Centerra Group, LLC v. United States

In the United States Court of Federal Claims

No. 17-1348C

(Filed Under Seal: December 14, 2017)

(Reissued for Publication: January 18, 2018)*

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CENTERRA GROUP, LLC, *

*

Plaintiff, *

*

v. *

* Postaward Bid Protest; Cross-Motions for

THE UNITED STATES, * Judgment on the Administrative Record;

* Standing; Evaluation of Technical and Price

Defendant, * Proposals; Tradeoff Analysis

*

and *

*

SOC LLC, *

*

Defendant-Intervenor. *

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Richard J. Webber, Washington, DC, for plaintiff.

Eric E. Laufgraben, United States Department of Justice, Washington, DC, for defendant.

James J. McCullough, Washington, DC, for defendant-intervenor.

OPINION AND ORDER

SWEENEY, Judge

In this postaward bid protest, plaintiff Centerra Group, LLC (“Centerra”) contends that

the National Nuclear Security Administration (“NNSA”) improperly awarded a contract for

protective force services to defendant-intervenor SOC LLC (“SOC”). Specifically, Centerra

*

In a January 12, 2018 joint status report, the parties proposed redactions to this

decision. They agreed on most of the proposed redactions. However, plaintiff and defendant did

not agree with defendant-intervenor’s proposal to redact the term “Corporate Governance

Board.” Because that term is not “protected information” under the protective order, the court

concludes that it should not be redacted. Redactions are indicated with a bracketed ellipsis

(“[. . .]”).

alleges that the NNSA’s evaluation of proposals and subsequent tradeoff decision were flawed.

Before the court are the parties’ cross-motions for judgment on the administrative record. As

explained below, the court denies Centerra’s motion, grants defendant’s motion, and grants in

part and denies in part SOC’s motion.

I. BACKGROUND

A. The Solicitation and Submission of Proposals

The NNSA issued solicitation DE-SOL-0009373 on December 1, 2016, to acquire force

protection services for its Nevada Field Office (“NFO”). Administrative R. (“AR”) 900-01, 959.

According to the solicitation’s Performance Work Statement (“PWS”):

The primary missions of NNSA/NFO are to support the Stockpile

Stewardship, Nonproliferation, Counter Terrorism, Strategic Partnership . . . ,

Radioactive Waste Management, and National Emergency Response programs

while providing a venue for other national security activities. . . .

NNSA/NFO is responsible for implementing operational safety and

security program requirements associated with meeting mission requirements.

The NNSA/NFO provides a denial strategy to prevent access to nuclear explosive

devices or prevent removal of Category I special nuclear material but ensures that

recapture/recovery capabilities continue to exist in the event that a denial strategy

fails. NNSA/NFO has developed management and operating plans to provide

adequate protective force protection and physical security systems and barriers

commensurate with threat guidance documents.

Id. at 959. In furtherance of these requirements, the successful offeror would be required to

perform tasks in five areas: General Management, Protective Force, Technical Security Systems,

Force-on-Force Exercises, and Reports and Deliverables. Id. at 960-74. Of relevance in this

protest, General Management tasks would be performed on a firm-fixed-price basis, and

Protective Force tasks would be performed on a time-and-materials basis.1 Id. at 960, 970. The

NNSA contemplated awarding a contract with an initial term of one year and four one-year

option periods. Id. at 903.

Pursuant to section L of the solicitation, offerors were to submit separate technical and

price proposals. Id. at 1244. The technical proposal was to contain sections describing the

offeror’s (1) approach and staffing plan, (2) past performance, and (3) small business

participation plan. Id. at 1250-52. The first section of the technical proposal was to include the

following information:

1

In a number of the documents included in the administrative record, “firm-fixed price”

is abbreviated as “FFP” and “time and materials” is abbreviated as “T&M.”

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(A) Approach: The Offeror shall describe its proposed technical approach for

accomplishing . . . the PWS. As part of the proposed approach, address any

technical risks associated with performing these requirements and the proposed

approach to avoid or minimize those technical risks.

....

(B) Staffing Plan: The Offeror shall describe the labor categories and job duties

of all proposed labor categories to perform the work required by the entire PWS.

The plan shall also identify the estimated quantity of proposed full-time

equivalent [(“FTE”) employees] allocated to each labor category for the basic

period and for each option period as well as in a Staffing Plan Summary (see

Attachment 11). Additionally, the Offeror shall describe its proposed approach

for ensuring sufficiency of staffing pool resources to respond promptly to

problems or program changes. The Offeror shall provide written resumes for the

personnel who will perform as Key personnel . . . for accomplishing the

requirements of the PWS.

Id. at 1250. As reflected in the questions and answers incorporated into the solicitation, offerors

were to propose a staffing plan based on the information provided in the solicitation and their

proposed technical approach; the NNSA expressly declined to provide offerors with information

regarding existing staffing beyond what was included in the solicitation. Id. at 1300, 1313, 1315.

The price proposal, in turn, was to include detailed information concerning labor costs for

the contract’s base period and the four option years. Id. at 1252, 1254. Under the heading

“Overview and General Requirements,” the NNSA provided:

The Offeror shall identify its proposed prices by completing and submitting the

Cost Model . . . (see Attachment 23), which accommodates both the FFP and

T&M requirements. The Offeror shall propose fully-burdened (except for profit

as discussed above), fixed[] labor rates for all years for the T&M effort as well as

firm fixed prices, depending on the item number and PWS area. The Cost Model

includes Government baselined travel and legacy defined benefit pension amounts

that all offerors shall use in their proposed prices and these are considered

“material” under the T&M effort. For evaluation purposes, assume the

Government baselined [Other Direct Cost (“ODC”)] amounts in the Cost Model

include all direct and indirect costs that shall not be further burdened by Offerors.

. . . Exclude the Government baselined legacy defined benefit pension plan costs

from the fringe pool and include them in ODCs.

Id. at 1252; accord id. at 1310 (indicating, in the questions and answers incorporated into the

solicitation, that “[a]ll legacy defined benefit pensions and related costs shall be in ODCs and

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shall not be included in the FFP or the T&M rates”); see also id. at 1274-92 (containing

Attachment 23, the Cost Model). In addition, the NNSA cautioned:

[U]nreasonably low or high proposed costs or prices may be grounds for

eliminating a proposal from consideration on the basis that the Offeror does not

understand the requirements, has made a mistake, or has made an unreasonable

offer. If estimated costs/prices to perform the proposed effort have been

decreased due to efficiencies or management decision, provide complete rationale

for the reduction. The burden of proof for credibility of proposed costs/prices

rests with the Offeror.

Id. at 1253.

Then, under the heading “Specific Cost/Price Requirements,” the NNSA provided the

following pertinent instructions:

(2) Offerors shall propose prices based on the PWS . . . , the Informational

Staffing Schedule (see Attachment 17), and the price proposal instructions

contained herein. . . .

(3) The Offeror shall address the basis of estimate to support the proposed hours.

A description of how the quantity and mix of labor hours were estimated shall be

provided. The Offeror shall identify the basis for the proposed labor rates and

explain how the rates are adjusted (e.g., blended rates, weighted averages, etc.), if

applicable, to arrive at the proposed rates. Clearly identify and explain the basis

for any annual escalation factors employed.

(4) The Offeror shall indicate the total number of [Direct Productive Labor Hours

(“DPLH”)] estimated per year for one [FTE] employee. The Offeror shall

demonstrate how its DPLH is calculated by identifying the number of annual

hours estimated for each type of non-productive time such as vacation, holiday,

sick leave, administrative leave, and other types of non-direct charged activities in

accordance with its current compensation policies.

Id. at 1254; see also id. at 1262-63 (containing Attachment 17, the Informational Staffing

Schedule, a document that includes a list of positions and the number of personnel at each

position, and also includes the following remark: “This generic Staffing Schedule is for

informational purposes only and identifies the positions directly engaged in ProForce or Security

Systems work. The offerors are expected to propose staffing in accordance with their technical

approach based on the work identified in the [PWS].”).

In section M of the solicitation, the NNSA described how it planned to evaluate the

proposals. Id. at 1259-61. With respect to the evaluation process in general, the NNSA advised

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that it intended to award the contract “without discussions,” but reserved the right to conduct

discussions if later deemed necessary. Id. at 1259. It further advised:

Exceptions or deviations to any terms and conditions alone will not render the

proposal unacceptable; however, any exceptions or deviations to the terms of the

solicitation may make the proposal unacceptable for award without discussions.

If an Offeror proposes exceptions to the terms and conditions of the contract, the

Government may make an award without discussions to another Offeror that did

not take exception to the terms and conditions of the solicitation.

Id.

Then, with respect to the substance of the evaluations, the NNSA stated that it intended to

award the contract to the offeror with the proposal “determined to be the best value and most

advantageous to the Government, based on four factors (in descending order of importance)”:

(1) Approach and Staffing Plan, (2) Past Performance, (3) Small Business Participation Plan, and

(4) Price. Id. at 1260. Specifically, with respect to the factors at issue in this protest, the NNSA

advised:

Criterion 1 - Approach and Staffing Plan

In evaluating Criterion 1, the Government will evaluate Offerors[’]

responses to Approach and Staffing Plans. These are equal in weight, and will not

. . . receive individual ratings. . . .

(i) Approach: The Government will evaluate the information provided by

the Offeror . . . to . . . assess (i) the Offeror’s understanding of the

requirements; and (ii) the completeness and feasibility of the proposed

technical approach. Additionally, the Government will evaluate the extent

to which the Offeror’s responses demonstrate an understanding of relevant

technical risks as well as the completeness and feasibility of the Offeror’s

approach to avoid or minimize those risks.

(ii) Staffing Plan: The Government will evaluate the information

provided by the Offeror . . . to assess whether the Offeror has proposed a

sufficient level of staffing and mix of skills throughout contract

performance. The Government will evaluate whether key personnel have

the relevant qualifications, education, and experience necessary to

effectively execute the duties and responsibilities for their proposed

positions considering the work required in the PWS. . . .

....

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Criterion 4 - Price

The price proposal will not be rated, but will be used in determining the

best value to the Government . . . . The total evaluated price will be analyzed in

accordance with [Federal Acquisition Regulation (“FAR”)] 15.404 to determine

reasonableness and balanced pricing. The total evaluated price is the sum total of

the proposed fixed prices and cost estimates for the Base Period and Option

Periods, to include the Government baselined [ODCs], and the Government’s

calculated price for the six-month Option to Extend Services period. A significant

cost/price deficiency or weakness that may cause the proposal to be rejected is

defined as an aspect of the Price Proposal that is lacking in reasonableness, and

the correction of which would cause a material alteration or revision of the

Offeror’s price proposal. An unreasonable, or unbalanced price proposal may

adversely affect the Offeror’s rating. Pursuant to FAR 15.404, the following will

be evaluated:

(1) Reasonableness. The total evaluated price, including all elements

thereof, will be used to evaluate reasonableness. The price proposal will

be evaluated to determine the appropriateness of the underlying

assumptions and estimating techniques used to generate the proposed

costs/prices and the consistency of those assumptions and techniques with

the proposed accomplishment of the required work. The Government may

use any of the cost or price analysis techniques specified in FAR 15.404 to

determine reasonableness.

(2) Balanced Pricing. In accordance with FAR . . . 15.404-1(g), the

Government will analyze the proposed Item and annual pricing for balance

and may reject a proposal if the contracting officer determines that the lack

of balance poses an unacceptable risk to the Government.

Id. at 1260-61; see also id. at 4-5 (providing no indication in the NNSA’s Source Evaluation Plan

that the NNSA would refer to an offeror’s price proposal when evaluating its technical proposal).

Finally, the NNSA advised:

In selecting the best value, the Government is more concerned with

obtaining a superior Technical Proposal (Criterion 1-3) than making an award at

the lowest evaluated price, and, accordingly, when combined, the three non-price

criteria are significantly more important than price. However, the Government

will not make an award at a price premium it considers disproportionate to the

benefits associated with the evaluated superiority of one Technical Proposal over

another. Thus, to the extent that Offerors’ Technical Proposals are evaluated as

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close or similar in merit, the evaluated price is more likely to be a determining

factor.

Id. at 1260.

The deadline for submitting proposals to the NNSA was January 18, 2017. Id. at 1249.

Timely proposals were submitted by two offerors: Centerra, the incumbent contractor, and SOC.

Id. at 3592. See generally id. at 1532-2385 (Centerra proposal), 2386-879 (SOC proposal).

B. Evaluation of Technical Proposals

The technical proposals were evaluated by a three-member Integrated Project Team

(“IPT”). Id. at 3590, 3601. With respect to Criterion 1 (Approach and Staffing Plan), the IPT (1)

identified each proposals’ significant strengths, strengths, weaknesses, significant weaknesses,

and deficiencies, and (2) assigned each proposal one of four possible adjectival

ratings–Excellent, Good, Satisfactory, or Less Than Satisfactory. Id. at 3594; see also id. at 6

(noting that a Good rating meant that “[t]he requirements [were] addressed in a comprehensive

manner normally evidenced by strengths that outweigh[ed] any weaknesses and a high

probability of successful contract performance with a moderate degree of risk,” and that a

Satisfactory rating meant that “[t]he requirements [were] addressed in an acceptable manner

normally evidenced by strengths and weaknesses that [were] generally offsetting and a

reasonable probability of successful contract performance with a moderate degree of risk”).

Upon reviewing Centerra’s proposal under Criterion 1, the IPT identified one significant

strength, three strengths, and one weakness for the Approach element of the criterion, and two

significant strengths, one strength, and two weaknesses for the Staffing Plan element of the

criterion. Id. at 3610. In its narrative evaluation, the IPT provided, in relevant part:

Evaluation of (A) Technical Approach

....

Centerra’s approach . . . is similar to how [it is] currently operating. . . .

The feasibility of Centerra’s approach is, to an extent, demonstrated by Centerra’s

implementation of this approach at the NFO for over 51 years . . . . Centerra’s

approach, combined with the demonstrated feasibility of its approach, represents a

significant benefit to the Government, as it appreciably increases the potential of

successful contract performance; thus, it is a SIGN[I]FICANT STRENGTH.

....

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Evaluation of (B) Staffing Plan

....

As compared to [Request for Proposal (“RFP”)] Attachment 17,

Centerra’s staffing plan added four new labor categories pertaining to Protective

Force: [. . .]. There are a significant number of positions that, when compare[d]

to the [Independent Government Cost Estimate], are assigned titles of “manager”

or “director,” giving the appearance of a “top-heavy” organization. There are

additional labor categories identified by the [subject matter experts] evaluating the

staffing plan that appear to be of a greater number than what would be required to

accomplish the tasks. . . .

Centerra identifies a Classification Officer position as required in the PWS

. . . . However, the description of duties for this position do[es] not indicate a full

understanding of the duties of a Classification Officer in accordance with [United

States Department of Energy] orders or as described in the PWS. Centerra

proposes a collateral assignment of the Classification Officer as [. . .] support.

The Government is concerned with one individual supporting both roles as this is

likely to be an insufficient level of staffing to successfully perform the related

aspects of the PWS and represents a WEAKNESS.

....

[With respect to the Director of Technical Services position, the proposed

individual’s] extremely limited educational and management experience[]

increases the risk of unsuccessful contract performance, and is a WEAKNESS.

....

Overall, the Centerra staffing plan is viable for successful contract

performance.

Id. at 3601-10. In sum, the IPT concluded:

Except in the one instance noted, Centerra’s technical approaches

demonstrated that Centerra had a comprehensive understanding of the

requirements and relevant technical risks in the evaluated categories, and

presented feasible performance approaches and risk mitigation strategies.

Centerra’s staffing plan appeared to present a sufficient level of staffing and mix

of skills (with one exception). . . .

....

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Centerra’s proposal[] included beneficial aspects in both its Approach and

Key Personnel, as indicated by its Significant Strengths and Strengths. These

aspects of its proposal outweighed its three assigned Weaknesses. NNSA notes

that the role of Classification Officer was not required to be handled by one

distinct person, but NNSA has determined that this collateral assignment carries

some risk that the individual may encounter obstacles to fully perform his or her

duties. Of more concern is [a specified individual’s] lack of qualifications,

education, and experience for his proposed role as the Director of Technical

Services. However, the IPT is hopeful that Centerra’s strong Program Manager

and Deputy Program Manager could moderate the risk posed by [this individual’s]

lack of qualifications, education, and experience. As such, Centerra’s Approach

and Staffing Plan[] was considered to have a moderate degree of risk with

Significant Strengths and Strengths that outweighed the three, identified

weaknesses; therefore, it[] was rated: GOOD.

Id. at 3610-11.

Then, upon reviewing SOC’s proposal on Criterion 1, the IPT identified one significant

strength and seven strengths for the Approach element of the criterion, and three significant

strengths, one strength, and four weaknesses for the Staffing Plan element of the criterion. Id. at

3626. In its narrative evaluation, the IPT provided, in relevant part:

Evaluation of (B) Staffing Plan

The SOC Staffing Plan provides a lean organization structure that

demonstrates a distinct chain of command that should ensure clear lines of

communication throughout the organization structure up to the General Manager

. . . . The RFP included Attachment 17, Informational Staffing Plan which, based

on analysis of the proposal, SOC followed for the assignment of personnel. The

SOC staffing plan notes during any absence of the General Manager, the [. . .] will

act in his place.

SOC proposes to have the ProForce [. . .] also serve as the [. . .] . . . . The

wide range of responsibilities associated with both positions may make this

dual-hatted arrangement difficult to accomplish safely and effectively. . . . This is

an important PWS function, and the collateral assignment may increase

performance risk, thus it is a WEAKNESS.

....

The position of Classification Officer, as stated in the PWS . . . , was

initially projected by NNSA to be a stand-alone assignment. SOC has the duties

of the Classification Officer as a collateral assignment to the Information Security

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Manager, who also has responsibility for [. . .]. This is an important PWS

function, and collaterally assigning it may increase performance risk, and thus it is

a WEAKNESS.

. . . SOC’s staffing plan does not include a designated standalone [. . .]

position (it seems to be collaterally assigned to the [. . .] . . . . This is an important

PWS function, and collaterally assigning it may increase performance risk, thus, it

is a WEAKNESS.

. . . SOC’s proposal identified the Lieutenant positions as [. . .], but did

not specifically identify their role as [. . .] . . . . This is an important function, and

collaterally assigning it may increase performance risk, thus, it is a WEAKNESS.

The SOC technical proposal identified the estimated labor categories,

FTEs, and description of job duties performed by each position . . . . The proposal

also adequately identified DPLH hours for each FTE and how those hours were

calculated for each respective position . . . .

SOC’s approach also included the support of a Corporate Governance

Board . . . . This capability provides a strong leadership and oversight capability

and is [. . .] at no additional cost to the Government . . . . This is a STRENGTH

because it is a benefit to the Government and increases the potential of successful

contract performance.

SOC provided a detailed approach to ensuring sufficiency of staffing pool

resources and its ability to respond promptly to problems, short-term emergency

operations, and project-specific short term staffing as well as special requests for

added security from NFO or NFO contractors for programs or missions. A

work-flow chart was provided . . . describing SOC’s process which it[] use[s] at

its other contract sites. . . . This aspect of the proposal is well supported and

documented, and demonstrates that SOC has a viable plan to ensure appropriate

levels of staffing a[nd] mixes of labor throughout contract performance.

Analysis of the identified labor categories (other than those noted above)

demonstrates an understanding of the work scope and appear[s] to provide an

adequate mix of skills . . . . Overall, despite the added risks associated with its

leaner (in some areas) staffing plan, SOC’s staffing approach delineated a

sufficient level of staffing and mix of skills throughout contract performance

(with the four exceptions noted above).

Id. at 3622-23. In sum, the IPT concluded:

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SOC’s technical approaches demonstrated that SOC had a comprehensive

understanding of the requirements and relevant technical risks in the evaluated

categories, and presented feasible performance approaches and risk mitigation

strategies. While SOC’s staffing plan presented sufficient levels of staffing and

mix of skills in many areas, there were four instances where it was unclear to the

IPT that sufficient staffing had been proposed. . . .

....

SOC’s proposal, as reflected by three of the Significant Strengths,

included the use of highly qualified key personnel . . . . This use of strong key

persons, combined with numerous strengths for innovative aspects of its technical

approach, outweighed the four weaknesses associated, generally, with the

assignment of multiple roles (which NNSA had anticipated as requiring distinct

personnel) to one person. NNSA notes that none of the roles collaterally assigned

to individuals are required to be handled by distinct personnel, but NNSA has

determined that this collateral assignment carries some risk that an individual may

encounter obstacles to fully perform his or her assignments. However, the IPT

anticipates that should SOC encounter overburdened individuals (whether for the

noted roles or otherwise), SOC’s management team would properly reallocate

workload and/or utilize its Corporate Governance Board to determine solutions.

As such, SOC’s Approach and Staffing Plan was considered to have a moderate

degree of risk, with Significant Strengths and Strengths that outweighed the four,

identified Weaknesses; therefore, it was rated: GOOD.

Id. at 3626-27; see also id. at 2629 (indicating, in SOC’s proposal, that one of the “two principal

roles” for SOC’s Corporate Governance Board was to “provide full corporate reachback for

whatever additional resources are required”), 2660 (indicating, in SOC’s proposal, that the

Corporate Governance Board would “provide[] the [General Manager] with direct access to

executive managers from the SOC Team . . . for infusion of expertise, personnel, or funds to

resolve program challenges or address contingencies”).

Next, with respect to Criterion 2 (Past Performance), the IPT (1) identified each

proposals’ significant strengths, strengths, weaknesses, significant weaknesses, and deficiencies,

and (2) assigned each proposal one of five possible adjectival ratings–Excellent, Good,

Satisfactory, Less Than Satisfactory, or Neutral. Id. at 3595-96. The IPT assigned an Excellent

rating to Centerra’s proposal, id. at 3611, 3615, and a Good rating to SOC’s proposal, id. at 3627,

3629.

Finally, with respect to Criterion 3 (Small Business Participation Plan), the IPT assigned

each proposal one of three possible adjectival ratings–Excellent, Satisfactory, or Less Than

Satisfactory. Id. at 3597. The IPT assigned an Excellent rating to Centerra’s proposal, id. at

3615-16, and a Satisfactory rating to SOC’s proposal, id. at 3629-30.

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C. Evaluation of Price Proposals

The IPT also evaluated the offerors’ price proposals. Id. at 3632. First, it

summarized–and calculated the differences between–the prices and DPLH proposed by the

offerors:2

Offeror Pricing and Total Evaluated Price

PWS Area DELTA DELTA

(Contract Type) CENTERRA SOC $ %

A: General Mgt. [. . .] [. . .] [. . .] [. . .]

(FFP)

B: Protective Force [. . .] [. . .] [. . .] [. . .]

(T&M)

C: Tech. Security [. . .] [. . .] [. . .] [. . .]

Systems (T&M)

D: Force-on-Force [. . .] [. . .] [. . .] [. . .]

(T&M)

Subtotal [. . .] [. . .] [. . .] [. . .]

Baselined Travel 500,000 500,000 0 0.0%

Baselined Legacy 14,500,000 14,500,000 0 0.0%

Pensions

Proposed [. . .] [. . .] [. . .] [. . .]

Transition

Total Proposed $249,976,900 $202,942,951 $47,033,949 23.2%

Price

Opt to Ext Svcs 24,455,101 19,130,496 5,324,605 27.8%

Labor

Opt to Ext Svcs 1,500,000 1,500,000 0 0.0%

Baselines

Total Evaluated $275,932,001 $223,573,447 $52,358,554 23.4%

Price

Notes: . . . Delta $ = Centerra - SOC. Delta % = (Centerra / SOC) - 1. The

Option to Extend Services dollars were calculated by the Government . . . .

2

The three tables that follow are reproduced from the IPT’s report.

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Proposed Prices Based on Element

Delta Delta % of

Element CENTERRA SOC $ % Total

Wages [. . .] [. . .] [. . .] [. . .] [. . .]

Indirect [. . .] [. . .] [. . .] [. . .] [. . .]

Costs

Baselined [. . .] [. . .] [. . .] [. . .] [. . .]

ODCs

Transition [. . .] [. . .] [. . .] [. . .] [. . .]

Profit [. . .] [. . .] [. . .] [. . .] [. . .]

Total $249,976,900 $202,942,951 $47,033,949 23.2% 100.0%

Price

Notes: Delta $ = Centerra - SOC, Delta % = (Centerra / SOC) - 1, % of Total =

the percent of the Delta $ . . . the element represent[s] (e.g., approximately [. . .]%

of the $47,033,949 delta is due to differences in proposed wages).

Proposed Direct Productive Labor Hours (DPLH)

PWS Area DELTA DELTA

(Contract Type) CENTERRA SOC DPLH %

A: General Mgt. (FFP) [. . .] [. . .] [. . .] [. . .]

B: Protective Force [. . .] [. . .] [. . .] [. . .]

(T&M)

C: Tech. Security Systems [. . .] [. . .] [. . .] [. . .]

(T&M)

D: Force-on-Force (T&M) [. . .] [. . .] [. . .] [. . .]

Subtotal [. . .] [. . .] [. . .] [. . .]

Opt to Ext Svcs Labor [. . .] [. . .] [. . .] [. . .]

Total Evaluated DPLH [. . .] [. . .] [. . .] [. . .]

Notes: Delta DPLH = Centerra - SOC. Delta % = (Centerra / SOC) - 1. The

Option to Extend Services labor hours were calculated by the Government . . . .

Id. at 3633-34, 3639.

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Next, the IPT described certain statements and assumptions made by the offerors in their

price proposals. Id. at 3635-38. Relevant to this protest, the IPT noted Centerra’s assumption

that it would require equitable adjustments, both at the start of and during contract performance,

to move defined benefit plan costs for certain employees from the ODC “baselined amount” to

either the firm-fixed-price or the time-and-materials rates. Id. at 3635-36. The IPT commented:

The proposed RFP award is a hybrid where the type is either firm-fixed-price

(FFP) or T&M dependent upon the [PWS] area. The Government can change the

baselined amounts during performance as necessary, but the proposed T&M rates

and firm fixed price effort are set at award. If Centerra’s approach will require the

removal of certain labor from the Legacy Defined Benefit Plan, then it should

have priced those affected T&M labor rates, or FFP areas, accordingly in its

proposal and should not have conditioned its price on contract changes upon

award. Moreover, as new employees are hired, the Government will reimburse

the awardee based on the T&M rates set at contract award. Centerra’s assumption

is not consistent with the RFP terms and conditions, and constitutes a condition on

a firm-fixed-price requirement. Thus it constitutes an exception to the RFP

requirements.

Id. at 3636.

After addressing the offerors’ statements and assumptions, the IPT compared the prices

proposed by the offerors. Initially, it offered a general comparison:

Although the proposed prices are materially different at 23.2% at the bottom-line

price, the prices are reasonable for the specific proposed approaches. Being the

incumbent contractor, Centerra’s proposed approach generally follows its current

concept of operations. By contrast, SOC was aggressive in its pricing, preferring

to demonstrate best value to the Government with a combination of PWS

performance and lean affordability.

Id. at 3640. It then made a more detailed comparison “that reveal[ed] the drivers of the price

differences”:

(1) Labor: Centerra[’s] proposed labor is approximately [. . .]% higher

than that proposed by SOC; however, the differences by PWS area are dramatic.

For the General Management area of the PWS, . . . Centerra proposed [. . .]%

([. . .]) more hours than SOC at a price that is [. . .]% ($[. . .]) higher. However,

for all other areas (Protective Force, Technical Security Systems, Force-on-Force)

of the PWS, Centerra had only [. . .]% ([. . .]) more hours, but at a price that is

[. . .]% ($[. . .]) higher. Centerra proposed a [. . .]% escalation for all non-union

and non-uniformed personnel, and complied with the Collective Bargaining

Agreement (CBA) for covered employees. . . . SOC complied with the existing

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CBA escalation for covered employees . . . . SOC did not propose [. . .] for

Service Contract Act . . . and exempt labor. In its [price] proposal, . . . SOC

states:

[. . .]

(2) Indirect Cost[s]: Centerra proposed indirect costs that are

approximately [. . .]% ($[. . .]) higher than SOC which represent almost [. . .]% of

the proposed bottom-line price difference. Since the Government expected

adequate price competition, a further breakout of indirect costs (Fringe, labor

overhead, G&A) was not requested. It is noted, however, that both Offerors

specified in their [price] proposals that their hourly rates for covered employees

include all requirements to include starting pay, wages, health and welfare,

qualification pay, bonus/incentive allowances and any/all other requirements for

compliance.

(3) Other Direct Costs: Both Offerors proposed the Government

baselined ODCs as required in the RFP.

(4) Transition: Centerra proposed [. . .] and SOC [. . .] transition costs.

(5) Profit: The Offerors proposed significantly different approaches to

profit. Centerra’s proposed profit is approximately [. . .] times higher than that

proposed by SOC. Centerra proposed a firm fixed price (FFP) profit rate of

[. . .]% and a T&M profit rate of [. . .]%. SOC proposed a [. . .]% profit rate for

the first year (both FFP and T&M) and a [. . .]% profit rate for all years thereafter.

The different approaches represent a bottom-line delta of $[. . .], where Centerra is

significantly higher than SOC. The difference in profit represents approximately

[. . .]% of the proposed delta between the bottom-line positions.

As demonstrated above, the bottom-line difference between the proposed

positions is material, but both proposed offers are reasonable for the specific

proposed approaches. Centerra has chosen a technical and pricing approach that

is generally consistent with its current concept of operations, while SOC addresses

the technical requirements of the RFP and endeavors to reduce costs to the

Government by proposing a reduced management structure and lower indirect and

profit rates.

Id. at 3640-41; see also id. at 17-18 (addressing, in the NNSA’s Acquisition Plan, the projected

cost of the contract, and remarking that “[t]he projected cost . . . is based on current negotiated

labor rates, with an escalation factor of 0% to 2.5% being applied to each year”). The IPT

concluded that both offerors proposed reasonable and balanced prices. Id. at 3643.

-15-

D. The Source Selection Decision

The IPT provided its findings to the Source Selection Authority (“SSA”) in a May 1,

2017 report, id. at 3590, and during a May 8, 2017 presentation, id. at 3700. The SSA then

prepared a Source Selection Decision Document. Id. at 3721-27. In that document, the SSA first

noted his agreement with the IPT’s findings:

As the SSA, I am satisfied that the IPT’s evaluation of proposals was

rigorous, thorough, and compliant with the established evaluation criteria, the

Source Evaluation Plan, and applicable laws and regulations. After a close and

thorough examination of the comprehensive IPT report, I agree with the IPT’s

technical ratings and price evaluations.

Id. at 3723. Then, after remarking that “SOC had the lowest evaluated price, by over $52

million,” while “the IPT’s evaluation suggest[ed] that in some respects, Centerra’s proposal was

more advantageous” under the Past Performance and Small Business Subcontracting Plan

criteria, the SSA engaged in a detailed review of the two proposals. Id. With respect to the

offerors’ proposed staffing plans and Criterion 1 overall, the SSA noted:

Both Offerors provided staffing approaches that, while differing in their

distribution and assignment of personnel, generally propose sufficient staffing and

skill mixes. While both Centerra and SOC received a weakness for not

demonstrating a complete understanding of the duties of the classification officer

position, and for assigning dual-hat responsibilities that could potentially increase

the performance risk, SOC received three additional weaknesses related to its

staffing plan. The IPT noted its concerns with SOC’s approach in which it

dual-hatted the [. . .], did not assign a dedicated [. . .], and did not have a full-time

dedicated [. . .] (it distributed responsibilities across more than one person).

However, SOC received a strength for including the support of a Corporate

Governance Board for leadership and oversight capability at no additional cost to

the Government.

....

For Criterion 1, even though SOC has a higher total of significant

strengths, strengths, and weaknesses; I agree with the IPT and find that Centerra

and SOC both merit ratings of “Good.” Though each has distinct advantages (and

disadvantages), overall, I find the two proposals to present a substantially similar

range of benefits (outweighing each proposals identified weaknesses) to the

Government.

Id. at 3725. And, with respect to the offerors’ proposed prices, the SSA noted:

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Although the proposed prices are materially different (23.4% of the

evaluated price), the prices are reasonable for the respective proposed approaches.

Being the incumbent contractor, Centerra’s proposed approach generally follows

its current concept of operations. By contrast, SOC appeared more aggressive in

its pricing, preferring to demonstrate best value to the Government with a

combination of PWS performance and lean affordability. This is not the only

reason for the price difference. As noted in . . . the IPT report, Centerra proposed

indirect costs that are approximately $[. . .], or [. . .]%, higher than SOC’s which

represents almost [. . .]% of the difference in the proposed price. In addition, the

Offerors proposed significantly different approaches to profit. Centerra’s

proposed profit is approximately $[. . .], or [. . .]%, higher than that profit

proposed by SOC. The difference in profit represents approximately [. . .]% of

the difference in the proposed price. I, as the SSA, agree with the assessment of

the variance between Centerra and SOC based on the price analysis described

above. Overall, I find that the proposed pricing is reasonable and balanced (with

no evidence of unbalanced pricing).

Additionally, I note that during the pricing evaluation, the IPT identified

that Centerra took exception to a firm-fixed-price aspect of the RFP. Centerra

identified that “[a]t contract start, [it would] require an equitable adjustment,” to

relocate benefit costs from the other direct cost baselined amount to “the Firm

Fixed Price or T&M rates.” Though labeled only as an assumption, it conditioned

performance on the Government granting it the ability to raise fixed prices and

labor rates. In my opinion, this condition would need to be resolved through

discussions.3

Id. at 3726-27 (footnote added).

Finally, the SSA performed a tradeoff analysis to reach his source selection decision:

Based on the IPT’s analysis and my independent judgment in comparing the

proposals in terms of Approach and Staffing Plan (Criterion 1), Past Performance

(Criterion 2), and Small Business Participation Plan (Criterion 3), I find that the

benefits associated with Centerra’s proposal (primarily in the form of past

performance and proposed small business participation) compared to SOC’s

proposal do not justify the additional $52 million price premium.

With regard to Criterion 1, both Offerors had similar levels of benefits to

the Government: a few key personnel with strong experiences, and beneficial

(though different) approaches. As both Offerors provided viable approaches with

some weaknesses that were outweighed by respective benefits, this Criterion was

3

The NNSA had not conducted discussions with the offerors. AR 3702.

-17-

not, in-and-of-itself, a discriminating factor in favor of one Offeror over the other.

The primary discriminating non-price factors were associated with the level of

confidence associated with the difference in past performance depth and proposed

use of small businesses. Under both Criteria 2 and 3, Centerra’s proposal

presented more beneficial aspects than did SOC’s. These benefits were, in

essence: (a) a slightly higher evaluated probability that Centerra could

successfully perform the PWS requirements; and (b) a more significant

opportunity for the use of small businesses (which would count toward NNSA’s

overall goals to provide work to small business entities). The evaluation of

SOC’s proposal under Criteria 2 and 3[] yielded evidence of Good past

performance history and moderate opportunities for small businesses. Those

slight differences aside, I believe either Offeror is capable of ensuring effective

and efficient contract performance.

I acknowledge that [the solicitation] states, “. . . when combined, the three

non-price criteria are significantly more important than price.” However, it also

identifies that, “the Government will not make an award at a price premium it

considers disproportionate to the benefits associated with the evaluated superiority

of one Technical Proposal over another.”

The price premium associated with Centerra’s proposal is not justified by

the evaluated superiority of Centerra in relation to Criteria 2 and 3. Under the

most important non-price factor, Approach and Staffing Plan, both Centerra and

SOC were evaluated to present similarly beneficial (though different) technical

approaches and staffing plans. As such, should Centerra receive the award, the

Government would be paying a 23% price premium for a slightly higher

probability of successful performance and a greater use of small businesses.

Under no circumstances are these advantages worth the 23% price premium (or

$52 million over the potential contract performance period). Therefore, even if

Centerra’s exception (noted . . . above) was somehow resolved or deemed

immaterial, it is not in the best interest of the Government, nor in line with the

stated evaluation criteria for trade-off, to issue an award to Centerra at the

proposed 23% price premium. As stated above, SOC’s proposal demonstrated

that it was more than capable of performing the work, and would, in my judgment,

provide performance and benefits proportionate to its evaluated price.

Id. at 3727; see also id. at 3806 (reflecting that the NNSA advised Centerra during its debriefing

that the SSA made the following determinations: (1) Centerra’s exception was “something that

would need to be resolved through discussions in order to make Centerra eligible for award,” and

(2) “even if the exception was somehow resolved or deemed immaterial, SOC’s proposal

represented the best value to the Government”). The SSA concluded:

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In accordance with the RFP, considering the IPT evaluation, and using my

independent review and judgment, I find that SOC’s proposal represents the best

value to the Government. Therefore, I have selected SOC for award of the

“Protective Force Services” contract to support the NNSA [NFO].

Id. at 3727.

E. Contract Award and Debriefing

On May 30, 2017, the NNSA notified both offerors that it had awarded the contract to

SOC. Id. at 3728-30, 3779-81. It then provided a written debriefing to both offerors on June 8,

2017. Id. at 3798-812.

F. Procedural History

Four days after its debriefing, Centerra lodged a protest with the Government

Accountability Office (“GAO”). Id. at 3814. It then lodged a supplemental protest with the

GAO on July 24, 2017. Id. at 3950. The GAO denied Centerra’s protests on September 21,

2017. Id. at 4068.

Six days later, on September 27, 2017, Centerra filed the instant protest. In its complaint,

it alleges that the NNSA (1) improperly evaluated SOC’s staffing plan, (2) improperly evaluated

the proposals on the Price criterion, and (3) erred in its tradeoff decision. Pursuant to a schedule

proposed by the parties, briefing on cross-motions for judgment on the administrative record

concluded on December 6, 2017, and the court heard argument on December 13, 2017.4

II. DISCUSSION

In ruling on motions for judgment on the administrative record pursuant to Rule 52.1(c)

of the Rules of the United States Court of Federal Claims, “the court asks whether, given all the

disputed and undisputed facts, a party has met its burden of proof based on the evidence in the

record.” A & D Fire Prot., Inc. v. United States, 72 Fed. Cl. 126, 131 (2006) (citing Bannum,

Inc. v. United States, 404 F.3d 1346, 1356 (Fed. Cir. 2005)). Because the court makes “factual

findings . . . from the record evidence,” judgment on the administrative record “is properly

understood as intending to provide for an expedited trial on the administrative record.” Bannum,

Inc., 404 F.3d at 1356.

4

During the initial status conference, defense counsel represented that the NNSA had

agreed to stay performance of the contract awarded to SOC during this protest.

-19-

A. Centerra’s Standing to Protest

The United States Court of Federal Claims (“Court of Federal Claims”) possesses

“jurisdiction to render judgment on an action by an interested party objecting to . . . the award of

a contract or any alleged violation of statute or regulation in connection with a procurement or a

proposed procurement,” 28 U.S.C. § 1491(b)(1) (2012), and may “award any relief that the court

considers proper, including declaratory and injunctive relief except that any monetary relief shall

be limited to bid preparation and proposal costs,” id. § 1491(b)(2). In its cross-motion for

judgment on the administrative record, SOC argues, as a threshold matter, that Centerra is not an

interested party and therefore lacks standing to protest the NNSA’s contract award. Centerra, of

course, disagrees.5

1. Legal Standard

“[T]he question of standing is whether the litigant is entitled to have the court decide the

merits of the dispute or of particular issues.” Warth v. Seldin, 422 U.S. 490, 498 (1975).

“Traditional standing analysis invokes the ‘case or controversy’ requirement of Article III of the

Constitution.” Sys. Application & Techs., Inc. v. United States, 691 F.3d 1374, 1382 (Fed. Cir.

2012). However, in bid protests, standing “is framed by 28 U.S.C. § 1491(b)(1), which . . .

imposes more stringent standing requirements than Article III.” Weeks Marine, Inc. v. United

States, 575 F.3d 1352, 1359 (Fed. Cir. 2009). As noted above, under 28 U.S.C. § 1491(b)(1), bid

protests may only be brought by “interested parties.” The term “interested party” is construed in

accordance with the Competition in Contracting Act of 1984 and, accordingly, “standing under

§ 1491(b)(1) is limited to actual or prospective bidders or offerors whose direct economic interest

would be affected by the award of the contract or by failure to award the contract.” Am. Fed’n of

Gov’t Emps. v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (citing 31 U.S.C.

§ 3551(2)(A) (2000)); see also Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312,

1319 (Fed. Cir. 2003) (interpreting this standard as requiring a protestor to show that it was an

interested party prejudiced by the procuring agency’s action and holding that “because the

question of prejudice goes directly to the question of standing, the prejudice issue must be

reached before addressing the merits”); Myers Investigative & Sec. Servs., Inc. v. United States,

275 F.3d 1366, 1370 (Fed. Cir. 2002) (defining “prejudice” as “injury”). Therefore, a party

lodging a protest must establish that it “(1) is an actual or prospective bidder, and (2) possesses

the requisite direct economic interest.” Rex Serv. Corp. v. United States, 448 F.3d 1305, 1307

(Fed. Cir. 2006); see also Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992) (noting that the

burden of establishing standing is on “[t]he party invoking federal jurisdiction”).

5

Defendant did not raise the issue of Centerra’s standing to protest in either its cross-

motion or its reply in support of its cross-motion. Nor did defendant provide any indication that

it supported SOC’s contention that Centerra lacks standing to protest. However, when queried

during oral argument regarding defendant’s legal position on the issue, defense counsel stated

that based on the specific facts and circumstances of this case, it does not take the position that

Centerra lacks standing to protest.

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2. Centerra Has Standing to Protest

Conceding, as it must, that Centerra was an actual offeror in the procurement at issue,

SOC’s standing argument pertains only to whether Centerra has a direct economic interest in the

award of the contract. To prove that it possesses a direct economic interest, a protestor must

show that it had a “substantial chance” of being awarded the contract. Rex Serv. Corp., 448 F.3d

at 1307; see also Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,

1334 (Fed. Cir. 2001) (noting that a protestor who could not be awarded the contract if its protest

was successful–because it “did not submit a proposal,” “withdrew from the procurement,” or

“rated below second”–lacks an “economic interest in the outcome” of the protest). “In other

words, the protestor’s chance of securing the award must not have been insubstantial.” Info.

Tech. & Applications Corp., 316 F.3d at 1319. According to SOC, Centerra did not have a

substantial chance of being awarded the contract because it conditioned portions “of its price

proposal on future equitable adjustments by the NNSA,” rendering its proposal “materially

noncompliant with the terms of the” solicitation. SOC Cross-Mot. 12.

As SOC notes, in section L of the solicitation, the NNSA both advised offerors that

legacy defined benefit pension costs were included in the government’s baselined ODCs and

prohibited offerors from increasing those amounts. The NNSA confirmed its position during the

question-and-answer period, advising offerors that legacy defined benefit pension costs were

included in ODCs and not in the firm-fixed-price or time-and-materials rates. Nevertheless,

Centerra indicated in its proposal–as a “pricing assumption”–that if it was awarded the contract,

it would seek equitable adjustments to shift legacy defined benefit pension costs from ODCs to

the firm-fixed-price or time-and-materials rates. Both the IPT and the SSA considered this

representation to constitute an exception to the requirements of the solicitation.6

In support of its contention that the condition imposed by Centerra on its price proposal

rendered the proposal nonresponsive, depriving Centerra of standing to protest the NNSA’s

award decision, SOC relies on several decisions of the Court of Federal Claims in which offerors

who had submitted conditioned proposals were found to lack standing to protest because they did

not have a substantial chance of being awarded the contract. See, e.g., U.S. Sec. Assocs., Inc. v.

United States, 124 Fed. Cl. 433, 437 (2015) (“The offer tendered by [the protestor] . . . cannot be

accepted by the government without the addition of new terms. In the context of a fixed price

procurement, that makes the protestor’s bid non-responsive and deprives it of standing to

challenge the award.”); Bannum, Inc. v. United States, No. 14-40C, 2014 WL 1373739, *4 (Fed.

Cl. Apr. 8, 2014) (unpublished decision) (agreeing that the protestor “did not have a substantial

chance of winning the contract because [its] proposal was nonresponsive to the terms of the

solicitation,” in that the protestor “conditioned its proposal on future price adjustments”), aff’d

on other grounds, 779 F.3d 1376 (Fed. Cir. 2015); Bannum, Inc. v. United States, 115 Fed. Cl.

148, 154 (2014) (agreeing that the protestor’s proposal was nonresponsive because the protestor

6

Centerra disputes that its “pricing assumption” constituted an exception to the

requirements of the solicitation.

-21-

“qualified its proposal by expressly representing that its prices did not reflect pricing associated

with” the solicitation, and that submission of a noncompliant proposal deprives an offeror of

standing to protest the award of a contract because the offeror would have no chance of being

awarded the contract), aff’d on other grounds, 779 F.3d at 1376. However, there is no indication

in those decisions that the solicitations at issue contained a provision addressing the

consequences of taking exception to a term of the solicitation.

In contrast, the solicitation in this case includes a provision indicating that exceptions to

any of the solicitation’s terms would not automatically render a proposal unacceptable for award,

that exceptions might make a proposal unacceptable for award in the absence of discussions, and

that if a proposal contains an exception, the contract could be awarded without discussions to an

offeror who did not take exception to the terms of the solicitation. This provision granted the

NNSA the discretion to, among other things, (1) consider Centerra’s proposal notwithstanding its

belief that Centerra’s proposal included an exception, (2) disregard what it considered to be an

exception in Centerra’s proposal and award the contract to Centerra without discussions, and (3)

award the contract to SOC without discussions. In light of this discretion, and the NNSA’s

ability to conduct discussions with the offerors at any time prior to contract award, the NNSA

possessed the authority to award the contract to Centerra even if Centerra’s “pricing assumption”

was in fact an exception to a term of the solicitation. In other words, under the solicitation at

issue in this protest, taking exception to a solicitation term would not have automatically

rendered Centerra’s proposal unacceptable. Thus, Centerra cannot be described as having an

insubstantial chance of being awarded the contract.7 It therefore has standing to protest the

NNSA’s award of the contract to SOC.

B. The Merits of Centerra’s Protest

In its motion for judgment on the administrative record, Centerra contends that the

NNSA’s award of the contract to SOC was arbitrary, capricious, and contrary to law because the

NNSA improperly evaluated SOC’s staffing plan and the price proposals, and the SSA

improperly performed the best value tradeoff. Defendant and SOC both dispute Centerra’s

contentions.

1. Legal Standard

The court reviews challenged agency actions pursuant to the standards set forth in 5

U.S.C. § 706. 28 U.S.C. § 1491(b)(4). Specifically, “the proper standard to be applied in bid

protest cases is provided by 5 U.S.C. § 706(2)(A): a reviewing court shall set aside the agency

7

Indeed, if the court were to require the NNSA to reevaluate the proposals, the NNSA

could (1) conclude that Centerra’s proposal represented the best value and award the contract to

Centerra without discussions; or (2) conclude that Centerra’s proposal would represent the best

value but for the perceived exception, conduct discussions to address the exception, and award

the contract to Centerra.

-22-

action if it is ‘arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with

law.’” Banknote Corp. of Am. v. United States, 365 F.3d 1345, 1350 (Fed. Cir. 2004). Under

this standard, the court

may set aside a procurement action if “(1) the procurement official’s decision

lacked a rational basis; or (2) the procurement procedure involved a violation of

regulation or procedure.” A court reviews a challenge brought on the first ground

“to determine whether the contracting agency provided a coherent and reasonable

explanation of its exercise of discretion, and the disappointed bidder bears a heavy

burden of showing that the award decision had no rational basis.” “When a

challenge is brought on the second ground, the disappointed bidder must show a

clear and prejudicial violation of applicable statutes or regulations.”

Centech Grp., Inc. v. United States, 554 F.3d 1029, 1037 (Fed. Cir. 2009) (citations omitted)

(quoting Impresa Construzioni Geom. Domenico Garufi, 238 F.3d at 1332-33); accord Advanced

Data Concepts, Inc. v. United States, 216 F.3d 1054, 1058 (Fed. Cir. 2000) (“The arbitrary and

capricious standard . . . requires a reviewing court to sustain an agency action evincing rational

reasoning and consideration of relevant factors.”).

Procurement officials “are ‘entitled to exercise discretion upon a broad range of issues

confronting them’ in the procurement process.” Impresa Construzioni Geom. Domenico Garufi,

238 F.3d at 1332-33 (quoting Latecoere Int’l, Inc. v. U.S. Dep’t of the Navy, 19 F.3d 1342, 1356

(11th Cir. 1994)). Thus, the court’s review of a procuring agency’s decision is “highly

deferential.” Advanced Data Concepts, Inc., 216 F.3d at 1058; see also Citizens to Preserve

Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971) (“The court is not empowered to

substitute its judgment for that of the agency.”). Furthermore, a “protestor’s burden of proving

that the award was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance

with law is greater [in negotiated procurements] than in other types of bid protests.” Galen Med.

Assocs., Inc. v. United States, 369 F.3d 1324, 1330 (Fed. Cir. 2004). And, when a contract is to

be awarded on a “best value” basis, procurement officials have “even greater discretion than if

the contract were to have been awarded on the basis of cost alone.” Id. (citing E.W. Bliss Co. v.

United States, 77 F.3d 445, 449 (Fed. Cir. 1996) (“Procurement officials have substantial

discretion to determine which proposal represents the best value for the government.”)).

Consistent with the deference accorded to procuring agencies conducting negotiated

procurements, when a protestor challenges a procuring agency’s evaluation of a technical

proposal, the court’s “review . . . should be limited to determining whether the evaluation was

reasonable, [was] consistent with the stated evaluation criteria and complied with relevant

statutory and regulatory requirements.” Banknote Corp. of Am. v. United States, 56 Fed. Cl.

377, 381 (2003), aff’d, 365 F.3d at 1345; accord E.W. Bliss Co., 77 F.3d at 449 (“[T]echnical

ratings . . . involve discretionary determinations of procurement officials that a court will not

second guess.”). Disagreements with a procuring agency’s evaluation, “no matter how vigorous,

fall far short of meeting the heavy burden of demonstrating that the findings in question were the

-23-

product of an irrational process and hence were arbitrary and capricious.” Banknote Corp. of

Am., 56 Fed. Cl. at 384; accord Active Network, LLC v. United States, 130 Fed. Cl. 421, 433

(2017); Tiber Creek Consulting, Inc. v. United States, 129 Fed. Cl. 409, 415 (2016).

In addition to showing “a significant error in the procurement process,” a protestor must

show “that the error prejudiced it.” Data Gen. Corp. v. Johnson, 78 F.3d 1556, 1562 (Fed. Cir.

1996); see also Bannum, Inc., 404 F.3d at 1351 (holding that if the procuring agency’s decision

lacked a rational basis or was made in violation of the applicable statutes, regulations, or

procedures, the court must then “determine, as a factual matter, if the bid protester was

prejudiced by that conduct”). “To establish prejudice . . . , a protester must show that there was a

‘substantial chance’ it would have received the contract award absent the alleged error.”

Banknote Corp. of Am., 365 F.3d at 1350 (quoting Emery Worldwide Airlines, Inc. v. United

States, 264 F.3d 1071, 1086 (Fed. Cir. 2001)); see also Data Gen. Corp., 78 F.3d at 1562 (“[T]o

establish prejudice, a protester must show that, had it not been for the alleged error in the

procurement process, there was a reasonable likelihood that the protester would have been

awarded the contract.”).

2. The NNSA Properly Evaluated SOC’s Staffing Plan

Centerra’s first contention is that the NNSA’s evaluation of SOC’s staffing plan under

Criterion 1 was arbitrary, capricious, and inconsistent with the evaluation criteria in three

respects. First, it asserts that the NNSA did not support its conclusion that SOC’s proposed

staffing level was sufficient to perform the General Management tasks described in the

solicitation. Second, it claims that the NNSA asserted a nonsensical rationale for discounting the

weaknesses it assigned to SOC’s proposal for having one employee perform the duties of two

positions (referred to as “dual hatting”). Third, it complains that the NNSA, when evaluating

SOC’s proposed staffing of the Protective Force positions, improperly relied on the information

included in the Informational Staffing Plan (Attachment 17) without analyzing the DPLH

proposed by SOC.

Defendant and SOC broadly counter that Centerra’s attacks on the NNSA’s evaluation of

SOC’s staffing plan amount to nothing more than disagreements with the evaluation, and that

such disagreements are insufficient to establish that the NNSA’s rating of SOC’s proposal under

Criterion 1 was arbitrary, capricious, or contrary to law. In addition, defendant and SOC assert

that Centerra’s allegations are premised on the erroneous assumption that the NNSA was

required to use Centerra’s staffing levels, rather than the PWS requirements, as the benchmark

for evaluating SOC’s staffing plan. Both arguments are compelling.8

8

SOC further argues that in challenging the NNSA’s evaluation of SOC’s staffing plan,

Centerra is attempting to add a requirement for a price realism analysis to the solicitation in

contravention of the rule that proposals are only to be evaluated on the factors set forth in the

solicitation. “[A] price realism analysis considers whether an offeror’s price is too low, such that

it indicates a risk of poor performance and a lack of understanding of the solicitation

-24-

a. The NNSA Supported Its Conclusion Regarding SOC’s Proposed Staffing of the

General Management Positions

Centerra first asserts that the NNSA did not support its conclusion that SOC’s proposed

staffing level was sufficient to perform the General Management tasks described in the

solicitation. It advances two arguments in support of this assertion. First, in its motion, Centerra

argues that the NNSA did not recognize “that SOC proposed to reduce existing General

Management staffing hours by nearly [. . .]” and did not explain why this reduction “does not

create a performance risk . . . .”9 Pl.’s Mot. 16. Then, in its response to defendant’s cross-

motion, Centerra argues that the IPT failed to “elaborate on the ‘added risks associated with

[SOC’s] leaner (in some areas) staffing plan’” or “explain why that staffing plan was a ‘sufficient

level of staffing.’” Pl.’s Resp. 4-5 (quoting the IPT’s report); accord id. at 7 (arguing that the

NNSA’s “determin[ation] that [SOC’s] staffing level and mix of skills were adequate . . . was not

based on any technical evaluation of SOC’s ‘leaner’ . . . staffing approach because the IPT

provided no such analysis”).

With respect to its first argument, Centerra ignores that the NNSA was not obligated to

compare SOC’s staffing plan to the existing level of staffing. In fact, the NNSA advised offerors

that their staffing plans should be based on the information provided in the solicitation, and

declared that the offerors did not need to know the existing staffing levels to prepare their

proposals. The NNSA further advised that it would “evaluate the information provided by the

Offeror . . . to assess whether the Offeror has proposed a sufficient level of staffing and mix of

skills throughout contract performance.” AR 1260. Nowhere in the solicitation did the NNSA

indicate that it would compare proposed staffing levels to existing staffing levels.

Centerra contends that notwithstanding the solicitation’s lack of a requirement for the

NNSA to compare existing and proposed staffing levels, the IPT actually did perform such a

comparison. This contention is based on two passages from the IPT’s report:

requirements.” UnitedHealth Military & Veterans Servs., LLC v. United States, 132 Fed. Cl.

529, 554 (2017). Because Centerra is challenging the NNSA’s evaluation of SOC’s staffing

plan, and not the NNSA’s evaluation of SOC’s price, the court declines to address SOC’s

argument.

9

Centerra also complains that the IPT, when evaluating SOC’s proposed staffing of the

General Management positions, “seemingly ignored” the information that SOC included in its

proposal under the heading “General Management Basis of Estimates.” Pl.’s Mot. 16. However,

the “General Management Basis of Estimates” section was part of SOC’s price proposal, and the

solicitation did not require the review of price proposals during the evaluation of technical

proposals. Thus, it was not improper for the IPT to disregard the information referenced by

Centerra.

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• “Overall, despite the added risks associated with its leaner (in some areas)

staffing plan, SOC’s staffing approach delineated a sufficient level of staffing

and mix of skills throughout contract performance (with the four exceptions

noted above).” Id. at 3623.

• “Being the incumbent contractor, Centerra’s proposed approach generally

follows its current concept of operations. By contrast, SOC was aggressive in

its pricing, preferring to demonstrate best value to the Government with a

combination of PWS performance and lean affordability.” Id. at 3640.

These passages reflect nothing more than the IPT’s awareness that SOC proposed both a lower

level of staffing and a lower price than Centerra. Neither these passages, nor the remainder of

the IPT’s evaluation of SOC’s staffing plan, include any detailed comparative analysis of the

proposed and existing staffing levels.10

Centerra’s second argument–made in response to defendant’s cross-motion–is premised

on its understanding that the “added risks associated with [SOC’s] leaner (in some areas) staffing

plan” noted by the IPT arise not from SOC’s proposed dual hatting of employees, but from other,

unspecified areas of leaner staffing. According to Centerra, instead of explaining these “added

risks,” the IPT relied on its finding that SOC could reallocate work or utilize its Corporate

Governance Board, a finding that amounts to a concession that SOC’s proposed staffing levels

were inadequate. Centerra’s reading of the IPT’s report is strained in two respects.

First, the IPT’s reference to SOC’s “leaner (in some areas) staffing plan” should be read

in the context of its entire evaluation. As noted above, the IPT initially remarked that SOC

proposed a staffing plan with “a lean organization structure . . . .” Id. at 3622. It then described

four instances–the dual hatting–in which the “lean organization structure” could increase

performance risk. Next, it found that aside from the proposed dual hatting of employees, SOC

understood the scope of work and proposed an adequate skill mix. Finally, the IPT concluded

that “[o]verall, despite the added risks associated with its leaner (in some areas) staffing plan,

SOC’s staffing approach delineated a sufficient level of staffing and mix of skills throughout

contract performance (with the four exceptions noted above).” Id. at 3623. Reading the IPT’s

analysis of SOC’s staffing plan as a whole, it is reasonable to conclude that the IPT’s use of the

phrase “leaner (in some areas) staffing plan” referred to the four instances of dual-hatting

employees and not to other, unspecified areas of leaner staffing. Such a conclusion is buttressed

by the fact that in providing its overall evaluation of Criterion 1, the IPT mentioned only the four

weaknesses assigned for the proposed dual hatting of employees, and not to risks associated with

other areas of SOC’s staffing plan.

10

The court further notes that the second passage is from the IPT’s evaluation of the

offerors’ price proposals, not the IPT’s evaluation of SOC’s staffing plan.

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Second, the IPT’s finding that SOC could reallocate work or utilize its Corporate

Governance Board does not amount to a concession that SOC proposed insufficient staffing. To

the contrary, the IPT found that SOC proposed sufficient staffing in most areas, and was only

uncertain as to whether SOC proposed sufficient staffing in the instances where it proposed the

dual hatting of employees. This uncertainty led the IPT to assign weaknesses and assess an

increased performance risk. However, the IPT did not find that SOC proposed insufficient

staffing.

In sum, Centerra has failed to establish that the NNSA did not support its conclusion that

SOC proposed sufficient staffing of the General Management positions.

b. The NNSA’s Treatment of the Dual-Hatting Weaknesses Was Reasonable

Next, Centerra asserts that the NNSA provided a nonsensical rationale for discounting the

four weaknesses it assigned to SOC’s proposal for dual hatting employees performing General

Management tasks. Specifically, Centerra remarks that although the NNSA recognized that dual

hatting employees creates some performance risk, it erroneously determined that SOC would

manage that risk by reallocating workloads (despite proposing a significantly reduced level of

staffing) or by utilizing its Corporate Governance Board to provide a solution (even though the

only purported solution available to the Corporate Governance Board was to add staff). In other

words, Centerra contends that the methods of mitigating risk lauded by the NNSA would be

ineffective because SOC did not propose a sufficient level of staffing to utilize those methods.

However, the NNSA reasonably concluded, based on its comparison of SOC’s proposal to the

PWS, that although there was some risk that four employees might become overburdened due to

the dual hatting, SOC proposed a sufficient level of staffing. Consequently, Centerra’s

contention amounts to nothing more than a disagreement with the NNSA’s evaluation of SOC’s

staffing plan.

c. The NNSA Evaluated SOC’s Proposed Staffing of the Protective Force Positions in

Accordance With the Solicitation

Finally, Centerra asserts that it was improper for the NNSA, when evaluating SOC’s

proposed staffing of the Protective Force positions, to rely on the information included in the

Informational Staffing Plan (Attachment 17) without analyzing SOC’s proposed DPLH.

Centerra avers that the Informational Staffing Plan (Attachment 17) was merely the starting point

for proposing staffing levels, and that offerors were required to determine the number of FTEs

and DPLH necessary to cover the positions described in the plan. According to Centerra,

because SOC did “not provide specific information regarding time allowed for muster and travel

to and from posts,” training, or relief, the NNSA could not have known how SOC arrived at its

DPLH. Pl.’s Mot. 21.

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It is apparent that Centerra is confounding the requirements for the technical proposals

and the requirements for the price proposals. With respect to the staffing plan portion of the

technical proposals, section L of the solicitation provided:

The Offeror shall describe the labor categories and job duties of all proposed labor

categories to perform the work required by the entire PWS. The plan shall also

identify the estimated quantity of proposed [FTE employees] allocated to each

labor category for the basic period and for each option period as well as in a

Staffing Plan Summary (see Attachment 11).

AR 1260. SOC complied with these requirements in the staffing plan section of its technical

proposal. See id. at 2662 (“Figure 1.2.1-1 defines each position in SOC’s organization, grouped

by the labor categories provided in RFP attachment 11, and the job duties assigned to ensure

successful completion of the entire PWS. Per the RFP, estimated FTEs for each labor category

appear in this table as well as in the Staffing Plan Summary (Attachment 1-1).”), 2665 (setting

forth the labor categories, job duties, and proposed FTEs for the Protective Force positions),

2686 (containing the portion of the Staffing Plan Summary (Attachment 11) applicable to the

Protective Force positions). The information referenced by Centerra–time for muster, travel,

training, and relief–was not required to be included in the staffing plan portion of the technical

proposals. Rather, that information was to be included in the price proposals; specifically, the

solicitation indicated that proposed prices were to include fully burdened labor rates and that

offerors were to explain the basis for their proposed labor rates. Moreover, section M of the

solicitation did not include any specific requirement that the NNSA analyze proposed DPLH

when evaluating an offeror’s staffing plan; all the NNSA was required to do was to “assess

whether the Offeror . . . proposed a sufficient level of staffing and mix of skills throughout

contract performance.” Id. at 1260. In sum, NNSA’s failure to analyze SOC’s proposed DPLH

when evaluating SOC’s staffing plan was not error.

d. Conclusion

As discussed above, Centerra’s challenges to the NNSA’s evaluation of SOC’s staffing

plan under Criterion 1 lack merit. The NNSA’s evaluation was not arbitrary, capricious, or

inconsistent with the evaluation criteria.

3. The NNSA Properly Evaluated the Price Proposals

Centerra next contends that the NNSA’s evaluation of the price proposals was arbitrary,

capricious, and inconsistent with the evaluation criteria in three respects. First, it claims that the

IPT mischaracterized the reason for the difference in prices between the two proposals and that

this mischaracterization was erroneously adopted by the SSA in his source selection decision.

Second, it asserts that the NNSA did not properly assess the risk of SOC’s decision [. . .] labor

rates in the option years. Third, it argues that the NNSA should have found risk in SOC’s low

proposed rates of profit. Defendant and SOC dispute all of Centerra’s contentions.

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With respect to its claim that the IPT mischaracterized the difference between the

offerors’ proposed prices, Centerra asserts that instead of characterizing “the overall price

difference as being attributable [. . .]% to indirect cost differences and [. . .]% to profit

differences,” the IPT should have recognized that the overall price difference was attributable to

Centerra’s higher number of proposed DPLH, “reflective of a higher quality and lower risk

proposal.” Pl.’s Mot. 23. It further asserts that the IPT’s purported mischaracterization of the

overall price difference “distorted the tradeoff of technical merit versus price, making it appear

that Centerra was not offering more value for its higher price.” Id. As a result, Centerra

contends, the IPT “misled the SSA.” Id.; accord Pl.’s Resp. 13-14 (contending that the SSA

failed to “document the difference in DPLH between the two proposals” and did “not address the

staffing differences between the two proposals, whether in DPLH or FTEs”). Centerra’s position

cannot be sustained, for several reasons. First, contrary to Centerra’s assertion, the IPT did note

that Centerra’s proposed labor hours contributed to its higher proposed price, commenting that

Centerra proposed [. . .]% more General Management DPLH than SOC at a [. . .]% higher price,

and that Centerra proposed [. . .]% more DPLH in the other areas than SOC at a [. . .]% higher

price. Second, by not challenging the accuracy of the IPT’s calculations, Centerra concedes that

the IPT accurately described the price differences. Finally, Centerra’s correlation of a higher

proposed price with a higher quality proposal reflects, once again, its mistaken impression that

SOC’s staffing plan should be measured against existing staffing levels rather than against the

requirements of the PWS. In short, the IPT did not mischaracterize the difference between the

offerors’ proposed prices. Consequently, the SSA could not have been misled by the IPT.

Centerra’s other two contentions are equally unpersuasive. In support of its contention

regarding SOC’s decision [. . .] labor rates, Centerra asserts that the premise of SOC’s

assumption that employee turnover would result in cost savings sufficient to offset salary

increases was that SOC would replace higher-paid, more-experienced employees with lower-

paid, less-experienced employees, and that having lower-paid, less-experienced employees was a

performance risk not recognized by the IPT. And, in support of its contention regarding SOC’s

proposed rates of profit, Centerra asserts that SOC’s low proposed rates would restrict SOC’s

ability to increase its General Management staffing (the firm-fixed-price portion of the contract)

to the level necessary to perform the work required by the contract, creating a performance risk

that was not recognized by the IPT. However, pursuant to section M of the solicitation, the IPT

was only required to determine whether the offerors’ proposed prices were reasonable and

balanced. Centerra fails to explain how the purported performance risks rendered SOC’s

proposed price unreasonable or unbalanced. Indeed, to the extent that SOC’s lower proposed

price is indicative of a performance risk, the existence of such a performance risk does not

automatically render SOC’s proposed price unreasonable or unbalanced.

In sum, Centerra has not established that the NNSA’s evaluation of the offerors’ price

proposals was arbitrary, capricious, or inconsistent with the evaluation criteria.

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4. The SSA Properly Performed the Best Value Tradeoff

Finally, Centerra contends that the SSA’s tradeoff decision was arbitrary, capricious, and

inconsistent with the award criteria in two respects. First, it asserts that because the NNSA erred

in evaluating SOC’s staffing plan and the price proposals, the SSA could not have conducted a

proper tradeoff analysis. Second, it argues that the SSA did not properly weigh the evaluation

criteria–giving too much weight to Criterion 4 (Price)–when conducting his tradeoff analysis. As

suggested by defendant and SOC, Centerra’s first contention is rendered moot because the court

has found that the NNSA’s evaluation of SOC’s staffing plan and the price proposals was not

arbitrary, capricious, or inconsistent with the evaluation criteria. Defendant and SOC also

correctly contend that the SSA’s weighing of the price and nonprice criteria was proper.

Under the FAR, a procuring agency must document its source selection decision, and that

documentation must “include the rationale for any business judgments and tradeoffs made or

relied on by the SSA, including benefits associated with additional costs.” FAR 15.308 (2016).

Even if a solicitation provides that technical evaluation criteria are more important than price, the

“magnitude of the price differential” between two proposals remains relevant because “logic

suggests that as that magnitude increases, the relative benefits yielded by the higher-priced offer

must also increase.” Serco Inc. v. United States, 81 Fed. Cl. 463, 497 (2008). “To conclude

otherwise[] threatens to ‘minimize[ ] the potential impact of price’ and, in particular, to make ‘a

nominal technical advantage essentially determinative, irrespective of an overwhelming price

premium.’” Id. (second alteration in the original) (quoting Coastal Sci. & Eng’g, Inc., 69 Comp.

Gen. 66, 67 (1989)). Thus, when performing a tradeoff analysis, a procuring agency “must select

a lower-priced, lower technically scored proposal if it reasonably decides that the premium

associated with selecting the higher-rated proposal is unwarranted.” Id. at 496; accord

Blackwater Lodge & Training Ctr., Inc. v. United States, 86 Fed. Cl. 488, 514 (2009); Banknote

Corp. of Am., 56 Fed. Cl. at 390.

In his tradeoff analysis, the SSA noted that Criterion 1 did not weigh in favor of either

offeror and that although Centerra’s proposal was more highly rated on Criteria 2 and 3, both

offerors could successfully perform the contract. The SSA then recognized that the solicitation

provided both that the nonprice factors, when combined, were “‘significantly more important

than price,’” and that the NNSA would “‘not make an award at a price premium it considers

disproportionate to the benefits associated with the evaluated superiority of one Technical

Proposal over another.’” AR 3727 (quoting the solicitation). In light of the technical ratings, the

offerors’ proposed prices, and the pertinent solicitation provisions, the SSA concluded:

The price premium associated with Centerra’s proposal is not justified by

the evaluated superiority of Centerra in relation to Criteria 2 and 3. Under the

most important non-price factor, Approach and Staffing Plan, both Centerra and

SOC were evaluated to present similarly beneficial (though different) technical

approaches and staffing plans. As such, should Centerra receive the award, the

Government would be paying a 23% price premium for a slightly higher

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probability of successful performance and a greater use of small businesses.

Under no circumstances are these advantages worth the 23% price premium (or

$52 million over the potential contract performance period). Therefore, . . . it is

not in the best interest of the Government, nor in line with the stated evaluation

criteria for trade-off, to issue an award to Centerra at the proposed 23% price

premium. As stated above, SOC’s proposal demonstrated that it was more than

capable of performing the work, and would, in my judgment, provide performance

and benefits proportionate to its evaluated price.

Id. The SSA’s conclusion is consistent with the evaluation criteria set forth in the solicitation;

even though Price was the least important criterion, the SSA was well within his authority to

determine that the magnitude of the price premium rendered the benefits provided by a more

highly rated technical proposal insignificant. Accordingly, the SSA’s tradeoff analysis was not

arbitrary or capricious.

5. Centerra’s Protest Fails on Its Merits

Centerra has failed to establish that the NNSA’s award of the protective force services

contract to SOC was arbitrary, capricious, or contrary to law.11 In other words, it has not

succeeded on the merits of its claims. Therefore, the court need not address the remaining

elements of Centerra’s request for injunctive relief.

III. CONCLUSION

For the reasons set forth above, although Centerra has standing to protest the NNSA’s

award of the protective force services contract to SOC, its protest cannot be sustained on its

merits. Thus, the court DENIES Centerra’s motion for judgment on the administrative record,

GRANTS defendant’s cross-motion for judgment on the administrative record, and GRANTS

IN PART and DENIES IN PART SOC’s cross-motion for judgment on the administrative

record. Centerra’s complaint is DISMISSED. No costs. The clerk shall enter judgment

accordingly.

The court has filed this ruling under seal. The parties shall confer to determine agreed-to

proposed redactions. Then, by no later than Friday, January 12, 2018, the parties shall file a

11

Consequently, the court need not determine whether Centerra was prejudiced by the

NNSA’s evaluation of proposals or tradeoff analysis.

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joint status report indicating their agreement with the proposed redactions, attaching a copy of

those pages of the court’s ruling containing proposed redactions, with all proposed

redactions clearly indicated.

IT IS SO ORDERED.

s/ Margaret M. Sweeney

MARGARET M. SWEENEY

Judge

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