elected to receive the 10% evaluation preference, and agreed to meet the 50% personnel cost requirements mandated by the solicitation. Upon considering the protester's proposal, however, the respondent concluded that the protester was not in compliance with the requirements of the solicitation concerning the 50% SDB-incurred personnel costs. Transcript at 366-68. For example, in Section K of the solicitation, the protester was required to designate the estimated percentage of subcontracting contemplated to perform the contract. In its original submission, the protester's certification at clause K22, "SUBCONTRACTING," stated: Offeror represents that the estimated percentage of subcontracting contemplated for this acquisition is 20 percent of direct labor exclusive of network and tariffed services. See Appendix B for Work Breakdown Structure. Protest File, Exhibit 10 at K-14 (emphasis added). On its face, the protester's proposal did not meet the requirement that 50% of the entire cost of contract performance for personnel services rendered in the United States was to be expended by employees of the protester. By its own admission, the 20% direct labor the protester did identify was "exclusive" of the direct labor associated with the network and tariffed services. Accordingly, the contracting officer promptly issued a "Discussion Item" (C002) to the protester on this very issue. 49. In discussion item C002, the contracting officer posed the following questions concerning the protester's subcontracting certification: C. NARRATIVE DESCRIPTION: Sonicraft has indicated that 20 percent of the direct labor exclusive of network and tariffed services will be subcontracted. D. QUESTION: What percentage of the ISVS requirement, inclusive of network and tariffed services will be subcontracted? Protest File, Exhibit 13 (emphasis added). The protester provided the following explanation in response: Sonicraft is certified by the FCC to resell AT&T's, MCI's, and Sprint's international switched voice and data services. . . . Sonicraft subcontracted with Sprint to provide the international switched voice and data services for its ISVS proposal to DECCO. The [Sprint] labor associated with these network and tariffed services is indirect and included in the cost of the services because they cannot be allocated to a specific customer account. Sonicraft has also subcontracted with Sprint to provide some of the unique requirements of the ISVS RFP. These charges represent the subcontracted direct labor. . . . Sonicraft will subcontract 24 percent of ISVS support effort to Sprint during year one. The effort will reduce to 18 percent in year five. This represents an average of approximately 20 percent of the direct labor subcontracted over the life of the contract. Id. (emphasis added). The protester also stated that it would perform contract management and billing with approximately six to eight "full-time equivalent" protester employees and two Sprint employees. Transcript at 90. 50. The protester did not develop an estimate for the full- time equivalent Sprint employees that would perform network and tariffed services, including even the direct labor that would be required to perform dedicated access installations (install, activate, integrate, and test access) that the protester estimated would comprise at least 5% of the installations under the ISVS contract. Transcript at 95. Nor did it provide labor estimates for those special features CLINs 0003, 0004, 0006, 0007, 0008, 0009, 0010, and 0011 where the respondent even provided the estimated number of calls and/or orders that would occur during the life of the contract. Protest File, Exhibit 7 at J-34, Attachment 3. In comparison, the intervenor, MCI, routinely performs such a cost analysis for such projects, and here its model projected that MCI would need the services of full-time equivalent employees to perform all of the services-- management, billing, network, installation, etc.--required by the work scope of the ISVS contract based on the Government's estimates at attachment 3, section J of the solicitation. Transcript at 605, 615-17, 619-22. 51. With its answer to discussion item C002, the protester also submitted to the contracting officer a new page K-14 to its proposal which contained a revised subcontracting certification. The revised certification now stated: Offeror represents that the estimated percentage of subcontracting contemplated for this acquisition is 20* percent direct labor and 100 percent of the network, which includes no direct labor. * Average over life of contract. Protest File, Exhibit 13 (emphasis added). 52. The contracting officer followed the protester's response with yet another discussion item (number C007, dated November 13, 1991) on the SDB personnel requirement: C. NARRATIVE DESCRIPTION: In order for an offeror to be entitled to the SDB preference on service contracts, as authorized in DFARS 252.219-7007, at least fifty percent of the cost of contract performance incurred for personnel shall be expended for employees of Sonicraft. You have indicated that 20 percent of the direct labor and 100 percent of the network will be subcontracted. For the Government to grant a preference, it must be determined what percentage of the personnel costs for the service is attributable to direct labor expanded [sic] by employees of Sonicraft. D. QUESTION: a. On what basis did Sonicraft exclude the personnel costs for network and tariffed services from your previous certification of direct labor to be performed on the contract? b. What amount of cost or percentage of the total cost of contract performance (direct labor) will be expended for employees of your firm for the entire contract? c. What amount of cost or percentage of the total cost of contract performance (direct labor) will be expended for employees of your primary subcontractor (US Sprint) for the entire contract? Protest File, Exhibit 13. 53. In its response to this discussion item, the protester introduced for the first time the concept of "indirect costs" when discussing the "direct labor" requirement. Transcript at 368. In response to the contracting officer's question concerning the amount of direct labor to be expended by Sprint, the protester indicated that Sprint's labor (both direct labor and indirect labor) were "indirect costs" because Sprint did not allocate its labor to specific contracts such as the ISVS contract: E. ANSWER: a. Sonicraft excluded the personnel costs for network and tariffed services because the labor associated with network and tariffed services is an indirect cost to Sprint. Indirect costs are defined as costs not directly identified with a single final cost objective, but identified with two or more final costs objectives, or with at least one intermediate cost objective. See FAR 30.301 and FAR 31.203. Costs associated with activities performed by personnel as part of Sprint's network and tariffed services are an integral part of the cost used in developing rates filed with the FCC. These costs are a part of the overall tariffed rates charged for Sprint network services and cannot be allocated to any specific customer account/contract. Since the ISVS network service is a relatively small percentage of the Sprint network, it will not be necessary to add additional personnel to operate their network. Sonicraft has accepted the network and tariff service costs as Sprint's indirect cost. Sonicraft will subcontract with Sprint to provide some of the unique services (collecting performance data, etc.) requested for the ISVS contract. These charges represent subcontract direct labor for the cost of contract performance. Under the regulations, direct costs are costs identified specifically with the contract or with a particular final cost objective. See FAR 30.301 and FAR 31.202. Personnel costs for network and tariffed services do not fall under this definition. Protest File, Exhibit 13. 54. Although the protester was asserting that it would not provide the personnel costs associated with the network and tariffed services because those personnel costs were indirect costs of Sprint, the protester did not explain why it could not estimate those personnel costs, or at least those CLIN Features 0003, 0004, 0006, 0007, 0008, 0009, 0010, and 0011, where the respondent had provided to the offerors the estimated calls or orders that would be placed by feature, by year, for each of the five contract years.[foot #] 5 For example, the respondent estimated that 8,202 calls would need directory assistance in year one, 16,407 in year two, 17,226 in year three, 18,090 in year four and 18,992 in year five. These, and similar estimates for the other CLINs, were provided by the respondent for the specific purpose of assisting the offeror in the preparation of its Pricing Proposal. See Protest File, Exhibit 7 at J-34, Attachment 3. 55. By letter dated December 24, 1991, the contracting officer advised the protester that the respondent did not accept the protester's explanation and detailed its reasons for concluding that the SDB evaluation preference would not be applied to the protester's proposal. Concerning the protester's "indirect cost" position, the contracting officer stated at paragraph c: Although Sprint might choose not to allocate such costs directly to a particular contract, the personnel costs involved in network services are a critical part of the costs of performing the Contract. The method by which a subcontractor decides to allocate costs does not determine if they are direct costs of performance for purposes of a SDB preference. These costs should be considered the direct costs of performance whenever they are directly involved in providing the services required under the solicitation. This letter also called for BAFOs to be submitted on January 14, 1992. Protest File, Exhibit 23. ----------- FOOTNOTE BEGINS --------- [foot #] 5 Sonicraft's Pricing Proposal did in fact separately price CLINs 0003AA, 0003AB, 0003AC, 0004AA, 0004AB, 0006, and 0010 with Monthly Recurring Charges (MRC) and provided Non-Recurring Charges (NRC) on CLINs 009AA, 009AB, 0011AA, 0011AB and 0011AC. See Protest File, Exhibit 10 at III(1)-29. ___ Sonicraft and Sprint failed to explain why they were not able to estimate the direct labor associated with these CLINs so as to satisfy the SDB Evaluation Preference requirement. ----------- FOOTNOTE ENDS ----------- 56. The protester responded with its own letter of January 3, 1992, and a barrage of letters of inquiry to senior DOD officials from the protester's Congressional delegation. Protest File, Exhibit 23. 57. The contracting officer met with other procurement officials to discuss the SDB preference for protester, then received the memorandum of January 9, 1991, from Mr. Moore, in which he abandoned his acknowledgment of July 15, 1991, that the telecommunications services "in this case equates to the labor associated with the network services that you resell" and now argued that "these services are not subject to the normal cost analysis." Soon thereafter, the contracting officer reversed her determination, dated December 24, 1991, that the protester was not entitled to the SDB Evaluation Preference. Transcript at 310-16, 324, 370-71. By letter dated January 9, 1992, she advised the protester that its proposal would receive the preference. Protest File, Exhibit 23. Final Evaluation and Selection of MCI 58. BAFOs were submitted on January 17, 1992, by MCI, AT&T, and the protester. The SSEB met on February 4 to 6, 1992, to discuss the recommendation for the successful offeror. Protest File, Exhibit 20. In order to assist the SSEB in its discus- sions, SSEB advisor John Falkenrath was requested to prepare a computer spread sheet which would compare the relative scores of all three offerors. Transcript at 266. In preparing the comparison, Mr. Falkenrath used the Evaluation Weights which were set forth as attachment 4 to the Technical Evaluation Plan of September 1991. Protest File, Exhibit 9. The weights were in accordance with the solicitation evaluation factors and were stated in the technical evaluation plan as follows: The Technical and Management Areas of the evaluation for ISVS comprises approximately 40% of the total evaluation (Price Area is approximately 60%). It was decided that a total of points would be assigned to the technical and management items and factors in order to clearly assess the various components of the technical proposal. Id. 59. Using the evaluation weights set forth in the technical evaluation plan, Mr. Falkenrath prepared the following summary: RELATIVE STANDING OF OFFERORS PRICE, TECHNICAL AND MANAGEMENT 60% PRICE (Including Small Disadvantaged Evaluation Preference of 10%) PRICE BY OFFEROR IN MILLIONS POINTS MCI AT&T Sonicraft MCI AT&T Sonicraft TOTAL POSSIBLE POINTS PERCENT FOR PRICE ----------- FOOTNOTE BEGINS --------- _____________ 24% TECHNICAL RATING BY OFFEROR POINTS (unweighted score) MCI AT&T Sonicraft MCI AT&T Sonicraft TOTAL POSSIBLE POINTS PERCENT FOR TECHNICAL ----------- FOOTNOTE BEGINS --------- _____________ 16% MANAGEMENT RATING BY OFFEROR POINTS (unweighted score) MCI AT&T Sonicraft MCI AT&T Sonicraft TOTAL POSSIBLE POINTS PERCENT FOR MANAGEMENT ----------- FOOTNOTE BEGINS --------- __________ ----------- FOOTNOTE ENDS ----------- TOTAL SCORE/POINTS AND PERCENTAGES MCI AT&T Sonicraft TOTAL POSSIBLE POINTS PERCENT FOR TOTAL SCORE 60. In preparing the summary, Mr. Falkenrath utilized prices which included the 10% SDB price evaluation preference and gave the protester the maximum number of points available for price. Respondent's Exhibit 2. The above summary was transferred to a blackboard and the information discussed by the SSEB members during the afternoon of the first day of their meetings. Transcript at 267. However, the chart and the numerical point scoring of price were not specifically discussed or relied on during the next day's meeting of the SSEB. Id. at 272. 61. At that point, the SSEB analyzed the differences in scores. The SSEB examined the low management score for the protester and even went back and reviewed the reference information and proposal responses for the protester. Protest File, Exhibit 20; Transcript at 372. Based on its review, the SSEB determined that the reasons for the protester's low management score were valid. Id. at 372. Next: The pricing of all three offerors was then reviewed to determine if the difference in the low price of offeror C [the protester] would offset their low management score. The SSEB determined that the low management score did not offset the lower price of offeror C. Even though price was given primary consideration, the evaluation criteria stated that the technical and management areas would be evaluated. Protest File, Exhibit 20. 62. The SSEB next looked at the technical and management scores of MCI and AT&T and determined that there were no signifi- cant differences between the two offerors in those areas. MCI, however, had a lower evaluated price than did AT&T. Protest File, Exhibits 18, and 20. Because MCI offered the lowest price, "[W]ith no significant difference in their technical and management proposals from offeror B [AT&T], the SSEB recommended that award be made to MCI." AT&T was ranked for award, with the protester ranked . Id. 63. On February 12, 1992, Colonel Warren L. Harris, the Source Selection Authority, adopted the SSEB's recommendation that award be made to MCI. Protest File, Exhibit 19. Discussion One fact dominates and cuts across every facet of the issues before us. That fact is that the protester could not and would not perform any significant portion of the contract. The government's officers and employees will place overseas long distance calls. Were the protester to receive the award, all of those calls would be placed by Sprint and all would be billed automatically by Sprint. Finding 45. It is simply impossible for the protester to do any of the "work" under the contract. Although the protester would be legally obligated to "manage" its subcontract with Sprint, findings 33, 34, such "management" would, for all intents and purposes, be ephemeral to the point that the protester itself contends that its management functions should be ignored in evaluating its proposal. The billings will come out of Sprint's computers, and protester presumably would forward them to the Government for payment. Finding 45. Problems arise under contracts. Such problems would, of necessity, have to be solved by Sprint. All that the protester could ever be expected to do is to act as an unnecessary go- between between the Government and Sprint. The protester has no ability to take any action vis-a-vis the Sprint network. From this perspective, we will now explore the protester's allegations. The protester challenges the respondent's evaluation of its proposal on two grounds: First, the protester initially asserted that the respondent failed to consider its subcontractor, Sprint, when the respondent evaluated the protester in the "Management Area" and that this omission caused the protester to receive unreasonably low management scores. However, the respondent did consider the fact that Sprint would essentially be performing the work and, during the evaluation process, increased the protester's score to reflect this element. The protester then contended that the respondent should have evaluated the management area as if Sprint were the prime contractor. If we accept this argument, and we do because it unquestionably represents the reality of their relationship, we then must conclude that that there is no merit to the protester's claim that it is entitled to the SDB 10% differential. Without the advantage of that differential, the protester is no longer in the running for the award. On that basis alone, we would deny the protest, as discusssed below. But at the time of evaluation, the respondent did not have the benefit of the protester's current contention and, taking the protester at its word, evaluated the express terms of the protester's own technical proposal against the stated requirements of the solicitation. We now explore the remaining grounds of the protest, without reference to whether the SDB preference applies. As to the protester's first contention, the solicitation expressly required that the offeror/prime contractor be solely responsible for management. In response, the protester's technical proposal clearly spelled out that the protester was to be responsible for all aspects of contract management (except for network trouble handling). Findings 29, 32, 33, 34. These representations were repeatedly stressed by the protester in its answers to the respondent's discussion items. Finding 35. The protester was clearly motivated to portray itself as the leader and focal point in the management area in attempting to qualify for the SDB 10% price evaluation preference, because the management-type activities were the only areas where the protester could possibly point to its own direct labor as a basis for obtaining the 10% SDB preference. After persuading the respondent to grant it the SDB evaluation preference, the protester discovered that it had fared very poorly in the management area. Thus, even with the 10% preference, its offer had not been evaluated as the most advantageous to the Government. Findings 42, 61. The protester now argues that the respondent should have ignored the protester completely in evaluating the "Management Area" and treat Sprint as the effective prime contractor. However, as noted above, if one accepts the protester's current contention and ignores its "management" role, then the protester surely loses the SDB preference. The Technical Evaluation Team (TET) did consider Sprint's presence in reaching the final technical scores for management, just as it did when it scored the "Technical Area." Findings 43, 44. In fact, it was because the TET did consider Sprint's management capabilities that protester's final management scores were significantly higher than they were during the first evaluation. Finding 43. For the TET to have scored the pro- tester's proposal higher, it would have had to totally disregard the protester's position as the prime contractor. Consequently, we conclude that the respondent's evaluation of the management area of the protester's proposal was reasonable, and did not violate statute, regulation, or the terms of the delegation of procurement authority. Although the respondent's evaluation of the protester's proposal included the 10% SDB price evaluation preference, its proposal was not considered the one most advantageous to the Government. Finding 61. Thus, even assuming the validity of the preference, unless the protester can establish that some other aspect of its proposal evaluation was improper, its protest must be denied. In order to overturn the respondent's evaluation of the protester in the "Management Area," the protester must prove that the respondent, which is afforded significant discretion in evaluating proposals, acted unreasonably. The law vests considerable discretion in the conduct of technical evaluations. Such evaluations will not be overturned unless protester has demonstrated that the evaluation is unreasonable. It is protester's burden to demonstrate that the SSAC's technical evaluation was unreasonable. Computer Sciences Corp., GSBCA 11497-P (Dec. 30, 1991), 1992 BPD 6, at 32. The protester has not met that burden. The solicitation expressly required that the prime contractor serve as the sole point of contact for all contract administration matters. The solicitation stated that the prime was to: [B]e responsible for the overall design and operation of the required service, including those services provided by subcontractors. The Contractor shall manage and coordinate the activities of any such subcontractor. . . . Finding 29. In keeping with these requirements, clause M2(3) made clear that the offeror's past performance and experience on similar projects would be examined in evaluating management. Finding 38. The protester's response to the solicitation repeatedly demonstrated that the protester understood these requirements and fully intended to be "responsible for overall ISVS program management, as well as delivery order administration, customer service administration, site installation planning, invoicing, training, and quality assurance." Finding 32. The protester consistently reaffirmed its intention to perform the contract management functions. In response to discussion item number T013, which questioned the protester's ability to staff these functions, the protester again told the respondent that its own personnel would perform all customer service functions except for network trouble handling.[foot #] 6 Finding 34. It even went so far as to provide an estimate of the protester's full-time equivalents for performance of these functions. Finding 49. In short, the following facts are not in dispute: 1. The solicitation made the offeror responsible for contract management and management of subcontracts. 2. The solicitation stated that the management evaluation factors would be applied to the offeror. ----------- FOOTNOTE BEGINS --------- [foot #] 6 At trial, the protester again confirmed that it intended to be responsible for contract management. Finding 35. ----------- FOOTNOTE ENDS ----------- 3. The protester's proposal evidenced its understanding of these requirements and affirmatively represented that the protester would perform the management functions. As set forth below, the respondent was bound to evaluate proposals in accordance with the stated solicitation requirements and according to the affirmative representations contained in the protester's proposal. The solicitation listed two primary factors for the evaluation of Management: (1) past performance, and (2) experience. The past performance factor was further divided into subfactors of management ability, quality of service, and managing changes. Finding 7. The subfactor of management ability was to be evaluated using three of the offeror's five largest nongovernmental customers of ISVS service in order "to determine his ability to manage a project comparable in size and complexity to the proposed service." Id. The protester provided two references for itself and three for Sprint in response to this requirement. The TET members assigned to perform the reference checks contacted all five references. Finding 40. The two protester references were the Chicago Public School System, which was a brand new contract for which monthly usage information was not available, and Tri- Industries, another very new account. Id. The protester's references, while asked to do so, could not provide the TET members with any information concerning many of the management functions which the protester promised to perform in its proposal. For example, the TET Chairman testified that the Chicago Public School System reference could provide no information as to the protester's billing system because AT&T, protester's subcontractor for that project, performed all of the billing functions on the contract. Finding 40. In contrast, the protester's proposal in response to the solicitation stated that the protester would be responsible for all billing management. Finding 34. Similarly, the TET chairman was concerned that the protester's references could provide no insight into the protester's ability to manage international services.[foot #] 7 Finding 40. ----------- FOOTNOTE BEGINS --------- [foot #] 7 The protester, in its Pre-Hearing Brief at 9, asserts that the Contracting Officer "failed to advise Sonicraft that its references could not answer questions on the interview questionnaire." Two points are significant: First, all offerors were specifically forewarned by RFP Amendment No. 0006 (at 3) that Section M2(c)(3)(A)(i)-(iii) would form the basis for questions to customer references, and the protester knew, or should have known, that it had no references that met the RFP (continued...) ----------- FOOTNOTE ENDS ----------- The inability of the protester's references to supply infor- mation as to the protester's past experience in performing the management functions which its proposal promised it would undertake was of great concern to the respondent's evaluators.[foot #] 8 Findings 40, 41. Based on the protester's failure to demonstrate the capacity and experience to perform the management for which it was to be responsible, the TET initially assigned low scores to the protester's management proposal. Finding 42. This low scoring on the part of the evaluators was reasonable and within the Government's discretion. The solicitation made the offeror responsible for management and the protester affirmatively represented in its proposal that it would be in charge of these management functions. Further, in response to discussion item number T013, the protester confirmed these representations and even went so far as to provide the respondent with a numerical personnel breakdown of how it proposed to staff the management functions. Finding 34. In evaluating the protester's proposal, the respondent was entitled to rely on the representations made by the protester as to what management functions it was to perform and to evaluate the protester based on those representations. In Phoenix Associates, Inc., GSBCA 9190-P, 88-1 BCA 20,455, 1988 BPD 1, the proposal submitted by an offeror on a Nuclear Regulatory Commission (NRC) solicitation for an Emergency Response Data System stated that the offeror intended to rely on one of its ----------- FOOTNOTE BEGINS --------- [foot #] 7 (...continued) criteria for references. Findings 3, 7. Second, the protester presumably provided its best references. Even if the protester did not anticipate that they would be unfavorable, this knowledge would not have helped -- one can only assume that the protester did not have any better references. [foot #] 8 SSEB member USAF Major Thomas VanDerPloeg testified that the successful awardee's management capability was extremely important to the Government because of the large number of agencies and locations using the ISVS contract. Finding 31. The awardee's management structure had to be capable of ensuring that the large number of government users were transitioned to the ISVS service as quickly and with as little service interruption as possible, and of responding effectively to changing Government needs during contract performance. Id. In ___ reviewing Sonicraft, Major VanDerPloeg determined that the company did not have the management depth and experience to handle the number of users and locations involved in the ISVS contract. Id. The other Government evaluators agreed with this ___ assessment. Findings 40, 41. ----------- FOOTNOTE ENDS ----------- subcontractors to design, furnish, and install the underlying data communications network, and on a second subcontractor for the necessary hardware and software to be installed in the NRC's headquarter. As in the instant case, there the protester's proposal stated that it would be responsible for managing the subcontractors as the "key link" between them and the agency. Id. at 103,445, 1988 BPD 1, at 19. The solicitation's program management evaluation criteria required the availability of qualified personnel and in that case the protester made the same argument that the protester makes here--that the agency erred in not considering primarily the various subcontractors' experiences and personnel instead of the prime's. We rejected that argument: The SEP in fact inferred experience as to process instrumentation experience and personnel availability from subcontractor resumes, but stated that the protester, as the prime contractor, did not show such experience in its proposal. Contel was to be responsible for telecommunications with CDC responsible primarily for the headquarters hardware, with support services being performed in conjunction with protester. Protester reserved to itself, as the prime contractor, the role of "key link," to "guide the implementation effort." Thus, it was proper for the respondent not to ignore the protester's lack of experience in the hope that its larger subcontractors would pick up the laboring oars, if necessary. Id. at 103,451-452, 1988 BPD 1, at 19 (emphasis added); see also EAI Corp., B-239231.10, Oct. 24, 1990, 90-2 CPD 325 (where offeror could not demonstrate the ability to manage three concurrent complex tasks as required by the solicitation but intended to rely on subcontractors, it was not improper for the agency to downgrade the proposal)[foot #] 9; ESCO, Inc., 66 Comp. Gen. 404 (1987), 87-1 CPD 450 (agency did nothing improper in downgrading a proposal because of the probable decrease in management effectiveness caused by heavy reliance on subcontractors). The protester has shown no impropriety in the respondent's evaluation. Respondent is required to comply with applicable ----------- FOOTNOTE BEGINS --------- [foot #] 9 In EAI Corp., the GAO rejected the argument, _________ intimated by Sonicraft here, that the agency's reluctance to count the large-business subcontractors' experience as being one and the same with the small business offeror's, constitutes a bias against small business. 90-2 CPD 325, at 5 n.1. ----------- FOOTNOTE ENDS ----------- statutes and regulations in the evaluation process. Protester, however, would have the Board nullify the respondent's legal obligation to evaluate its offerors in accordance with the information contained in the solicitation and in the proposals, and accept its contention that the respondent wrongly evaluated its management proposal by failing to take Sprint into account. The protester not only is wrong on the law, but its argument is defeated by the uncontroverted facts before the Board.[foot #] 10 Sprint's management ability and experience were considered by the evaluators, and the protester's m a n a g e m e n t s c o r e s w e r e u p g r a d e d accordingly.[foot #] 11 Nonetheless, the protester's proposal was still ranked the lowest in both the technical and management areas.[foot #] 12 Finding 59. The protester and Sprint took a calculated business risk in submitting their proposal. In order to gain the advantage of the SDB price evaluation preference, Sprint risked being downgraded ----------- FOOTNOTE BEGINS --------- [foot #] 10 Sonicraft in its Pre-Hearing Brief at 9, B.5, asserts that, although the TET evaluated Sprint in the "Technical area," it "virtually ignored Sprint's ISVS experience and network management capability." This is untrue. When the TET re-scored the proposals after receiving the answers to all Discussion Items, it increased the protester's "Management Area" score significantly because of Sprint's presence, but it simply couldn't ignore the fact that the protester was to be the Prime Contractor. Finding 43. [foot #] 11 The hearing judge questioned the respondent's evaluators as to why, as a practical matter, Sprint was not the sole subject of the management evaluation. In response, the TET members testified that Sprint was considered, but that they ___ believed -- correctly -- that they were bound to evaluate the protester according to the representations contained in its proposal. In conducting the evaluation, the TET members determined that the protester did not have the infrastructure or depth of organization with which even to act as an effective intermediary between the Government and Sprint. Finding 40. [foot #] 12 Count II of the protester's Complaint alleged that the respondent violated applicable procurement law by failing to contact the protester's government references. The RFP did not ask for government references. In any event, this "mistake" did not prejudice protester. At the hearing, the testimony of Captain Mark Ciancetta and Colonel William Alexander clearly established that had the TET members contacted the protester's government references, they would have received unfavorable reviews of the protester's management capabilities on its government contracts. Transcript at 334, 341-42, 506-08, 511. ----------- FOOTNOTE ENDS ----------- on management factors because of the protester's inexperience in providing long distance services, and lack of experience in providing international services. The 10% pricing preference had to carry with it an obligation on the part of the SDB to perform some significant aspect of contract performance, or else its application would make a mockery of the intent behind the governing legislation. (See SDB discussion below.) Here, at the very least, the protester promised that it would perform the management functions of the contract. The protester cannot have it both ways: it cannot seek the SDB preference based on its personnel performing a portion of the contract, and at the same time seek to have the agency ignore its ability to perform that portion of the contract. The protester's second ground for protest is that the respondent violated some unspecified procurement law or regulation because it did not assign numerical points to the individual pricing proposals in its final evaluation decision, thereby failing to give proper, and dispositive, consideration to the protester's price. According to the protester, the respondent failed to assign a numerical score to price. That is not so. Findings 59, 60. Moreover, the record establishes that, had the Source Selection Evaluation Board (SSEB) scored price and given the protester 100% of the available points for price with the 10% SDB Preference, the protester still would not have been the highest ranked offeror. Finding 59. In addition, the protester has failed to offer any legal authority in support of its contention. That is because none exists. Both this Board and the General Accounting Office (GAO) have rejected the notion that price must be assigned a numerical weight. Computervision Corp., GSBCA 8744-P, 87-1 BCA 19,553, at 98,816, 1987 BPD 227, at 11; BRC Associates, Inc., B-237156, Feb. 2, 1990, 90-1 CPD 145. The protester's argument is further vitiated by the fact that the SSEB did in fact assign price the numerical weight which was contemplated by the technical evaluation plan. Finding 59. While the SSEB did not strictly adhere to the resultant number of points, it used this figure as a "guide" in its consideration of the relative trade-offs between the offerors as to the price, technical, and management areas.[foot #] 13 Findings ----------- FOOTNOTE BEGINS --------- [foot #] 13 TET advisor John Falkenrath stated that the numerical scoring for price was "scrapped" by the SSEB. Transcript at 270-72. However, his statement must be taken in context with his other testimony: he prepared the computer spreadsheet during the first day of the SSEB meetings, which compared the price, technical, and management areas, and these numbers were discussed by the SSEB on that day. While the spreadsheet and the specific numbers were not utilized by the SSEB on the following day, Mr. Falkenrath testified, and the (continued...) ----------- FOOTNOTE ENDS ----------- 60-62. The agency's use of these figures as a guide is entirely consistent with existing case law. See, e.g., Bendix Field Engineering Corp., B-241156, Jan. 16, 1991, 91-1 CPD 44, at 5 ("[a]djectival ratings, like numerical point scores, when used for proposal evaluation, are useful only as guides to intelligent decision-making, and are not generally controlling for award because they often reflect the disparate, subjective judgments of the evaluators") (emphasis added); BMY v. United States, 693 F.Supp. 1232, 1245 (D.D.C. 1988) ("The government is not required by regulation to analyze contract offers by a numerical scoring or weighing system. . . . Moreover, even if defendant had assigned numerical weights to the factors it considered, it had discretion to treat the resulting 'score' as a guide, and not as the determinant of contract award."). As such, protester simply has not proven that respondent failed to perform a "meaningful analysis" of the price and technical trade-offs in evaluating its proposal. See Protester's Pre-Hearing Brief at 4, 10-11. The record before the Board establishes the following: 1. The Technical Evaluation Plan adhered to the relative weights set forth in the solicitation. 2. The SSEB considered the proposals as scored in accordance with the Technical Evaluation Plan. 3. The SSEB analyzed the differences in scores by assuring itself that the protester's low management scores were reasonable in light of the information provided by the protester in its proposal and references. 4. The SSEB then conducted a cost/technical trade-off analysis to determine whether the protester's low price was sufficient to offset its low management scores. ----------- FOOTNOTE BEGINS --------- [foot #] 13 (...continued) contracting officer, Carole Schneider, confirmed, that the relative standings of the price, technical, and management areas were discussed by the SSEB on the following day. Transcript at 270-72 (Falkenrath), 372 (Schneider). ----------- FOOTNOTE ENDS ----------- 5. The results of the cost/technical trade-off analysis were provided to the Source Selection Authority. Findings 62, 63. Contrary to the protester's assertions, the agency did conduct a trade-off analysis here. An agency's cost/technical trade-off is entitled to great deference. In Corvac, Inc., B- 244766, Nov. 13, 1991, 91-2 CPD 454, at 7, the GAO upheld the decision to award to a higher priced, higher technically rated proposal--even though the solicitation made cost more important than technical factors--stating: Technical and price tradeoffs are permitted and the extent that one may be sacrificed for the other is governed by the test of rationality and consistency with the stated evaluation criteria. . . . We will accord due weight to the agency's judgment concerning the significance of the difference in the technical merit of offers and whether the difference is sufficiently significant to outweigh the price difference. [Citations omitted.] Accord Danoff & Donnelly; Kensington Associates, B-243368, July 26, 1991, 91-2 CPD 95, at 5; Universal Technologies, Inc., B-241157, Jan. 18, 1991, 91-1 CPD 63. Based on the above facts and law, the protester has failed to carry its burden in proving that the agency's cost/technical trade-off analysis was irrational. The SDB Evaluation Preference Finally, the protester's argument as to price evaluation is eviscerated by the fact that the protester was given both the SDB price evaluation preference and the maximum possible number of points for price. Finding 60. By so doing, the SSEB in fact gave more weight to price than was contemplated by the Source Selection Plan or the solicitation. First, as Thomas Wagner, SSEB chairman, testified, because none of the offerors received the maximum possible score for any technical or management factor, the granting of the total possible points for price to the protester actually skewed the evaluation to give price more than its 60% weighting. Finding 60. In sum, the record is devoid of any facts on which to premise a finding that the respondent failed to consider price in accordance with the criteria stated in the solicitation. Nor has protester shown that the respondent's evaluation of its proposal was in any way improper. As the protester therefore has failed to prove these grounds for its protest, its protest must be denied by the Board. The principal requirements the protester was obligated to meet in order to receive the 10% SDB preference were to ensure that, in its proposal and in contract performance, the protester itself would account for 50% of the personnel costs: At least fifty percent (50%) of the cost of Contract performance incurred for personnel shall be expended for employees of the concern. Finding 6. This requirement, commonly referred to as the "50% Rule," and as further clarified by the contracting officer to include only "direct labor" which is "performed in the U.S.," obligated the protester to demonstrate in its proposal that, if awarded a contract, at least 50% of the cost of the ISVS Contract performance incurred for direct labor would be expended for the protester employees. Although an SDB Evaluation Preference is exclusively a DOD program (DFARS Subpart 219.70),[foot #] 14 its 50% requirement was derived from a congressional mandate, as implemented by the SBA, pursuant to Public Law 99-661. See 13 C.F.R. 124.314.[foot #] 15 DOD's 50% Rule was established as a mandatory requirement for any offeror/contractor claiming the SDB Preference; that is, the offeror electing to be evaluated with the SDB Preference must demonstrate in its proposal ----------- FOOTNOTE BEGINS --------- [foot #] 14 See Commercial Energies, Inc. v. United ___ ________________________________________ States, 929 F.2d 682, 685 (Fed. Cir. 1991). Although this case ______ involves a supply contract and is concerned with issues different from those here, it does provide a brief legislative history of DOD's SDB Preference clause. [foot #] 15 13 C.F.R. 124.314 "requires the selected 8(a) concern . . . to perform a certain percentage of the requirement with its own work force." The percentages for both service and supply contracts are taken directly from 8(a)(14)(A) of the Small Business Act, 15 U.S.C. 637(a)(14)(A), as amended by Public Law 99-661. See 54 Fed. Reg. 34709 (1989) (codified at 13 C.F.R. ___ 124.314). ----------- FOOTNOTE ENDS ----------- that, if awarded the contract, it can and will fully comply with the 50% Rule. See finding 7 (section M(5) of the solicitation).[foot #] 16 While the DOD clause is both an evaluation factor and a mandatory performance requirement, that portion related to the 50% Rule is comparable to FAR 52.219-14, "Limitations on Subcontracting" (the FAR Clause), a clause applicable to both small business set-asides and 8(a) set-aside acquisitions, and the FAR's response to the congressional mandate for a 50% Rule. The FAR Clause is statutorily derived from section 921 of Public Law 99-661. See 15 U.S.C. 637, 644 (1988). That section created the requirement that small business concerns ( 921(c)(2)) and small disadvantaged business concerns under the 8(a) program ( 921(c)(1)) perform at least 50% of the cost of the contract in order to be eligible for award.[foot #] 17 During the course of the legislative deliberation on this law, as it relates to the 50% Rule, Congress was concerned with the "SBA's failure to require that the prime contractor, under a set-aside contract, perform a specific proportion of the work in- house, with its own personnel." See H.R. Rep. No. 99-718, 99th Cong., 2d Sess. 257 (1986). As this legislative history clearly indicates, the 50% level of effort was created "to resolve the question of excessive subcontracting and analysis of whether a joint venture exists." Id. Congress recognized that the participation of legitimate small businesses in federal procurements "is thwarted when set-aside awardees are permitted to function effectively as brokers by disbursing substantial portions of work--in clear excess of normal industry practices-- to a host of subcontractors." Id. ----------- FOOTNOTE BEGINS --------- [foot #] 16 The current version (December 1991) is at DFARS 252.219-7006. [foot #] 17 Pub.L. 99-661, 921(c)(1) states, in pertinent part, that in the case of contracts for services, other than construction, "at least 50% of the cost of contract performance incurred for personnel shall be expended for employees of the concern." This section amended 15 U.S.C. 637(a) (1988), which relates to small disadvantaged business concerns. Likewise, Section 921(c)(2) states that in the case of contracts for services, other than construction, "the concern will perform at least 50% of the cost of the contract with its own employees." This section amended 15 U.S.C. 644 (1988), which relates to small business concerns generally. ----------- FOOTNOTE ENDS ----------- The Senate had no analogous provision to section 911 of the House Bill. Accordingly, the Conference Report noted that the 50% Rule in the House version of the bill was left unchanged. However, the Report did reiterate the intent of Congress that small business-prime contractors perform at least 50% of the work with their own work force. The only concern which the Conference Report voiced was the inability to establish a "specific remedial measure against contractors who agree to perform as required and then violate the provision." S. Conf. Rep. No. 99-1001, 99th Cong., 2d Sess. 501 (1986). Because no effective measure could be established, "the conferees [noted their] intent to monitor closely Small Business Administration's efforts to enforce this section." Id. The legislative history of Public Law 99-661 clearly shows that Congress had a strong interest in enforcing the 50% Rule and saw the rule as a necessary element in furtherance of the Govern- ment's policy to increase the role of small businesses in federal procurements, as well as to ensure that as an eligibility criterion, the offeror's ability to meet that requirement could be easily identified and, to the extent a challenge was necessary, resolved. While the 50% Rule has not been altered legislatively since its enactment, the impact of that rule was discussed during the deliberations on Pub.L. No. 100- 180.[foot #] 18 In 1987, Congress again held hearings to address the issues raised by the 50% Rule established in Section 921 of Pub.L. No. 99-661. See The Impact of Amendments to Small Business Procurement Programs in the Fiscal Year 1987 DOD Authorization Act: Hearings before the Subcommittee on Government Contracting and Paperwork Reduction of the Senate Comm. on Small Business, 100th Cong., 1st Sess. (1987). During the hearings by the Small Business Subcommittee on Government Contracting, SBA's Associate Administrator for Procurement Assistance, Monika Edwards Harrison, noted that "the requirement for a contractor's in-house performance of 50% of the labor costs of set-aside or 8(a) contracts is feasible." Id. at 4. Ms. Harrison's only concern was that the standards should be "based on total contract value, rather than on the concept of costs." Id. Indeed, in addition to the testimony of Ms. Harrison, the SBA presented a feasibility study mirroring Ms. Harrison's statement. See id. at 13-14. ----------- FOOTNOTE BEGINS --------- [foot #] 18 Pub.L. No. 100-180 at 809 amended Title IX of Pub.L. No. 99-661 and otherwise made minor changes to 15 U.S.C. 644. Prior to its enactment, however, the Senate Small Business Committee reviewed the impact of amendments to small business procurement programs in the Fiscal Year 1987 DOD Authorization Act. ----------- FOOTNOTE ENDS ----------- While no changes were made to the 50% Rule as a consequence of these hearings, the Conference Committee which eventually advised on the passage of Pub.L. No. 100-180 offered further explanation on the reason for Section 921 of Pub.L. No. 99-661. The Conference Committee noted that: [T]he limitation was imposed to prevent the mere "brokering" of set-aside contracts with actual performance being undertaken by "other than small firms," and to assure that set-aside contracts will afford effective opportunities to sharpen the business management skills of the awardee through actual per- formance. See H.R. Conf. Rep. No. 100-446, 100th Cong., 1st Sess. 662 (1987). Again, the Conference Committee, in addition to addressing the general government policy of increasing contracting by small business concerns and eliminating sham operations, indicated the intent of Section 921 to serve as a criterion for contract award. Indeed, the Conference Report noted: [U]nder [ 921] a firm's adherence to the specified limitations on subcontracting forms a part of the firm's status as "small business" eligible for the award. Thus, if a firm were not to agree to perform the required portion of the work with its own employees, the firm could not be awarded a contract. Id. (emphasis added). In our view, the protester's claim to the SDB Preference violated both the specific provisions of the solicitation clause, and the legislative spirit and intent of the law. To this extent, the protester's proposal was ineligible for the preference. As the facts in this case demonstrate, it is obvious that if the protester had been awarded the contract, the cost of contract performance that would be incurred for personnel costs by the protester would be totally insignificant compared to the personnel costs that would be incurred by Sprint. The protester argues that it is irrelevant that virtually all services will be performed by Sprint employees, but instead argues that the relevant factor is how Sprint accounts for the cost of its network labor in its own cost accounting system. Early in the procurement process, the protester established this "straw man" accounting argument. In answer to Discussion Item No. 0007, the protester stated that: Costs associated with activities performed by personnel as part of Sprint's network and tariffed services are an integral part of the cost used in developing rates filed with the FCC. These costs [associated with activities performed by personnel] are a part of the overall tariffed rates charged for Sprint network services and cannot be allocated to any specific customer account/contract. Since the ISVS network service is a relatively small percentage of the Sprint network, it will not be necessary to add additional personnel to operate their network. Sonicraft has accepted the [Sprint] network and tariff service costs as Sprint's indirect costs. Finding 53. The SDB Evaluation Preference clause is not concerned with cost accounting systems that track labor to the contract. Rather, the requirement is to determine whether the prime contractor meets the 50% Rule. Sprint's accounting system is simply not relevant. The fact that Sprint allocates its performance costs to specific contracts, and considers that all of its network labor costs are indirect costs under any specific contract is also irrelevant. Sprint's labor costs must be part of the direct cost of the network, albeit those costs are not, for Sprint's internal accounting purposes, allocated as a direct cost to any particular contract. The protester's position is premised on its statement that "the protester has accepted the [Sprint] network and tariff service costs as Sprint's indirect costs." Finding 53. The premise is irrelevant; the subcontractor's accounting system cannot dictate whether there is compliance with the 50% Rule. Before a determination can be made concerning the personnel costs that are to be included in the 50% Rule equation, one must first determine the scope of the labor pool to be quantified, i.e., whose labor goes into the pool? It is evident from the legislative history and the nature of the clause itself that the labor pool should consist of the labor for all services performed by any party or entity who provides services in furtherance of the contract. To limit the pool to the prime contractor would make a mockery of the clause. Any "front" or "sham" prime contractor would comply on that basis. The protester simply argues that Sprint's final cost objective for cost accounting purposes (its network) and the protester's final cost objective (the ISVS contract) are different. Therefore, because Sprint does not use individual contracts as a final cost objective, Sprint's labor would be an indirect cost. Finding 47. It is clear that labor performed by the protester and Sprint in providing the international switched voice services (as detailed in the Statement of Work) would constitute "direct labor," that the estimate of the total amount of "direct labor" to be performed need not be the same for Sprint's cost accounting purposes, and that all such "direct labor" is to be used in determining the protester's compliance with the 50% Rule. In summary, in order to receive the SDB Evaluation Preference, an offeror must insure that at least 50% of the cost of contract performance incurred for personnel would be expended for its employees. Since it was impossible for the protester to meet the 50% Rule in contract performance, it was not entitled to the SDB Preference. Nevertheless, regardless of the applicability of the SDB preference, the protester has failed to meet its burden of proving that the respondent's evaluation of the protester's technical proposal in the "Management Area," or its evaluation of the protester's price, was conducted in an unreasonable manner or that a violation of statute, regulation, or the terms of the delegation of procurement authority occurred here. This, in and of itself, is sufficient to deny the protest on all grounds. Decision The protest is DENIED.