BNUMBER: B-259857.2; B-259858.2
DATE: July 5, 1995
TITLE: Matter of: Loral Aeronutronic
**********************************************************************
REDACTED VERSION[*]
Matter of: Loral Aeronutronic
File: B-259857.2; B-259858.2
Date: July 5, 1995
Francis J. O'Toole, Esq., Robert J. Conlan, Jr., Esq., and Joseph C.
Port, Jr., Esq., Sidley & Austin, for the protester.
Thomas J. Madden, Esq., John J. Pavlick, Jr., Esq., Fernand A.
Lavallee, Esq., and Carla D. Craft, Esq., Venable, Baetjer, Howard &
Civiletti, for Raytheon Company; and Donald J. Kinlin, Esq., Thompson,
Hine and Flory, for Hughes Missile Systems Company, interested
parties.
James I. Menapace, Esq., Department of the Navy, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protester's contention that agency selection officials could not
upgrade the evaluation assessments given by lower level evaluators
without a reevaluation of all proposals is denied where the record
shows that the selection officials reasonably disagreed with the
evaluators about the weight to be accorded certain elements and
subfactors in assigning an overall assessment and made their
adjustment in a manner consistent with the evaluation scheme in the
solicitation.
2. Challenge to adequacy of the cost realism adjustments made to the
awardee's proposal to reflect its high risk is denied where the record
shows that the agency made a significant upward adjustment to address
the high risk nature of the proposal, and none of the protester's
assertions raises issues the agency did not consider, or shows that
the agency's approach to making these adjustments was unreasonable.
3. Cost/technical tradeoff decision in demonstration and validation
procurement where agency makes two awards and selects as the second
awardee an offeror with a high cost, high risk proposal that, if shown
to be feasible, promises significant advances in the weapon system's
technology is not objectionable as record shows it is reasonable and
consistent with evaluation criteria.
DECISION
Loral Aeronutronic protests the award of contracts to Raytheon Company
and Hughes Missile Systems Company by the Department of the Navy,
Naval Air Systems Command, pursuant to request for proposals (RFP) No.
N00019-93-R-0017, issued for the AIM-9X Sidewinder Missile
Demonstration/Validation program. Loral argues that the Navy's
selection of Raytheon for one of two awards under this RFP was
unreasonable because source selection officials upgraded the
evaluation of Raytheon's technical proposal without a reevaluation of
the proposals, failed to upwardly adjust Raytheon's proposed costs to
reflect the high degree of risk associated with that proposal, and
performed an irrational cost/technical tradeoff.
We deny the protest.
BACKGROUND
This procurement is for the demonstration and validation (D&V) phase
for the Sidewinder AIM-9X short-range air-to-air missile. The AIM-9X
will be a major upgrade to the current AIM-9M missile (in service
since 1982) with the most significant improvements in the seeker
component--i.e., the device which tracks the intended target. The
Navy[1] plans to incorporate an imaging midwave infrared seeker in the
AIM-9X version of the missile.
During the D&V phase at issue in this procurement, the Navy
anticipates award of up to two contracts to develop competing
prototype seekers for the purpose of defining the critical design
characteristics and expected capabilities of the next generation of
Sidewinder missiles. Upon completion of this contract, the Navy
anticipates selecting one of the two offerors' designs for award of an
engineering and manufacturing development contract, followed by a
production contract, with a possibility of developing a second
production source if appropriate.
On May 11, 1993, the Navy released the RFP anticipating award of a
cost-plus-incentive-fee contract. Section M-2 of the RFP advised that
the award(s) would be made to the offeror(s) whose proposals provide
the best value to the government. Section M-2 also identified the
following evaluation criteria, in descending order of importance:
technical; cost; management; and integrated logistics support (ILS).
In addition, offerors were advised that the Navy would assess the risk
associated with the technical, management, and ILS evaluation factors;
and the realism of proposed costs.
Under the evaluation factors of technical, cost, and ILS, the RFP set
forth two subfactors each. The subfactors under the technical and
cost factors are of particular relevance here. Under the technical
factor, the RFP identified seeker technical approach and D&V program
as the subfactors, with the first subfactor more important than the
second. For the more important seeker technical approach subfactor,
the RFP advised that particular emphasis would "be placed on the
potential of the offeror's seeker design concept to meet the IRCCM
[infrared counter-counter measures], off-boresight, and acquisition
range requirements of the [specification]." Thus, each of these
categories plus a fourth category, other seeker requirements, were
evaluation elements under the seeker technical approach subfactor.
For the D&V program subfactor, the RFP identified two evaluation
elements: system/subsystem capability, and schedule realism. Under
the cost factor, the RFP identified two subfactors with equal weight:
seeker design to cost (DTC)--i.e., the unit recurring hardware cost of
the 5000th seeker; and D&V contract cost.
By the July 13 closing date, the Navy received proposals from three
offerors: Loral, Hughes, and Raytheon. The proposals were reviewed
by the source selection evaluation board (SSEB) which rated each
factor and subfactor with one of four adjectival ratings:
exceptional, satisfactory, marginal, or unsatisfactory. At the
conclusion of the technical review, the SSEB presented the results of
the evaluation to the source selection advisory council (SSAC). The
SSAC concluded that award could not be made on the basis of initial
proposals, and included all three offers in the competitive range for
the purpose of participating in negotiations.
At the conclusion of written and oral discussions, all three offerors
submitted best and final offers (BAFO), which were again evaluated by
the SSEB. The SSEB reported the strengths, weaknesses, and risks of
each proposal to the SSAC, as follows:
TECHNICAL RATINGS/RISK[2]
Hughes Raytheon Loral
Seeker Tech. Approach S/Medium E/High S/Medium
--IRCCM
--Off-boresight Cap. [DELETED]
--Acquisition Range
--Other
D&V Program S/Low S/High S/Medium
--System/Subsystem
Capability [DELETED]
--Schedule Realism
Overall Technical S/Medium S/High S/Medium
After review and discussion of the SSEB's findings, the SSAC concluded
that the risk associated with the Hughes seeker approach was
relatively lower than that associated with the Loral approach even
though the SSEB assessed both as medium risk under this subfactor of
the technical factor. The SSAC therefore changed the risk assessment
under the seeker technical approach subfactor from medium to low.
This change caused the risk assessment of Hughes under the overall
technical factor to change from medium to low.
Similarly, the SSAC disagreed with the SSEB's assessment under the
technical evaluation factor that all three offerors were satisfactory.
The SSAC viewed the Raytheon proposal as superior to the other two
proposals because of Raytheon's exceptional ratings for its proposed
[DELETED]. As a result, the SSAC upgraded Raytheon's overall
technical rating from satisfactory to exceptional. After the SSAC
completed its review of the SSEB materials, the results of the
evaluation (with the changed ratings/risk assessments shown in bold)
were as follows:
Hughes Raytheon Loral
Evaluated Cost[3]
D&V $23.2M $32.6M $24.7M
DTC $103K $122K $86K
Technical/Risk S/Low E/High S/Medium
Management/Risk E/Low E/Low S/Low
ILS/Risk S/Low S/Low S/Low
Based on this review, the SSAC first concluded that the Hughes
proposal presented the best value to the government. In its proposal
evaluation report prepared for the Source Selection Authority (SSA),
the SSAC stated that the Hughes
"seeker design not only met all performance requirements but also
exceeded [DELETED] requirements and met the [DELETED]
requirements. In addition, [its] technical proposal was
evaluated by the SSAC to be low risk. Considering the cost
criteria, [Hughes] was evaluated as having the lowest projected
[D&V] contract cost and the second lowest seeker DTC. Under the
management criterion, [Hughes] was evaluated as having an
exceptional management proposal."
After recommending award of one contract to Hughes, the SSAC then
compared the proposals of Loral and Raytheon to determine the next
best value to the government. In essence, the SSAC concluded that
Raytheon's exceptional technical proposal--although assessed as high
risk, and with higher costs--presented significant technical
advantages over Loral's medium risk, lower cost, satisfactory
technical proposal. As a result, the SSAC unanimously recommended
that the SSA award the second D&V contract to Raytheon.
In accepting the SSAC's recommendations, the SSA agreed that the
Hughes proposal offered "the best value to the [g]overnment based on
an integrated assessment of ratings and risk." The SSA also concurred
with the recommendation of the SSAC to award the second contract to
Raytheon stating that:
"[Raytheon] offers the second best value primarily due to their
exceptional technical proposal which offers significantly
superior relative seeker performance. The Raytheon proposal
exceeds the required thresholds and provides enhancing features
which benefit the [g]overnment in all of those technical emphasis
areas of the specification which set forth both required and
desired values."
The SSA also concluded that the superiority of Raytheon's approach
justified the premium involved in Raytheon's higher costs, and
concluded that Raytheon's exceptional management rating would "assist
in mitigating the higher technical risk of the [Raytheon] proposal."
After the Navy awarded contracts to Hughes and Raytheon, Loral filed
this protest.
UPGRADE OF RAYTHEON'S TECHNICAL PROPOSAL
Loral's challenge to the SSAC's upward adjustment of Raytheon's
overall technical rating from satisfactory to exceptional is based on
three general contentions: (1) that the upward adjustment was
improper because it was done without a reevaluation of Raytheon's
proposal; (2) that the adjusted ratings violate the evaluation
criteria; and (3) that the SSAC's adjustment impermissibly credited
Raytheon for exceeding certain specification terms.
As described above, there were two technical approach subfactors
identified in the RFP: seeker technical approach--the most important
subfactor; and D&V program. The seeker technical approach subfactor
contained separate evaluation elements for IRCCM, off-boresight
capability, acquisition range, and other seeker requirements. In
evaluating these four elements, the SSEB concluded that for two of the
elements--[DELETED]--Raytheon's approach was exceptional but presented
high risk. For the remaining two elements--[DELETED]--the SSEB
concluded that Raytheon's approach was satisfactory with low and
medium risk, respectively. Thus, under the seeker technical approach
subfactor the SSEB concluded that Raytheon's proposal was exceptional
but presented high risk. In generating Raytheon's overall technical
rating, the SSEB combined the exceptional rating for seeker technical
approach with the satisfactory rating for the less important D&V
program subfactor and concluded that Raytheon's overall technical
approach was satisfactory with high risk.
When the SSEB findings were presented to the SSAC, the record shows
that--without reevaluating proposals, and with consideration of the
relative strengths and merits of the three offers--the SSAC disagreed
with and changed the rating assigned to Raytheon for its overall
technical approach from satisfactory to exceptional. The explanation
for this adjustment is found in the minutes of the SSAC's
consideration of the SSEB's evaluation results, which state that:
"The SSAC also viewed the overall [t]echnical [s]atisfactory
rating for [Raytheon] differently than the SSEB because of
[Raytheon's] superior design approach which greatly increases
[DELETED] Based on the strength of the design and the exceptional
ratings given for [DELETED], the SSAC concluded that [Raytheon's]
overall technical rating should be [e]xceptional."
Based on this upgrade of Raytheon's technical proposal, the SSA, as
explained above, selected Raytheon as offering the second greatest
value to the government.[4]
SSAC's Change to Ratings Required No Reevaluation
Loral first claims that the SSAC's upgrade of Raytheon's proposal was
per se improper without a reevaluation of the proposal, and that the
SSAC wrongly considered the relative strengths and merits of the
competing proposals. In our view, Loral's contention is based on a
flawed understanding of the source selection process and on a
misreading of recent case law.
As explained in the source selection plan, each evaluator involved in
preparing the SSEB report was required to prepare an individual
assessment of the strengths and weaknesses of each offeror's proposal.
The plan advised that "evaluators shall not evaluate the relative
merits of one proposal as compared to another, but shall reflect an
evaluation of the proposals against the requirements of the
solicitation." Source Selection Plan at 27. At the conclusion of the
evaluation, the SSEB presented its findings to the SSAC.
When the results of an SSEB evaluation are presented to an SSAC, there
is no requirement that the SSAC accept the findings of the evaluators,
and no bar against assessing the relative merits of competing
proposals. We have frequently held that source selection officials in
negotiated procurements are not bound by the recommendations or
evaluation judgments of lower-level evaluators, even though the
working-level evaluators may normally be expected to have the
technical expertise required for such evaluations. Grey Advertising,
Inc., 55 Comp. Gen. 1111 (1976), 76-1 CPD 325; Calspan Corp.,
B-258441, Jan. 19, 1995, 95-1 CPD 28; Benchmark Sec., Inc.,
B-247655.2, Feb. 4, 1993, 93-1 CPD 133. In addition, since the SSAC
is assessing the evaluated proposals in an advisory capacity for the
SSA, the SSAC--like the SSA--may within its discretion disagree with
the assessment of the working-level evaluators. See Oklahoma
Aerotronics, Inc.--Recon., B-237705.2, Mar. 28, 1990, 90-1 CPD 337.
In fact, source selection officials routinely compare the relative
strengths and weaknesses of proposals, as happened here. See TRI-COR
Indus., Inc., B-252366.3, Aug. 25, 1993, 93-2 CPD 137; N W Ayer
Inc., B-248654, Sept. 3, 1992, 92-2 CPD 154. Thus, the technical
judgments of selection officials are governed only by the tests of
rationality and consistency with the stated evaluation criteria.
Calspan Corp., supra.
Although Loral accedes to the long-standing precedent in this area,
its contention that the SSAC acted improperly here is apparently based
on a conclusion that the recent court decision in Latecoere Int'l,
Inc. v. Dept. of the Navy, 19 F.3d 1342 (11th Cir. 1994), reduced the
discretion accorded to selection officials involved in reviewing
evaluations, and barred those officials from disagreeing with the
assessments of evaluators without a reevaluation of proposals. In
Latecoere, evidence of agency bias against selection of a foreign firm
led the court to conclude that such bias had translated into changed
ratings for the firm, especially given the dearth of explanation about
the reason for the changes in the ratings. Here, there is no evidence
that the agency was biased against Loral, and in fact, the SSAC made
no change to Raytheon's rating under any individual subfactor or
element. Rather, the SSAC simply disagreed with the SSEB's conclusion
that when combining the two technical subfactor ratings of exceptional
(seeker technical approach) and satisfactory (D&V program), the
overall rating should be satisfactory and not exceptional. Since the
SSAC's change is consistent with the RFP's weighting of the seeker
technical approach subfactor as more important than the D&V program
subfactor, we fail to see how the SSAC acted unreasonably or violated
the stated evaluation scheme.[5]
Change to Ratings Was Not Otherwise Improper
Loral next argues that the SSAC's adjustment was improper because a
score of exceptional for Raytheon's technical proposal is inconsistent
with the definition of that term as set forth in the source selection
plan.[6]
Loral's argument in this regard ignores the distinction between the
evaluation scheme (which was set forth in the RFP), and the source
selection plan provided to evaluators as a guideline. Loral does not
actually allege a misapplication of evaluation criteria--such as
ignoring the fact that the seeker technical approach subfactor is more
important than the D&V program subfactor--but contends that the SSAC's
upgrade strayed from the ratings definitions in the source selection
plan. Allegations of deviations from an agency's source selection
plan do not constitute a basis for questioning the validity of an
award selection. Rather, source selection plans are internal agency
instructions and, as such, do not give outside parties any rights.
Young Enters., Inc., B-256851.2, Aug. 11, 1994, 94-2 CPD 159 at n.4;
National Steel & Shipbuilding Co., B-250305.2, Mar. 23, 1993, 93-1 CPD
260; Burnside-Ott Aviation Training Center, Inc.; Reflectone Training
Sys., Inc., B-233113; B-233113.2, Feb. 15, 1989, 89-1 CPD 158;
Robert E. Derecktor of Rhode Island, Inc.; Boston Shipyard Corp.,
B-211922; B-211922.2, Feb. 2, 1984, 84-1 CPD 140.
Moreover, Loral fails to show that the evaluation was in any way
unreasonable. In its supplemental comments on the agency report,
Loral sets forth 28 separate weaknesses identified by the SSEB
evaluators. According to Loral, these weaknesses--each of which was
presented to the SSAC--should have barred a conclusion that the
proposal was exceptional overall. However, the SSEB--not the
SSAC--rated Raytheon's approach exceptional under the most important
technical subfactor (seeker technical approach), and exceptional under
two of the four elements of the seeker technical approach subfactor.
In turn, the SSAC's decision about the overall technical rating was
based simply on a reweighing of the two subfactors using two
considerations: (1) the stated importance of the subfactors as set
forth in the RFP; and (2) the SSEB's assessment of Raytheon as
exceptional and satisfactory under the two technical subfactors,
despite the identified weaknesses. Hence, Loral's challenge fails
because the SSAC's adjustments were in no way inconsistent with the
assessments of the evaluators, which Loral does not challenge.
Evaluation Gave No Improper Extra Credit
The third element of Loral's challenge to the SSAC decision to upgrade
Raytheon's proposal is the allegation that the Navy improperly gave
credit to Raytheon for exceeding portions of the specifications that
the Navy termed "desired values." According to Loral, since the Navy
set "desired" values in relatively few areas in the specifications,
the Navy, in essence, effectively advised potential offerors that such
values were the maximum benefit the Navy would credit in these areas.
The Navy explains that its specification did, in fact, identify both
requirements and desired values, but explains that it gave an
exceptional rating for exceeding requirements, not for exceeding the
desired values, as Loral claims.[7] For example, the Navy explains
that the acquisition range values for the missile--the term
"acquisition" as used here means the ability of the missile to
successfully acquire its target--included certain desired values
depending on the circumstances or environment in which the missile
would be operating--e.g., "blue sky" operation versus "cluttered
background" operation. The Navy's response that it did not give extra
credit for meeting desired values is buttressed by the record. For
example, the Navy explains, and the record shows, that Hughes received
an exceptional rating under the [DELETED] element of the seeker
technical approach subfactor without exceeding--and in some instances
without meeting--any of the desired values.
The basis for Loral's complaint appears to be that the Navy's
selection documents, in fact, mention that Raytheon's proposal exceeds
some of the specification's desired values. For example, in the
SSAC's Proposal Analysis Report--in which the SSAC recommends that the
SSA select Raytheon's proposal over that of Loral--the SSAC states
that Raytheon's proposal "exceeds most seeker performance requirements
and exceeds many desired acquisition range values in blue sky and
background." SSAC Proposal Analysis Report at 3 (emphasis in
original).
In our view, there was nothing unreasonable about the Navy's
recognition of the many potential benefits in Raytheon's high-tech,
albeit high-risk, approach. The very nature of this
demonstration/validation effort is to award a contract of limited
duration--18 months--during which two offerors attempt to assess and
evaluate the feasibility of significant upgrades to the seeker
component in this missile. As the Navy explains in its supplemental
report,
"[i]t is common sense that if a target can be acquired at a
greater distance, i.e., greater Acquisition Range, or if the
missile can be fired at a greater angle with respect to the
shooter, i.e., greater Off-Boresight Capability, the pilot is
provided with a greater chance to prevail in the engagement. This
ability to save lives and aircraft is of obvious benefit to the
[g]overnment."
Since Raytheon received its exceptional ratings from the evaluators
without regard to its proposed ability to exceed "desired" values, and
since the SSAC upgraded Raytheon's proposal based on a weighing of the
exceptional and satisfactory technical ratings and subratings, we
conclude that the Navy's consideration of these benefits in its
selection decision was a reasonable exercise of its discretion in
selecting the proposal that offered the greatest value to the
government.
UNREASONABLE COST REALISM EVALUATION
Loral argues that the Navy's cost realism analysis of Raytheon's
proposal was flawed because the Navy failed to consider the risks
inherent in the proposal. According to Loral, if the Navy had
properly increased Raytheon's proposed costs to account for the
significant technical risks in the proposal identified by the
evaluators, Raytheon's evaluated costs would have been even higher
than the Navy concluded.
Loral's general complaint in this area is that the many technical
risks identified by the Navy's evaluators--and, in essence, repeated
by Loral's technical expert--should have translated into a larger cost
realism adjustment than was made by the Navy. However, Loral does
not, and cannot, point to specific numbers to quantify the adjustment
it seeks. Rather, Loral asks our Office to overturn an agency
selection decision at the first step of testing technology for a
significant upgrade to a major weapons system because the agency did
not develop a cost for each and every difficulty that might arise
during the development of new seeker technology. As such, Loral's
arguments simply fail to comprise a valid challenge to the Navy's cost
realism decision.
In performing the cost realism analysis here, the Navy made
significant upward adjustments to Raytheon's proposed costs. Under
the seeker DTC subfactor, the Navy increased Raytheon's costs by
[DELETED] percent; under the D&V contract cost subfactor, the Navy
increased Raytheon's costs by [DELETED] percent. The resulting
evaluated costs of all three offerors is shown below:
Hughes Raytheon Loral
Evaluated Cost
D&V Contract $23.2M $32.6M $24.7M
Seeker DTC $103K $122K $86K
In its significant adjustments to the two elements of Raytheon's
proposed costs, the Navy included upgrades to several estimates and
factored in the associated ongoing costs for a [DELETED] slip in the
D&V schedule. For the D&V costs, this slip was an attempt to capture
additional costs associated with additional testing that both the Navy
and Loral estimate will be required to fully investigate the
likelihood of success of the Raytheon proposal.
Loral correctly points out that an offeror's proposed estimated costs
are not dispositive in evaluating proposals for the award of a cost
reimbursement contract because regardless of the costs proposed, the
government is bound to pay the contractor its actual and allowable
costs. Federal Acquisition Regulation (FAR) 15.605(c).
Consequently, a cost realism analysis must be performed by the agency
to determine the extent to which an offeror's proposed costs represent
what the contract should cost, assuming reasonable economy and
efficiency. CACI, Inc.-Fed., 64 Comp. Gen. 71 (1984), 84-2 CPD 542.
Our review of an agency's exercise of judgment in this area is limited
to determining whether the agency's cost evaluation was reasonably
based and not arbitrary. General Research Corp., 70 Comp. Gen. 279
(1991), 91-1 CPD 183, aff'd, American Management Sys., Inc.; Dept.
of the Army--Recon., 70 Comp. Gen. 510 (1991), 91-1 CPD 492; Grey
Advertising, Inc., supra.
Our review of Loral's arguments and the evaluation record leads us to
conclude that the Navy has made a reasonable attempt to evaluate the
technical merits, costs, and risks associated with these proposals.
To the extent that Loral argues that some of the facets of risk will
have cost repercussions, there is no doubt that Loral is correct.
However, the Navy here already made a significant upward cost
adjustment to Raytheon's proposed costs--[DELETED] percent for seeker
DTC costs and [DELETED] percent for D&V costs--specifically because it
was concerned that the high risk nature of Raytheon's proposed
approach would result in schedule slippage and other increased costs.
Moreover, we find little compelling about Loral's specific
contentions. As an example, Loral's technical expert argues that
Raytheon's [DELETED] for its seeker component with its [DELETED] has
an [DELETED] design with an unproven capability to [DELETED].[8]
According to Loral, this potential problem with the [DELETED] should
have been reflected in the cost realism adjustment.
The Navy agrees with the assessment of risk, but responds that it need
not add costs for this problem since the D&V effort contemplated here
does not require a fully qualified [DELETED] due to the less severe
environment for D&V tests than for working tactical missiles. Thus,
although the Navy explicitly recognized that the risk associated with
Raytheon's approach was great, the Navy decided that the kinds of
problems envisioned by Loral would not arise during the course of the
D&V contract. Given that the Navy recognized the problem, reflected
it in its risk assessment but reasonably concluded that there was no
need to increase proposed costs at this juncture--as opposed to
assessing additional costs to Raytheon on the E&MD contract should
this Navy-identified problem remain unresolved at that time--and given
that Loral has failed to offer other than mere disagreement with the
Navy's assessment, we will not disturb the Navy's conclusion.
Some of Loral's arguments are shown by the record to be factually
inaccurate. For example, Loral contends that Raytheon's proposal is
high risk in the area of its [DELETED] focal plane array because
Raytheon has never had a significant focal plan array production
program. However, the record shows that a wholly owned subsidiary of
Raytheon is currently producing such [DELETED] focal plane arrays.[9]
Similarly, Loral's argument that the Navy should have adjusted
Raytheon's D&V costs upward because of a need for development of
[DELETED] overlooks the fact that the Navy increased Raytheon's
proposed D&V costs for [DELETED] and learning curve factors for
[DELETED]. Thus, the record supports the Navy's response that it
reasonably assessed Raytheon's proposed costs in this area.
In short, since the Navy has attempted to quantify the additional
costs associated with Raytheon's higher-risk approach, and since Loral
has failed to show how the Navy could have performed the review more
accurately, we have no basis to object to the cost realism evaluation.
COST/TECHNICAL TRADEOFF
Loral argues that the Navy unreasonably selected Raytheon as the
offeror whose proposal was second most advantageous to the government,
after the proposal of Hughes. Instead, Loral contends that its
proposal was more advantageous to the government than Raytheon's
proposal.
The essence of Loral's challenge here is that after the Navy
(inferentially) concluded that the higher-rated Raytheon proposal was
not worth the additional cost and risk when compared to the
lower-cost, lower-risk Hughes proposal, the Navy could not then
rationally conclude in its second award decision that the benefits of
the Raytheon proposal outweighed a proposal with even lower costs than
Hughes's.
We find no merit to this argument. First, we note that Loral's
claim[10] that it submitted the low-cost offer is not supported by the
record. There were two subfactors of equal weight under the cost
factor here. Under the D&V contract subfactor, Loral was the second
low-cost offeror, after Hughes; under the seeker DTC subfactor, Loral
was the offeror with the lowest cost.[11] Thus, the premise of
Loral's argument--that the Navy could not reasonably select Raytheon
after first selecting Hughes because Loral has even lower costs than
Hughes--is wrong. Loral has lower costs on one of the two subfactors,
not both. Second, Loral's argument is apparently based on a
conclusion that the Hughes and Loral proposals presented equal risk:
they did not. When choosing between Loral and Raytheon the Navy was
faced with proposals that offered medium and high risks, respectively.
A more precise recap of the record shows that after the Navy selected
Hughes's satisfactory, low-risk, lowest D&V evaluated cost proposal as
the offer most advantageous to the government, the SSA considered
selection of Loral versus Raytheon for the second award. In
considering this selection decision, the SSA weighed the benefits of
Loral's satisfactory, medium-risk, lowest seeker DTC evaluated cost
(and second lowest D&V evaluated cost) against Raytheon's exceptional,
but high-risk and highest evaluated cost (on both cost subfactors) and
concluded that the Navy would balance the selection of Hughes's
low-risk approach with Raytheon's exceptional, high-risk approach.
In a negotiated procurement, the government is not required to make
award to the firm offering the lowest cost unless the RFP specified
that cost will be the determinative factor. Antenna Prods. Corp., 69
Comp. Gen. 182 (1990), Jan. 22, 1990, 90-1 CPD 82. As explained
above, the RFP here clearly stated that technical merit would be more
important than cost. In such cases where an agency chooses between a
higher-cost, higher-rated proposal and a lower-cost, lower-rated
proposal, our review is limited to a determination of whether the
cost/technical tradeoff is reasonable and consistent with the
solicitation's evaluation criteria. Grey Advertising, Inc., supra;
SDA Inc., B-248528.2, Apr. 14, 1993, 93-1 CPD 320.
The basis for this selection decision here is set forth in two
documents: the SSAC's recommendations to the SSA; and the SSA's
memorandum to the record describing the selection decision. Our
review of the record shows that the Navy adequately considered and
documented its selection of Hughes and Raytheon over Loral. In
essence, the Navy decided that given the difference in potential
advances in seeker technology if the Raytheon proposal is workable,
selecting Raytheon's higher-risk approach for this limited duration
D&V contract to see if the risks could be reduced sufficiently, while
at the same time selecting Hughes in case the risks could not be
reduced, was a sound, commonsense approach to selecting awardees for
the D&V effort here. Since this conclusion is consistent with the
evaluation scheme set forth in the RFP, there is no basis for finding
that the conclusion is unreasonable. Information Sys. Networks, Inc.,
B-254384.3, Jan. 21, 1994, 94-1 CPD 27.
The protest is denied.
Robert P. Murphy
General Counsel
* The decision issued July 5, 1995, contained confidential or source
selection sensitive information, and was subject to a General
Accounting Office protective order. This version of the decision has
been redacted. Deletions in text are indicated by "[DELETED]."
1. The Sidewinder missile is part of a Joint Service Program between
the Navy and Air Force; the Navy is responsible for managing the
program.
2. The technical ratings are abbreviated as follows: exceptional (E);
satisfactory (S); marginal (M); and unsatisfactory (U). The risk
assessments are low, medium, and high.
3. Evaluated cost of each offeror's D&V is shown in millions of
dollars (M), and is the estimated total realistic cost for this
contract. Evaluated cost of seeker DTC is shown in thousands of
dollars (K), and as explained above, is defined as the unit recurring
hardware cost of the 5000th seeker. The Navy estimated that the
5000th seeker would be purchased some 16 years after award of this
contract--the D&V contract here requires offerors to build a seeker
prototype within 18 months; followed by several years of Engineering
and Manufacturing Development (E&MD); followed by 10 years of
production before the 5000th unit is purchased. RFP, Annex E.
4. While we consider below each of Loral's challenges to the SSAC's
decision to upgrade Raytheon's proposal, we note that the Navy
probably could have reasonably selected Raytheon without the upward
adjustment at issue in this protest--suggesting that Loral was not
prejudiced by the SSAC's adjustment. During the evaluation Loral did
not receive a single exceptional rating on any technical evaluation
subfactor or element, while Raytheon's proposal was rated exceptional
under the most important technical subfactor and two evaluation
elements thereunder. Despite the initial overall assessment that both
proposals were satisfactory, these distinctions alone could have
supported a Navy decision that Raytheon's proposal offered the second
best value in this procurement without the upgrade by the SSAC.
5. Almost as an aside, Loral similarly claims that the SSAC could not
properly change the risk assessment of Hughes' technical approach from
medium to low risk. Although Loral fails to present a full-blown
challenge to the SSAC's view of Hughes's proposal, our decision
upholding the SSAC's discretion to upgrade Raytheon's proposal also
applies to its view of Hughes's proposal. In addition, materials
submitted by Loral's own expert--specifically, four case studies
analyzing the three proposals across all feasible combinations of the
evaluation factors and relative weights--support the Navy's decision
to select Hughes. See Supplemental Affidavit of Kevin L. Martin at
5-8.
6. In this regard, the Navy's source selection plan defined an
"exceptional" proposal as follows:
"Proposal exceeds requirements or contains enhancing features
which benefit the [g]overnment. Any weakness is minor with no
impact."
Source Selection Plan at 28.
7. Since the specifications at issue in this procurement are highly
classified, the Navy and all parties agreed to proceed without
reference to classified individual specification requirements. In
this instance, all parties agree that the specification includes both
minimum requirements and desired values. According to the Navy, since
an offeror's proposal could receive an exceptional rating for
exceeding minimum requirements, it was not possible to give additional
credit for exceeding desired values.
8. The Navy's evaluators expressed the same concerns in this regard.
9. Loral's reply in its final comments that the focal plane array
produced by Raytheon's subsidiary will need much testing, retesting
and redesign does not rise above the level of disagreement with the
Navy's assessment that the design is high risk, but need not be
reflected in an adjustment to the proposed costs.
10. Loral's supplemental comments state that Loral "unquestionably was
by far the low cost offeror," and that "it is clear that Loral was
evaluated by the Navy as offering substantially lower costs than
Raytheon or Hughes." Supplemental Comments at 43, 48.
11. Although the RFP accorded equal weight to the two subfactors, we
note that the D&V contract is the only contract awarded by this
procurement, and Loral was not the low-cost offeror.