FEA technical and cost evaluators site-surveyed the PRC and OSI facilities. This included independent corroboration of the offerors' capabilities and cost back-up by reviewing (among other things) the latest audited financial statements, business backlog, security, materials and equipment, and the quotations and invoices supporting the cost proposals received. The detail in the cost proposals was reviewed and evaluated to determine whether the proposed costs were fair and reasonable in light of the RFP requirements, and notice was taken of circumstances which allowed OSI to offer such low costs.

FEA has indicated that the final updated cost comparison estimate for dedicated services, which was included in Attachment 14 of FEA's report, and on which PRC apparently based its cost analysis, was prepared after the award to OSI. FEA states that this cost estimate was based upon a rough handwritten estimate prepared in July 1974 prior to the RFP's issuance as part of a cost comparison study justifying this procurement. We have broken down and extended this cost estimate (which was based on monthly costs) to reflect the total estimated costs for each phase of the project:

The total project estimate ($8,436,000) seems to include under profit approximately the total base fee and award fee pool included in OSI's contract. We understand, however, that it omits several costs which would be incurred under the contract as awarded (e.g., micrographics). Nevertheless, this estimate was apparently the only one FEA had prepared prior to the closing date for receipt of proposals, and it was evidently used as a point of reference for the cost evaluation. FEA states that the cost evaluators kept the original FEA "cost figures" in mind when they reviewed the cost proposals, but they did not regard these figures as refuting the credibility of any of the cost proposals reviewed. FEA has noted that in order to foster the broadest possible competition, wide latitude in hardware/software utilization was given to offerors by the RFP, which accounts for the great variances in the costs proposed by the various offerors.

232-098 O-77-8

Finally, with regard to OSI's cost proposal, the Environmental Protection Agency (EPA), with whom OSI has a similar contract, was contacted to ascertain whether OSI has had any problems with EPA from an operational or accounting standpoint. EPA officials indicated that EPA had not experienced any unusual problems. From its review, FEA concluded that OSI's estimated costs were not only low but also were reasonable and realistic and did not constitute a "buy-in."

Our Office has recognized that a low cost estimate proposed by an offeror should not be accepted at face value and that under FPR § 1-3.807-2 (1964 ed., Amend. 103, March 1972), an agency should make an independent cost projection of the estimated costs reflected in the cost proposal. See Raytheon Company, 54 Comp. Gen. 169 (1974); Signatron, Inc., 54 Comp. Gen. 530 (1974); Tracor Jitco, Inc., 54 Comp. Gen. 896 (1975). However, FPR § 1-3.807-2 specifically recognizes that the scope of such an analysis "is dependent on the facts surrounding the particular procurement and pricing situation" and on "the amount of the proposed contract and the cost and time needed to accumulate the necessary data for analysis." The cost analysis regulations do not require an item-by-item comparison in every case. The award of cost-reimbursement contracts requires procurement personnel to exercise informed judgments as to whether cost proposals are realistic in light of the proposed costs and the technical approach. Such judgments must properly be left to the administrative discretion of the procuring agency, since it is in the best position to assess the "realism" of the proposed estimated costs and technical approaches, and must bear the major criticism for any difficulties or expenses experienced by reason of a defective analysis. 50 Comp. Gen. 390, 410 (1970); B-176311 (1), (2) and (3), October 26, 1973; ILC Dover, B-182104, November 29, 1974.

On the basis of our review of the record, we are unable to completely rationalize or explain the reasons for the substantial difference between PRC's and OSI's proposed estimated costs for similar equipment configurations, although we may speculate that FEA thought that PRC's estimated costs were too high. However, in view of the foregoing, we are unable to conclude that FEA's determination that OSI's estimated costs were realistic has no reasonable basis. 50 Comp. Gen. 390; 51 id. 621 (1972); 52 id. 738 (1973); ILC Dover, supra; Ohio State University, supra. Contrast Vinnell Corporation, B-180557, October 8, 1974. As noted above, FEA substantially relied on the fact that OSI was performing a very similar contract for EPA, whereas PRC did not have as similar experience. Also, PRC has not shown that its "cost analysis" of OSI's cost proposal (which PRC prepared without the benefit of OSI's cost proposal) is any more accurate than the FEA's appraisal of OSI's proposal, especially considering PRC's

many assumptions and adjustments to what it mistakenly regarded as the Government estimate and considering that PRC could well be unaware of competitive advantages which OSI may have in purchasing or leasing the equipment necessary for performing the contract or in allocating its personnel and facilities. In addition, OSI's proposed estimated costs for the contract ($6,981,769, less fees) does not appear to be out of line with the actual Government estimate ($7,626,000, less profit and some of the contract requirements), especially considering the wide array of ADP configurations that could be proposed under the RFP.

PRC contends that OSI is "buying-in." One of the purposes of a preaward cost analysis is to insure that such a "buy-in" does not occur. See 50 Comp. Gen. 788 (1971). As indicated above, PRC has presented no probative evidence to show that FEA's conclusion as to the realism of OSI's cost proposal had no reasonable basis.

A CPAF contract was awarded in part to control cost overruns and to prevent the possibility of a "buy-in." The amount OSI is to be awarded from the award fee pool is based in substantial part on OSI's ability to prevent cost overruns and perform within its estimated costs.

In addition, General Provision No. 19b requires a contractor to give notice to the Government if it has reason to believe a cost overrun will occur. It also provides that the Government is not obligated to reimburse the contractor for costs in excess of the estimated costs until the Government notifies the contractor to proceed on the basis of a revised estimate.

Moreover, OSI has been required to certify that to the best of its knowledge and belief, the cost or pricing data contained in its cost proposal was accurate, complete and current. See FPR § 1-3.807-3 (1964 ed.). If this certified cost or pricing data is subsequently found to have been inaccurate, incomplete or noncurrent as of the effective date of OSI's certificate, the Government is entitled to an adjustment of the negotiated price (including fees) to exclude any significant sums by which the price was increased because of the defective data. See clause 27 of the contract's general provisions and FPR § 1-3.807-5 (1964 ed.).

In any case, we have recognized that while the Government does not favor the practice of "buying-in," this practice is not illegal. See 50 Comp. Gen. 788.

We have some doubt as to the weight given cost in the award selection. The only RFP references to the importance of cost in FEA's evaluation scheme are (1) "boilerplate" language on page 2 of the introductory statement to the RFP:

Awards will be made to responsible offerors, whose offers, conforming to this Request for Proposals, are most advantageous to the Government considering evaluation criteria, cost, and other factors.

and (2) section II-F of the RFP, which stated in pertinent part:

*** cost is an important factor in selection of the offeror for contract award. In addition, detailed cost proposals (separate from technical proposals) were required to be submitted in accordance with the instructions in Exhibit D incorporated into the RFP.

We may speculate that the quoted language means that the cost evaluation had essentially a "veto" effect where an offeror showed costs which were either unreasonably high or unrealistically low, or cost may have been the deciding factor where the proposals were ranked technically equal. However, the relative importance attached to cost in the award selection is not clear from the RFP, nor even from FEA's award selection deliberation. We believe the RFP was defective for failing to apprise offerors of the relative importance of cost vis-a-vis the other specified evaluation factors. See 52 Comp. Gen. 161 (1972); id. 738; ILC Dover, supra; Signatron, Inc., supra. Intelligent competition requires that offerors be advised of all evaluation factors and the relative importance of those factors. See 49 Comp. Gen. 229 (1969); 50 id. 59; id. 246 (1970); 51 id. 153 (1971); BDM Services Company, B-180245, May 9, 1974; Hercules Incorporated, B-180831, October 8, 1974. Where offerors are not apprised of the relative importance of cost and technical evaluation factors, there exists the possibility of the submission of proposals which unwittingly emphasized factors of little importance or deemphasized factors of critical importance to the selection decision. As we stated in Signatron, Inc., supra:

*** We believe that each offeror has a right to know whether the procurement is intended to achieve a minimum standard at the lowest cost or whether cost is secondary to quality. Competition is not served if offerors are not given any idea of the relative values of technical excellence and price. * * *

Although the RFP was defective for failing to disclose the relative weight to be accorded estimated costs, we find no prejudice inuring to the other competitive offeror and do not believe the award should be disturbed for this defect. This is so because, irrespective of the weight given cost, OSI's proposal, as evaluated, received the high score on the technical evaluation and offered the lowest estimated costs as evaluated by FEA. See 52 Comp. Gen. 161; BDM Services Company, Inc., supra. In addition, the alternative proposals of PRC completely responded to the cost and technical considerations that formed the bases for the competition. Therefore, whatever the relative importance of cost as applied by FEA, the completeness of the PRC proposals preclude the conclusion that the skeletal RFP coverage on the importance of cost misled PRC into submitting proposals to its competitive detriment.

PRC also refers to cost allocation problems which would occur where OSI has shared facilities. PRC contends that the Government could well overpay OSI under such circumstances since PRC believes that it is unlikely that OSI would properly allocate its costs for the shared

items between FEA and the other users of the facilities, such as EPA. General Provision 19a of the contract states that costs will be paid in accordance with Subpart 1-15.2 of the FPR, which specifically provides that costs may only be paid if reasonable and allocable to the contract and sets out detailed rules for determining the validity of such costs. These rules, if properly applied, protect the Government from overpayments where facilities have been shared. In any case, this is a matter of contract administration not appropriate for consideration in a bid protest.

PRC also refers to certain contract modifications and to certain instances where it believes OSI has failed to comply with the contract requirements. PRC states this shows that FEA is meeting the "buy-in" and cost overrun problems by allowing reductions in service without equitable reductions in price. However, PRC has presented no probative evidence to support its contention, and this is also a matter of contract administration.

CONFLICT OF INTEREST

The protesters have contended that Mr. Clint Murchison, Jr., Chairman of OSI's Board of Directors, holds interests in the oil and gas industry and that this should have disqualified OSI from the award because the contractor must process sensitive proprietary data necessary for regulating the petroleum industry and for effectively combating the "energy crisis."

FEA has reported that it has been informed that Mr. Murchison has some interests in the oil and gas industry. However, in the absence of a condition in the RFP which limited proposals only to those firms (including officers of the firms), which have no connection with the oil or gas industry, together with a clearly supportable reason for so limiting competition, we are unable to sustain the protests on this point. Moreover, we are unaware of any legal prohibition in any statute or regulation, which would in any way have limited OSI's full participation in this procurement. Under somewhat similar circumstances, we have held that a firm should not be excluded from competi tion simply on the basis of a theoretical or potential conflict of interest See Logicon, Inc., B-181616, November 8, 1974; Exotech Systems, Inc. 54 Comp. Gen. 421 (1974); VAST, Inc., B-182844, January 31, 1975.

Although there are some problems with the security of the ADP system which FEA accepted for award (detailed below), we do not believe that the sensitive proprietary data stored in the ADP system has been rendered any less secure by virtue of Mr. Murchison's relationship with OSI. Not all OSI personnel are authorized access to the FEA ADP facility; only those personnel with a "bonafide requirement